TERADYNE, INC (Form: 10-Q, Received: 08/14/2015 13:32:54)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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 July 5, 2015

¨	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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

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 August 7, 2015 was 210,834,989 shares.

TERADYNE, INC.

INDEX


		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of July 5, 2015 and December 31, 2014		1

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 5, 2015 and June 29, 2014		2

	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 5, 2015 and June 29, 2014		3

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 5, 2015 and June 29, 2014		4

	Notes to Condensed Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		42

Item 4.	Controls and Procedures		42

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		44

Item 1A.	Risk Factors		44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		45

Item 4.	Mine Safety Disclosures		45

Item 6.	Exhibits		46

PART I

Item 1:

Financial Statements

TERADYNE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	July 5, 2015			December 31, 2014
	(in thousands, except per share information)
ASSETS
Current assets:
Cash and cash equivalents	$	300,685		$	294,256
Marketable securities		452,040			533,787
Accounts receivable, less allowance for doubtful accounts of $2,424 and $2,491 at July 5, 2015 and December 31, 2014, respectively		296,654			151,034
Inventories, net:
Parts		67,285			70,821
Assemblies in process		17,376			10,347
Finished goods		37,156			23,961

		121,817			105,129
Deferred tax assets		58,345			57,239
Prepayments		80,249			95,819
Other current assets		6,596			6,582

Total current assets		1,316,386			1,243,846

Property, plant and equipment, net		291,929			329,038
Marketable securities		275,882			470,789
Deferred tax assets		6,836			7,494
Other assets		13,364			10,419
Retirement plans assets		13,850			12,896
Intangible assets, net		279,126			190,600
Goodwill		495,434			273,438

Total assets	$	2,692,807		$	2,538,520

LIABILITIES
Current liabilities:
Accounts payable	$	86,463		$	47,763
Accrued employees’ compensation and withholdings		94,544			100,994
Deferred revenue and customer advances		77,347			71,603
Other accrued liabilities		85,470			50,247
Contingent consideration		15,092			895
Accrued income taxes		43,163			20,049

Total current liabilities		402,079			291,551

Long-term deferred revenue and customer advances		25,354			19,929
Retirement plans liabilities		107,557			108,460
Deferred tax liabilities		38,624			23,315
Long-term other accrued liabilities		24,468			13,830
Long-term contingent consideration		20,503			2,455

Total liabilities		618,585			459,540

Commitments and contingencies (See Note P)

SHAREHOLDERS’ EQUITY

Common stock, $0.125 par value, 1,000,000 shares authorized, 212,507 shares and 216,613 shares issued and outstanding at July 5, 2015 and December 31, 2014, respectively		26,563			27,077
Additional paid-in capital		1,462,349			1,437,135
Accumulated other comprehensive (loss) income		(3,162	)		4,689
Retained earnings		588,472			610,079

Total shareholders’ equity		2,074,222			2,078,980

Total liabilities and shareholders’ equity	$	2,692,807		$	2,538,520

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, 2014, 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 Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
	(in thousands, except per share amount)
Revenues:
Products	$	437,243		$	452,488		$	709,568		$	707,874
Services		75,496			73,079			145,572			138,703

Total revenues		512,739			525,567			855,140			846,577
Cost of revenues:
Cost of products		181,491			202,411			300,487			326,859
Cost of services		32,680			32,743			63,662			62,258

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		214,171			235,154			364,149			389,117

Gross profit		298,568			290,413			490,991			457,460
Operating expenses:
Engineering and development		75,832			73,414			147,282			140,499
Selling and administrative		77,073			77,489			149,114			155,492
Acquired intangible assets amortization		15,258			18,271			29,066			36,542
Restructuring and other		(385	)		572			(385	)		572

Total operating expenses		167,778			169,746			325,077			333,105

Income from operations		130,790			120,667			165,914			124,355
Non-operating (income) expense:
Interest income		(1,674	)		(1,266	)		(3,490	)		(2,302	)
Interest expense		444			159			606			6,576
Other (income) expense, net		(116	)		382			(5,776	)		562

Income before income taxes		132,136			121,392			174,574			119,519
Income tax provision		29,257			20,187			38,908			17,385

Net income	$	102,879		$	101,205		$	135,666		$	102,134

Net income per common share:
Basic	$	0.48		$	0.52		$	0.63		$	0.53

Diluted	$	0.48		$	0.47		$	0.62		$	0.45

Weighted average common shares—basic		213,845			194,408			215,516			193,860

Weighted average common shares—diluted		215,496			216,568			217,154			226,526

Cash dividend declared per common share	$	0.06		$	—		$	0.12		$	0.06

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, 2014, are an integral part of the condensed

consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
	(in thousands)
Net income	$	102,879		$	101,205		$	135,666		$	102,134

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax of $0		(6,267	)		—			(6,267	)		—
Available-for-sale marketable securities:
Unrealized (losses) gains on marketable securities arising during period, net of tax of $(1,648), $558, $(944), $1,242		(2,675	)		1,165			(876	)		2,304
Less: Reclassification adjustment for gains included in net income, net of tax of $(40), $(141), $(209), $(243)		(231	)		(272	)		(561	)		(448	)

		(2,906	)		893			(1,437	)		1,856
Defined benefit pension and post-retirement plans:
Amortization of net prior service benefit included in net periodic pension expense and post-retirement benefit income, net of tax of $(42), $(42), $(85), $(85)		(74	)		(74	)		(147	)		(147	)

Other comprehensive (loss) income		(9,247	)		819			(7,851	)		1,709

Comprehensive income	$	93,632		$	102,024		$	127,815		$	103,843

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, 2014, are an integral part of the condensed

consolidated financial statements.

TERADYNE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended
	July 5, 2015			June 29, 2014
	(in thousands)
Cash flows from operating activities:
Net income	$	135,666		$	102,134
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		36,230			33,785
Amortization		31,395			42,990
Stock-based compensation		15,405			23,530
Provision for excess and obsolete inventory		15,881			15,071
Non cash charge for the sale of inventories revalued at the date of acquisition		595			—
Tax benefit related to employee stock compensation awards		(892	)		(1,671	)
Contingent consideration adjustment		(1,600	)		—
Gain from the sale of an equity investment		(5,406	)		—
Deferred taxes		(10,371	)		(5,697	)
Other		1,154			1,165
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable		(142,493	)		(143,125	)
Inventories		23,500			18,469
Prepayments and other assets		14,054			27,000
Accounts payable and other accrued expenses		53,392			52,796
Deferred revenue and customer advances		5,685			13,800
Retirement plans contributions		(1,999	)		(2,388	)
Accrued income taxes		23,261			5,495

Net cash provided by operating activities		193,457			183,354
Cash flows from investing activities:
Purchases of property, plant and equipment		(46,110	)		(91,389	)
Acquisition of business, net of cash acquired		(282,332	)		—
Purchases of available-for-sale marketable securities		(590,250	)		(523,306	)
Proceeds from sales of available-for-sale marketable securities		631,400			152,818
Proceeds from maturities of available-for-sale marketable securities		231,416			377,436
Proceeds from the sale of an equity investment		5,406			—
Proceeds from life insurance		1,098			4,391

Net cash used for investing activities		(49,372	)		(80,050	)
Cash flows from financing activities:
Issuance of common stock under employee stock purchase and stock option plans		17,878			10,643
Tax benefit related to employee stock compensation awards		892			1,671
Repurchase of common stock		(128,316	)		—
Dividend payments		(25,857	)		(11,656	)
Payment of revolving credit facility costs		(2,253	)		—
Payments of long-term debt		—			(190,975	)

Net cash used for financing activities		(137,656	)		(190,317	)

Increase (decrease) in cash and cash equivalents		6,429			(87,013	)
Cash and cash equivalents at beginning of period		294,256			341,638

Cash and cash equivalents at end of period	$	300,685		$	254,625

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, 2014, are an integral part of the condensed

consolidated financial statements.

TERADYNE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A. The Company

Teradyne, Inc. (“Teradyne”) is a leading global supplier of automatic test equipment and collaborative robots. Teradyne’s automatic test equipment and collaborative robots products and services include:

•

semiconductor test (“Semiconductor Test”) systems;

•

wireless test (“Wireless Test”) systems;

•

defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, storage test (“Storage Test”) systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); and

•

industrial automation (“Industrial Automation”) products include collaborative robots used by global manufacturing and light industrial customers to improve quality and increase manufacturing efficiency.

On June 11, 2015, Teradyne acquired Universal Robots A/S (“Universal Robots”) for approximately $284 million of cash plus up to an additional $65 million of cash if certain performance targets are met extending through 2018. Universal Robots is the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality and increase manufacturing efficiency.

B. Accounting Policies

Basis of Presentation

The consolidated interim financial statements include the accounts of Teradyne and its wholly-owned 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 presentation of such interim financial statements. Certain prior year amounts were reclassified to conform to the current year presentation. The December 31, 2014 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

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 U.S. Securities and Exchange Commission (“SEC”) on February 27, 2015, for the year ended December 31, 2014.

Preparation of Financial Statements and Use of Estimates

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.

Revenue Recognition

Teradyne recognizes revenue when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to Teradyne’s customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass

upon destination, acceptance or cash payment, Teradyne defers revenue recognition until such events occur except when title transfer is tied to cash payment outside the United States. Outside the United States, Teradyne recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable Teradyne to recover the products in the event of customer payment default and the arrangement does not prohibit the customer’s use or resale of the product in the ordinary course of business.

Teradyne’s equipment has non-software and software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require Teradyne to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. Teradyne also defers the portion of the sales price that is not due until acceptance, which represents deferred profit.

For multiple element arrangements, Teradyne allocates revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be considered a separate unit the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in Teradyne’s control.

Teradyne’s post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers’ ability to use the product. Teradyne defers revenue for the selling price of installation and training. Extended warranties constitute warranty obligations beyond one year and Teradyne defers revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-20, “Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC 605-25, “Revenue Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual period or as services are performed.

Teradyne’s products are generally subject to warranty and related costs of the warranty are provided for in cost of revenue when product revenue is recognized. Teradyne classifies shipping and handling costs in cost of revenue. Teradyne generally does not provide its customers with contractual rights of return for any of its products.

Translation of Non-U.S. Currencies

The functional currency for all non-U.S. subsidiaries is the U.S. dollar, except for the Industrial Automation segment for which the local currency is its functional currency. All foreign currency denominated monetary assets and liabilities are remeasured on a monthly basis into the functional currency using exchange rates in effect at the end of the period. All foreign currency denominated non-monetary assets and liabilities are remeasured into the functional currency using historical exchange rates. Net foreign exchange gains and losses resulting from remeasurement are included in other (income) expense, net. For Industrial Automation, assets and liabilities are translated into U.S. dollars using exchange rates in effect at the end of the period. Revenue and expense amounts are translated using an average of exchange rates in effect during the period. Translation adjustments are recorded within accumulated other comprehensive income (loss).

C. Recently Issued Accounting Pronouncements

On April 7, 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation for debt discount. The guidance in the new standard is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. Therefore the amortization of such costs should continue to be calculated using the interest method and be reported as interest expense. For Teradyne, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those years. This ASU is expected to have no impact on Teradyne’s financial position and results of operations.

In May 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. On April 1, 2015, the FASB proposed a deferral of the effective date of the new revenue standard by one year, until January 1, 2018. This deferral was approved on July 22, 2015. For Teradyne, the standard will be effective in the first quarter of 2018. Early adoption is permitted but not before the original effective date (that is, annual periods beginning after December 15, 2016). The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Teradyne has not yet selected a transition method. Teradyne is currently evaluating the impact of this ASU on its financial position and results of operations.

D. Acquisitions

Universal Robots

On June 11, 2015, Teradyne acquired all of the outstanding equity of Universal Robots located in Odense, Denmark. Universal Robots is the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality and increase manufacturing efficiency. Universal Robots is a separate operating and reportable segment, Industrial Automation.

The total purchase price of $317.7 million consisted of $283.9 million of cash paid and $33.8 million of contingent consideration, measured at fair value. The contingent consideration is payable upon the achievement of certain thresholds and targets for earnings before income taxes, depreciation and amortization (“EBITDA”) for calendar year 2015, revenue for the period from July 1, 2015 to December 31, 2017 and revenue for the period from July 1, 2015 to December 31, 2018. The maximum amount of contingent consideration that could be paid is $65 million.

The valuation of the contingent consideration utilized the following assumptions: (1) probability of meeting each target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target were estimated based on a review of the historical and projected results. Discount rates of 6 percent, 8 percent and 10 percent, respectively, were based on corporate bond yields adjusted for the level of difficulty to achieve and the term of the earn out payment. A significant portion of the risk in achieving the contingent consideration was captured in the probabilities assigned to meeting each target.

The Universal Robots acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. The allocation of the total purchase price to Universal Robots’ net tangible liabilities and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible assets and net tangible liabilities in the amount of $226.5 million was allocated to goodwill, which is not deductible for tax purposes. The purchase price allocation is preliminary pending the final determination of the fair value of contingent consideration, acquired assets and assumed liabilities.

The following table represents the preliminary allocation of the purchase price:


	Purchase Price Allocation
	(in thousands)
Goodwill	$	226,501
Intangible assets		119,950
Tangible assets acquired and liabilities assumed:
Current assets		10,853
Non-current assets		3,415
Accounts payable and current liabilities		(11,453	)
Long-term deferred tax liabilities		(25,736	)
Long-term other liabilities		(5,844	)

Total purchase price	$	317,686

Teradyne estimated the fair value of intangible assets using the income and cost approaches. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:


	Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Developed technology	$	88,890		4.9
Trademarks and tradenames		21,680		10.0
Customer relationships		9,380		2.0

Total intangible assets	$	119,950		5.6

For the period from June 12, 2015 to July 5, 2015, Universal Robots contributed $3.7 million of revenues and had a $(1.7) million loss from operations before income taxes.

The following unaudited pro forma information gives effect to the acquisition of Universal Robots as if the acquisition occurred on January 1, 2014. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
Revenue	$	520,217	$	533,578	$	873,188	$	861,774
Net income		99,719		94,138		126,644		86,362
Net income per common share:
Basic	$	0.47	$	0.48	$	0.54	$	0.45

Diluted	$	0.46	$	0.43	$	0.58	$	0.38

Pro forma results for the three and six months ended July 5, 2015 were adjusted to exclude $1.0 million of acquisition related costs incurred in 2015, and $0.6 million of non-recurring expense related to the fair value adjustment to acquisition-date inventory.

Pro forma results for the six month ended June 29, 2014, were adjusted to include $1.6 million of non recurring expense related to fair value adjustment to acquisition-date inventory and $1.0 million of acquisition related costs.

Avionics Interface Technologies, LLC.

On October 31, 2014, Teradyne acquired substantially all of the assets and liabilities of Avionics Interface Technologies, LLC (“AIT”) located in Omaha, Nebraska. AIT is a supplier of equipment for testing state-of-the-art data communication buses. The acquisition of AIT complements Teradyne’s Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in Teradyne’s System Test segment.

The total purchase price of $21.2 million consisted of $19.4 million of cash paid and $1.8 million of contingent consideration, measured at fair value. The contingent consideration is payable upon achievement of certain revenue and gross margin targets in 2015 and 2016. The maximum amount of contingent consideration that could be paid is $2.1 million.

The valuation of the contingent consideration utilized the following assumptions: (1) probability of meeting each target; (2) expected timing of meeting each target; and (3) discount rate reflecting the risk associated with the expected payments. The probabilities and timing for each target were estimated based on a review of the historical and projected results. A discount rate of 4.7 percent was selected based on the estimated cost of debt for the business. A significant portion of the risk in achieving the contingent consideration was captured in the probabilities assigned to meeting each target.

The AIT acquisition was accounted for as a business combination and, accordingly, the results have been included in Teradyne’s consolidated results of operations from the date of acquisition. The allocation of the total purchase price to AIT’s net tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets in the amount of $10.5 million was allocated to goodwill, which is deductible for tax purposes.

The following table represents the final allocation of the purchase price:


	Purchase Price Allocation
	(in thousands)
Goodwill	$	10,516
Intangible assets		9,080
Tangible assets acquired and liabilities assumed:
Current assets		2,452
Non-current assets		359
Accounts payable and current liabilities		(1,164	)

Total purchase price	$	21,243

Teradyne estimated the fair value of intangible assets using the income approach. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives. Components of these intangible assets and their estimated useful lives at the acquisition date are as follows:


	Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Customer relationships	$	5,630		5.0
Developed technology		2,580		4.8
Trademarks and tradenames		380		5.0
Non-compete agreement		320		4.0
Customer order backlog		170		0.3

Total intangible assets	$	9,080		4.8

E. Financial Instruments and Derivatives

Cash Equivalents

Teradyne considers all highly liquid investments with maturities of three months or less at the date of acquisition to be cash equivalents.

Marketable Securities

Teradyne accounts for its investments in debt and equity securities in accordance with the provisions of Accounting Standards Codification (“ASC”) 320-10, “ Investments—Debt and Equity Securities. ” ASC 320-10 requires that certain debt and equity securities be classified into one of three categories; trading, available-for-sale or held-to-maturity securities. As of July 5, 2015, Teradyne’s investments in debt and equity securities were classified as available-for-sale and recorded at their fair market value.

On a quarterly basis, Teradyne reviews its investments to identify and evaluate those that have an indication of a potential other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include:

•

The length of time and the extent to which the market value has been less than cost;

•

The financial condition and near-term prospects of the issuer; and

•

The intent and ability to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

Teradyne uses the market and income approach techniques to value its financial instruments and there were no changes in valuation techniques during the three and six months ended July 5, 2015. As defined in ASC 820-10, “ Fair Value Measurements and Disclosures, ” fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets as of the reporting date.

Level 2: Inputs other than Level 1, that are observable either directly or indirectly as of the reporting date. For example, a common approach for valuing fixed income securities is the use of matrix pricing. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices, and is considered a Level 2 input.

Level 3: Unobservable inputs that are not supported by market data. Unobservable inputs are developed based on the best information available, which might include Teradyne’s own data.

Teradyne’s available-for-sale fixed income securities are classified as Level 2. Contingent consideration is classified as Level 3. The vast majority of Level 2 securities are priced by third party pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available, use other observable inputs like market transactions involving identical or comparable securities.

Realized losses recorded in the three and six months ended July 5, 2015 were $0.1 million and $0.1 million, respectively. There were no realized losses recorded in the three and six months ended June 29, 2014. Realized gains recorded in the three and six months ended July 5, 2015 were $0.4 million and $1.0 million, respectively. Realized gains recorded in the three and six months ended June 29, 2014 were $0.4 million and $0.7 million, respectively. Realized gains and realized losses are included in interest income and interest expense, respectively. Unrealized gains and losses are included in accumulated other comprehensive income (loss). The cost of securities sold is based on the specific identification method.

During the six months ended July 5, 2015 and June 29, 2014, there were no transfers in or out of Level 1, Level 2 or Level 3 financial instruments.

The following table sets forth by fair value hierarchy Teradyne’s financial assets and liabilities that were measured at fair value on a recurring basis as of July 5, 2015 and December 31, 2014.


	July 5, 2015
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	154,396	$	—	$	—	$	154,396
Cash equivalents		145,256		1,033		—		146,289
Available-for-sale securities:
U.S. Treasury securities		—		281,522		—		281,522
U.S. government agency securities		—		183,768		—		183,768
Corporate debt securities		—		122,696		—		122,696
Certificates of deposit and time deposits		—		76,876		—		76,876
Commercial paper		—		48,446		—		48,446
Equity and debt mutual funds		14,174		—		—		14,174
Non-U.S. government securities		—		440		—		440

Total	$	313,826	$	714,781	$	—	$	1,028,607

Liabilities
Contingent consideration	$	—	$	—	$	35,595	$	35,595
Derivatives		—		87		—		87

Total	$	—	$	87	$	35,595	$	35,682

Reported as follows:


	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	299,652	$	1,033	$	—	$	300,685
Marketable securities		—		452,040		—		452,040
Long-term marketable securities		14,174		261,708		—		275,882

	$	313,826	$	714,781	$	—	$	1,028,607

Liabilities
Other current liabilities	$	—	$	87	$	—	$	87
Contingent consideration		—		—		15,092		15,092
Long-term contingent consideration		—		—		20,503		20,503

	$	—	$	87	$	35,595	$	35,682


	December 31, 2014
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Assets
Cash	$	111,471	$	—	$	—	$	111,471
Cash equivalents		160,218		22,567		—		182,785
Available-for-sale securities:
U.S. Treasury securities		—		402,154		—		402,154
U.S. government agency securities		—		258,502		—		258,502
Corporate debt securities		—		141,467		—		141,467
Commercial paper		—		140,638		—		140,638
Certificates of deposit and time deposits		—		49,036		—		49,036
Equity and debt mutual funds		12,333		—		—		12,333
Non-U.S. government securities		—		446		—		446

Total	$	284,022	$	1,014,810	$	—	$	1,298,832

Liabilities
Contingent consideration	$	—	$	—	$	3,350	$	3,350
Derivatives		—		149		—		149

Total	$	—	$	149	$	3,350	$	3,499

Reported as follows:


	(Level 1)		(Level 2)		(Level 3)		Total
	(in thousands)
Assets
Cash and cash equivalents	$	271,689	$	22,567	$	—	$	294,256
Marketable securities		—		533,787		—		533,787
Long-term marketable securities		12,333		458,456		—		470,789

	$	284,022	$	1,014,810	$	—	$	1,298,832

Liabilities
Other current liabilities	$	—	$	149	$	—	$	149
Contingent consideration		—		—		895		895
Long-term contingent consideration		—		—		2,455		2,455

	$	—	$	149	$	3,350	$	3,499

Changes in the fair value of Level 3 contingent consideration for the three and six months ended July 5, 2015 and June 29, 2014 were as follows:


	For the Three Months Ended					For the Six Months Ended
	July 5, 2015			June 29, 2014		July 5, 2015			June 29, 2014
	(in thousands)
Balance at beginning of period	$	3,350		$	2,230	$	3,350		$	2,230
Acquisition of Universal Robots		33,845			—		33,845			—
Fair value adjustment(a)		(1,600	)		—		(1,600	)		—

Balance at end of period	$	35,595		$	2,230	$	35,595		$	2,230

(a)

The fair value measurement of the contingent consideration for the earn-out in connection with the acquisition of ZTEC Instruments, Inc. was reduced to $0 because Teradyne and the Securityholder Representative, on behalf of the ZTEC securityholders, agreed to terminate the earn out prior to the end of the December 31, 2015 earn-out period, with no payout in connection with the resolution of indemnity claims asserted by both Teradyne and the Securityholder Representative.

The following table provides quantitative information associated with the fair value measurement of Teradyne’s Level 3 financial instruments:


Liability	July 5, 2015 Fair Value	Valuation Technique	Unobservable Inputs	Weighted Average
	(in thousands)
Contingent consideration (Universal Robots)	$33,845	Income approach- discounted cash flow	EBITDA earn-out for calendar year 2015 probability		99	%
			Discount rate		6.0	%
			Revenue earn-out for period July 1, 2015—December 31, 2017 probability		72	%
			Discount rate		8.0	%
			Revenue earn-out for period July 1, 2015—December 31, 2018 probability		29	%
			Discount rate		10.0	%

Contingent consideration (AIT)	$1,750	Income approach- discounted cash flow	Revenue earn-out for calendar years 2015 and 2016 probability		90	%
Contingent consideration (AIT)	$1,750	Income approach- discounted cash flow	Discount rate		4.7	%

The significant unobservable inputs used in the Universal Robots fair value measurement of contingent consideration are the probabilities of successful achievement of revenue thresholds and targets in the periods July 1, 2015—December 31, 2017 and July 1, 2015—December 31, 2018 and EBITDA threshold and target for calendar year 2015, and respective discount rates. Increases or decreases in the revenue and EBITDA probabilities and the period in which results will be achieved would result in a higher or lower fair value measurement. The maximum amount of contingent consideration in connection with the acquisition of Universal Robots that could be paid is $65 million. The earn-out periods in connection with the Universal Robots acquisition end on December 31, 2015, December 31, 2017 and December 31, 2018.

The significant unobservable inputs used in the AIT fair value measurement of contingent consideration are the probabilities of successful achievement of calendar year 2015 and 2016 revenue thresholds and targets, and a discount rate. Increases or decreases in the revenue probabilities and the period in which results will be achieved would result in a higher or lower fair value measurement. The maximum amount of contingent consideration in connection with the acquisition of AIT that could be paid is $2.1 million. The earn-out periods in connection with the AIT acquisition end on December 31, 2015 and December 31, 2016.

The carrying amounts and fair values of Teradyne’s financial instruments at July 5, 2015 and December 31, 2014 were as follows:


	July 5, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Assets
Cash and cash equivalents	$	300,685	$	300,685	$	294,256	$	294,256
Marketable securities		727,922		727,922		1,004,576		1,004,576
Contingent consideration		35,595		35,595		3,350		3,350
Liabilities
Derivatives	$	87	$	87	$	149	$	149

The fair values of accounts receivable, net and accounts payable approximate the carrying value due to the short-term nature of these instruments.

The following tables summarize the composition of available-for-sale marketable securities at July 5, 2015 and December 31, 2014:


	July 5, 2015
	Available-for-Sale									Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	281,963	$	221	$	(662	)	$	281,522	$	21,403
U.S. government agency securities		183,601		170		(3	)		183,768		10,341
Corporate debt securities		123,176		1,021		(1,501	)		122,696		61,348
Certificates of deposit and time deposits		76,849		32		(5	)		76,876		11,009
Commercial paper		48,438		10		(2	)		48,446		13,233
Equity and debt mutual funds		12,083		2,118		(27	)		14,174		1,074
Non-U.S. government securities		440		—		—			440		—

	$	726,550	$	3,572	$	(2,200	)	$	727,922	$	118,408

Reported as follows:


	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	451,854	$	196	$	(10	)	$	452,040	$	53,028
Long-term marketable securities		274,696		3,376		(2,190	)		275,882		65,380

	$	726,550	$	3,572	$	(2,200	)	$	727,922	$	118,408


	December 31, 2014
	Available-for-Sale									Fair Market Value of Investments with Unrealized Losses
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
U.S. Treasury securities	$	402,197	$	362	$	(405	)	$	402,154	$	317,771
U.S. government agency securities		258,452		135		(85	)		258,502		104,642
Corporate debt securities		139,374		2,414		(321	)		141,467		96,998
Commercial paper		140,616		26		(4	)		140,638		41,747
Certificates of deposit and time deposits		49,048		11		(23	)		49,036		20,684
Equity and debt mutual funds		10,492		1,870		(29	)		12,333		1,234
Non-U.S. government securities		446		—		—			446		—

	$	1,000,625	$	4,818	$	(867	)	$	1,004,576	$	583,076

Reported as follows:


	Cost		Unrealized Gain		Unrealized (Loss)			Fair Market Value		Fair Market Value of Investments with Unrealized Losses
	(in thousands)
Marketable securities	$	533,833	$	99	$	(145	)	$	533,787	$	240,234
Long-term marketable securities		466,792		4,719		(722	)		470,789		342,842

	$	1,000,625	$	4,818	$	(867	)	$	1,004,576	$	583,076

As of July 5, 2015, the fair market value of investments with unrealized losses was $118.4 million. Of this value, $0.2 million had unrealized losses greater than one year and $118.2 million had unrealized losses less than one year. As of December 31, 2014, the fair market value of investments with unrealized losses was $583.1 million. Of this value, $2.3 million had unrealized losses greater than one year and $580.8 million had unrealized losses less than one year.

Teradyne reviews its investments to identify and evaluate investments that have an indication of possible impairment. Based on this review, Teradyne determined that the unrealized losses related to these investments at July 5, 2015 and December 31, 2014, were temporary.

The contractual maturities of investments held at July 5, 2015 were as follows:


	July 5, 2015
	Cost		Fair Market Value
	(in thousands)
Due within one year	$	451,854	$	452,040
Due after 1 year through 5 years		218,798		219,045
Due after 5 years through 10 years		6,481		6,512
Due after 10 years		37,334		36,151

Total	$	714,467	$	713,748

Contractual maturities of investments held at July 5, 2015 exclude equity and debt mutual funds as they do not have contractual maturity dates.

Derivatives

Teradyne conducts business in a number of foreign countries, with certain transactions denominated in local currencies. The purpose of Teradyne’s foreign currency management is to minimize the effect of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities. Teradyne does not use derivative financial instruments for trading or speculative purposes.

To minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities denominated in foreign currencies, Teradyne enters into foreign currency forward contracts. The change in fair value of these derivatives is recorded directly in earnings, and is used to offset the change in value of monetary assets and liabilities denominated in foreign currencies.

The notional amount of foreign currency forward contracts was $100.7 million and $73.0 million at July 5, 2015 and December 31, 2014, respectively. The fair value of the outstanding contracts at July 5, 2015 and December 31, 2014 were losses of $0.1 million and $0.1 million, respectively.

In the three months ended July 5, 2015, Teradyne recorded a net realized gain of $1.6 million related to foreign currency forward contracts hedging net monetary positions. In the six months ended July 5, 2015, Teradyne recorded a net realized loss of $1.9 million related to foreign currency forward contracts hedging net monetary positions.

In the three and six months ended June 29, 2014, Teradyne recorded net realized losses of $1.1 million and $1.9 million, respectively, related to foreign currency forward contracts hedging net monetary positions. Gains and losses on foreign currency forward contracts and foreign currency remeasurement gains and losses on monetary assets and liabilities are included in other (income) expense, net.

The following table summarizes the fair value of derivative instruments at July 5, 2015 and December 31, 2014:


	Balance Sheet Location	July 5, 2015		December 31, 2014
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current liabilities	$	87	$	149

Total derivatives		$	87	$	149

Teradyne had no offsetting foreign exchange contracts at July 5, 2015 and December 31, 2014.

The following table summarizes the effect of derivative instruments recognized in the statement of operations during the three and six months ended July 5, 2015 and June 29, 2014. The table does not reflect the corresponding gains and losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies. For the three months ended July 5, 2015, net losses from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $2.1 million. For the six months ended July 5, 2015, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $2.2 million. For the three and six months ended June 29, 2014, net gains from the remeasurement of monetary assets and liabilities denominated in foreign currencies were $0.7 million and $1.3 million, respectively.


	Location of (Gains) Losses Recognized in Statement of Operations	For the Three Months Ended					For the Six Months Ended
		July 5, 2015			June 29, 2014		July 5, 2015		June 29, 2014
		(in thousands)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (income) expense, net	$	(1,547	)	$	1,122	$	1,878	$	1,869

Total Derivatives		$	(1,547	)	$	1,122	$	1,878	$	1,869

See Note F: “Debt” regarding derivatives related to the convertible senior notes.

F. Debt

Revolving Credit Facility

On April 27, 2015, Teradyne entered into a Credit Agreement (the “Credit Agreement”) with Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $350 million (the “Credit Facility”). The Credit Agreement further provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders incremental commitments under the Credit Facility in an aggregate principal amount not to exceed $150.0 million.

Proceeds from the Credit Facility may be used for general corporate purposes and working capital. During the three months ended July 5, 2015, Teradyne incurred $2.3 million in costs related to the revolving credit facility. These costs are being amortized over the five year term of the revolving credit facility and are included in interest expense in the statement of operations. As of August 14, 2015, Teradyne has not borrowed any funds under the Credit Facility.

The interest rates applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.00% to 1.00% per annum or LIBOR plus a margin ranging from 1.00% to 2.00% per annum, based on the Consolidated Leverage Ratio of Teradyne and its Restricted Subsidiaries. In

addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.125% to 0.350% per annum, based on the then applicable Consolidated Leverage Ratio.

Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.

The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s and its Restricted Subsidiaries’ ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter: a consolidated leverage ratio and an interest coverage ratio. As of July 5, 2015, we were in compliance with all covenants.

The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.

Convertible Senior Notes

On March 31, 2009, Teradyne entered into an underwriting agreement regarding a public offering of $175.0 million aggregate principal amount of 4.50% convertible senior notes due March 15, 2014 (the “Notes”). On April 1, 2009, the underwriters exercised their option to purchase an additional $15.0 million aggregate principal amount of the Notes for a total aggregate principal amount of $190.0 million. The Notes bore interest at a rate of 4.50% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2009. The Notes had a maturity date of March 15, 2014. Substantially all of the Notes were converted prior to March 15, 2014 and were “net share settled,” meaning that the holders received, for each $1,000 in principal amount of Notes, $1,000 in cash and approximately 131.95 shares of Teradyne common stock (calculated by taking 182.65 shares, being the fixed number specified in the Notes purchase agreement, less 50.7 shares). The 50.7 shares were determined, as specified in the Notes purchase agreement, by dividing the $1,000 principal amount by the $19.74 average trading price of Teradyne’s common stock over the 25 day trading period from February 5, 2014 to March 12, 2014.

Teradyne satisfied the Notes “net share settlement” by paying the aggregate principal amount of $190 million in cash and issuing 25.1 million shares of common stock. On March 13, 2014, Teradyne exercised its call option agreement entered into with Goldman, Sachs & Co. (the “hedge counterparty”) at the time of issuance of the Notes and received 25.1 million shares of Teradyne’s common stock, which Teradyne retired.

From June 17, 2014 to September 17, 2014, the hedge counterparty exercised its warrant agreement entered into with Teradyne at the time of issuance of the Notes. The warrants were net share settled. In 2014, Teradyne issued 21.2 million shares of its common stock for warrants exercised at a weighted average strike price of $7.6348 per share.

The interest expense on Teradyne’s convertible senior notes for the three and six months ended July 5, 2015 and June 29, 2014 was as follows:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Contractual interest expense on the coupon	$	—	$	—	$	—	$	1,757
Amortization of the discount component and debt issuance fees recognized as interest expense		—		—		—		4,493

Total interest expense on the convertible debt	$	—	$	—	$	—	$	6,250

G. Prepayments

Prepayments consist of the following and are included in prepayments on the balance sheet:


	July 5, 2015		December 31, 2014
	(in thousands)
Contract manufacturer prepayments	$	55,674	$	65,972
Prepaid maintenance and other services		6,920		7,343
Prepaid taxes		5,124		11,462
Other prepayments		12,531		11,042

Total prepayments	$	80,249	$	95,819

H. Deferred Revenue and Customer Advances

Deferred revenue and customer advances consist of the following and are included in short and long-term deferred revenue and customer advances on the balance sheet:


	July 5, 2015		December 31, 2014
	(in thousands)
Extended warranty	$	43,299	$	43,300
Product maintenance and training		36,836		30,500
Customer advances		8,159		8,875
Undelivered elements and other		14,407		8,857

Total deferred revenue and customer advances	$	102,701	$	91,532

I. Product Warranty

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance 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 warranty balance below is included in other accrued liabilities on the balance sheet.


	For the Three Months Ended						For the Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
	(in thousands)
Balance at beginning of period	$	7,423		$	6,615		$	8,942		$	6,660
Acquisition		372			—			372			—
Accruals for warranties issued during the period		3,926			5,399			6,287			8,257
Adjustments related to pre-existing warranties		(797	)		(302	)		(1,828	)		(442	)
Settlements made during the period		(2,696	)		(2,639	)		(5,545	)		(5,402	)

Balance at end of period	$	8,228		$	9,073		$	8,228		$	9,073

When Teradyne receives revenue for extended warranty beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The extended warranty balance below is included in short and long-term deferred revenue and customer advances on the balance sheet.


	For the Three Months Ended						For the Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
	(in thousands)
Balance at beginning of period	$	40,704		$	33,949		$	43,300		$	34,909
Acquisition		699			—			699			—
Deferral of new extended warranty revenue		8,172			11,960			12,376			14,321
Recognition of extended warranty deferred revenue		(6,276	)		(5,857	)		(13,076	)		(9,178	)

Balance at end of period	$	43,299		$	40,052		$	43,299		$	40,052

J. Stock-Based Compensation

Teradyne grants performance-based restricted stock units (“PRSUs”) to its executive officers with a performance metric based on relative total shareholder return (“TSR”). Teradyne’s three-year TSR performance will be measured against the Philadelphia Semiconductor Index, which consists of thirty companies in the semiconductor device and capital equipment industries. The final number of TSR PRSUs that vest will vary based upon the level of performance achieved from 200% of the target shares to 0% of the target shares. The TSR PRSUs will vest upon the three-year anniversary of the grant date. Beginning with PRSUs granted in January 2014, if the recipient’s employment ends prior to the determination of the performance percentage due to (1) permanent disability or death or (2) retirement or termination other than for cause, after attaining both at least age sixty and at least ten years of service, then all or a portion of the recipient’s PRSUs (based on the actual performance percentage achieved on the determination date) will vest on the date the performance percentage is determined. Except as set forth in the preceding sentence, no TSR PRSUs will vest if the executive officer is no longer an employee at the end of the three-year period.

The TSR PRSUs are valued using a Monte Carlo simulation model. The number of units expected to be earned, based upon the achievement of the TSR market condition, is factored into the grant date Monte Carlo valuation. Compensation expense is recognized on a straight-line basis over the three-year service period. Compensation expense is recognized regardless of the eventual number of units that are earned based upon the market condition, provided the executive officer remains an employee at the end of the three-year period. Compensation expense is reversed if at any time during the three-year service period the executive officer is no longer an employee, subject to the retirement and termination eligibility provisions noted above.

During the six months ended July 5, 2015 and June 29, 2014, Teradyne granted 0.2 million and 0.1 million, respectively, TSR PRSUs with a grant date fair value of $18.21 and $22.06, respectively. The fair value was estimated using the Monte Carlo simulation model with the following assumptions:


	For the Six Months Ended
	July 5, 2015			June 29, 2014
Risk-free interest rate		0.77	%		0.75	%
Teradyne volatility-historical		28.2	%		36.1	%
Philadelphia Semiconductor Index volatility-historical		19.7	%		24.6	%
Dividend yield		1.33	%		1.25	%

Expected volatility was based on the historical volatility of Teradyne’s stock and the Philadelphia Semiconductor Index over the most recent three year period. The risk-free interest rate was determined using the

U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.24 per share divided by Teradyne’s stock price on the grant date of $18.10 for 2015 grants and $19.16 for 2014 grants.

During the six months ended July 5, 2015, Teradyne granted 1.5 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $17.26 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $4.43.

During the six months ended June 29, 2014, Teradyne granted 1.6 million of service-based restricted stock unit awards to employees at a weighted average grant date fair value of $18.12 and 0.1 million of service-based stock options to executive officers at a weighted average grant date fair value of $5.49.

Restricted stock unit awards granted to employees vest in equal annual installments over four years. Stock options vest in equal annual installments over four years and have a term of seven years from the date of grant.

The fair value of stock options was estimated using the Black-Scholes option-pricing model with the following assumptions:


	For the Six Months Ended
	July 5, 2015			June 29, 2014
Expected life (years)		4.0			4.0
Risk-free interest rate		1.1	%		1.2	%
Volatility-historical		33.4	%		38.8	%
Dividend yield		1.33	%		1.25	%

Teradyne determined the stock options’ expected life based upon historical exercise data for executive officers, the age of the executive officers and the terms of the stock option grant. Volatility was determined using historical volatility for a period equal to the expected life. The risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant. Dividend yield was based upon an estimated annual dividend amount of $0.24 per share divided by Teradyne’s stock price on the grant date, of $18.10 for 2015 grants and $19.16 for 2014 grants.

Effective January 31, 2014, Michael Bradley retired as Chief Executive Officer of Teradyne. On January 22, 2014, Teradyne entered into an agreement (the “Retirement Agreement”) with Mr. Bradley. Under the Retirement Agreement, Mr. Bradley’s unvested restricted stock units and stock options granted prior to his retirement date will continue to vest in accordance with their terms through January 31, 2017; and any vested options or options that vest during that period may be exercised for the remainder of the applicable option term. In the Retirement Agreement, Mr. Bradley agreed to be bound by non-competition and non-solicitation restrictions through January 31, 2017. Mr. Bradley continues to serve on Teradyne’s Board of Directors. In the three months ended March 30, 2014, Teradyne recorded a one-time charge to stock-based compensation expense of $6.6 million related to the Retirement Agreement.

K. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss), which is presented net of tax, consist of the following:


	For the Six Months Ended July 5, 2015
	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Balance at December 31, 2014, net of tax of $1,598, $(453)	$	—		$	2,365		$	2,324		$	4,689

Other comprehensive loss before reclassifications, net of tax of $0, $(944)		(6,267	)		(876	)		—			(7,143	)
Amounts reclassified from accumulated other comprehensive income, net of tax of $(209), $(85)		—			(561	)		(147	)		(708	)

Net current period other comprehensive loss, net of tax of $0, $(1,153), $(85)		(6,267	)		(1,437	)		(147	)		(7,851	)

Balance at July 5, 2015, net of tax of $0, $445, $(538)	$	(6,267	)	$	928		$	2,177		$	(3,162	)


	For the Six Months Ended June 29, 2014
	Unrealized Gains on Marketable Securities			Retirement Plans Prior Service Credit			Total
	(in thousands)
Balance at December 31, 2013, net of tax of $794, $(284)	$	1,381		$	2,619		$	4,000

Other comprehensive income before reclassifications, net of tax of $1,242, $0		2,304			—			2,304
Amounts reclassified from accumulated other comprehensive income, net of tax of $(243), $(85)		(448	)		(147	)		(595	)

Net current period other comprehensive income, net of tax of $999, $(85)		1,856			(147	)		1,709

Balance at June 29, 2014, net of tax of $1,793, $(369)	$	3,237		$	2,472		$	5,709

Reclassifications out of accumulated other comprehensive income to the statement of operations for the three and six months ended July 5, 2015 and June 29, 2014, were as follows:


Details about Accumulated Other Comprehensive Income Components	For the Three Months Ended				For the Six Months Ended				Affected Line Item in the Statements of Operations
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Available-for-sale marketable securities:
Unrealized gains, net of tax of $40, $141, $209, $243	$	231	$	272	$	561	$	448	Interest income
Amortization of defined benefit pension and postretirement plans:
Prior service benefit, net of tax of $42, $42, $85, $85		74		74		147		147	(a)

Total reclassifications, net of tax of $82, $183, $294, $328	$	305	$	346	$	708	$	595	Net income

(a)	The amortization of prior service benefit is included in the computation of net periodic pension cost and postretirement benefit; see Note O: “Retirement Plans.”

L. Goodwill and Intangible Assets

The changes in the carrying amounts of goodwill by segment are as follows:


	Wireless Test		Industrial Automation			System Test Group		Total
	(in thousands)
Balance at December 31, 2014	$	262,922	$	—		$	10,516	$	273,438
Goodwill acquired during period		—		226,501			—		226,501
Foreign currency translation adjustment		—		(4,505	)		—		(4,505	)

Balance at July 5, 2015	$	262,922	$	221,996		$	10,516	$	495,434

Amortizable intangible assets consist of the following and are included in intangible assets, net on the balance sheet:


	July 5, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
	(in thousands)
Developed technology	$	432,656	$	244,514	$	188,142		5.9 years
Customer relationships		155,831		100,500		55,331		7.5 years
Tradenames and trademarks		51,668		16,275		35,393		5.3 years
Non-compete agreement		320		60		260		4.0 years
Customer order backlog		170		170		—		0.3 years

Total intangible assets	$	640,645	$	361,519	$	279,126		6.6 years


	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life
	(in thousands)
Developed technology	$	345,513	$	224,059	$	121,454		6.2 years
Customer relationships		146,635		93,998		52,637		7.7 years
Tradenames and trademarks		30,414		14,205		16,209		9.0 years
Non-compete agreement		320		20		300		4.0 years
Customer order backlog		170		170		—		0.3 years

Total intangible assets	$	523,052	$	332,452	$	190,600		6.8 years

Aggregate intangible asset amortization expense was $15.3 million and $29.1 million, respectively, for the three and six months ended July 5, 2015 and $18.3 million and $36.5 million, respectively, for the three and six months ended June 29, 2014. Estimated intangible asset amortization expense for each of the five succeeding fiscal years is as follows:


Year	Amortization Expense
	(in thousands)
2015 (remainder)	$	39,932
2016		79,863
2017		71,269
2018		44,440
2019		23,591
Thereafter		20,031

M. Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands, except per share amounts)
Net income for basic and diluted net income per share	$	102,879	$	101,205	$	135,666	$	102,134

Weighted average common shares-basic		213,845		194,408		215,516		193,860
Effect of dilutive potential common shares:
Incremental shares from assumed conversion of convertible notes (1)		—		—		—		10,026
Convertible note hedge warrant shares (2)		—		20,406		—		20,674
Restricted stock units		978		705		940		878
Stock options		603		1,006		649		1,056
Employee stock purchase plan		70		43		49		32

Dilutive potential common shares		1,651		22,160		1,638		32,666

Weighted average common shares-diluted		215,496		216,568		217,154		226,526

Net income per common share-basic	$	0.48	$	0.52	$	0.63	$	0.53

Net income per common share-diluted	$	0.48	$	0.47	$	0.62	$	0.45

(1)	Incremental shares from the assumed conversion of the convertible notes were calculated using the difference between the average Teradyne stock price for the period and the conversion price of $5.48,

multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the convertible debt, was divided by the average Teradyne stock price for the period.

(2)

Convertible note hedge warrant shares were calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.6650, multiplied by 34.7 million shares. The result of this calculation, representing the total intrinsic value of the warrant, was divided by the average Teradyne stock price for the period. Teradyne’s call option on its common stock (convertible note hedge transaction) was excluded from the calculation of diluted shares because the effect was anti-dilutive. See Note F: “Debt” regarding the convertible note hedge transaction.

The computation of diluted net income per common share for the three and six months ended July 5, 2015 excludes the effect of the potential exercise of stock options to purchase approximately 0.2 million shares because the effect would have been anti-dilutive.

The computation of diluted net income per common share for the three and six months ended June 29, 2014 excludes the effect of the potential exercise of stock options to purchase approximately 0.3 million shares because the effect would have been anti-dilutive.

N. Restructuring and Other

Other

During the three and six months ended July 5, 2015, Teradyne recorded a $1.6 million gain from the decrease in the fair value of the ZTEC contingent consideration liability, partially offset by $1.0 million of acquisition costs related to Universal Robots.

Restructuring

During the six months ended July 5, 2015, Teradyne recorded $0.3 million of severance charges related to headcount reductions of 4 people, primarily in Semiconductor Test. During the six months ended June 29, 2014, Teradyne recorded $0.6 million of severance charges related to headcount reductions of 28 people, primarily in Wireless Test.

O. Retirement Plans

ASC 715, “Compensation—Retirement Benefits” , requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans. The pension asset or liability represents a difference between the fair value of the pension plan’s assets and the projected benefit obligation.

Defined Benefit Pension Plans

Teradyne has defined benefit pension plans covering a portion of domestic 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 these plans in accordance with local laws and to the extent that such contributions are tax deductible. The assets of these plans consist primarily of fixed income and equity 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 (“ERISA”) and the Internal Revenue Code (“IRC”), as well as unfunded foreign plans.

In the six months ended July 5, 2015, Teradyne contributed $1.2 million to the U.S. supplemental executive defined benefit pension plan and $0.4 million to certain qualified plans for non-U.S. subsidiaries.

For the three and six months ended July 5, 2015 and June 29, 2014, Teradyne’s net periodic pension cost was comprised of the following:


	For the Three Months Ended
	July 5, 2015						June 29, 2014
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	615		$	263		$	563		$	248
Interest cost		3,289			385			3,223			509
Expected return on plan assets		(3,634	)		(215	)		(3,125	)		(259	)
Amortization of prior service cost		34			—			34			—
Actuarial (gain) loss		(3	)		—			362			—

Total net periodic pension cost	$	301		$	433		$	1,057		$	498


	For the Six Months Ended
	July 5, 2015						June 29, 2014
	United States			Foreign			United States			Foreign
	(in thousands)
Service cost	$	1,231		$	510		$	1,109		$	498
Interest cost		6,571			744			6,438			1,014
Expected return on plan assets		(7,259	)		(410	)		(6,250	)		(475	)
Amortization of prior service cost		67			—			67			—
Actuarial (gain) loss		(3	)		—			362			—

Total net periodic pension cost	$	607		$	844		$	1,726		$	1,037

Postretirement Benefit Plan

In addition to receiving pension benefits, U.S. Teradyne employees who meet early retirement eligibility requirements as of their termination dates may participate in Teradyne’s Welfare Plan, which includes death, 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.

For the three and six months ended July 5, 2015 and June 29, 2014, Teradyne’s net periodic postretirement benefit income was comprised of the following:


	For the Three Months Ended						For the Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
	(in thousands)
Service cost	$	12		$	17		$	24		$	29
Interest cost		59			82			118			168
Amortization of prior service benefit		(150	)		(150	)		(299	)		(299	)
Actuarial gain		(19	)		(247	)		(19	)		(247	)

Total net periodic post-retirement benefit	$	(98	)	$	(298	)	$	(176	)	$	(349	)

P. Commitments and Contingencies

Purchase Commitments

As of July 5, 2015, Teradyne had entered into purchase commitments for certain components and materials. The purchase commitments covered by the agreements aggregate to approximately $230.3 million, of which $222.9 million is for less than one year.

Legal Claims

Teradyne is subject to various legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Teradyne’s results of operations, financial condition or cash flows.

Q. Income Taxes

The effective tax rate for the three months ended July 5, 2015 and June 29, 2014 was 22.1% and 16.6%, respectively. The effective tax rate for the six months ended July 5, 2015 and June 29, 2014 was 22.3% and 14.6%, respectively. The effective tax rates for these periods were lower than the expected federal statutory rate of 35% primarily because of the favorable effect of statutory rates applicable to income earned outside the United States. The tax rate for the six months ended July 5, 2015 was increased by additions to the uncertain tax positions for transfer pricing included in the projected annual effective tax rate partially offset by $1.7 million of discrete tax benefits composed of $0.7 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.0 million from other discrete tax benefits. The rate for the six months ended June 29, 2014 was also reduced by $2.9 million of discrete tax benefits composed of $1.2 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.7 million of other discrete tax benefits.

On a quarterly basis, Teradyne evaluates the realizability of the deferred tax assets by jurisdiction and assesses the need for a valuation allowance. At July 5, 2015, Teradyne believes that it will ultimately realize the deferred tax assets recorded on the condensed consolidated balance sheet. However, should Teradyne believe that it is more likely than not that the deferred tax assets would not be realized, the tax provision would increase in the period in which Teradyne determined that the realizability was not likely. Teradyne considers the probability of future taxable income and historical profitability, among other factors, in assessing the realizability of the deferred tax assets.

As of July 5, 2015 and December 31, 2014, Teradyne had $33.3 million and $30.4 million, respectively, of reserves for uncertain tax positions. The $2.9 million net increase in reserves for uncertain tax positions relates primarily to transfer pricing exposures.

As of July 5, 2015, Teradyne anticipated the liability for uncertain tax positions could decrease by approximately $0.5 million over the next twelve months, primarily as a result of the expiration of statutes of limitations and settlements with tax authorities. The potential decrease is related to transfer pricing exposures.

Teradyne recognizes interest and penalties related to income tax matters in income tax expense. As of July 5, 2015 and December 31, 2014, $0.5 million and $0.6 million respectively of interest and penalties were included in the reserve for uncertain tax positions.

Teradyne qualifies for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met. The tax savings due to the tax holiday for the six months ended July 5, 2015 was $6.2 million or $0.03 per diluted share. The tax savings due to the tax holiday for the six months ended June 29, 2014 was $6.1 million or $0.03 per diluted share. The tax holiday is currently expected to expire on December 31, 2015. Teradyne is in discussion with the Singapore Economic Development Board with respect to extension of the tax holiday for periods after December 31, 2015.

R. Segment Information

Teradyne has four operating segments (Semiconductor Test, Wireless Test, System Test and Industrial Automation), which are its reportable segments. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services. The Wireless Test segment includes operations related to the design, manufacturing and marketing of wireless test products and services. The System Test segment includes operations related to the design, manufacturing and marketing of products and services for defense/aerospace instrumentation test, storage test and circuit-board test. The Industrial Automation segment includes operations related to the design, manufacturing and marketing of collaborative robots. Each operating segment has a segment manager who is directly accountable to and maintains regular contact with Teradyne’s chief operating decision maker (Teradyne’s chief executive officer) to discuss operating activities, financial results, forecasts, and plans for the segment.

Teradyne evaluates performance based on several factors, of which the primary financial measure is business segment income before income taxes. The accounting policies of the business segments in effect are described in Note B: “Accounting Policies” in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2014, unless updated in this form 10-Q, where applicable.

Segment information for the three and six months ended July 5, 2015 and June 29, 2014 is as follows:


	Semiconductor Test		Wireless Test			System Test			Industrial Automation			Corporate and Eliminations			Consolidated
	(in thousands)
*Three months ended July 5, 2015:*
Revenues	$	400,315	$	62,879		$	45,822		$	3,723		$	—		$	512,739
Income (loss) before income taxes (1)(2)		129,546		6,841			(4,333	)		(1,700	)		1,782			132,136
Total assets (3)		649,087		485,857			95,544			358,276			1,104,043			2,692,807
*Three months ended June 29, 2014:*
Revenues	$	421,434	$	68,699		$	35,434		$	—		$	—		$	525,567
Income (loss) before income taxes (1)(2)		107,270		14,229			(715	)		—			608			121,392
Total assets (3)		747,492		638,012			71,644			—			1,173,515			2,630,663
*Six months ended July 5, 2015:*
Revenues	$	671,232	$	96,927		$	83,258		$	3,723		$	—		$	855,140
Income (loss) before income taxes (1)(2)		172,671		(3,600	)		(3,328	)		(1,700	)		10,531			174,574
Total assets (3)		649,087		485,857			95,544			358,276			1,104,043			2,692,807
*Six months ended June 29, 2014:*
Revenues	$	683,171	$	89,909		$	73,497		$	—		$	—		$	846,577
Income (loss) before income taxes (1)(2)		141,870		(10,856	)		(267	)		—			(11,228	)		119,519
Total assets (3)		747,492		638,012			71,644			—			1,173,515			2,630,663

(1)	Interest income, interest expense, and other (income) expense, net are included in Corporate and Eliminations.

(2)	Included in the income (loss) before income taxes for each of the segments are charges related to inventory and other.

(3)	Total business assets are directly attributable to each business. Corporate assets consist of cash and cash equivalents, marketable securities and certain other assets.

Included in the Semiconductor Test segment are charges in the following line items in the statements of operations:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Cost of revenues—inventory charge	$	6,409	$	3,713	$	6,940	$	9,918
Restructuring and other		305		—		305		—

Total	$	6,714	$	3,713	$	7,245	$	9,918

Included in the Wireless Test segment are charges in the following line items in the statements of operations:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Cost of revenues—inventory charge	$	330	$	879	$	1,176	$	3,972
Restructuring and other		—		426		—		426

Total	$	330	$	1,305	$	1,176	$	4,398

Included in the System Test segment are charges in the following line items in the statements of operations:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Cost of revenues—inventory charge	$	7,702	$	440	$	7,765	$	1,181
Restructuring and other		—		146		—		146

Total	$	7,702	$	586	$	7,765	$	1,327

Included in the Industrial Automation segment are charges in the following line item in the statements of operations:


	For the Three Months Ended				For the Six Months Ended
	July 5, 2015		June 29, 2014		July 5, 2015		June 29, 2014
	(in thousands)
Cost of revenues—inventory step-up (1)	$	595	$	—	$	595	$	—

Total	$	595	$	—	$	595	$	—

Included in Corporate and Eliminations are charges and credits in the following line items in the statements of operations:


	For the Three Months Ended					For the Six Months Ended
	July 5, 2015			June 29, 2014		July 5, 2015			June 29, 2014
	(in thousands)
Restructuring and other—ZTEC contingent consideration adjustment	$	(1,600	)	$	—	$	(1,600	)	$	—
Other (income) expense, net—gain from the sale of an equity investment		(624	)		—		(5,406	)		—
Restructuring and other—Universal Robots acquisition costs		960			—		960			—
Selling and administrative—stock-based compensation expense (2)		—			—		—			6,598

Total	$	(1,264	)	$	—	$	(6,046	)	$	6,598

(1)	Included in the cost of revenues for the three and six months ended July 5, 2015 is the cost for purchase accounting inventory step-up.

(2)	Expense related to the January 2014 retirement of Teradyne’s former chief executive officer; see Note J: “Stock-Based Compensation”.

S. Shareholders’ Equity

Stock Repurchase Program

In January 2015, the Board of Directors authorized Teradyne to repurchase up to $500 million of common stock, $300 million of which Teradyne intends to repurchase in 2015. The cumulative repurchases as of July 5, 2015 totaled 6.5 million shares of common stock for $128.3 million at an average price of $19.74 per share.

Dividend

Holders of Teradyne’s common stock are entitled to receive dividends when they are declared by Teradyne’s Board of Directors.

In January 2015 and May 2015, Teradyne’s Board of Directors declared a quarterly cash dividend of $0.06 per share. Dividend payments for the three and six months ended July 5, 2015 were $12.8 million and $25.9 million, respectively.

In January 2014, Teradyne’s Board of Directors declared an initial quarterly cash dividend of $0.06 per share that was paid on June 2, 2014. Dividend payments for the three and six months ended June 29, 2014 were $11.7 million.

While Teradyne declared a quarterly cash dividend and authorized a share repurchase program, it may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of Teradyne’s Board of Directors which will consider, among other things, Teradyne’s earnings, capital requirements and financial condition.

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 our filings with the Securities and Exchange Commission. See also Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements, except as may be required by law.

Overview

We are a leading global supplier of automatic test equipment and collaborative robots. We design, develop, manufacture and sell automatic test systems and solutions used to test semiconductors, wireless products, hard disk drives and circuit boards in the consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Our automatic test equipment and collaborative robots products and services include:

•

semiconductor test (“Semiconductor Test”) systems;

•

wireless test (“Wireless Test”) systems;

•

We have a broad customer base which includes integrated device manufacturers (“IDMs”), outsourced semiconductor assembly and test providers (“OSATs”), wafer foundries, fabless companies that design, but contract with others for the manufacture of integrated circuits (“ICs”), developers of wireless devices and consumer electronics, manufacturers of circuit boards, automotive suppliers, wireless product manufacturers, storage device manufacturers, aerospace and military contractors, and distributors that sell collaborative robots.

On June 11, 2015, we acquired Universal Robots A/S (“Universal Robots”) for approximately $284 million of cash plus up to an additional $65 million of cash if certain performance targets are met extending through 2018. Universal Robots is the leading supplier of collaborative robots which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality and increase manufacturing efficiency. Universal Robots is a separate operating and reportable segment, Industrial Automation. The acquisition of Universal Robots provides a growth engine to our business and complements our existing System Test and Wireless Test segments.

In October 2014, we acquired Avionics Interface Technologies, LLC (“AIT”), a supplier of equipment for testing state-of-the-art data communication buses. The acquisition of AIT complements our Defense/Aerospace line of bus test instrumentation for commercial and defense avionics systems. AIT is included in our System Test segment.

We believe our recent acquisitions have enhanced our opportunities for growth. We intend to continue to invest in our business, grow market share in our markets and expand further our addressable markets while tightly managing our costs.

The sales of our products and services are dependent, to a large degree, on customers who are subject to cyclical trends in the demand for their products. These cyclical periods have had, and will continue to have, a significant effect on our business since our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor and electronics industries. Historically, these demand fluctuations have resulted in significant variations in our results of operations. The sharp swings in the semiconductor and electronics industries in recent years have generally affected the semiconductor and electronics test equipment and services industries more significantly than the overall capital equipment sector.

In the fourth quarter of 2014, we performed our annual goodwill impairment test and recorded a goodwill impairment charge of $98.9 million in our Wireless Test segment as a result of decreased projected demand attributable to an estimated smaller future wireless test market due to reuse of wireless test equipment, price competition and different testing techniques. Further reductions in the size of the wireless test market may occur, which may result in additional goodwill impairment charges, increased risk of excess and obsolete inventories, asset write-offs and restructuring charges.

Critical Accounting Policies and Estimates

We have identified the policies which are critical to understanding our business and our results of operations. Except for below, there have been no significant changes during the six months ended July 5, 2015 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Revenue Recognition

We recognize revenues when there is persuasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers upon shipment or at delivery destination point. In circumstances where either title or risk of loss pass upon destination, acceptance or cash payment, we defer revenue recognition until such events occur except when title transfer is tied to cash payment outside the United States. Outside the United States, we recognize revenue even if we retain a form of title to products delivered to customers, provided the sole purpose is to enable us to recover the products in the event of customer payment default and the arrangement does not prohibit the customer’s use or resale of the product in the ordinary course of business.

Our equipment has non-software and embedded software components that function together to deliver the equipment’s essential functionality. Revenue is recognized upon shipment or at delivery destination point, provided that customer acceptance criteria can be demonstrated prior to shipment. Certain contracts require us to perform tests of the product to ensure that performance meets the published product specifications or customer requested specifications, which are generally conducted prior to shipment. Where the criteria cannot be demonstrated prior to shipment, revenue is deferred until customer acceptance has been received. We also defer the portion of the sales price that is not due until acceptance, which represents deferred profit.

For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of selling price (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). For a delivered item to be considered a separate unit, the delivered item must have value to the customer on a standalone basis and the delivery or performance of the undelivered item must be considered probable and substantially in our control.

Our post-shipment obligations include installation, training services, one-year standard warranties, and extended warranties. Installation does not alter the product capabilities, does not require specialized skills or

tools and can be performed by the customers or other vendors. Installation is typically provided within five days of product shipment and is completed within one to two days thereafter. Training services are optional and do not affect the customers’ ability to use the product. We defer revenue for the selling price of installation and training. Extended warranties constitute warranty obligations beyond one year and we defer revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-20, “Separately Priced Extended Warranty and Product Maintenance Contracts” and ASC 605-25, “Revenue Recognition Multiple-Element Arrangements.” Service revenue is recognized over the contractual period or as services are performed.

Our products are generally subject to warranty and the related costs of the warranty are provided for in cost of revenues when product revenue is recognized. We classify shipping and handling costs in cost of revenues.

We do not provide our customers with contractual rights of return for any of our products.

Translation of Non-U.S. Currencies

The functional currency for all non-U.S. subsidiaries is the U.S. dollar, except for the Industrial Automation segment for which the local currency is its functional currency. All foreign currency denominated monetary assets and liabilities are re-measured on a monthly basis into the functional currency using exchange rates in effect at the end of the period. All foreign currency denominated non-monetary assets and liabilities are re-measured into the functional currency using historical exchange rates. Net foreign exchange gains and losses resulting from re-measurement are included in other (income) expense, net. For Industrial Automation, assets and liabilities are translated into U.S. dollars using exchange rates in effect at the end of the period. Revenue and expense amounts are translated using an average of exchange rates in effect during the period. Translation adjustments are recorded within accumulated other comprehensive income (loss).

SELECTED RELATIONSHIPS WITHIN THE CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS


	For the Three Months Ended						For the Six Months Ended
	July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
Percentage of revenues:
Revenues:
Products		85	%		86	%		83	%		84	%
Services		15			14			17			16

Total revenues		100			100			100			100
Cost of revenues:
Cost of products		35			39			35			39
Cost of services		6			6			7			7

Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below)		42			45			43			46

Gross profit		58			55			57			54
Operating expenses:
Engineering and development		15			14			17			17
Selling and administrative		15			15			17			18
Acquired intangible assets amortization		3			3			3			4
Restructuring and other		—			—			—			—

Total operating expenses		33			32			38			39

Income from operations		26			23			19			15
Non-operating (income) expenses
Interest income		—			—			—			—
Interest expense		—			—			—			1
Other (income) expense, net		—			—			(1	)		—

Income before income taxes		26			23			20			14
Income tax provision		6			4			5			2

Net income		20	%		19	%		16	%		12	%

Results of Operations

Second Quarter 2015 Compared to Second Quarter 2014

Book to Bill Ratio

Book to bill ratio is calculated as net bookings divided by net sales. Book to bill ratio by reportable segment was as follows:


	For the Three Months Ended
	July 5, 2015		June 29, 2014
Semiconductor Test		1.0		1.3
Wireless Test		1.3		0.8
System Test		1.0		1.1
Industrial Automation		1.4		—
Total Company		1.0		1.2

Revenues

Revenues by our four reportable segments were as follows:


	For the Three Months Ended				Dollar Change
	July 5, 2015		June 29, 2014		Dollar Change
	(in millions)
Semiconductor Test	$	400.3	$	421.5	$	(21.2	)
Wireless Test		62.9		68.7		(5.8	)
System Test		45.8		35.4		10.4
Industrial Automation		3.7		—		3.7

	$	512.7	$	525.6	$	(12.9	)

The decrease in Semiconductor Test revenues of $21.2 million, or 5%, was primarily due to lower memory test product sales. The decrease in Wireless Test revenue of $5.8 million, or 8%, was primarily driven by lower connectivity test system sales. The increase in System Test revenue of $10.4 million, or 29%, was primarily due to higher sales in Storage Test of 3.5” hard disk drive testers for cloud storage.

Revenues by country as a percentage of total revenues were as follows (1):


	For the Three Months Ended
	July 5, 2015			June 29, 2014
Taiwan		26	%		30	%
China		18			19
United States		12			11
Singapore		8			6
Japan		8			2
Philippines		7			4
Europe		6			5
Korea		5			13
Malaysia		5			5
Thailand		4			4
Rest of World		1			1

		100	%		100	%

(1)	Revenues attributable to a country are based on location of customer site.

Gross Profit

Our gross profit was as follows:


	For the Three Months Ended						Dollar/Point Change
	July 5, 2015			June 29, 2014			Dollar/Point Change
	(in millions)
Gross Profit	$	298.6		$	290.4		$	8.2
Percent of Total Revenues		58.2	%		55.3	%		2.9

Gross profit as a percent of revenue increased by 2.9 points as a result of a 4.3 point increase related to product mix and sales of previously leased testers in Semiconductor Test, partially offset by a 1.4 point decrease due to higher excess and obsolete inventory provisions in Storage Test and Semiconductor Test.

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 positions. 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 twelve quarters, is written-down to estimated net realizable value.

During the three months ended July 5, 2015, we recorded an inventory provision of $14.4 million included in cost of revenues primarily due to $7.7 million related to a downward revision to previously forecasted demand levels for our 2.5” hard disk drive testers in Storage Test and $6.0 million related to product transition in Semiconductor Test. Of the $14.4 million of total excess and obsolete provisions, $7.7 million was related to System Test, $6.4 million was related to Semiconductor Test, and $0.3 million was related to Wireless Test.

During the three months ended June 29, 2014, we recorded an inventory provision of $5.0 million included in cost of revenues primarily due to downward revisions to previously forecasted demand levels. Of the $5.0 million of total excess and obsolete provisions, $3.7 million was related to Semiconductor Test, $0.9 million was related to Wireless Test, and $0.4 million was related to System Test.

During the three months ended July 5, 2015 and June 29, 2014, we scrapped $0.8 million and $2.3 million of inventory, respectively. During the three months ended July 5, 2015 and June 29, 2014, we sold $2.6 million and $2.1 million of previously written-down or written-off inventory, respectively. As of July 5, 2015, we had inventory related reserves for inventory which had been written-down or written-off totaling $122.8 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:


	For the Three Months Ended						Dollar Change
	July 5, 2015			June 29, 2014			Dollar Change
	(in millions)
Engineering and Development	$	75.8		$	73.4		$	2.4
Percent of Total Revenues		14.8	%		14.0	%

The increase of $2.4 million in engineering and development expenses was due primarily to increased spending in System Test and higher variable compensation.

Selling and Administrative

Selling and administrative expenses were as follows:


	For the Three Months Ended						Dollar Change
	July 5, 2015			June 29, 2014			Dollar Change
	(in millions)
Selling and Administrative	$	77.1		$	77.5		$	(0.4	)
Percent of Total Revenues		15.0	%		14.7	%

The decrease of $0.4 million in selling and administrative was due primarily to lower spending in Semiconductor Test partially offset by higher variable compensation.

Restructuring and Other

Other

During the three months ended July 5, 2015, we recorded a $1.6 million gain from the decrease in the fair value of the ZTEC contingent consideration, partially offset by $1.0 million of acquisition costs related to Universal Robots.

Restructuring

During the three months ended July 5, 2015, we recorded $0.3 million of severance charges related to headcount reductions of 4 people, primarily in Semiconductor Test. During the three months ended June 29, 2014, we recorded $0.6 million of severance charges related to headcount reductions of 28 people, primarily in Wireless Test.

Income Taxes

The effective tax rate for the three months ended July 5, 2015 and June 29, 2014 was 22.1% and 16.6%, respectively. The increase in the effective tax rate is primarily attributable to a projected increase in income subject to tax in the United States as compared to lower rate, in foreign jurisdictions and an increase in uncertain tax positions for transfer pricing.

Six Months of 2015 Compared to Six Months of 2014

Revenues

Revenues by our four reportable segments were as follows:


	For the Six Months Ended
	July 5, 2015		June 29, 2014		Dollar Change
	(in millions)
Semiconductor Test	$	671.2	$	683.2	$	(12.0	)
Wireless Test		96.9		89.9		7.0
System Test		83.3		73.5		9.8
Industrial Automation		3.7		—		3.7

	$	855.1	$	846.6	$	8.5

The decrease in Semiconductor Test revenues of $12.0 million, or 2%, was primarily due to lower SOC product volume, driven by the application processors and microcontrollers markets. The increase in Wireless Test revenue of $7.0 million, or 8%, was primarily due to higher cellular test product volume. The increase in System Test revenue of $9.8 million, or 13%, was primarily due to higher sales in Storage Test due to 3.5” hard disk drive testers for cloud storage.

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


	For the Six Months Ended
	July 5, 2015			June 29, 2014
Taiwan		28	%		29	%
China		16			17
United States		13			12
Korea		8			10
Japan		8			4
Singapore		7			8
Europe		6			6
Malaysia		5			5
Philippines		5			4
Thailand		3			4
Rest of World		1			1

		100	%		100	%

Gross Profit

Our gross profit was as follows:


	For the Six Months Ended						Dollar/Point Change
	July 5, 2014			June 29, 2014			Dollar/Point Change
	(in millions)
Gross Profit	$	491.0		$	457.5		$	33.5
Percent of Total Revenue		57.4	%		54.0	%		3.4

Gross profit as a percent of revenue increased by 3.4 points primarily due to an increase of 3.7 points related to product mix and sales of previously leased testers in Semiconductor Test, partially offset by higher warranty costs.

During the six months ended July 5, 2015, we recorded an inventory provision of $15.9 million included in cost of revenues primarily due to $7.7 million related to a downward revision to previously forecasted demand levels for our 2.5” hard disk drive testers in Storage Test and $6.0 million related to product transition in Semiconductor Test. Of the $15.9 million of total excess and obsolete provisions, $7.8 million was related to System Test, $6.9 million was related to Semiconductor Test, and $1.2 million was related to Wireless Test.

During the six months ended June 29, 2014, we recorded an inventory provision of $15.1 million included in cost of revenues with $9.0 million due to downward revisions to previously forecasted demand levels and $6.1 million related to product transition in Semiconductor Test. Of the $15.1 million of total excess and obsolete provisions, $9.9 million was related to Semiconductor Test, $4.0 million was related to Wireless Test, and $1.2 million was related to System Test.

During the six months ended July 5, 2015 and June 29, 2014, we scrapped $1.4 million and $3.3 million of inventory, respectively. During the six months ended July 5, 2015 and June 29, 2014, we sold $4.5 million and $3.6 million, respectively, of previously written-down or written-off inventory. As of July 5, 2015 we had inventory related reserves for inventory which had been written-down or written-off totaling $122.8 million. We have no pre-determined timeline to scrap the remaining inventory.

Engineering and Development

Engineering and development expenses were as follows:


	For the Six Months Ended						Dollar Change
	July 5 2015			June 29, 2014			Dollar Change
	(in millions)
Engineering and Development	$	147.3		$	140.5		$	6.8
Percent of Total Revenue		17.2	%		16.6	%

The increase of $6.8 million in engineering and development expenses was due primarily to increased spending in Semiconductor Test and higher variable compensation.

Selling and Administrative

Selling and administrative expenses were as follows:


	For the Six Months Ended						Dollar Change
	July 5, 2015			June 29, 2014			Dollar Change
	(in millions)
Selling and Administrative	$	149.1		$	155.5		$	(6.4	)
Percent of Total Revenue		17.4	%		18.4	%

The decrease of $6.4 million in selling and administrative expenses was due primarily to a one-time $6.6 million stock-based compensation charge related to Michael Bradley’s (retired Chief Executive Officer) Retirement Agreement in the six months ended June 29, 2014, partially offset by higher variable compensation.

Restructuring and Other

Other

During the six months ended July 5, 2015, we recorded a $1.6 million fair value adjustment to decrease the ZTEC acquisition contingent consideration, partially offset by $1.0 million of acquisition costs related to Universal Robots.

Restructuring

During the six months ended July 5, 2015, we recorded $0.3 million of severance charges related to headcount reductions of 4 people, primarily in Semiconductor Test. During the six months ended June 29, 2014, we recorded $0.6 million of severance charges related to headcount reductions of 28 people, primarily in Wireless Test.

Income Taxes

The effective tax rate for the six months ended July 5, 2015 and June 29, 2014 was 22.3% and 14.6%, respectively. The increase in the effective tax rate is primarily attributable to a projected increase in income

subject to tax in the United States as compared to lower rates in foreign jurisdictions as well as an increase in uncertain tax positions for transfer pricing. The effective tax rate for the six months ended July 5, 2015 was reduced by discrete tax benefits of $1.7 million composed of $0.7 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.0 million of other discrete tax benefits. The effective tax rate for the six months ended June 29, 2014 was reduced by discrete tax benefits of $2.9 million composed of $1.2 million from disqualifying dispositions of incentive stock options and employee stock purchase plan shares and $1.7 million of other discrete tax benefits.

Contractual Obligations

The following table reflects our contractual obligations as of July 5, 2015:


	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Other
	(in thousands)
Purchase Obligations	$	230,288	$	222,882	$	7,406	$	—	$	—	$	—
Retirement Plan Contributions		111,651		4,145		8,260		8,885		90,361		—
Operating Lease Obligations		62,441		15,326		20,191		12,368		14,556		—
Fair Value of Contingent Consideration		35,595		15,092		15,410		5,093		—		—
Other Long-Term Liabilities Reflected on the Balance Sheet under GAAP (1)		88,446		—		25,354		—		—		63,092

Total	$	528,421	$	257,445	$	76,621	$	26,346	$	104,917	$	63,092

(1)

Included in Other Long-Term Liabilities are liabilities for customer advances, extended warranty, uncertain tax positions, deferred tax liabilities and other obligations. For certain long-term obligations, we are unable to provide a reasonably reliable estimate of the timing of future payments relating to these obligations and therefore we included these amounts in the column marked “Other.”

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities balances decreased by $270.2 million in the six months ended July 5, 2015, to $1,029 million.

In the six months ended July 5, 2015, changes in operating assets and liabilities used cash of $24.6 million. This was due to a $104.9 million increase in operating assets and an $80.3 million increase in operating liabilities.

The increase in operating assets was due to a $142.5 million increase in accounts receivable due to higher sales, partially offset by a $23.5 million decrease in inventories and a $14.1 million decrease in prepayments and other assets. The increase in operating liabilities was due to a $40.6 million increase in other accrued liabilities, a $31.2 million increase in accounts payable due to higher sales, a $23.2 million increase in accrued income taxes, and a $5.7 million increase in customer advance payments and deferred revenue, partially offset by a $18.4 million decrease in accrued employee compensation due primarily to variable compensation and employee stock compensation awards’ payroll tax payments, and $2.0 million of retirement plan contributions.

Investing activities during the six months ended July 5, 2015 used cash of $49.4 million, due to $590.3 million used for purchases of marketable securities, $282.3 million used for the acquisition of Universal Robots, and $46.1 million used for purchases of property, plant and equipment, partially offset by proceeds from maturities and sales of marketable securities of $231.4 million and $631.4 million, respectively, proceeds from the sale of an equity investment of $5.4 million, and proceeds from life insurance of $1.1 million related to the cash surrender value from the cancellation of Teradyne owned life insurance policies. The decrease in purchases of property, plant and equipment of $45.3 million was primarily due to higher purchases of testers for customer leasing in the six months ended June 29, 2014.

Financing activities during the six months ended July 5, 2015 used cash of $137.7 million, due to $128.3 million used for repurchase of 6.5 million shares of common stock at an average price of $19.74 per share, $25.9 million used for dividend payments, and $2.3 million used for debt issuance costs related to our April, 2015 revolving credit facility, partially offset by $17.9 million from the issuance of common stock under employee stock purchase and stock option plans and $0.9 million from the tax benefit related to employee stock compensation awards.

In the six months ended June 29, 2014, changes in operating assets and liabilities used cash of $27.9 million. This was due to a $97.7 million increase in operating assets and a $69.7 million increase in operating liabilities.

The increase in operating assets was due to a $143.1 million increase in accounts receivable due to higher sales, partially offset by a $27.0 million decrease in prepayments and other assets and an $18.5 million decrease in inventories due to higher sales. The increase in operating liabilities was due to a $39.3 million increase in accounts payable due to higher sales, a $37.9 million increase in other accrued liabilities, a $13.8 million increase in customer advance payments and deferred revenue and a $5.5 million increase in accrued income taxes, partially offset by a $20.1 million decrease in accrued employee compensation due primarily to variable compensation and employee stock compensation awards’ payroll tax payments, a $4.3 million convertible note interest payment, and $2.4 million of retirement plan contributions.

Investing activities during the six months ended June 29, 2014 used cash of $80.1 million, due to $523.3 million used for purchases of marketable securities and $91.4 million used for purchases of property, plant and equipment, partially offset by proceeds from maturities and sales of marketable securities that provided cash of $377.4 million and $152.8 million, respectively, and proceeds from life insurance of $4.4 million related to the cash surrender value from the cancellation of Teradyne owned life insurance policies on its retired chief executive officer.

Financing activities during the six months ended June 29, 2014 used cash of $190.3 million. $191.0 million of cash was used for payments on long-term debt and $11.7 million was used for dividend payments, partially offset by $10.6 million from the issuance of common stock under employee stock purchase and stock option plans and $1.7 million from the tax benefit related to employee stock compensation awards.

In January 2014, our Board of Directors declared an initial quarterly cash dividend of $0.06 per share that was paid on June 2, 2014. In the six months ended June 29, 2014, dividend payments were $11.7 million.

In January 2015 and May 2015, our Board of Directors declared a quarterly cash dividend of $0.06 per share. In the six months ended July 5, 2015, dividend payments were $25.9 million.

In January 2015, our Board of Directors authorized the repurchase of up to $500 million of common stock, $300 million of which we intend to repurchase in 2015. As of July 5, 2015, we repurchased 6.5 million shares of common stock at an average price of $19.74, for a total cost of $128.3 million.

While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors which will consider, among other things, our earnings, capital requirements and financial condition.

We believe our cash, cash equivalents and marketable securities balance will be sufficient to pay our quarterly dividend, execute our authorized share repurchase program and meet our working capital and expenditure needs for at least the next twelve months. The amount of cash, cash equivalents and marketable securities in the U.S. and our operations in the U.S. provide sufficient liquidity to fund our business activities in the U.S. We have approximately $455 million of cash, cash equivalents and marketable securities outside the U.S. that if repatriated would incur additional taxes. Determination of the additional taxes that would be incurred

is not practicable due to uncertainty regarding the remittance structure, the mix of earnings and earnings and profit pools in the year of remittance, and overall complexity of the calculation. Inflation has not had a significant long-term impact on earnings.

Equity Compensation Plans

As discussed in Note N: “Stock Based Compensation” in our 2014 Form 10-K, we have a 1996 Employee Stock Purchase Plan and a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity 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

On April 7, 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation for debt discount. The guidance in the new standard is limited to the presentation of debt issuance costs and does not affect the recognition and measurement of debt issuance costs. Therefore the amortization of such costs should continue to be calculated using the interest method and be reported as interest expense. The standard is effective for our financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those years. This ASU is expected to have no impact on our financial position and results of operations.

In May 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to show the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services. On April 1, 2015, the FASB proposed a deferral of the effective date of the new revenue standard by one year, until January 1, 2018. This deferral was approved on July 22, 2015. The standard will be effective in our first quarter of 2018. Early adoption is permitted but not before the original effective date (that is, annual periods beginning after December 15, 2016). The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We have not yet selected a transition method. We are currently evaluating the impact of this ASU on our financial position and results of operations.

Item 3:

Quantitative and Qualitative Disclosures about Market Risk

For “Quantitative and Qualitative Disclosures about Market Risk” affecting Teradyne, see Part 2 Item 7a, “Quantitative and Qualitative Disclosures about Market Risks,” in our Annual Report on Form 10-K filed with the SEC on February 27, 2015. 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, 2014.

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

We are subject to various legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our results of operations, financial condition or cash flows.

Item 1A:

Risk Factors

In addition to 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, 2014, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form 10-K remain applicable to our business.

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.

We may incur indebtedness.

On April 27, 2015, we entered into a five-year, senior secured revolving credit facility of $350.0 million. Subject to customary conditions, we may seek to obtain from existing or new lenders incremental commitments under the credit facility in an aggregate principal amount not to exceed $150.0 million. We have not borrowed any funds under this credit facility. We could borrow funds under this credit facility at any time for general corporate purposes and working capital. Incurring indebtedness, among other things, could:

•

make it difficult to pay other obligations;

•

make it difficult to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;

•

require the dedication of a substantial portion of any cash flow from operations to service our indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures; and

•

limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete.

Restrictive covenants in the agreement governing our senior secured revolving credit facility may restrict our ability to pursue business strategies.

The agreement governing our senior secured revolving credit facility limits our ability, among other things, to: incur additional secured indebtedness; sell, transfer, license or dispose of assets; consolidate or merge; enter into transactions with our affiliates; and incur liens. In addition, our senior secured revolving credit facility contains financial and other restrictive covenants that limit our ability to engage in activities that may be in our long term best interest, such as, subject to permitted exceptions, making capital expenditures in excess of certain thresholds, making investments, loans and other advances, and prepaying any additional indebtedness while our indebtedness under our senior secured revolving credit facility is outstanding. Our failure to comply with financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness.

We may not fully realize the benefits of our acquisitions or strategic alliances.

In June 2015, we acquired Universal Robots. We may not be able to realize the benefit of acquiring Universal Robots or successfully grow Universal Robots’ business. We may continue to acquire additional

businesses, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing businesses. We may not be able to realize the expected synergies and cost savings from the integration with our existing operations of other businesses or technologies that we may acquire. In addition, the integration process for our acquisitions may be complex, costly and time consuming and include unanticipated issues, expenses and liabilities. We may have difficulty in developing, manufacturing and marketing the products of a newly acquired company in a manner that enhances the performance of our combined businesses or product lines and allows us to realize value from expected synergies. Following an acquisition, we may not achieve the revenue or net income levels that justify the acquisition. Acquisitions may also result in one-time charges (such as acquisition-related expenses, write-offs or restructuring charges) or in the future, impairment of goodwill, that adversely affect our operating results. Additionally, we may fund acquisitions of new businesses, strategic alliances or joint ventures by utilizing our cash, incurring debt, issuing shares of our common stock, or by other means.

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

In January 2015, our Board of Directors cancelled our 2010 stock repurchase program and authorized a new stock repurchase program for up to $500 million of common stock, $300 million of which we intend to repurchase in 2015. The cumulative repurchases as of July 5, 2015, totaled 6.5 million shares of common stock for $128.3 million at an average price of $19.74.

The following table includes information with respect to repurchases we made of our common stock during the three months ended July 5, 2015 (in thousands except per share price):


Period	(a) Total Number of Shares (or Units) Purchased			(b) Average Price Paid per Share (or Unit)			(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs
April 6, 2015 – May 3, 2015		1,380		$	18.77			1,380	$	427,461
May 4, 2015 – May 31, 2015		1,224		$	20.25			1,218	$	402,816
June 1, 2015 – July 5, 2015		1,504		$	20.77			1,499	$	371,685

		4,108	(1)	$	19.94	(1)		4,096

(1)	Includes 11,979 shares at an average price of $21.18, withheld from employees for the payment of taxes.

We satisfy U.S. federal and state minimum withholding tax obligations due upon the vesting and the conversion of restricted stock units into shares of our common stock, by automatically withholding from the shares being issued, a number of shares with an aggregate fair market value on the date of such vesting and conversion that would satisfy the minimum withholding amount due.

Item 4:

Mine Safety Disclosures

Not Applicable

Item 6:

Exhibits


Exhibit Number		Description

2.1		Share Sale and Purchase Agreement by and among Teradyne Holdings Denmark ApS, Teradyne, Inc., and the shareholders of Universal Robots A/S, dated May 13, 2015 (filed herewith)

10.1		Credit Agreement among Teradyne, Inc., Barclays Bank PLC, as the administrative agent and collateral agent, and the lenders party thereto dated April 27, 2015 filed as Exhibit 10.1 to Teradyne’s Current Report on Form 8-K filed April 27, 2015

10.2		Amendment No. 1 to Credit Agreement, dated as of May 19, 2015, among Teradyne, Inc., Barclays Bank PLC, as the administrative agent and collateral agent, and the lenders party thereto (filed herewith)

10.3		2006 Equity and Cash Compensation Incentive Plan, as amended, filed as Appendix A to Teradyne’s Notice and Proxy Statement on Schedule 14A filed April 2, 2015

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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)

August 14, 2015

Exhibit 2.1

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SHARE SALE AND PURCHASE AGREEMENT

concerning Universal Robots A/S

CVR no. 29 13 80 60

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CONTENTS


		Page
1	DEFINITIONS, INTERPRETATION AND ENTIRE AGREEMENT		6

2	PURPOSE AND BACKGROUND		17

3	CONCLUSION OF AGREEMENT		17

4	SALE AND PURCHASE OF SHARES		18

5	PURCHASE PRICE		18

6	EARN OUT		19

7	CONTINGENT BONUS OBLIGATIONS		26

8	OPERATIONS UNTIL CLOSING		27

9	COOPERATION AND FURTHER COVENANTS		29

10	CLOSING CONDITIONS		31

11	TERMINATION		31

12	CLOSING MECHANICS		32

13	ACTIONS AFTER CLOSING; PURCHASE PRICE ADJUSTMENT		34

14	SPECIAL INDEMNIFICATIONS		36

15	WARRANTIES		38

16	SELLERS’ LIABILITY, LIMITATIONS AND CLAIMS PROCEDURE		39

17	GUARANTEE		42

18	RESTRICTIVE COVENANTS		42

19	CONFIDENTIALITY AND PUBLICATION		43

20	GOVERNING LAW AND DISPUTES		44

21	OTHER PROVISIONS		45

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SCHEDULES


Schedule 1.1(a):		Accounting Policies

Schedule 1.1(b):		Annual Report

Schedule 1.1(c):		Illustrative calculations of Debt

Schedule 1.1(d):		Due Diligence Information (CD Rom of the VDR)

Schedule 1.1(e):		EBITDA

Schedule 1.1(f):		Escrow Agreement

Schedule 1.1(g):		List of Subsidiaries

Schedule 3.1(a):		Transcripts from the Danish Business Authority

Schedule 3.1(b):		Minutes of board meeting in the Company (approval of the Agreement)

Schedule 3.2(a):		Buyer’s signing documents

Schedule 3.2(b):		Buyer’s approval of the Agreement

Schedule 6.2.1:		Illustrative calculations of the EBITDA Earn Out, the Forecast Revenue Earn Out and the Outperformance Revenue Earn Out

Schedule 6.8:		The Group’s Budget Assumptions & Comments 2015-2018, dated 26-11-2014

Schedule 12.4(a):		Form of No MAC Declaration

Schedule 15.1:		Sellers’ Warranties

Schedule 19.4:		Joint press release

Schedule 21.2:		Addresses

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This

SHARE SALE AND PURCHASE AGREEMENT

was concluded on 13 May 2015 between on the one side

Vækstfonden

CVR no. 16 29 46 75

Strandvejen 104A, 3.

2900 Hellerup

Denmark

(“VF”)

BKI Holding ApS

CVR no. 28 48 23 37

Ediths Allé 12, Dyrup

5220 Odense SV

Denmark

(“BKIH”)

ANBE af 2006 ApS

CVR no. 29 78 31 01

Dyrupgårdvænget 81, Dyrup

5250 Odense SV

Denmark

(“ANBE”)

Esben Østergaard

Hunderupvej 63

5000 Odense C

Denmark

(“EØ”)

Kristian Kassow

Edvard Thomasens Vej 33, 4. Th.

2300 København S

Denmark

(“KK”)

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Kasper Støy

Johan Semps Gade 5, 1.

1402 København K

Denmark

(“KS”)

Clas Nylandsted Andersen

Revningevej 209

5300 Kerteminde

Denmark

(“CNA”)

Lasse Kieffer

Grønlandsgade 27, 1.

5000 Odense C

Denmark

(“LK”)

Thomas Visti Jensen

Tesdorpfsvej 15

5000 Odense C

Denmark

(“TVJ”)

Enrico Krog Iversen

Dyrupgårdvænget 81, Dyrup

5250 Odense SV

Denmark

(“EKI”)

Niels Erik Kildemoes

Falen 27B, 3. th.

5000 Odense C

Denmark

(“NEK”)

Niels Jul Jacobsen

Ulriksholmvej 27

5230 Odense M

Denmark

(“NJJ”)

(each of VF, BKIH, ANBE, EØ, KK, KS, CNA, LK, TVJ, EKI, NEK and NJJ referred to as a “Seller” and collectively the “Sellers”)

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and on the other side

Teradyne Holdings Denmark ApS

CVR no. 36 73 68 79

c/o Bech-Bruun Law firm

Langelinie Allé 35

2100 Copenhagen

Denmark

(the “Buyer”)

and

Teradyne, Inc.

600 Riverpark Drive

North Reading, MA 01864

USA

(the “Guarantor”)

concerning 100% of the issued and outstanding shares in Universal Robots A/S (the “Company”).

WHEREAS, on the date hereof the Sellers have the power to cause and direct the transfer of the Shares (as defined) and desire to sell the Shares to Buyer, and Buyer desires to purchase the Shares from Sellers, upon the terms and subject to the conditions hereinafter set forth:

1	DEFINITIONS, INTERPRETATION AND ENTIRE AGREEMENT

1.1	In the Agreement, the following words and expressions have the meanings stated below, unless the context requires otherwise.


Accelerated Earn Out Payments		as stated in clause 6.8.7.

Accounting Policies		the Company’s accounting principles, policies, practices and procedures together with the estimates and assessments all as applied by the Group and as described in Schedule 1.1(a) , to the extent in accordance with Danish GAAP and accepted by the Company’s auditor, however, provided that with respect to the Company’s treatment of foreign exchange gains and losses, it has been agreed with the Company’s auditor that the Company operates during the financial year with budgeted foreign exchange rates, and on a frequent basis (not necessarily daily basis) the foreign exchange is being traded to DKK and gains and losses are treated as part of Revenues. Gains/losses from conversion of debt/receivables by year-end is as well treated as Revenues.

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Accounts Date		31 December 2014.

Adjustment Amount		the difference, if any, between the Preliminary Purchase Price and the Closing Purchase Price; see clause 13.2.

Affiliate		with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition “control” when used in respect of any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

Agreement		this agreement, including all Schedules and Exhibits hereto which are hereby incorporated by reference herein.

Annual Report		the Company’s consolidated and audited annual report as of the Accounts Date, see Schedule 1.1(b) .

Basket		as stated in clause 16.4.2(b).

Breach		any misrepresentation, incorrectness, incompleteness and/or breach of any of the Sellers’ Warranties.

Business Day		any day other than a Saturday or Sunday on which banks are generally open for business and not required or authorized by Law to be closed in Denmark and Massachusetts, United States of America (disregarding banking business being conducted exclusively through the Internet).

Buyer’s Knowledge		the actual knowledge that either of Eric Truebenbach, Mark Jagiela, Gregory Beecher, Charles Gray, Mark Kohalmy, Michael Callahan or Walter Vahey had on the Signing Date.

Cash		cash, cash equivalents, short term and long term marketable securities and related interest receivables as determined in accordance with the Accounting Policies, provided, that such amount shall be reduced in any event by any amounts necessary to satisfy any checks-in-transit and overdrafts of any Group Company and increased in any event by any deposits-in-transit.

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Cap		as stated in clause 16.4.3.

Closing		the Parties’ fulfilment of the obligations described in clause 12.

Closing Date		the date on which Closing takes place; see clause 12.1.

Closing Memorandum		minutes of the meeting at which Closing takes place.

Closing Purchase Price		as stated in clause 5.2.

Company		Universal Robots A/S, CVR no. 29 13 80 60, a limited liability company incorporated and registered in accordance with Danish legislation.

Confidential Information		as stated in clause 19.2.

Contingent EBITDA Earn Out Bonuses		as stated in clause 7.1.

Contingent Escrow Account Bonuses		as stated in clause 7.1.

Contingent Forecast Revenue Earn Out Bonuses		as stated in clause 7.1.

Contingent Outperformance Revenue Earn Out Bonuses		as stated in clause 7.1.

Corporate Documents		the charter and other documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs, including its articles of incorporation or association and/or its by-laws.

Cut-Off Date		as stated in clause 11.1(a).

De Minimis Threshold		as stated in clause 16.4.2(a).

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Debt

means the sum of the following items (expressed as a positive number):

(i) all liabilities for borrowed money, including all obligations evidenced by notes, bonds, debentures or similar instruments and all obligations under loans from any Seller, including, in each case, (A) all accrued and unpaid interest, costs, fees as well as (B) any prepayment penalties payable in connection with the transactions contemplated by this Agreement, regardless of whether due on the Effective Date, it being understood that, with respect to the Secured Debt, the respective accrued costs, fees and prepayment penalties in connection with the release of the Secured Debt shall equal those stated in the Pay-Off Amounts,

(ii) all liabilities under any capitalized lease, including accrued interest,

(iii) any corporate income Tax liabilities and provisions,

(iv) any residual amounts, including taxes, payable for any pre-closing dividends payable to any Person other than the Buyer or any of its Affiliates,

(v) all outstanding transaction costs, including fees and expenses of legal counsel, financial advisors and consultants and cost of establishing and maintaining the virtual data room incurred by the Group Companies, whether or not due, invoiced or billed prior to the Effective Date,

(vi) all bonuses and other transaction-related payments to be paid by the Group Companies to any director, officer, employee or consultant of the Group in connection with the transaction contemplated by this Agreement, except for (a) such bonuses and payments that have been paid before the Effective Date and (b) the Contingent EBITDA Earn Out Bonuses, Contingent Escrow Account Bonuses, Contingent Forecast Earn Out Bonuses and the Contingent Outperformance Revenue Earn Out Bonuses, and

(vii) any outstanding portions of the purchase price owed by the Company to IFU in connection with the acquisition of IFU’s shares in Universal Robots (Shanghai) Co. Ltd.

Schedule 1.1(c) sets forth, for illustrative purposes only, Sellers’ estimate of the Group’s consolidated Debt as of the Effective Date.

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Disputed Matters		the items on which the Parties are unable to agree following an Objection with respect to (i) the draft Final Purchase Price Calculation as described in clause 13.2.3, (ii) the draft calculation of the EBITDA Earn Out Calculation as described in clause 6.2.4, or (iii) a Quarterly Product Revenue Statement as described in clause 6.6.

Disclosed		any written information fairly disclosed by the Sellers or on behalf of the Sellers in the Due Diligence Information or in this Agreement (the “Disclosed Information”) in a way that would allow a reasonably diligent person skilled in the field to which the information relates (e.g. business administration, accounting, regulatory, legal, etc.), given the nature and context of the disclosure, to reasonably discern the relevance of such matter, including the substance of any potential claim, loss, liability or disadvantage based on reading and analysing the said information, provided that (i) if the relevant information (or relevant elements of a subject matter) has been disclosed in the Due Diligence Information, it has been disclosed in a document or several documents contained in one or more data room folders where, based on the location of such folder or folders, as the case may be, in the data room and its labelling, such facts or circumstances could have been reasonably expected to be disclosed and (ii), if there is inconsistent information within the Disclosed Information, only the more recent facts and circumstances shall be deemed disclosed, unless it would be a reasonable assumption, in the given context of such inconsistencies, that the former facts and circumstances were still relevant.

Disclosed Information		as stated in the definition of “Disclosed”.

DKK		Danish Kroner, the valid currency of Denmark.

Due Diligence Information		the written information provided to the Buyer in the virtual data room established in connection with the transactions contemplated by this Agreement, included in Schedule 1.1(d) and any further written information provided to the Buyer between 8 May 2015 and the Signing Date.

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Earn Out Payments		as stated in clause 6.1.

Earn Out Payments Cap Amount		an aggregate amount for the total Earn Out Payments of USD 65,000,000.

Earn Outs		the EBITDA Earn Out, Forecast Revenue Earn Out and Outperformance Revenue Earn Out.

EBITDA		as set forth in Schedule 1.1(e) and as determined in accordance with the Accounting Policies, but in any case excluding (a) charges related to the acquisition of the Group by the Buyer, (b) gains or losses from the sale of long-lived assets or extraordinary items not being in the ordinary course of business, (c) financial income, and (d) financial expenses.

EBITDA Earn Out		the Earn Out Payment described in clause 6.2.

EBITDA Earn Out Calculation		as stated in clause 6.2.3.

EBITDA Earn Out Period		1 January 2015 – 31 December 2015.

EBITDA Target		the Group’s budgeted consolidated EBITDA amounting to DKK 88,000,000.

EBITDA Threshold		DKK 70,400,000.

Effective Date		24:00 h on the Closing Date.

Encumbrances		as defined in Schedule 15.1 .

Enterprise Value		USD 285,000,000.

Escrow Account		the account with the Escrow Agent in the joint names of the Sellers’ Representative and the Buyer.

Escrow Agent		Danske Bank A/S.

Escrow Agreement		the agreement between the Sellers’ Representative, the Buyer and the Escrow Agent relating to the operation of the Escrow Account on the agreed terms set out in Schedule 1.1(f) .

Escrow Amount		an aggregate amount of USD 28,500,000.

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Expert		a state authorized public accountant appointed by the Grant Thornton, Statsautoriseret Revisionspartnerselskab among its Danish partners. If Grant Thornton, Statsautoriseret Revisionspartnerselskab is unwilling to appoint the Expert among its partners, the Expert will be a state authorized public accountant otherwise agreed by Sellers’ Representative and Buyer, or, failing such agreement within 10 Business Days after Grant Thornton, Statsautoriseret Revisionspartnerselskab refused to appoint the Expert, upon request of either Sellers’ Representative or Buyer appointed by “FSR-Danish Auditors” from an internationally recognised auditing firm not having provided substantial services (substantial services for the purposes of this Agreement being understood as services involving fees of an amount equivalent to more than DKK 500,000 annually) to any of the Parties or the Group for the past 3 years, but none of Deloitte, PWC, KPMG or EY.

Final Purchase Price Calculation		as set out in clause 13.2.1.

Forecast Revenue Earn Out		as set out in clause 6.3.

Forecast Revenue Target		DKK 2,058,454,000.

Forecast Revenue Hurdle		DKK 1,646,763,200.

Forecast Revenue Period		the period running from 1 July 2015 – 31 December 2017.

Governmental Authority		any national, supranational, foreign, provincial, state, municipal or local government, governmental, regulatory or administrative authority, agency, body, branch or bureau, instrumentality or commission or any court, tribunal, or judicial or arbitral body.

Group		the Company and the Subsidiaries.

Group Company		a company in the Group.

Group Companies		several or all of the companies in the Group.

IFU		the Investment Fund for Developing Countries, an independent self-governing fund with legal personality, established by Act of Parliament having its principal office at Fredericiagade 27, 1310 Copenhagen K, Denmark.

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Interest		an annual interest rate of 2% p.a. with the calculation of interest being made on the basis of days actually elapsed and 365 days per year.

Law		any national, supranational, state, provincial, municipal or local statute, law, constitution, ordinance, code, regulation, directive, rule, order, requirement or rule of law (including common law) or code issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority or parliament.

Loss		any damage, direct loss and expense (including reasonable attorneys’ fees and other expenses in connection with any claim) suffered by the Buyer or any of its Affiliates (including the Group) in respect of a Breach, but always excluding any indirect or consequential losses including loss of profit, as further qualified in clause 16.2.1.

Material Adverse Change		any result, occurrence, fact, change, event or effect which individually or in the aggregate has a material adverse effect on the Group’s consolidated (i) revenue for the period 1 January 2015 – 31 December 2015 equal to or exceeding DKK 96,827,400 or (ii) EBITDA for the period 1 January 2015 – 31 December 2015 equal to or exceeding DKK 17,600,000, except to the extent resulting from (A) global economic conditions, (B) conditions generally affecting the Group’s industry, or (C) a substantial downturn in financial markets, provided that such event does not affect the Group as a whole in a substantially disproportionate manner.

Merger Condition		as stated in clause 10.1.

Notice		as stated in clause 21.2.

Objection		any objection of the Sellers’ Representative to the Buyer’s draft (i) Final Purchase Price Calculation, (ii) EBITDA Earn Out Calculation, or (iii) a Quarterly Product Revenue Statement.

Outperformance Revenue Earn Out		as described in clause 6.4.

Outperformance Revenue Hurdle		DKK 3,478,639,000, ref. Schedule 6.2.1 .

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Outperformance Revenue Period		the period running from 1 July 2015 – 31 December 2018.

Outperformance Revenue Target		DKK 3,890,329,800.

Parties		the Sellers and the Buyer.

Party		a Seller or the Buyer.

Pay-Off Amounts		such amounts in such currencies as notified under clause 12.2(b) as being the amount required, if any: (i) to discharge the indebtedness (whether or not due and payable) owed under or in connection with the Secured Debt at the Closing Date (for the avoidance of doubt, including the outstanding principal amount of any drawing and any accrued but unpaid interest thereon at the Closing Date); (ii) to release all guarantees and security in relation to the Secured Debt at the Closing Date; and (iii) to terminate the Secured Debt at the Closing Date (such amount being inclusive of any applicable break costs, prepayment or early termination fees and other related fees or fees of a similar nature), assuming such discharge, release and termination takes effect from the Closing Date.

Person		any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, incorporated or non-incorporated organisation, country, state, city, municipality, government, political subdivision, agency, authority, or instrumentality of a government or other entity.

Preliminary Purchase Price		as stated in clause 12.3.

Preliminary Purchase Price Calculation		as stated in clause 12.3.

Products		the Group’s current and future (i) product range of robots, including any of the UR3 Robot, UR5 Robot and the UR10 Robot and including any modifications or upgrades, (ii) related spare parts, (iii) maintenance services, (iv) software embedded in the robots, (v) extended warranties offerings, and (vi) training services.

Purchase Price		as stated in clause 5.1.

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Quarterly Product Revenue Statement		as stated in clause 6.5.2.

Revenues		any and all revenues generated by the Company and any Subsidiaries; such Revenues for purpose of calculating the Earn Out Payments to be adjusted and determined in accordance with the principles set out in clause 6.8.

Schedule		a schedule to the Agreement.

Secured Debt		the Company’s outstanding commitments as of the Closing Date under the overdraft facility agreement with Danske Bank.

Sellers’ Bank Account		a USD client account of Accura Advokatpartnerselskab with Nordea Bank Danmark A/S, reg. no. 2191, account no. 5036344085, IBAN: DK7020005036344085 and SWIFT/BIC: NDEADKKK.

Sellers’ Knowledge		the actual knowledge that either of EKI, Klaus M. Vestergaard (CFO), EØ, Michael Bo Larsen (Head of R&D), Troels Hornsved (Supply Chain & Assembly Director), LK or Lisa Hansen had on the Signing Date.

Sellers’ Representative		as stated in clause 21.1.

Sellers’ Warranties		as described in Schedule 15.1 .

Shares		the shares issued by the Company consisting of DKK 218,312 class A shares and DKK 327,803 class B shares of DKK 1 each, equal to 100% of the Company’s total issued nominal share capital of DKK 546,115.

Signing Date		the date on which the Sellers, the Buyer and the Guarantor have signed the Agreement.

SKAT		as stated in clause 13.3.2.

Subsidiaries		the companies set out in Schedule 1.1(g) and any further subsidiaries which the Company may have from time to time.

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Taxes		any and all taxes and tax liabilities, whether actual or deferred or contingent, payable to or imposed by a Governmental Authority in respect of income taxes, sales and use taxes, transfer taxes, franchise taxes, value-added taxes, withholding taxes, stamp duties, customs duties, payroll taxes, social security taxes and charges, environmental taxes and property taxes and all other taxes and public duties of any kind and any fees, penalties and interest amounts relating thereto.

Title Warranties		the Warranties in clauses 2.1, 2.2, 2.3, 2.4, 3.5 and 3.6 of Schedule 15.1 .

Third Party Claim		as stated in clause 16.6.1.

Third Party Rights		any type of legal charge, lien, right of first refusal, purchase option, retention of title, option or title, in each case in favour of a third Person.

USD		United States Dollar, being the valid currency of the United States of America.

Warranties		the warranties given by the Sellers or the Buyer in accordance with clause 15 and Schedule 15.1 as the case may be.

1.2	The Agreement is the result of the Parties’ negotiations, and it cannot be interpreted against a Party as a consequence of such Party having drafted one or more of the provisions of the Agreement.

1.3	The words “include”, “includes” or “including” and similar expressions mean for the purpose of this Agreement “including, but not limited to”.

1.4	Defined terms in the singular include the plural and vice versa, unless the context requires otherwise.

1.5	The table of contents and the headings of the Agreement are for guidance only and have no legal effect on the understanding or interpretation of the provisions of the Agreement.

1.6	The terms defined in this Agreement have the defined meanings when used in any Schedule, appendix, certificate or other document delivered or made available pursuant thereto.

1.7	References to a Person are also to its successors and permitted assigns.

1.8	Unless the context otherwise requires, references to any agreement shall mean such agreement as amended or modified from time to time.

1.9	References to any Law shall be as amended from time to time and shall include all rules and regulations promulgated thereunder.

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1.10	Unless the context otherwise requires, references to any time shall refer to time in Denmark.

1.11	The Agreement contains the entire agreement between the Parties concerning the Buyer’s acquisition of the Shares and supersedes all previous agreements between the Parties and the Guarantor on the subject matter.

1.12	With respect to the conversion of currencies, the following shall apply:

(a)

The conversion of foreign currencies into DKK in connection with the preparation of the Preliminary Purchase Price Calculation, Final Purchase Price Calculation, the EBITDA Earn Out Calculation and the Quarterly Product Revenue Statements shall be made pursuant to the currency exchange and conversion provisions contained in the Accounting Policies.

(b)

The conversion of DKK amounts stated in the Preliminary Purchase Price Calculation and Final Purchase Price Calculation into USD for purposes of payment of the Preliminary Purchase Price and Adjustment Amount, if any, shall be calculated by applying the exchange rate as published by the Danish Central Bank ( Nationalbanken ) for a transaction between the two currencies in question quoted as at the close of business (in Copenhagen) on (i) the day immediately preceding the date on which the Sellers’ Representative delivers the final Preliminary Purchase Price Calculation to the Buyer with respect to the Preliminary Purchase Price, and (ii) the Closing Date with respect to the Adjustment Amount.

(c)

With respect to any Loss or other claim under any of the Sellers’ Warranties as well as any other claims pursuant to this Agreement other than claims comprised in paragraph (b) above incurred in a currency not being USD, such amount shall be raised and settled in the relevant currency of the underlying Loss.

2	PURPOSE AND BACKGROUND

At Closing the Sellers will own the Shares and wish to sell them to the Buyer, and the Buyer wishes to acquire the Shares on the terms and conditions set out in the Agreement.

3	CONCLUSION OF AGREEMENT

3.1	As of the Signing Date, the Sellers have provided the Buyer with documentation evidencing:

(a)

that the Agreement has been duly executed and delivered by duly authorized Persons who may represent the relevant Sellers that are limited liability companies; see Schedule 3.1(a) ; and

(b)

that the Sellers have obtained all requisite corporate approvals for the execution and delivery of this Agreement by Sellers including approval of the contemplated share sale from the Company’s board of directors pursuant to the Company’s articles of association and statements from each of the Sellers irrevocably waiving any pre-emption rights to the Shares, see Schedule 3.1(b) .

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3.2	As of the Signing Date, the Buyer and the Guarantor have provided the Sellers with documentation evidencing:

(a)

that the Agreement has been duly executed and delivered by Persons authorized to represent the Buyer and the Guarantor; see Schedule 3.2(a) ; and

(b)

that the Buyer and the Guarantor have obtained all requisite corporate approvals, including approval of their board of directors, for the execution and delivery of this Agreement by the Buyer and the Guarantor; see Schedule 3.2(b) .

4	SALE AND PURCHASE OF SHARES

4.1

The Sellers agree to sell the Shares to the Buyer, free and clear of any Encumbrances and including all rights to undistributed dividends, and the Buyer agrees to acquire the Shares free and clear of any Encumbrances and including all rights to undistributed dividends from the Sellers, subject to the terms set out in the Agreement.

4.2	With effect from and after the Closing Date, the Buyer shall own all rights attaching to the Shares, including title, voting rights and the right to receive dividends.

5	PURCHASE PRICE

5.1	The purchase price for the Shares, including each element thereof, shall be calculated and paid in USD and shall be equal to the Closing Purchase Price plus the Earn Out Payments, if any (the “Purchase Price”).

5.2	The “Closing Purchase Price” shall be the Enterprise Value plus

(a)

the Cash of the Group, and less

(b)

the Debt of the Group ,

in each case determined as of the Effective Date on a consolidated basis and applying the Accounting Policies as further set forth in this Agreement, provided that if the Parties agreed on any deviations from the Accounting Policies in this Agreement, such agreements shall prevail over the Accounting Policies.

5.3	The final Cash and final Debt shall be determined in accordance with the procedures set forth in clause 13.2.

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6	EARN OUT

6.1

The Sellers shall be entitled to receive additional consideration with respect to the (i) EBITDA Earn Out, (ii) Forecast Revenue Earn Out, and (iii) Outperformance Revenue Earn Out (collectively referred to as the “Earn Out Payments”) payable by the Buyer, subject to certain financial performance conditions being satisfied as specified in clause 6.2 through 6.5 and 6.8.

6.2	EBITDA Earn Out

6.2.1

The Sellers shall be eligible for an Earn Out Payment of up to USD 15,000,000 depending on the Group’s consolidated EBITDA during the EBITDA Earn Out Period as illustrated in Schedule 6.2.1 and determined in accordance with the principles set forth in clause 6.8.

6.2.2

If the Group’s consolidated EBITDA for the EBITDA Earn Out Period exceeds the EBITDA Threshold, the Buyer is obliged to pay an Earn Out Payment related to the EBITDA Earn Out to the Sellers as illustrated in Schedule 6.2.1 . Accordingly, the Sellers shall be entitled to a linear Earn Out Payment of USD 0.85227 for every DKK 1 consolidated EBITDA of the Group exceeding the EBITDA Threshold during the EBITDA Earn Out Period up to a maximum Earn Out Payment with respect to the EBITDA Earn Out of USD 15,000,000 if the EBITDA Target is met or exceeded.

6.2.3

The Buyer shall no later than 5 Business Days after the completion of the audit of the Group’s consolidated annual report for the EBITDA Earn Out Period by Notice to the Sellers’ Representative provide a draft calculation of the Earn Out Payment with respect to the EBITDA Earn Out (ref. clause 6.2.2) applying the provisions of clause 6 and Schedule 6.2.1 and accompanied by all relevant documentation, including the Group’s audited consolidated annual report for the EBITDA Earn Out Period (the “EBITDA Earn Out Calculation”).

6.2.4

If the Sellers’ Representative disagrees with any element of the Buyer’s draft EBITDA Earn Out Calculation, the Sellers’ Representative must give Notice of an Objection to the Buyer no later than 25 Business Days after receipt of the Buyer’s draft EBITDA Earn Out Calculation. The provisions set out in clause 13.2.4 shall apply in case the Sellers’ Representative provides a Notice of Objection to the Buyer’s draft EBITDA Earn Out Calculation.

6.2.5

Any Earn Out Payment provided for in this clause 6.2 shall be paid in cash USD to the Sellers’ Bank Account. To the extent the Buyer’s draft EBITDA Earn Out Calculation provides for an Earn Out Payment to be paid in accordance with this clause 6.2, the Buyer shall make such payment when delivering the draft EBITDA Earn Out Calculation to the Sellers’ Representative (see clause 6.2.3). Any additional Earn Out Payment including Interest, if any, shall be paid within 10 Business Days after such point in time where all Objections to the Buyer’s draft EBITDA Earn Out Calculation, if any, have been finally resolved in accordance with the provisions set out in clause 13.2.4. From the date where the Buyer delivered its calculation of the EBITDA Earn Out Calculation pursuant to clause 6.2.3 Interest shall accrue until payment has been made in full.

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6.3	Forecast Revenue Earn Out

6.3.1

The Sellers shall be eligible for an additional Earn Out Payment with respect to the Forecast Revenue Earn Out of up to USD 25,000,000 depending on the consolidated Revenues of the Group during the Forecast Revenue Period as illustrated in Schedule 6.2.1 . Accordingly, the Sellers shall be entitled to an additional linear Earn Out Payment of USD 0.06073 for every DKK 1 of consolidated Revenues of the Group during the Forecast Revenue Period that exceeds the Forecast Revenue Hurdle up to a maximum Earn Out Payment with respect to the Forecast Revenue Earn Out of USD 25,000,000 if the Forecast Revenue Target is met or exceeded.

6.4	Outperformance Revenue Earn Out

The Sellers shall be eligible for an additional Earn Out Payment with respect to the Outperformance Revenue Earn Out of up to USD 25,000,000 depending on the consolidated Revenues of the Group during the Outperformance Revenue Period and as illustrated in Schedule 6.2.1 . Accordingly, the Sellers shall be entitled to an additional linear Earn Out Payment of USD 0.06073 for every DKK 1 consolidated Revenues of the Group during the Outperformance Revenue Period that exceeds the Outperformance Revenue Hurdle up to a maximum Earn Out Payment with respect to the Outperformance Revenue Earn Out of USD 25,000,000 if the Outperformance Revenue Target is met or exceeded.

6.5	Determination of Revenues; Quarterly Product Revenue Statements

6.5.1

The Revenues shall be determined in accordance with the principles set forth in clause 6.8.

6.5.2

Following the Closing Date, no later than 40 calendar days following the end of its fiscal quarter and 90 calendar days following the end of its fiscal year (and for the third quarter of 2015 only for the period from 1 July 2015 through the end of its third fiscal quarter), the Buyer shall by Notice to the Sellers’ Representative provide a statement setting forth the consolidated Revenues of the Group during the previous fiscal quarter of the Buyer (the “Quarterly Product Revenue Statement”). Further, a Quarterly Product Revenue Statement relating to a fourth quarter shall always be accompanied by the Group’s consolidated audited annual report for the relevant fiscal year. Such obligation to prepare Quarterly Product Revenue Statements shall expire once the Quarterly Product Revenue Statement has been prepared that follows (i) the fiscal quarter of the Buyer during which the Outperformance Revenue Target has been reached or (ii) the end of the Outperformance Revenue Period.

6.5.3

The Sellers’ Representative shall be entitled to request access to and the Buyer shall be obligated to provide the Sellers’ Representative with any underlying information and documentation reasonably required by the Sellers’ Representative in order to review the Quarterly Product Revenue Statements, including the relevant parts of the Buyer’s and the Group’s accounts and, if existing, auditor’s long form audit reports.

6.5.4

Without prejudice for any subsequent Objections made by the Sellers’ Representative, the Sellers’ Representative and a representative of the Buyer shall meet by conference call each quarter to discuss the Quarterly Product Revenue Statement and to give the Sellers’ Representative the opportunity to discuss any items concerning the conduct of the Buyer or the

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Group until the lapse of the Outperformance Revenue Period. So long as EKI is an employee of the Group, EKI shall participate in the meeting and shall in good faith report on any issues concerning the conduct of the Buyer or the Group until lapse of the Outperformance Revenue Period that has or could reasonably be expected to have a material impact on the Group’s ability to achieve the EBITDA or Revenues required to achieve one or more of the Earn Outs. EKI may not, neither in these nor any other discussions, whether relating to the Earn Outs or any other issues, disclose to the other Sellers any confidential information relating to the Group, the Buyer or any of its Affiliates, except for facts and circumstances that already have been disclosed by or on behalf of the Buyer to the other Sellers or the Sellers’ Representative.

6.6	Objection to the Quarterly Product Revenue Statement

6.6.1

If the Sellers’ Representative disagrees with any element of any Quarterly Product Revenue Statement, the Sellers’ Representative must give Notice of an Objection to the Buyer no later than 25 Business Days after the Sellers’ Representative’s receipt of a Quarterly Product Revenue Statement covering the fourth quarter in a given calendar year (accompanied by the Group’s consolidated audited annual report for the relevant fiscal year), it being understood that the Sellers’ Representative may only file one Notice of Objection for each Quarterly Product Revenue Statement, provided that if the Buyer for whatever reason restates a former Quarterly Product Revenue Statement, then the Sellers’ Representative is not prevented from submitting an additional Notice of Objection concerning the period covered by the Quarterly Product Revenue Statement being restated. The Sellers’ Representative must describe in detail each Objection including, if applicable, the Sellers’ Representative’s calculation of the relevant Earn Out Payment and refer to the provisions of the Agreement that the Sellers invoke in support of their position. Unless (i) any Objection has been served on the Buyer within the time frame stipulated above and (ii) the Objection contains all such information as specified in the immediate preceding sentence, the respective Quarterly Product Revenue Statements will be final and binding on the Parties.

6.6.2

If the Sellers give Notice of an Objection in accordance with clause 6.6.1, the procedures and time frames stipulated in clause 13.2.4 shall apply mutatis mutandis with regard to determining the Revenues and Earn Out Payment relating to either the Forecast Revenue Earn Out or the Outperformance Revenue Earn Out.

6.7	Due date of Earn Out Payments relating to the Forecast Revenue Earn Out and Outperformance Revenue Earn Out

The Earn Out Payments provided for in clause 6.3 and 6.4 (Forecast Revenue Earn Out and Outperformance Revenue Earn Out, respectively) shall become due and payable in cash in USD to the Sellers’ Bank Account 3 Business Days after delivery by the Buyer of the Quarterly Product Revenue Statement following the earlier of (i) the fiscal quarter of the Buyer during which Revenues resulting in attainment of the maximum Earn Out Payment of USD 25,000,000 achievable under the Forecast Revenue Earn Out and Outperformance Revenue Earn Out, respectively, have been achieved, and (ii), as regards the Forecast Revenue Earn Out, 1 April 2018, and, as regards the Outperformance Revenue Earn Out, 1 April 2019, it being understood that, if the Sellers’ Representative gives Notice of an Objection in accordance

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with clause 6.6.1, the Buyer shall initially only be obliged to pay the undisputed amount to the Sellers and then subsequently, when the Revenues and the relevant Earn Out Payment have been finally determined in accordance with clause 13.2.4, the Buyer shall pay the additional Earn Out Payment including Interest, if any, to the Sellers’ Bank Account. From the relevant due date (as described above) with respect to the Forecast Revenue Earn Out and Outperformance Revenue Earn Out, as the case may be, Interest shall accrue until payment has been made in full.

6.8	Accounting Policies, Conduct of business during the Earn Out period

6.8.1

For purpose of determining the EBITDA Earn Out, the Forecast Revenue Earn Out and the Outperformance Revenue Earn Out, respectively, the relevant EBITDA and Revenues shall be determined by applying the Accounting Policies, except that, (i) when calculating the EBITDA for the purposes of the EBITDA Earn Out, the following costs shall be excluded:

any costs related to the transactions contemplated by this Agreement,

any management fees, overhead costs, administration contributions or similar charges charged by the Buyer or its Affiliates after the Closing Date to the Group Companies, regardless of whether such amounts have been actually paid to the Buyer or any Affiliate of Buyer or merely allocated in the accounts of any of the Group Companies,

any material changes to the executive compensation plans existing on the Signing Date introduced by the Buyer or any of its Affiliates, and

any operating expenses imposed on the Group by the Buyer or any Affiliate of the Buyer without the written consent of the Sellers’ Representative and that are not included in Schedule 6.8 ,

and (ii) that, when calculating the Revenues for purposes of determining the Forecast Revenue Earn Out and the Outperformance Revenue Earn Out,

if Products are sold from a Group Company to the Buyer or an Affiliate of the Buyer that is not a Group Company (including if such sales are made to sell the Products on to third Persons), such sales to the Buyer or its Affiliates shall be deemed to have been made at the Group’s distributor list prices applicable at the time of the sale net of any standard distributor discounts and rebates (e.g. bonus),

Revenues are calculated net of all types of discounts / rebates,

any amounts that do not become collectible (whether due to credit memo or bad debt) will not count as Revenues and will be reduced from the Revenues calculation during the period in which such amounts become uncollectible (e.g. written-off); if such amounts turn out to be uncollectible after a Quarterly Product Revenue Statement has been delivered, including the final Quarterly Product Revenue Statement relating to the Forecast Revenue Earn Out or Outperformance Revenue Earn Out, the Buyer may make corresponding adjustments in any subsequent Quarterly Product Revenue

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Statement or submit an additional Quarterly Product Revenue Statement, and the Sellers shall repay to the Buyer any Earn Out Payments that they already received with respect to such uncollectible amounts, always provided that if the Company or any Subsidiary has recovered or will be entitled to recover such amount (or any part thereof) under a trade credit insurance then an adjustment shall only be made with respect to the residual amount not being covered by the trade credit insurance, and further provided that if the Group after the Closing Date will not maintain the Group’s past practice with respect to taking out trade credit insurances, the uncollectible amounts shall be calculated as if such practice had been maintained on substantially similar terms as those in place as of the Effective Date,

Revenues exclude VAT, and

if any trade or commercial arrangements between a Group Company and the Buyer or any Affiliate of the Buyer (which is not already covered by clause 6.8.1(ii)(a)) has not been made on arms’ length conditions, such trade or commercial arrangements shall be deemed to have been made on arms’ length conditions and the Revenues shall be calculated accordingly.

6.8.2

If the Sellers have indemnified the Buyer or a Group Company for any Breach or any indemnification pursuant to clause 14, then for the purpose of determining the EBITDA or Revenues, any such indemnification payment shall (on a USD for USD basis or other relevant currency, as the case may be) be treated as EBITDA or Revenues, as the case may be, if and to the extent the underlying Breach or cause for indemnification resulted in a reduction of EBITDA or Revenues of any Group Company.

6.8.3

For purpose of determining any payment related to the EBITDA Earn Out, the Forecast Revenue Earn Out and the Outperformance Revenue Earn Out, respectively, if there are any discrepancies between the Accounting Policies and the provisions set out in this clause 6, the provisions in this clause 6 shall prevail.

6.8.4

During the period from the Closing Date until the earlier of (i) realization of Revenues equal to the Outperformance Revenue Target and (ii) the lapse of the Outperformance Revenue Period, the Buyer undertakes and shall cause the Group to:

conduct the business of the Group as a stand-alone and separate business unit in the ordinary course consistent with past practice with a view, in good faith, to maximize the Revenues and EBITDA of the Group consistent with Schedule 6.8 ,

use its commercially reasonable efforts to provide the resources and make the investments necessary to operate the business of the Group consistent with Schedule 6.8 ,

not materially change the pricing or margin strategy of the Group as contemplated in Schedule 6.8 ,

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use its commercially reasonable efforts to carry out the additional staff hiring as contemplated in Schedule 6.8 ,

not change the legal structure of the Group in a manner that will have any adverse effect on the calculation of EBITDA or Revenues for purposes of the Earn Outs, it being understood that the shares of Universal Robots USA, Inc. may in any event be transferred to the Guarantor or an Affiliate of the Guarantor established in the U.S.,

generally maintain the Group’s operations as a distinct business and not integrate its business with other entities (or outsource production) in a manner that would or would reasonably be expected to negatively impact the Group’s ability to achieve the EBITDA or Revenues required for the full Earn Out Payments, and

not intentionally take any action, the purpose of which is to deprive the Sellers of or materially reduce any of the Earn Out Payments,

unless, in each case above, except for paragraph g), any such measure is a reasonable response to any changes or developments in (A) the economic or competitive environment of the Group as a whole, (B) market conditions for the Group as a whole or (C) the financial, business or operating condition of the Group as a whole.

6.8.5

The Buyer shall procure that the Group is managed and operated in a commercially reasonable manner and, subject to the exceptions at the end of clause 6.8.4, consistent in all material respects with Schedule 6.8 , as it may be amended from time to time in accordance with this Agreement. The Buyer may submit a request in writing to the Sellers’ Representative to consent to any measure, action or omission, including a modification to Schedule 6.8 that, without such consent, would otherwise constitute a violation of the provisions of clause 6.8.4. If the Sellers’ Representative gives its consent, no such violation shall be deemed to have occurred. The Sellers’ Representative shall in good faith provide its consent unless the Sellers’ Representative reasonably and in good faith believes that the proposed modification, measure, action or omission shall impact or potentially may impact the Group’s ability to achieve the EBITDA or Revenues required to achieve one or more of the Earn Outs.

6.8.6

As long as EKI continues to work for any Group Company, EKI shall cooperate with the Buyer to procure that the Group is managed and operated in a commercially reasonable manner and, subject to the exceptions at the end of clause 6.8.4, consistent in all material respects with Schedule 6.8 , as it may be amended from time to time in accordance with this Agreement. If, in response to the Group performing during the Outperformance Earn Out Period inconsistent with Schedule 6.8 , the Buyer takes actions consistent with Schedule 6.8 , such actions shall not constitute non-compliance with clause 6.8.4.

6.8.7

If the Buyer or any Group Company carries out any actions or omissions that constitute a non-compliance with the provisions of clause 6.8.4 and the action or omission has or could reasonably be expected to have a material impact on the Group’s ability to achieve the EBITDA or Revenues required to achieve one or more of the Earn Outs, then the Sellers’ Representative shall without undue delay upon actual knowledge (for the avoidance of doubt meaning

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actual knowledge of both ANBE and VF) of the action or omission provide the Buyer with written Notice of such non-compliance. Buyer shall have 10 Business Days to correct or dispute such Notice of non-compliance. If the Buyer disputes the asserted non-compliance or the Sellers’ Representative does not accept the Buyer’s correction to the asserted non-compliance, then the Sellers’ Representative and a designated Buyer’s representative shall (i) discuss the dispute and, (ii) if the Buyer should ultimately agree that there was a non-compliance with the provisions of clause 6.8.4, discuss for purposes of calculating the relevant Earn Out in good faith any adjustments to the EBITDA or Revenues, as the case may be, generated by the Group Companies as if such non-compliance had not taken place. If the Buyer and the Sellers’ Representative are unable to reach agreement about whether there was a non-compliance with the provisions of clause 6.8.4 and/or the respective adjustment of the EBITDA or Revenues generated by the Group Companies due to such non-compliance, each of them may initiate a claim under clause 20. The subject matter of such arbitration shall be to ascertain: (i) if a non-compliance of the provisions of clause 6.8.4 has occurred, and if the arbitrators determine non-compliance has occurred;, (ii) if the non-compliance has had a material impact on the Group’s ability to achieve one or more of the Earn Outs; and if the arbitrators determine such non-compliance has had such a material impact; (iii) the amount of the Earn Outs to be accelerated (“Accelerated Earn Out Payments”), provided that such Accelerated Earn-Out Payments shall in no event exceed the Earn Out Payments Cap Amount, as set forth below:

if the non-compliance occurred during the EBITDA Earn Out Period, an amount of USD 7.5 million under the EBITDA Earn Out and USD 12.5 million under the Forecast Revenue Earn Out shall become immediately accelerated and payable to the Sellers and in addition thereto if it is the arbitrators’ assessment that in the absence of such non-compliance and based on the Group’s accumulated EBITDA since 1 January 2015 and accumulated Revenues performance since 1 July 2015 it is more likely than not that the Sellers would have achieved Earn Out Payments in excess of the USD 20 million under the EBITDA Earn Out, the Forecast Revenue Earn Out and/or the Outperformance Revenue Earn Out, then such excess Earn Out Payments as determined by the arbitrators shall also become accelerated and payable to the Sellers,

if the non-compliance occurred during the Forecast Revenue Earn Out Period but after lapse of the EBITDA Earn Out Period, an amount of USD 12.5 million under the Forecast Revenue Earn Out shall become immediately accelerated and payable to the Sellers and in addition thereto if it is the arbitrators’ assessment that in the absence of such non-compliance and based on the Group’s accumulated Revenues performance since 1 July 2015 it is more likely than not that the Sellers would have achieved an Earn Out Payment in excess of USD 12.5 million under the Forecast Revenue Earn Out and/or the Outperformance Revenue Earn Out, then such excess Earn Out Payments as determined by the arbitrators shall also become accelerated and payable to the Sellers,

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if the non-compliance occurred during the Outperformance Revenue Earn Out Period but after lapse of the Forecast Revenue Period and if it is the arbitrators’ assessment that in the absence of such non-compliance and based on the Group’s accumulated Revenues performance since 1 July 2015 it is more likely than not that the Sellers would have achieved an Earn Out Payment under the Outperformance Revenue Earn Out, then all or a part of the Outperformance Revenue Earn Out as determined by the arbitrators shall become accelerated and payable to the Sellers.

6.8.8

After the lapse of each of the EBITDA Earn Out Period, Forecast Revenue Earn Out Period or Outperformance Revenue Period, respectively, and notwithstanding any Accelerated Earn Out Payments pursuant to clause 6.8.7, to the extent that the Group has achieved EBITDA and/or Revenues under the applicable Earn Out, the Buyer shall make any required Earn Out Payment as provided in this Agreement, however, deducting any Accelerated Earn Out Payments already determined and paid pursuant to clause 6.8.7. Any rights set forth in clause 6.8.7 and 6.8.8 shall be the only remedies of the Sellers in case of any non-compliance of the Buyer with the provisions of clause 6.8.4.

6.9	Acceleration of Earn Out Payments

If the Buyer completes a sale or transfer of the Company or the Group to a third Person during the EBITDA Earn Out Period, the Forecast Revenue Earn Out Period or the Outperformance Revenue Earn Out Period, including any sale or transfer of the Group’s material assets, then (a) the maximum Earn Out Payments achievable under any of the EBITDA Earn Out (if the sale or transfer occurs within the EBITDA Earn Out Period) and the Forecast Revenue Earn Out (if the sale or transfer occurs within the the EBITDA Earn Out Period or the Forecast Earn Out Period) shall be accelerated, less the aggregate amount of any payment previously made under the applicable Earn Out, and become due and payable to the Sellers’ Bank Account no later than 10 Business Days after the Sellers’ Representative’s Notice to the Buyer to this effect and (b) specifically with regard to the Outperformance Revenue Earn Out, the Buyer undertakes to procure that such third Person purchaser shall assume any and all obligations of the Buyer under this Agreement with respect to the Outperformance Revenue Earn Out. This clause 6.9 shall be the sole remedy of the Sellers with respect to a sale or transfer of the Company or the Group during the Outperformance Revenue Earn Out Period.

6.10	Capitalized Value of Earn Out Payments

In respect of section 12 B of the Danish Tax Assessment Act ( Ligningsloven ) the Parties have agreed that the capitalized value of the Earn Out Payments amounts to USD 35,000,000.

7	CONTINGENT BONUS OBLIGATIONS

7.1

Subject to certain conditions as set out in their respective bonus agreements as Disclosed in an email from Sellers’ counsel to Buyer’s counsel sent on 12 May 2015 and as illustrated in the bonus calculations also sent by email from Sellers’ counsel to Buyer’s counsel on 12 May 2015, each of Klaus Vestergaard, Lisbet Thyge Frandsen, Helle Priess, Tim Rowley and Liselotte Frellsen may be entitled to receive certain bonus payments from the Company. The Parties have agreed that the bonus payments becoming payable upon Closing shall be

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treated as Debt and deducted from the Closing Purchase Price, whereas any bonus payments which may materialize and become payable by the Company due to (i) satisfaction of the EBITDA Earn Out or any part thereof (“Contingent EBITDA Earn Out Bonuses”), (ii) satisfaction of the Forecast Revenue Earn Out or any part thereof (“Contingent Forecast Revenue Earn Out Bonuses”), (iii) satisfaction of the Outperformance Revenue Earn Out or any part thereof (“Contingent Outperformance Revenue Earn Out Bonuses”), or (iv) release of any outstanding amount of the Escrow Amount after the escrow period has lapsed (“Contingent Escrow Account Bonuses”), such bonus payments shall be set-off by the Buyer on a USD for USD basis in the (a) Earn Out Payment related to EBITDA Earn Out (with respect to any Contingent EBITDA Earn Out Bonuses), (b) the Earn Out Payment related to Forecast Revenue Earn Out (with respect to any Contingent Forecast Revenue Earn Out Bonus), (c) the Earn Out Payment related to Outperformance Revenue Earn Out (with respect to any Contingent Outperformance Revenue Earn Out Bonus) and (d) the amount, if any, to be released from the Escrow Account after lapse of the Escrow Agreement (with respect to any Contingent Escrow Account Bonuses).

8	OPERATIONS UNTIL CLOSING

8.1

From the Signing Date until Closing, except as required by the transactions contemplated by this Agreement, Schedule 6.8 , or with the Buyer’s prior written consent (not to be unreasonably withheld, conditioned or delayed), the Sellers will procure that the Group continues to operate in the ordinary course of business in accordance with past practice and that each Group Company:

(a)

does not change its Corporate Documents, unless such change is required by applicable Law;

(b)

does not issue any of its equity securities or other securities of any nature convertible into its equity securities;

(c)

does not create, grant or issue any right to subscribe for or acquire any of its equity securities;

(d)

does not grant any mortgage, charge or other security over any of its assets or give or agree to give any material guarantee or indemnity, except for guarantees and indemnities given in the ordinary course of business;

(e)

does not acquire by merger or consolidation with, purchase equity interests of or purchase substantially all of the assets of, or otherwise acquire, any business, or make any investment in, any Person or merge or consolidate with any Person;

(f)

maintains the Group’s insurance policies on the existing terms and conditions;

(g)

does not make any material change to the Accounting Policies;

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(h)

does not amend in any material way, or terminate, any contract which is material to the Group as a whole and, in particular, none of the Material Agreements (as defined in Schedule 15.1 );

(i)

does not enter into any agreements relating to the borrowing of money;

(j)

does not make any loans, advances or capital contributions to, or investments in, any other Person other than loans, advances or capital contributions, or investments by the Company or any of the Subsidiaries to any Subsidiary;

(k)

does not make inventory purchases outside the ordinary course;

(l)

does not make any capital expenditures in excess of USD 25,000 in the aggregate that are payable after the Closing Date;

(m)

makes capital and operating expenditures if and when required in the ordinary course consistent with past practice and as contemplated Schedule 6.8 and does not delay any such capital or operating expenditures to a period after the Closing Date;

(n)

does not take any other actions the purpose of which is to increase the Cash of the Group Companies as of the Effective Date or to otherwise artificially increase the Closing Purchase Price;

(o)

does not make any change in the terms of employment of any director, officer or Key Employee of the Group (as defined in Schedule 15.1 );

(p)

other than in accordance with agreements in existence on the date hereof, collective bargaining arrangements in existence on the date hereof or in accordance with prior practice;

(q)

complies with and fulfils any obligations pursuant to applicable Laws, collective bargaining agreements etc. to inform and/or negotiate with trade unions, any employee representative bodies and/or its employees, with respect to the transactions contemplated by this Agreement;

(r)

does not make or change any material Tax election, change any annual Tax accounting period or consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment;

(s)

does not institute any material litigation, arbitration or settle or waive any material claim or right other than (i) in relation to the collection of trade debts, (ii) in the ordinary course of business, or (iii) as instructed by its insurance providers;

(t)

complies with the share purchase agreement between IFU and the Company regarding the acquisition of IFU’s shares in Universal Robots (Shanghai) Co. Ltd. and takes all actions necessary in order to give effect to the share transfers contemplated thereunder, in particular in order to obtain all public approvals required in connection with such share transfer; and

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(u)

does not agree or commit to do or, as the case may be, not to do any of the foregoing.

9	COOPERATION AND FURTHER COVENANTS

9.1	General Cooperation

9.1.1

Subject to the terms and conditions of this Agreement, the Buyer and the Sellers and their respective Affiliates shall use their best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Law to consummate the transactions contemplated by this Agreement. The Sellers and the Buyer agree to execute and deliver, and to cause their respective Affiliates to execute and deliver, such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer ownership of the Shares.

9.1.2

To the extent legally permissible under applicable Law, after the Signing Date, the Parties shall coordinate with each other and use commercially reasonable efforts to negotiate master supply agreements or amendments, which include customary supplier protections, with certain sole source suppliers to the Group.

9.2	Press Releases

9.2.1

Subject to clause 19, between the Signing Date and the Closing Date, the Sellers shall not, and shall procure that the Group Companies will not, issue any press releases regarding the products or the business of the Group Companies without the Buyer’s prior written consent, which shall not be unreasonably withheld. Any such press releases shall be deemed approved if the Buyer does not explicitly object to such press release within 3 Business Days after having received an English language draft of such press release.

9.3	German Merger Control Filing

9.3.1

In furtherance and not in limitation of the foregoing, promptly after the Signing Date and in any event no later than 3 Business Days after the Signing Date, the Buyer shall file the notification required to be filed by it to the German Federal Cartel Office in relation to the transactions contemplated by this Agreement and expedite all other submissions and rendering of information requested or required by the German Federal Cartel Office in furtherance thereof.

9.3.2

Without prejudice to clause 9.3.3, the Buyer shall take all action reasonably requested by the Sellers and the Sellers shall take (and the Sellers shall procure that the Group Companies will take) all actions reasonably requested by the Buyer to assist the Parties in satisfying the condition described in clause 10.1. To this end the Buyer and the Sellers and their respective legal advisors shall work together and—to the extent legally permissible—share all information relevant for the notification procedure to the German Federal Cartel Office, including draft notifications prior to submission to the authority, and for this purpose the Buyer shall only be obligated to share commercially sensitive information regarding its operations with the Sellers’ counsel (on a counsel to counsel basis).

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9.3.3

If any objections are asserted with respect to the transactions contemplated under this Agreement by the German Federal Cartel Office, each of the Sellers and the Buyer shall, and shall cause its controlled Affiliates to, use its best reasonable efforts to promptly resolve such objections. Such efforts shall include entering into any settlement, undertaking, consent decree, stipulation or agreement or agreeing to any order regarding antitrust or competition matters in connection with any objections of the German Federal Cartel Office to the transactions contemplated hereby; unless such settlement, undertaking, consent decree, stipulation or agreement results in any unreasonable economic burden for any Group Company, the Buyer or any of the Buyer’s Affiliates.

9.4	Access to Information

9.4.1

From the date hereof until the Closing Date, the Sellers will, to the extent consistent with applicable Law, (i) give, and will cause each Group Company to give, Buyer, its counsel, financial advisors, auditors and other authorized representatives reasonable access to the offices, properties, books and records of the Group, and (ii) furnish, and will cause the Group to furnish, to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Group as such Persons may reasonably request, in each case to the extent reasonable required in connection with the transactions contemplated hereby and their implementation post Closing. Any access pursuant to this clause shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of Sellers or a Group Company. The Buyer shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing. Notwithstanding the foregoing, the Buyer shall not have access to personnel records of the Group relating to individual performance or evaluation records, medical histories or other information which in Sellers’ good faith opinion is sensitive or the disclosure of which could subject a Group Company to risk of liability.

9.4.2

On and after the Closing Date, the Buyer will afford promptly to the Sellers and their professional advisors reasonable access to the Group Companies’ books of account, financial and other records (including auditor’s work papers), employees and auditors to the extent necessary for the Sellers in connection with any third Person (i.e., not the Buyer or any of Buyer’s Affiliates) audit, investigation, dispute or litigation relating to a Group Company; provided that any such access by the Sellers shall not unreasonably interfere with the conduct of the business of the Group. The Sellers shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing.

9.5	Waiver of Claims

9.5.1

Each Seller (including on behalf of its Affiliates and closely related Persons) hereby irrevocably waives any claims it or they may have against any Group Company as of the Closing Date, except for ordinary outstanding claims for board of directors’ fees, salary, bonus and similar payments arising out of the employment agreements and consultancy agreements, if applicable. Notwithstanding the preceding sentence, any waiver by VF shall not be considered a waiver of any rights pursuant to the surety ( Vækstkaution ) provided by VF for the benefit of the Company.

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9.6	Share Transfers India

9.6.1

Following the Closing Date, EKI and the Buyer shall take all actions and make all declarations required in order to promptly sell and transfer the shares of EKI in Universal Robots (India) Private Limited to the Buyer. The consideration for the sale and transfer of such shares shall equal their nominal value. The Buyer shall bear any and all costs to complete the aforementioned share transfer and the Buyer shall indemnify and hold harmless EKI against any and all claims of whatever nature arising out of or related to the holding of the shares in Universal Robots (India) Private Limited after the Closing Date and until the share transfer has been completed.

10	CLOSING CONDITIONS

10.1

Subject to clauses 10.2 and 11, the obligations of each Party to complete the Closing are subject only to the fulfilment of the condition that the German Federal Cartel Office has approved the transactions contemplated by this Agreement or that, after the Buyer made the filing pursuant to clause 9.3, a relevant waiting period expired so that the transactions contemplated by this Agreement are deemed to have been approved (the “Merger Condition”).

10.2	In addition to the Merger Condition, the obligation of the Buyer to complete the Closing is subject to the condition that no Material Adverse Change shall have occurred after the Signing Date. The Buyer may waive this condition in its sole discretion.

11	TERMINATION

11.1	Subject to clause 11.2 below, the Agreement may be terminated prior to Closing only:

(a)

by either the Sellers’ Representative on behalf of all Sellers or by the Buyer on its own behalf and on behalf of the Guarantor, if the Merger Condition has not been satisfied within 3 months after the Signing Date (the “Cut-Off Date”);

(b)

by the Parties’ written agreement; and

(c)

by either the Sellers’ Representative on behalf of all Sellers or by the Buyer on its own behalf and on behalf of the Guarantor by the non-breaching Party in the circumstances set out in clause 12.7.

provided that neither the Sellers’ Representative nor the Buyer shall be entitled to terminate this Agreement if the failure to consummate the Closing prior to the Cut-Off Date resulted primarily from the failure to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement by any of the Sellers, in case of a termination by the Sellers’ Representatives, or by the Buyer or the Guarantor, in case of a termination by the Buyer.

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11.2

In addition to any termination rights set forth in clause 11.1, the Buyer may, on its own behalf and on behalf of the Guarantor, terminate this Agreement if between the Signing Date and the Closing Date a Material Adverse Change occurred or became known to the Buyer. Such termination right of the Buyer shall expire once it has performed all of its obligations under clause 12.5.

11.3

In case of termination of the Agreement in accordance with clause 11.1 or 11.2, no Party shall have any claim against the other Party in respect of this Agreement other than for breach existing at the time of termination. Notwithstanding the termination of this Agreement, the provisions of clauses 19, 20 and 21 shall remain in force between the Parties.

12	CLOSING MECHANICS

12.1

Closing shall, unless otherwise agreed by the Parties, take place at the offices of Accura Advokat partnerselskab, Tuborg Boulevard 1, DK-2900 Hellerup, Denmark, on 1 June 2015, at 10:00am subject to the Merger Condition having been fulfilled or waived no later than 5 Business Days prior to that date. If the condition has not been fulfilled or waived prior to that date, Closing must instead take place on the date which is 5 Business Days after the Merger Condition has been fulfilled or waived, or such other date as mutually agreed by the Parties.

12.2	No later than 4 Business Days prior to the Closing Date, the Sellers’ Representative must deliver to the Buyer:

(a)

a draft Closing Memorandum; and

(b)

a certificate from Danske Bank A/S stating (i) the amounts and currency required to effect full prepayment of the Pay-Off Amounts, and (ii) all payee account details as will be required by the Buyer to effect payment of the Pay-Off Amounts in accordance with clause 12.5(b) and, in a form acceptable to the Buyer acting reasonably, confirming finally and irrevocably and with binding effect for Danske Bank A/S, that (iii) subject to performance of the payment instructions as set out in the certificate all Third Party Rights in respect of the Secured Debt shall be deemed to be fully and finally discharged and released.

12.3

No later than 4 Business Days prior to the Closing Date, the Sellers’ Representative must deliver to the Buyer a good faith estimate of the consolidated Cash and consolidated Debt of the Group as of the Effective Date, each determined in accordance with the principles set forth in clause 5.2 (the “Preliminary Purchase Price Calculation”). The Buyer may review and discuss the Preliminary Purchase Price Calculation with the Sellers’ Representative within 2 Business Days following delivery of the Preliminary Purchase Price Calculation. The Sellers’ Representative shall provide to the Buyer all information and data reasonably requested by the Buyer for such review. The Sellers’ Representative shall consider any comments of the Buyer regarding the Preliminary Purchase Price Calculation in good faith and, at the latest on the 2nd Business Day before the Closing Date, notify the Buyer of its final good faith estimate of the Closing Purchase Price (the “Preliminary Purchase Price”);

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12.4	At Closing, the Sellers’ Representative must deliver the following documents:

(a)

a statement in the form attached as Schedule 12.4(a) signed by the Sellers’ Representative on the Closing Date on behalf of the Sellers and confirming that to the knowledge of the Sellers no Material Adverse Change occurred after the Signing Date;

(b)

the Company’s original register of shareholders evidencing that the Buyer is entered as the owner of the Shares free from any Third Party Rights;

(c)

letters of resignation from each member of the board of directors of the Company;

(d)

the Escrow Agreement duly executed by the Sellers;

(e)

a final version of the Closing Memorandum executed on behalf of the Sellers; and

(f)

evidence of the authority of the individual(s) signing the Closing Memorandum on behalf of the Sellers.

12.5	At Closing, the Buyer must take the following actions and deliver the following documents:

(a)

transfer the Preliminary Purchase Price less the Escrow Amount into the Sellers’ Bank Account in immediately available cash funds in USD, as evidenced by confirmation from the Sellers’ Bank Account that the payment has been received, such payment being a sufficient discharge of the Buyer’s liability for such sum owed to the Sellers and accordingly the Buyer shall not be concerned to see the application thereof between the Sellers;

(b)

transfer the Pay-Off Amounts into the accounts notified by the Sellers to the Buyer pursuant to clause 12.2(b) in immediately available funds;

(c)

transfer the Escrow Amount into the Escrow Account in immediately available funds;

(d)

the Escrow Agreement duly executed by the Buyer;

(e)

a final version of the Closing Memorandum executed on behalf of the Buyer; and

(f)

evidence of the authority of the individual(s) signing the Closing Memorandum on behalf of the Buyer.

12.6

The actions taken under clauses 12.4 and 12.5 will be considered to have been taken simultaneously, and none of the actions taken by one Party will be considered to have been taken until the actions to be taken by the other Party have also been taken. In connection with the completion of Closing, the Parties must approve and sign the Closing Memorandum.

12.7

If either a Seller or the Buyer fails to fulfil any of its obligations at Closing under clauses 12.4 and 12.5 such failure will be considered as a breach of this Agreement to the effect that (i) the Sellers’ Representative on behalf of all Sellers in case of a breach by the Buyer, (ii) or the Buyer on its own behalf and behalf of the Guarantor in case of a breach by a Seller, will become entitled

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(a)

to terminate the Agreement with immediate effect; and

(b)

to be indemnified against its loss from the Party in breach (without application of the limitations stated in clause 16).

13	ACTIONS AFTER CLOSING; PURCHASE PRICE ADJUSTMENT

13.1	Notification of Resignations and Directors and Officers liability insurance.

13.1.1

The Buyer undertakes to, or cause the relevant Group Company to, notify the Danish Business Authority no later than 2 Business Days after the Closing Date and for similar relevant foreign public authorities and registers, if any, no later than 20 Business Days after the Closing Date about the retirement of board members in accordance with clause 12.4(c) and pending the de-registrations of such board members, the Buyer shall indemnify and hold harmless such individuals against any and all claims of whatever nature arising out of the operations of the Group after the Closing Date. The Buyer undertakes promptly to provide the Sellers’ Representative with evidence of such completed de-registrations.

13.1.2

The Buyer undertakes to procure that the Company’s existing Directors and Officers liability insurance is maintained on unchanged terms and coverage through a run-off coverage for claims made for a period of 5 years following the Closing Date against any of the individuals covered by the Directors and Officers liability insurance as of the date hereof.

13.2	Purchase Price Adjustment.

13.2.1

No later than 40 calendar days after the Closing Date, the Buyer must provide the Sellers’ Representative with a draft calculation of the consolidated Cash and Debt of the Group as of the Effective Date, each determined in accordance with the Accounting Policies (however subject to clause 5.2), as well as the resulting Adjustment Amount, if any, and the final Closing Purchase Price (the “Final Purchase Price Calculation”).

13.2.2

If the Sellers’ Representative does not notify the Buyer of an Objection to the Final Purchase Price Calculation in accordance with the procedures of clause 13.2.3 it will be final and binding on the Parties and the Adjustment Amount payable, if any, and by which Party, shall be determined by reference to such Final Purchase Price Calculation.

13.2.3

Following delivery of the Final Purchase Price Calculation to the Sellers’ Representative, the Sellers’ Representative may review the Final Purchase Price Calculation and the Buyer must procure that the Group makes available and gives the Sellers’ Representative and its advisors access during usual business hours and upon reasonable notice to all necessary information and relevant employees within the Group as well as to the Group Companies’ auditors to enable the Sellers’ Representative to review the Final Purchase Price Calculation within the timeframe set forth herein. If the Sellers’ Representative disagrees with any element of the Buyer’s draft of the Final Purchase Price Calculation, the Sellers’ Representative must give Notice of an Objection to the Buyer no later than 25 Business Days after delivery of the Buyer’s draft of the Final Purchase Price Calculation. The Sellers’ Representative must describe

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in reasonable detail the Objections, include the Sellers’ Representative’s calculation of the Final Purchase Price Calculation and refer to the provisions of the Agreement that the Sellers’ Representative invokes in support of its position, including which adjustments to the Adjustment Amount, if any, the Sellers’ Representative requests. Unless (i) any Objection has been served on the Buyer within the time frame stipulated above and (ii) the Objection contains all such information as specified in the immediate preceding sentence, the draft Final Purchase Price Calculation prepared by the Buyer will be final and binding on the Parties.

13.2.4

If the Sellers’ Representative gives Notice of an Objection in accordance with clause 13.2.3, the Sellers’ Representative and the Buyer must attempt to reach an agreement on the Objections no later than 15 Business Days after the Buyer’s receipt of the Objection. If the Sellers’ Representative and the Buyer are unable to reach an agreement within this time limit, either the Sellers’ Representative or the Buyer may demand that the Disputed Matters be referred to the Expert.

(a)

The Expert will resolve the Disputed Matters by determining the proper value of the items which are subject of the Disputed Matters in accordance with the Agreement, including clause 5. The Parties shall make available to the Expert such information and documentation as reasonably requested by the Expert in order to resolve the Disputed Matters. The Expert’s decision on the Disputed Matters must be within the range of the values proposed for such Disputed Matter by the Buyer and the Sellers’ Representative. If the determination of the Disputed Matters depends on an accounting estimate, the Expert must make an independent estimate on the basis of what he considers to be fair and reasonable under the Agreement and consistent with the Accounting Policies (however subject to clause 5.2). If his independent determination is outside the range proposed by the Sellers’ Representative and the Buyer, his determination will be deemed to be equal to the value proposed by the Sellers’ Representative or the Buyer depending whose proposed value was closest to such determination. Upon determination of the Disputed Matters, the Expert will prepare a Final Purchase Price Calculation implementing his determination on the Disputed Matters (but without making any changes to any elements of the Final Purchase Price Calculation which were not Disputed Matters).

(b)

The Final Purchase Price Calculation prepared by the Expert, taking into account any agreements on Objections reached by the Sellers’ Representative and the Buyer, will be final and binding on the Parties, and it can only be challenged in accordance with clause 20 in the event of fraudulent acts or obvious errors. The Adjustment Amount payable, if any, shall be determined by reference to such Final Purchase Price Calculation or, if no Disputed Matters had to be referred to the Expert, by reference to such other Final Purchase Price Calculation agreed between the Sellers’ Representative and the Buyer or which became final and binding in accordance with clause 13.2.2.

(c)

The Expert will make decisions as to the apportionment of his fees and other costs between the Parties, taking into account the amount by which each Party’s calculation of the Closing Purchase Price deviated from the Closing Purchase Price determined by him.

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13.2.5

No later than 5 Business Days after the Final Purchase Price Calculation has become final and binding on the Parties in accordance with this clause 13.2, the Adjustment Amount (together with the Interest accrued on the Adjustment Amount from the Closing Date through the date of payment) must be paid in immediately available funds by the Sellers to the Buyer, it being understood that the Buyer may, but is not obligated to, to withdraw such Adjustment Amount from the Escrow Account, or by the Buyer to the Sellers’ Bank Account, as applicable.

13.3	Joint Taxation

13.3.1

The Company is presently not subject to mandatory tax consolidation pursuant to Section 31 of the Danish Company Tax Act. When the Buyer as of the Closing Date commences to control the Company for the purpose of Section 31 of the Danish Company Tax Act, the Company will be jointly taxed with the Buyer and an existing Danish subsidiary of the Buyer’s Dutch parent company.

13.3.2

The Buyer will procure that notice is given to the Danish tax authorities (“SKAT”) of the Company’s commencement of joint taxation with the Buyer and the existing Danish subsidiary of the Buyer’s Dutch parent company per the Closing Date. The notice will be submitted to SKAT no later than 30 Business Days after the Closing Date.

14	SPECIAL INDEMNIFICATIONS

14.1	Tax Indemnity

14.1.1

Notwithstanding any other provisions of this Agreement, the Sellers undertake—to the extent not fully provided for in the Final Purchase Price Calculation—to indemnify and hold harmless the Buyer or, at the Buyer’s election, the respective Group Companies, on a USD for USD basis, from and against any Tax claims, including any losses and costs (including fees of external advisers, penalties, interests etc.) incurred by any Group Company as a result of or in connection with any liability for Taxes relating to any period until the Effective Date that are payable by any Group Company after the Effective Date. With respect to fiscal years and/or accounting periods beginning before the Effective Date and ending after the Effective Date, the portion of Taxes related to the time period until the Effective Date shall be deemed equal to the amount which would have to be assessed by the competent Tax authority if the Effective Date was the end of the respective business year and/or accounting period of the relevant Group Company. Notwithstanding the aforementioned, the Sellers shall not be liable in respect of any claim pursuant to this clause 14.1.1 to the extent that Taxes arise or are increased by reason of (i) any change after the Effective Date in the bases, methods or policies of Tax accounting of the Buyer, the Company or any Group Company other than in the ordinary course of business as conducted at the Effective Date, or (ii) any Tax claim occurring due to or otherwise as a result of the joint taxation with Buyer or Buyer’s Affiliates as further described in clause 13.3 which would not have occurred without such joint taxation. To the extent that the Sellers can reasonably demonstrate that an actual Tax relief is available to the Buyer or any Group Company in relation to the Tax claim in question, the Buyer shall reimburse such actual Tax relief when it is received by the respective Group Company.

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14.1.2

Any payment under clause 14.1.1 above shall be due and payable by the Sellers from the Escrow Account and if such payment is made after release of the Escrow Account only then directly from the Sellers within 15 Business Days after the Sellers’ Representative has been notified in writing by the Buyer about the payment obligation and the corresponding payment date pursuant to this Agreement and has received a copy of the relevant Tax assessment notice or Tax return, but in no event earlier than 5 Business Days before the relevant Tax to be indemnified is due and payable to the Tax authority. If any Tax for which indemnification is sought under clause 14.1.1 is contested, the payment of such Tax by the Sellers shall be due 5 Business Days after such Tax has been finally and bindingly determined by the relevant Tax authority or court of proper jurisdiction, provided that the Tax authority has suspended payment of such Tax until such Tax becomes final and binding. If the Tax authority did not suspend payment of such Tax, the Sellers shall make respective advance indemnification payments to the Buyer. If the final amount to be indemnified for such Tax is lower than the advance indemnification payment made by the Sellers, the Buyer shall reimburse the difference to Sellers, including all interest received thereon from the respective Tax authority, if any.

14.1.3

Any claims under clause 14.1.1 shall become time-barred 3 months after the underlying Tax has been finally and bindingly determined.

14.1.4

Any costs and payments of the Group Companies relating to the Closing, including for exit bonuses, shall for purposes of this clause 14.1 be attributed to the time period before the Closing.

14.2	Product Indemnification

14.2.1

Notwithstanding any other provisions of this Agreement, the Sellers shall indemnify and hold harmless the Buyer or, at the Buyer’s election, the respective Group Companies, on a USD for USD basis, from and against any cost incurred by any Group Company as a result of customer complaints in connection with the read head magnetic encoder misalignment failure issue on robots shipped between 1 September 2014 and 31 March 2015, whereby a plastic bracket potentially could cause a sensor misalignment that could result in a robot stop and where such failure results in a product retrofit within the period from the Closing Date and the date falling 18 months after of the Closing Date. Claims pursuant to this clause 14.2.1 shall be subject to the limitations in clauses 16.4.2 and 16.4.3.

14.3	Limitations

14.3.1

Subject to the last sentence of clause 14.2.1, none of the limitations in clause 15 or 16 shall apply to this clause 14, however, the Sellers’ aggregated liability pursuant to this clause 14 together with liability for any other Losses due to a Breach of the Sellers’ Warranties shall in no event exceed the Cap and the Sellers’ liability pursuant to this clause 14 shall always be several and not joint. Notwithstanding anything to the contrary in this clause 14.3 and for the avoidance of doubt, any amount for which the Sellers have indemnified the Buyer or a Group Company pursuant to clause 14.1 shall not be included in the Basket pursuant to clause 16.4.2(b).

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15	WARRANTIES

15.1	Sellers’ Warranties .

15.1.1

The Sellers have made the Warranties stated in Schedule 15.1 to the Buyer, such Warranties being (i) the only representations or warranties given by the Sellers, and (ii) made as of the Signing Date and to be deemed repeated as of the Closing Date unless such Warranty expressly is made as of the Signing Date only. The Buyer acknowledges that it is not relying on any express or implied representations or warranties whatsoever, except as expressly set forth in this Agreement and further acknowledges that the Sellers make no representation or warranty whatsoever with respect to any projections, estimates, forecasts or budgets delivered to or made available to the Buyer or its representatives of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Group or the future business and operations of the Group.

15.1.2

Except with respect to Breaches of the Title Warranties, the Sellers are not liable for any Breach of the Sellers’ Warranties to the extent it is within the Buyer’s Knowledge that the Sellers’ Warranties were incorrect, incomplete or misleading or to the extent matters rendering any of the Sellers’ Warranties incorrect, incomplete or misleading have been Disclosed to the Buyer before the Buyer and the Guarantor have signed this Agreement.

15.2	Buyer’s Warranties

The Buyer has made the following Warranties to the Sellers as of the Signing Date and as of the Closing Date:

(a)

The Buyer is a corporation duly organized and validly existing under the laws of the Denmark and has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby.

(b)

The execution and delivery by the Buyer of this Agreement, the performance by the Buyer of its obligations hereunder and the consummation by the Buyer of the transactions contemplated hereby have all been duly authorized by all requisite action on the part of the Buyer.

(c)

This Agreement has been duly executed and delivered by the Buyer and this Agreement constitutes a legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally.

(d)

No consent of any shareholder, board of directors or any other Person or body is required in connection with the execution, delivery and performance by the Buyer of the Agreement.

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(e)

Except as may be required under any merger control Laws, the execution, delivery and performance by the Buyer of this Agreement does not and will not (i) violate, conflict with or result in the breach of the Buyer’s Corporate Documents, (ii) violate or conflict with or require consent or notification under any, judgment, court order or other decision made by a court, arbitration tribunal or public authority against or binding upon the Buyer, (iii) conflict with or constitute a violation of or require consent or notification under any law or regulation applicable to the Buyer, or (iv) conflict with or result in breach of or require consent or notification under any agreement to which the Buyer is a party, except for any such agreements in respect of which a breach will not adversely affect the Buyer’s ability to perform any of its obligations under and to consummate the transactions contemplated, by this Agreement.

(f)

The Buyer is not a party to any dispute before a court, arbitration tribunal or public authority which may prevent or delay Closing if the Buyer is unsuccessful in such dispute.

15.3	Buyer’s due diligence

15.3.1

The Buyer has, prior to the execution of this Agreement, conducted its own independent investigation, review and analysis of the Group’s business, assets, liabilities, results of operation, financial condition, software, technology, intellectual property rights and prospects, including through review of the Due Diligence Information as set out in Schedule 1.1(d) .

16	SELLERS’ LIABILITY, LIMITATIONS AND CLAIMS PROCEDURE

16.1	Survival; Liability for Breach

In the event of any Breach by the Sellers, the Sellers must indemnify and hold the Buyer harmless against and from any Loss in accordance with the general rules of Danish law, subject to the limitations stated in this clause 16; provided that the Sellers shall be entitled to remedy a Breach within 20 Business Days (if capable of being cured) after receipt of the Buyer’s Notice of the claim, and the claim and the Breach will cease to exist if and to the extent the Sellers effectively remedy the Breach and its financial consequences for the Buyer and the Group before expiry of this deadline.

16.2	Calculation of Loss

16.2.1

Notwithstanding anything herein to the contrary, the Sellers shall not be liable for any Loss which has been included in calculation of the Final Purchase Price Calculation. The Buyer’s Loss shall be calculated as the Buyer’s or respective Group Company’s direct loss on a USD 1 for USD 1 basis without regard to any methods of calculation (P/E, EBITDA multiple or similar method) used for the determination of the Enterprise Value.

16.2.2

When calculating a Loss, the Buyer must take into account any amount and any similar financial benefit that the Buyer or a Group Company has effectively received or which the Sellers can reasonably demonstrate that the Buyer is entitled to receive from a third party as a result of the Breach or the Loss, and any such amount and benefit must be set off against the Buyer’s claim, including (i) any net tax benefit that the Buyer or a Group Company is entitled to receive as a result of such Breach or Loss and (ii) any insurance payment or benefit that the Buyer or a Group Company has effectively received or is entitled to receive in respect of such Loss (or would have been entitled to receive under the insurance policies in place at the Closing Date).

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16.2.3

For the avoidance of doubt, the Buyer shall not be entitled to indemnification or other restitution more than once in respect of the same Loss (no double counting).

16.3	Mitigation

The Buyer is required to mitigate any Loss in accordance with the general rules of Danish law. In furtherance of the foregoing, Buyer undertakes and agrees to use reasonable efforts to recover from a third party any Loss for which an indemnity payment hereunder may be due. If the Buyer receives payment from a third party in respect of a Loss subsequent to an indemnification payment by Sellers against which the Sellers have already indemnified the Buyer, the Buyer shall promptly reimburse the Sellers up to the amount paid by the Sellers in indemnification hereunder.

16.4	Limitations

16.4.1

The Sellers shall have no obligation to indemnify the Buyer in respect of any Loss in respect of a Breach if the Buyer fails to give Notice (in accordance with clause 16.5) of the claim to the Sellers’ Representative:

(a)

no later than on the day falling 18 months after the Closing Date, 11:59 pm CET; and

(b)

no later than 30 Business Days after the Buyer has become aware of the events or circumstances giving rise to a claim.

16.4.2

The Sellers shall have no obligation to indemnify the Buyer in respect of any Loss caused by a Breach of the any of the Warranties unless;

(a)

the amount of such Loss arising from a single Breach or series of related Breaches of any of the Warranties exceeds USD 150,000 (the “De Minimis Threshold”); and

(b)

the total amount of the Buyer’s Losses in respect of all such Breaches of the Warranties (each exceeding the De Minimis Threshold), is in excess of USD 1,700,000 (the “Basket”) in which case the Sellers shall be liable for the full amount of such Loss.

16.4.3

The Sellers’ maximum liability for all Losses in respect of all such Breaches and any liability pursuant to any indemnity under clause 14 shall be limited to a total amount equivalent to the Escrow Amount (the “Cap”). For the avoidance of doubt, if and to the extent an Adjustment Amount is paid to the Buyer from the Escrow Account in settlement of such Adjustment Amount, any such Adjustment Amount shall not limit the residual maximum liability of the Sellers pursuant to the preceding sentence.

16.4.4

The limitations in clause 16.4 do not apply to any Breach of any of the Title Warranties or Breach arising out of or as a result of fraud or wilful misrepresentation, always provided that none of the Sellers’ liability for such Breach can in any event exceed such Seller’s portion of the Purchase Price. For any Breach and the breach of any indemnity or covenant as provided by the Sellers pursuant to this Agreement, the Sellers’ liability shall be several and not joint.

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16.4.5

Any payment by the Sellers as indemnification of Buyer against any Loss will be considered a reduction of the Purchase Price.

16.4.6

The Sellers shall not be liable in respect of any claims to the extent that such claim is attributable to, or such claim otherwise having arisen or is increased as a result of, any Law not being in force at the Closing Date.

16.5	Claims procedure

16.5.1

The Sellers shall have no obligation to indemnify the Buyer’s Loss in respect of a Breach unless the Buyer gives Notice (in accordance with clause 21.2) to the Sellers’ Representative within 30 Business Days, after the Buyer became aware of events or circumstances giving rise to the claim. The Buyer’s Notice must include a reasonably detailed description of the claim, its actual and legal basis and – to the extent reasonably possible – a calculation of the Loss or the estimated Loss together with reasonable supporting documentation.

16.5.2

The Sellers shall have a period of 30 Business Days from receipt of the Notice of claim to dispute such claim by the Sellers’ Representative providing Notice that the Sellers dispute such claim in accordance with clause 21.2.

16.5.3

If the Sellers’ Representative provides timely notice that they dispute such claim, in full or in part, the Buyer may request arbitration in accordance with clause 20.2 and if it so requests, shall serve its written complaint ( klageskrift ) on the Sellers within 30 Business Days after the Buyer has received Notice from the Sellers’ Representative that the Sellers dispute the claim. If the written complaint is not served within such period, the Sellers will be released from any and all obligations to indemnify the Buyer against the Loss arising from the claim in question or any other alleged Loss based on substantially the same events or circumstances.

16.6	Third Party Claims

16.6.1

If the grounds for a claim in relation to any of the Sellers’ Warranties arise as a result of, or in connection with, a claim by, or alleged liability to, a third Person (a “Third Party Claim”), the Sellers shall be entitled to participate in the defence of any Third Party Claim and, subject to the limitations set forth in this clause. The Buyer shall upon the event of a Third Party Claim:

(a)

As soon as possible, but in no event later than thirty 30 Business Days after the Buyer becomes aware of the relevant fact or set of circumstances, give notice thereof to the Sellers’ Representative;

(b)

give the Sellers’ Representative reasonable access to the personnel of the Buyer and/or the relevant Group Company, as the case may be, and to any relevant premises, accounts, documents and records within their respective possession, and allow the Sellers’ Representative to take copies thereof, in order to enable the Sellers’ Representative to examine the basis of any potential Third Party Claim; and

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(c)

subject to the Sellers’ Representative (on behalf of the relevant Seller(s)) in writing accepting full liability for the Third Party Claim:

•

not, and procure that no Group Company will, (i) make any admission of liability and (ii) agree to settle or compromise any Third Party Claim with any Person without obtaining the prior written consent of the Sellers’ Representative, not to be unreasonably withheld or delayed;

•

upon the Sellers’ Representative’s request, allow the Sellers’ Representative the right to dispute and defend such Third Party Claim in the name of the relevant Group Company, and to properly conduct any litigation resulting therefrom.

16.6.2

In case the Buyer fails to comply with the foregoing, the Sellers’ obligation to indemnify the Buyer for the Third Party Claim shall be reduced, if and to the extent such non-compliance has caused an increase in the Loss in respect of the relevant matter.

16.7	Exclusivity

After Closing, the rights described in this clause 16 (and clause 21.8) shall be the Buyer’s exclusive remedy for any Breach. Except in case of a Breach of Title Warranties, the Buyer is not entitled to terminate ( hæve ) the Agreement. The Buyer is not entitled to demand a proportionate reduction of the Purchase Price ( forholdsmæssigt afslag ). The Buyer expressly waives any right to claim damages from the present or former board of directors or management of any Group Company with respect to any act or omissions of such individuals and the Buyer shall seek its remedy against the Sellers exclusively under the provisions of this Agreement. The provisions in this clause 16.7 do not apply to any matters which are caused by fraud or wilful misrepresentation.

17	GUARANTEE

The Guarantor hereby as primary obligor ( selvskyldnerkaution ) irrevocably and unconditionally guarantees the due performance of the obligations of the Buyer under this Agreement, in particular any and all payment obligations under clauses 5 and 6.

18	RESTRICTIVE COVENANTS

18.1	Non-compete

18.1.1

For a period of 3 years following the Closing Date, each of EKI, EØ and CNA undertakes not to be directly or indirectly engaged in any business which competes with the Group’s business as conducted immediately prior to the Signing Date nor shall such Persons for the avoidance of doubt act as a consultant, owner, or partner of, any business or organization which directly or indirectly competes with or is directly or indirectly engaged in the same business as conducted by the Group prior to the Signing Date.

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18.1.2

For the avoidance of doubt, the restrictions in clause 18.1.1 shall not prevent CNA to continue serving as the chairman of the board of directors of the Danish Technological Institute ( Teknologisk Institut ), which as part of its operations runs an innovation center for robot technology ( Center for Robotteknologi).

18.2	Non-solicitation

For a period of 6 months following the Signing Date each of EKI, EØ, NJJ, TVJ, and CNA undertakes to refrain from enticing or persuading or attempting to entice or persuade any employees to leave their employment with the Group.

18.3	Agreed penalty

In addition to any other relief that may be available to the Buyer, any violation of the covenants in this clause 18 shall trigger an agreed penalty payable from the relevant Seller(s) in breach to the Buyer for an amount of USD 1,000,000 (with respect to violation of clause 18.1) and USD 200,000 (with respect to violation of clause 18.2) for each violation. If a violation persists for a period of more than 2 weeks, such continued violation shall be deemed to constitute a new and separate violation, which shall entitle the Buyer to payment of additional penalties for each period of 2 weeks where such violation persists. In addition to any other relief that may be available to the Buyer. The provisions in this in clause 18 may be enforced by either the Buyer or a Group Company. For the avoidance of doubt, only the Seller(s) in violation of the provisions in this clause 18 shall be severally liable for payment of the agreed penalty and the Buyer may not deduct its claim from the Escrow Amount, but shall solely pursue its claim directly from the Seller(s) in violation. Payment of penalty shall not relieve the Sellers of their obligations pursuant to this clause 18.

19	CONFIDENTIALITY AND PUBLICATION

19.1	Each Party undertakes to treat, and shall procure that its Affiliates and its and their respective representatives treat, Confidential Information strictly confidential and refrain from disclosing it to any third Persons, unless such disclosure is explicitly permitted by this Agreement.

19.2	In this Agreement, “Confidential Information” shall mean:

(a)

with respect to the confidentiality obligations of either Party: the contents of (i) this Agreement, (ii) any related agreements, minutes, term sheets, notes, letters or other documents prepared or executed by a Seller, its Affiliates or its or their representatives on the one hand and the Buyer, its Affiliates or its or their representatives on the on the other hand, and (iii) related discussions and negotiations;

(b)

with respect to the confidentiality obligations of the Sellers alone: any information about the Group Companies and their business and any information obtained in connection with the preparation, negotiation, execution or consummation of this Agreement and the transactions contemplated herein about the Buyer, its Affiliates and its representatives, except, however, that EKI and EØ shall not be deemed to violate this clause 19 as long as they continue to be employed by any Group Company and are entitled to disclose Confidential Information under their respective employment contracts; and

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(c)

with respect to the confidentiality obligations of the Buyer alone: until the Closing any information about the Group Companies and their business and as from the date of this Agreement any information obtained in connection with the preparation, negotiation, execution or consummation of this Agreement and the transactions contemplated herein about the Sellers, their Affiliates and their representatives;

except for information that (i) has come into the public domain, or (ii) in the case of paragraphs (b) or (c) has been received from a third Person, except in each of (i) and (ii) where such information has come into the public domain or been received from a third Person following a breach of the confidentiality obligations under this clause 19.

19.3

Each Party may disclose Confidential Information (i) to professional advisors advising it on the transactions contemplated by this Agreement, provided such advisors are bound by contractual or professional confidentiality obligations at least as strict as the obligations under this Agreement and (ii) as may be required by applicable Law, including stock exchange regulations.

19.4

Notwithstanding clauses 19.1—19.3, the Buyer and the Sellers’ Representative shall promptly after the Signing Date issue a joint press release in the agreed form attached as Schedule 19.4 . The Parties shall, however, not be prevented from disclosing such information which is required to be disclosed under applicable Law or stock exchange regulations. Following the Signing Date, the Parties shall comply with the procedures set out in clause 9.2.

20	GOVERNING LAW AND DISPUTES

20.1	The Agreement is governed by and will be interpreted in accordance with Danish law, excluding its conflicts of law rules to the extent they would lead to the application of laws other than Danish law.

20.2

Any dispute arising out of the Agreement, including any dispute concerning its existence or validity that cannot be settled amicably between the Parties must be submitted to the Danish Institute of Arbitration (Danish Arbitration) for final and binding decision. The Danish Institute of Arbitration will apply the rules of procedure in force when the application for arbitration is submitted.

20.3

Each Party will appoint 1 arbitrator (it being understood that the Sellers shall collectively appoint 1 arbitrator). The Danish Institute of Arbitration will appoint 1 further arbitrator who will act as the chairman of the arbitration tribunal. If a Party fails to appoint an arbitrator within 30 Business Days of submitting an application for arbitration or of receiving Notice of arbitration, the Danish Institute of Arbitration will also appoint that arbitrator.

20.4	The arbitration proceedings will take place in Copenhagen and the language of the proceedings will be English.

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20.5

The Parties are not entitled to disclose any confidential information relating to the arbitration proceedings to any third party, including information on any decision or arbitration award, unless the other Party has consented in writing to such disclosure. However, either Party is entitled to disclose information relating to the arbitration proceedings to a third party if such disclosure is made to protect its interests in relation to the other Party or to comply with current legislation or public authority decisions, or if such disclosure is required under any listing agreements.

21	OTHER PROVISIONS

21.1

Each of the Sellers hereby irrevocably appoints VF and ANBE jointly as its representatives (collectively the “Sellers’ Representative”) and authorises the Sellers’ Representative to act on its behalf in connection with all transactions contemplated by this Agreement and to make and receive all Notices, declarations and statements on its behalf. When acting as the Sellers’ Representative under this Agreement, including giving Notices or otherwise making statements or declarations or taking any other action under or in connection with this Agreement, VF and ANBE have to act jointly and, to the extent they give any Notices, all such Notices have to be signed by both VF and ANBE. Any Notices of the Sellers Representative that are not signed by both VF and ANBE and any other actions or declarations of the Sellers Representative that are not jointly made by VF and ANBE shall be null and void, deemed to not have been made, and have no legal effect for purposes of this Agreement. Notwithstanding the foregoing sentences of this clause 21.1, if the Sellers provide to the Buyer any Notice that has been signed by Sellers representing more than 50% of the Shares sold under this Agreement, then such Notice shall be deemed to have been given by and on behalf of all Sellers and such Notice may be given instead of any Notice of the Sellers’ Representative, except, however that if the Sellers’ Representative previously had given a valid Notice regarding the same matter, then the Buyer may rely on such Notice and such Notice of the Sellers’ Representative shall prevail over any conflicting subsequent Notice signed by the Sellers.

21.2

Any notice to be given under the Agreement, including with respect to exercising any rights under this Agreement, must be in writing and delivered by hand or sent by registered mail, by fax or by email (in which case a scanned document duly signed by the respective Parties shall be attached to such email) to the addresses stated in Schedule 21.2 (“Notice”).

21.3	No Party is entitled to assign, in full or in part, the rights and obligations set out in the Agreement without the prior written consent of the other Parties.

21.4	If the Parties agree to amend the Agreement, such agreement must be made in a writing signed by the Parties.

21.5	Unless otherwise explicitly stated in the Agreement, each Party will pay its own costs relating to the negotiations, drafting and conclusion of the Agreement and the fulfilment of the obligations of the Agreement (including all fees for its own legal, financial or other advisors).

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21.6

This Agreement shall become effective once signed by all Parties. Until and unless each Party has signed a counterpart, this Agreement shall have no effect and no Party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the Parties hereto and their respective successors and assigns.

21.7

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other governmental authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

21.8

The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

The Agreement has been executed in 3 original copies (one original for each of Buyer, VF and ANBE) and with copies hereof to all other Sellers.

SEPARATE SIGNATURE SHEET TO FOLLOW

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SIGNATURE SHEET FOR SHARE SALE AND PURCHASE AGREEMENT

CONCERNING UNIVERSAL ROBOTS A/S

For Teradyne Holdings Denmark ApS:

/s/ Charles J. Gray

Charles J. Gray (by proxy)


For Teradyne, Inc. (as Guarantor):

/s/ Gregory R. Beecher
Gregory R. Beecher (CFO, Vice President)

For Vækstfonden:

/s/ Ulrik Jørring				/s/ Morten Westh Naldal
Ulrik Jørring				Morten Westh Naldal

For ANBE af 2006 ApS:				For BKI Holding ApS:

/s/ Enrico Krog Iversen				/s/ Clas Nylandsted Andersen
Enrico Krog Iversen (CEO)				Clas Nylandsted Andersen (by proxy)

For Kristian Kassow:				For Esben Østergaard:

/s/ Clas Nylandsted Andersen				/s/ Clas Nylandsted Andersen
Clas Nylandsted Andersen (by proxy)				Clas Nylandsted Andersen (by proxy)

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For Kasper Støy:				For Clas Nylandsted Andersen:

/s/ Clas Nylandsted Andersen				/s/ Clas Nylandsted Andersen
Clas Nylandsted Andersen (by proxy)				Clas Nylandsted Andersen

For Enrico Krog Iversen:				For Niels Erik Kildemoes:

/s/ Enrico Krog Iversen				/s/ Clas Nylandsted Andersen
Enrico Krog Iversen				Clas Nylandsted Andersen (by proxy)

For Lasse Kieffer:				For Thomas Visti Jensen:

/s/ Clas Nylandsted Andersen				/s/ Clas Nylandsted Andersen
Clas Nylandsted Andersen (by proxy)				Clas Nylandsted Andersen (by proxy)

For Niels Jul Jacobsen:

/s/ Clas Nylandsted Andersen
Clas Nylandsted Andersen (by proxy)

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SCHEDULE 15.1 – SELLERS’ WARRANTIES

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CONTENTS


		Page
1	DEFINITIONS		4

2	AUTHORITY		6

3	THE GROUP		7

4	CAPITALISATION		7

5	FINANCIAL INFORMATION		8

6	ORDINARY COURSE AND ABSENCE OF CERTAIN EVENTS		8

7	TAXES		9

8	REAL PROPERTY		10

9	OPERATING EQUIPMENT, MACHINERY, FIXTURES AND FITTINGS		11

10	INTELLECTUAL PROPERTY RIGHTS & IT		11

11	PERMITS		14

12	INSURANCE		14

13	PRODUCTS AND PRODUCT LIABILITY		14

14	EMPLOYEES		15

15	AGREEMENTS		16

16	LITIGATION		17

17	ANTI TRUST MATTERS		17

18	COMPLIANCE WITH LAWS		17

19	ENVIRONMENTAL MATTERS		18

20	PUBLIC SUBSIDIES		18

21	DISCLOSURE		18

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EXHIBITS


Exhibit 3.6		Share Register

Exhibit 15		Material Agreements

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1	DEFINITIONS

1.1	Defined terms and expressions in this Schedule 15.1 shall be construed as having the meaning attributed to them in the Share Sale and Purchase Agreement concerning Universal Robots A/S (the “Agreement”).

In addition, the following terms and expressions shall have the following meanings:


Anti-Bribery Laws		as stated in clause 18.2.

Benefit Plans		(i) any agreements and other commitments, whether of an individual or collective nature, regarding pension benefits and (ii) any agreements and other commitments regarding employee benefits, such as anniversary, holiday or jubilee payments, early retirement, bonus, profit participation and other variable remuneration elements, stock options, stock appreciation rights and similar rights, granted to any current or former director or employee of any Group Company that are sponsored or maintained by a Group Company or with respect to which a Group Company has made or is required to make payments, transfers, or contributions or has any liability.

Company Software		any software, including in particular operating systems used for the products of the Group Companies, owned, developed, marketed, distributed, licensed, or sold by any Group Company.

Encumbrance		any option, pledge, mortgage, lien, security interest, claim, option, right of first refusal, pre-emptive right, community property interest or other claims of third parties of any kind, or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

Danish GAAP		the accounting principles set forth in the Danish Financial Statements Act ( Årsregnskabsloven ) and other Danish generally accepted accounting practices.

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IPR		any Registered IPR and any of the following: (a) any invention, discovery, whether patentable or un-patentable and whether or not reduced to practice, and all improvements (b) trade secret, technical information, know-how and any other confidential information, including ideas, research and development, know-how, data, drawings, prototypes, models, formulas, manufacturing, production and other processes and techniques, engineering, production and other designs and business methods (c) unregistered trademarks, trade names or brand identifier, (d) unregistered copyrights, (e) software or components thereof, and (f) any other intellectual property, industrial property or proprietary rights anywhere throughout the world.

IT Systems		as stated in clause 10.14.

Key Employees		means each of Enrico Krog Iversen, Klaus Vestergaard, Esben Østergaard, Michael Bo Larsen, Lasse Kieffer, Troels Horsved, and Lisa Hansen.

Leased Properties		as stated in clause 8.2.

Malicious Code		as stated in clause 10.9.

Management Accounts		the non-audited monthly management accounts of the Group as presented to the Company’s board of directors covering the period from 1 January 2015 until 30 April 2015.

Material Agreements		any of the following agreements (whether written or oral): (i) licenses with respect to any IPR to or from any third Person that are material to the Company’s business, including commitments by a Group Company not to enforce certain IPR against any third Person, except for any (i) off-the-shelf software licenses and (ii) IPR licenses contained in any customer agreements entered into the ordinary course of business consistent with past practice, (ii) contracts with the top customers and suppliers of the Group set forth in Exhibit 15 .

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Permit		as stated in clause 11.1.

Permitted Encumbrances		means statutory Encumbrances and customary retention of title by suppliers.

Registered IPR		any of the following applied for or registered with any registration authority (a) trademarks, trade names, brand identifier, logos, symbols, names, domain names, trade dress, designs, copyrights, all applications and registrations for any of the foregoing, including all renewals of same, and (b) all patents, utility models and patent applications, including renewals, extensions, reissues, divisionals, continuations, continuations in part and reexaminations thereof and all patents that may be issued on such applications.

2	AUTHORITY

2.1	Each of BKIH and ANBE is a corporation duly organized and validly existing under the laws of Denmark and has the full right, power and authority to enter into the Agreement and to consummate all transactions contemplated thereby.

2.2	VF is a Danish growth fund duly organized and validly existing under the laws of Denmark and has the full right, power and authority to enter into the Agreement and to consummate all transactions contemplated thereby.

2.3	The execution and delivery by the Sellers of this Agreement, the performance by the Sellers of their obligations hereunder and the consummation by the Sellers of the transactions contemplated hereby have all been duly authorized by all requisite action on the part of the Sellers.

2.4

This Agreement has been duly executed and delivered by each Seller and this Agreement constitutes a legal, valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally.

2.5

The execution, delivery and performance of this Agreement does not and will not (i) violate, conflict with or result in the breach of VF’s, BKIH’s or ANBE’s Corporate Documents, (ii) violate or conflict with any, judgment, court order or other decision made by a court, arbitration tribunal or Governmental Authority against or binding upon a Seller and/or any Group Company, (iii) conflict with or constitute a violation of any law or regulation applicable to a Seller and/or any Group Company, or (iv) conflict with or result in breach of any agreement to which a Seller is a party, except in the case of (ii)–(iv) as such violation, conflict or breach, as the case may be, would not be reasonably likely to materially and adversely affect a Seller’s ability to perform its obligations under and to consummate the transactions contemplated, by this Agreement.

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2.6	No Seller is a party to any dispute before a court, arbitration tribunal or Governmental Authority which may prevent Closing if a Seller is unsuccessful in such dispute.

3	THE GROUP

3.1

Each Group Company is a corporation duly organised and validly existing under the applicable laws of their respective countries of incorporation and, to the extent the concept applies, in good standing. Each of the Group Companies has requisite corporate or similar power and authority to own its properties and to carry on its business as currently conducted.

3.2

No Group Company has filed, and no third Person has filed against any Group Company, any petition for winding-up, dissolution, liquidation, bankruptcy or receivership and there are no facts or circumstances justifying such filing. None of the Group Companies have made any assignment in favour of, or initiated any negotiations with respect to, an overall compromise or arrangement with all of or the majority of its creditors.

3.3	The Company has no subsidiaries other than the Subsidiaries and holds no shares or other ownership interests in any other Person. No Subsidiary holds any shares or other ownership interests in any other Person.

3.4

Except for the shares of IFU in Universal Robots (Shanghai) Co. Ltd and the shares of EKI in Universal Robots (India) Private Limited, no third Person (not being a member of the Group) owns shares or any similar ownership interest in the Subsidiary and no has third party been granted any right to acquire or subscribe for such shares or ownership interest.

3.5	The Company has full and unrestricted title (directly or indirectly) to the shares in the Subsidiaries free and clear from any Encumbrances.

3.6	Each Seller is the sole legal owner of the Shares listed against its name in the Company’s share register attached as Exhibit 3.6 , and the Shares listed against its name therein are free and clear from any Encumbrances.

3.7	The Due Diligence Information contains an up-to-date, complete and correct copy of the Company’s Corporate Documents.

4	CAPITALISATION

4.1	The share capital of the Company amounts to nominal DKK 546,115 shares, divided into nominal DKK 218,312 class A shares and nominal DKK 327,803 class B shares that have all been properly and validly issued and which are all fully paid up.

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4.2	The share capital of the Subsidiaries is fully paid up to the extent such full payment is a mandatory requirement under any relevant statutory law.

4.3	No Group Company has issued any outstanding warrants, options or other instruments entitling any Person to acquire, convert or subscribe for equity in any of the Group Companies.

4.4	No share certificates have been issued for the Shares or for any of the shares in any of the Subsidiaries.

5	FINANCIAL INFORMATION

5.1	The Annual Report has been prepared in accordance with Danish GAAP and, to the extent such principles comply with Danish GAAP, the principles set forth in Schedule 1.1(a) of the Agreement on a consistent basis.

5.2	The Annual Report gives a true and fair view of the Company’s and of the Group’s financial position as of the Accounts Date and of the results and cash flows of the Company and the Group for the financial year 1 January 2014 until 31 December 2014.

5.3

The Management Accounts have been derived from the books and records of the Group and prepared in accordance with Danish GAAP, except for certain yearend adjustments. The profit and loss statements, balance sheet and cash flow statement included in the Management Accounts do not materially misstate the financial position, financial performance or cash flows of the Group as at the date to which they were made up, or the profits or losses for the accounting period to which they relate.

6	ORDINARY COURSE AND ABSENCE OF CERTAIN EVENTS

6.1	Since the Accounts Date and until the Closing Date

6.1.1

the Group Companies have carried out their business in the ordinary course consistent with past practice as a going concern;

6.1.2

no unusual or onerous contract has been entered into by any Group Company

6.1.3

no Material Contract has been terminated or the terms and conditions thereof has been amended other than in the ordinary course of business;

6.1.4

no resolution of the Company in a general meeting has been passed other than routine resolutions relating to the routine business of annual meetings;

6.1.5

no resolution on dividends has been made other than the adoption at the annual general meeting of the Company on 14 April 2015 of the board of directors’ proposal to pay a dividend DKK of 17,000,000;

6.1.6

no Key Employee has been given notice of termination;

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6.1.7

no change in remuneration or the employment terms of Key Employees has been made or promised other than adjustments which follow from existing contractual commitments as Disclosed.

6.1.8

no material increases of the rates of compensation including bonuses (except bonuses as Disclosed) to the employees of the Group Companies have been made or agreed to, other than increases due to collective bargaining agreement(s), prior agreements or increases which are otherwise made in the ordinary course of business;

6.1.9

no material litigation, arbitration or settlement or waiver of any material claim or right have been instituted or made other than in relation to the collection of trade debts, in the ordinary course of business or as instructed by its insurance providers;

6.1.10

each Group Company made capital and operating expenditures if and when required in the ordinary course consistent with past practice and as contemplated in Schedule 6.8 to the Agreement, and no Group Company delayed any such capital or operating expenditures to a period after the Signing Date;

6.1.11

no Seller and no Group Company took any other actions the purpose of which is to increase the Cash of the Group Companies as of the Effective Date or to otherwise artificially increase the Closing Purchase Price;

6.1.12

no budgeted or necessary capital or operating expenditures have been delayed; and

6.1.13

no agreement or commitment to do any of the foregoing has been entered into or accepted.

TAXES

7.1	All Tax returns and reports relating to Taxes required to be filed by or on behalf of a Group Company have been properly filed with the relevant authority, including all information required to be filed for purposes of correct Tax assessments.

7.2	No special tax relief, tax exemptions or tax privileges enjoyed by any Group Company may be changed or reversed due to circumstances attributable to such Group Company’s activities prior to the Closing Date, or due to the conclusion of the Agreement or Closing.

7.3

No Tax authority has raised any claims against any Group Company regarding the payment, assessment or otherwise in respect of Taxes and none of the Group Companies has received written notice of any threatened or pending audit, investigation or similar proceeding relating to Taxes, and, to the Sellers’ Knowledge, there are no grounds for the raising of any such Tax claims.

7.4	No transactions, agreements or arrangements have been made or entered into by any Group Company with Tax arbitrage or Tax evasion as their primary purpose, and no transactions, agreements or arrangements constitute unlawful Tax evasion.

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7.5	The Group Companies have at all times transacted with other Group Companies and their Affiliates and/or shareholders on fair market terms and have adequate documentation to substantiate this in accordance with applicable Danish Tax rules.

7.6	No Tax will be imposed on any Group Company as a consequence of the conclusion of the Agreement or Closing.

7.7	No Group Company has participated in any tax exempt restructurings according to applicable Danish Tax rules to which a holding period requirement applies on the date of the conclusion of the Agreement or Closing.

7.8	To the Sellers’ Knowledge, the Group Companies right to deduct input VAT is correctly reflected in the applicable VAT returns and to the Sellers’ Knowledge there exists no basis for any Governmental Authority to contest the right to deduct input VAT.

7.9	To the Sellers’ Knowledge, the Group Companies have not conducted any activities in other countries than Denmark for which a registration obligation for Tax purposes has arisen but not complied with.

7.10	No Group Company has waived any statutory limitation periods with respect to Taxes.

7.11	No Group Company is part of a joint taxation with companies or legal entities outside the Group.

8	REAL PROPERTY

8.1	No Group Company owns or has owned any real property.

8.2	All lease agreements related to real property leased, sub-leased or used by the Group Companies as at the date hereof (the “Leased Properties”) have been Disclosed in the Due Diligence Information.

8.3	To the Sellers’ Knowledge, the Leased Properties are in a lawful state and in reasonably satisfactory condition considering their present use.

8.4	As of the Signing Date, no lease relating to any Leased Property has been terminated or breached by the Group Companies or, to the Sellers’ Knowledge, by the landlord, which would entitle the other party to terminate the lease.

8.5	Each of the Leased Properties can legally be used for the purpose for which they are currently used.

8.6	As of the Signing Date, no claim related to or arising out of real properties previously owned, leased or otherwise used by any Group Company is pending or to the Sellers’ Knowledge threatened against any Group Company.

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8.7	No landlord has the right to terminate and/or demand any amendment of the lease agreement as a result of the execution and/or consummation of the Agreement.

8.8	As of the Signing Date there is no pending litigation or arbitration concerning any Group Company’s lease and to the Sellers’ Knowledge no such litigation or arbitration is threatened.

9	OPERATING EQUIPMENT, MACHINERY, FIXTURES AND FITTINGS

9.1

The Group Companies are the legal or beneficial owners of all operating equipment, machinery, fixtures and fittings and other technical plants reflected in the Annual Report and Management Accounts for April 2015, free and clear of any Encumbrances, except for Permitted Encumbrances, and except for the assets acquired or sold in the ordinary course of business in the period since the dates of the Annual Report or Management Accounts as for April 2015, respectively.

9.2

As of the Signing Date and save for ordinary wear and tear, all plants, machinery, fixtures, vehicles, and other equipment (including hardware and machinery) owned or operated by a Group Company in connection with its business are, other than minor defects, in the ordinary course (i) in good and safe repair, (ii) free from any material defects, and (iii) operational insofar as it is necessary for such business to be carried on safely, lawfully, and efficiently.

9.3

The assets owned by the Group or held under lease or rental agreements or other agreements permitting their use comprise in all material respects and with the exception of consumables assets necessary for the continuation of the Group’s business as currently conducted, and no assets are shared with another person.

10	INTELLECTUAL PROPERTY RIGHTS & IT

10.1

Disclosed in the Due Diligence Information are all Registered IPR owned or purported to be owned by the Group Companies. The Group Companies are the owner(s) of such Registered IPR free and clear of any Encumbrances. All maintenance fees and other fees to file, obtain and maintain in effect such Registered IPR have been paid and no such Registered IPR has unintentionally been allowed to lapse by any Group Company. None of such Registered IPR is subject to any opposition, interference, inventorship challenge or cancellation proceedings, and, to the Sellers’ Knowledge, no such proceedings are threatened with respect to any such Registered IPR.

10.2	The Group Companies hold valid title or license to use the IPR necessary for the Group to carry on its business in all material respects as presently conducted.

10.3	Each Group Company is validly licensed to use the IPR used in its business and no separate action will be necessary to enable it to continue to use such IPR to the same extent and in the same manner as they have been used prior to the date hereof.

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10.4	To the Sellers’ Knowledge, no Group Company infringes or ever has infringed IPR of any third Person. As of the Signing Date and during the 36 months preceding the Signing Date, no Group Company has received any claim stating that it is in infringement of any IPR of any third Person.

10.5

The Group has not granted any licenses with respect to any of the IPR owned by the Group that are used in the operation of the business of the Group concerning the Company’s products, except for (i) licenses granted to end customers in the ordinary course of business; (ii) licenses granted to distributors, suppliers and other third parties for the purpose of development, manufacture, marketing and/or supply related to the Products; or (iii) licenses otherwise granted in the ordinary course of business. As of the Signing Date and to the Sellers’ Knowledge, no Group Company is infringing or ever has infringed any license agreement on the basis of which it has licensed any IPR from or to a third Person.

10.6	As of the Signing Date no Group Company is engaged in any dispute in which any third party is claiming that any Group Company infringes the intellectual property rights of the third party and, to the Sellers’ Knowledge, no such dispute is threatened.

10.7	As of the Signing Date and to the Sellers’ Knowledge, no third party is infringing or making unauthorised use of any IPR owned or used by any Group Company.

10.8

To the Sellers’ Knowledge, no Company Software (i) contains any bug, defect, or error that materially and adversely affects the use, functionality, or performance of such software or any Product, or (ii) fails to comply in any material respect with any applicable warranty or other contractual commitment relating to the use, functionality, or performance of such software or any Product.

10.9

No Company Software written by, or to the Sellers’ Knowledge on behalf of the Company, contains any “back-door”, “drop dead device”, “time bomb”, “Trojan horse, “virus”, “worm”, “Spyware” or “adware” (as such terms are commonly understood in the software industry) or any other code designed or intended to have, or capable of performing or facilitating, any of the following functions: (i) disrupting, disabling, harming, or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device or (ii) compromising the privacy or data security of a user or damaging or destroying any data or file without the user’s consent (collectively, “Malicious Code”). The Group Companies have implemented industry standard measures designed to prevent the introduction of Malicious Code into Company Software, including firewall protections, regular virus scans, and protection of access credentials and the like.

10.10

No source code for any Company Software written by, or to the Sellers’ Knowledge on behalf of the Company, has been delivered, licensed, or made available to any Person who is not, as at the Signing Date, an employee or of the Group. No Group Company has any duty or obligation (whether present, contingent, or otherwise) to deliver, license, or make available the source code for any Company Software to any escrow agent or other Person. As of the Signing Date, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the delivery, license, or disclosure of any source code for any software to any other Person who is not, as of the Signing Date, an employee of the Company.

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10.11

No Company Software developed and commercially used by the Group is subject to any “copyleft” or other obligations or condition (including any obligation or condition under any “open source” license such as GNU Public License, Lesser GNU Public License, or Mozilla Public License) that (i) could require, or could condition the continued use or distribution of such software on, (a) the disclosure, licensing, or distribution of any source code for any portion of such Company Software, or (b) the granting to licensees of the right to make derivative works or other modifications to such Company Software or portions thereof or (ii) could otherwise impose any limitation, restriction, or condition on the right or ability of the Company to use, distribute or charge for any Company Software.

10.12

No funding, facilities, or personnel of any Governmental Authority or any public or private university, college, or other educational or research institution were used, directly or indirectly, to develop or create, in whole or in part, any Company Software or other IPR owned, purported to be owned or exclusively licensed by any Group Company.

10.13

No Group Company is or ever has been a member or promoter of, or a contributor to, any industry standards body or similar organization that could require or obligate any Group Company to grant or offer to any other Person any license or right to any Intellectual Property Rights owned, purported to be owned or exclusively licensed by any Group Company.

10.14

The Group Companies have designed, operated and maintained the information technology systems used by them (“IT Systems”): (i) to keep their IT Systems free from Malicious Code, (ii) with procedures and facilities to safeguard the security and the integrity of its IT Systems, and (iii) to comply with all software license obligations all at a level consistent with standard practices of companies of its size. As of the Signing Date and to the Sellers’ Knowledge, there have been no unauthorized intrusions or breaches of the security with respect to the IT Systems.

10.15

As of the Signing Date, none of the Group Companies’ present or former employees have made any claim for any payment, which remains unsettled, or any other claims in respect of any invention or other IPR, which is being utilized or claimed by the Group Companies, and to the Sellers’ Knowledge, and save for such rights which follow from mandatory Law, no such employees have such rights. All the documents transferring all the title, right and interest in and to any IPR which are being or planned to be utilized or claimed by the Group Companies has been properly prepared and signed by the employees owning such rights, title and interest before the date hereof.

10.16

The Group has taken reasonable and customary measures to prevent third Persons from obtaining unauthorized knowledge of or exploiting its business secrets and know-how.

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11	PERMITS

11.1

Each Group Company holds all necessary permits, licenses, certifications, approvals, registrations, consents, authorizations, exemptions and orders issued or granted by a Governmental Authority (each a “Permit”) required by the relevant Group Company for the carrying on its business as presently conducted. Such Permits are in full force and effect, and each Group Company is and always has been in compliance with the applicable requirements of such Permits. As of the Signing Date and since 31 December 2012, no Group Company has received written notice of any noncompliance with any applicable requirements of such Permits.

12	INSURANCE

12.1

All material insurance policies in respect of the Group Companies have been Disclosed in the Due Diligence Information and all such policies are and will until the Closing Date remain in full force and effect in accordance with their terms and all premiums which have become due and payable have been paid.

12.2

The Group has an insurance coverage, which to the Sellers’ Knowledge is commercially adequate for its current business. As of the Signing Date, there are no material outstanding claims under any of the Group’s insurance policies and, to the Seller’s Knowledge as of the Signing Date, no such claim is threatened, nor has any Group Company received any notice of termination of the said insurance policies and, to the best of the Sellers’ Knowledge, no such termination is threatened.

12.3	In the three years preceding the Signing Date, the Group has not suffered or reported any loss which might substantially affect the Group’s chance for future insurance cover on usual and customary terms and conditions.

13	PRODUCTS AND PRODUCT LIABILITY

13.1

No Group Company manufactures, sells or provides or has manufactured, sold or provided any Product or service (i) which does not comply in all material respects with all contractual specifications and other applicable standards, or (ii) which is defective, dangerous, or not in accordance with any given representation or warranty.

13.2	As of the Signing Date, no defects in any of the Group Companies’ Products or services have resulted in any liability or claim to pay damages or other compensation for any of the Group Companies, including in respect of personal injury.

13.3	The Group Companies have appropriate quality control procedures in place to ensure that its Products and services are safe and in all material respects comply with all applicable Laws, contractual specifications and other applicable standards.

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13.4	As of the Signing Date, there are no pending general recalls of any of any of the Products which are presently marketed and distributed, and as of the Signing Date and to the Sellers’ Knowledge no such recall is threatened.

13.5	As of the Signing Date, there are no pending insurance claims against any member of the Group regarding product liability and no such claims are filed with the Group Companies’ insurers and to the Sellers’ Knowledge no such claims are threatening.

14	EMPLOYEES

14.1	Disclosed in the Due Diligence Information is a complete list of all employees, directors and officers of the Group Companies stating their starting date, function, salary and other key terms of employment as of the 30 April 2015.

14.2	All employees, directors and officers of the Group have written employment contracts, which in respect of the contracts to which the Company is a party comply with Danish Law or other applicable Law and which correctly reflect the terms of their employment.

14.3

As of the Signing Date, no Key Employee has received notice of termination of his/her employment by the respective Group Company and no Key Employee has given notice of termination of his/her employment relationship with the relevant Group Company and to the Sellers’ Knowledge no such termination is threatening.

14.4	No amount due or in respect of any former or present director, officer or employee of the Group is in arrears and unpaid other than his salary and other benefits for the month current at the date of this Agreement.

14.5	As of the Signing Date no Group Company is a party to any dispute with any present or prior director or Key Employee.

14.6

All salaries and other benefits of employees of the Group have to the extent due, been paid or, if not due, a corresponding provision required by applicable law for the payment thereof has been established in the relevant accounts. The Group Companies have withheld all amounts required by law or agreement to be withheld from the wages or salaries of, and other payments to, its employees and any former employees.

14.7

Any collective bargaining agreement to which any Group Company is a party has been entered into on terms which are normal and customary for companies carrying on similar activities as the Group Companies. All collective bargaining agreements to which any Group Company is a party have been Disclosed in the Due Diligence Information.

14.8	The Group Companies have fulfilled their obligations to inform, and negotiate with, trade unions or any employee representative bodies with respect to the transactions contemplated by this Agreement. As of the Signing Date, there is no on-going strike by any employees of the Group.

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14.9

All Benefit Plans to which any Group Company is a party have been Disclosed in full in the Due Diligence Information. Each Benefit Plan is being and has always been maintained in all respects in accordance with its terms, any applicable collective or individual agreement and the requirements of all applicable Laws. All pension schemes of the Group Companies are defined contribution schemes only. Each Group Company has performed all obligations required to be performed by it under any Benefit Plan and is not in default under or in violation of any Benefit Plan.

14.10

No Group Company is party to any defined benefit plan regarding funding of pension commitments towards employees.

14.11

Disclosed in the Due Diligence Information are complete copies of all agreements, commitments or arrangements concerning (i) bonuses or similar payments that will become payable on account of the entering into or completion of this Agreement and/or (ii) any other benefits which accrue to any director, officer, employee or consultant of any Group Company on account of the entering into or completion of this Agreement.

14.12

To Sellers’ Knowledge and as of the Signing Date, no Group Company is subject to any pending or threatened claims from current or former employees or any Governmental Authority in relation to working environment or working-related accidents.

15	AGREEMENTS

15.1

No Group Company is a party to any contract, agreement or business arrangement (written or oral) with customers, distributors, suppliers or other third parties which have not been concluded, agreed and made, in the reasonable opinion of the Sellers, (i) on commercial terms that are in all material respects not uncommon within the industry; and/or (ii) in the ordinary course of business of the Group; and/or (iii) in the best interest of the Group.

15.2	All Material Agreements of any Group Company have been Disclosed in the Due Diligence Information.

15.3	No Group Company is a party to any agreements, contracts or arrangements which contains a cap or “most favored nation” provision relating to the prices that can be charged by the respective Group Company for its products and/or services.

15.4	Except as Disclosed in the Due Diligence Information, no Group Company is a party to any Material Agreement that may be terminated, rescinded, lapse or amended in consequence of the execution of this Agreement or the consummation of the transactions contemplated by this Agreement.

15.5

No Group Company is, and has within the past 3 years been a party to, liable under or subject to any Material Agreement, which to the Sellers’ Knowledge cannot be expected to be fulfilled or performed by the relevant Group Company, or which limits the relevant Group Company and/or the Group from independently carrying on its business as presently conducted.

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15.6

No Group Company is in breach of any provision of or in default under the terms of Material Agreement and as of the Signing Date, no party has given notice (written or oral) of claims pertaining to or alleging such breach, which could reasonably be expected to give rise to the party terminating or rescinding such Material Agreement.

15.7	No Group Company is party to any agreement

15.7.1

containing covenants that limit the ability of any Group Company to compete in any business or with any Person or in any geographic area or otherwise restricting a Group Company from engaging in any business activity anywhere in the world,

15.7.2

relating to any hedging or swap arrangement, or

15.7.3

under which a Group Company has directly or indirectly guaranteed, or provided other collateral for, liabilities or obligations of any other Person other than another Group Company.

16	LITIGATION

16.1

As of the Signing Date no written notification involving any claim or series of related claims against any Group Company in excess of USD 50,000 has been received by any duly authorized officer within the Group. There are no pending litigation or arbitration proceedings or any pending actions by any Governmental Authority involving any Group Company and to the Sellers’ Knowledge (i) no such litigation or arbitration proceedings or actions are threatened and (ii) no basis for any such claims or actions exist.

17	ANTI TRUST MATTERS

17.1	No Group Company is a party to any agreement, decision or concerted practice aimed at or resulting in an actual or potential, direct or indirect, prevention, restriction or limitation of competition.

17.2	As of the Signing Date no Group Company has been notified by any Governmental Authority that its operation, business or dealings are the subject matter of any anti-trust investigation.

18	COMPLIANCE WITH LAWS

18.1	Each Group Company is and always has been in compliance with all applicable Laws. To the Sellers’ Knowledge and as of the Signing Date, no investigation, audit or review by any Governmental Authority with respect to any Group Company is pending or threatened.

18.2

Each Group Company is and always has been in compliance in all material respects with all legal requirements under (i) the Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd–1, et seq.), (ii) the national laws implementing the Organization for Economic Cooperation and Development Convention Against Bribery of Foreign Public Officials in International Business Transactions and other international anti-bribery conventions and (iii) all other applicable anti-bribery and anti-corruption Laws, in jurisdictions in which the Group Companies are or have been operating (collectively, the “Anti-Bribery Laws”).

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18.3

As of the Signing Date, no Group Company has received any written notice or other written communication from any Governmental Authority with regard to any actual, alleged or potential violation of the Anti-Bribery Laws. As of the Signing Date, there are no claims pending involving any Group Company with regard to any actual or alleged non-compliance with the Anti-Bribery Laws by any Group Company or any of its owners, shareholders, directors, employees, representatives or agents.

19	ENVIRONMENTAL MATTERS

19.1

The operations of the Group are in all material respects in conformity and compliance with applicable environmental health and safety law, rules and regulations, including with respect to interior and exterior environment, working environment, emissions (air/odour, noise, water, etc), waste treatment, deposit and storage of chemicals and other contaminating and/or hazardous substances.

19.2

No Group Company is or has been party to any judicial or administrative injunctions, proceedings or investigations in relation to polluted or contaminated air, land or water. As of the Signing Date, no proceedings are pending, or to the Sellers’ Knowledge threatened, against any of the Group Companies in respect of any breach of environmental Law or environmental licences.

19.3

There is no soil or water contamination caused by the Group Companies on any of the properties owned, leased or formerly owned or leased or otherwise used by any Group Company or on any third party’s properties, which (i) may cause any order issued by a public authority under applicable Law for cleaning or other remedial action against a Group Company, (ii) would prevent the continued use of the Properties for such purposes and in the manner the properties are being used by the Group Companies as of the date hereof, or (iii) which would entitle any third party to raise a claim against any Group Company to pay damages, indemnification or the similar.

20	PUBLIC SUBSIDIES

20.1	No Group Company has received any public subsidies, grants or allowances that are subject to (conditional or unconditional) repayment obligations.

21	DISCLOSURE

21.1	The Sellers have complied with their “good faith duty of disclosure” ( sælgers loyale oplysningspligt ) under the general rules of Danish law in connection with the transactions contemplated by this Agreement.

Exhibit 10.2

EXECUTION VERSION

AMENDMENT NO. 1

This Amendment No. 1, dated as of May 19, 2015 (this “ Amendment ”), to that certain Credit Agreement, dated as of April 27, 2015 (the “ Credit Agreement ”), by and among Teradyne, Inc. (the “ Borrower ”), the banks and other financial institutions or entities from time to time party thereto as lenders (the “ Lenders ”), and Barclays Bank PLC, as administrative agent (in such capacity, the “ Administrative Agent ”) and collateral agent for the Lenders, is entered into by and among the Borrower, the subsidiaries of the Borrower party hereto (such subsidiaries, together with the Borrower, the “ Amendment Parties ”), the Administrative Agent and the Lenders party hereto (the “ Consenting Lenders ”). Capitalized terms used herein but not defined herein are used as defined in the Credit Agreement.

W I T N E S S E T H :

W HEREAS , the Borrower, the Administrative Agent and the Lenders are party to the Credit Agreement;

W HEREAS , the Borrower has requested that the Administrative Agent and the Lenders agree to amend certain provisions of the Credit Agreement as set forth herein; and

W HEREAS , subject to the terms and conditions set forth in this Amendment, the Consenting Lenders (which constitute Required Lenders) are willing to make such amendment.

N OW , T HEREFORE , in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Amendment Parties, the Consenting Lenders and the Administrative Agent, intending to be legally bound hereby, agree as follows:

SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT

Effective as of the First Amendment Effective Date (as defined in Section 2 below), Section 7.7 of the Credit Agreement is hereby amended by amending and restating clause (l) thereof as follows:

“(l) (x) Permitted Acquisitions and (y) Investments in connection with actual or contemplated Permitted Acquisitions; provided that the aggregate amount of Investments by Loan Parties in non-Loan Parties permitted under this clause (y) shall not exceed 25% of Consolidated Assets as determined as of the last day of the most recent fiscal quarter for which financial statements have been delivered hereunder prior to the making thereof;”.

SECTION 2. CONDITIONS PRECEDENT

This Amendment shall become effective as of the date (the “ First Amendment Effective Date ”) on which the Administrative Agent shall have received this Amendment, duly executed by the Amendment Parties and Consenting Lenders constituting Required Lenders.

SECTION 3. REPRESENTATIONS AND WARRANTIES

The Amendment Parties hereby confirm that each of the representations and warranties made by any Group Member in Section 4 of the Credit Agreement or in any other Loan Document are true and correct in all material respects ( provided that if any representation or warranty is by its terms

qualified by materiality, such representation shall be true and correct in all respects) on and as of the First Amendment Effective Date, except to the extent that any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date.

SECTION 4. MISCELLANEOUS

4.1 Costs and Expenses . The Borrower agrees to reimburse the Administrative Agent for its costs and expenses in connection with this Amendment (and any other Loan Documents delivered in connection herewith) as provided in Section 10.5 of the Credit Agreement.

4.2 Reference to and Effect on the Loan Documents .

(a) As of the First Amendment Effective Date, each reference in the Credit Agreement to “ this Agreement ,” “ hereunder ,” “ hereof ,” “ herein ,” or words of like import, and each reference in the other Loan Documents to the Credit Agreement (including, without limitation, by means of words like “ thereunder ”, “ thereof ” and words of like import), shall mean and be a reference to the Credit Agreement as amended by this Amendment.

(b) Except as expressly provided in this Amendment, each Amendment Party hereby ratifies and confirms all of the terms and conditions of the Credit Agreement, the Security Documents and the other Loan Documents to which it is a party and all documents, instruments and agreements related thereto, which remain in full force and effect.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under the Credit Agreement or any Loan Document, or constitute a waiver or amendment of any other provision of the Credit Agreement or any Loan Document (as amended hereby) except as and to the extent expressly set forth herein.

4.3 Counterparts . This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by email or facsimile transmission shall be effective as delivery of an originally executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

4.4 Governing Law . THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

4.5 Loan Document and Integration . This Amendment is a Loan Document, and together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

4.6 Headings . Section headings contained in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purposes.

4.7 Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

[S IGNATURE P AGES F OLLOW ]

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers and members thereunto duly authorized, as of the date indicated above.


TERADYNE, INC., as Borrower

By:		/s/ Charles Gray
Name:		Charles Gray
Title:		Vice President and General Counsel