What is a Shareholder Rights Plan and why did Teradyne adopt one?

A Shareholder Rights Plan is a defensive measure adopted by a company's board of directors to protect against hostile takeovers. Teradyne adopted this plan to deter potential acquirers from gaining control of the company without negotiating with the board, thereby protecting shareholders from potentially coercive or inadequate offers.

How does this plan affect current shareholders?

As of the record date (November 27, 2000), each shareholder will receive one Right for each share of common stock they own. Initially, these Rights do not have any separate trading or exercise rights and are tied to the common shares. They only become exercisable under specific circumstances, typically if a hostile party acquires a significant stake in the company.

Under what conditions do the Rights become exercisable, and what happens then?

The Rights become exercisable (on or after the "Distribution Date") if a person or group acquires beneficial ownership of 20% or more of Teradyne's outstanding common shares, or announces a tender offer that would result in such ownership. Upon exercise, the holder can purchase Teradyne common stock at a significantly discounted price, or in certain takeover scenarios, receive shares of the acquiring company, making the acquisition prohibitively expensive for the hostile bidder.

Can the Board of Directors remove or modify these Rights?

Yes, the Board of Directors has the authority to redeem the Rights at any time for a nominal price ($0.001 per Right) before a hostile party becomes an "Acquiring Person." They can also amend the terms of the Rights, though not in a way that would adversely affect existing rights holders after a hostile party has emerged, with certain exceptions.

TER 8-K SEC Disclosure — Nov 20, 2000

Summary

Teradyne, Inc. (TER) filed an 8-K on November 20, 2000, reporting the adoption of a Shareholder Rights Plan, effective November 16, 2000. This plan, formalized through a Rights Agreement with Fleet National Bank, essentially issued one common share purchase right (a "Right") for each outstanding share of common stock as of November 27, 2000. Each Right entitles the holder to purchase Teradyne common shares at a price of $540.00, subject to adjustments. The Rights become exercisable upon the occurrence of certain events, primarily if an "Acquiring Person" acquires 20% or more of Teradyne's outstanding common stock, or a tender offer commences that would lead to such an acquisition. The plan is designed to deter hostile takeovers by making them more expensive and complex for potential acquirers.

Key Highlights

1Teradyne adopted a Shareholder Rights Plan, commonly known as a "poison pill", on November 16, 2000.
2Each outstanding common share will receive one Right, entitling the holder to purchase Teradyne common stock at $540.00 per share.
3The Rights become exercisable if an 'Acquiring Person' accumulates 20% or more of the company's outstanding common stock.
4The purpose of the Rights Plan is to protect shareholders from coercive or unfair takeover tactics.
5The Rights are exercisable only after a specific "Distribution Date" is triggered.
6The Rights will expire on November 27, 2010, unless redeemed earlier by the Board of Directors.
7The Rights Agreement was entered into with Fleet National Bank as the Rights Agent.

TERADYNE, INC 8-K Report (Nov 20, 2000)

Summary

Key Highlights

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