Form PRE 14A TERADYNE, INC For: May 07

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

Teradyne, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

TERADYNE, INC.

600 Riverpark Drive

North Reading, Massachusetts 01864

NOTICE OF VIRTUAL ANNUAL MEETING OF SHAREHOLDERS

TO THE SHAREHOLDERS:

The Annual Meeting of Shareholders (the “Annual Meeting”) of Teradyne, Inc., a Massachusetts corporation, will be virtually held on Friday, May 7, 2021 at 11:00 A.M. Eastern Time. Due to the novel coronavirus (COVID-19) pandemic, the Annual Meeting will be held in a virtual meeting format only, and will not be held at a physical location. The Annual Meeting will be held for the following purposes:

1.    To elect the eight nominees named in the accompanying proxy statement to the Board of Directors to serve as directors for a one-year term.

2.    To approve, in a non-binding, advisory vote, the compensation of the Company’s named executive officers.

3.    To approve an amendment to the Company’s Articles of Organization to lower the voting requirement for shareholder approval of mergers, share exchanges and substantial sales of Company assets from a super-majority to a simple majority.

4.    To approve an amendment to the Company’s Articles of Organization to permit shareholders to act by a simple majority written consent, rather than by unanimous written consent.

5.    To approve an amendment to the 1996 Employee Stock Purchase Plan to increase the aggregate number of shares of common stock that may be issued pursuant to the plan by 3,000,000 shares.

6.    To approve the 2006 Equity and Cash Compensation Incentive Plan, as amended, to include, among other changes, a new total annual compensation cap for non-employee directors.

7.     To ratify the selection of the firm of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

8.    To transact such other business as may properly come before the meeting and any postponements or adjournments thereof.

Shareholders entitled to notice of and to vote at the Annual Meeting shall be determined as of the close of business on March 11, 2021, the record date fixed by the Board of Directors for such purpose.

By Order of the Board of Directors,

Charles J. Gray, Secretary

March [     ], 2021

Shareholders are requested to vote in one of the following three ways: (1) by completing, signing and dating the proxy card provided by Teradyne and returning it by return mail to Teradyne in the enclosed envelope or at the address indicated on the proxy card, (2) by completing a proxy using the toll-free telephone number listed on the proxy card, or (3) by completing a proxy on the Internet at the address listed on the proxy card.

Table of Contents

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TERADYNE, INC.

600 Riverpark Drive

North Reading, Massachusetts 01864

PROXY STATEMENT

March [    ], 2021

Proxies in the form provided by Teradyne, Inc. (“Teradyne” or the “Company”) are solicited by the Board of Directors (“Board”) of Teradyne for use at the Annual Meeting of Shareholders (the “Annual Meeting”) to be virtually held on Friday, May 7, 2021, at 11:00 A.M. Eastern Time. Due to the novel coronavirus (COVID-19) pandemic, the Annual Meeting will be held in a virtual meeting format only, and will not be held at a physical location.

Registered holders and beneficial owners only will be admitted to the virtual Annual Meeting at https://www.virtualshareholdermeeting.com/TER2021 by entering the 16-digit control number found on your proxy card, voting instruction form or notice. We encourage you to log on 15 minutes prior to the start time for the meeting. You will have the opportunity to vote your shares during the Annual Meeting by following the instructions available on the meeting website during the meeting. You will also be provided an opportunity to ask questions of the Board of Directors and management by following the instructions available on the meeting website during the meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page.

Only shareholders of record as of the close of business on March 11, 2021 (the “Record Date”) will be entitled to vote at the Annual Meeting and any adjournments thereof. As of the Record Date, [    ] shares of common stock were issued and outstanding. Each share outstanding as of the Record Date will be entitled to one vote, and shareholders may vote at the virtual meeting or by proxy. Delivery of a proxy will not in any way affect a shareholder’s right to attend and vote at the virtual Annual Meeting. Any shareholder delivering a proxy has the right to revoke it only by written notice to the Secretary or Assistant Secretary delivered at any time before it is exercised, including at the Annual Meeting. All properly completed proxy forms returned in time to be cast at the Annual Meeting will be voted.

Important Notice Regarding the Availability of Proxy Materials for

the Shareholder Meeting to be Held Virtually on May 7, 2021

This Proxy Statement and the Accompanying Annual Report on Form 10-K, Letter to Shareholders, and Notice, are available at www.proxyvote.com

At the meeting, the shareholders will consider and vote upon the following proposals put forth by the Board:

1.    To elect the eight nominees named in this proxy statement to the Board of Directors to serve as directors for a one-year term.

2.    To approve, in a non-binding, advisory vote, the compensation of the Company’s named executive officers.

3.    To approve an amendment to the Company’s Articles of Organization to lower the voting requirement for shareholder approval of mergers, share exchanges and substantial sales of Company assets from a super-majority to a simple majority.

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4.     To approve an amendment to the Company’s Articles of Organization to permit shareholders to act by a simple majority written consent, rather than by unanimous written consent.

5.    To approve an amendment to the 1996 Employee Stock Purchase Plan to increase the aggregate number of shares of common stock that may be issued pursuant to the plan by 3,000,000 shares.

6.    To approve the 2006 Equity and Cash Compensation Incentive Plan, as amended, to include, among other changes, a new total annual compensation cap for non-employee directors.

7.    To ratify the selection of the firm of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

8.    To transact such other business as may properly come before the meeting and any postponements or adjournments thereof.

The Board recommends that you vote FOR the proposals listed above.

On or about March [     ], 2021, the Company mailed to its shareholders of record as of March 11, 2021 a notice containing instructions on how to access this proxy statement and the Company’s annual report online and to vote. Also on March [     ], 2021, the Company began mailing printed copies of these proxy materials to shareholders that have requested printed copies.

If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet. If you received a notice by mail and would like to receive a printed copy of the proxy materials, you should follow the instructions for requesting such materials included in the notice.

If a shareholder completes and submits a proxy, the shares represented by the proxy will be voted in accordance with the instructions for such proxy. If a shareholder submits a proxy card but does not fill out the voting instructions, shares represented by such proxy will be voted FOR each of the proposals listed above.

Shareholders may vote in one of the following three ways:

A majority of the outstanding shares represented at the virtual meeting or by proxy shall constitute a quorum for the transaction of business. Abstentions and broker “non-votes” are counted as present or represented for purposes of determining the presence or absence of a quorum for the meeting. A “non-vote” occurs when a nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. Brokers who hold shares on your behalf have discretionary authority to vote shares if specific instructions are not given with respect to routine matters. Although the determination of whether a nominee will have discretionary voting power for a particular item is typically determined only after proxy materials are filed with the SEC, we expect that Proposals No. 1, 2, 3, 4, 5, 6 and 8 will be non-routine matters and that Proposal No. 7 will be a routine matter. Accordingly, if your shares are held by a broker on your behalf and you do not instruct the broker as to how to vote your shares, your broker would be entitled to exercise discretion to vote your shares on Proposal No. 7 but not on Proposals No. 1, 2, 3, 4, 5, 6 and 8. For this Annual Meeting, an affirmative vote of at least a majority of the shares voting at the meeting is required for approval of Proposals No. 1, 2, 5, 6

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and 7 and an affirmative vote of at least two-thirds of the shares outstanding and entitled to vote on the matter is required for approval of Proposals No. 3 and 4. Abstentions and broker “non-votes” are included in the number of shares present, or represented, at the meeting, but are not included in the number of shares voting at the meeting on non-routine matters. However, abstentions and broker “non-votes” will have the effect of a vote “against” Proposals No. 3 and 4 because these proposals require the affirmative vote of at least two-thirds of the shares outstanding and entitled to vote on the matter even if shares are not present or represented at the meeting. The vote on each matter submitted to shareholders is tabulated separately. An automated system administered by Teradyne’s transfer agent tabulates the votes.

The Board knows of no other matter to be presented at the Annual Meeting. If any other matter should be presented at the annual meeting upon which a vote properly may be taken, shares represented by all proxies received by the Board will be voted in accordance with the judgment of those officers named as proxies and in accordance with the Securities and Exchange Commission’s (“SEC’s”) proxy rules. See the section entitled “Shareholder Proposals for 2022 Annual Meeting of Shareholders” for additional information.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Board presently consists of nine members, eight of whom are independent directors. Each director is elected annually for a one-year term. Mr. Herweck joined the Board effective November 9, 2020. The terms of the directors expire at the 2021 Annual Meeting of Shareholders. The Board, based on the recommendation of the Nominating and Corporate Governance Committee, has nominated all current directors for re-election other than Mr. Vallee who is retiring from the Board effective upon the conclusion of the 2021 Annual Meeting of Shareholders. Teradyne has no reason to believe that any of the nominees will be unable to serve; however, if that should be the case, proxies will be voted for the election of some other person (nominated in accordance with Teradyne’s bylaws) or the Board will decrease the number of directors that currently serve on the Board. If elected, each director will hold office until the 2022 Annual Meeting of Shareholders.

The Board recommends a vote FOR the election to the Board each of Mses. Johnson and Matz and each of Messrs. Bradley, Gillis, Guertin, Herweck, Jagiela, and Tufano.

The following table sets forth the nominees to be elected at this annual meeting, the year each person was first appointed or elected, the principal occupation of that person during at least the past five years, that person’s age, any other public company boards on which the nominee serves or has served in the past five years, and the nominee’s qualifications to serve on the Board. In addition to the information presented below regarding each nominee’s specific experience, background, qualifications, attributes and skills that led the Board to the conclusion that he or she should serve as a director, Teradyne also believes that all of its director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Teradyne and the Board. Additionally, Teradyne values the directors’ diversity and significant experience on other public company boards of directors and board committees.

Nominees for Directors

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Director Qualifications and Experience

As described above, each Director nominee brings a diversity of skills and experiences to the Board that are complementary and, together, cover the spectrum of areas that impact the Company’s current and evolving business. A summary of each nominee’s qualifications and experience is set forth in the matrix below. As the matrix is a summary, it does not include all the skills, experience, qualifications and diversity that each nominee offers, and the fact that a particular experience, skill or qualification is not listed does not mean that a nominee does not possess it. The Board believes that the combination of backgrounds, skills and experience has resulted in a Board that is well-equipped to exercise oversight responsibilities on behalf of the Company’s stakeholders.

The Board is committed to diversity and the pursuit of board refreshment and balanced tenure. The following matrix shows the tenure and age of director nominees and whether the nominee identifies as female or as ethnically diverse.

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PROPOSAL NO. 2

ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS

The Company is providing shareholders with the opportunity at the 2021 Annual Meeting to vote on the following advisory resolution, commonly known as “Say-on-Pay”:

RESOLVED, that the shareholders of the Company approve, in a non-binding, advisory vote, the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement under the headings “Compensation Discussion and Analysis” and “Executive Compensation Tables” pursuant to Item 402 of Regulation S-K.

The Company’s Compensation Committee has implemented an executive compensation program that rewards performance. The Compensation Committee fosters a performance-oriented environment by tying a significant portion of each executive officer’s cash and equity compensation to the achievement of short-term and long-term performance objectives that are important to the Company and its shareholders. The Compensation Committee has designed the Company’s executive compensation program to attract, motivate, reward and retain the senior management talent required to achieve the Company’s corporate objectives and increase shareholder value. The Company believes that its compensation policies and practices reflect a pay-for-performance philosophy and are strongly aligned with the long-term interests of shareholders. The Company recommends shareholders read the sections of this proxy statement entitled “Compensation Discussion and Analysis” and “Executive Compensation Tables” before voting on this “Say-on-Pay” advisory proposal.

The executive compensation program resulted in compensation for the Company’s named executive officers that reflects the Company’s challenging performance goals for 2020 and performance in achieving many of those goals despite the COVID-19 pandemic. The Company increased revenues by 36% to $3.1 billion, generated significant free cash flow, grew GAAP earnings 65% to $4.28, and grew non-GAAP earnings 62% to $4.62¹ per share, the seventh consecutive year of earnings per share growth, all as described in the section of this proxy statement entitled “Compensation Discussion and Analysis.” The Company grew sales in its semiconductor test, memory test, wireless test and system test businesses which helped offset weaker results in its industrial automation businesses due to COVID-19 and the global industrial downturn. Beyond its strong financial performance, the Company introduced new products in growing segments across its test and industrial automation businesses to expand its served markets and position itself for continued growth.

Due to the uncertainty regarding the duration, severity and business impact of the COVID-19 pandemic, the Company suspended the January 2020 stock repurchase program as of April 1, 2020. In January 2021, Teradyne’s Board of Directors approved a $2.0 billion share repurchase program and the Company intends to repurchase a minimum of $600 million of shares in 2021. The Company was able to continue its quarterly dividend of $0.10 per share in 2020.

The Company’s performance-based variable cash compensation for 2020 was tied to the Company’s annual rate of profitability, two-year rolling revenue growth rate and the achievement of strategic business objectives, including market share gains, revenue and bookings goals, profit and gross margin targets, strategic customer design-in wins and new product launches – the achievement of which positively impact the Company’s long-term performance. For 2020 variable cash compensation, the Company increased the two-year rolling revenue growth rate that results in the maximum payout for the revenue growth metric from 15% to 17% and maintained the annual profit before interest and taxes (“PBIT”) rate that results in the maximum payout for the profitability metric at 30%. In 2020, while the maximum payout for these metrics was achieved due to the Company’s PBIT rate of 30.3% and two-year rolling revenue growth rate of 23%, certain strategic goals in 2020 were not achieved,

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many of which were due to weaker results in the Company’s industrial automation businesses due to the COVID-19 pandemic and the global industrial downturn. As a result, in 2020, the executive officers received variable cash compensation payouts ranging from 168% to 170% of their target awards.

In 2020, the Company’s long-term performance criteria for performance-based stock awards included both a relative total shareholder return component and a cumulative PBIT component, each measured at the end of a three-year performance period, consistent with the Company’s long-term goal to deliver profitability and superior return to shareholders. The relative total shareholder return component is based on a comparison of the Company’s total shareholder return to the performance of the NYSE Composite Index.    For the PBIT component, the three-year cumulative target PBIT rate is 19% and the PBIT rate required to achieve maximum payout is 30%. The final number of shares earned for the performance-based stock awards granted in 2020 will be determined in January 2023.

In January 2021, the executive officers achieved: (1) 138% of their target performance-based stock awards granted in 2018 that were eligible to vest with the relative total shareholder return component, based on Teradyne’s relative total shareholder return performance (194.47%) measured against the NYSE Composite Index (12.61%) during the three-year performance period from January 2018 to January 2021; and (2) 180% of their target performance-based stock awards granted in 2018 that were eligible to vest with the PBIT component, based on the Company’s three-year cumulative PBIT rate from January 1, 2018 to December 31, 2020 of 27.4%. The performance-based stock awards with the total shareholder return component, given the total shareholder return of the Company against the NYSE Composite Index would have been awarded at 200% of target but was reduced due to the cap on the award of four times the grant date value. The three-year cumulative target PBIT rate for the performance-based stock awards granted in 2018 was 17% and the PBIT rate required to achieve maximum payout was 30%.

The Company’s shareholders voted to approve the Say-on-Pay advisory proposal at the 2020 Annual Meeting of Shareholders with 96% of the votes cast approving the proposal. Notwithstanding this result, the Compensation Committee continues to assess the Company’s executive compensation program to ensure it remains aligned with both short-term and long-term performance. For example, in 2020, the Compensation Committee adjusted the mix of equity awarded to the executive officers by increasing the performance-based stock awards from 50% to 60% of the total grant date fair value of the awards (with performance-based stock awards measured at target), decreasing the time-based stock awards from 40% to 30%, and retaining non-qualified stock options at 10% of the 2020 equity award. Also, in 2020, the Compensation Committee increased the revenue growth rate that results in the maximum payout for the revenue growth metric for variable cash compensation from 15% to 17%.

The performance-based variable cash compensation and equity awards are described in detail in the “Compensation Discussion and Analysis” section of this proxy statement.

The Company will report the results of the “Say-on-Pay” vote in a Form 8-K following the 2021 Annual Meeting of Shareholders. The Company also will disclose in subsequent proxy statements how the Company’s compensation policies and decisions take into account the results of the shareholder advisory vote on executive compensation.

The Board recommends a vote FOR the advisory resolution approving the compensation of the Company’s named executive officers as described in this proxy statement.

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PROPOSAL NO. 3

AMENDMENT TO THE ARTICLES OF ORGANIZATION TO LOWER THE VOTING REQUIREMENT FOR APPROVAL OF MERGERS, SHARE EXCHANGES AND SUBSTANTIAL SALES OF COMPANY ASSETS FROM A SUPER-MAJORITY TO A SIMPLE-MAJORITY

Section 11.04 of the Massachusetts Business Corporation Act requires the affirmative vote of at least two-thirds of the outstanding shares of the corporation entitled to vote on a matter in order to approve a plan of merger or share exchange, unless the articles of organization provide for a lesser percentage. Because the Company’s Articles of Organization (the “Articles”) do not provide for a lesser percentage, mergers and share exchanges must be approved by at least two-thirds of the Company’s outstanding shares entitled to vote on such matters.

The Board considered the advantages and disadvantages of the current “two-thirds of the outstanding shares” voting standard to approve a merger or a share exchange. The Company has no current or specific plans to engage in any merger, share exchange or similar transaction, but is seeking to provide the Company with greater flexibility in the future. The Board believes that this proposal is consistent with our continuing commitment to best practices in corporate governance, including growing sentiment that the elimination of such a provision provides shareholders greater ability to participate in the corporate governance of a company.

After careful consideration, on January 26, 2021, the Board unanimously approved, and recommends that the Company’s shareholders approve, an amendment to the Company’s Restated Articles of Organization (the “Articles”) to add Article VI.B to the Articles, which provides that the following actions shall require the affirmative vote of holders of a majority in interest of all stock issued, outstanding and entitled to vote on such matter: (i) the sale, lease, exchange, or other disposal of all or substantially all of the corporation’s property, (ii) a merger or consolidation of the corporation with or into any other entity, or (iii) a share exchange with any other entity. The Board determined that this amendment to the Articles was in the best interests of the Company and its shareholders and directed this amendment to the Articles to be submitted to the shareholders for approval at the 2021 Annual Meeting.

Restated Articles or Organization

If approved, this amendment to the Articles would become effective upon filing of Restated Articles of Organization (the “Restated Articles”) with the Secretary of the Commonwealth of the Commonwealth of Massachusetts, the form of which is attached as Appendix B, which the Company intends to file promptly after the 2021 Annual Meeting. If Proposal No. 4 is not approved by shareholders at the 2021 Annual Meeting, the Restated Articles would not include the proposed Article VI.C described in Proposal No. 4.

Vote Required

The affirmative vote of the holders of at least two-thirds of shares outstanding and entitled to vote on this matter as of the Record Date is required for the approval of this proposal. Abstentions and “broker non-votes” will have the same effect as voting “against” the proposal.

The Board recommends a vote FOR the approval of the amendment to the Articles to lower the voting requirement for approval of mergers, share exchanges and substantial sales of company assets from a super-majority to a simple-majority.

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PROPOSAL NO. 4

AMENDMENT TO THE ARTICLES OF ORGANIZATION TO PERMIT SHAREHOLDER ACTION BY WRITTEN CONSENT BY A SIMPLE MAJORITY

Section 7.04 of the Massachusetts Business Corporation Act provides that action to be taken at a meeting of shareholders may be taken without a meeting if the action is taken either: (1) by all shareholders entitled to vote on the action; or (2) to the extent permitted by the articles of organization, by shareholders having not less than the minimum number of votes necessary to take the action at a meeting at which all shareholders entitled to vote on the action are present and voting.

Our Board is committed to high standards of corporate governance for the Company and its shareholders. The Board considered the advantages and disadvantages of permitting shareholder action by written consent by a simple majority. This proposal would allow shareholders to have the ability to effect change at our Company without waiting until an annual shareholder meeting. Shareholder action by written consent could also save our Company the cost of holding a physical meeting between annual meetings.

After careful consideration, on January 26, 2021, the Board unanimously approved, and recommends that the Company’s shareholders approve, an amendment to the Articles to add Article VI.C to the Articles, which permit shareholder action without a meeting if evidenced by consents signed by one or more shareholders who hold a majority in interest of all stock issued, outstanding and entitled to vote on the matter. The Board determined that this amendment to the Articles was in the best interests of the Company and its shareholders and directed this amendment to the Articles to be submitted to the shareholders for approval at the Annual Meeting.

Restated Articles or Organization

If approved, this amendment to the Articles would become effective upon filing of the Restated Articles with the Secretary of the Commonwealth of the Commonwealth of Massachusetts, the form of which is attached as Appendix B, which the Company intends to file promptly after the 2021 Annual Meeting. If Proposal No. 3 is not approved by shareholders at the 2021 Annual Meeting, the Restated Articles would not include the proposed Article VI.B described in Proposal No. 3.

Vote Required

The affirmative vote of the holders of at least two-thirds of shares outstanding and entitled to vote on this matter as of the Record Date is required for the approval of this proposal. Abstentions and “broker non-votes” will have the same effect as voting “against” the proposal.

The Board recommends a vote FOR the approval of the amendment to the Articles to permit shareholder action by written consent by simple majority.

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PROPOSAL NO. 5

APPROVAL OF AN AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE PLAN

Proposed Amendment

On January 26, 2021, the Board adopted an amendment to the 1996 Employee Stock Purchase Plan (the “ESPP”) to increase the aggregate number of shares of common stock authorized for issuance under the ESPP by 3,000,000 shares, subject to the approval of the Company’s shareholders. The Board recommends the shareholders approve the amendment. The ESPP, as amended including the proposed amendment for the shareholders to approve, is attached as Appendix C to this proxy statement.

Background to Proposed Amendment

Teradyne’s equity compensation program is a critical part of our compensation policy to attract, motivate and retain talented employees, align employee and stockholder interests, link employee compensation with company performance and maintain a culture based on employee stock ownership. The ESPP encourages broad employee stock ownership in Teradyne. The proposed amendment is essential to permit the Company to continue the pursuit of these objectives.

As of February 23, 2021, only 1.3 million shares remained authorized for issuance under the ESPP. Assuming current participation rates and stock price levels, the Company expects these remaining shares would be issued by mid-2022, after which the Company would no longer be able to provide a broad-based equity incentive plan to encourage employee ownership in the Company. An absence of a suitable broad-based equity incentive plan might negatively impact the recruitment and retention of present and future employees.

The Compensation Committee retained Compensia, an independent compensation consultant, to provide an analysis of the ESPP and to advise the Compensation Committee on the increase in the number of shares under the ESPP to propose for approval by the shareholders. Based on its analysis, Compensia recommended an increase of 3,000,000 shares. The Compensation Committee reviewed Compensia’s analysis and approved the recommendation for an increase of 3,000,000 shares.

As amended, the ESPP would authorize the issuance of up to 3,000,000 shares of common stock in addition to the 30,400,000 shares of common stock previously authorized under the plan. Upon approval, based on total shares outstanding as of February 23, 2021, the total number of shares available for issuance under the ESPP would be 4.3 million representing approximately 2.6% of total shares outstanding. As of this same date, the total number of shares available for issuance under the Company’s 2006 Equity and Cash Compensation Incentive Plan is 5.7 million which represents approximately 3.4% of total shares outstanding and the total number of outstanding awards under that plan (assuming performance-based RSUs are earned at target performance) represents approximately 1% of total shares outstanding.

Based on the three- (3) year average usage and the current participation rate, the Company expects that the 3,000,000 share increase would provide sufficient shares, at share price levels as of February 23, 2021, for approximately seven (7) to eight (8) years. This estimate would be impacted by a significant increase or decrease in participation. This estimate also would be impacted by the Company’s share price, which determines the number of shares able to be purchased by employees under the ESPP.

Description of the ESPP, as amended

The following is a brief summary of the material terms of the ESPP. This summary is qualified in its entirety by reference to the full text of the ESPP, which is attached as Appendix C to this proxy statement.

In General. The ESPP is intended to encourage stock ownership by eligible employees of the Company (and participating subsidiaries) so that they may share in the company’s growth by acquiring or increasing their

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ownership interest in the Company, and to encourage eligible employees to remain employed by the Company and its participating subsidiaries. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Code. The ESPP is implemented by a series of separate offerings, which we refer to as payment periods. On the first day of each payment period, each participating employee is granted an option to purchase shares of common stock, which will be automatically exercised on the last day of the payment period. As of February 23, 2021, there are approximately 5,500 eligible employees, over fifty percent of whom participated in the ESPP.

Administration. The Plan is administered by the Compensation Committee. The Committee has the power to interpret the ESPP, determine all questions or issues that might arise under the ESPP, and to adopt and amend rules and regulations for administration of the ESPP, as the Committee may deem appropriate.

Eligibility. Employees of the Company (and participating subsidiaries) who are employed on the first business day of a payment period and whose customary employment is not less than twenty (20) hours per week and is more than five (5) months per calendar year are eligible to participate in the ESPP. However, an employee may not be granted an option under the ESPP if such employee serves as a member of the committee administering the ESPP or if, after the granting of the option, such employee would be treated as owning five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any parent corporation or subsidiary corporation of the Company. Non-employee directors cannot participate in the ESPP.

Authorized Shares. As amended, the ESPP would authorize the issuance of up to 33,400,000 shares of common stock, subject to adjustment as described below (as of February 23, 2021, 29.1 million of these shares had already been issued and are not available for issuance under the ESPP again). Shares of common stock that may be issued under the ESPP include authorized but unissued shares or shares reacquired by the Company, including by purchase in the open market. If any option granted under the ESPP expires or terminates for any reason without having been exercised in full, or ceases for any reason to be exercisable in whole or in part, the unpurchased shares subject to such option will again be available for purchase under the ESPP. As of February 23, 2021, the closing price of a share of the Company’s common stock was $129.78.

Payment Periods. The payment periods consist of each successive six- (6) month period commencing on the first day of January and ending on the last day of June, and commencing on the first day of July and ending on the last day of December, of each calendar year.

Options. On the first business day of each payment period, the Company grants to each participant in the ESPP an option to purchase a maximum of 3,000 shares of common stock. On the last day of the payment period, the employee will be deemed to have exercised this option, at the option price, to the extent of such employee’s accumulated payroll deductions, subject to the employee’s continued eligibility throughout the payment period. The option price is an amount equal to eighty-five percent (85%) of the fair market value of the common stock on the last business day of the payment period, determined based on the closing price of the common stock on The Nasdaq Stock Market LLC on that date.

Limitations. If the employee’s accumulated payroll deductions on the last day of a payment period would enable the employee to purchase more than 3,000 shares, the excess amount will be promptly refunded to the employee by the Company, without interest. Furthermore, in no event may any employee be granted an option which permits that employee’s right to purchase shares under the ESPP to accrue at a rate which exceeds $25,000 of fair market value for each calendar year in which the option is outstanding. If an employee’s accumulated payroll deductions on the last day of a payment period would enable a purchase in excess of this limit, the excess amount will be promptly refunded to the employee by the Company, without interest.

Participation. Eligible employees may elect to participate in the ESPP by delivering, on or before the first day of a payment period, an authorization in the form established by the Committee of the amount (a whole

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percentage not less than two percent (2%) or more than ten percent (10%) of the employee’s cash compensation) to be deducted from the employee’s pay and applied toward the purchase of common stock in such payment period in accordance with the terms of the ESPP. Unless an employee files a new authorization or withdraws from the ESPP, the employee’s elections will continue to succeeding payment periods. The Company will accumulate and hold for the employee’s account the amounts deducted from the employee’s pay. No interest will be paid on these amounts. Deductions may not be increased during a payment period. Deductions may be decreased during a payment period, provided that an employee may not decrease his or her deduction more than once during any payment period.

Withdrawal. An employee may withdraw from the ESPP, in whole but not in part, at any time prior to the last day of a payment period by delivering a withdrawal notice to the Company, in which event the Company will refund, without interest, the entire balance of the employee’s deductions not previously used to purchase stock under the ESPP.

Adjustments. In the event of a change in the outstanding stock of the Company by reason of a stock split, recapitalization, merger, consolidation, reorganization, stock dividend or other capital change, the aggregate number and type of shares available under the ESPP, the number and type of shares under options granted but not exercised, and the maximum number and type of shares purchasable under an option will be appropriately adjusted to reflect the change in outstanding stock; provided that no adjustment will be made unless the Company is satisfied that it will not constitute a modification of rights granted under the ESPP or otherwise disqualify the ESPP as an employee stock purchase plan under Section 423 of the Code.

Transfer Restrictions. An employee’s rights under the ESPP are the employee’s alone and may not be transferred to, assigned to, or availed of by, any other person, except by will or the laws of descent and distribution. Any option granted to an employee may be exercised, during the employee’s lifetime, only by the employee.

Termination of a Participant’s Rights. If an employee is not a participant in the ESPP on the last day of the payment period, the employee generally is not entitled to exercise his or her option. An employee’s rights under the ESPP generally terminate upon voluntary withdrawal from the ESPP or upon cessation of employment for any reason, except that if an employee is laid off or retires during the last three (3) months of a payment period, that employee is nevertheless deemed to be a participant in the ESPP on the last day of the payment period.

Amendment. The Committee or the Board may from time to time adopt amendments to the ESPP. However, the approval of the shareholders is required for any amendment that (i) increases the number of shares that may be issued under the ESPP; (ii) changes the class of employees eligible to receive options under the ESPP, if such change would be treated as the adoption of a new plan for the purposes of Section 423 of the code; (iii) causes Rule 16b-3 under the Exchange Act to be inapplicable to the ESPP; or (iv) requires shareholder approval pursuant to the rules and regulations of The Nasdaq Stock Market LLC.

Termination. The ESPP may be terminated at any time by the Board; however, such termination will not affect options then outstanding under the ESPP. If, at any time, shares of the Company’s common stock reserved for issuance under the ESPP remain available for purchase, but not in sufficient number to satisfy all then-unfilled purchase requirements, the available shares will be apportioned among participants in proportion to the amount of payroll deductions accumulated on behalf of each participant that would otherwise be used to purchase stock, and the ESPP will terminate. Upon termination of the ESPP, all payroll deductions not used to purchase common stock will be refunded to ESPP participants, without interest.

Certain Federal Income Tax Consequences of Participation in the ESPP

The following is a summary of certain U.S. federal income tax consequences associated with the grant and exercise of options to purchase shares of common stock pursuant to the ESPP, assuming the ESPP is and remains

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qualified under Section 423 of the Code. The summary does not purport to cover federal employment tax or other U.S. federal tax consequences that may be associated with the ESPP, nor does it cover state, local or non-U.S. taxes, except as may be specifically noted.

The amounts deducted from an employee’s pay under the ESPP will be included in the employee’s compensation subject to federal income tax. In general, no additional income will be recognized by the employee either at the time options are granted pursuant to the ESPP or at the time the employee purchases shares pursuant to the ESPP.

If the employee disposes of shares acquired pursuant to the ESPP more than two (2) years after the first day of the payment period in which the employee acquired the shares and more than one (1) year after the date of purchase, or upon the employee’s death, then upon such event the employee will recognize compensation income in an amount equal to the lesser of (a) the excess, if any, of the fair market value of the shares on the date of such event over the amount the employee paid for the shares, or (b) fifteen percent (15%) of the fair market value of the shares on the first day of the payment period. In addition, the employee generally will recognize long-term capital gain or loss in an amount equal to the difference between the amount realized upon the sale of shares and the employee’s adjusted tax basis in the shares (generally, the amount the employee paid for the shares plus the amount, if any, taxed as compensation income).

If the employee otherwise disposes of shares acquired pursuant to the ESPP before the expiration of the holding periods described above, then upon disposition the employee will recognize compensation income in an amount equal to the excess, if any, of the fair market value of the shares on the date of purchase over the amount the employee paid for the shares. In addition, the employee generally will recognize capital gain or loss in an amount equal to the difference between the amount realized upon the sale of the shares and the employee’s adjusted tax basis in the shares (generally, the amount the employee paid for the shares plus the amount, if any, taxed to the employee as compensation income).

If the holding periods described above are satisfied with respect to common stock acquired pursuant to the ESPP, the Company will not be entitled to a tax deduction for amounts taxed as ordinary income or capital gain to an employee with respect to such shares. If the holding periods described above are not satisfied, the Company generally will be entitled to a tax deduction equal to the amount of compensation income taxable to the employee upon disposition of such shares.

New Plan Benefits

The amount of future stock purchases under the ESPP is not determinable because, under the terms of the ESPP, purchases are based upon elections made by participants. Future purchase prices are not determinable because they are based upon the fair market value of shares of the Company’s common stock at the end of each applicable payment period.

The Board recommends a vote FOR approval of the amendment to the 1996 Employee Stock Purchase Plan.

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PROPOSAL NO. 6

APPROVAL OF THE 2006 EQUITY AND CASH COMPENSATION INCENTIVE PLAN, AS AMENDED

Proposed Amendment

On March 4, 2021, the Board adopted an amendment to the 2006 Equity and Cash Compensation Incentive Plan (the “Plan”) to (1) introduce a cap on total compensation that may be paid or granted, as applicable, annually to non-employee members of the Board, replacing the cap on annual equity compensation granted to non-employee members of the Board, and (2) modify certain other Plan terms as described below, including as a result of changes in law, in each case, subject to the approval of the Company’s shareholders. The Board recommends the shareholders approve the Plan, as amended. The Plan, as amended including the proposed amendment for the shareholders to approve, is attached as Appendix D to this proxy statement. If shareholders do not approve the Plan, as amended, the Plan prior to the amendment adopted by the Board on March 4, 2021 will remain in effect.

The Company is not requesting at this time to increase the number of shares authorized for issuance under the Plan.

Background to Proposed Amendment

The Plan is a critical part of the Company’s compensation policy to attract, motivate and retain talented employees and qualified directors, align employee and stockholder interests, link employee compensation with company performance and maintain a culture based on employee stock ownership. The Board believes that the proposed amendment to the Plan, including introducing a cap on total compensation that may be paid annually to non-employee members of the Board, better aligns the Plan with similar plans of the Company’s peers. While the amendment to the Plan will replace the current annual limit for non-employee director equity grants with a new cap on total annual compensation for non-employee directors, better aligning the Company with its peers, the Board is not increasing the compensation for non-employee directors at this time. For a summary of the number of outstanding equity-based awards under the Plan and shares available for issuance under the Plan as a percentage of outstanding shares, please see Proposal 5 on page 12 of this proxy statement.

Important new and modified features of the Plan include:

General Description of the Plan, as amended

The following is a brief summary of the material features of the Plan. This summary is qualified in its entirety by reference to the full text of the Plan, which is attached as Appendix D to this proxy statement.

In General. The purpose of the Plan is to provide equity ownership and compensation opportunities in the Company (each, an “Award”) to employees, officers, directors, consultants and advisors of the Company and its subsidiaries, all of whom are eligible to receive Awards under the Plan. Under present law, however, incentive stock options within the meaning of Section 422 of the Code, a type of stock-based Award that may be granted

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pursuant to the Plan, may be granted only to employees of the Company or subsidiaries of the Company. Any person to whom an Award is granted will be called a “Participant.” As of March 4, 2021, there are approximately 5,500 employees, of which 24 are officers, 7 non-employee directors, who are eligible to be Participants in the Plan. No consultants or advisors are currently eligible to be Participants in the Plan.

Administration. The Plan is administered by the Compensation Committee of the Board (the “Committee”). The Committee has the authority to grant Awards, to determine the terms and conditions of Awards, to adopt, amend and repeal rules relating to the Plan, to interpret and correct the provisions of the Plan and any Award, and, subject to the limitations of the Plan, to modify and amend any Award. The Plan also provides that authority to grant Awards to employees may be delegated to one or more executive officers of the Company, with certain limitations.

Types of Awards. Awards under the Plan may take the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, phantom stock or any other stock-based interests as the Committee shall determine.

Vesting; Terms of Awards. Awards may be granted subject to time-based vesting schedules and/or performance-based vesting measured by Performance Criteria. “Performance Criteria” means performance criteria, applied to either the Company as a whole or to a division, business unit or subsidiary, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case, as specified by the Committee in the Award, including, without limitation, the following: cash flow; earnings per share; earnings before interest, taxes and amortization; return on equity; total shareholder return; share price performance; return on capital; return on assets or net assets; revenue; orders; product gross margins, including by customer; income or net income; operating income or net operating income; operating profit or net operating profit; income from operations less restructuring and other, net, amortization of acquired intangible assets, acquisition and divestiture related charges or credits, pension actuarial gains and losses, and other non-recurring gains and charges; operating margin or profit margin; return on operating revenue; return on invested capital; market segment share; customer wins or design-ins; product release schedules; new product innovation; product cost reduction; brand recognition/acceptance; product ship targets; process improvement results; verification of business strategy and/or business plan; improvement of strategic position; adaptation to changes in the marketplace or environment; or customer satisfaction. A Performance Criteria may also be based on individual or subjective performance criteria as determined by the Committee. If the Award is subject to Performance Criteria and the Award so provides, evaluation of achievement against Performance Criteria may take into account, without limitation, any of the following events that occur during a performance period: asset write-downs; litigation or claim judgments or settlements; the effect of changes in tax law; accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs and any extraordinary non-recurring charges or other events.

Authorized Shares. Subject to adjustment as described below, the maximum number of shares of Common Stock that may be issued pursuant to Awards granted under the Plan is 32 million shares. As of February 23, 2021, approximately 5.7 million shares of Common Stock remained available for issuance under the Plan. If any stock-based Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued shares covered by such Award shall again be available for the grant of Awards under the Plan. However, shares of Common Stock delivered to the Company by a Participant to purchase shares upon the exercise of an Award or to satisfy tax withholding obligations with respect to an Award shall not be added back into the number of shares available for the future grant of Awards under the Plan. The maximum number of shares of stock-based Awards that may be granted to any individual Participant under the Plan during any one fiscal year is 2 million. As of February 23, 2021, the closing price of a share of Common Stock was $129.78.

Stock Options. Stock options represent the right to purchase shares of Common Stock within a specified period of time at a specified price. The exercise price for options will be not less than 100% (110% for an

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incentive stock option granted to a 10% or more shareholder) of the closing price of the Common Stock on the date of grant. Announcements or developments shortly following a grant date may cause the market price of the Common Stock to rise. The Plan will be administered based on market prices on the dates of grants, which may differ substantially from market prices shortly following the grants. The aggregate fair market value, determined on the date the option is granted, of the stock for which any person may be granted incentive stock options which become exercisable for the first time by such person in any calendar year cannot exceed the sum of $100,000 or such sum as is allowed by the Code (determined on the date such option is granted). No incentive stock option will be granted to a person who is not an “employee” as defined in the applicable provisions of the Code, and regulations issued thereunder. Options granted under the Plan will be subject to a minimum vesting period of no less than one (1) year, unless the applicable Options fall under the exception to minimum vesting periods described below. Options shall expire in no more than ten (10) years (five (5) years in the case of an incentive stock option granted to a 10% or more shareholder) after the date of grant. A Participant holding an Option is not entitled to receive dividends or dividend equivalents declared and payable prior to the exercise of the Option. The Committee may not reprice stock options or stock appreciation rights granted under the Plan without shareholder approval.

Manner of Exercise of Stock Options. Each option or portion thereof may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable, by delivery of a properly signed written notice of exercise to the Company at its principal office address or to such transfer agent as the Company shall designate, or by notification to the Company-designated third party commercial provider. Payment for the exercise of options under the Plan may be made by one or any combination of the following forms of payment: (i) by cash or by check payable to the order of the Company, or by fund transfer from the holder’s account maintained with the Company-designated third party commercial provider, if any; (ii) at the discretion of the Committee, through delivery of shares of Common Stock having a fair market value equal as of the date of exercise to the cash exercise price of the option, or (iii) at the discretion of the Committee, by delivery of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option by the optionee’s broker or selling agent.

Stock Appreciation Rights. A stock appreciation right (an “SAR”) is an Award entitling the holder, upon exercise, to receive cash or shares of Common Stock, or a combination thereof, in an amount determined solely by reference to appreciation, from and after the date of grant, in the fair market value of a share of Common Stock. SARs may be granted separately from or expressly in tandem with an option. A SAR granted in tandem with an option will be exercisable only at such time or times, and to the extent, that the related option is exercisable, provided that the SAR will generally terminate upon exercise of the related option and the option will terminate and no longer be exercisable upon the exercise of the related SAR. SARs granted under the Plan will be subject to a minimum vesting period of no less than one (1) year, unless the applicable SARs fall under the exception to minimum vesting periods described below. A Participant holding a SAR is not entitled to receive dividends or dividend equivalents.

Restricted Stock and Restricted Stock Units. Restricted stock is Common Stock that is subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. Restricted stock units represent the right to receive shares of Common Stock in the future, with the right to future delivery of the shares subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. Subject to any restrictions applicable to the Award, a Participant holding restricted stock, whether vested or unvested, will be entitled to enjoy all rights of a shareholder with respect to such restricted stock, including the right to vote the shares. A Participant holding restricted stock units may not vote the shares represented by those units or receive dividends on the shares represented by those units. Restricted stock and restricted stock units issued under the Plan will be subject to a minimum vesting period of no less than one (1) year, unless the applicable restricted stock and restricted stock unit Awards fall under the exception to minimum vesting periods described below.

Phantom Stock. Phantom stock is an Award entitling recipients to receive, in cash or shares, the fair market value of shares of Common Stock upon the satisfaction of conditions specified by the Committee in connection

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with the grant of such Award. A Participant may not vote the shares represented by a phantom stock Award. Phantom stock granted under the Plan will be subject to a minimum vesting period of no less than one (1) year, unless the applicable phantom stock fall under the exception to minimum vesting periods described below.

Other Stock-Based Awards. The Plan provides the flexibility to grant other forms of Awards based upon Common Stock, having the terms and conditions established at the time of grant by the Committee. Any such awards that are so-called “full value” awards will be subject to a minimum vesting period of no less than one (1) year, unless such Awards fall under the exception to minimum vesting periods described below.

Limit on Non-Employee Director Compensation. In addition to the per participant limit described above, the aggregate value of all compensation granted or paid to any non-employee director of the Company with respect to any calendar year, including Awards under the Plan and cash fees or other compensation paid by the Company to such non-employee outside of the Plan for his or her service as a non-employee director, shall not exceed $750,000. For this purpose, the value of Awards granted under the Plan will be the grant date fair value in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor provision. The limit will not apply to any compensation granted or paid to a non-employee director for his or services to the Company other than as a non-employee director.

Exception to Minimum Vesting Periods and Acceleration Limitations. The Committee may grant or accelerate the vesting of Awards with respect to up to five percent (5%) of the shares of Common Stock authorized for issuance under the Plan in a manner that would not otherwise be permitted under the minimum vesting period and vesting acceleration limitations set forth in the Plan.

Adjustment. In the event of any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, the following shall be adjusted (or substituted Awards may be made) as determined by the Committee: (i) the number and class of securities available for Awards under the Plan and the per-Participant share limit; (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding Award; (iii) the repurchase price per security subject to repurchase; and (iv) the terms of each other outstanding stock-based Award.

Transferability. Except as the Committee may otherwise determine or provide in an Award, Awards may be transferred only by will or by the laws of descent and distribution and, during a Participant’s lifetime, will be exercisable only by the Participant. However, nonstatutory stock options may be transferred to a grantor retained annuity trust or a similar estate planning vehicle under which the trust is bound by all provisions of the option which are applicable to the holder thereof.

Treatment upon Acquisition. Unless otherwise expressly provided in the applicable Award, upon the occurrence of an acquisition of the Company by another entity, appropriate provision must be made for the continuation or the assumption by the surviving or acquiring entity of all Awards. In addition to or in lieu of the foregoing, the Committee may provide that Awards granted under the Plan must be exercised by a certain date or shall be terminated, that Awards shall be terminated in exchange for a cash payment equal to the excess, if any, of the fair market value of the shares subject to such Awards over the applicable exercise price, or, in connection with the merger or consolidation of another entity with the Company or the Company’s acquisition of another entity, that Awards under the Plan may be substituted for stock and stock-based awards issued by such entity or an affiliate thereof. The Committee is also authorized in connection with an acquisition of the Company to accelerate, in full or in part, any Awards then outstanding under the Plan.

Effect of Termination, Disability or Death. The Committee determines the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or designated beneficiary, may exercise rights under the Award, subject to

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applicable law and the provisions of the Code. In the event of a Participant’s disability or death, the Committee is permitted to authorize the acceleration of such Participant’s Awards, in full or in part.

Amendment of Awards. The Committee may, without shareholder approval, amend, modify or terminate any outstanding Award, except that: (i) the Committee may not materially and adversely change the terms of a Participant’s Award without the Participant’s consent; (ii) previously issued options may not be amended without shareholder approval to reduce the price at which such previously issued options are exercisable or to extend the period of time beyond ten (10) years for which such previously issued options shall be exercisable; and (iii) previously issued Awards may not be amended or terminated in violation of the repricing restrictions of the Plan.

Termination of Plan; Amendments. Awards may not be granted under the Plan at any time after May 12, 2025, but Awards granted on or before that date may be remain outstanding and may be exercised thereafter. The Committee may amend, suspend or terminate the Plan or any portion thereof at any time, provided that any material amendment to the Plan will not be effective unless approved by the Company’s shareholders.

U.S. Federal Income Tax Consequences

The following is a summary of certain U.S. federal income tax consequences associated with certain awards granted under the Plan. The summary does not purport to cover federal employment tax or other U.S. federal tax consequences that may be associated with the Plan, nor does it cover state, local or non-U.S. taxes, except as may be specifically noted.

Stock Options (other than ISOs). In general, a participant has no taxable income upon the grant of a stock option that is not intended to be an ISO (an “NSO”) but realizes income in connection with the exercise of the NSO in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction.

ISOs. In general, a participant realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the participant. Generally, a disposition of shares acquired pursuant to an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale of shares acquired pursuant to an ISO is treated as a long-term capital gain or loss for which the Company is not entitled to a deduction.

SARs. The grant of a SAR does not itself result in taxable income, nor does taxable income result merely because a SAR becomes exercisable. In general, a participant who exercises a SAR for shares of stock or receives payment in cancellation of a SAR will have ordinary income equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the Company.

Unrestricted Stock Awards. A participant who purchases or is awarded unrestricted stock generally has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company.

Restricted Stock Awards. A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the

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purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.

For purposes of determining capital gain or loss on a sale of shares awarded under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount (if any) realized in connection with the forfeiture.

Restricted Stock Units. The grant of a restricted stock unit does not itself generally result in taxable income. Instead, the participant is generally taxed upon vesting (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under Section 409A of the Code. If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules described above for restricted stock.

New Plan Benefits

The following table sets forth the awards that were granted to our named executive officers, our executive officers as a group, our non-employee directors as a group, and our other employees (who are not executive officers) as a group under the Plan during 2020. The number of performance-based restricted stock units listed in the table below is based on the maximum number of shares of common stock that may be delivered under the awards, assuming the applicable performance conditions are achieved at maximum levels of achievement.

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Securities Authorized for Issuance under Equity Compensation Plans

The table below includes aggregated information regarding awards outstanding and the shares available for future awards under the Plan and the 1996 Employee Stock Purchase Plan (the “ESPP”), in each case, as of February 23, 2021.

The Board recommends a vote FOR approval of the Plan as amended.

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PROPOSAL NO. 7

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected (and the Board of Directors has approved) PricewaterhouseCoopers LLP to serve as Teradyne’s independent registered public accounting firm for the fiscal year ending December 31, 2021. PricewaterhouseCoopers LLP, or its predecessor Coopers & Lybrand L.L.P., has served as Teradyne’s independent registered public accounting firm since 1968. The appointment of PricewaterhouseCoopers LLP is in the best interest of Teradyne’s shareholders. Teradyne expects that a representative from PricewaterhouseCoopers LLP will be at the annual meeting, will have the opportunity to make a statement if so desired and will be available to respond to appropriate questions. The ratification of this selection is not required by the laws of The Commonwealth of Massachusetts, where Teradyne is incorporated, but the results of this vote will be considered by the Audit Committee in selecting an independent registered public accounting firm for future fiscal years.

The Board recommends a vote FOR ratification of the selection of PricewaterhouseCoopers LLP.

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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

Corporate Governance and Board Policies

Teradyne is committed to good, transparent corporate governance to ensure that the Company is managed for the long-term benefit of its shareholders. Teradyne’s Board of Directors (the “Board”) has adopted Corporate Governance Guidelines (“Guidelines”) to provide a framework for the effective governance of Teradyne. The Nominating and Corporate Governance Committee periodically reviews the Guidelines and recommends changes, as appropriate, to the Board for approval. The Board has also adopted written charters for its standing committees (Audit, Compensation, and Nominating and Corporate Governance), and the Company has a Code of Conduct applicable to all directors, officers and employees. Copies of the Guidelines, committee charters, and Code of Conduct are available on the Company’s web site at www.teradyne.com under the “Governance” section of the “Investor Relations” link. Teradyne posts additional information on its web site from time to time as the Board makes changes to Teradyne’s corporate governance policies.

Teradyne has instituted a variety of policies and practices to foster and maintain good corporate governance. The Board reviews these practices on a regular basis. Teradyne’s current policies and practices include the following:

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Board Nomination Policies and Procedures

The Nominating and Corporate Governance Committee is responsible for identifying, evaluating and recommending candidates for election to the Board and does not distinguish between nominees recommended by shareholders and other nominees. All nominees must meet, at a minimum, the Board membership criteria described below.

Director nominees are evaluated on the basis of a range of criteria, including (but not limited to): integrity, honesty and adherence to high ethical standards; business acumen, experience and ability to exercise sound judgments and contribute positively to a decision-making process; commitment to understanding Teradyne and its industry; commitment to regularly attend and participate in Board and Committee meetings; ability to ensure that outside commitments do not materially interfere with duties as a Board member; absence of a conflict of interest or appearance of a conflict of interest; and other appropriate considerations.

Nominees shall be 74 years or younger as of the date of election or appointment. No director may serve on more than four other public company boards.

The Board seeks nominees with a broad diversity of viewpoints, professional experience, education, geographic representation, backgrounds and skills. The backgrounds and qualifications of directors, considered as a group, should provide a significant composite mix of backgrounds, expertise and experience that will allow the Board to fulfill its responsibilities. The Board values racial, ethnic, cultural, gender, economic, professional and educational diversity in evaluating new candidates and seeks to incorporate a wide range of those attributes in Teradyne’s Board of Directors. Board composition and succession planning are reviewed regularly to ensure that Teradyne’s directors reflect the knowledge, experience, skills and diversity required for the needs of the Board.

At the 2021 Annual Meeting, shareholders will be asked to consider the election of Peter Herweck, who has been nominated for election as director for the first time. In November 2020, Mr. Herweck was appointed by our Board as a new director. Mr. Herweck was originally proposed to the Nominating and Corporate Governance Committee as a potential candidate for the Board by an international executive and board search firm.

Shareholders wishing to suggest candidates to the Nominating and Corporate Governance Committee for consideration as potential director nominees may do so by submitting the candidate’s name, experience, and other relevant information to the Nominating and Corporate Governance Committee, 600 Riverpark Drive, North Reading, MA 01864. Shareholders wishing to nominate directors may do so by submitting a written notice to the Secretary at the same address in accordance with the nomination procedures set forth in Teradyne’s bylaws. Additional information regarding the nomination procedure is provided in the section below captioned “Shareholder Proposals for 2022 Annual Meeting of Shareholders.”

Director Independence

Teradyne’s Guidelines require that at least a majority of the Board shall be independent and set out standards for determining director independence. To be considered independent, a director must satisfy the definitions pursuant to the SEC rules and the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”), and, in the Board’s judgment, not have a material relationship with Teradyne. Teradyne’s Guidelines are available on Teradyne’s web site at www.teradyne.com under the “Governance” section of the “Investor Relations” link.

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The Board has determined that the following directors are independent using the criteria identified above: Michael A. Bradley, Edwin J. Gillis, Timothy E. Guertin, Peter Herweck, Mercedes Johnson, Marilyn Matz, Paul J. Tufano and Roy A. Vallee. In determining the independence of Teradyne’s directors, the Board reviewed and determined that the following did not preclude a determination of independence under Teradyne’s standards: Ms. Johnson’s position as a director of Maxim Integrated Products, both a Teradyne supplier and customer; Mr. Bradley’s position as a director of Avnet, Inc., both a Teradyne customer and supplier; and each of Ms. Johnson’s and Mr. Vallee’s position as a director of Synopsys, Inc., both a Teradyne customer and supplier. Teradyne’s business with Maxim Integrated Products, Avnet and Synopsys during 2020 was immaterial to Teradyne and to the other companies. Teradyne will continue to monitor its business relationships to ensure they have no impact on the independence of its directors. The Board determined that Michael A. Bradley met the standards for independence on February 1, 2018 because, as of that date, he had not received compensation from Teradyne related to his employment as the Company’s Chief Executive Officer during a twelve-month period within the last three years. The Board has determined that Mark E. Jagiela is not independent because he is Teradyne’s Chief Executive Officer.

All members of the Company’s three standing committees – the Audit, Compensation and Nominating and Corporate Governance Committee—are required to be independent and have been determined by the Board to be independent pursuant to the SEC rules and the listing standards of Nasdaq, as well as Teradyne’s standards.

The independent directors of the Board and its standing committees periodically meet without management present.

Board Leadership Structure and Self-Assessment

Since May 2014, Mr. Vallee has served as an independent Chair of the Board. As Mr. Vallee is not standing for re-election, the Board will appoint an independent director as Chair to replace Mr. Vallee following the election of directors at the 2021 Annual Meeting of Shareholders. The Board believes that having an independent Chair is the preferred corporate governance structure for the Company because it strikes an effective balance between management and independent leadership participation in the Board process.

The Board and each of its committees annually undertake a self-assessment, including an evaluation of its composition, mandate and function. The Chair of the Nominating and Corporate Governance Committee manages this annual process and implementation of any action items resulting from the process. For example, as a result of one of the Board’s self-assessments in which the directors expressed their interest in having a separate strategy discussion, an annual strategic session with management was implemented in 2018.

Code of Ethics

The Code of Conduct is Teradyne’s ethics policy. The Board has established a means for anyone to report violations of the ethics policy on a confidential or anonymous basis. Teradyne’s Code of Conduct is available on Teradyne’s web site at www.teradyne.com under the “Governance” section of the “Investor Relations” link.

Teradyne shall disclose any change to or waiver from the Code of Conduct granted to an executive officer or director within four business days of such determination by disclosing the required information on its web site at www.teradyne.com under the “Governance” section of the “Investor Relations” link.

Insider Trading Policy

The Board has adopted an insider trading policy to prevent the misuse of confidential information about Teradyne as well as other companies with which the Company has a business relationship and to promote compliance with the securities laws. Among other things, the insider trading policy prohibits trading on material non-public information and prohibits directors, executive officers and certain other employees from buying or

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selling Teradyne securities during the Company’s non-trading periods, also called “blackout periods”, except pursuant to an approved trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934 (“Rule 10b5-1”). The Board has also adopted a Rule 10b5-1 plan policy which applies to all executive officers and directors of Teradyne who adopt Rule 10b5-1 plans for trading in Teradyne’s securities. The policy sets forth mandatory guidelines that are intended to ensure compliance with Rule 10b5-1 and to conform to best practices with respect to the design and implementation of Rule 10b5-1 plans.

Hedging and Pledging Policy

The Board recognizes there may be an appearance of improper or inappropriate conduct if Teradyne’s employees, executives and directors engage in certain types of transactions, even in circumstances where they may not be aware of any material, nonpublic information. Therefore, the Board has adopted, through the insider trading policy, a policy prohibiting employees, executives and directors from hedging Teradyne stock through short sales, prepaid variable forward contracts, equity swaps, collars and exchange funds. In addition, transactions in put options, call options or other derivative securities, on an exchange or in any other organized market, are prohibited by this policy. The policy also prohibits holding Teradyne securities in a margin account or pledging Teradyne securities as collateral for loans.

Corporate Responsibility and Sustainability

The Board is committed to promoting, creating and maintaining a safe and healthy workplace, environment and society. Teradyne is committed to employee health, safety and welfare, to managing its activities that impact the environment in a responsible and effective manner, and to supporting the communities where its employees live and work. Teradyne strives to be a leader in driving improvements in environmental sustainability, supply chain responsibility, diversity and inclusion, and positive social impact. In 2019, Teradyne formalized its corporate social responsibly (“CSR”) program and published its first CSR report. In August 2019, the Board invited an outside expert to present to the full Board on best practices and trends in CSR programs. In 2020, the Company improved its CSR program and, in October 2020, published its second annual CSR report. The Company plans to continue to enhance its program and to provide additional, detailed disclosures to its shareholders, employees, customers, suppliers and other stakeholders. As described below in the “Human Capital Resources” section, in 2020, throughout the COVID-19 pandemic, the Company’s primary concern has been ensuring the health and safety of its employees and providing the resources to enable employees to effectively work remotely and to work in a safe environment when on-site. Detailed information regarding Teradyne’s corporate responsibility and sustainability activities is available on its website at www.teradyne.com under the “Corporate Social Responsibility” link.

Human Capital Resources

The Board oversees the Company’s culture and its management of human capital. The Board believes that the Company’s future success depends upon its continued ability to attract, develop, and retain a high-performance workforce, comprised of people with shared values.

Corporate Culture

Teradyne’s core values are conducting business with honestly and integrity, collaborating with colleagues as a company without doors, and partnering with customers every step of the way. The Company is committed to conducting business in a responsible manner, with strategic operational policies, procedures and values that support transparency, sustainability and legal compliance. Teradyne ensures its employees ethically operate and fulfill business commitments through robust governance of the Company’s code of conduct and environmental, health and safety programs. The Company is committed to equality through nondiscrimination, harassment prevention and pay equity policies. Teradyne values a diverse, inclusive and respectful work environment where all employees enjoy challenging assignments, development opportunities and a safe, positive culture.

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Competitive Pay and Benefits

The primary objective of Teradyne’s compensation program for employees generally is to provide a compensation and benefits package that will continue to attract, retain, motivate and reward high performing employees who operate in a highly competitive and technologically challenging environment. Company seeks to achieve this objective by linking a significant portion of compensation to company and business unit performance. Teradyne enables employees to share in the success of the Company through various programs including a stock purchase program, equity compensation, profit sharing and bonus plans. The Company seeks competitiveness and fairness in total compensation with reference to peer comparisons and internal equity. In addition to providing employees with competitive compensation packages, Teradyne offers benefits designed to meet the needs of employees and their families, including paid time off, parental leave, bereavement leave, health insurance coverage, flexible work arrangements, contributions to retirement savings, and access to employee assistance and work-life programs.

Employee Development and Training

Teradyne believes that employee development and training is a key factor in attracting, motivating, improving and retaining a strong, competitive workforce. The Company provides continual development to its employees focused on developing their job skills and competencies. Examples include new manager competencies like giving feedback and coaching, and training in software development tools and project management. Teradyne’s employees also receive annual performance reviews and are involved in setting goals for their own development and performance. Employees and managers look back on the previous year, review career development plans and create goals for the next year.

Teradyne is committed to recruiting and developing talent at the collegiate level to help advance STEM education for the future generation. For example, the Company’s paid internships and entry-level positions offer real-world experience, and its paid co-op program offers higher education students a unique learning opportunity as students alternate one semester in a work assignment and one semester in the classroom. Additionally, Teradyne pays $5,250 per year for educational courses related to an employee’s work or as part of a degree program, including tuition, lab fees and books. The Company also offers a scholarship program for employees with college-age children and grandchildren.

Employee Engagement

Teradyne conducts regular employee surveys to check in with its global workforce and obtain input on a number of topics. The feedback received from these surveys helps management assess employee sentiment, identify areas of improvement and guides decision-making as it relates to people management. In addition, the Company’s CEO and other executives meet with employees on a frequent basis through exchange meetings and quarterly webcasts. The exchange meetings allow the executives to directly interact with a small group of employees, while the global webcasts enable all employees to engage with senior leaders and ask questions in an open Q&A session. The Company also offers employees an opportunity to network and connect with colleagues who share similar interests. This includes groups such as New Employees to Teradyne, Women’s Affinity Group, Blue and Green (for team members that are committed to the environment), Runner’s affinity groups and LGBTQ+ advocates.

Diversity and Inclusion

Teradyne believes in fostering a diverse workforce and an equitable and inclusive culture in order to build a stronger and more resilient company for its customers, employees and communities. To support this effort, the Company has a Diversity and Inclusion Charter that was developed by its Diversity, Equity and Inclusion executive sub-committee and designed to ensure that the Company builds diversity across its workforce. Teradyne has established programs for recruiting and hiring candidates from various backgrounds and

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experiences. The Company has implemented policies regarding gender pay equity and has conducted audits in the United States which have not identified any pay equity issues in the employee populations tested. Teradyne is an equal opportunity/affirmative action employer committed to making employment decisions without regard to race, religion, ethnicity or national origin, gender, sexual orientation, gender identity or expression, age, disability, protected veteran status or any other characteristics protected by law.

Teradyne has a tradition of amplifying the charitable actions of its employees and responding to the needs of its communities. In 2020, in order to show support for effecting positive change in society, Teradyne joined countless others to donate to organizations supporting social justice and racial equality. Teradyne also sponsors the Massachusetts Conference for Women and the California Conference for Women, each of which offers opportunities for business networking, professional development and personal growth.

The Company values that its employees have diverse opinions about the best ways for the global society to continue to work towards eliminating bias. Teradyne believes that in the workplace it is important and expected that employees treat each other, and each other’s opinions, with respect and empathy, and focus on supporting each other in the Company’s business objectives, while demonstrating respect, dignity, inclusion, integrity and teamwork.

Health and Safety

The health and safety of its employees is the Company’s highest priority. Teradyne is committed to complying with all applicable regulatory health and safety requirements wherever it operates. The Company conducts internal audits, regular reviews and monitoring of regulations to ensure compliance with laws and regulations at the local, state, province and country levels. Teradyne ensures workers are provided with the knowledge to perform their jobs safely by deploying mandatory environment, health and safety training. The Company also requires contractors to complete safety training prior to working at any Teradyne site. The Company monitors, tracks and reports common safety metrics such as accidents, near misses and illness, and its injury and illness rate is below the industry average. Teradyne also provides its employees with a flexible and adjustable workspace, which includes reviewing ergonomics issues in the workplace, educating employees to self-identify risks and ensuring they have the work environment they need to do their jobs safely and effectively.

Throughout the COVID-19 pandemic, Teradyne’s primary concern has been ensuring the health and safety of its employees. At the onset of the pandemic, the Company made the decision to close its offices and implement work from home policies for most employees. During this time, Teradyne has also provided resources to enable employees to effectively manage remote work, such as web conferencing and project collaboration solutions and furniture and equipment for at-home offices. To protect those employees whose work requires them to be on-site, the Company has implemented cleaning processes, access to personal protection equipment and other protocols to ensure their safety. Teradyne has also supported its global workforce during this time by sending regular all-employee communications, providing development opportunities for managers and employees to support working virtually in an effective manner, establishing emergency response teams to empower local decision-making, conducting surveys to check in with employees, sharing regular video updates from its leadership team, and establishing a well-defined return to work process.

Board Oversight of Risk

Management is responsible for the day-to-day management of risks to the Company, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. Management attends regular Board and committee meetings and discusses with the Board and committees various risks confronting the Company, including operational, cybersecurity, legal, market and competitive risks as well as the risks to the Company, its business and its employees due to the COVID-19 pandemic. Management and the Board have not identified any risks arising from Teradyne’s compensation plans, policies and practices for the executives or employees that are reasonably likely to have a material adverse effect on the Company.

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Related Party Transactions

Under Teradyne’s written “Conflict of Interest Policy,” which is part of Teradyne’s Code of Conduct, the General Counsel notifies the Audit Committee of any investment or other arrangement to be entered into by Teradyne that could or would be perceived to represent a conflict of interest with any of the executive officers or directors. Every year Teradyne makes an affirmative inquiry of each of the executive officers and directors as to their existing relationships. Teradyne reports any potential conflicts identified through these inquiries to the Audit Committee. No potential conflicts were identified in 2020.

Shareholder Communications with Board of Directors

Shareholders and other interested parties may communicate with one or more members of the Board, including the Chair, or the non-management directors as a group by writing to the Non-Management Directors, Board of Directors, 600 Riverpark Drive, North Reading, MA 01864 or by electronic mail at [email protected]. Any communications that relate to ordinary business matters that are not within the scope of the Board’s responsibilities, such as customer complaints, will be sent to the appropriate executive. Solicitations, junk mail, and other similarly frivolous or inappropriate communications will not be forwarded, but will be made available to any director who wishes to review them.

Under Teradyne’s Corporate Governance Guidelines, each director is expected to attend each annual meeting of shareholders. All directors attended the 2020 Annual Meeting of Shareholders held on May 8, 2020.

Board Meetings

The Board met four times during the year ended December 31, 2020. The non-employee directors, all of whom are independent, held executive sessions in which they met without management after its regularly scheduled meetings during 2020. The Chair of the Board presides over all Board meetings and each executive session. During 2020, each director attended at least 75% of the total number of meetings of the Board and committee meetings held while such person served as a director. Teradyne’s Corporate Governance Guidelines, which are available at www.teradyne.com under the “Governance” section of the “Investor Relations” link, provide a framework for the conduct of the Board’s business.

Board Committees

The Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. In accordance with the listing standards of Nasdaq, all of the committees are comprised of independent directors. The members of each committee are appointed by the Board based on the recommendation of the Nominating and Corporate Governance Committee. Each committee performs a self-evaluation and reviews its charter annually. Actions taken by any committee are reported to the Board, usually at the next Board meeting following the action. The table below shows the current membership of each of the standing committees:

The Board will appoint committee members for the 2021-2022 term following the election of directors at the 2021 Annual Meeting of Shareholders.

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Audit Committee

The Audit Committee has three members, all of whom have been determined by the Board to be independent pursuant to SEC rules and the listing standards of Nasdaq, as well as Teradyne’s independence standards. In addition, the Board determined that each member of the Audit Committee is financially literate and an “audit committee financial expert” as defined in the rules and regulations promulgated by the SEC. The Board has determined that Ms. Johnson’s simultaneous service on three additional audit committees does not impair her ability to effectively serve on Teradyne’s Audit Committee. The Audit Committee’s oversight responsibilities, described in greater detail in its charter, include, among other things:

The Audit Committee met eight times during 2020. The responsibilities of the Audit Committee and its activities during 2020 are more fully described in the Audit Committee Report contained in this proxy statement.

Compensation Committee

The Compensation Committee has four members, all of whom have been determined by the Board to be independent pursuant to SEC rules and the listing standards of Nasdaq, as well as Teradyne’s independence standards. The Compensation Committee’s primary responsibilities, discussed in greater detail in its charter, include, among other things:

The Compensation Committee has the authority to and does engage the services of independent advisors, experts and others to assist it from time to time. Teradyne’s compensation and benefits group in the Human Resources Department supports the Compensation Committee in its work and assists in administering the compensation plans and programs.

The Compensation Committee met six times during 2020.

The Compensation Committee has retained Compensia, Inc. (“Compensia”), an executive compensation consulting firm, to assist it in carrying out its duties and responsibilities regarding executive and non-employee

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director compensation. In 2020, this engagement involved preparing (1) an executive officer compensation competitive analysis; (2) a director compensation competitive analysis; (3) a peer group analysis; and (4) a tally sheet analysis for executive officers. To maintain the independence of its advice, Compensia provides no services to Teradyne other than the services provided to the Compensation Committee. In addition, the Compensation Committee conducts annually a conflict of interest assessment for Compensia and any other independent advisors engaged during the year using the factors applicable to compensation consultations under SEC rules and the listing standards of Nasdaq, and, for 2020, no conflict of interest was identified.

The Compensation Committee also uses proprietary compensation surveys prepared by Radford, a global compensation consultant focused on technology companies.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is comprised entirely of independent directors in accordance with SEC rules and the listing standards of Nasdaq, as well as Teradyne’s independence standards. None of Teradyne’s executive officers serves on the Compensation Committee of any of the companies in which the directors are officers.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee has four members, all of whom have been determined by the Board to be independent pursuant to SEC rules and the listing standards of Nasdaq, as well as Teradyne’s independence standards. The Nominating and Corporate Governance Committee’s primary responsibilities, discussed in greater detail in its charter, include, among other things, to:

The Nominating and Corporate Governance Committee identifies director candidates through numerous sources, including recommendations from existing Board members, executive officers, and shareholders and through engagements with executive search firms. The Nominating and Corporate Governance Committee regularly reviews Board composition, skills, diversity and succession plans.

Non-employee directors must notify the Nominating and Corporate Governance Committee if the director experiences a change of position from that held upon first becoming a member of the Board. Upon any such notification, the Nominating and Corporate Governance Committee will review the potential impact on the director’s independence and the appropriateness of the director’s continued membership on any Board committees under the circumstances. Teradyne’s Corporate Governance Guidelines also provide that the continuation of a former Chief Executive Officer of the Company on the Board is a matter to be decided by the Board, upon recommendation of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee met four times during 2020.

Director Compensation

Teradyne uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board. Every year, Compensia, the Compensation Committee’s independent

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compensation consulting firm, conducts an analysis of director compensation, including a review of benchmark data, and reports to the Committee any recommendations regarding director compensation. The Compensation Committee considers Compensia’s annual recommendations as part of its annual review of director compensation. Non-employee directors’ compensation is determined by the Board at the recommendation of the Compensation Committee. Directors who are employees of Teradyne receive no compensation for their service as a director.

Cash Compensation

In 2020, the non-employee directors were compensated at the rate of $80,000 per year. Additional fees paid to certain non-employee directors in 2020 were as follows:

Stock-Based Compensation

Each non-employee director receives an annual equity award having a fair market value equal to $200,000 on the earlier of (i) the date of the Annual Meeting of Shareholders or (ii) the last Thursday in May. This annual equity award, which is delivered in the form of restricted stock units, vests in full on the earlier of (i) the first anniversary of the date of grant or (ii) the date of the following year’s Annual Meeting of Shareholders.

Each new non-employee director is granted an equity award on the date first elected or appointed to the Board having a fair market value equal to $200,000, pro-rated to reflect the period between the director’s date of election or appointment and the date of the next annual board grant. This equity award, which is also delivered in the form of restricted stock units, vests in full on the date of the next annual equity award grant. The equity award is granted under the shareholder-approved 2006 Equity and Cash Compensation Incentive Plan, which, in 2020, limited annual equity awards for non-employee directors to an amount not to exceed $200,000. See Proposal No. 6 for a description of a new total annual compensation cap for non-employee directors that the Board approved as part of the Amended and Restated 2006 Equity and Cash Compensation Incentive Plan.

Director Deferral Program

The non-employee directors may elect to defer receipt of their cash and/or equity awards and have the compensation invested into (1) an interest-bearing account (based on ten-year Treasury note interest rates) or (2) a deferred stock unit (“DSU”) account. If a non-employee director elects to participate in this deferral program, he or she will receive either the cash value of the interest-bearing account or the shares of the Company’s common stock underlying the DSUs, in either case, within 90 days following the end of his or her board service.

Director Stock Ownership Guidelines

The Company maintains stock retention and stock ownership guidelines to align the interests of the non-employee directors with those of the Company’s shareholders and ensure that the directors have an ongoing financial stake in the Company’s success. Pursuant to the guidelines, the non-employee directors are expected to attain (within five years from the date of initial election to the Board) and maintain an investment level in shares of the Company’s common stock equal to five times their annual cash retainer. All of the non-employee directors other than Mr. Herweck, who joined the Board in 2020, met the ownership guidelines as of December 31, 2020.

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Director Compensation Table for 2020

The table below summarizes the compensation Teradyne paid to the non-employee directors for the fiscal year ended December 31, 2020.

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AUDIT AND FINANCIAL ACCOUNTING OVERSIGHT

Audit Committee Report

In 2021, the Audit Committee reviewed Teradyne’s audited financial statements for the fiscal year ended December 31, 2020 and met with both management and PricewaterhouseCoopers LLP (“PwC”), Teradyne’s independent registered public accounting firm, to discuss those financial statements.

The Audit Committee also reviewed the report of management contained in Teradyne’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC, as well as PwC’s report included in Teradyne’s Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements and financial statement schedule and (ii) the effectiveness of internal control over financial reporting.

The Audit Committee has discussed with PwC the matters required to be discussed under the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has received the written disclosures and the letter from PwC required by the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence.

Based on these reviews and discussions with management and PwC, the Audit Committee recommended to the Board (and the Board has approved) that Teradyne’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

AUDIT COMMITTEE

Edwin J. Gillis (Chair)

Mercedes Johnson

Paul J. Tufano

The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that Teradyne specifically incorporates it by reference in any such filing.

Principal Accountant Fees and Services

Fees for Services Provided by PricewaterhouseCoopers LLP

The following table sets forth the aggregate fees for services provided by PwC, Teradyne’s independent registered public accounting firm, for the fiscal years ended December 31, 2020 and December 31, 2019.

Audit Fees

Audit Fees are fees related to professional services rendered for the audit of Teradyne’s annual financial statements and internal control over financial reporting for fiscal years 2020 and 2019. These fees include the review of Teradyne’s interim financial statements included in its quarterly reports on Form 10-Q and services that are normally provided by PwC in connection with other statutory and regulatory filings or engagements.

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Audit-Related Fees

Audit-Related Fees in 2019 were for services were associated with acquisition due diligence.

Tax Fees

Tax Fees in 2020 and 2019 were for professional services related to global tax planning and compliance matters.

All Other Fees

All Other Fees are fees for services other than audit fees, audit-related fees and tax fees. In 2020 and 2019, the fees were related to accounting seminars and financial statement disclosure and technical accounting software licenses.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

During 2020 and 2019, the Audit Committee pre-approved all audit and other services performed by PwC.

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm in order to ensure that the provision of such services does not impair the independent registered public accounting firm’s independence. These services may include audit services, audit-related services, tax services and other services. In addition to generally pre-approving, on a case-by-case basis, services provided by the independent registered public accounting firm, the Audit Committee adopted a policy for the pre-approval of certain specified services that may be provided by the independent registered public accounting firm. The services set forth on the pre-approved list have been identified in a sufficient level of detail so that management will not be called upon to make a judgment as to whether a proposed service fits within the pre-approved service list. Pursuant to the policy, management informs the Audit Committee, at least annually or more frequently upon its request, if the Company uses any pre-approved service and the fees incurred in connection with that service.

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OWNERSHIP OF SECURITIES

The following table sets forth as of March 11, 2021 information relating to the beneficial ownership of Teradyne’s common stock by each director, each named executive officer and all directors and executive officers as a group.

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The following table sets forth certain persons who, based upon Schedule 13G filings made since December 31, 2020, own beneficially more than five percent of Teradyne’s common stock.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides information with respect to the following persons who, pursuant to SEC rules, constitute our “named executive officers” for 2020:

This Compensation Discussion and Analysis describes the material elements of Teradyne’s executive compensation program during the fiscal year ended December 31, 2020. It also provides an overview of the Company’s executive compensation philosophy, as well as the Company’s principal compensation policies and practices. Finally, it analyzes how and why the Compensation Committee of the Board of Directors (the “Compensation Committee”) arrived at the specific compensation decisions for the Company’s executive officers, including the named executive officers, in 2020, and discusses the key factors that the Compensation Committee considered in determining the compensation of the named executive officers.

2020 Executive Compensation Summary

Teradyne is a leading global supplier of automation equipment for test and industrial applications. The Company designs, develops, manufactures and sells automatic test systems used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including the consumer electronics, wireless, automotive, industrial, computing, communications, aerospace and defense industries. Teradyne’s industrial automation products include collaborative robotic arms, autonomous mobile robots and advanced robotic control software used by global manufacturing, logistics and light industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs. The automatic test equipment and industrial automation markets are highly competitive and characterized by rapid changes in demand that necessitate adjusting operations and managing spending prudently across business cycles.

In 2020, the Company increased revenue by 36% to $3.1 billion, generated significant free cash flow, grew GAAP earnings 65% to $4.28, and grew non-GAAP earnings 62% to $4.62² per share, the seventh consecutive year of earnings per share growth. The Company grew sales in its semiconductor test, memory test, wireless test and system test businesses which helped offset weaker results in its industrial automation businesses due to COVID-19 and the global industrial downturn during 2020. Beyond this strong financial performance, the Company introduced new products in growing segments across its test and industrial automation businesses to expand its served markets and position itself for continued growth. Despite the global COVID-19 pandemic, in 2020, the Company was able to significantly grow revenues and earnings per share while continuing to invest for long-term, future growth and maintaining financial discipline.

Throughout the COVID-19 pandemic, Teradyne’s primary concern has been ensuring the health and safety of its employees. At the onset of the pandemic, the Company made the decision to close its offices and

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implement work from home policies for most employees. During this time, Teradyne has also provided resources to enable employees to effectively manage remote work, such as web conferencing and project collaboration solutions and furniture and equipment for at-home offices. To protect those employees whose work requires them to be on-site, the Company has implemented cleaning processes, access to personal protection equipment and other protocols to ensure their safety. Teradyne has also supported its global workforce during this time by sending regular all-employee communications, providing development opportunities for managers and employees to support working virtually in an effective manner, establishing emergency response teams to empower local decision-making, conducting surveys to check in with employees, sharing regular video updates from our leadership team, and establishing a well-defined return to work process. Teradyne continues to monitor the evolving situation regarding the COVID-19 pandemic and its impact on its employees, business, results of operations, financial condition, liquidity and cash flows.

In 2020, the Company returned $155 million to shareholders through its dividend and share repurchase programs. Due to the uncertainty regarding the duration, severity and business impact of the COVID-19 pandemic, the Company suspended its stock repurchase program as of April 1, 2020. In January 2021, the Company announced a new $2 billion share repurchase authorization and plans to repurchase a minimum of $600 million of shares in 2021. Additionally, the Company plans to continue its quarterly dividend of $0.10 per share. The dividend and repurchase programs reflect the Company’s confidence in the business and ability to return capital to its shareholders while retaining sufficient financial flexibility to pursue growth opportunities through both internal investments and acquisitions.

The Company’s 2020 performance-based variable cash compensation was tied to its annual rate of profitability, a two-year rolling revenue growth rate metric, and the achievement of strategic business objectives, including market share gains, revenue and bookings goals, profit and gross margin targets, strategic customer design-in wins and new product launches. Teradyne’s performance-based executive compensation program resulted in compensation for the Company’s named executive officers that reflects the Company’s challenging performance goals for 2020 and performance in achieving those goals. For 2020 variable cash compensation, at the beginning of 2020, the Company increased the two-year rolling revenue growth rate that results in the maximum payout for the revenue growth metric from 15% to 17% and maintained the annual PBIT rate that results in the maximum payout for the profitability metric at 30%. In 2020, while the maximum payout for these metrics was achieved due to the Company’s PBIT rate of 30.3% and two-year rolling revenue growth rate of 23%, certain strategic goals in 2020 were not achieved, many of which were due to weaker results in the Company’s industrial automation businesses due to the COVID-19 pandemic and the global industrial downturn. As a result, in 2020, the executive officers received variable cash compensation payouts ranging from 168% to 170% of their target awards.

The Compensation Committee believes that the executive compensation for 2020 is reasonable and appropriate and is justified by the performance of the Company and its achievement of its financial and strategic goals.

The variance in compensation of the named executive officers year over year demonstrates the alignment between pay and performance. The actual variable cash compensation paid to the named executive officers from 2016 to 2020 has varied from 79% to 181% of target depending on the strength of Company performance as compared to objectives in the applicable year.

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While this variance in compensation demonstrates that the program effectively rewards the executive officers when there is superior performance by the Company and appropriately adjusts compensation downward in the case of less-than-superior performance, the Compensation Committee continues to review the executive compensation program and its mix of short- and long-term incentives to ensure it reflects the correct balance between short-term financial performance and long-term shareholder return. The Committee also continues to establish challenging performance metrics reflecting the Company’s business objectives and strategy.

In January 2020, after a review of peer benchmarking and global survey data, the Compensation Committee adjusted the mix of equity awarded to the executive officers by increasing performance-based stock awards from 50% to 60% of the total grant date fair value of the awards (with performance-based stock awards measured at

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target), decreasing time-based stock awards from 40% to 30%, and retaining non-qualified stock options at 10% of the 2020 equity award. The Company also increased the revenue growth rate that results in the maximum payout for the revenue growth metric for variable cash compensation from 15% to 17%.

Teradyne has instituted a variety of compensation policies and practices to foster and maintain best practices for executive compensation. The Compensation Committee reviews these practices on a regular basis. Teradyne’s current policies and practices related to compensation and governance include the following:

Executive Compensation Objectives

The objective of the executive compensation program is to provide a competitive level of compensation that:

In setting compensation levels for the executive officers (or in the case of the Chief Executive Officer, in making recommendations to the independent members of the Board), the Compensation Committee takes into account such factors as internal equity, competitive market data (drawn from peer company and survey information), benefits, individual and corporate performance and the general and industry-specific business environment, as well as the roles and responsibilities of each executive officer.

Role of the Compensation Committee

The Compensation Committee’s role is to fulfill certain responsibilities of the Board relating to compensation for the executive officers, and to review and oversee the administration of equity-based incentives, profit sharing, deferred compensation, retirement and pension plans, and other compensatory plans. The Compensation Committee recommends to the independent members of the Board all aspects of the Chief Executive Officer’s compensation and is also responsible for approving all aspects of the other executive officers’ compensation. The Compensation Committee has the authority to select, retain and terminate compensation consultants, independent counsel and such other advisors as it determines necessary to carry out its responsibilities and approve the fees and other terms of retention of any such advisors.

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Role of Executive Officers in Determining Executive Pay

The Chief Executive Officer makes individual compensation recommendations for the other executive officers to the Compensation Committee for its review, consideration and determination. The Compensation Committee’s compensation consultant and members of the Company’s human resources department provide competitive market information for comparative purposes. The executive officers do not determine any element of their own compensation or their total compensation amount.

Competitive Positioning

To ensure its compensation is competitive, the Company makes extensive use of comparative data for its worldwide employee programs and its executive officer compensation. This includes data gathered from surveys, the Compensation Committee’s compensation consultant and public filings.

For purpose of determining 2020 compensation, the Compensation Committee engaged the independent compensation consulting firm Compensia to develop a competitive analysis of Teradyne’s peer companies, to analyze executive pay packages and to advise on the relationship of the Company’s short-term and long-term performance incentives to total compensation. In November 2019, Compensia recommended to the Compensation Committee a peer group that reflects organizations of comparable size (revenue and market capitalization) and operations (product type and geographic scope) to Teradyne and that provides an appropriate sample size for comparisons. The Compensation Committee reviewed and approved a peer group that included the 18 companies listed below:

At the time the peer group was approved, Teradyne was below the median of the peer group in terms of revenue (39^th percentile), but above the median of the peer group in terms of market capitalization (53^rd percentile).

During 2020, for purposes of setting 2021 compensation, Compensia recommended that the Compensation Committee (1) remove Coherent and Viavi Solutions from the peer group due to their lower market

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capitalizations and (2) add Arista Networks to the peer group because it was determined to be better match in terms of financial performance (revenues and market capitalization).

The Compensation Committee augmented the peer group used to set 2020 compensation with data from the Radford Global Survey. From this survey, the Company used reported data for its peer group companies as well as all technology companies with industry and financial characteristics generally aligned with our peers and with annual revenues between $1 billion and $4.6 billion and market capitalizations between $3 billion and $26.6 billion.

Executive Compensation Program

The Board has implemented an executive compensation program that fosters a performance-oriented environment by tying a significant portion of each executive officer’s cash and equity compensation to the achievement of short-term and long-term performance targets that are important to the Company and its shareholders. This approach is designed to focus the executive officers on creating shareholder value over the long-term and on delivering exceptional performance throughout fluctuations in business cycles.

The following charts illustrate performance-based target compensation for the Chief Executive Officer and the other named executive officers (as a group) as a percentage of total target compensation for 2020.

Target Cash Compensation

Target cash compensation includes base salary and performance-based variable cash compensation. Base salary is designed to attract and retain talented executives and to provide a stable source of income. Variable cash compensation links the executive officers’ cash compensation to the Company’s annual and strategic performance objectives and motivates the executive officers to achieve Teradyne’s financial, operating, and growth goals.

Each January, the Compensation Committee sets target cash compensation for each executive officer, other than the Chief Executive Officer. The independent members of the Board set the target cash compensation for the Chief Executive Officer. The goal is that the target total cash compensation for each executive officer should be competitive with cash compensation of individuals holding similar roles and responsibilities as reflected by the peer group and global survey data. The Committee and the Board also consider the performance of the Company relative to its peers, individual performance, the role and responsibilities of the executive officer, and other benefits available to the executive officers, including Teradyne’s Cash Profit Sharing Plan.

Additionally, each January, the Compensation Committee establishes the specific performance measures and formulas for the year’s variable cash compensation program. The performance-based variable cash compensation goals are based on: (1) a baseline formula for non-GAAP profit rate before interest and taxes or

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PBIT³ percentage; (2) a two-year rolling revenue growth rate; and (3) measurable operating, financial and strategic goals. These components are aggregated in the variable cash compensation payout calculation and capped at 200% of target. The performance-based variable cash compensation, depending on the named executive officer, is determined by a formula comprised of either company-wide or divisional PBIT percentage, company-wide or divisional revenue growth, and the performance against key operating, financial and strategic goals by the Company’s business divisions. The revenue growth metric contributes 30% toward the target variable cash compensation payout with the PBIT metric contributing 40% and the operating, financial and strategic goals contributing 30%.

In establishing the performance target levels for the financial performance measures, the Compensation Committee sets the PBIT rate and the revenue growth rate at a level it believes to be appropriate for the businesses in which the Company operates, and sets other operating and financial goals based on the specific objectives of the Company for the year, as well as certain strategic objectives. These operating, financial and strategic goals may include strategic customer wins, market share gains, gross margin and profitability goals, new product introductions, engineering project milestones, cost controls and growth targets – the achievement of which positively impact the Company’s long-term performance. Teradyne is not disclosing the specific performance target levels for these goals because they represent confidential, commercially sensitive information that Teradyne does not disclose to the public and it believes, if disclosed, would cause competitive harm. The target levels for such performance measures, such as product development, market share, new product introductions and margin goals for new and existing products, are inherently competitive and, if disclosed, would provide valuable insight into specific customers, markets and areas where Teradyne is focusing.

The Compensation Committee sets operating, financial and strategic goals for the variable cash compensation program to align executive compensation with both the Company’s short-term financial and operating strategy and its long-term profitable growth strategy. In developing the variable cash compensation program, the Compensation Committee takes into account that these goals are difficult to achieve because they are heavily contingent upon multiple factors, including technological innovations, customer demand and the actions of competitors. The target levels for the measures to improve competitive positioning are challenging due to the strong competition within the Company’s markets, while technical and engineering innovations make product development goals difficult to achieve in a fixed time frame.

Following the close of each fiscal year, the variable cash payout is calculated and presented to the Compensation Committee for review. Based on the performance of the divisions and the performance against the operating, financial and strategic goals, the variable cash compensation then is determined by the independent members of the Board for the Chief Executive Officer and by the Compensation Committee for the other named executive officers.

Equity Compensation

Equity compensation is designed to align executive compensation with shareholder return, motivate and reward individual and Company performance, and attract and retain talented individuals. Teradyne’s equity compensation program provides three types of equity incentives: (1) time-based awards which vest in equal installments annually over four years conditioned upon continued service, supporting the Company’s employee retention efforts; (2) performance-based awards, split equally between awards that vest based on the achievement of relative total shareholder return and cumulative PBIT percentage, in each case, measured at the end of a

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three-year performance period; and (3) stock options granted with a fair market value exercise price, which vest in equal installments annually over four years conditioned upon continued service, where executives only benefit if the Company’s stock price appreciates.

Equity awards are made under the shareholder-approved 2006 Equity and Cash Compensation Incentive Plan (see Proposal No. 6 elsewhere in this Proxy Statement). The awards granted to the executive officers are based upon peer group data provided by the Company’s independent compensation consultant, Compensia, and global survey data and each executive’s relative contribution, performance and responsibility within the organization. The Compensation Committee assesses these factors each year for each executive officer.

At the beginning of each year, the Compensation Committee approves an overall equity budget to be used for awards to executive officers, employees and directors. Various factors are used in determining the annual equity award budget, including the total projected compensation expense to be incurred as a result of the equity awards, “overhang” from previously issued and outstanding awards, burn rates and competitive market data from the peer group, global survey data, and compensation surveys. The independent members of the Board determine the award type and grant date value for the Chief Executive Officer and the Compensation Committee determines the award type and grant date value for each other executive officer. Management approves equity awards for all other employees within the overall equity budget pursuant to a delegation of authority from the Compensation Committee.

The equity awards granted to the executive officers are made in January, in order to align the evaluation and award of the equity compensation to the end of the fiscal year. Stock options are granted with an exercise price equal to the closing price on the date of grant, as provided by the terms of the shareholder-approved 2006 Equity and Cash Compensation Incentive Plan. No employee equity awards are granted during blackout periods, except for new hire grants. New hire grants are automatically issued on the first trading day of the month following the employee’s start date, in accordance with guidelines approved by the Compensation Committee.

Retirement Benefits

Retirement benefits are designed to attract and retain talented employees and reward long-term service to the Company. Retirement benefits provide a long-term savings opportunity for employees on a tax-efficient basis. In the U.S., the Company maintains the Teradyne, Inc. Savings Plan (the “401k Plan”). The 401k Plan is available to all employees and provides a discretionary employer matching contribution. Executive officers may participate in the 401k Plan on the same terms as those available for other eligible U.S. employees. For 2020, the Company matched $1 for every $1 contributed by the employee to the Company’s 401k Plan and Supplemental Savings Plan (as defined below) up to 4% of the employee’s compensation (subject to Internal Revenue Service limits) for employees not accruing benefits in the Retirement Plan or SERP (each as defined below), and no match for employees accruing benefits in the Retirement Plan or SERP.

The Company also maintains a non-qualified Teradyne, Inc. Supplemental Savings Plan (the “Supplemental Savings Plan”) for certain employees whose benefits would otherwise be capped based on restrictions imposed by the Internal Revenue Service. For additional information regarding the Supplemental Savings Plan, see the Nonqualified Deferred Compensation Table.

Teradyne also provides a separate retirement plan, the Retirement Plan for Employees of Teradyne, Inc. (the “Retirement Plan”). In 1999, this plan was discontinued for new employees, but participating employees were given the option to elect to continue in the plan or opt out of the plan in order to receive a higher employer match in the 401(k) Plan. Commencing in 2009, employees who continued in the separate Retirement Plan have received no 401(k) employer match. No named executive officer is currently earning benefits under the Retirement Plan, but Mr. Jagiela had participated in this plan prior to 1999.

The Company also maintains a defined benefit Supplemental Executive Retirement Plan (“SERP”) for certain senior employees. For additional information, see the Pension Benefits Table. No named executive officer is a participant in the SERP.

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The Company also provides certain other benefits to its retirees. Based on age and service, Messrs. Jagiela, Gray, Burns and Smith qualify for these broad-based employee benefits. At retirement, they will be eligible to receive a pro-rated amount of variable cash compensation through the date of their retirement. In addition, most retirees can continue in the health, dental and vision programs at a partially subsidized rate.

In addition, if a named executive officer retires after at least ten years of service and having reached the age of sixty, then (a) one hundred percent of the shares issued upon settlement of a performance-based stock award grant awarded more than 365 days prior to the date of termination of employment will vest on the date the amount of shares underlying the performance-based RSU grant are determined at the end of the three-year performance period and (b) a pro-rata portion (based on the number of days the named executive officer was employed by the Company during the 365 day period) of the shares issued upon settlement of a performance-based stock award grant awarded less than 365 days prior to the date of termination of employment will vest on the date the amount of shares underlying the performance-based stock award grant are determined at the end of the three-year performance period.

Change in Control Agreements and Severance Agreements

The Compensation Committee and the Board have approved a change in control agreement for each executive officer. The structure and design of these agreements, including the level of payments and benefits provided to the executive officers under the agreements, are intended to be similar to those provided by peer companies.

The change in control agreements provide a retention tool for the executive officers to remain with the Company both during and following the change in control transaction and enable the executive officers to focus on the continuing business operations and the success of a potential business combination that the Board has determined to be in the best interests of the shareholders. This results in stability and continuity of operations during a potentially uncertain time. The terms of the Change in Control Agreements are described under “Post-Termination Compensation Table”—“Change in Control Agreements.”

The Compensation Committee and the Board have also approved severance agreements for Messrs. Jagiela and Mehta which provide for severance payments in exchange for post-employment non-hire, non-solicit, and non-competition restrictions. The terms of the Severance Agreements are described under “Post-Termination Compensation Table” – “Chief Executive Officer Severance Agreement” and “Chief Financial Officer Severance Agreement”.

Other Benefits

To attract and retain highly qualified employees, the Company offers benefit programs designed to be competitive in each country in which the Company operates. All U.S. employees and executive officers participate in similar healthcare, life and disability insurance, and other welfare programs.

To offer most employees an opportunity to acquire an equity interest in Teradyne, the Company offers an Employee Stock Purchase Plan. This plan allows participating employees to purchase shares of common stock through regular payroll deductions of up to 10% of their annual compensation, to a maximum of $25,000 per calendar year, not to exceed 6,000 shares. The purchase price is an amount equal to 85% of the fair market value of the common stock at market close on the last trading day of the purchase period. Each purchase period is a six-month period beginning in January or July and ending in June or December, respectively. Over fifty percent of world-wide employees, including certain executive officers, currently participate in the plan.

Teradyne’s Cash Profit Sharing Plan distributes 10% of Teradyne’s GAAP pre-tax profit (excluding its Industrial Automation Group, Wireless Test Division, and the Avionics Interface Technologies business) to all eligible employees, as determined by the Compensation Committee, including eligible executive officers. Plan payments are distributed as a consistent percentage of target cash compensation for all participants twice per year subject to any restrictions or exceptions approved by the Compensation Committee.

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Stock Ownership Guidelines

The Company maintains stock retention and stock ownership guidelines to align the interests of the executive officers with those of the Company’s shareholders and ensure that the executive officers responsible for overseeing operations have an ongoing financial stake in the Company’s success.

Pursuant to these guidelines, the Chief Executive Officer is expected to attain and maintain an investment level in shares of the Company’s common stock equal to three times his annual base salary and all other executive officers are expected to attain and maintain an investment level equal to two times their annual base salary. In each case, such investment levels are expected to be attained within five years from the date upon which the individual becomes subject to the guidelines. Until this ownership guideline is met, the executive officers are expected to retain at least 50% of the shares issued pursuant to Company equity awards, after taxes.

Shares subject to the stock ownership guidelines do not include any pledged Company stock. The Company maintains a policy prohibiting executives and directors from pledging Teradyne stock.

At year-end, all named executive officers were at or above the stock ownership guideline investment levels, except for (i) Mr. Mehta who became subject to the guidelines upon his hiring in April 2019 and has until April 2024 to meet the stock ownership guidelines investment level and (ii) Mr. Burns who became subject to the guidelines upon his promotion in October 2020 and has until October 2025 to meet the stock ownership guidelines investment level.

Compensation Recoupment Policy

A compensation recoupment policy is applicable to all the executive officers. Under this policy, the Company may recover incentive compensation that was based on achievement of financial results that were subsequently restated if an executive officer was found to be personally responsible for any fraud or intentional misconduct that caused the restatement. This policy covers variable cash compensation and performance-based equity awards. The Board will review the Company’s compensation recoupment policy following the adoption of regulations by the Securities and Exchange Commission implementing Section 954 of the Dodd-Frank Act.

Impact of Accounting and Tax Treatment on Executive Compensation

As a result of federal tax legislation enacted in December 2017, compensation paid to certain of the Company’s executive officers in excess of $1 million per person per year will not be deductible unless it qualifies for transition relief applicable to certain compensation arrangements in place as of November 2, 2017 and not later materially modified.

The Compensation Committee believes that the interests of the Company’s stockholders are best served if the Compensation Committee continues to retain flexibility and discretion to approve and amend compensation plans, agreements and arrangements to support our corporate objectives, even if a plan, agreement or arrangement does not qualify for full or partial tax deductibility and even if an amendment results in a loss or limitation of tax deductibility. Despite the changes as a result of the recent tax legislation, the Compensation Committee currently expects (consistent with its executive compensation philosophy) to structure the Company’s executive compensation programs such that a significant portion of executive compensation is linked to the performance of Teradyne.

The Compensation Committee also takes into consideration the accounting treatment of the different forms of awards it may grant to executive officers.

2020 Executive Compensation

In January 2020, the Compensation Committee reviewed the performance of the named executive officers during 2019 and conducted its annual assessment of executive compensation. In addition to the executive

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officer’s performance during 2019, the Compensation Committee considered competitive market and peer group data provided by Compensia, its independent executive compensation consultant, as well as global survey data in setting executive compensation for 2020.

2020 Target Cash Compensation

To align cash compensation with the competitive market, the Compensation Committee, and the independent members of the Board in the case of the Chief Executive Officer, approved increases in the 2020 base salaries and target cash compensation for certain of the named executive officers. The 2019 and 2020 base salaries and target cash compensation for the named executive officers, other than Mr. Burns who became an executive officer in October 2020, are set forth below:

For 2020, the independent members of the Board increased Mr. Jagiela’s base salary by 2.5% and retained his performance-based variable cash compensation target at 110% of his annual base salary. The Compensation Committee increased the base salary of Mr. Gray by 2.6%. The Compensation Committee increased the performance-based variable cash compensation target for Mr. Mehta from 75% to 80% of his annual base salary and the performance-based variable cash compensation target for Mr. Gray from 70% to 75% of his annual base salary. Mr. Smith retained his performance-based variable cash compensation target at 75% of his annual base salary.

In October 2020, Mr. Burns was promoted to President, Semiconductor Test division, at which time the Compensation Committee, based on peer group and global survey data, set his annual base salary at $327,148 with a performance-based variable cash compensation target of 80% of his annual base salary, which results in a target total cash compensation of $588,866.

The performance-based variable cash compensation in 2020 was based on the following:

The above components were aggregated in the variable cash compensation payout calculation with the revenue growth metric contributing 30%, the PBIT metric contributing 40% and the strategic goals contributing 30%, based upon target performance of each metric. Achievement of a PBIT rate above 19% and of a revenue growth rate above 5% were necessary to result in payments above target for those metrics. Achievement of a 30% PBIT rate and a 17% revenue growth rate would have resulted in a maximum payout of 200% of target for those metrics. The operating, financial and strategic goals for 2020 included market share gains, profit margin and gross margin targets, revenue and bookings targets, market penetration with new products and product development milestones in the Company’s various business units. The Compensation Committee believes these business and financial objectives effectively balance short-term profitability with long-term investment and growth. The maximum variable cash compensation payout for each named executive officer remained at 200% of his target amount for 2020.

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The variable cash compensation for Messrs. Jagiela, Mehta and Gray for 2020 was calculated by measuring total company performance: company-wide profit against the 19% target, company-wide two-year rolling revenue growth rate against the 5% target, and a weighted averaging formula, based on division revenue, of the performance of all divisions against its specific operating, financial and strategic goals. The variable cash compensation formula for Mr. Burns in 2020 is divided (1) 75% from the performance of the Semiconductor Test division and (2) 25% from total company performance. The variable cash compensation formula for Mr. Smith in 2020 is divided equally between (1) the performance of the Semiconductor Test division and (2) total company performance. Effective October 1, 2020, Mr. Burns was promoted to President, Semiconductor Test division and Mr. Smith was named President, Industrial Automation Group.

In January 2021, the Compensation Committee reviewed the Company’s performance against its 2020 performance-based variable cash compensation targets. The divisions’ performances varied from 0% to 171% of target. The variable cash compensation payout for the Semiconductor Test Division, which historically accounts for approximately 65-75% of Teradyne’s revenue and a commensurate portion of the variable cash compensation calculation for the executive officers, exceeded its PBIT percentage target, revenue growth target and achieved certain goals, such as increasing SOC test market share, which positively impacted the calculation. Once the performance of the total company and each of the divisions was measured against the PBIT target, two-year revenue growth target, and divisional goals, the payout for the named executive officers was calculated. For 2020, while the maximum payout for these metrics was achieved due to the Company’s PBIT rate of 30.3% and two-year rolling revenue growth rate of 23%, certain strategic goals in 2020 were not achieved, many of which were due to weaker results in the Company’s industrial automation businesses due to the COVID-19 pandemic and the global industrial downturn.

The Compensation Committee, and the independent members of the Board in the case of the Chief Executive Officer, approved for 2020 (1) a 168% payout of target variable cash compensation for Messrs. Jagiela, Mehta and Gray, (2) a 170% payout of target for Mr. Burns, and (3) a 169% payout of target for Mr. Smith. Due to the different variable compensation factors for each executive officer, total cash compensation paid was between 29% and 36% above target, depending on the named executive officer. The payout amounts of 2020 performance-based variable cash compensation for each named executive officer can be found under the column “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

2020 Equity Awards

In January 2020, the Compensation Committee, and the independent members of the Board in the case of the Chief Executive Officer, approved the 2020 equity awards for the named executive officers, other than Mr. Burns, who was not then an executive officer. In connection with his appointment as President, Semiconductor Test division, in October 2020, the Compensation Committee approved additional equity awards for Mr. Burns. The Compensation Committee and independent members of the Board adjusted the mix of equity awarded to the executive officers by increasing performance-based stock awards (granted in the form of performance-based restricted stock units (“RSUs”)) from 50% to 60% of the total grant date fair value of the awards (with performance-based stock awards measured at target), decreasing time-based stock awards (granted in the form of time-based RSUs) from 40% to 30%, and retaining non-qualified stock options at 10% of the 2020 equity award.

For the 2020 performance-based RSUs, the Compensation Committee approved performance metrics split equally between (1) a relative total shareholder return (“TSR”) formula measured at the end of a three-year performance period (using a 45-day price averaging method at both the beginning and the end of the performance period, which will be December 31, 2022) and (2) a three-year cumulative PBIT rate. Fifty percent (50%) of the performance-based RSUs (at target) are eligible to be earned and to vest based on the Company’s relative TSR performance and 50% based on cumulative PBIT rate. The Compensation Committee equally weighted these performance metrics to be consistent with the Company’s long-term goal to deliver profitability and superior return to shareholders. The TSR-based metric aligns the interests of executive officers with the interests of

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shareholders and provides a significant incentive for the executive officers to focus on increasing long-term shareholder value, while the PBIT-based metric provides an incentive to maintain a high level of profitability over the long term.

For the TSR-based metric, Teradyne’s TSR performance is measured against the NYSE Composite Index (ticker symbol: NYA) which consists of over 2,000 companies listed on the New York Stock Exchange. The NYA Index represents a broad, diverse group of high quality investment alternatives. The Compensation Committee has concluded that the diverse NYA Index is an appropriate benchmark for Teradyne. Teradyne’s TSR percentage point gain minus that of the NYA Index at the end of the three-year period will determine the number of performance-based RSUs earned based on the TSR-based performance metric. With respect to the portion of the performance-based RSUs for 2020 subject to vesting based on TSR performance, the 45-day price averaging measurement period for the three-year performance period is 45 days prior to December 31 of the year before the third anniversary of the grant date. The TSR measurement allows for payment from 0% to 200% of target shares based on underperforming or exceeding the NYA Index’s three-year return.

For the PBIT-based metric, the three-year cumulative target PBIT rate is 19%, the threshold PBIT rate required to trigger a payout is 7%, and the PBIT rate required to achieve maximum payout is 30%. With respect to the portion of the performance-based RSUs subject to vesting based on PBIT, the PBIT measurement allows for payment from 0% to 200% of target shares based on cumulative three-year PBIT rate.

The number of performance-based RSUs that may be paid out based on relative TSR performance and PBIT rate are each illustrated below:

The final number of performance-based RSUs earned will be determined by the Compensation Committee and the independent members of the Board, as applicable, upon the completion of the three-year performance period. All of the performance-based RSUs earned will vest at the end of the three-year performance period. No performance-based RSUs will vest if the named executive officer is no longer an employee at the end of the three-year period, except that if the named executive officer’s employment ends prior to the determination of the number of performance-based RSUs earned based on performance due to death or retirement or termination other than for cause after attaining both at least age sixty and at least ten years of service, then (a) 100% of the shares issued upon settlement of his performance-based RSUs awarded more than 365 days prior to the last day of employment and (b) a pro-rata portion (based on the number of days the named executive officer was employed by the Company during the 365 day period) of the shares issued upon settlement of his performance-based RSUs awarded less than 365 days prior to the last day of employment will vest, in each case, on the date the Compensation Committee and the independent members of the Board, as applicable, determine the final number of the performance-based RSUs earned. Continued vesting following retirement or termination, other than for cause, is subject to the named executive officer’s continued compliance with any post-employment obligations to Teradyne.

To maintain a competitive equity compensation level relative to the market, the 2020 equity award values at target for certain of the named executive officers were increased from the 2019 equity award values at target.

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Mr. Jagiela’s 2020 equity award increased 30%, and the awards for Messrs. Mehta, Gray, and Smith were increased 11%, 5%, and 12% (in each case, for purposes of restricted stock units, value is based on the stock price on the date of grant), respectively.

The specific number of RSUs was calculated based upon the closing market price of the Company’s common stock on the grant date and the specific number of options was calculated based upon the Black-Scholes grant date fair value. The table below sets forth the grant date equity values of the 2020 time-based RSUs, performance-based RSUs and stock options for each named executive officer.

The grant date for the 2020 equity awards approved by the Compensation Committee for all named executive officers was January 24, 2020. The grant date for the additional 2020 equity awards approved by the Compensation Committee for Mr. Burns was October 1, 2020. The 2020 time-based RSUs for all employees, including named executive officers, vest in equal installments annually over four years, commencing on the first anniversary of the grant date. The performance-based RSUs vest on the third anniversary of the grant date, with (1) half of the performance-based RSUs eligible to vest based upon the determination of Teradyne’s TSR performance relative to the NYA Index and (2) half of the performance-based RSUs eligible to vest based on three-year cumulative PBIT, in each case, as described above. The stock option grants vest in equal installments annually over four years, commencing on the first anniversary of the grant date, and have a term of seven years from the date of grant.

The number of equity awards granted to each named executive officer is disclosed in the Grants of Plan-Based Awards Table and the value of the performance-based RSUs granted for each named executive officer assuming the highest level of performance conditions is achieved is disclosed in the footnotes to the column “Stock Awards” in the Summary Compensation Table.

2020 Determination of Performance Achievement for 2017 Performance-Based RSU Grant

In January 2020, the Compensation Committee reviewed performance against the 2017 performance-based RSU targets: (1) a TSR formula measured against the NYA Index at the end of the three-year performance period ending on December 31, 2019 (using a 45-day price averaging method at both the beginning and the end of the

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three-year performance period), capped at four times the grant date value; and (2) a three-year cumulative PBIT rate. On this basis, the Compensation Committee approved the number of the 2017 performance-based RSUs based on the TSR formula at 158% of target and the number of performance-based RSUs based on the three-year cumulative PBIT rate at 200% of target. The performance-based stock awards with the total shareholder return component, given the total shareholder return of the Company (174.10%) against the NYSE Composite Index (24.83%) would have been awarded at 200% of target but was reduced due to the cap on the award of four times the grant date value. The three-year cumulative target PBIT rate for the performance-based stock awards granted in 2017 was 15%, the PBIT rate required to achieve maximum payout was 25%, and the PBIT rate for the three-year period from January 1, 2017 to December 31, 2019 was 25.7%. These performance-based RSUs vested in full on January 27, 2020.

2021 Determination of Performance Achievement for 2018 Performance-Based RSU Grant

In January 2021, the Compensation Committee reviewed performance against the 2018 performance-based RSU targets: (1) a TSR formula measured against the NYA Index at the end of the three-year performance period ending on December 31, 2020 (using a 45-day price averaging method at both the beginning and the end of the three-year performance period), capped at four times the grant date value; and (2) a three-year cumulative PBIT rate. On this basis, the Compensation Committee approved the number of the 2018 performance-based RSUs based on the TSR formula at 138% of target and the number of performance-based RSUs based on the three-year cumulative PBIT rate at 180% of target. The performance-based stock awards with the total shareholder return component, given the total shareholder return of the Company (194.47%) against the NYSE Composite Index (12.61%) would have been awarded at 200% of target but was reduced due to the cap on the award of four times the grant date value. The three-year cumulative target PBIT rate for the performance-based stock awards granted in 2018 was 17%, the PBIT rate required to achieve maximum payout was 30%, and the PBIT rate for the three-year period from January 1, 2018 to December 31, 2020 was 27.4%. These performance-based RSUs vested in full on January 26, 2021.

Compensation Committee Report

The Compensation Discussion and Analysis has been reviewed with management. Based on the review and discussion with management, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in Teradyne’s Annual Report on Form 10-K for the year ended December 31, 2020.

COMPENSATION COMMITTEE

Timothy E. Guertin (Chair)

Peter Herweck

Marilyn Matz

Roy A. Vallee

The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that Teradyne specifically incorporates it by reference in any such filing.

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Executive Compensation Tables

Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the named executive officers during the fiscal years ended December 31, 2020, 2019, and 2018 (or, as applicable, such years as the named executive officer was employed by, or serving as an executive officer of, the Company).

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Grants of Plan-Based Awards Table for 2020

The following table sets forth information concerning plan-based awards to the named executive officers during the fiscal year ended December 31, 2020.

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VC—Variable Cash Compensation

PRSU—Performance-based Restricted Stock Units

RSU—Time-based Restricted Stock Units

SO—Stock Options

Outstanding Equity Awards at Fiscal Year-End Table for 2020

The following table sets forth information concerning the outstanding equity awards held by the named executive officers at fiscal year-end, December 31, 2020.