TERADYNE, INC (Form: 10-Q, Received: 11/09/2007 13:41:43)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-06462

TERADYNE, INC.

(Exact name of registrant as specified in its charter)

Massachusetts

04-2272148

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)


600 Riverpark Drive, North Reading, Massachusetts		01864
(Address of Principal Executive Offices)		(Zip Code)

978-370-2700

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s only class of Common Stock as of November 2, 2007 was 173,640,993 shares.

TERADYNE, INC.

INDEX


		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2007 and October 1, 2006	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and October 1, 2006	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	31

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

PART I

Item 1: Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	September 30, 2007			December 31, 2006
	(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	429,078		$	568,025
Marketable securities		187,176			47,766
Accounts receivable, net of allowance for doubtful accounts of $4,757 and $4,962 on September 30, 2007 and December 31, 2006, respectively		231,561			155,770
Inventories:
Parts		38,344			42,152
Assemblies in process		53,508			50,661

		91,852			92,813
Prepayments and other current assets		31,345			21,527
Current assets of discontinued operations		—			3,509

Total current assets		971,012			889,410
Property, plant, and equipment, at cost		821,849			862,062
Less: accumulated depreciation		470,137			496,541

Net property, plant, and equipment		351,712			365,521
Marketable securities		131,409			328,827
Goodwill		69,147			69,147
Intangible and other assets		36,622			35,819
Retirement plans assets		36,400			31,503
Long-term assets of discontinued operations		—			828

Total assets	$	1,596,302		$	1,721,055

LIABILITIES
Current liabilities:
Accounts payable	$	64,516		$	39,918
Accrued employees’ compensation and withholdings		65,188			87,811
Deferred revenue and customer advances		38,711			44,053
Other accrued liabilities		48,375			47,023
Income taxes payable		5,262			36,052
Current liabilities of discontinued operations		—			4,859

Total current liabilities		222,052			259,716
Retirement plans liabilities		83,736			81,121
Long-term other accrued liabilities		21,071			18,352
Long-term liabilities of discontinued operations		—			679

Total liabilities		326,859			359,868

Commitments and contingencies (Note O)

SHAREHOLDERS’ EQUITY
Common stock, $0.125 par value, 1,000,000 shares authorized, 177,817 and 188,952 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		22,227			23,619
Additional paid-in capital		1,136,748			1,179,015
Accumulated other comprehensive loss		(57,065	)		(66,309	)
Retained earnings		167,533			224,862

Total shareholders’ equity		1,269,443			1,361,187

Total liabilities and shareholders’ equity	$	1,596,302		$	1,721,055

The accompanying notes, together with the Notes to Consolidated Financial Statements included in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2006 are an integral part of the condensed consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007			October 1, 2006
	(in thousands, except per share amounts)
Net revenues:
Products	$	239,299		$	294,838		$	663,435		$	919,846
Services		60,162			59,879			178,429			177,719

Total net revenues		299,461			354,717			841,864			1,097,565
Cost of revenues:
Cost of products		117,268			142,301			329,597			451,123
Cost of services		37,947			38,031			117,404			114,348

Total cost of revenues		155,215			180,332			447,001			565,471

Gross profit		144,246			174,385			394,863			532,094
Operating expenses:
Engineering and development		52,245			51,791			153,924			154,193
Selling and administrative		62,870			70,452			188,642			214,789
In-process research and development		—			—			16,700			—
Restructuring and other, net		(3,119	)		(15,112	)		(304	)		(36,806	)

Operating expenses		111,996			107,131			358,962			332,176

Operating income from continuing operations		32,250			67,254			35,901			199,918
Interest income		7,784			12,453			27,182			33,595
Interest expense		(119	)		(3,518	)		(629	)		(10,359	)
Other income		—			—			1,832			—

Income from continuing operations before income taxes		39,915			76,189			64,286			223,154
Provision for income taxes		4,717			9,866			9,556			27,874

Income from continuing operations		35,198			66,323			54,730			195,280
Income (loss) from discontinued operations before income taxes		6,084			(1,908	)		6,795			(3,623	)
Income tax provision		293			3,850			518			3,774

Income (loss) from discontinued operations		5,791			(5,758	)		6,277			(7,397	)

Net income	$	40,989		$	60,565		$	61,007		$	187,883

Income from continuing operations per common share:
Basic	$	0.19		$	0.34		$	0.29		$	0.99

Diluted	$	0.19		$	0.34		$	0.29		$	0.97

Net income per common share:
Basic	$	0.22		$	0.31		$	0.33		$	0.96

Diluted	$	0.22		$	0.31		$	0.32		$	0.94

Weighted average common shares—basic		183,566			193,563			187,527			196,608

Weighted average common shares—diluted		185,298			204,551			189,222			208,585

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Nine Months Ended
	September 30, 2007			October 1, 2006
	(in thousands)
Cash flows from operating activities:
Net income	$	61,007		$	187,883
Income (loss) from discontinued operations		381			(7,397	)
Gain on sale from discontinued operations		5,896			—

Income from continuing operations		54,730			195,280
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation		45,351			51,836
Amortization		5,902			3,866
Stock-based compensation		19,645			17,599
In-process research and development charge		16,700			—
Gain on sale of land and building		(3,597	)		(38,319	)
Gain on sale of product lines		(906	)		(406	)
Provision for doubtful accounts		104			104
Provision for inventory		942			11,237
Other non-cash items, net		786			2,981
Changes in operating assets and liabilities, net of product lines and businesses sold:
Accounts receivable		(75,896	)		(5,742	)
Inventories		27,261			66,797
Other assets		(17,638	)		4,274
Accounts payable, deferred revenue and accrued expenses		2,900			33,068
Retirement plans contributions		(2,128	)		(25,300	)
Income taxes payable		(30,790	)		25,105

Net cash provided by continuing operations		43,366			342,380
Net cash used for discontinued operations		(3,103	)		(477	)

Net cash provided by operating activities		40,263			341,903

Cash flows from investing activities:
Investments in property, plant and equipment		(63,788	)		(82,353	)
Acquisition of technology		(17,600	)		—
Proceeds from sale of product lines		906			406
Proceeds from sale of land and building		7,888			79,220
Purchases of available-for-sale marketable securities		(333,165	)		(372,570	)
Proceeds from sale and maturities of available-for-sale marketable securities		396,436			578,999

Net cash (used for) provided by continuing operations		(9,323	)		203,702
Net cash provided by (used for) discontinued operations		10,765			(317	)

Net cash provided by investing activities		1,442			203,385

Cash flows from financing activities:
Payments of long term debt and notes payable		—			(43,648	)
Repurchase of common stock		(203,562	)		(109,312	)
Issuance of common stock under employee stock option and stock purchase plans		22,910			22,006

Net cash used for financing activities		(180,652	)		(130,954	)

(Decrease)/increase in cash and cash equivalents		(138,947	)		414,334
Cash and cash equivalents at beginning of period		568,025			340,699

Cash and cash equivalents at end of period	$	429,078		$	755,033

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. The Company

Teradyne, Inc. is a leading supplier of automatic test equipment.

Teradyne’s automatic test equipment offerings include:

•

Semiconductor test products and services (“Semiconductor Test”);

•

Circuit-board test and inspection products and services, military/aerospace instrumentation test products and services, and automotive diagnostic test products and services (“Systems Test Group”)

Statements in this Quarterly Report on Form 10-Q which are not historical facts, so called “forward looking statements,” are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in Teradyne’s filings with the Securities and Exchange Commission (the “SEC”). See also “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors That May Affect Future Results” and Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2006.

B. Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements include the accounts of Teradyne and its subsidiaries. All significant intercompany balances and transactions have been eliminated. These interim financial statements are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair statement of such interim financial statements. Certain prior years’ amounts were reclassified to conform to the current year presentation. The December 31, 2006 condensed consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles.

The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in Teradyne’s Annual Report on Form 10-K, filed with the SEC on March 1, 2007 for the year ended December 31, 2006.

On August 1, 2007, Teradyne completed the sale of Broadband Test Systems, its voice and broadband access network test division. The results of operations of Broadband Test Systems as well as balance sheet and cash flow amounts pertaining to this business have been classified as discontinued operations in the condensed consolidated financial statements (see “Note E: Discontinued Operations”).

Preparation of Financial Statements

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements. Actual results may differ significantly from these estimates.

C. Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. Teradyne is currently evaluating the impact of adopting this standard.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

D. Product Warranty

Teradyne generally provides a one-year warranty on its products commencing upon installation or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The balance below is included in other accrued liabilities (in thousands).


	For the Nine Months Ended
	September 30, 2007			October 1, 2006
Balance at beginning of period	$	12,897		$	10,496
Accruals for warranties issued during the period		10,369			18,075
Accruals related to pre-existing warranties (includes changes in estimates)		(1,696	)		(154	)
Settlements made during the period		(11,530	)		(12,742	)

Balance at end of period	$	10,040		$	15,675

When Teradyne receives revenue for extended warranties beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The balance below is included in deferred revenue and customer advances and long-term other accrued liabilities (in thousands):


	For the Nine Months Ended
	September 30, 2007			October 1, 2006
Balance at beginning of period	$	8,350		$	5,596
Deferral of new extended warranty revenue		2,550			5,142
Recognition of extended warranty deferred revenue		(4,204	)		(2,224	)

Balance at end of period	$	6,696		$	8,514

E. Discontinued Operations

On August 1, 2007, Teradyne completed the sale of its Broadband Test Systems division to Tollgrade Communications, Inc. for $11.3 million in cash. Teradyne sold this business as its growth potential as a stand-alone business within Teradyne was not attractive. The financial information for discontinued businesses has been reclassified to discontinued operations for all periods presented. Net revenues and income (loss) from discontinued operations for the three and nine months ended September 30, 2007 and October 1, 2006 are as follows (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007		October 1, 2006
Net revenues	$	929		$	4,405		$	11,153	$	16,106

(Loss) income from discontinued operations before income taxes	$	(198	)	$	(1,908	)	$	513	$	(3,623	)
Gain from sale of discontinued operations before income taxes		6,282			—			6,282		—
Income tax provision		293			3,850			518		3,774

Income (loss) from discontinued operations	$	5,791		$	(5,758	)	$	6,277	$	(7,397	)

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Included in the September 30, 2007 nine months discontinued operations are $0.9 million of fees directly related to the sale transaction between Teradyne and Tollgrade Communications Inc.

F. Stock-Based Compensation

During the nine months ended September 30, 2007, Teradyne granted restricted stock units to employees, executives and directors. The total number of shares granted was 2.0 million at the weighted average grant date fair value of $15.19. Awards granted to employees and executives vest in equal installments over four years. Awards granted to non-employee directors vest after one year. A significant number of awards granted to executive officers are performance-based restricted stock units. The amount of actual performance-based restricted stock units that will vest over four years is determined on or near the first anniversary of the grant.

G. Other Comprehensive Income

Other comprehensive income is calculated as follows for the three months ended (in thousands):


	For the Three Months Ended
	September 30, 2007			October 1, 2006
Net income	$	40,989		$	60,565
Foreign currency translation adjustments		(272	)		1,038
Change in unrealized loss on foreign exchange contracts, net of tax of $0		(55	)		—
Change in unrealized loss on marketable securities, net of tax of $0		2,047			4,974
Retirement plans net gain, net of tax of $(13)		861			—
Retirement plans net prior service gain, net of tax of $0		153			—
Retirement plans net transition asset, net of tax of $(28)		29			—
Additional minimum pension liability, net of tax of $0		—			(130	)

Other comprehensive income	$	43,752		$	66,447

Other comprehensive income is calculated as follows for the nine months ended (in thousands):


	For the Nine Months Ended
	September 30, 2007			October 1, 2006
Net income	$	61,007		$	187,883
Foreign currency translation adjustments		(38	)		1,746
Change in unrealized loss on foreign exchange contracts, net of tax of $0		—			(31	)
Change in unrealized loss on marketable securities, net of tax of $0		4,212			2,303
Retirement plans net gain, net of tax of $47		4,605			—
Retirement plans net prior service gain, net of tax of $0		460			—
Retirement plans net transition asset, net of tax of $(47)		5			—
Additional minimum pension liability, net of tax of $0		—			(342	)

Other comprehensive income	$	70,251		$	191,559

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

H. Intangible Assets

Amortizable intangible assets consist of the following and are included in intangible and other assets on the balance sheet (in thousands):


	September 30, 2007
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
Completed technology	$	19,193	$	15,206	$	3,987	7.5 years
Service and software maintenance contracts and customer relationships		4,779		3,528		1,251	8 years
Trade names and trademarks		3,800		2,810		990	8 years
Acquired workforce		700		88		612	4 years

Total intangible assets	$	28,472	$	21,632	$	6,840	7.6 years


	December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
Completed technology	$	19,193	$	13,281	$	5,912	7.5 years
Service and software maintenance contracts and customer relationships		4,779		3,078		1,701	8.0 years
Trade names and trademarks		3,800		2,454		1,346	8.0 years

Total intangible assets	$	27,772	$	18,813	$	8,959	7.7 years

Aggregate amortization expense was $1.0 million for the three months ended September 30, 2007 and $0.9 million for the three months ended October 1, 2006. Aggregate amortization expense for the nine months ended September 30, 2007 was $2.8 million and for the nine months ended October 1, 2006 was $2.7 million. Estimated amortization expense for each of the five succeeding fiscal years is as follows (in thousands):


Year	Amount
2007 (remainder)	$	840
2008		3,137
2009		2,644
2010		175
2011		44

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

I. Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):


	For the Three Months Ended					For the Nine Months Ended
	September 30, 2007		October 1, 2006			September 30, 2007		October 1, 2006
Income from continuing operations	$	35,198	$	66,323		$	54,730	$	195,280
Income (loss) from discontinued operations		5,791		(5,758	)		6,277		(7,397	)

Net income for basic net income per share		40,989		60,565			61,007		187,883
Income impact of assumed conversion of convertible debt		—		2,562			—		7,945

Net income for diluted net income per share	$	40,989	$	63,127		$	61,007	$	195,828

Weighted average common shares—basic		183,566		193,563			187,527		196,608
Effect of dilutive securities:
Incremental shares from assumed conversion of convertible debentures		—		10,367			—		10,873
Employee and director stock options		858		235			991		748
Restricted stock units		837		361			647		303
Employee stock purchase rights		37		25			57		53

Dilutive potential common shares		1,732		10,988			1,695		11,977

Weighted average common shares—diluted		185,298		204,551			189,222		208,585

Net income per common share—basic
Continued operations	$	0.19	$	0.34		$	0.29	$	0.99
Discontinued operations		0.03		(0.03	)		0.04		(0.03	)

	$	0.22	$	0.31		$	0.33	$	0.96

Net income per common share—diluted
Continued operations	$	0.19	$	0.34		$	0.29	$	0.97
Discontinued operations		0.03		(0.03	)		0.03		(0.03	)

	$	0.22	$	0.31		$	0.32	$	0.094

The computation of diluted net income per common share for the three and nine months ended September 30, 2007 excludes the effect of the potential exercise of options to purchase approximately 14.1 million and 14.1 million shares, respectively, because the option price was greater than the average market price of the common shares and the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three and nine months ended October 1, 2006 excludes the effect of the potential exercise of options to purchase approximately 15.9 million and 16.0 million shares, respectively, because the option price was greater than the average market price of the common shares and the effect would have been anti-dilutive. The effect of Teradyne’s outstanding convertible notes on diluted net income per share for the three and nine months ended October 1, 2006 was calculated using the “if converted” method as required by SFAS No. 128, “Earnings per Share”. In using the “if converted” method, $2.6 million and $7.9 million of interest expense related to the convertible notes for the three and nine

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

months ended October 1, 2006, net of tax and profit sharing expenses, was added back to net income to arrive at diluted net income. Accordingly, 10.4 million and 10.9 million incremental shares from the assumed conversion of the convertible debt are added to shares when calculating diluted net income per common share for the three and nine months ended October 1, 2006, respectively.

J. Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the nine months ended September 30, 2007. The accrual for severance and benefits is reflected in accrued employees’ compensation and withholdings. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and long-term other accrued liabilities and is expected to be paid out over the lease terms, the latest of which expires in 2012. Teradyne expects to pay out approximately $1.7 million against the lease accruals over the next twelve months. Teradyne’s future lease commitments are net of expected sublease income of $10.3 million as of September 30, 2007.

2007 Activities


(in thousands)	Gain on Sale of Real Estate			Insurance Recovery			Vacated Facility Related			Severance and Benefits			Total
Balance at December 31, 2006	$	—		$	—		$	—		$	—		$	—
(Credits)/charges		(3,597	)		(1,782	)		53			6,417			1,091
Cash receipts/(payments)		3,597			1,782			(53	)		(3,593	)		1,733

Balance at September 30, 2007	$	—		$	—		$	—		$	2,824		$	2,824

During the nine months ended September 30, 2007, Teradyne recorded the following restructuring activities:

•

$6.4 million of severance charges related to headcount reductions of 196 people across all functions and segments;

•

$3.6 million gain on the sale of land and building in Deerfield, Illinois; and

•

$1.8 million of cash proceeds recovered from insurance related to a facility fire in Taiwan.

2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Total
Balance at December 31, 2006	$	625		$	1,865		$	2,490
Credits		—			(135	)		(135	)
Cash payments		(444	)		(1,635	)		(2,079	)

Balance at September 30, 2007	$	181		$	95		$	276

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pre-2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Gain on Sale of Product Lines			Total
Balance at December 31, 2006	$	9,604		$	1,183		$	—		$	10,787
Credits		(69	)		(285	)		(906	)		(1,260	)
Cash (payments)/receipts		(2,705	)		(648	)		906			(2,447	)

Balance at September 30, 2007	$	6,830		$	250		$	—		$	7,080

During the nine months ended September 30, 2007, Teradyne recorded the following pre-2006 restructuring activities:

•

$0.9 million credit for earn-out payments received in the Systems Test Group from a product line divestiture; and

•

$0.3 million credit for revised estimates on severance payments.

K. Stock Repurchase Program

In July 2006, Teradyne’s Board of Directors authorized a stock repurchase program. Under the program, Teradyne could spend up to an aggregate of $400 million to repurchase shares of its common stock in open market purchases, in privately negotiated transactions or through other appropriate means over two years. Shares were to be repurchased at Teradyne’s discretion, subject to market conditions and other factors. During the three months ended September 30, 2007, Teradyne repurchased 11.4 million shares of common stock for $176.0 million at an average price of $15.38 per share. For the nine months ended September 30, 2007, Teradyne repurchased 13.1 million shares of common stock for $203.6 million at an average price of $15.52 per share. During October, 2007 Teradyne completed the $400 million stock repurchase program, repurchasing a cumulative total of 27.9 million shares of common stock at an average price of $14.31 per share.

On November 7, 2007, Teradyne’s Board of Directors authorized a new stock repurchase program. Under the program, the Company is permitted to spend an aggregate of $400 million to repurchase shares of its common stock in open market purchases, in privately negotiated transactions or through other means. Shares are to be repurchased at the Company’s discretion, subject to market conditions and other factors

L. Technology Acquisition

On March 7, 2007, Teradyne purchased in-process enabling test technology and hired certain engineers from MOSAID Technologies Inc. for $17.6 million, which includes $0.6 million in fees directly related to the acquisition. Of the purchase price, $16.7 million has been allocated to in-process research and development and therefore was immediately charged to the statement of operations. The balance of the purchase price was allocated to acquired workforce and fixed assets.

This technology was acquired for use in the development of a new semiconductor test product. As of the acquisition date, the technology had not reached technical feasibility, had no alternative future use and its fair value was estimable with reasonable reliability, and therefore was classified as in-process research and development. The technology is unique to the semiconductor test market and requires significant development. The estimated fair value of the in-process technology was determined based on the use of a discounted cash flow model using an income approach. Estimated cash flows were probability adjusted to take into account the stage of completion and the risks surrounding successful development and commercialization of the in-process

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

technology. Such a valuation requires significant estimates and assumptions including but not limited to determining the timing and estimated costs to complete the in-process project as well as the estimated cash flows to be generated as a result of completing the project development.

M. Retirement Plans

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of U.S. employees and employees of certain non-U.S. subsidiaries. Benefits under these plans are based on employees’ years of service and compensation. Teradyne’s funding policy is to make contributions to the plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of the plans consist primarily of equity and fixed income securities. In addition, Teradyne has an unfunded supplemental executive defined benefit plan in the United States to provide retirement benefits in excess of levels allowed by the Employment Retirement Income Security Act and the Internal Revenue Code, as well as unfunded foreign plans.

Components of net periodic pension cost for all plans for the three and nine months ended September 30, 2007 and October 1, 2006 are as follows (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007			October 1, 2006
Net Periodic Benefit Cost:
Service cost	$	1,387		$	1,643		$	4,197		$	4,892
Interest cost		4,133			3,834			12,407			11,468
Expected return on plan assets		(4,866	)		(4,282	)		(14,629	)		(12,826	)
Amortization of unrecognized:
Net transition obligation		(17	)		(15	)		(49	)		(43	)
Prior service cost		212			208			635			623
Net loss		905			1,479			2,727			4,425

Total expense	$	1,754		$	2,867		$	5,288		$	8,539

Teradyne contributed $1.1 million to its U.K. pension plan and $0.9 million to its Japan pension plan in the nine months ended September 30, 2007.

Postretirement Benefit Plans

In addition to receiving pension benefits, Teradyne’s U.S. employees who meet specific retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes death benefits, and medical and dental benefits up to age 65. Death benefits provide a fixed sum to retirees’ survivors and are available to all retirees. Substantially all of Teradyne’s current U.S. employees could become eligible for these benefits, and the existing benefit obligation relates primarily to those employees.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Components of net periodic postretirement cost are as follows (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007			October 1, 2006
Net Periodic Benefit Cost:
Service cost	$	63		$	(3	)	$	190		$	186
Interest cost		329			229			986			1,046
Amortization of unrecognized:
Prior service cost		(58	)		(60	)		(176	)		(173	)
Net loss (gain)		71			(70	)		214			409

Total expense	$	405		$	96		$	1,214		$	1,468

N. Income Taxes

Teradyne adopted FIN 48, “Accounting for Uncertainties in Income Taxes” (“FIN 48”) effective January 1, 2007. FIN 48 applies to all income tax positions accounted for under FASB Statement No. 109, “Accounting for Income Taxes”, and addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. FIN 48 also addressed other aspects of reporting and disclosing uncertain tax positions. Upon adoption, the amount of unrecognized tax benefits, if recognized, would have impacted the effective tax rate by $2.5 million. Upon adoption, it was anticipated that within the next twelve months of adoption $2.3 million of unrecognized tax benefits would no longer be considered unrecognized tax benefits due to audit settlements. Upon adoption and as of September 30, 2007, Teradyne has open tax years beginning in 2003 for major jurisdictions including U.S., Japan, Singapore and the United Kingdom. Teradyne records all interest and penalties related to income taxes as a component of income tax expense. Accrued interest and penalties related to income tax items upon adoption and recognized during the three and nine months ended September 30, 2007 was not material.

Teradyne’s unrecognized tax benefits are as follows (in thousands):


	For the Nine Months Ended September 30, 2007
Beginning balance, upon adoption as of January 1, 2007	$	10,584
Additions:
Tax positions for current year		126
Tax positions for prior years		2,013

Ending balance as of April 1, 2007	$	12,723
Additions:
Tax positions for current year		37
Tax positions for prior years		2,407
Reductions:
Settlements		(2,342	)

Ending balance as of July 1, 2007	$	12,825
Additions:
Tax positions for current year		202
Tax positions for prior years		204

Ending balance as of April 1, 2007	$	13,231

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Of the $13.2 million of unrecognized tax benefits as of September 30, 2007, $6.8 million would impact the consolidated income tax rate if ultimately recognized. The remaining $6.4 million would impact goodwill if ultimately recognized. As of September 30, 2007, it is anticipated that within the next twelve months, $2.0 million of unrecognized tax benefits will no longer be considered unrecognized tax benefits due to audit settlements.

Due to the continued uncertainty of realization of our U.S. deferred tax assets, Teradyne maintained its valuation allowance at September 30, 2007 and December 31, 2006. Teradyne does not expect to significantly reduce its valuation allowance until sufficient positive evidence exists, including sustained profitability, that realization is more likely than not.

O. Commitments and Contingencies

Legal Claims

On September 5, 2001, after Teradyne’s August 2000 acquisition of Herco Technology Corp. and Perception Laminates, Inc., the former owners of those companies filed a complaint against Teradyne and two of its then executive officers in the Federal District Court in San Diego, California, asserting securities fraud and breach of contract related to the acquisition. The District Court dismissed certain of the plaintiffs’ claims, granted partial summary judgment against them with respect to their breach of contract claim and denied their motion for reconsideration. In July 2007, after an appeal by the plaintiffs, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the District Court rulings. Teradyne petitioned the Ninth Circuit for rehearing of the ruling it reversed. In October 2007, the Ninth Circuit denied Teradyne’s petition for rehearing. Teradyne will continue to defend the claim that was sent back to the District Court.

In 2001, Teradyne was designated as a Potentially Responsible Party (“PRP”) at a clean-up site in Los Angeles, California. This claim arose out of its acquisition of Perception Laminates in August 2000. Prior to that date, Perception Laminates had itself acquired certain assets of Alco Industries Inc. under an asset purchase agreement dated October 20, 1992. Neither Teradyne nor Perception Laminates has ever conducted any operations at the Los Angeles site. Teradyne has asked the State of California to drop the PRP designation, but California has not yet agreed to do so.

Teradyne believes that it has meritorious defenses against the above unsettled claims and intends to vigorously contest them. While it is not possible to predict or determine the outcomes of the unsettled claims or to provide possible ranges of losses that may arise, Teradyne believes the losses associated with all of these actions will not have a material adverse effect on its consolidated financial position or liquidity, but could possibly be material to its consolidated results of operations of any one period.

In addition, Teradyne is subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Although there can be no assurance, there are no such matters pending that Teradyne expects to be material with respect to its business, financial position or results of operations.

P. Segment Information

Teradyne’s two reportable segments are Semiconductor Test and Systems Test Group. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Systems Test Group segment includes operations related to the design, manufacturing and marketing of circuit-board test and inspection products and services, military/aerospace instrumentation test products and services, and automotive diagnostic and test products and services.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During the third quarter of 2007, the internal management reporting of the Company changed to better align with the company’s operational management structure, resulting in a change in the Company’s reportable segments. Segment reporting has been restated for all periods presented to reflect this change. The reportable segments presented reflect the information reviewed and used by the chief operating decision maker.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income from continuing operations before taxes. The accounting policies of the business segments are the same as those described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2006. Due to the sale on August 1, 2007 of Broadband Test Systems, its results have been excluded from segment reporting and included in discontinued operations for all periods presented. Previously, Broadband Test Systems and Diagnostic Solutions had been combined to form the Other Test Systems segment. Diagnostic Solutions and Assembly Test are now components of the Systems Test Group segment. Segment information for the three and nine months ended September 30, 2007 and October 1, 2006 is as follows (in thousands):


	Semiconductor Test		Systems Test Group		Corporate and Eliminations		Consolidated
*Three months ended September 30, 2007:*
Net revenues	$	243,470	$	55,991	$	—	$	299,461
Income from continuing operations before taxes (1)(2)		24,507		3,623		11,785		39,915
Total assets (3)		572,004		228,099		796,199		1,596,302

*Three months ended October 1, 2006:*
Net revenues	$	282,776	$	71,941	$	—	$	354,717
Income from continuing operations before taxes (1)(2)		63,246		6,437		6,506		76,189
Total assets (3)		563,671		256,423		1,148,331		1,968,425

*Nine months ended September 30, 2007:*
Net revenues	$	668,118	$	173,746	$	—	$	841,864
Income from continuing operations before taxes (1)(2)		18,119		13,075		33,092		64,286

*Nine months ended October 1, 2006:*
Net revenues	$	892,284	$	205,281	$	—	$	1,097,565
Income from continuing operations before taxes (1)(2)		185,750		18,145		19,259		223,154

(1)	Net interest income is included in Corporate and Eliminations.

(2)	Included in the income from continuing operations before taxes for each of the segments are charges for the three and nine months ended September 30, 2007 and October 1, 2006 that include restructuring and other, net and in-process research and development charges, as follows:

(3)	Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities, unallocated fixed assets of support divisions and common facilities and certain other assets.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Included in the Semiconductor Test segment are charges for the following (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007		October 1, 2006
Restructuring and other, net	$	(830	)	$	(16,261	)	$	1,742	$	(35,699	)
In-process research and development		—			—			16,700		—

Total	$	(830	)	$	(16,261	)	$	18,442	$	(35,699	)

Also included in income from continuing operations before taxes for the nine months ended September 30, 2007 is an inventory provision of $0.5 million related to non-FLEX products.

Included in the Systems Test Group are charges for the following (in thousands):


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2007		October 1, 2006		September 30, 2007		October 1, 2006
Restructuring and other, net	$	1,351	$	427	$	1,055	$	(1,311	)

Included in the Corporate and Eliminations segment are charges for the following (in thousands):


	For the Three Months Ended					For the Nine Months Ended
	September 30, 2007			October 1, 2006		September 30, 2007			October 1, 2006
Restructuring and other, net	$	(3,640	)	$	722	$	(3,101	)	$	204

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. Management believes that there have been no significant changes during the nine months ended September 30, 2007 to the items disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2007		October 1, 2006		September 30, 2007		October 1, 2006
Percentage of total net revenues:
Products	80	%	83	%	79	%	84	%
Services	20		17		21		16

Total net revenues	100		100		100		100
Cost of revenues:
Cost of products	39		40		39		41
Cost of services	13		11		14		10

Total cost of revenues	52		51		53		51

Gross profit	48		49		47		49
Operating expenses:
Engineering and development	17		14		18		14
Selling and administrative	21		20		23		20
In-process research and development	—		—		2		—
Restructuring and other, net	(1	)	(4	)	0		(3	)

Operating expenses	37		30		43		31

Operating income from continuing operations	11		19		4		18
Interest income	3		3		3		3
Interest expense	(1	)	(1	)	(0	)	(1	)
Other income	—		—		0		—

Income from continuing operations before income taxes	13		21		7		20
Provision for income taxes	1		2		1		2

Income from continuing operations	12		19		6		18

Income (loss) from discontinued operations before income taxes	2		(1	)	1		(0	)
Income tax provision	0		1		0		1

Income (loss) from discontinued operations	2		(2	)	1		(1	)

Net income	14	%	17	%	7	%	17	%

Provision for income taxes as a percentage of income from continuing operations before income taxes	12	%	13	%	15	%	12	%

Results of Operations

On August 1, 2007, we closed the sale of our Broadband Test Systems division with Tollgrade Communications, Inc. for $11.3 million in cash. We sold this business as its growth potential as a stand-alone business within Teradyne was not attractive. The financial results of Broadband Test Systems have been reported as discontinued operations in the condensed consolidated financial statements for all periods presented throughout this Form 10-Q. Previously, Broadband Test Systems and Diagnostic Solutions had been combined to form the Other Test Systems segment. Diagnostic Solutions and Assembly Test are now components of Systems Test Group segment. Unless indicated otherwise, the discussion and amounts provided in this “Results of Operations” section and elsewhere in this Form 10-Q relate to continuing operations only.

Discontinued businesses net revenues and income (loss) for the three and nine months ended September 30, 2007 and October 1, 2006 are as follows (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2007			October 1, 2006			September 30, 2007		October 1, 2006
Net revenues	$	929		$	4,405		$	11,153	$	16,106

(Loss) income before income taxes	$	(198	)	$	(1,908	)	$	513	$	(3,623	)
Gain from sale of discontinued operations		6,282			—			6,282		—
Income tax provision		293			3,850			518		3,774

Income (loss) from discontinued operations	$	5,791		$	(5,758	)	$	6,277	$	(7,397	)

Included in discontinued operations are $0.9 million fees directly related to the sale transaction between Teradyne and Tollgrade Communications, Inc.

Third Quarter 2007 Compared to Third Quarter 2006

Bookings

Net bookings for our two reportable segments were as follows (dollars in millions, except percent change):


	For the Three Months Ended
	September 30, 2007		October 1, 2006		% Change
Semiconductor Test	$	217.2	$	182.3	19.1	%
Systems Test Group		56.1		55.8	0.5	%

	$	273.3	$	238.1	14.8	%

Semiconductor Test orders increased 19.1% driven by more demand across a wide range of end markets, applications and geographies. Additionally, there was a mix shift compared to prior year with subcontractors making up a larger percentage of orders. Semiconductor Test business is dependent on the current and anticipated market for test equipment, which historically has been highly cyclical.

Systems Test Group increase in orders was primarily due to increased military/aerospace board test program-related bookings partially offset by a decrease in automotive test and commercial board test orders. Automotive test orders are program related and have significant fluctuations. The decrease in automotive test bookings was primarily due to a large program rollout in 2006 for the Vehicle Measurement Module product line.

backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules and/or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition and results of operations.

Net bookings by region as a percentage of total net bookings were as follows:


	For the Three Months Ended
	September 30, 2007		October 1, 2006
United States	22.5	%	31.2	%
South East Asia	19.1		18.5
Taiwan	15.2		6.8
Singapore	13.5		10.2
Europe	10.5		15.5
Japan	9.5		10.8
Korea	9.2		5.7
Rest of World	0.5		1.3

	100	%	100	%

Backlog of unfilled orders for our two reportable segments was as follows (dollars in millions):


	For the Three Months Ended
	September 30, 2007		October 1, 2006
Semiconductor Test	$	224.5	$	207.1
Systems Test Group		93.0		100.9

	$	317.5	$	308.0

Revenue

Net revenues for our two reportable segments were as follows (dollars in millions, except percent changes):


	For the Three Months Ended				% Change
	September 30, 2007		October 1, 2006		% Change
Semiconductor Test	$	243.5	$	282.8	(13.9	)%
Systems Test Group		56.0		71.9	(22.1	%)

	$	299.5	$	354.7	(15.6	)%

The decrease in Semiconductor Test revenue is due to System-On-a-Chip (“SOC”) device units growing at a lower rate in 2007 compared to 2006. This resulted in decreased demand across a wide range of end markets, applications, and geographies.

The decrease in Systems Test Group revenue was due primarily to the large program rollout in 2006 for the Vehicle Measurement Module product line.

Our sales by region as a percentage of total net sales were as follows:


	For the Three Months Ended
	September 30, 2007		October 1, 2006
United States	19.3	%	22.3	%
South East Asia	17.2		17.8
Singapore	15.3		7.0
Europe	12.9		13.1
Korea	11.7		7.9
Japan	10.6		17.3
Taiwan	10.6		12.3
Rest of the World	2.4		2.3

	100	%	100	%

Gross Profit

Our gross profit was as follows (dollars in millions):


	For the Three Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Gross Profit	$	144.2		$	174.4		$	(30.2	)
Percent of Total Revenue		48.2	%		49.2	%

Gross profit as a percentage of revenue decreased from the third quarter of 2006 to 2007 by 1.0 percentage point. Of the decrease, 2.0 points can be attributed to lower volume in Semiconductor Test offset in part by lower fixed costs and greater manufacturing efficiencies.

We assess the carrying value of our inventory on a quarterly basis by estimating future demand and comparing that demand against on-hand and on-order inventory provisions. Forecasted revenue information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenue demand. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed during the next four quarters, is written down to estimated net realizable value.

During the three months ended September 30, 2007 and October 1, 2006, we scrapped $3.0 million and $5.3 million of inventory, respectively, and sold $0.0 million and $0.7 million of previously written-down or written-off inventory, respectively. As of September 30, 2007, we have inventory related reserves for amounts which had been written-down or written-off totaling $127.5 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows (dollars in millions):


	For the Three Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Engineering and Development	$	52.2		$	51.8		$	0.4
Percent of Total Revenue		17.4	%		14.6	%

The increase of $0.4 million in engineering and development expenses is due to an increase in Semiconductor Test spending related to entry into an adjacent market offset in part by a reduction in variable employee compensation expense in each segment.

Selling and Administrative

Selling and administrative expenses were as follows (dollars in millions):


	For the Three Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Selling and Administrative	$	62.9		$	70.5		$	(7.6	)
Percent of Total Revenue		21.0	%		19.9	%

The decrease of $7.6 million from the third quarter of 2006 to 2007 is primarily the result of:

•

a decrease of $5.4 million in transition expenses, including the consolidation of facilities in Massachusetts and costs associated with the outsourcing of certain information technology functions; and

•

a decrease of $2.1 million in variable employee compensation.

Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the three months ended September 30, 2007. The accrual for severance and benefits is reflected in accrued employees’ compensation and withholdings. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and long-term other accrued liabilities and is expected to be paid out over the lease terms, the latest of which expires in 2012. We expect to pay out approximately $1.7 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $10.3 million as of September 30, 2007.

2007 Activities


(in thousands)	Gain on Sale of Real Estate			Insurance Recovery			Severance and Benefits			Total
Balance at July 1, 2007	$	—		$	—		$	2,249		$	2,249
(Credits)/charges		(3,628	)		(1,782	)		2,285			(3,125	)
Cash receipts/(payments)		3,628			1,782			(1,679	)		3,731

Balance at September 30, 2007	$	—		$	—		$	2,855		$	2,855

During the three months ended September 30, 2007, we recorded the following 2007 restructuring activities:

•

$3.6 million gain on the sale of land and building in Deerfield, Illinois;

•

$1.8 million of cash proceeds recovered from insurance related to a facility fire in Taiwan; and

•

$2.3 million of severance charges related to headcount reductions of 57 people across all functions and segments.

The restructuring actions taken during the three months ended September 30, 2007, are expected to generate quarterly cost savings of approximately $1.1 million.

2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Total
Balance at July 1, 2007	$	335		$	167		$	502
Charges		—			6			6
Cash payments		(154	)		(78	)		(232	)

Balance at September 30, 2007	$	181		$	95		$	276

Pre-2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Total
Balance at July 1, 2007	$	7,353		$	400		$	7,753
Cash payments		(523	)		(150	)		(673	)

Balance at September 30, 2007	$	6,830		$	250		$	7,080

Interest Income and Expense

Interest income decreased to $7.8 million for the third quarter of 2007 from $12.5 million in the third quarter of 2006, due to lower cash balances primarily from the repayment of our 3.75% Convertible Notes (the “Notes”) in the fourth quarter of 2006 and stock repurchases made beginning in the second half of 2006. Interest expense decreased to $0.1 million in the third quarter of 2007 from $3.5 million in the third quarter of 2006, due primarily to the repayment of the Notes.

Income Taxes

The tax expense of $4.7 million and $9.9 million for the third quarter of 2007 and 2006, respectively consists primarily of foreign taxes. As a result of incurring significant operating losses from 2001 through 2003, we determined that it is more likely than not that our deferred tax assets may not be realized, and since the fourth quarter of 2002 we have established a full valuation allowance for our net deferred tax assets. If we generate sustained future taxable income against which these tax attributes may be applied, some portion or all of the valuation allowance would be reversed. If the valuation allowance were reversed, a portion would be recorded as an increase to additional paid in capital, and the remainder would be recorded as a reduction to income tax expense.

Nine Months of 2007 Compared to Nine Months of 2006

Bookings

Net bookings for our two reportable segments were as follows (in millions, except percent change):


	For the Nine Months Ended				Percent Change
	September 30, 2007		October 1, 2006		Percent Change
Semiconductor Test	$	679.2	$	810.3	(16.2	)%
Systems Test Group		146.7		189.0	(22.4	)

	$	825.9	$	999.3	(17.4	)%

Semiconductor Test orders decreased 16% driven by less demand across a wide range of end markets, applications and geographies, as SOC device units grew at a lower rate in 2007 than in 2006. Semiconductor Test business is dependent on the current and anticipated market for test equipment, which historically has been highly cyclical.

Systems Test Group orders decreased 22% primarily due to a decrease in automotive test. Automotive test orders are program related and have significant fluctuations. The decrease in automotive test bookings was primarily due to a large program rollout in 2006 for the Vehicle Measurement Module product line.

Customers may delay delivery of products or cancel orders suddenly and without significant notice, subject to possible cancellation penalties. Due to possible changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules and/or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition and results of operations.

Net bookings by region as a percentage of total net bookings were as follows:


	For the Nine Months Ended
	September 30, 2007		October 1, 2006
United States	20.4	%	25.0	%
Taiwan	17.0		12.3
Singapore	15.1		12.0
South East Asia	16.3		17.4
Japan	11.0		12.5
Europe	10.6		13.4
Korea	8.8		6.4
Rest of the World	0.8		1.0

	100	%	100	%

Revenue

Net revenues for our two reportable segments were as follows (in millions, except percent changes):


	For the Nine Months Ended				% Change
	September 30, 2007		October 1, 2006		% Change
Semiconductor Test	$	668.2	$	892.3	(25.1	)%
Systems Test Group		173.7		205.3	(15.4	)

	$	841.9	$	1,097.6	(23.3	)%

Semiconductor Test revenue decrease is attributed to decreased demand across a wide range of end markets, applications and geographies as SOC device units grew at a lower rate in 2007 than in 2006.

The decrease in Systems Test Group revenue is due to a decrease in automotive test revenue due primarily to the large program rollout in 2006 for the Vehicle Measurement Module product line.

Our sales by region as a percentage of total net sales were as follows:


	For the Nine Months Ended
	September 30, 2007		October 1, 2006
United States	22.7	%	21.5	%
Singapore	15.5		10.9
South East Asia	15.3		19.2
Europe	12.4		14.2
Taiwan	12.2		14.4
Japan	11.6		11.9
Korea	7.8		6.4
Rest of the World	2.5		1.5

	100	%	100	%

Gross Profit

Our gross profit was as follows (dollars in millions):


	For the Nine Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Gross Profit	$	394.9		$	532.1		$	(137.2	)
Percent of Total Revenue		46.9	%		48.5	%

The decrease in gross profit as a percentage of revenue from the first nine months of 2006 to 2007 was primarily the result of lower volume in Semiconductor Test and to a lesser extent a revenue mix shift towards service in 2007, together accounting for 4.5 points of the decrease. This decrease was partially offset by 2.9 points resulting from the 2006 charge in non-FLEX inventory writedowns in Semiconductor Test as well as lower fixed manufacturing costs in the first nine months of 2007 compared to the first nine months of 2006.

Included in gross profit for the nine months ended October 1, 2006 is an inventory provision of $8.0 million related to non-FLEX products. During the nine months ended September 30, 2007 and October 1, 2006, we scrapped $12.8 million and $17.1 million of inventory, respectively, and sold $0.6 million and $2.8 million of previously written-down or written-off inventory, respectively. As of September 30, 2007, we have inventory related reserves for amounts which had been written-down or written-off of $127.5 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows (dollars in millions):


	For the Nine Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Engineering and Development	$	153.9		$	154.2		$	(0.3	)
Percent of Total Revenue		18.3	%		14.0	%

The decrease of $0.3 million in engineering and development expenses is due to a reduction in variable employee compensation expense in each segment offset in part by an increase in Semiconductor Test spending related to entry into an adjacent market.

Selling and Administrative

Selling and administrative expenses were as follows (dollars in millions):


	For the Nine Months Ended						Period Change
	September 30, 2007			October 1, 2006			Period Change
Selling and Administrative	$	188.6		$	214.8		$	(26.2	)
Percent of Total Revenue		22.4	%		19.6	%

The decrease of $26.2 million from the third quarter of 2006 to 2007 is primarily the result of:

•

a decrease of $13.5 million in transition expenses, including the consolidation of facilities in Massachusetts and costs associated with the outsourcing of certain information technology functions; and

•

a decrease of $11.3 million in variable employee compensation.

Restructuring and Other, Net

The tables below represent activity related to restructuring and other, net, in the nine months ended September 30, 2007. The accrual for severance and benefits is reflected in accrued employees’ compensation and withholdings. The accrual for lease payments on vacated facilities is reflected in other accrued liabilities and long-term other accrued liabilities and is expected to be paid out over the lease terms, the latest of which expires in 2012. We expect to pay out approximately $1.7 million against the lease accruals over the next twelve months. Our future lease commitments are net of expected sublease income of $10.3 million as of September 30, 2007.

2007 Activities


(in thousands)	Gain on Sale of Real Estate			Insurance Recovery			Vacated Facility Related			Severance and Benefits			Total
Balance at December 31, 2006	$	—		$	—		$	—		$	—		$	—
(Credits)/charges		(3,597	)		(1,782	)		53			6,417			1,091
Cash receipts/(payments)		3,597			1,782			(53	)		(3,593	)		1,733

Balance at September 30, 2007	$	—		$	—		$	—		$	2,824		$	2,824

During the nine months ended September 30, 2007, we recorded the following 2007 restructuring activities:

•

$3.6 million gain on the sale of land and building in Deerfield, Illinois; and

•

$1.8 million of cash proceeds recovered from insurance related to a facility fire in Taiwan.

•

$6.4 million of severance charges related to headcount reductions of 196 people across all functions and segments; and

The restructuring actions taken during the nine months ended September 30, 2007, are expected to generate quarterly cost savings of approximately $3.3 million.

2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Total
Balance at December 31, 2006	$	625		$	1,865		$	2,490
Credits		—			(135	)		(135	)
Cash payments		(444	)		(1,635	)		(2,079	)

Balance at September 30, 2007	$	181		$	95		$	276

Pre-2006 Activities


(in thousands)	Vacated Facility Related			Severance and Benefits			Gain on Sale of Product Lines			Total
Balance at December 31, 2006	$	9,604		$	1,183		$	—		$	10,787
Credits		(69	)		(285	)		(906	)		(1,260	)
Cash (payments)/receipts		(2,705	)		(648	)		906			(2,447	)

Balance at September 30, 2007	$	6,830		$	250		$	—		$	7,080

During the nine months ended September 30, 2007, Teradyne recorded the following pre-2006 restructuring activities:

•

$0.3 million credit for revised estimates on severance payments; and

•

$0.9 million credit for earn-out payments received in the Systems Test Group from product line divestiture.

In-process Research and Development

On March 7, 2007, we purchased in-process enabling test technology and hired certain engineers from MOSAID Technologies Inc. for $17.6 million, which includes $0.6 million in fees directly related to the acquisition. Of the purchase price, $16.7 million was allocated to in-process research and development and therefore was immediately charged to the statement of operations. The balance of the purchase price was allocated to acquired workforce and fixed assets.

This technology was acquired for use in the development of a new semiconductor test product. As of the acquisition date, the technology had not reached technical feasibility, had no alternative future use and its fair value was estimable with reasonable reliability, and therefore has been classified as in-process research and development. The technology is unique to the semiconductor test market and requires significant development. The estimated fair value of the in-process technology was determined based on the use of a discounted cash flow model using an income approach. Estimated cash flows were probability adjusted to take into account the stage

of completion and the risks surrounding successful development and commercialization of the in-process technology. Such a valuation requires significant estimates and assumptions including but not limited to determining the timing and estimated costs to complete the in-process project as well as the estimated cash flows to be generated as a result of completing the project development.

Interest Income and Expense

Interest income decreased to $27.2 million for the first nine months of 2007 from $33.6 million in the first nine months of 2006 due to lower cash balances from the repayment of our Notes in the fourth quarter of 2006 and stock repurchases made beginning in the second half of 2006. Interest expense decreased to $0.6 million in the first nine months of 2007 from $10.4 million in the first nine months of 2006 due primarily to the repayment of the Notes.

Income Taxes

The tax expense of $9.6 million and $27.9 million for the first nine months of 2007 and 2006, respectively, consists primarily of foreign taxes. As a result of incurring significant operating losses from 2001 through 2003, we determined that it is more likely than not that our deferred tax assets may not be realized, and since the fourth quarter of 2002 we have established a full valuation allowance for our net deferred tax assets. If we generate sustained future taxable income against which these tax attributes may be applied, some portion or all of the valuation allowance would be reversed. If the valuation allowance were reversed, a portion would be recorded as an increase to additional paid in capital, and the remainder would be recorded as a reduction to income tax expense.

Contractual Obligations

As of September 30, 2007, our purchase obligations with vendors totaled $140.3 million.

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balance decreased $197.0 million in the first nine months of 2007, to $747.7 million. Cash and cash equivalents activity for the first nine months of 2007 and 2006 was as follows (in millions):


	For the Nine Months Ended
	September 30, 2007			October 1, 2006
Cash provided by operating activities:
Net income from continuing operations, adjusted for non-cash items	$	139.7		$	244.2
Changes in operating assets and liabilities, net of product lines and businesses sold		(96.3	)		98.2
Cash (used for) discontinued operations		(3.1	)		(0.5	)

Total cash provided by operating activities		40.3			341.9

Cash (used for) provided by investing activities from continuing operations		(9.3	)		203.7
Cash provided by (used for) investing activities from discontinued operations		10.8			(0.3	)

Total cash provided by investing activities		1.5			203.4

Total cash used for financing activities		(180.7	)		(131.0	)

(Decrease)/increase in cash and cash equivalents	$	(138.9	)	$	414.3

Changes in operating assets and liabilities used cash of $96.3 million in the first nine months of 2007 due primarily to an increase in accounts receivable of $75.9 million and a decrease in income taxes payable of $30.8 million for taxes paid primarily in foreign jurisdictions. Accounts receivable increased $75.8 million, primarily in the Semiconductor Test segment, partially due to increased volume since the end of the year and partially due to an increase in days sales outstanding from 65 days as of December 31, 2006 to 71 days as of September 30, 2007 due to an increase in extended payment terms to certain customers which are generally secured by bank letters of credit. Inventory decreased $27.3 million in the first nine months of 2007 primarily in our Semiconductor Test and to a lesser extent in the Systems Test Group. Changes in operating assets and liabilities provided cash of $98.2 million in the first nine months of 2006 due primarily to a $66.8 million decrease in inventory as a result of shorter final configuration and test cycle time with our Flex products. We contributed $20.0 million to the U.S. pension plan and $5.3 million to the U.K. pension plan during the nine months ended October 1, 2006.

Investing activities consist of purchases of capital assets, the acquisition of technology for $17.6 million in the first quarter of 2007, proceeds from sales of buildings or product lines as well as the purchase, sale and maturity of marketable securities. Capital expenditures decreased by $18.6 million in the first nine months of 2007 compared to the first nine months of 2006 primarily in the Semiconductor Test due to a decrease in spending on internally manufactured test systems.

Financing activities represent the sale of our common stock, repurchases of our common stock and payments on our convertible senior notes and other debt. During the nine months ended September 30, 2007, we repurchased 13.1 million shares of our common stock for $203.6 million at an average price of $15.52 per share. During the nine months ended October 1, 2006, we repurchased $39.3 million of our Notes.

We believe our cash, cash equivalents and marketable securities balance of $747.4 million will be sufficient to meet working capital and expenditure needs for at least the foreseeable future. Inflation has not had a significant long-term impact on earnings.

Equity Compensation Plans

In addition to our 1996 Employee Stock Purchase Plan discussed in “Note O: Stock Based Compensation” in our 2006 Form 10-K, we have a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”), a cash and equity compensation incentive plan.

The purpose of the 1996 Employee Stock Purchase Plan is to encourage stock ownership by all eligible employees of Teradyne. The purpose of the 2006 Equity Plan is to provide equity ownership and compensation opportunities in Teradyne to our employees, officers, directors, consultants and/or advisors. Both plans were approved by our shareholders.

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 which establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting this standard.

Certain Factors That May Affect Future Results

From time to time, information we provide, statements made by our employees or information included in our filings with the SEC (including this Form 10-Q) contain statements that are not purely historical, but are forward looking statements, made under Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which involve risks and uncertainties. In particular, forward looking statements made herein include projections, plans and objectives for our business, financial condition, operating results, future

operations, or future economic performance, statements relating to the sufficiency of capital to meet working capital requirements, capital expenditures, including future lease payments and commitments and contributions to our pension plan, expectations as to customer orders and demand for our products and statements relating to backlog, bookings and cancellations, gross margins and pricing considerations. These statements are neither promises nor guarantees but involve risks and uncertainties, both known and unknown, which could cause our actual future results to differ materially from those stated in any forward looking statements. Factors that may cause such differences include, but are not limited to the following:

•

we are subject to intense competition;

•

our business is dependent on the current and anticipated market for electronics, which historically has been highly cyclical;

•

our operating results are likely to fluctuate significantly;

•

we are subject to risks of operating internationally;

•

if we fail to develop new technologies to adapt to our customers’ needs and if our customers fail to accept our new products, our revenues will be adversely affected;

•

if our suppliers do not meet product or delivery requirements, we could have reduced revenues and earnings;

•

our operations may be adversely impacted if our outsourced service providers fail to perform;

•

we have significant guarantees and indemnification obligations;

•

we have taken measures to ensure that we are prepared to address slowdowns in the market for our products, which could have long-term negative effects on our business or impact our ability to adequately address a rapid increase in customer demand;

•

we may incur significant liabilities if we fail to comply with environmental regulations;

•

we currently are and in the future may be subject to litigation that could have an adverse effect on our business;

•

if we are unable to protect our intellectual property, we may lose a valuable asset or may incur costly litigation to protect our rights;

•

our business may suffer if we are unable to attract and retain key employees;

•

we may incur higher tax rates than we expect;

•

our business is impacted by worldwide economic cycles, which are difficult to predict;

•

acts of war, terrorist attacks and the threat of domestic and international terrorist attacks may adversely impact our business;

•

provisions of our charter and by-laws and Massachusetts law make a takeover of Teradyne more difficult; and

•

we may acquire new businesses or form strategic alliances in the future, and we may not realize the benefits of such acquisitions.

These factors, and others, are discussed from time to time in our filings with the SEC, including our Annual Report on Form 10-K filed with the SEC on March 1, 2007 for the year ended December 31, 2006.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Item 7a. “Quantitative and Qualitative Disclosures About Market Risks,” in our Annual Report on Form 10-K filed with the SEC on March 1, 2007. There were no material changes in our exposure to market risk from those set forth in our Annual Report for the fiscal year ended December 31, 2006.

Item 4: Controls and Procedures

As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

PART II. OTHER INFORMATION

Item 1: Legal Proceedings

On September 5, 2001, after our August 2000 acquisition of Herco Technology Corp. and Perception Laminates, Inc., the former owners of those companies filed a complaint against Teradyne and two of our then executive officers in the Federal District Court in San Diego, California, asserting securities fraud and breach of contract related to the acquisition. The District Court dismissed certain of the plaintiffs’ claims, granted partial summary judgment against them with respect to their breach of contract claim and denied their motion for reconsideration. In July 2007, after an appeal by the plaintiffs, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the District Court rulings. We petitioned the Ninth Circuit for rehearing of the ruling that it reversed. In October 2007, the Ninth Circuit denied our petition for rehearing. We will continue to defend the claim that was sent back to the District Court.

In 2001, we were designated as a Potentially Responsible Party (“PRP”) at a clean-up site in Los Angeles, California. This claim arose out of our acquisition of Perception Laminates in August 2000. Prior to that date, Perception Laminates had itself acquired certain assets of Alco Industries Inc. under an asset purchase agreement dated October 20, 1992. Neither Teradyne nor Perception Laminates has ever conducted any operations at the Los Angeles site. We have asked the State of California to drop the PRP designation, but California has not yet agreed to do so.

We believe that we have meritorious defenses against the above unsettled claims and intend to vigorously contest them. While it is not possible to predict or determine the outcomes of the unsettled claims or to provide possible ranges of losses that may arise, we believe the losses associated with all of these actions will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations of any one period.

In addition, we are subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. Although there can be no assurance, there are no such matters pending that we expect to be material with respect to our business, financial position or results of operations.

Item 1A: Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table includes information with respect to repurchases we made of our common stock during the three-month period ended September 30, 2007 (in thousands except per share price):


Period	(a) Total Number of Shares (or units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs (1)
July 2, 2007–July 29, 2007	541	$	17.15	12,828	$	225,350
July 30, 2007–August 26, 2007	8,495	$	15.57	21,323	$	93,041
August 27, 2007–September 30, 2007	2,405	$	14.29	23,728	$	58,672

(1)

In July 2006, our Board of Directors authorized a stock repurchase program. Under the program, we were allowed to spend an aggregate of $400 million to repurchase shares of our common stock in open market repurchases, in privately negotiated transactions or through other appropriate means over the next two years. As of October 2007, we completed our authorized stock repurchase program. Since the inception of the program in the third quarter of 2006 we repurchased 27,947,230 shares at an average price of $14.31 per share.

Item 5: Other Information

On November 7, 2007, our Board of Directors authorized a new stock repurchase program. Under the program we are permitted to spend an aggregate of $400 million to repurchase shares of our common stock in open market purchases, in privately negotiated transactions or through other means. Shares are to be repurchased at our discretion, subject to market conditions and other factors.

Item 6: Exhibits


Exhibit Number		Description
3.1		Amended and Restated By-laws of Teradyne (as amended on May 24, 2007) (filed herewith).

10.1†		Standard Manufacturing Agreement entered into as of November 24, 2003 by and between Teradyne and Solectron Corporation (“Solectron”) (filed herewith).

10.2†		Amendment 1 to Standard Manufacturing Agreement, dated as of January 18, 2007, by and between Teradyne and Solectron (filed herewith).

10.3†		Second Amendment to Standard Manufacturing Agreement, dated as of August 27, 2007, by and between Teradyne and Solectron (filed herewith).

31.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) of Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

† Confidential Treatment requested.

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.

Registrant

/s/ G REGORY R. B EECHER

Gregory R. Beecher

Vice President,
Chief Financial Officer and Treasurer

(Duly Authorized Officer
and Principal Financial Officer)

November 9, 2007

Exhibit 3.1

[ANNOTATED]

****************

AMENDED AND RESTATED

BY-LAWS

TERADYNE, INC.

(Amended and Restated as of May 24, 2007)

****************

ARTICLE I

Name, Location, Seal and Fiscal Year

1. Name . The name of the corporation is Teradyne, Inc.

2. Location . The corporation may have an office and transact business in Boston, Massachusetts, and at such other place or places as the Board of Directors or stockholders may appoint.

3. Seal . The seal of the corporation shall bear the name of the corporation, the word Massachusetts, the year of incorporation and such other device or inscription as the Board of Directors may determine. The form of the seal may be changed by the Board of Directors.

4. Fiscal Year . The fiscal year of the corporation shall, unless otherwise determined by the Board of Directors, begin on January 1 and end on December 31.

ARTICLE II

Stockholders

1. Annual Meeting . The annual meeting of stockholders shall be held on such date and at such time and place (within the United States) as may be fixed by the Board of Directors from time to time. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, the Articles of Organization or these By-Laws, may be specified by the Directors, the Chief Executive Officer or the President. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu thereof, and any action taken at such meeting shall have the same effect as if taken at the annual meeting.

Except as provided in Article III, Section 2, the only business which may be conducted at any such meeting of the stockholders shall (a) have been specified in the written notice of meeting (or any supplement thereto) given by or at the direction of the Directors, the Chief Executive Officer or the President, (b) have otherwise been properly brought before the meeting by or at the direction of the Directors, the Chief Executive Officer or the President, or (c) have otherwise been properly brought before the meeting by or on behalf of any stockholder who shall have been a stockholder of record on the record date for such meeting and who shall continue to be entitled to vote thereat. In addition to any other applicable requirements, for business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than fifty (50) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than sixty-five (65) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the fifteenth day following the day on which notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder’s notice to the Secretary shall set forth as to each matter

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the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of capital stock of the corporation held of record, owned beneficially and represented by proxy by such stockholder as of the record date for the meeting (if such date shall then have been made publicly available) and as of the date of such notice by the stockholder, and (iv) all other information which would be required to be included in a proxy statement filed with the Securities and Exchange Commission if, with respect to any such item of business, such stockholder were a participant in a solicitation subject to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Proxy Rules”).

Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the meeting except in accordance with the procedures set forth in this Article II, provided, however, that nothing in this Article II shall be deemed to preclude discussion by any stockholder of any business properly brought before the meeting.

The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article II, and if he should so determine, he shall so declare to the meeting and that business shall be disregarded. [Section 1 restated March 13, 1991, May 23, 1996 and July 1, 2004.]

2. Special Meetings . Special meetings of stockholders may be called by the Chief Executive Officer, the President or by the Directors. A special meeting shall be called by the Secretary, or in case of the death, absence, incapacity or refusal of the Secretary, by any other officer, upon written application of one or more stockholders who hold at least 66-2/3% in interest of the capital stock entitled to vote at a meeting (or such lesser percentage in interest as shall be the maximum percentage permitted under Massachusetts law). The call for the meeting shall state the date, hour and place and the purposes of the meeting. [Section 2 restated September 14, 1989, May 23, 1996 and July 1, 2004.]

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3. Place of Meetings . All meetings of stockholders shall be held at the principal office of the corporation unless a different place (within the United States) is fixed by the Directors, the Chief Executive Officer or the President and stated in the notice of the meeting. [Section 3 restated May 23, 1996.]

4. Notice of Meetings . A written notice of every meeting of stockholders, stating the place, date and hour thereof, and the purpose for which the meeting is to be held, shall be given by the Secretary or by the person calling the meeting at least seven days before the meeting or such longer period as required by law to each stockholder entitled to vote thereat and to each stockholder who by law, the Articles of Organization or these By-Laws is entitled to such notice, by (i) leaving such notice with him or at his residence or usual place of business, (ii) mailing it postage prepaid and addressed to such stockholder at his address as it appears upon the books of the corporation or (iii) sending such notice via electronic mail to the stockholder’s electronic mail address as it appears upon the books of the corporation. No notice need be given to any stockholder if a written waiver of notice, executed before or after the meeting by the stockholder or his attorney thereunto authorized, is filed with the records of the meeting. [Section 4 restated July 1, 2004.]

5. Quorum . The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum, but a lesser number may adjourn any meeting from time to time without further notice; except that if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class a quorum shall consist of the holders of a majority in interest of the stock of that class issued, outstanding and entitled to vote.

6. Voting and Proxies . Each stockholder shall have one vote for each share of stock entitled to vote held by him of record according to the records of the corporation unless otherwise provided by the Articles of Organization. Stockholders may vote in person or by written proxy. Proxies shall be filed with the Secretary of the meeting, or of any adjournment thereof, before being voted. No proxy dated more than eleven months before the meeting named therein shall be

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valid and no proxy shall be valid after the final adjournment of such meeting. Notwithstanding the provisions of the preceding sentence, a proxy coupled with an interest sufficient in law to support an irrevocable power, including, without limitation, an interest in shares or in the corporation generally, may be made irrevocable if it so provides, need not specify the meeting to which it relates, and shall be valid and enforceable until the interest terminates, or for such shorter period as may be specified in the proxy. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. [Section 6 restated July 1, 2004.]

7. Action at Meeting . When a quorum is present, the holders of a majority of the stock present or represented and voting on a matter, (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) except where a larger vote is required by law, the Articles of Organization or these By-Laws, shall decide any matter to be voted on by the stockholders. Each Director shall be elected by a majority of the votes cast with respect to the Director at any meeting for the election of Directors at which a quorum is present, provided that if the number of nominees exceeds the number of Directors to be elected, the Directors shall be elected by a plurality of the votes cast by stock represented in person or by proxy at any such meeting and entitled to vote on the election of Directors. For purposes of this Section, a majority of the votes cast means that the number of votes cast “for” a Director must exceed the number of votes cast “against” that Director. No ballot shall be required for such election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. The corporation shall not directly or indirectly vote any share of its stock, provided, however, that notwithstanding the foregoing, the corporation may vote shares of its

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own stock held by it, directly or indirectly, in a fiduciary capacity. [Section 7 amended May 24, 2007.]

8. Procedure for Meeting . The Secretary, who may call on any officer or officers of the corporation for assistance, shall make all necessary and appropriate arrangements for the meetings of the stockholders, receive all proxies, and ascertain and report by certificate to each meeting of the stockholders the number of shares present in person or by proxy and entitled to vote at such meeting. In the absence of the Secretary, an Assistant Secretary shall perform said duties. The certificate of the Secretary or an Assistant Secretary as to the regularity of such proxies and as to the number of shares present in person or by proxy and entitled to vote at such meeting shall be received as prima facie evidence of the number of shares which are present in person and by proxy and entitled to vote, for the purpose of establishing the presence of a quorum at such meeting, for the purpose of organizing such meeting, and for all other purposes. [Section 8 restated July 1, 2004.]

9. Inspectors . At each meeting of the stockholders, (i) the proxies shall be received and taken in charge by three inspectors, (ii) where voting is to be by ballot on any question, the polls shall be opened and closed and the ballots shall be taken in charge by such inspectors, and (iii) all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by such three inspectors or a majority thereof. Such inspectors may be appointed by the Board of Directors before such meeting, or, if no such appointment shall have been made, then by the presiding officer at such meeting. In the event for any reason any of the inspectors previously appointed shall fail to attend such meeting, or being present will not or cannot act in such capacity, then an inspector or inspectors in place of such inspector or inspectors failing to attend or not acting shall be appointed by the presiding officer.

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ARTICLE III

Directors

1. Powers . The business of the corporation shall be managed by a Board of Directors who may exercise all the powers of the corporation except as otherwise provided by law, by the Articles of Organization or by these By-Laws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled.

2. Nomination and Election . The Board of Directors shall consist of not less than three (3) nor more than fifteen (15) persons. The number of the Board of Directors for each year shall be fixed by vote of a majority of the Directors then in office. Until the 2008 annual meeting of stockholders, the Board of Directors shall be classified with respect to the time for which they severally hold office, as provided in Section 8.06 of Chapter 156D of the Massachusetts General Laws, into three classes, as nearly equal in number as possible, the term of office of those of the first class (“Class I Directors”) to continue until the 1990 annual meeting of stockholders and until their successors are duly elected and qualified, the term of office of those of the second class (“Class II Directors”) to continue until the 1991 annual meeting of stockholders and until their successors are duly elected and qualified, and the term of those of the third class (“Class III Directors”) to continue until the 1992 annual meeting of stockholders and until their successors are duly elected and qualified. The terms of all directors in office immediately prior to the opening of the polls for the 2008 annual meeting of stockholders shall expire at the time of the opening of the polls for the 2008 annual meeting of stockholders. At the 2008 annual meeting of stockholders and at each succeeding annual meeting of stockholders, each director shall be elected to hold office for a term continuing until the next annual meeting of stockholders and until his or her successor shall have been duly elected and qualified. [Section 2 amended January 22, 2007.]

Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors at the annual meeting may be made at the annual meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of

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Directors or by any stockholder entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Article III. Nominations, other than those made by or at the direction of the Board of Directors or the nominating committee of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than fifty (50) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than sixty-five (65) days’ notice of prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such stockholder’s notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the citizenship of the person, (iv) the class and number of shares of capital stock of the corporation which are beneficially owned by the person, and (v) any other information relating to the person that is required to be disclosed in solicitations of proxies for election of directors pursuant to the Proxy Rules; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class and number of shares of capital stock of the corporation which are beneficially owned by the stockholder as of the record date for the meeting (if such date shall then have been made publicly available) and as of the date of such notice, (iii) a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iv) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder, (v) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the Proxy

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Rules and (vi) the consent of each nominee to serve as a Director of the corporation if so elected. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as Director.

Additionally, any stockholder may suggest candidates for consideration by the nominating committee of the Board of Directors by submitting the candidate’s name, experience and other relevant information to the nominating committee of the Board of Directors. The nominating committee of the Board of Directors will review any candidate recommended to it and will notify the stockholder who made such recommendation of its conclusion with respect to the candidate. If the nominating committee determines that such candidate is qualified and eligible to be a nominee, it shall so notify the Board of Directors.

No person shall be eligible for election as a Director unless nominated in accordance with the procedures set forth herein. [Section 2 restated January 28, 1997 and July 1, 2004.]

3. Vacancies . Vacancies and newly created directorships, whether resulting from an increase in the size of the Board of Directors, from the death, resignation, disqualification or removal of a Director or otherwise, shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term in which the vacancy occurred or the new directorship was created and until such Director’s successor shall have been elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. [Section 3 restated March 13, 1991 and amended on January 22, 2007.]

4. Enlargement of the Board . The number of the Board of Directors may be increased and one or more additional Directors elected by vote of a majority of the Directors then in office. [Section 4 restated March 13, 1991.]

5. Resignation . Any Director may resign by delivering his written resignation to the corporation at its principal office or to the Chief Executive Officer, President, Secretary or

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Assistant Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. [Section 5 restated March 13, 1991, May 23, 1996 and July 1, 2004.]

6. Removal . Any Director may be removed from office only (a) for cause as defined in Section 8.06(f)(2) of Chapter 156D of the Massachusetts General Laws and by the affirmative vote of a majority of the shares of the corporation outstanding and entitled to vote in the election of Directors or (b) for cause by vote of a majority of the Directors then in office. [Section 6 restated July 1, 2004.]

7. Meetings . Regular meetings of the Directors may be held without call or notice at such places and at such times as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice at the same place as the annual meeting of stockholders, or the special meeting held in lieu thereof, following such meeting of stockholders. Special meetings of the Directors may be held at any time and place designated in a call by the Chief Executive Officer, President, Treasurer or two or more Directors. [Section 7 restated May 23, 1996.]

8. Notice of Meetings . Notice of all special meetings of the Directors shall be given to each Director by the Secretary or Assistant Secretary, or in the case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or by telephone or by telegram sent to his business or home address at least forty-eight hours in advance of the meeting or by written notice mailed to his business or home address at least seventy-two hours in advance of the meeting. Notice need not be given to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors’ meeting need not specify the purposes of the meeting. [Section 8 restated July 1, 2004.]

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9. Quorum . At any meeting of the Directors, a majority of the Directors then in office shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice.

10. Action at Meeting . At any meeting of the Directors at which a quorum is present, the vote of a majority of those present, unless a different vote is specified by law, the Articles of Organization or these By-Laws, shall be sufficient to decide such matter.

11. Action by Consent . Any action by the Directors may be taken without a meeting if a written consent thereto is signed by all of the Directors and filed with the records of the Directors’ meetings. Such consents shall be treated as a vote of the Directors for all purposes.

12. Committees . The Directors may, by vote of a majority of the Directors then in office, elect from their number an executive or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Articles of Organization or these By-Laws they are prohibited from delegating. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By-Laws for the Directors.

ARTICLE IV

Officers

1. Enumeration . The officers of the corporation shall consist of a President, a Treasurer, a Secretary, and such other officers, including a Chief Executive, one or more Vice-Presidents, Assistant Treasurers, Assistant Secretaries as the Directors may determine. [Section 1 restated May 23, 1996 and July 1, 2004.]

2. Election . The President, Treasurer and Secretary shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may

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be chosen by the Directors at such meeting or at any other meeting. [Section 2 restated July 1, 2004].

3. Qualification . The President (and if so appointed by the Board of Directors, the Chief Executive Officer) may, but need not, be a Director. No officer need be a stockholder. Any one or more officers may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. [Section 3 restated May 23, 1996.]

4. Tenure . Except as otherwise provided by law, the Articles of Organization or these By-Laws, the President, Treasurer and Secretary shall each hold office until the first meeting of the Directors following the annual meeting of stockholders and thereafter until a successor is chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the annual meeting of stockholders, unless a shorter term is specified in the vote choosing or appointing them. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President or Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. [Section 4 restated July 1, 2004.]

5. Removal . The Directors may remove any officer with or without cause by vote of a majority of the entire number of Directors then in office; provided, that an officer may be removed for cause only after a reasonable notice and opportunity to be heard by the Board of Directors prior to action thereof.

6. President, Chief Executive Officer and Vice-President . If a Chief Executive Officer has been appointed by the Board of Directors, he shall be the chief executive officer of the corporation and shall, subject to the direction of the Directors, have general supervision and control of its business. If the Board of Directors has not appointed a Chief Executive Officer, the President shall be the chief executive officer of the corporation and shall, subject to the direction of the Directors, have general supervision and control of its business. Unless otherwise provided by the Directors, the President (or if at any time there exists a Chief Executive Officer, the Chief

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Executive Officer) shall preside, when present, at all meetings of stockholders and of the Directors. [Section 6 restated May 23, 1996.]

Any Vice-President (and the President, if at any time there is a Chief Executive Officer) shall have such powers as the Directors may from time to time designate.

7. Treasurer and Assistant Treasurers . The Treasurer shall, subject to the direction of the Directors, have general charge of the financial affairs of the corporation and shall cause to be kept accurate books of account. He shall have custody of all funds, securities, and valuable documents of the corporation, except as the Directors may otherwise provide.

Any Assistant Treasurer shall have such powers as the Directors may from time to time designate.

8. Secretary and Assistant Secretaries . The Secretary shall keep a record of the meetings of stockholders. Unless a Transfer Agent is appointed, the Secretary shall keep or cause to be kept in Massachusetts, at the principal office of the corporation, the stock and transfer records of the corporation, in which are contained the names and the record addresses of all stockholders and the amount of stock held by each.

The Secretary shall keep a record of the meetings of the Directors.

Any Assistant Secretary shall have such powers as the Directors may from time to time designate. In the absence of the Secretary from any meeting of stockholders, an Assistant Secretary if one be elected, and otherwise a Temporary Secretary designated by the person presiding at the meeting, shall perform the duties of the Secretary. [Section 8 restated July 1, 2004.]

9. Other Powers and Duties . Each officer shall, subject to these By-Laws, have in addition to the duties and powers specifically set forth in these By-Laws, such duties and powers as are customarily incident to his office, and such duties and powers as the Directors may from time to time designate.

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ARTICLE V

Capital Stock

1. Issuance of Stock . The Board of Directors shall have the power to issue from time to time shares of the capital stock of the corporation for such consideration, in such installments, and upon such terms as the Directors may determine in accordance with the law, the Articles of Organization or these By-Laws.

2. Certificates of Stock . Each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the Chief Executive Officer, the President or a Vice President, and by the Treasurer or an Assistant Treasurer, but when a certificate is countersigned by a Transfer Agent or a Registrar other than a Director, officer or employee of the corporation, such signatures may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue.

Every certificate for shares of stock which are subject to any restriction on transfer pursuant to the Articles of Organization, these By-Laws or any agreement to which the corporation is a party, shall have the restriction noted conspicuously on the certificate and shall also set forth on the face or back either the full text of the restriction or a statement of the existence of such restriction and a statement that the corporation will furnish a copy to the holder of such certificate upon written request and without charge. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series authorized to be issued or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the

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corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.

3. Transfers . Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its Transfer Agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the corporation or its Transfer Agent may reasonably require. Except as may be otherwise required by law, the Articles of Organization or these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereof, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-Laws.

It shall be the duty of each stockholder to notify the corporation or its Transfer Agent of his post office address.

4. Transfer Agent and Registrar . The Directors shall have power to appoint one or more Transfer Agents and Registrars for the transfer and registration of certificates of stock of any class, and may require that stock certificates shall be countersigned and registered by one or more of such Transfer Agents and Registrars. The resolutions adopted by the Board of Directors, appointing and conferring the powers, rights, duties and obligations of the Transfer Agent or Registrar, or both, shall allocate and delimit the power to make original issue and transfer of the capital stock of the corporation, shall specify whether stockholders shall give notice of changes of their addresses to the Transfer Agent or the Registrar, and shall allocate and impose the duty of maintaining the original stock ledgers or transfer books, or both, of the corporation, and of disclosing the names of the stockholders, the number of shares held by each, by kinds and classes, and the address of each stockholder as it appears upon the records of the corporation. Stockholders shall be responsible for notifying the Transfer Agent or Registrar, as the case may

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be, in writing, of any changes in their addresses from time to time, and failure so to do will relieve the corporation, its stockholders, officers, Directors, Transfer Agent and Registrar, of liability for failure to direct notices, dividends, or other documents or property to an address other than the one appearing upon the records of the Transfer Agent or Registrar, as the case may be, who is the agent specified in such a resolution as the agent to receive notices of changes of address.

5. Lost, Stolen or Destroyed Certificates . The corporation may issue a new certificate for shares of stock in the place of any certificate theretofore issued and alleged to have been lost, stolen or destroyed, but the Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his legal representative, to furnish affidavit as to such loss, theft or destruction, and to give a bond in such form and substance, and with such surety or sureties, with fixed or open penalty, as it may direct, to indemnify the corporation and the Transfer Agent or Registrar against any claim that may be made on account of the alleged loss, theft or destruction of such certificate.

6. Record Date . The Directors may fix in advance a time of not more than seventy days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or the making of any distribution to stockholders, or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date the Directors may for any of such purposes close the transfer books for all or any part of such period. [Section 6 restated July 1, 2004.]

7. Reacquisition of Stock . Shares of stock previously issued which have been reacquired by the corporation, may be restored to the status of authorized but unissued shares by vote of the Board of Directors, without amendment of the Articles of Organization.

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ARTICLE VI

Protection of Directors and Officers

1. Contracts and Transactions with Interested Directors and Officers . If the corporation enters into contracts or other transactions with one or more of its Directors and officers or with any corporation, partnership, association, trust, or other organization with which any of its Directors or officers are directly or indirectly connected, such contracts or transactions shall not be invalidated or in any way affected by the fact that any such Director or officer has or may have any interest therein which is or might be adverse to the interests of the corporation, even though the vote or votes of the Director or Directors having such interest shall have been necessary to obligate the corporation under or in such contract or transaction, nor shall any such Director or officer, corporation, partnership, association, trust or other organization be liable to account to this corporation for any profit realized by him or such corporation, partnership, association, or trust or other organization from or through any such transaction or contract by reason of the fact that he or such corporation, partnership, association, trust or other organization with which such Director or officer is directly or indirectly connected was interested in such transaction or contract; provided, however, that in every such case the fact of such interest and all material matters concerning same shall be disclosed to other Directors or stockholders authorizing such contract or transaction.

2. Indemnification . (a) Each Director, officer, employee and other agent of the corporation, and any person who, at the request of the corporation, serves as a director, officer, employee or other agent of another organization in which the corporation directly or indirectly owns shares or of which it is a creditor shall be indemnified by the corporation against any cost, expense (including attorneys’ fees), judgment, liability and/or amount paid in settlement reasonably incurred by or imposed upon him in connection with any action, suit or proceeding (including any proceeding before any administrative or legislative body or agency), which he

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may be made a party to or otherwise involved with or with which he shall be threatened, by reason of his being, or related to his status as, a Director, officer, employee or other agent of the corporation or of any other organization in which the corporation directly or indirectly owns shares or of which the corporation is a creditor, which other organization he serves or has served as director, officer, employee or other agent at the request of the corporation (whether or not he continues to be an officer, Director, employee or other agent of the corporation or such other organization at the time such action, suit or proceeding is brought or threatened), unless such indemnification is prohibited by the Massachusetts Business Corporation Act. The foregoing right of indemnification shall be in addition to any rights to which any such person may otherwise be entitled and shall inure to the benefit of the executors or administrators of each such person. The corporation may pay the expenses incurred by any such person in defending a civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit, or proceeding, upon receipt of an undertaking by such person to repay such payment if it is determined that such person is not entitled to indemnification hereunder. This section shall be subject to amendment or repeal only by action of the stockholders.

(b) The Board of Directors may, without stockholder approval, authorize the corporation to enter into agreements, including any amendments or modifications thereto, with any of its Directors, officers or other persons described in paragraph (a) above providing for indemnification of such persons to the maximum extent permitted under applicable law and the corporation’s Articles of Organization and By-Laws. [Section 2(b) added May 8, 1987 and restated July 1, 2004.]

ARTICLE VII

Miscellaneous Provisions

1. Execution of Instruments . All deeds, leases, transactions, contracts, bonds, notes and other obligations authorized to be executed by an officer of the corporation in its behalf shall

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be signed by the Chief Executive Officer, the President or the Treasurer except as the Directors may generally or in particular cases otherwise determine. [Section 1 restated May 23, 1996.]

2. Voting of Securities . Except as the Directors may otherwise designate, the Chief Executive Officer, the President or Treasurer may waive notice of, and appoint any person or persons to act as proxy or attorney in fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. [Section 2 restated May 23, 1996.]

3. Corporate Records . The original, or attested copies, of the Articles of Organization, By-Laws and records of all meetings of the incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the corporation, or at an office of its Transfer Agent or of the Secretary. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose but not to secure a list of stockholders for the purpose of selling said list or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. [Section 3 restated July 1, 2004.]

4. Articles of Organization . All references in these By-Laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation, as amended and in effect from time to time.

5. Amendments . These By-Laws may be amended or repealed in whole or in part at any annual or special meeting of the stockholders by a vote of a majority of the stock present and entitled to vote, provided notice of the proposed amendment or repeal shall have been given in the notice of such meeting. In addition, the Directors may amend or repeal these By-Laws in whole or in part, except with respect to any provision thereof which by law, the Articles of Organization or these By-Laws requires action by the stockholders. Any By-Law adopted by the

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Directors may be amended or repealed by the stockholders in the manner hereinabove in this Article set forth. Not later than the time of giving notice of the meeting of stockholders next following the amending or repealing by the Directors of any By-Law, notice thereof stating the substance of such change shall be given to all stockholders entitled to vote on amending these By-Laws. [Section 5 restated March 13, 1991.]

6. The provisions of Chapter 110D of the Massachusetts General Laws as in effect from time to time shall not apply to control share acquisitions of the corporation. [Section 6 added July 14, 1988.]

Amended and Restated November 12, 1986

Amended May 8, 1987

Amended July 14, 1988

Amended September 14, 1989

Amended and Restated March 13, 1991

Amended and Restated May 23, 1996

Amended and Restated January 28, 1997

Amended and Restated effective July 1, 2004 (approved by the Board of Directors May 27, 2004)

Amended on January 22, 2007

Amended on May 24, 2007

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Exhibit 10.1

CONFIDENTIAL TREATMENT

STANDARD MANUFACTURING AGREEMENT

Solectron Corporation, (“Supplier”) a Delaware corporation whose principal place of business is located at 847 Gibraltar Drive, Milpitas, CA 95035 and Teradyne, Inc., (“Customer”), a Massachusetts corporation whose principal place of business is located at 321 Harrison Ave., Boston, MA 02118 in their desire to formulate a strategic business relationship and to define their expectations regarding this relationship, hereby agree as follows:

1.0	Precedence

1.1.	This Agreement is intended by Supplier and Customer to operate as a basic set of operating conditions regarding their respective business relationship. Product specific requirements and pricing will be mutually agreed to and documented by an addendum to this Agreement.

1.2.	Should any conflict occur, this Agreement and its addenda shall prevail over the terms and conditions of any quotation, purchase order, acknowledgment form or other instrument.

1.3.	This Agreement may be executed in one or more counterparts, each of which will be deemed the original, but all of which will constitute but one and the same document. The parties agree this Agreement and its addenda may not be modified except in writing signed by both parties.

2.0	Definitions

2.1.	The term “Customer” shall be defined as Teradyne, Inc., including all of its domestic and international divisions and subsidiaries.

2.2.

The term “Supplier” shall be defined as Solectron Corporation including, but not limited to, Solectron Technology Singapore Pte. Ltd., Solectron Technology Sdn Bhd, Solectron Netherlands BV and any other Offshore Business Headquarters, and all of its domestic and international divisions and subsidiaries.

2.3.	The term “Product(s)” shall be defined as item(s) manufactured or sold by Supplier and listed in Current Price List and as otherwise agreed in writing by the parties.

2.4.	The term “Purchase Order” shall be defined as Customer’s written authorization to build and ship a specific quantity of item(s) for a specified Delivery Date for a specified price.

2.5.	The term “Cycle Time” shall be defined as the time required to convert piece parts to finished assemblies and deliver to Customer’s facility after issuance of purchase order.

2.6.	The term “Delivery Date” shall be defined as the Product delivery date reflected on Customers purchase order or the latest agreed upon delivery date for rescheduled orders for delivery at Customers location set forth on the purchase order.

* - Confidential Treatment Requested. Omitted portions filed with the Securities and Exchange Commission (“SEC”).

2.7.

“Current Price List” refers to the contract attachment which defines the price of any and all board assemblies to be supplied by Supplier at a specific revision, specific price, specific lead-time, whether in turnkey or consignment or a combination thereof and may be revised by mutual written agreement of the parties.

2.8.

“Non-Standard Components” are components purchased for Products that Supplier purchased on behalf of Customer in performance of a Purchase Order or Forecast that are non-cancelable, non-returnable, have been altered from original packaging and/or received value added services, such as programming, tape and reeling or special customer marking, or unusable in manufacturing for Supplier’s other customers. Such parts shall be identified in writing at time of contract approval or upon release of a new board assembly requirement, which includes such components and shall be resubmitted upon any change to part status at Supplier. Due to the dynamic nature of such listing, Seller may experience changes in designation during the quarter. In such event, if material liability is created due to a forecast change by Buyer, Seller will provide backup data to justify the Buyer liability. Notwithstanding the above, Buyer is liable for standard components that have been altered from original packaging and/or received value added services, such as programming, tape and reeling or special Buyer marking that Seller can not mitigate.

2.9.	The term “Order Policy” refers to the method of controlling inventory by buying different classifications of parts at different intervals and in different increments, as set forth in Supplier’s order policy, see below, which will be reviewed quarterly and modified based on mutual consent.


ORDER POLICY
Parts Classification	% Demand $	Dock to Stock Time	Order Interval / Lot Size (Shop Days)
A	[ ]*%	[ ]*	[ ]*

B	[ ]*%	[ ]*	[ ]*

C	[ ]*%	[ ]*	[ ]*

2.10.

“Consigned Components” are those components Customer will provide to Supplier on a consignment basis at no charge which will be incorporated in the manufacture of the Product.

2.11.

“Turnkey Components” refers to the components provided by Supplier, required to build the board assembly to the required configuration, manufactured and supplied by vendors on the Customer’s approved vendor list (“AVL”) and included in the current price of the Product.

2.12.

“Standard Components” shall be defined as standard product (“off-the-shelf technology”) which is not custom or unique to Customer’s design. These components shall be further defined as those which can be canceled and/or returned to the original supplier or used in other Supplier applications.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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2.13.

“On-Time Delivery” is defined as between [ ]* days prior to and zero (0) days after Delivery Date.

2.14.

“Excess Material” is defined as material purchased and on hand at Supplier in reasonable compliance with a Purchase Order or a Forecast that is in excess of [ ]* of customer demand as projected in the Forecast.

2.15.

“Custom Components” are defined as designed by Customer and are unique to their product. Such parts shall be identified in writing at time of contract approval or upon release of a new board assembly requirement, which includes such components and shall be resubmitted upon any change to part status at Supplier. Due to the dynamic nature of such listing, Seller may experience changes in designation during the quarter. In such event, if material liability is created due to a forecast change by Buyer, Seller will provide backup data to justify the Buyer liability. Notwithstanding the above, Buyer is liable for standard components that have been altered from original packaging and/or received value added services, such as programming, tape and reeling or special Buyer marking that Seller can not mitigate.

2.16.

“Materials” as used in this Agreement is interchangeable with components and/or parts.

2.17.

“Forecast” shall be defined as the rolling 12-month requirement of Products for which Customer intends to place firm Purchase Orders. Forecasts shall be updated on a weekly basis and do not constitute firm orders to purchase Product.

2.18.

“Invoice Date” shall mean the date the invoice is issued by the Supplier to the Customer for Product sold and delivered hereunder.

2.19.

“Good Cause” shall exist for the termination by Customer or Supplier of a Purchase Order or modification of a Forecast if the material breach by other party of any term or condition of this Agreement or any addenda hereto is not timely cured as provided in this Agreement.

2.20.

“Effective Date” shall mean the date of this Agreement as set forth on the signature page hereto.

3.0

Term

3.1.

This Agreement shall commence on the effective date when signed by both parties, and shall continue for an initial term of two (2) years. It is the intent of both parties to automatically renew the Contract for successive one (1) year increments unless either party requests in writing, at least [ ]* days prior to the anniversary date, that this Agreement is to be renegotiated.

4.0	Product Forecast

4.1.	It is agreed that Customer will provide Supplier, on a weekly basis Product Forecast.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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4.2.

Customer agrees to hold a firm four (4) weeks plus current week schedule in the forecast. Schedule changes within four (4) weeks of Forecast plus the current week may be required to support Customer demand, however they must be mutually agreed to by both parties. Supplier shall provide Customer a net change analysis of new forecasts and load forecast in MRP within five (5) business days.

4.3.

Business simulation or “what if” analysis will be required as business conditions warrant. Supplier to provide an initial “sizing” of the request on a best effort basis within a twenty-four (24) hour period. Supplier must provide a complete analysis on how the Teradyne schedule can be achieved within five (5) business days. This change must be mutually agreed upon. The initial response will raise the constraining items, the complete response will provide information on Supplier’s ability to solve these original constraints.

Key response items to include are:

Material constraints.

Manufacturing and test constraints.

Premium and test charges.

5.0	Material Procurement

5.1.

Customer to provide a certificate of compliance or deviation form with any Customer supplied and/or consigned material that does not agree with the AVL. Supplier is to only use material that is on the Customer AVL. Any material substitutes must be authorized in writing by Customer. Customer is to provide weekly updates to the AVL. This will be achieved via the Customer Component Information System (CIS) system. It is required that Supplier updates its AVL documentation accordingly within five business days.

5.2.

The Supplier shall work with Customer to establish supply chain initiatives to enhance the overall flexibility and responsiveness of the supply chain. Supply Chain initiatives include such items as Vendor Managed Inventory (VMI), Supplier finished good hubs, raw or semi-finished good kanbans at various stages and supporting Teradyne’s Supply Chain Express Initiatives.

6.0	Purchase Orders and Price Reviews

6.1.

Customer agrees to provide Supplier with Purchase Orders or Order releases four (4) weeks in advance of delivery (or as otherwise provided by an addendum) and shall become effective upon transmittal of the order to Supplier, providing that these Purchase Orders and Order releases and the requirements therein were set forth in the forecast. Any changes to a Purchase Order or an Order release within four (4) weeks of the Delivery Date needs mutual agreement. Supplier agrees to use its reasonable efforts to accommodate any changes requested less than the four (4) weeks from the Delivery Date.

6.2.	Unless otherwise mutually agreed, Supplier and Customer will meet once every three (3) months during the term of this Agreement to review pricing and determine whether any

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price increase or decrease is required. Any price change shall apply only to purchase orders or material releases issued after the effective date of such price change. Pricing for Products and components will be maintained and agreed to by both parties at the conclusion of each cost review.

6.3.	Customer and Supplier will utilize [ ]. Supplier’s [ ] will be applied as follows:

Specific [ ]* and [ ]* assemblies

(PNs: [ ]*)

[ ]* — [ ]*%

[ ]* other assemblies ([ ]*):

[ ]* — [ ]*%;

[ ]* assemblies:

[ ]* — [ ]*%.

6.4.	Purchase Price Variation (PPV)

PPV reconciliation occurs quarterly in conjunction with the mutually agreed to pricing review schedule. All variance occurrences within the given time frame are included in the reconciliation with the exception of any out-of-cycle unfavorable variances resulting from part change (per an ECO) or agreed to premium charges resulting from forecast re-scheduled pull-ins or increases within lead-time. Supplier will advise Customer when unfavorable PPV is identified. PPV exceeding $[ ]* require prior Customer approval to order placement and Customer will make reasonable efforts to approve unfavorable PPV requests or settle with manufacturer to maintain pricing. PPV should not impact any material buys required to meet scheduled commit dates and Supplier is authorized to proceed with MRP execution to meet Customer requirements.

6.5.	Cost Reduction

Supplier initiated cost reduction proposals, that are successfully implemented, will be shared with the Supplier in the amount of [ ]* for the first (1st) quarter. After the first (1st) quarter, [ ]* of the cost savings will be provided to the Customer in the form of reduced assembly prices. The full benefit of Customer initiated cost reduction will be provided to the customer in the form of reduced assembly prices. Customer and Supplier shall mutually determine if the supplier cost reduction proposals qualify for cost savings sharing.

7.0

Delivery

7.1.	Supplier will target 100% On-Time Delivery, defined in Section 2.13 for each lot delivery scheduled for a single Delivery Date. This Section, as appropriate, may be modified by an addendum to reflect specific Product requirements.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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7.2.

All Products shall be delivered FCA Supplier’s facility (Incoterms 2000). All right, title and interest in, to and under Products shall transfer to Teradyne when such Products are delivered to the carrier. Supplier shall use reasonable commercial efforts to deliver Products on the applicable delivery dates and assist Customer in arranging any desired insurance (in amounts that Customer shall determine). All costs of shipping, insurance and freight and customs duties, costs, taxes, premiums, and other expenses relating to such transportation and delivery shall be at Customer’s expense.

7.3.	If delivery schedules require acceleration or increase, Supplier will use commercially reasonable efforts to meet the request, subject to material and capacity availability.

7.4.	Upon learning of any potential delivery delays, Supplier will immediately notify Customer as to the cause and extent of such delay.

7.5.

If Supplier fails to make deliveries at the specified time and such failure is caused by Supplier, Supplier will, at no additional cost to Customer, employ accelerated measures such as material expediting fees, premium transportation costs, or labor overtime required to meet the specified delivery schedule or minimize the lateness of deliveries.

7.6.	Under normal working conditions the Customer will not incur overtime-premium charges for work performed. From time to time unscheduled demand may require overtime. Charges, if any, for such overtime will be mutually agreed to in advance. The Customer must authorize premium charges for material.

8.0	Payment Terms

8.1.

Supplier may issue an invoice to the Customer for Product sold and delivered hereunder no earlier than the date the Product is delivered to the common carrier. The invoice shall be sent electronically to Customer so that it is received the same day as the issue date. Supplier and Customer agree to payment terms of Net 30 days from the Invoice Date. Customer shall issue payment electronically so that it is received 30 days from the Invoice Date.

8.2.	Currency will be in U.S. Dollars unless specifically negotiated and reflected in the addenda.

9.0

Quality

9.1.	Supplier shall manufacture the Products in accordance with the quality requirements; standards and expectations as mutually agreed to and reflected in the addenda.

9.2.	Improvement Goals

Customer and Supplier mutually agree that continuous improvement goals for cost, quality and Cycle Time reduction shall be established, measured, and will be reviewed at least quarterly to ensure the mutual goals are met and new goals are identified.

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10.0	Engineering Changes

10.1.

Customer may, upon advance written notice to Supplier, submit engineering changes for incorporation into the Product. This engineering change notification (“ECN”) shall document the change to effectively support an investigation of the impact of such engineering change on price, delivery, quality and performance. Supplier will review the engineering change and report to Customer within five (5) working days. If any such change affects the price, delivery, quality, or performance of said Product, an equitable adjustment will be negotiated between Supplier and Customer. When required Supplier will respond within one (1) business day with a cost, schedule, and inventory exposure impact analysis, if any, to incorporate the ECN. This one-day response will be on a best efforts basis.

10.2.

Supplier agrees not to undertake significant process changes, design changes, or process step discontinuance without prior written notification and concurrence of the Customer.

11.0	Inventory Management

11.1.

Only to the extent reasonably necessary to timely meet forecasted demand, Purchase Orders, and delivery dates, Supplier is authorized to procure material on behalf of Customer based on the submittal of an Forecast or Purchase Order from the Customer. Supplier will procure material based on Order Policy. The Order Policy will be reviewed quarterly and adjusted based on business needs.

Supplier is authorized to purchase materials using standard purchasing practices including, but not limited to, acquisition of material recognizing economic order quantities, supplier minimum and multiple order quantities, Order Policy and long lead time component management in order to meet the forecasted requirements of Customer. Any purchases made in excess of the MRP requirements due to minimum order quantity, lot sizing or economic order quantities that increase the Customers inventory liability by greater than $[ ]* must require the Customer approval. Customer recognizes its financial responsibility for the material purchased by Supplier on behalf of Customer, provided Supplier executes to the requirements herein. Supplier shall obtain prior written authorization from Customer for any deviation from these practices. Customer’s financial responsibility for such material purchased by Supplier based on a Forecast is strictly limited to that defined in this Section of the Agreement.

11.2.

Material Cancellation/De-expedite

Customer may cancel/de-expedite material by means of modifying the weekly Forecast or providing a written cancellation notice to Supplier of an outstanding Purchase Order.

(a) Modification in the Weekly Forecast – Modifications to the Forecast may result in material cancellation or de-expedites if the change in Forecast either eliminates the demand for the part, or moves out the Purchase Order due date by more than four (4) weeks beyond the originally-scheduled delivery date. In the event material cancellation is required, the Supplier is obligated to comply with sections 11.3 to 11.6 below.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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(b) Changes via a written cancellation notice—major events such as a cancelled order by the Customer, may cause a significant reduction in demand. In these cases the Customer shall issue the Supplier a formal written cancellation letter. Any cancellation or de-expedite charges are to be provided to Customer within three (3) days or less from the date of the notification of the cancellation and will be reviewed on an as needed basis until closure. This process will require the approval of the subcontract manager at Customer and will be worked through the Supplier Program Manager.

11.3.

Compensation for Cancelled Material

Customer may terminate or cancel a Purchase Order or modify a Forecast at any time for Good Cause, with liability limited to: (i) Purchase Orders that have been fulfilled prior to the date of termination or cancellation; (ii) Excess Material existing at the date of termination or cancellation; (iii) completed Product inventory existing at the date of termination or cancellation. In the event of a termination or a cancellation of a Purchase Order or the modification of a Forecast by Customer for reasons other than Good Cause or the qualification of material as Excess Material, Customer agrees to compensate Supplier for Products and material inventory as follows: (i) the contract price of all finished Products in Supplier’s possession (provided that the finished goods were authorized by a Customer Purchase Order), (ii) the standard cost of material inventory (including cost of acquisition) and customer specific value added materials or services and value add, whether in raw form or a Work in Process (“WIP”), and not returnable to the vendor or usable for other customers, (iii) the standard cost of material on order which cannot be canceled and is to be received by Supplier (including cost of acquisition), the standard cost of material on order which cannot be canceled and has been or will be cancelled at the sub-tier supplier and not received at Supplier (cost of acquisition will not be applied) and (iv) any imposed vendor cancellation charges incurred with respect to material canceled or returned to the vendor, or otherwise set forth in an addendum. Cancellation issues are to be handled in accordance with Section 11.7 Excess Inventory Payment.

11.4.

General Cancellation Provisions

The following applies to all cancellation regardless of reason:

•

Mitigation Efforts: The Supplier shall make all reasonable efforts to mitigate its costs and liabilities in the event of the cancellation or modification of a Purchase Order or a Forecast or the qualification of material as Excess Material, including, without limitation, the immediate cessation of all manufacturing activities and the provision of notice to Supplier’s vendors within five (5) business days to cancel all outstanding orders and stop all production. The Supplier must also make all commercially reasonable efforts to mitigate its liabilities by, for example, reviewing other customers’ requirements for the same parts. Should such matches be found, Supplier agrees to internally transfer excess components to these customers to dispose of these parts.

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•

Teradyne will not be liable for any standard commodity material which can be consumed by Solectron’s other customers’ requirements within ninety (90) days, or can be returned to suppliers at no charge.

•

In the event Supplier seeks any compensation from Customer under this section 11, the Supplier must reasonably substantiate costs, expenses, damages and claims and must receive written authorization from the Customer prior to taking action that may result in cancellation charges that are to be borne by or assessed against the Customer. Mitigation documentation and identification of component Excess Material to Product, will be provided for the high cost components.

11.5.

Inventory Reporting and Analysis Requirements

Supplier shall review and discuss with Customer, on a weekly basis, inventory reports generated which identify the Customers inventory exposure, the net change in exposure caused by the latest week MRP, and the order alignment/cancellation actions required of Solectron to reduce on order exposure.

The following inventory reports will be made available by Supplier at such time they are reasonably requested by the Customer.

All inventory reporting to be segregated by Non-Standard and Standard parts.

Cancellation/De-Expedite Status

The Supplier will provide to Customer, on a bi-weekly basis a written report indicating the following:

•

Newly identified de-expedite and cancel opportunities sorted by sub-tier supplier in descending dollar order based on the cancelled portion. Newly identified de-expedite and cancel opportunities are defined as the new MRP actions identified during the past two week period.

•

The Supplier’s performance against the previously recorded de-expedite and cancel opportunities sorted by sub-tier supplier in descending dollar order based on the cancelled portion.

•

By board type in descending dollar order based on the cancelled portion.

•

The previously recorded de-expedite and cancel opportunities must be identifiable to the date that the MRP action was initiated.

Excess Material Exposure

The Supplier will provide a written weekly summary report of Excess Material that includes:

•

Total on hand inventory

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•

Total on order inventory

•

Excess Material

•

Excess Material on order

•

The fifty (50) highest valued parts that are Excess Material

•

The total Customer inventory value

The Supplier will provide a written weekly report that reflects:

•

Raw form materials

•

WIP

•

Finished goods or Products

•

Material on order

Detailed back-up reporting to be provided on a monthly basis or upon request.

11.6.

Excess Inventory Disposition:

11.6.1

Contra-Asset Account On-hand Raw Material, WIP, Finished Goods and on-order Raw Materials liabilities will be evaluated monthly relative to Customer Forecast.

In the first week of Supplier’s Fiscal Month, Supplier will notify Customer of inventory balance in excess of Customer’s [ ]* demand at the end of prior Supplier’s fiscal month. By the 15th day of each month, Customer will provide a PO to Supplier for the quoted material value of the excess inventory position. Supplier will book the PO payment to an inventory reserve allocated to Customer on Supplier’s balance sheet. The parts will physically stay in Supplier’s stockroom, warehouse, or WIP stock.

The value of excess inventory payments will continue to show in Supplier’s gross inventory, but the inventory reserve (contra-asset) will cause the net inventory position of Supplier’s Customer inventory to be reduced less than the gross position. Reporting of inventory balances to Customer by Supplier would show an itemization of parts that equals the gross position with a line at the bottom of the report which would reflect the reserve position and show a net inventory number.

Customer may ship to Supplier a mutually agreed quantity of Customer owned material at Supplier’s current budget price that has demand in the Forecast. Supplier will receive and hold such inventory into Supplier’s on-hand inventory and Supplier will book the inventory value to the reserve account (contra-asset) allocated to Customer on Supplier’s balance sheet. The parts will be physically located in Supplier’s active stockroom, warehouse, or WIP stock.

Supplier will refresh the excess inventory analysis to reflect the changes in on-hand inventory on a monthly basis, and provide a consumption report to the Customer the first week of the next month. Supplier is fully responsible for the value of all inventories held

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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in Supplier’s warehouse. By the 15th day of each month, Supplier will provide a PO (payment terms of net 30) to Customer for physical inventory reductions as inventory is consumed or otherwise mitigated.

Example 1:

Inv Qty

[ ]* Dmd

[ ]* Excess

Std Price

Extend $

P/N ABC

[

P/N DEF

[

Total

[

Additional Reserve

[

Customer Issue P.O. To Supplier

[

11.6.2

Customer will pay Supplier a monthly management fee per site as follows based on the value of the inventory held in the contra-asset accounts at the respective site:


- $[ ]—$[ ]		[ ]*% per month;
- >$[ ]—$[ ]		$[ ]* per month fixed fee;
		- >$[ ]* $[ ]* per month fixed fee, plus [ ]% per month for the value of the inventory above $[ ].

The fee is an accommodation for the following contra-asset management costs incurred by Supplier. The fee is intended to cover the costs of the following activities:

cycle counts;

quarterly audits, not to exceed one day and one person Supplier support unless discrepancies require additional support;

storage;

shrinkage;

insurance;

transportation between warehouses;

management / analysis / activity reporting.

11.6.4

Customer will provide purchase order and authorization to ship or scrap within ten (10) days of notification, at quoted material price plus cost of acquisition, for on hand material that is obsolete due to date code, or zero demand in Forecast or other material Customer wants to remove from the contra asset account. Quoted cost of acquisition is [ ]* percent ([ ]*%) for the Americas, and [ ]* percent ([ ]*%) for Asia.

11.6.5

Supplier may take exception to certain material held in the Contra asset accounts and request Customer take physical possession of such material. Customer may request Supplier to hold inventory outside of buyback requirements. The parties agree to negotiate in good faith such material, and reach a resolution acceptable to both parties.

12.0	Customer Owned Tooling

All Customer tooling/equipment furnished to Supplier or paid for by Customer in connection with this Agreement shall:

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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Be clearly marked and remain the personal property of Customer.

Be kept free of liens and encumbrances.

Be maintained and securely stored by Supplier, unless, otherwise agreed. The determination of who shall be responsible for the maintenance expense will be determined on a case by case basis.

Be inventoried annually and a copy of such inventory shall be provided to Customer.

Supplier shall securely store Customer property at its own risk and shall not modify the property without the written permission of Customer. Upon Customer’s request, Supplier shall redeliver the tooling/equipment to Customer in the same condition as originally received by Supplier with the exception of reasonable wear and tear.

Supplier shall provide to Customer periodic reports listing all Customer owned tooling/equipment under Supplier’s possession and control. Supplier shall advise Customer if the forecasted demand exceeds the capacity provided by both the customers tooling and the suppliers overall capacity. Such notice shall be provided with sufficient time to allow the Customer to take required action.

13.0	Confidential Information

13.1.

Supplier and Customer agree to execute, as part of this Agreement, a Nondisclosure Agreement for the reciprocal protection of confidential information.

13.2.

Subject to the terms of the Nondisclosure Agreement and the proprietary rights of the parties, Supplier and Customer agree to exchange, at least semi-annually, relevant process development information and business plans.

14.0

Warranty

14.1.

Supplier warrants for a period of [ ]* from the date of manufacture, or [ ]* months for Products Supplier hubs for demand pull, that (i) the Product will conform to the specifications applicable to such Product at the time of its manufacture, which are furnished in writing by Customer and accepted by Supplier; (ii) such Product will be of good material (supplied by Supplier) and workmanship and free from defects for which Supplier is responsible in the manufacture; (iii) such Product will be free and clear of all liens and encumbrances and that Supplier will convey good and marketable title to such Product. In the event that any Product manufactured shall not be in conformity with the foregoing warranties Supplier shall, at Customer’s option, either credit Customer the purchase price paid by Customer for such Product, or, at Supplier’s expense, replace, repair or correct such Product. The foregoing constitutes Customer’s sole remedies against Supplier for breach of warranty claims.

14.2.

Supplier shall have no responsibility or obligation to Customer under warranty claims with respect to Products that have been subjected to abuse, misuse, accident, alteration, neglect or damaged in repair by other than Supplier personnel.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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14.3.

Supplier agrees to transfer to Customer any transferable warranty made to Supplier by its vendors with respect to materials included in or comprising Products.

THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND SUPPLIER EXPRESSLY DISCLAIMS AND CUSTOMER WAIVES, ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR USE.

14.4.

In the case of non-conforming Product (excluding defects caused by Customer) the Supplier will be responsible for all rework costs associated with the non-conforming board. The Supplier will use all commercial means necessary to meet all scheduled Delivery Date requirements.

14.5.

CONFIDENTIALITY

14.5.1

The parties shall treat the terms and conditions and the existence of this Agreement as Confidential Information (as such term is defined in the NDA referenced below).

14.5.2

Confidential Information. Upon execution hereof, the parties shall comply with the provisions of that Non-Disclosure Agreement executed by Supplier and Customer on (the “NDA”). Notwithstanding any identification of information exchanged hereunder as Confidential Information as defined in the NDA, Supplier specifically acknowledges that in order to manage, monitor, and resolve demand, inventory, supply and production issues directly relating to the manufacture and fulfillment of Customer’s products, Customer must share a variety of Supplier’s information and data, as well as some or all of this Agreement, with other third parties involved in the manufacture of Customer’s products. Accordingly, Customer must be and Supplier acknowledges that Customer is free to disclose to those necessary third parties, but not to any competitors of Supplier, data and information provided to Customer by Supplier solely as necessary to manage and resolve component supply and production issues relating to Customer’s products and provided that such third parties have agreed in writing to maintain the confidentiality of such Confidential Information.

14.5.3

Neither party may use the other party’s name in advertisements, news releases, publicity statements, financial statement filings (unless in areas specifically required to meet General Accepted Accounting Principles (GAAP) or Securities Exchange Commission (SEC) filing requirements) or disclose the existence of this Agreement, nor any of its details or the existence of the relationship created by this Agreement, to any third party without the specific, written consent of the other. If disclosure of this Agreement or any of the terms hereof is required by applicable law, rule, or regulation, or is compelled by a court or governmental agency, authority, or body: (i) the parties shall use all legitimate and legal means available to minimize the disclosure to third parties of the content of the Agreement, including without limitation seeking a confidential treatment request or protective order; (ii) the party compelled to make and disclosure shall inform the other

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party at least ten (10) business days in advance of the disclosure; and (iii) the party compelled to make disclosure shall give the other party a reasonable opportunity to review and comment upon the disclosure, and any request for confidential treatment or a protective order pertaining thereto, prior to making such disclosure. The parties may disclose this Agreement in confidence to their respective legal counsel, accountants, bankers, and financing sources as necessary in connection with obtaining services from such third parties.

14.5.4

Neither party may use the other party’s name or trademarks in advertisements, materials, web sites, press releases, interviews, articles, brochures, banners, letterhead, business cards, project reference or client listings without the other’s written consent.

14.6.

COMPLIANCE WITH LAWS; IMPORT/EXPORT

14.6.1

Compliance with Laws. Supplier warrants it has complied and shall comply with all applicable laws, regulations and ordinances in effect at the time of manufacture of each of the Products. Upon Customer’s reasonable request, Supplier agrees to provide reasonable assistance to Customer to facilitate compliance with such laws.

14.6.2

Import and Export. Supplier shall provide Customer with information and assistance as may be reasonably required and requested in connection with executing import, export, sales, and trade programs, including but not limited to, manufacturer’s affidavits, harmonized tariff schedule, export control classification number, qualification information (e.g. origin), and U.S. Federal Communications Commission’s identifier when applicable. Customer shall reimburse Supplier for all costs incurred to provide such information and assistance.

14.6.3

Compliance with Environmental Laws. Supplier shall comply with all applicable environmental federal, state and local laws, regulations and ordinances, including but not limited to the laws and regulations of the United States, relating to this Agreement and Supplier’s manufacture of the Products provided hereunder. In the event that Supplier’s performance of its obligations under this Agreement requires the delivery to or handling by Customer of hazardous materials as specified in the U.S. Department of Transportation, Title 49 or OSHA standards or regulations, Supplier will promptly notify in writing Customer and upon request will provide Customer with material safety data sheets and other documentation reasonably necessary for compliance with applicable laws and regulations. Notwithstanding the foregoing, Supplier shall be fully responsible under this Agreement for any liability resulting from its actions in supplying or transporting hazardous materials or otherwise failing to comply with environmental laws and regulations.

14.7	OWNERSHIP AND BAILMENT RESPONSIBILITIES

14.7.1

Any specifications, drawings, schematics, technical information, data, tools, dies, patterns, masks, gauges, test equipment and other materials furnished to Supplier by Customer or paid fork Customer shall (i) remain or become Customer’s property, (ii) be used by Supplier exclusively for Customer’s orders, (iii) be clearly marked as Customer’s

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property, (iv) be segregated when not in use, (v) be kept in good working condition at Supplier’s expense, and (vi) be shipped to Customer, at Customer’s expense, promptly on Customer’s demand or upon termination or expiration of this Agreement, whichever occurs first. Any such property furnished by Customer to Supplier that is marked or otherwise noted by Customer as being confidential information will be treated by Supplier in accordance with the confidentiality obligations set forth herein.

14.7.2

Supplier shall be liable for any loss of or damage to Customer’s property while in Supplier’s possession or control, ordinary wear and tear excepted and shall maintain and provide in effect appropriate property and casualty insurance for the full replacement value of such Customer property.

15.0	Termination

15.1.

If either party fails to meet any one or more of the terms and conditions as stated in either this Agreement or the addenda, Supplier and Customer agree to negotiate in good faith to resolve such default. If the defaulting party fails to cure such default or submit an acceptable written plan to resolve such default within thirty (30) days following notice of default, the nondefaulting party shall have the right to immediately terminate this Agreement by furnishing the defaulting party with written notice of termination.

15.2.

This Agreement may be immediately terminated by either party should the other party; (i) become insolvent; (ii) enter into or file a petition, arraignment or proceeding seeking an order for relief under the bankruptcy laws of its respective jurisdiction; (iii) enter into a receivership of any of its assets or; (iv) enter into a dissolution of liquidation of its assets or an assignment for the benefit of its creditors.

15.3.

Either Supplier or Customer may terminate this Agreement without cause by giving six (6) months advance written notice to the other party.

16.0	Dispute Resolution

16.1.

In the spirit of continued cooperation, the parties intend to and hereby establish the following dispute resolution procedure to be utilized in the unlikely event any controversy should arise out of or concerning the performance of this Agreement.

16.2.

It is the intent of the parties that any dispute be resolved informally and promptly through good faith negotiation between Supplier and Customer. Either party may initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. The parties agree to meet in good faith to jointly define the scope and a method to remedy the dispute. If these proceedings are not productive of a resolution, then senior management of Supplier and Customer are authorized to and will meet personally to confer in a bona fide attempt to resolve the matter.

16.3.

Should any disputes remain existent between the parties after completion of the two-step resolution process, set forth above, then the parties shall, if mutually agreed, promptly submit any dispute to mediation with an independent mediator or to arbitration with a single arbitrator pursuant to the rules of the American Arbitration Association. Failing

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mutual agreement to mediate or arbitrate, each party shall be free to seek recourse in a court of competent jurisdiction.

16.4.

The parties agree that claims or actions related to confidentiality, bankruptcy, intellectual property or non-payment of monies due under this Agreement may be brought in a court of competent jurisdiction without prior dispute resolution as described above.

17.0	Limitation of Liability

IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, OR TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY DAMAGES OF ANY KIND WHETHER OR NOT EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.

18.0	Patent, Copyright and Trademark Indemnity

Supplier will, at its expense, defend, indemnify and hold harmless Customer and its officers, directors, employees and agents from and against any and all losses, costs, liabilities and expenses (including reasonable attorneys’ fees) arising out of any action brought against Customer or any of its customers based on a claim that (i) Supplier’s manufacturing process for the Products infringes the intellectual property rights of any third party, or (ii) Products manufactured by Supplier that fail to conform to Customer’s specifications, whether due to defects or engineering changes by Supplier, infringe the intellectual property rights of any third party, to the extent that such claim would have been obviated if such products were manufactured according to Customer’s specifications.

Customer will, at its expense, defend, indemnify and hold harmless Supplier and its officers, directors, employees and agents from and against any and all losses, costs, liabilities and expenses (including reasonable attorneys’ fees) arising out of any action brought against Supplier based on a claim that the Products manufactured in compliance with Customer’s specifications infringe the intellectual property rights of a third party.

The indemnification obligations specified above arise only if the indemnified party: (i) gives the indemnifying party prompt notice of any such claims; (ii) permits the indemnifying party to direct the defense and the settlement of such claims; (iii) and renders reasonable assistance and cooperation to the indemnifying party.

19.0

General

19.1.

Each party to this Agreement will maintain insurance to protect itself from claims (i) by the party’s employees, agents and subcontractors under Worker’s Compensation and Disability Acts, (ii) for damages because of injury to or destruction of tangible property resulting out of any negligent act, omission or willful misconduct of the party or the party’s employees or subcontractors, (iii) for damages because of bodily injury, sickness, disease or death of its employees or any other person arising out of any negligent act,

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omission, or willful misconduct of the party or the party’s employees, agents or subcontractors.

19.2.

Neither party shall delegate, assign or transfer its rights or obligations under this Agreement, whether in whole or part, without the prior written consent of the other party.

19.3.

Failure by either party to enforce any provision of this Agreement shall not be deemed to be a continuing waiver or a waiver of any other default or other term and condition.

19.4.

Neither party shall be liable for any failure or delay in its performance under this Agreement due to acts of God, acts of civil or military authority, fires, floods, earthquakes, riots, wars or any other cause beyond the reasonable control of the delayed party provided that the delayed party: (i) gives the other party written notice of such cause within five (5) days of the discovery of the event; and (ii) uses its reasonable efforts to remedy such delay in its performance.

19.5.

This Agreement shall be governed by, and construed in accordance with the laws of the State of California, excluding its conflict of laws provisions.

19.6.

Neither party shall have or shall represent that it has any power, right or authority to bind the other party or to assume or create any obligations or responsibility express or implied, on behalf of the other party or in the other party’s name.

19.7.

Nothing stated in this Agreement shall be construed as constituting a partnership or joint venture, or as creating the relationship of employer and employee, franchiser or franchisee, master or servant or principal or agent.

19.8.

Supplier is to maintain at all times a “core” Customer focus team. A “core” team is defined as a program manager, materials/commodity specialist, manufacturing engineer, and a production control specialist. The team should be modified at all times to support changes in business or demand as required.

19.9.

In the case of a transfer of material assets, fixtures, and procedures from one Supplier site to another, due to a program transfer that is caused by performance issues at the Supplier site, Supplier will pay for all shipping and related costs and expenses. This will include the following:

Packaging of material and or fixtures.

Freight cost associated with the transfer.

Successful receipt and set-up of all material, fixtures, and equipment.

Transfer must be completed in a time frame that will not negatively effect delivery of Product to Customer.

19.10.

In the case of program re-deployment to a non-Supplier location the following will occur:

Customer and Supplier will work in good faith to mutually re-deploy all material, fixtures, and associated assets to its final destination.

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19.11.

If the Customer chooses to transfer any of the assemblies to another non-Supplier manufacturing site due to Supplier’s inability to supply the assemblies in accordance with quality and delivery requirements (the determination that Supplier can not perform must be mutually agreed to), the Customer will not be responsible for the payment of the Supplier’s material overhead fee when procuring material from Supplier.

20.0

Notices

Notices hereunder are deemed to be given when hand delivered, e-mailed, faxed or mailed first class, postage prepaid to the addresses of the parties as set forth herein, or such other addresses as shall be furnished in writing by either party.

21.0	Records and Audits

Supplier shall keep complete, correct and accurate books of account containing all records that are required according to Supplier’s business processes and policies, and in order to allow Customer to determine the accuracy of the prices charged to Customer under this Agreement and to verify the efforts of Supplier to reduce such prices.

Solectron shall, upon request from Customer at time of Quarterly Cost Review, provide to Customer:

A report that identifies, by assembly, quantity and such other attributes as are relevant, all finished goods, work in progress, Parts and other items held or ordered by Solectron (i) for which Customer is or may become liable to pay Solectron under any provision of this Agreement, and (ii) in addition to the foregoing, those that Solectron intends to use in producing Products.

For the verification of component pricing, Solectron shall provide Customer Weighted Average Actual Price (WAAP) data for components, at the Customer part number level.

All WAAP information disclosed between the parties shall be deemed Confidential Information. Customer shall not reveal WAAP data to component suppliers, distributors, other contract manufacturers, or any other third parties, either directly or indirectly. The parties acknowledge that improper disclosure of WAAP data to suppliers could result in irreparable damage to procurement leverage; therefore, each party agrees to take prompt corrective action for any improper disclosure and to take disciplinary action where appropriate.


		WAAP (Weighted Average Actual Price) is a systems generated formula
WAAP = [ ]*
		** WAAP recalculates on a daily basis.

The Supplier agrees to provide access to the following types of information with respect to Solectron’s performance of its obligations under this Agreement on an as needed basis:

* - Confidential Treatment Requested. Omitted portions filed with the SEC.

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•

Component business awards where such awards are specified by Customer

•

Yield data at board test and final test

•

Rework and scrap rates

•

Supplier performance ratings

•

Factory cycle-time

•

Component lead times

•

Freight costs

•

Inventory visibility

•

ECN tracking and effectiveness

•

Summaries of Customer shipments and billings

•

Other information to be provided based on mutual agreement of both parties

22.0

This Agreement is the complete and exclusive understanding of the parties on this subject matter and this Agreement supercedes any previous agreements, either oral or written, relating to the subject matter herein. No alterations or modifications to this Agreement shall be binding upon either Supplier or Customer unless made in writing and signed by an authorized representative of each.

23.0

Backups

23.1.

Supplier shall identify a secondary manufacturing site that can assume within a commercially reasonable time period, all manufacture of Customer’s Products in the event the primary manufacturing site becomes incapable of executing the Customer’s requirements.

The capacity and capabilities of the secondary site should be updated/reviewed quarterly as part of the QBR.

23.2.

Supplier shall archive, in a location that is geographically separate from the current manufacturing site, all information necessary to relocate the manufacturing process.

Information to be archived will include, but is not limited to:

Assembly processes and documentation

Test processes and documentation

Current AVL and contact list

Packaging and shipping processes and documentation

Current material pipeline

23.4.

Archived information shall be refreshed on a weekly basis for dynamic data and as needed for static data.

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Agreed:

Supplier:		Customer:
Solectron Corporation		Teradyne, Inc.

By:	/s/ Joe Regan	By:	/s/ James Federico
Name:	Joe Regan	Name:	James A. Federico
Title:	Corp. VP	Title:	VP, ATEOps
Date:	11-24-03	Date:	11/21/2003


Supplier:
Solectron Technology Singapore Ltd.

By:		/s/ Joe Regan
Name:		Joe Regan
Title:		Vice President
Date:		11-24-03

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Exhibit 10.2

CONFIDENTIAL TREATMENT

CONFIDENTIAL

AMENDMENT 1

STANDARD MANUFACTURING AGREEMENT

Between

Teradyne Inc.

And

Solectron Corporation

Solectron (Suzhou) Technology Co., Ltd (“SLR Suzhou”), a PRC corporation whose principal place of business is located at 9 Suqian Road, Suzhou Industrial Park, Jiangsu, China 215021, and Teradyne Kabushiki Kaisha, (“TKK”), a Japanese corporation whose principal place of business is located at 1-5-4 Higashiyama, Meguro-ku, Tokyo, Japan agree that the process of Excess inventory Disposition as follows:

1.0

Effect of Amendment

1.1.

Except as expressly set forth herein, the terms and conditions of the Standard Manufacturing Agreement entered into between Solectron Corporation and Teradyne Inc. on November 24, 2003 (the “Master Agreement”) shall apply and govern the relationship between SLR Suzhou and TKK. This Amendment commence on the effective date when signed by both parties, and shall continue for an initial term of two (2) years. It is the intent of both parties to automatically renew this Amendment for successive one (1) year increments unless either party requests in writing, at least thirty (30) days prior to the anniversary date, that this Amendment is to be renegotiated.

1.2.	Except as otherwise defined in this Amendment, all words with initial capitalized letters have the meaning ascribed to them in the Master Agreement.

1.3.

Except as specifically modified by the terms of this Amendment, all other terms and conditions of the Master Agreement shall remain in full force and effect. Unless otherwise stated in this Amendment, it is agreed that the terms and conditions of this Amendment shall be subject and subordinate to the Master Agreement, and the terms and conditions of the Master Agreement are incorporated herein by reference.

2.0

Deposit to the balance of Excess Material

2.1.	Parties agree that the balance of Excess Material as at December 21, 2006 is [ ]*. SLR Suzhou shall issue an invoice to TKK with breakdown itemizing Excess Materials parts.

* - Confidential Treatment Requested. Omitted portions filed with the Securities and Exchange Commission.

2.2.	TKK will review the breakdown and shall deposit money with SLR Suzhou for the value of the invoice.

3.0

Process of Excess Materials Disposition

3.1.

In the first week of every Fiscal Month of SLR Suzhou, SLR Suzhou will provide Excess Materials inventory level as at the end of the prior month, with break-down itemizing Excess Materials parts to the TKK representative designated by TKK. The TKK representative will review the result and give an approval to SLR Suzhou.

3.2.	In the event current month Excess Materials balance has increased from the previous month, SLR Suzhou shall issue a Debit Note in US$ to TKK (Attn: Accounting Manager), pursuant to which TKK shall reimburse SLR Suzhou payment for settlement of the Debit Note in full.

3.3.

In the event current month Excess Materials balance decreases (i.e. SLR Suzhou has consumed the Excess Material), SLR Suzhou will issue a Credit Note to TKK (Attn: Accounting Manager), following which TKK will offset the Credit Memo with the “Account Payable-Trade” balance, and pay the net Account Payable amount to SLR Suzhou.


Agreed:

SLR Suzhou:	TKK:
Solectron Technology	Teradyne Kabushiki Kaisha
(Suzhou) Co. Ltd.

[Stamp of SLR Suzhou]

By:	By:	/s/ T. Takezaki
Name:	Name:	Tokio Takezaki
Title:	Title:	TKK Controller
Date:	Date:	Jan. 18, 2007


		Exhibit 10.3
CONFIDENTIAL		Execution Version

CONFIDENTIAL TREATMENT

SECOND AMENDMENT

STANDARD MANUFACTURING AGREEMENT

BETWEEN

TERADYNE, INC.

AND

SOLECTRON CORPORATION

THIS SECOND AMENDMENT (this “Amendment”) is made as of August 27, 2007 (the “Effective Date”) by and between Teradyne, Inc., a Massachusetts corporation having a place of business at 600 Riverpark Drive, North Reading, Massachusetts 01864, on its behalf and on behalf of its divisions and subsidiaries, including Teradyne (Asia) Pte. Ltd. and Teradyne (Shanghai) Co., Ltd. (collectively, “Customer” or “Buyer”), and Solectron Corporation, a Delaware corporation having a place of business at 847 Gibraltar Drive, Milpitas, California 95035, on its behalf and on behalf of its divisions and subsidiaries, including Solectron (Suzhou) Technology Co., Ltd. (collectively, “Supplier” or “Solectron”).

WITNESSETH:

WHEREAS , Customer and Supplier entered into a Standard Manufacturing Agreement on November 24, 2003, as amended by the Amendment 1 to Standard Manufacturing Agreement dated January 18, 2007 (collectively, the “Master Agreement”), under which Supplier manufactures and sells to Customer certain board assemblies and provides other products and services, more specifically described in the Master Agreement; and

WHEREAS , Customer and Supplier desire to expand the scope of their business relationship to encompass additional manufacturing and testing responsibilities on the part of Supplier with respect to Customer’s FLEX family of automatic test equipment products and other systems products as may be mutually agreed, upon the terms and conditions set forth herein; and

WHEREAS, Customer and Supplier desire to set forth additional terms and conditions for all Products, including but not limited to, board assemblies and systems products set forth herein; and

WHEREAS , all capitalized terms not defined herein shall have the meanings ascribed to them in the Master Agreement;

* - Confidential Treatment Requested. Omitted portions filed with the Securities Exchange Commission (“SEC”).


CONFIDENTIAL		Execution Version

NOW, THEREFORE , for and in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

PART I – TERMS APPLICABLE ONLY TO PRODUCTS MANUFACTURED AT SUPPLIER SITE IN SUZHOU, CHINA

1.0

Scope of Part I

1.1

This Part I of the Amendment is entered into in connection with the expansion of the scope of Supplier’s current activities under the Master Agreement to include Supplier’s support of mutually agreed electromechanical system Products (“Products”), including Level 3, Level 4, and Level 5 Manufacturing as defined herein. Level 3 Manufacturing shall mean installation of intelligent power supplies, complex cable assemblies, backplanes and thermal controls such that all components in the box assembly are fully wired and tested. Level 4 Manufacturing shall mean installation of board assemblies, other components and hardware, and software with final testing. Level 5 Manufacturing shall mean the Final Configuration and Test (“ FCT ”) phase in the manufacturing and test process of finished system Products, and fulfillment of orders to Customer or end customers. Pursuant to the terms of this Amendment and the Master Agreement, Supplier shall perform all Level 3 Manufacturing, Level 4 Manufacturing, and Level 5 Manufacturing activities and related undertakings necessary to manufacture, build and test the system Products in accordance with Customer’s specifications for the Customer’s FLEX family of automatic test equipment products, and other mutually agreed system Products.

1.2

This Part I of the Amendment applies exclusively to Supplier’s activities at the manufacturing facility of it’s subsidiary Solectron (Suzhou) Technology Co., Ltd. located in Suzhou, China (the “ Supplier Facility ”), it being understood and agreed that no other operations of Supplier are covered by Part I of this Amendment. In the event of a conflict between Part I and Part II of this Amendment with respect to system Products manufactured and tested in the Supplier Facility, Part I shall take precedence over Part II.

2.0

Use of Facility

2.1

Supplier will accommodate and provide, pursuant to the terms of Section 2.2 below, use and access for approximately [ ]* contract employees of Teradyne (Shanghai) Co., Ltd. (the “ On-Site Employees ”) at Supplier Facility to oversee the complete production cycle of the manufacture and test of the Products (the “Permitted Use”). The number of Customer employees at the Supplier Facility assumes [ ]*. The number of On-Site Employees at the Supplier Facility may

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

vary from time to time upon agreement of Customer and Supplier.

2.1.1

The On-Site Employees shall not under any circumstances be, or be construed to be, employees of Supplier or any Supplier affiliate. The On-Site Employees shall remain at all times employees of Customer or a third party contracted by Customer, and Customer shall be responsible for the actions and decisions of the On-Site Employees.

2.1.2

Customer shall be responsible for damages to the Supplier Facility and Supplier’s equipment to the extent caused by On-Site Employees.

2.1.3

Customer shall at all times comply with all applicable laws in the performance of the Permitted Use, including but not limited to all applicable employment laws (labor laws) of the jurisdiction in which the On-Site Employees are employed by Customer. It is expressly agreed that Customer is an independent contractor, and neither Customer nor the On-Site Employees are employees or agents of Supplier and have no authority to bind Supplier by contract or otherwise or make any claim for employment benefits against Supplier.

2.1.4

While in, on, or about the Supplier Facility, Customer shall be responsible to ensure On-Site Employees shall comply with all applicable rules and regulations of Supplier that have been provided to Customer or to the On-Site Employee. Customer shall ensure that On-Site Employees remain in Licensed Areas and the FCT Area, and do not enter portions of the Supplier Facility where other customer products are manufactured and tested by Supplier.

2.2

Supplier hereby licenses to Teradyne (Shanghai) Co. Ltd. (“Teradyne Shanghai”) and Teradyne Shanghai hereby licenses from Supplier, those areas of approximately [ ]* square feet of office space, or other mutually agreed amount of office space, in the aggregate located within the Supplier Facility, as shown on the floor plan attached hereto as Exhibit A (collectively, the “ Licensed Areas ”), for the term of this Amendment and subject to the provisions of this Section 2 . Use of the Licensed Areas by Teradyne Shanghai shall not constitute a leasehold interest in favor of Teradyne Shanghai. Teradyne Shanghai shall use the Licensed Areas solely and exclusively for the Permitted Use.

2.3

Other than the Supplier employees who are providing Services to Customer and subject to the Firewall Procedures set forth in Section 8.6 below, On-Site Employees and any other persons designated by an authorized employee of Customer and agreed by Supplier, no other customers of Supplier or other third parties (other than Customer and its designees) shall have access to the Licensed Areas or the FCT Area (as defined below). Supplier shall throughout the term of

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

this Amendment maintain the Licensed Areas in good condition and repair so that it constitutes a first-class professional working environment. Any necessary repairs to the Licensed Areas shall be performed by Supplier. [ ]*

2.4	At all times during the term of this Amendment, the following terms and conditions shall govern the provision of infrastructure support and access to Customer for its information technology needs:

2.4.1

Supplier shall license to Customer a private and secure space within the manufacturing area of the Supplier Facility to be used as an IT Room (the “IT Room”) by Customer, as shown on the Floor Plan attached hereto as Exhibit A. The IT Room shall be within 90 meters of all seats to be used by the On-Site Employees. The IT Room shall measure at least 2 meters by 3 meters and shall have a key-lockable door. The IT Room shall have electrical circuits to support two Uninterruptible Power Supplies. The IT Room shall have adequate air conditioning and ventilation for computer equipment.

2.4.2

Supplier shall license at Customer expense a suitable right-of-way for data network wiring and/or fiber from the IT Room to other areas such as but not limited to the telecom demarcation where public carrier services enter the Supplier Facility, to the Teradyne Shanghai cubical seating areas shown on the Floor Plan, to the new Rework Lab shown on the Floor Plan and to the existing J750 Office and Rework Lab until they are vacated. The right-of-way shall also permit telephone wiring from the Supplier PBX to the On-Site Employee seating areas and from the telecom demark to the On-Site Employee seating areas for telephone and facsimile. The right-of-way shall also permit use of wireless ethernet and cordless telephone devices within a 100-meter radius of the On-Site Employee seating areas. Customer is responsible to provide, install and maintain any such data network, wireless ethernet, and cordless telephone devices If such data network, wireless ethernet, or cordless telephone devices interfere with Supplier’s manufacturing and testing of products for other customers, and after reasonable time is given for Customer to remedy the interference, Supplier in it’s sole discretion, may require discontinuance of such wireless ethernet and cordless telephone devices by Customer.

2.4.3

Supplier shall license Teradyne Shanghai to use approximately [ ]* extensions or other mutually agreed number of extenstions on its telephone PBX, all with voice mail. Such extensions shall be wired to the various On-Site Employee seating areas and Rework Lab. Supplier shall permit Teradyne Shanghai to use a reasonable number of trunk interfaces on telephone PBX for external calls. The recurring cost of trunk lines dedicated to Teradyne Shanghai and toll calls made on such trunk line will be at Teradyne Shanghai’s expense. Supplier shall

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

similarly accommodate reasonable future requests to expand the total number of extensions or increase the number of trunks.

2.4.4.

Supplier shall assist Teradyne Shanghai in arranging for network and telephone wiring to be installed, at Customer’s expense.

2.4.5

Supplier shall be responsible for the implementation of network wiring and switches for the tester areas shown on the Floor Plan, at Customer’s expense. Such tester area network shall be isolated from other networks and shall connect to other networks only through firewalls. Such tester area network shall provide at a minimum two 100 Mbps RJ-45 ethernet drops per test bay.

2.4.6

Supplier shall work with Teradyne Shanghai at Customer’s expense to provide a firewall-to-firewall link between the two companies’ networks for purposes such as but not limited to the following:

2.4.6.1

Allow both Teradyne Shanghai and Supplier test engineers to securely reach the tester area network from their respective corporate networks for troubleshooting or other purposes.

2.4.6.2

Allow quality data to pass from tester area network to a Teradyne Suzhou server in Suzhou for archiving.

2.4.6.3

Allow Supplier test engineers to access Teradyne applications and quality data related to the FCT Activities.

2.4.6.4

Allow collaboration between Supplier employees in Suzhou and Customer employees worldwide.

2.4.7

Customer shall develop scripts to run on testers manufactured by Supplier to collect quality data and deposit such data through the firewall on a Customer server in its IT Room. Such data shall be archived by Customer and shall be accessible by the Supplier through a firewall.

2.4.8

Customer and Supplier shall cooperate to provide smooth network and telephone migration from areas currently used by the [ ]*

2.5

Supplier shall devote an area of approximately [ ]* square feet or other mutually agreed area within the Supplier Facility exclusively to the FCT Activities, as shown on the site plan attached hereto as Exhibit A (the “ FCT Area ”). The site plan assumes [ ]*. Supplier shall throughout the term of this Amendment maintain the FCT Area in good condition and repair so that it constitutes a tour ready manufacturing working environment in accordance with Supplier 5S

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

principles. Any necessary repairs to the FCT Area shall be performed by Supplier, at its cost and expense, promptly upon mutual agreement by Customer and Supplier of the need therefor. [ ]*.

2.6

Customer or certain other representatives of Customer shall have full and unrestricted access to the FCT Area and the Licensed Area during normal Supplier business hours throughout the term of this Amendment, subject to Supplier’s standard security procedures of which Customer shall have received written notice. Customer shall request access from Supplier during non-normal Supplier business hours.

2.7

Supplier shall indemnify, defend with competent and experienced counsel and hold harmless Customer, its officers, directors and employees, from and against any and all damages, liabilities, actions, causes of action, suits, claims, demands, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and court costs) arising from injury to or death of persons or damage to property on or about the Supplier Facility, including, without limitation, the Licensed Area, and caused by the acts or omissions of Supplier, its employees, agents, representatives or contractors.

2.8

Customer shall indemnify, defend with competent and experienced counsel and hold harmless Supplier, its officers, directors and employees, from and against any and all damages, liabilities, actions, causes of action, suits, claims, demands, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements and court costs) arising from injury to or death of persons or damage to property on or about the Supplier Facility, including, without limitation, the Licensed Area, and caused by the acts or omissions of Customer, its employees, agents, representatives or contractors.

2.9	Customer shall compensate Supplier for Licensed Areas, IT Room, FCT Area, voice and network services set-up, any agreed repair expenses, and any other agreed non-recurring expenses via separate NRE Purchase Order. [ ]*

3.0

Consigned Equipment

3.1

Customer may, from time to time throughout the term of this Amendment, consign to Supplier certain capital equipment, including the capital equipment listed on Exhibit B hereto (the “Consigned Equipment”). The terms and conditions of Sections 12.0 and 14.7 of the Master Agreement shall govern the Supplier’s use and possession of the Consigned Equipment, as supplemented by this Amendment.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

3.2

With respect to the Consigned Equipment and the use and possession thereof, Supplier shall comply with any and all applicable requirements of the Customs authorities of the People’s Republic of China (“China”) and any agency, department, commission, board, bureau or instrumentality of any governmental or quasi-governmental authority of China. The parties agree that, if and when required by China Customs, the Consigned Equipment shall be returned by Supplier to Customer. Supplier shall properly crate, insure and ship the Consigned Equipment (using Customer’s standard packing materials or their equivalent and a carrier reasonably acceptable to Customer), to the place of original shipment or such other place outside of China that Customer may designate. Customer will reimburse Supplier for its actual costs and expenses for crating, insuring and shipping the Consigned Equipment upon receipt of a proper invoice therefore. Supplier shall be responsible, at Supplier’s sole cost and expense, for the posting of any deposit or guarantee required by China Customs with respect to any potential duty or VAT (as defined below) on the Consigned Equipment, with reimbursement by Customer to Supplier of any such expense, including but not limited to, duty, VAT and surcharges, via separate Purchase Order.

3.3	Without in any way limiting the provisions of Section 6.0 below, Supplier agrees that it will report in a timely manner to the applicable Chinese Customs authorities all required information regarding its importation, possession and use of the Consigned Equipment.

3.4

In the event it is determined at any time by the applicable Chinese Customs authorities that any Consigned Equipment is not qualified for exemption from import duty and other import costs, the responsibility for payment of such duty and costs shall be borne exclusively by Supplier, except that so long as Supplier can demonstrate that it has made reasonable and good faith efforts to comply with any and all applicable requirements of the Customs authorities and to qualify the Consigned Equipment for exemption from import duty and other import costs, Customer shall reimburse Supplier for any such expense via separate Purchase Order. Customer shall provide Purchase Order and make cash payment to reimburse Supplier for such expenses within thirty (30) days of notification by Supplier.

3.5

Any software delivered by Customer for use with the Consigned Equipment (the “software”) will be shipped with a software license for the term of this Amendment. Supplier shall only use the software with the Consigned Equipment and shall not copy, remove, alter, modify or encumber the software. The terms of the software license are as set forth in the Software License Agreement between Customer and Supplier dated of even date herewith, a copy of which is attached hereto as Exhibit C .


CONFIDENTIAL		Execution Version

4.0

Raw Materials Inventory

4.1	With respect to the FLEX family of systems Products and other mutually agreed Products, the following provisions of this Section 4.0 shall apply to Materials:

4.1.1

Except where explicit other arrangements with Customer have been made, Supplier shall directly source the Materials and subassemblies necessary for the complete manufacture of the Products and all FCT Activities. All Materials and subassemblies will be declared and imported into China by Supplier as the importer of record and Supplier will be responsible for compliance with all applicable laws, import controls and regulations governing the importation and/or use of such Materials and subassemblies into China. Notwithstanding anything to the contrary contained herein, any duty, value added tax or similar costs arising with respect to Materials and subassemblies that cannot be imported into China duty free, and value added or similar tax free, shall be borne by Supplier and Customer shall reimburse Supplier for any such expense via Product pricing, provided that Supplier can demonstrate that it has made reasonable and good faith efforts to comply with all applicable laws, import controls, and regulations governing the importation and/or use of such Materials and subassemblies into China.

4.1.2

Supplier shall provide prompt notification to Customer in the event of a violation of such laws, import controls or regulations or the initiation or existence of a government investigation that could affect Supplier’s performance under this Amendment.

4.1.3

Supplier and Customer may mutually agree that selected parts necessary for the manufacture and assembly of the system Products and/or the conduct of the FCT Activities may be sourced directly by Customer and provided to Supplier on a consignment basis (the “Consigned Materials”). The Consigned Materials will be supplied to Supplier by Customer in accordance with the following process and on the following terms: (i) Customer will place the purchase orders with the raw material suppliers; (ii) Customer will pay all associated shipping costs and other transportation related costs for the Consigned Materials; (iii) Customer will be responsible for risk of loss or damage to the Consigned Materials during transportation to the Supplier Facility; (iv) Supplier will be responsible for the Consigned Materials and shall bear risk of loss with respect to the Consigned Materials while such items are in Supplier’s control, custody or possession and until delivery of the completed system Product; (v) Supplier will be the importer of record with respect to the Consigned Material and is responsible for compliance with all applicable laws, import controls, and regulations governing the import and export of such items into China (including the maintenance of customs log books); (vi) Customer shall reimburse Supplier via Product pricing for all duties, customs, value added or similar tax (collectively “VAT”) incurred by Supplier related to such Consigned Material or Product using such Consigned Material, provided that Supplier can demonstrate that it has made reasonable and good faith efforts to comply with all applicable laws, import controls, and regulations governing the importation and/or use of such Consigned Material.


CONFIDENTIAL		Execution Version

5.0

Prepaid Inventory

5.1

In the first week of every fiscal month of Supplier, Supplier will provide to Customer’s designated representative a breakdown of the Excess Materials balance, if any, as at the end of the prior month (the “ Excess Materials Balance ”). If the Excess Materials Balance for any given month has increased from that of the immediately preceding month, Supplier shall issue a debit note in USD to Teradyne (Asia) Pte., Ltd. (Attn: Accounting Manager), in an amount equal to the quoted Materials value allocable to the increase in the Excess Materials Balance. Upon approval of such breakdown and debit note, Customer shall make a pre-payment to Supplier with respect to said increase in Excess Materials in an amount equal to the face value of such debit note within thirty (30) days of notification by Supplier. If the Excess Materials Balance for any given month has decreased from that of the immediately preceding month, Supplier shall issue a credit note in USD to Customer (Attn: Accounting Manager), in an amount equal to the quoted Materials value allocable to the decrease in the Excess Materials Balance. Upon approval of such breakdown and credit note, Customer shall offset the credit note with the “Account Payable-Trade” balance and pay the net Account Payable amount to Supplier.

5.2	Title and risk of loss to all Excess Materials as to which a pre-payment is made in accordance with this Section 5 shall remain with Supplier.

5.3	The provisions of this Section 5 shall supercede in its entirety Section 11.6.1 of the Master Agreement.

6.0

Shipping

6.1

Except to the extent expressly otherwise provided in Section 6. 3 below, all costs of shipping, insurance, freight, customs duties, costs, taxes, premiums and other expenses relating to the transportation and delivery to the Supplier Facility of all inventory and Materials sourced by Supplier (other than Consigned Equipment and Consigned Materials) shall be at Supplier’s expense. All costs of shipping, insurance, freight, customs duties, costs, taxes, premiums and other expenses relating to the transportation and delivery to the Supplier Facility of all Consigned Equipment and Consigned Materials shall be at Customer’s expense.

6.2

Supplier shall be responsible for tracking all shipments of inventory, Materials, Consigned Material, and Consigned Equipment from the applicable point of origin to the Supplier Facility, with Customer assistance as necessary, so as to enable Customer to expedite the delivery of such shipments at any point in the delivery process, with respect to the FLEX family of system Products or other mutually agreed Products.

6.3	If during the term of this Amendment with respect to the FLEX family of system Products or other mutually agreed Products, Supplier is required to pay or incurs


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any customs fees, duty, value added or similar tax (collectively, “VAT”) with respect to the importation into Suzhou, China of Materials (expressly excluding Consigned Equipment and Consigned Materials) or sale of Product, and such VAT payment exceeds the amount of any corresponding VAT refund, if applicable, made to Supplier upon shipment of such Product and Materials, then, in such event, Customer shall reimburse Supplier the net amount of any such VAT amount incurred by Supplier via Product pricing. Supplier agrees to use commercially reasonable efforts to minimize VAT payments. Supplier agrees to provide reasonable supporting documentation regarding VAT to Customer upon request. Supplier agrees to maintain such documentation for a period of at least two (2) years from the date of creation. Customer shall have the right, at its option and expense, to require that such documents be examined and audited by Customer or by an independent certified public accountant selected by Customer and agreed by Supplier, provided confidential information of Supplier’s other customers or suppliers shall not be provided in such audit.

7.0

Pricing Schedule

7.1	The parties will review Product pricing every three (3) months as set forth in Section 6.2 of the Master Agreement.

7.2

Foreign Currency Exchange Rate Fluctuations . The quoted price established for Materials purchased in foreign currency or Products sold in foreign currency will be based on the Supplier exchange rate in effect when pricing is set. Supplier exchange rate is obtained from third-party sources. Quarterly pricing reviews shall include a review of the exchange rates.

7.3	Section 6.3 of the Master Agreement shall apply only to PCBAs. Regarding the FLEX family of system Products and other mutually agreed system Products, the following pricing methodology shall apply.

7.3.1

The systems Products will be priced uniquely based on the configuration. The price will be based on the sales order items, namely the printed circuit board assemblies and higher level assemblies (“Instruments”) types and quantities, the electro-mechanical system, the final configuration parts, as well as the final configuration conversion (see Exhibit D , [ ]* for an example of system that is fully priced).

7.3.2

The Instruments supplied by Supplier will be priced based on the initial PCBA Price List set forth in Exhibit D , [ ]*.

7.3.3

The electro-mechanical assemblies will be priced based on the initial Electro-Mechanical Material Price List set forth in Exhibit D , [ ]* and [ ]*, and will be comprised of direct Material prices only. The other cost elements will be charged separately.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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7.3.4

The piece parts necessary for the FCT Activities will be priced based on the initial FCT Material Price List set forth in Exhibit D , [ ]* and will be comprised of direct Material prices only. The other cost elements will be charged separately.

7.3.5

[ ]*

7.3.6

[ ]*

7.3.7

[ ]*

7.3.8

[ ]*

7.3.9

[ ]*

7.3.10

[ ]*

7.3.11

Engineering Changes . The [ ]* will include headcount for engineering changes.

7.4	Section 6.3 of the Master Agreement shall apply only to PCBAs. Regarding the J750 family of system Products and other mutually agreed system Products, the following shall apply:

7.4.1

The systems Products will be priced as per agreed current quotations.

8.0

Confidentiality; Intellectual Property; Use of Teradyne Software

8.1

Supplier and Customer agree to execute, as part of this Amendment, a Non-Disclosure Agreement for the reciprocal protection of Confidential Information (the “NDA”). The parties stipulate and agree that the terms of the NDA shall apply to and govern all information exchanged or shared under the Master Agreement and this Amendment.

8.2

Subject to the provisions of Section 8.3 below, Customer’s Confidential Information may be disclosed by Supplier only to those of its employees, agents and consultants who require knowledge thereof in connection with the performance by Supplier of its obligations under the Master Agreement, as amended by this Amendment, and who are obligated to hold such Customer Confidential Information in confidence and restrict its use consistent with Supplier’s obligations under this Section. Supplier shall be responsible for any breach of this Section by any employee, agent or consultant of Supplier. Supplier’s Confidential Information may be disclosed by Customer only to those of its employees, agents and consultants and the On-Site Employees who require

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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knowledge thereof in connection with the performance of the Master Agreement, as amended by this Amendment, and who are obligated to hold such Supplier Confidential Information in confidence and restrict its use consistent with Customer’s obligations under this Section. Customer shall be responsible for any breach of this Section by any employee, agent or consultant of Customer and by any On-Site Employee.

8.3

In order to comply with Supplier’s obligations under the NDA, Supplier shall cause, each of its exempt employees, agents and consultants having access to Customer’s Confidential Information, including, without limitation, the FCT Activities, to execute and deliver to Supplier an Exempt Employee Proprietary Information Agreement in the form of Exhibit E hereto (a “Proprietary Information Agreement”), or substantially similar form. Supplier employees located in China will execute such Proprietary Information Agreement or substantially similar agreement written in Chinese.

8.4	Upon Customer’s request, Supplier shall promptly return all of Customer’s Confidential Information to Customer, together with all copies thereof in whatever media.

8.5	Without in any way limiting the provisions of Section 8.6 below, to the extent the provisions of this Sections 8 are inconsistent with or in addition to those contained in Section 14.5 “CONFIDENTIALITY” of the Master Agreement, the provisions of the above Sections shall be controlling.

8.6	From and after the Effective Date, Supplier shall implement and maintain in effect firewall procedures (collectively, “Firewall Procedures”) consisting of the following:

a. segregating (A) a portion of a building for production-related equipment and fixed assets which are owned by Customer or otherwise dedicated to the FCT Activities and/or such other electromechanical and backend (in-circuit test and post in-circuit test) processes of Customer as are covered by the terms of the Master Agreement (collectively, “Customer’s Business”), (B) contracts, commitments, purchase orders, agreements, documents, instruments or other writings relating to Customer’s Business and (C) Customer Proprietary Information (including any related Intellectual Property, as defined below, of Customer);

b. designating a representative or representatives to be responsible for the implementation of the Firewall Procedures and for the safeguarding of the Customer Confidential Information;

c. storing Customer Confidential Information per Supplier standard security procedures and processes;


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d. using Supplier standard email password practices and password access systems (current systems are the file transfer process and Active Business Partners web portal) for Customer Confidential Information stored in electronic form allowing access to such Confidential Information only to authorized employees, agents and consultants of Supplier who have executed a Proprietary Information Agreement or substantially similar agreement in accordance with the provisions of Section 8.3 above (the “ Authorized Personnel ”); and

8.7

Supplier agrees and acknowledges that certain Customer proprietary software (“Customer Software”) is necessary to manufacture and test the Products and that its possession and use of Customer Software is subject to the FTC Enterprise Software License Agreement, the form of which is attached hereto as Exhibit F . Supplier acknowledges that Customer Software is valuable intellectual property of Customer and agrees to hold Customer Software at its locations in a confidential manner and in full compliance with the NDA.

8.8	Supplier agrees to install and test the latest appropriate version of Customer Software in full configuration mode for all Products built and/or shipped. Supplier agrees to re-install the specific Customer Software required by a specific order with the appropriate license file.

9.0

Compliance with Laws

9.1

Supplier shall, at all times during the term of this Amendment, and at its own expense, comply with all laws, regulations and ordinances applicable to the activities and transactions contemplated by the Master Agreement and this Amendment and undertaken in connection with the manufacture and testing of the Products.

9.2

Supplier agree, at all times during the term of this Amendment and at its own expense, to comply with U.S. and all other applicable export control laws and regulations, specifically including, but not limited to, the requirements of the Arms Export Control Act, 22 USC 2751-2794, including the International Traffic in Arms Regulation (ITAR), 22 CFR 120 et seq.; and the Export Administration Act, 50 USC app 2401-2420, including the Export Administration Regulations, 15 CFR 730-774; including the requirement for obtaining any export license or agreement, if applicable. Without limiting the foregoing, Supplier agrees that it will not transfer any export-controlled item, data or service, including without limitation transfer to foreign persons employed by or associated with, or under contract to, Supplier, without the authority of an export license, or agreement, or applicable exemption or exception. Customer agrees to provide Supplier with the HTS and ECCN or ITAR Category classification of all Products, Materials or technical data provided by Customer to Supplier upon request in support of this Amendment. In the event a necessary license is denied by the applicable government agency, the parties will use reasonable good faith efforts to find a


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mutually agreeable alternate solution and, pending such solution, the parties shall be released from their obligations under the Master Agreement and this Amendment to the extent performance of such obligations is impaired by the license denial.

9.3

Supplier agrees, at all times during the term of this Amendment and at its own expense, to comply with all applicable import and export control laws and regulations of China, specifically including, but not limited to, laws and regulations promulgated or imposed by the State Council, Ministry of Commerce, Customs, and State Administration of Taxation. Without limiting the foregoing, Supplier shall be responsible for (i) compliance with requirements of the Processing Trade, export VAT refund program and appropriate declarations of value, HS Code and country of origin requirements, with assistance from Customer as required, and (ii) all local customs clearance in China and all associated logbook transactions.

9.4

Supplier shall provide prompt notification to Customer in the event of a known violation of export or import controls and regulations, the compliance with which is the obligation of Supplier hereunder, or the initiation or existence of a government investigation that could affect Supplier’s performance under this Amendment. Supplier’s obligation to comply with U.S., Chinese and all other applicable export control laws and regulations shall survive termination of this Amendment. This Amendment may be terminated by either party if the other party is or becomes listed in any Denied Parties List or export privileges are otherwise denied, suspended or revoked in whole or in part by any applicable government entity or agency.

10.

Purchase Orders .

10.1.

Section 6.1 of the Master Agreement is supplemented and amended as follows with respect to system Products only:

Customer shall submit, and the Supplier shall accept, subject to Material (including sub-assemblies) and capacity availability, Purchase Orders to Supplier per one of the following methods:

(A)

Customer may submit to Supplier a Product Purchase Order upon no less than four (4) weeks in advance of the Product build completion date. Upon receipt of the Purchase Order from the Customer , the Supplier will configure and test the complete system Product prior to or on the Product build completion date. Any changes to a Purchase Order within four (4) weeks of the Product build completion date shall be subject to mutual agreement.

(B)

Customer may submit to Supplier a Purchase Order ten (10) business days in advance of the Product build completion date. Upon receipt of


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the Purchase Order from the Customer , the Supplier will configure and test the complete system Product prior to or on the Product build completion date. Supplier agrees and acknowledges that the Product system configuration may be modified by the Customer via a purchase order change request, provided that the Product build completion date may be adjusted, if necessary, to account for such purchase order change. The Customer may, at its election, delay or defer the Product ship date requested on the Purchase Order by issuing a purchase order change request, and in such event the Supplier shall retain possession of and store the completed system Product until the revised Product ship date. Supplier shall maintain an ample quantity of Material, work in process and finished good inventory to support the Customer forecast, including building sub-assemblies per Kanban Agreement or per forecasted demand. If Supplier builds system Product sub-assemblies to Customer forecasted demand, and such system Product sub-assembly is not consumed within [ ]* from the date Supplier places the sub-assembly into inventory at Supplier Facility (and such aged sub-assembly does not meet the definition of Excess or Obsolete Material), Customer agrees to either (i) provide a firm Product Purchase Order with a delivery date within [ ]* calendar days to consume such aged sub-assembly, or (ii) issue payment to Supplier for such aged sub-assembly inventory, provided that this inventory is netted against the demand and removed from the supply in the calculation prior to the Excess claim submittal per Section 5.0 of this Agreement.

10.2	Supplier may elect to tear down systems Product and restock the instruments, electro-mechanical sub-assemblies and Material, in the event that Customer reschedules or cancels the Purchase Order.

11.0

Indemnification ; Limitation of Liability

11.1

Each party shall indemnify, defend with competent and experienced counsel and hold harmless the other party, its officers, directors and employees, from and against any and all damages, liabilities, actions, causes of action, suits, claims, demands, losses, penalties, costs and expenses (including without limitation reasonable attorneys’ fees and disbursements and court costs) that the other party may incur, become responsible for or pay out to any third party as a result of death or bodily injury to any person, destruction or damage to any tangible property, to the extent caused by (a) any failure by the indemnifying party, its officers, employees or agents, to perform any of its obligations under the Master Agreement and this Amendment, (b) any negligent or willful acts, errors or

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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omissions by the indemnifying party, its officers, employees or agents in the performance of services under the Master Agreement and under this Amendment. It is expressly understood and agreed by the parties that the limitation of liability provision set forth in Section 17.0 of the Master Agreement shall not apply with respect to, and shall not limit, the indemnifying party’s obligations under the foregoing indemnity and under the NDA entered into by the Parties as provided in Section 8.1 above.

12.0

Warranty Repairs .

12.1	Section 14.8 shall be added as follows and shall apply to systems Products only:

In Warranty Repairs Performed by Customer . In the event the Customer needs to repair a warranted defect in a systems Product under warranty, but it is not feasible to ship the entire systems Product back to Supplier, Supplier shall provide replacement parts to Customer at no charge, contingent upon Customer sending back to Supplier the defective parts within thirty (30) calendar days of Customer’s replacement request date. Supplier shall use commercially reasonable efforts to ship emergency replacement parts as expeditiously as possible during normal business hours, and field stock replacement parts within five (5) business days, subject to material availability. Supplier shall be responsible for freight expenses of replacement parts required for warranted defect repair. Customer and Supplier will negotiate in good faith a settlement of any other out-of-pocket expenses actually incurred by Customer in performing such warranty repair at Customer’s customer location. Such expenses will be estimated by Customer and provided to Supplier prior to Customer incurring such expenses, so as not to exceed those labor costs and other expenses that would have reasonably been incurred by Supplier had the systems Product been returned to Supplier for repair. If the defective parts are not returned to Supplier within said thirty (30) calendar day period, Supplier will be entitled to invoice Customer for the such replacement parts at Supplier’s current quoted material price plus markup.

13.0

Out of Warranty Repairs .

13.1

Out of Warranty Repairs for System Products . Supplier shall offer repairs to out of warranty completed system Products at [ ]* pricing. Labor and other costs shall be addressed as part of the [ ]*. All Customer out of warranty repairs shall be requested on written Purchase Orders, prior to Supplier commencement of repair work. Supplier agrees to provide a [ ]* month workmanship warranty limited to such repairs performed by Supplier. Material price and labor rates will be adjusted as part of the quarterly pricing review.

13.2	Refurbishment for System Products . Supplier shall offer refurbishment to completed system Products at [ ]* pricing. Labor and other costs shall be

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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addressed as part of the [ ]*. All Customer refurbishment shall be requested on written Purchase Orders, prior to Supplier commencement of refurbishment work. Supplier agrees to provide a [ ]* month workmanship warranty limited to such refurbishment performed by Supplier. Material price and labor rates will be adjusted as part of the quarterly pricing review.

14.0

Delivery

14.1

Section 7.2 of the Master Agreement is hereby deleted and replaced in entirety as follows: “All Products shall be delivered FCA Supplier facility (Incoterms 2000). All right, title and interest in, to and under Products shall transfer to Customer when such Products are cleared for export and made available to Customer’s nominated agent at Supplier facility. All costs of shipping, insurance and freight and customs duties, costs, taxes, premiums, and other expenses relating to transportation and delivery from Supplier’s facility shall be at Customer’s expense. Customer shall be responsible to provide insurance on Product while in-transit. Supplier shall prepare commercial invoice and other documents for export on behalf of Customer, at Customer’s expense”.

PART II – GENERAL TERMS APPLICABLE TO ALL PRODUCTS MANUFACTURED AT ALL SUPPLIER SITES

15.0	Scope of Part II . The scope of Part II of this Amendment shall apply to all Products manufactured by Supplier for Customer at all its facilities world-wide, including but not limited to, board assemblies, higher level assemblies, and systems Products.

16.0	The terms “Product(s)”, “board(s)”, “assembly(ies)”, and “board assembly(ies)” as used in the Master Agreement shall also apply to systems Products.

Section 2.14 of the Master Agreement shall be deleted in its entirety and replaced as follows: “Excess Material” is defined as material, sub-assemblies or Products purchased or manufactured and on hand at Supplier in reasonable compliance with a Purchase Order or a Forecast that is in excess of [ ]* of customer demand as projected in the Forecast.”

17.0	Replace Section 3.1 Term in entirety as follows:

Section 3.1 Term . The Master Agreement and this Amendment shall continue for a term of three (3) years from the Amendment Effective Date unless earlier terminated in accordance with its provisions. This Master Agreement shall automatically renew for successive one (1) year increments unless earlier terminated in accordance with its provisions.

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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18.0	Insert the following sentence to Section 6.2 after the first sentence in the paragraph:

“The quoted price established for Materials purchased in foreign currency will be based on the Supplier exchange rate in effect when pricing is set. Solectron exchange rate is obtained from third party sources. Quarterly pricing reviews shall include a review of the exchange rates. Notwithstanding the foregoing, all transactions between Supplier and Customer shall be in United States Dollars”

19.0	Replace Section 7.2 in entirety as follows:

All Products shall be delivered FCA Supplier facility (Incoterms 2000). All right, title and interest in, to and under Products shall transfer to Customer when such Products are cleared for export and made available to Customer’s nominated agent at Supplier facility. All costs of shipping, insurance and freight and customs duties, costs, taxes, premiums, and other expenses relating to transportation and delivery from Supplier’s facility shall be at Customer’s expense. Customer shall be responsible to provide insurance on Product while in-transit. Supplier shall prepare commercial invoice and other documents for export on behalf of Customer, at Customer’s expense.

20.0	Replace Sections 14.1 and 14.4 in entirety as follows:

Section 14.1 . Supplier warrants that (i) the Product will conform to the specifications applicable to such Product at the time of its manufacture, which are furnished in writing by Customer and accepted by Supplier; (ii) the Product will be free from defects in workmanship and free from defects for which Supplier is responsible in the manufacture of Product for a period of [ ]* from the date of manufacture, or [ ]* months from the date of manufacture for Product that Supplier maintains in hubs for demand pull; and (iii) such Product will be free and clear of all liens and encumbrances and that Supplier will convey good and marketable title to such Product. In the event that any Product manufactured does not conform with the foregoing warranties, Supplier shall repair or replace such Product at its sole cost and expense. If Supplier is unable to repair or replace the Product, Supplier will credit Customer the purchase price paid by Customer for such Product. The foregoing constitutes Customer’s sole remedies against Supplier for breach of warranty claims.

Section 14.4 . Supplier shall, and hereby does, pass through, transfer and assign all vendor warranties and all intellectual property-related indemnities now or hereafter in effect between itself and any of its third party vendors and suppliers, to the extent permissible. Further, Supplier agrees to enforce all warranty and indemnity rights and claims it may have against any third party vendors and

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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suppliers on its behalf and on behalf and for the benefit of the Customer upon Customer’s request. Customer shall cooperate with Supplier in enforcing such warranty and indemnity rights and will reimburse Supplier for reasonable costs and expenses incurred by Supplier that have been approved in writing by Customer.

21.0	Revise Section 14.5.3 as follows:

(A)

The following parenthetical is inserted in the second sentence of said Section 14.5.3 immediately following the word “rule:” “(including SEC filing requirements).”

(B)

Clause (ii) of said Section 14.5.3 is deleted in its entirety and the following is substituted in lieu thereof: “(ii) the party compelled to make any disclosure shall use reasonable efforts to inform the other party prior to such disclosure.”

22.0	Add Section 14.6.4 Compliance to Environmental Directives as follows:

Section 14.6.4 Compliance to Environmental Directives . Environmental Directives shall mean the requirements of European Union Directives 2002/95/EC (“RoHS”) or 2002/96/EC (“WEEE”), or any other Law, regulation, directive or order governing the permissible content of regulated materials or the recovery and recycling of Products, and/or Materials. Supplier shall be responsible for compliance to Environmental Directives only to the extent that such Environmental Directives apply to and govern the use of manufacturing process materials selected and used by Supplier in its manufacturing processes to produce the Product and the manufacturing process itself.

23.0	Add Section 14.8 Personal Injury Indemnification as follows:

Section 14.8 Personal Injury Indemnification . Each party agrees to indemnify and hold the other harmless against any loss, cost or expense, including reasonable attorneys fees, finally awarded against the other in connection with a claim by a third party for personal injury or tangible property damage, to the extent that such damage is caused by a negligent act or omission by the indemnifying party or its agents. Each indemnitor’s obligations hereunder shall be conditioned upon receiving a prompt notice of each such claim from the indemnitee and the sole authority to defend, and the indemnitee shall cooperate and provide reasonable assistance to the indemnitor in defense of the claim.

24.0	Add Section 14.9 Intellectual Property as follows:

Section 14.9 Intellectual Property .

Section 14.9.1 General . The parties expressly acknowledge and agree that, except as specifically provided in this Master Agreement, at no time shall either party


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acquire or retain, or appropriate for its own use, any right, title or interest in or to any of the other party’s intellectual property. The parties agree that neither party will take any action that might impair in any way any right, title or interest of the other party in or to any of the parties’ respective intellectual property.

Section 14.9.2 Limited License . Subject to the terms and conditions of this Master Agreement, Customer grants to Supplier a non-exclusive, nontransferable limited right and license to use Customer’s intellectual property as specifically set forth herein to perform the services for Customer under this Master Agreement. Supplier agrees not to decompile, disassemble, or otherwise reverse engineer any Customer intellectual property or equipment provided to Supplier for performance of the services.

Section 14.9.3 Customer’s Ownership Interest . Customer and Supplier agree that any improvements and modifications to the intellectual property of Customer, regardless of which party contributes to such improvement or modification, will be deemed part of Customer’s intellectual property or Product specifications to be used by Supplier in the performance of the services under this Master Agreement and will constitute the property of Customer.

Section 14.9.4 Solectron’s Ownership Interest . Customer and Supplier agree that Supplier will promptly disclose in writing any processes, proprietary information, and/or intellectual property, including all process documentation, assembly and tooling drawings and documents, schematics and other related information, that is necessary for the manufacture, test and use of the Product, which is developed and discovered by Supplier during any period in which Supplier is performing the services under this Master Agreement, and that such processes, proprietary information, and/or intellectual property will be deemed the exclusive property of Supplier, provided that Customer is granted a non-exclusive, worldwide, royalty-free, unrestricted, perpetual license to use said processes, proprietary information, and/or intellectual property.

25.0	Replace Section 15.3 in entirety as follows:

Section 15.3. Either Supplier or Customer may terminate this Agreement without cause but only upon providing twelve (12) months advance written notice to the other party.

26.0	Modify Section 18.0 Patent, Copyright and Trademark Indemnity by adding the following language to the end of the second paragraph:

“If such a claim appears likely or is made, Customer may, at its option, modify the Product, procure any necessary license, or replace it with a non-infringing, functionally equivalent product. Customer has no liability for any claim of infringement to the extent arising from (i) Customer’s compliance with, or use of, Supplier owned designs, specifications, instructions or technical information; (ii)


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Product modifications by Supplier or a third party that have not been approved by Customer. These terms state Customer’s exclusive liability for claims of intellectual property infringement or misappropriation of trade secrets.”

Modify Section 18.0 Patent, Copyright and Trademark Indemnity by adding the following language to the end of the first paragraph:

“These terms state Supplier’s exclusive liability for claims of intellectual property infringement or misappropriation of trade secrets.”

27.0	Add Section 19.12 United Nations Convention for the International Sale of Goods .

Section 19.12 United Nations Convention for the International Sale of Goods . The United Nations Convention for the International Sale of Goods (1980) is hereby excluded and shall not apply to this Master Agreement.

28.0	Replace Section 19.2 in its entirety as follows:

Section 19.2 Assignment . Supplier may not assign any of its rights, obligations, or responsibilities under the Master Agreement, this Amendment, or the software license agreements attached as Exhibits C and F to this Amendment, nor delegate or subcontract all, or any portion, of the work to be performed hereunder or thereunder, to any third party except that Supplier may assign such rights, obligations or responsibilities to: (i) a successor in interest by merger, reorganization or otherwise; or (ii) a purchaser of all or substantially all assets of Supplier, subject to the condition that such third party abides by and performs all obligations and duties of Supplier hereunder. Buyer may not assign any of its rights, obligations, or responsibilities under the Master Agreement, this Amendment, or the software license agreements attached as exhibits C and F to this Amendment, except that Buyer may assign such rights, obligations or responsibilities to: (i) any affiliated entity; (ii) a successor in interest whether by merger, reorganization or otherwise; or (iii) a purchaser of all or substantially all assets of Buyer, subject to Supplier’s credit approval of assignee and written consent, which shall not be unreasonably withheld and further subject to the condition that such third party abides by and performs all obligations and duties of Buyer hereunder.

29.0

Miscellaneous

29.1	The invalidity of any provision of this Amendment shall in no way affect the validity of the remainder of this Amendment

29.2	This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute


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one and the same instrument. Signatures transmitted by facsimile shall be deemed to be originals.

29.3	Each party represents and warrants that it has full authority to execute this Amendment and that the signatory below has full authority to bind such party to the terms of this Amendment.

29.4	The inclusion of headings in this Amendment is for convenience only and shall not affect the construction or interpretation hereof.

29.5	Exhibits A, B, C, D, E and F hereto are incorporated herein by this reference and form an integral part of Part I of this Amendment.

30.0

Effect of Amendment

Except as expressly modified by the terms of this Amendment, all terms and conditions of the Master Agreement shall remain in full force and effect. Notwithstanding anything to the contrary contained herein, in the event of a conflict between the provisions of this Amendment and those of the Master Agreement, the provisions of this Amendment shall be controlling with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives as of the Effective Date.

(signatures on next page)


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TERADYNE, INC.		SOLECTRON CORPORATION

By:	/s/ Jim Federico	By:	/s/ Warren Ligan
Name:	Jim Federico	Name:	Warren Ligan
Title:	Vice President	Title:	SVP -

TERADYNE (SHANGHAI) CO., LTD		SOLECTRON (SUZHOU) TECHNOLOGY CO., LTD.

By:	/s/ Gregory R. Beecher	By:	/s/ Henry Low
Name:	Gregory R. Beecher	Name:	Henry Low
Title:		Title:	SVP, North Asia Ops

TERADYNE (ASIA) PTE. LTD.

By:	/s/ Gregrory R. Beecher
Name:	Gregory R. Beecher
Title:	Director


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LIST OF EXHIBITS

EXHIBIT A—FLOOR PLAN

EXHBIT B—CONSIGNED EQUIPMENT

EXHIBIT C—FORM OF SOFTWARE LICENSE AGREEMENT (CONSIGNED EQUIPMENT)

EXHIBIT D—PRICING SCHEDULE

EXHIBIT E—FORM OF EXEMPT EMPLOYEE PROPRIETARY INFORMATION AGREEMENT

EXHIBIT F—FORM OF ENTERPRISE SOFTWARE LICENSE AGREEMENT


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EXHIBIT A

FLOOR PLAN

[ ]*

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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EXHIBIT B

CONSIGNED EQUIPMENT

[ ]*

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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EXHIBIT C

SOFTWARE LICENSE AGREEMENT (CONSIGNED EQUIPMENT)

This Agreement defines the license terms and conditions under which Teradyne, Inc. (“Customer”) grants user rights to selected software and the undersigned (“Supplier”) will use such selected software. These terms apply only to software owned or controlled by Customer that is delivered to Supplier by Customer and is listed on Schedule 1 attached hereto (“Software”).

In consideration of the mutual covenants contained herein, the parties agree as follows:

1. Customer grants a license to Software, as outlined herein, effective when Software is delivered to Supplier and, if required, a license key to enable use of Software. The license grants Supplier the limited, non-exclusive and non-transferable right to use Software and related documentation only for their internal use. Software that operates on a test system or equipment is licensed for use only with the specific test system or equipment for which it is authorized by Customer, except temporary use on another test system or other equipment is permitted if due to malfunction of the identified test system or equipment. Unless otherwise specified by Customer, in associated purchase documents or license keys, the term of this license shall extend only for so long as Supplier is consigned the use of the test system or equipment. Unless otherwise specified in writing by Customer, the license of Software is not transferable or sublicenseable by Supplier or its consolidated subsidiaries to any other party.

2. Supplier’s rights in Software and documentation are user’s rights only, and all title and ownership rights in them remain with Teradyne (or third party supplier to Customer). Supplier acknowledges that the Software and related documentation contain trade secret and proprietary information of Customer, and agrees not to disclose it to any others, using the same degree of care as with its own materials of a similar nature, but in no event less than reasonable care. Supplier shall not modify, decompile, disassemble or otherwise reverse engineer Software. Supplier will not copy the Software or related documentation, except for archival or emergency backup purposes. Any such copy must contain the copyright or proprietary notice as furnished with the original. Supplier agrees to allow Customer to monitor compliance with these conditions in a manner that does not interfere with normal business operations. When additional licenses or license terms exist or are required for any third party material incorporated in or delivered with Software, the terms of that third party license will supercede any conflicting terms in this Agreement as it relates to the third party material.

3. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, OR TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY DAMAGES OF ANY KIND WHETHER OR NOT EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.


CONFIDENTIAL		Execution Version

items of Software for such cause, Supplier agrees to return such item of Software and Documentation including any copies or partial copies thereof. Licenses to other items of Software not so terminated shall continue in full force and effect. In the case of Supplier’s ceasing to do business or becoming bankrupt, the Agreement is terminated including all licenses to specific items of Software and Supplier agrees to return all Software and Documentation.

5. Any change to this License Agreement must be in writing, signed by both parties. The laws of the State of California will govern interpretation of this License Agreement. Customer makes no grant of license rights to any third party software, source code, applications or open source software not delivered by Customer (hereinafter Third Party Software) necessary to use the Software on Supplier’s workstations or at its’ facilities. Supplier is responsible for securing all licenses for Third Party Software.

6. Supplier shall not export, re-export or release any specific item or items of Software, the source code for any specific item or items of Software, or any product incorporating any Software to a national of a country or to any country to which restrictions are applied from time to time by the U.S. Department of Commerce without an export license from the U.S. Government. This restriction shall survive the expiration or termination of this License Agreement.

7. To the best of Customer’s knowledge, after reasonable diligence, Customer represents that, as of the date of this License Agreement, the export of the Software to China does not require an individually validated export license from the U.S. Department of Commerce and that such export is not restricted or prohibited by the U.S. Department of Commerce or U.S. Government.


TERADYNE, INC. 600 Riverpark Drive North Reading, MA 01864		SOLECTRON CORPORATION 847 Gibraltar Drive Milpitas, CA 95035

Authorized Signature:		Authorized Signature:

Name Printed		Name Printed

Title		Title

Date		Date

SOLECTRON (SUZHOU) TECHNOLOGY CO. LTD.

Authorized Signature:

Name Printed

Title

Date


CONFIDENTIAL		Execution Version

Schedule 1 to Exhibit C

Consigned Equipment Software

[ ]*

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


CONFIDENTIAL		Execution Version

EXHIBIT D

PRICING SCHEDULE

[ ]*

* - Confidential Treatment Requested. Omitted portions filed with the SEC.


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EXHIBIT E

EXAMPLE FORM OF SUPPLIER EXEMPT EMPLOYEE

PROPRIETARY INFORMATION AGREEMENT

EMP #

^®

EXEMPT EMPLOYEE PROPRIETARY INFORMATION AGREEMENT

In consideration of my employment or continued employment by (the “Company”), a wholly-owned subsidiary of Solectron Corporation and in consideration of the compensation now and hereafter paid to me, I agree to the following:

1. Maintaining Confidential Information

a. Company Information. I agree, at all times during the term of my employment, and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to divulge or disclose, directly or indirectly, to any person, corporation or other entity, without written authorization of the management of the Company, any trade secrets, confidential knowledge, data or proprietary information (collectively referred as ‘Confidential Information”) relating to products, processes, know-how, designs, formulas, development or experimental work, computer programs, data bases, other original work of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its clients, consultants or licensees.

b. Former Employee Information. I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of my former or concurrent employers or companies, if any, and that I will not bring onto the premises of the Company any unpublished document or any property belonging to my former or concurrent employers or companies, if any, unless consented to in writing by the said employers or companies.

c. Third Party Information. I recognize that the Company has received, and in the future will receive, from third parties their confidential or proprietary information, subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose them to any person, firm or corporation (except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party) or to use it for the benefit of anyone or other than for the Company or such third party (consistent with the Company’s agreement with such third party) without the express written authorization of the management of the Company.

2. Retaining and Assigning Inventions and Original Works

a. Inventions and Original Works Retained by Me. I have attached hereto, as Exhibit A, a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to my employment with the Company, which belong to me, which relate to the Company’s proposed business and products, and which are not assigned to the Company, or, if no such list is attached, I represent that there are no such inventions.

b. Inventions and Original Works Assigned to the Company. I agree that I will promptly make full written disclosure to the Company, hold in trust for the sole right and benefit of the Company, and assign to the Company all my rights, title, and interest in and to, all inventions, discoveries, improvements, technology, trade secrets, computer programs, know-how, design, formulas,


CONFIDENTIAL		Execution Version

original works of authorship, or any other confidential materials, data, information or instructions, technical or otherwise, and whether or not patentable or copyrightable (collectively referred to as “Inventions”) which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed, or reduced to practice, during the period of time I am in the employ of the Company.

c. Maintenance of Records. I agree to keep and maintain adequate and current written records of all Inventions made by me during the term of my employment with the Company. The records shall be in the form of notes, sketches, drawings, and any other formats that may be specified by the Company. The records shall be available to and remain the sole property of the Company at all times.

d. Obtaining Patents and Copyright Registrations. I agree that, whenever requested by the Company, I shall assist the Company in obtaining patents and copyright registrations, as the case may be, covering Inventions assigned hereunder to the Company, and I shall execute any patent or copyright applications, or such other documents considered necessary by the Company or its counsel, to apply for and obtain such patents or copyrights.

I agree that my obligation to assist the Company to obtain letters patent and copyright registrations, as the case may be, covering inventions assigned hereunder to the Company shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate for time actually spent by me at the Company’s request on such assistance.

If the Company is unable, because of my mental or physical incapacity, or for any other reason, to secure my signature on any documents required to apply for or to pursue any application for any patents or copyright registrations, as the case may be, covering inventions assigned to the Company as above, I hereby irrevocably designate and appoint the Company, and its duly authorized officers and agents, as my agent and attorney in fact, to act for and in my behalf, to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents or copyright registrations thereon with the same legal force and effect as if executed by me.

I hereby waive and quit claim to the Company any and all claims, of any nature whatsoever, which I now, or may hereafter, have for infringement of any patents or copyrights resulting from any such application for patents or copyright registrations assigned hereunder to the Company.

3. Conflicting Employment . I agree that, during the term or my employment with the Company, I will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company.

4. Returning Company Documents . I agree that, at the time of leaving the employ of the Company, I will deliver to the Company (and will not keep in my possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to the Company, its successors or assigns. In the event of termination of my employment, I agree to sign and deliver the “Termination Certification” attached hereto as Exhibit B.

5. Representations . I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence in trust prior to my employment by the Company. I have not entered into and I agree that I will not enter into, any oral or written agreement in conflict with any of the provisions of this Agreement.


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6. General Provisions .

a. Governing Law . This Agreement will be governed by and construed according to the laws of and the courts in will have non-exclusive jurisdiction over any dispute relating to or arising from this Agreement.

b. Entire Agreement . This Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

c. Severability . If one or more of the provisions in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the remaining provisions of this Agreement, which will continue in full force and effect.

d. Successors and Assigns . This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

e. Effective Date . This Agreement shall be effective as of .



Employee signature	Date	Name of Employee (print)


Witness signature	Date	Name of Witness (print)


CONFIDENTIAL		Execution Version

EXHIBIT F

EXAMPLE FORM OF FTC ENTERPRISE SOFTWARE LICENSE AGREEMENT

Teradyne Software License Agreement

TSL No. 4250.1

This Agreement defines the license terms and conditions under which Teradyne, Inc. (“Customer”) grants user rights to selected software and how Solectron Corporation (“Supplier”) will use such selected software. These terms apply only to software owned or controlled by Customer that is delivered to Supplier by Customer as such may be updated from time to time (“Software”).

In consideration of the mutual covenants contained herein, the parties agree as follows:

1. Customer grants a license to Software, as outlined herein, effective when Software is delivered to Supplier and, if required, a license key to enable use of Software. The license grants Supplier and its consolidated subsidiaries the limited, non-exclusive and non-transferable right to use Software and related documentation only for final configuration and test of Customer hardware systems. Unless otherwise specified by Customer, in associated master contracts, the term of this license shall extend only for so long as Supplier is performing final test and configuration for Customer. Unless otherwise specified in writing by Customer, the license of Software is not transferable or sublicenseable by Supplier or its consolidated subsidiaries to any other party.

2. Supplier’s rights in Software and documentation are user’s rights only, and all title and ownership rights in them remain with Customer (or third party supplier to Customer). Supplier acknowledges that the Software and related documentation contain trade secret and proprietary information of Customer, and agrees not to disclose it to any others, using the same degree of care as with its own materials of a similar nature, but in no event less than reasonable care. Supplier shall not modify, decompile, disassemble or otherwise reverse engineer Software. Supplier may copy the Software or related documentation in order to properly perform any final test and configuration of Customer hardware systems. Any such copy, however, must contain the copyright or proprietary notice as furnished with the original. Supplier agrees to allow Customer to monitor compliance with these conditions in a manner that does not interfere with normal business operations.

3. IN NO EVENT WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, OR TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY DAMAGES OF ANY KIND WHETHER OR NOT EITHER PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.

4. Customer can terminate Supplier’s rights to use any specific item or items of Software for any material failure to perform Supplier’s obligations under this License with respect to that item or items of Software that is not remedied within thirty (30) days of written notice, or Supplier’s ceasing to do business or becoming bankrupt. If Customer terminates the license to such item or items of Software for such cause, Supplier agrees to return such item of Software and Documentation including any copies or partial copies thereof. Licenses to other items of Software not so terminated shall continue in full force and effect. In the case of Supplier’s ceasing to do business or becoming bankrupt, the Agreement is terminated including all licenses to specific items of Software. Supplier agrees to return all Software and Documentation.

5. Any change to this License Agreement must be in writing, signed by both parties. The laws of the State of California will govern interpretation of this License Agreement.

6. Supplier shall not export, re-export or release any specific item or items of Software, the source code for any specific item or items of Software, or any product incorporating any Software to a national of a country or to any country to which restrictions are applied from time to time by the U.S. Department of Commerce without an export license from the US Government. This restriction shall survive the expiration or termination of this License Agreement.


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TERADYNE, INC.						SOLECTRON CORPORATION
600 Riverpark Drive						847 Gibraltar Drive
North Reading, MA 01864						Milpitas, CA 95035


Authorized Signature:						Authorized Signature:

Name Printed						Name Printed


Title						Title
Date						Date

Exhibit 31.1

CERTIFICATIONS

I, Michael A. Bradley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2007

By:		/s/ M ICHAEL A. B RADLEY
		Michael A. Bradley Chief Executive Officer and President

Exhibit 31.2

CERTIFICATIONS

I, Gregory R. Beecher, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Teradyne, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2007

By:		/ S / G REGORY R. B EECHER
		Gregory R. Beecher Vice President, Chief Financial Officer, and Treasurer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Bradley, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C (S)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ M ICHAEL A. B RADLEY

Michael A. Bradley

Chief Executive Officer and President

November 9, 2007

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Teradyne, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory R. Beecher, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C (S)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

/s/ G REGORY R. B EECHER

Gregory R. Beecher

Vice President, Chief Financial Officer, and Treasurer November 9, 2007

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