<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For Quarter Ended April 30, 1994 Commission File Number 0-10761
LTX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2594045
- - ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
LTX Park at University Avenue, Westwood, Massachusetts 02090
(address of principal executive offices and zip code)
Registrant's telephone number, including area code (617) 461-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at June 3, 1994
- - --------------------------------------- ---------------------------
Common Stock, par value $0.05 per share 26,034,727
</TABLE>
<PAGE> 2
LTX CORPORATION
Index
<TABLE>
<S> <C>
Page Number
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheet 1
April 30, 1994 and July 31, 1993
Consolidated Statement of Operations
Three months and nine months ended
April 30, 1994 and April 30, 1993 2
Consolidated Statement of Cash Flows
Nine months ended April 30, 1994
and April 30, 1993 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 9
Part II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE> 3
LTX CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1994 1993
<S> <C> <C>
ASSETS --------- --------
Current assets:
Cash and equivalents $6,247 $21,725
Accounts receivable, less allowances of $700 and $700 39,379 34,953
Inventories 46,339 45,180
Other current assets 4,702 4,116
--------- ---------
Total current assets 96,667 105,974
Property and equipment, net 29,637 28,258
Other assets 4,612 4,025
--------- ---------
$130,916 $138,257
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term liabilities $15,341 $10,047
Accounts payable 25,019 26,924
Accrued expenses and restructuring charges 23,308 8,708
Unearned service revenues 3,943 4,671
--------- ---------
Total current liabilities 67,611 50,350
Long-term liabilities, less current portion 1,293 1,060
Convertible subordinated debentures 20,134 19,943
Deferred compensation 428 428
Stockholders' equity:
Common stock, $0.05 par value 1,302 1,236
Additional paid-in capital 116,960 112,111
Accumulated deficit (76,812) (46,871)
--------- ---------
Total stockholders' equity 41,450 66,476
--------- ---------
$130,916 $138,257
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 1 -
<PAGE> 4
LTX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
April 30, April 30,
------------------------ --------------------------
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales: -------- -------- --------- ---------
Product $34,164 $41,197 $109,541 $109,852
Service 6,052 4,588 15,958 13,330
-------- -------- --------- ---------
Total net sales 40,216 45,785 125,499 123,182
-------- -------- --------- ---------
Cost of sales:
Product 25,485 27,693 78,742 73,132
Service 3,237 2,775 9,363 8,363
Provision for excess inventories -- -- 3,500 --
------- -------- --------- ---------
Total cost of sales 28,722 30,468 91,605 81,495
------- -------- --------- ---------
Gross profit 11,494 15,317 33,894 41,687
Engineering and product
development expenses 4,794 4,765 14,927 14,519
Selling, general and
administrative expenses 10,353 10,331 32,523 30,699
Restructuring charges -- -- 14,376 --
------- -------- --------- ---------
Income (loss) from operations (3,653) 221 (27,932) (3,531)
Interest expense, net 994 1,058 2,745 2,997
------- -------- --------- ---------
Loss before income
taxes and minority interest (4,647) (837) (30,677) (6,528)
Provision for income taxes -- -- -- --
------- -------- --------- --------
Loss before minority interest (4,647) (837) (30,677) (6,528)
Minority interest in net loss of subsidiary 316 -- 736 1,207
------- -------- --------- -------
Net loss ($4,331) ($837) ($29,941) ($5,321)
======= ======== ======== =======
Primary and fully diluted net loss per share ($0.17) ($0.04) ($1.18) ($0.26)
Weighted average shares 26,021 21,365 25,295 20,525
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 2 -
<PAGE> 5
LTX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
April 30,
----------------
1994 1993
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss ($29,941) ($5,321)
Add (deduct) non-cash items:
Depreciation and amortization 6,866 6,947
Minority interest in subsidiary net loss (736) (1,207)
Original issue discount amortization 191 196
(Increase) decrease in:
Accounts receivable (4,426) (9,283)
Inventories (1,159) 1,328
Other current assets (586) 596
Other assets 149 (1,260)
Increase (decrease) in:
Accounts payable (1,905) 9,248
Accrued expenses and restructuring charges 14,600 1,589
Unearned service revenues (728) (2,947)
--------- ---------
Net cash provided by (used in) operating activities (17,675) (114)
--------- ---------
CASH USED IN INVESTING ACTIVITIES:
Expenditures for property and equipment, net (11,086) (4,680)
--------- ---------
Net cash used in investing activities (11,086) (4,680)
--------- ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from sale of common stock 4,000 8,952
Proceeds from stock purchase and option plans 915 353
Increase (decrease) in bank debt 4,963 (639)
Proceeds from sale and leaseback of equipment 3,483 1,142
Payments of long-term debt (78) (526)
--------- ---------
Net cash provided by financing activities 13,283 9,282
--------- ---------
Net increase (decrease) in cash and equivalents (15,478) 4,488
Cash and equivalents at beginning of period 21,725 11,714
--------- ---------
Cash and equivalents at end of period $6,247 $16,202
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest $3,744 $3,642
Income taxes 0 0
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 3 -
<PAGE> 6
LTX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial statements have been prepared by the
Company, without audit, and reflect all adjustments which, in the opinion
of management, are necessary for a fair statement of the results of
the interim periods presented. Certain information and footnote
disclosures normally included in the annual financial statements which are
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Accordingly, although the Company
believes that the disclosures are adequate to make the information
presented not misleading, the financial statements should be read in
conjunction with the footnotes contained in the Company's Annual Report on
Form 10-K.
2. Revenues from product sales are recognized at the time units are
shipped. Service revenues are recognized over the applicable contractual
periods or as services are performed. Revenues from engineering contracts
are recognized over the contract period on a percentage of completion
basis.
3. Inventories are stated at the lower of cost (first-in, first-out) or
market and include material, labor and manufacturing overhead. Inventories
consisted of the following at:
<TABLE>
<CAPTION>
April 30, July 31,
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Raw materials $10,560 $11,694
Work-in-process 24,196 23,859
Finished goods 11,583 9,627
------- -------
$46,339 $45,180
======= =======
</TABLE>
4. Interest expense and income were as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
April 30, April 30,
------------- -------------
1994 1993 1994 1993
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Expense $1,094 $1,114 $3,082 $3,150
Income (100) (56) (337) (153)
------- ------- ------- -------
Interest expense, net $994 $1,058 $2,745 $2,997
======= ======= ======= =======
</TABLE>
5. Net loss per share is based on the weighted average number of shares
of common stock outstanding.
- 4 -
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the principal
items included in the Consolidated Statement of Operations as percentages of
total revenues.
<TABLE>
<CAPTION>
Percentage
Percentage of Net Sales Increase/(Decrease)
----------------------------------------- -----------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended 1994 1994
April 30, April 30, Over Over
---------------- ----------------
1994 1993 1994 1993 1993 1993
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Product 85.0 % 90.0 % 87.3 % 89.2 % (17.1)% (0.3)%
Service 15.0 10.0 12.7 10.8 31.9 19.7
------- ------- ------- -------
Total sales 100.0 100.0 100.0 100.0 (12.2) 1.9
Cost of sales:
Product 63.4 60.5 62.7 59.4 (8.0) 7.7
Service 8.0 6.1 7.5 6.8 16.6 12.0
Provision for excess inventories -- -- 2.8 -- -- 100.0
------- ------- ------- -------
Total cost of sales 71.4 66.6 73.0 66.2 (5.7) 12.4
------- ------- ------- -------
Gross profit 28.6 33.4 27.0 33.8 (25.0) (18.7)
Engineering and product
development expenses 11.9 10.4 11.9 11.8 0.7 2.8
Selling, general and
administrative expenses 25.8 22.5 25.9 24.9 0.2 5.9
Restructuring charges -- -- 11.5 -- -- N/M
------- ------- ------- -------
Income (loss) from operations (9.1) 0.5 (22.3) (2.9) N/M N/M
Interest expense, net 2.5 2.3 2.1 2.4 (6.0) (8.4)
------- ------- ------- -------
Loss before income
taxes & minority interest (11.6) (1.8) (24.4) (5.3) N/M N/M
Provision for income taxes -- -- -- -- -- --
------- ------- ------- -------
Loss before minority
interest (11.6) (1.8) (24.4) (5.3) N/M N/M
Minority interest in net loss of
subsidiary 0.8 -- 0.5 1.0 N/M (39.0)
------- ------- ------- -------
Net loss (10.8)% (1.8)% (23.9)% (4.3)% N/M N/M
======= ======= ======= =======
</TABLE>
- 5 -
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended April 30, 1994 Compared
to the Three Months Ended April 30, 1993
Sales were $40.2 million in the third quarter of fiscal 1994 as
compared to $45.8 million in the third quarter of the prior fiscal
year. The decline in revenues reflected lower digital product shipments,
particularly for testing microprocessor and other personal computer-related
devices. An increase in sales of the Company's mixed signal products and
services in the third quarter of fiscal 1994 partially offset the decline in
digital product sales.
The gross profit margin was 28.6% of net sales in the third quarter of
fiscal 1994 compared to 33.4% in the third quarter of the prior fiscal year.
The Company's gross profit margin in the third quarter of fiscal 1994 was
adversely affected by proportionately higher fixed manufacturing costs on
lower digital product sales and by the lower average selling prices for its
digital products due to changes in product mix and competitive pricing.
Engineering and product development expenses in the third quarter of
fiscal 1994 were approximately the same level as the third quarter of fiscal
1993. Expenses in both years included substantial development costs relating
to the Delta 100 and Delta 50 generation of digital test systems, enVision
test system software and significant enhancements to the Company's mixed signal
product line.
In March 1994, the Company announced a major restructuring to properly
size operations to its current level of business. The restructuring
primarily consisted of a planned consolidation of facilities, including the
Company's leased buildings in Westwood, Massachusetts, and a workforce
reduction of 100 employees. The Company took a $14.4 million charge to its
second quarter results of operations relating to the elimination of excess
leased facilities and severance payments and outplacement benefits for
terminated employees.
Although the initial effects of the restructuring benefited the third
quarter of fiscal 1994 in comparison with the second quarter of fiscal 1994,
selling, general and administrative expenses in the third quarter of 1994 were
approximately the same level as the third quarter of fiscal 1993 due to
increases in personnel and sales activity levels in the first six months of
fiscal 1994.
Interest expense was slightly lower due to the conversion to common
stock of the Company's 10 1/2% Convertible Subordinated Debenture Due
2010 in July 1993. This reduction was partially offset by an increase in
interest expense on higher average bank borrowings for the third quarter of
fiscal 1994 as compared to the third quarter of the prior fiscal year.
There was no tax provision in the third quarter of fiscal 1994 or the
third quarter of fiscal 1993 due to the net loss in both periods. The
Company is currently in a net operating loss carryforward position in most
tax jurisdictions.
The Company's Japanese subsidiary had a net loss in the third quarter
of both fiscal 1994 and fiscal 1993. The minority interest in the net loss of
subsidiary in the third quarter of fiscal 1994 represents the minority
partner's 33% share of the Company's Japanese subsidiary's loss in the period.
There was no minority interest in the third quarter of fiscal 1993 as the
minority partner's original investment had been consumed. The Company's
minority partner guaranteed a portion of the subsidiary's bank lines in the
later part of fiscal 1993.
The Company incurred a net loss of $4.3 million in the third quarter of
fiscal 1994 as compared to a net loss of $0.8 million in the third quarter of
the prior fiscal year.
- 6 -
<PAGE> 9
Nine Months Ended April 30, 1994 Compared
to the Nine Months Ended April 30, 1993
Sales were $125.5 million for the nine months ended April 30, 1994 as
compared to $123.2 million for the nine months ended April 30, 1993 which was
an increase of 1.9%. Although shipments of the Company's mixed signal product
line increased approximately 35% and service revenues increased approximately
20%, the reduction in sales of the Company's digital products of approximately
25% limited the year-to-year increase in total revenues. The decline in
shipments of the Company's digital products resulted from lower demand from
customers who use such products to test microprocessors and personal
computer-related devices.
The gross profit margin was 27.0% of net sales for the nine months
ended April 30, 1994 as compared to 33.8% for the nine months ended April 30,
1993. In the second quarter of fiscal 1994, the Company recorded a $3.5 million
provision for excess inventories primarily as a result of the lower than
anticipated shipment levels in the first six months of fiscal 1994. This
provision lowered the gross profit margin by 2.8% of net sales for the nine
months ended April 30, 1994. In addition, the gross profit margin for the nine
months ended April 30, 1993 includes a payment of $4.3 million from a
development contract with Ando Electric Co., Ltd. which was included in product
sales. There was no similar contract revenue for the nine months ended April
30, 1994. The gross profit margin was also adversely affected by
proportionately higher fixed manufacturing costs on lower digital product sales
and by lower average selling price for the Company's digital products
during the nine months ended April 30, 1994.
Engineering and product development expenses were $14.9 million for the
nine months ended April 30, 1994 as compared to $14.5 million for the nine
months ended April 30, 1993. Expenses in both years included substantial
development costs relating to the Delta 100 and Delta 50 generation of digital
test systems, enVision test system software and significant enhancements to the
Company's mixed signal product line.
Selling, general and administrative expenses were $32.5 million for the
nine months ended April 30, 1994 as compared to $30.7 million for the
nine months ended April 30, 1993. The increase in expenses of $1.8 million was
largely due to personnel additions and a higher level of selling expenses,
including travel and trade show costs, in the first part of fiscal 1994.
Interest expense was slightly lower year-to-year due to the conversion
to common stock of the Company's 10 1/2% Convertible Subordinated Debentures
Due 2010 in July 1993. This reduction was partially offset by an increase
in interest expense on higher average bank borrowings for the nine months ended
April 30, 1994.
There was no tax provision for the nine months ended April 30, 1994
and the nine months ended April 30, 1993 due to the net loss in both periods.
The Company's Japanese subsidiary had a net loss for the nine months
ended April 30, 1994 and for the nine months ended April 30, 1993. The
minority interest in the net loss of subsidiary represents the minority
partner's share of the Company's Japanese subsidiary's loss in both periods.
The Company incurred a net loss of $29.9 million for the nine months
ended April 30, 1994 as compared to a net loss of $5.3 million for the nine
months ended April 30, 1993. The net loss for the nine months ended April 30,
1994 includes a $14.4 million restructuring charge and a $3.5 million provision
for excess inventories.
- 7 -
<PAGE> 10
Three Months Ended April 30, 1994 Compared
to the Three Months Ended January 31, 1994
Sales in the third quarter of fiscal 1994 increased to $40.2 million
from $38.1 million in the second quarter of fiscal 1994. This increase was
primarily a result of a higher level of digitial product shipments in the
quarterly period as compared to the low level in the second quarter of fiscal
1994. Although orders for the Company's mixed signal products exceeded shipments
in the third quarter of fiscal 1994, sales of such products in the third
quarter were slightly less than the second quarter of fiscal 1994.
The gross profit margin was 28.6% of net sales in the third quarter of
fiscal 1994 as compared to 28.8% of net sales in the second quarter of fiscal
1994, excluding the $3.5 million provision for excess inventories. The slight
decline in the gross profit margin was primarily a result of
proportionately higher fixed manufacturing costs on lower digital manufacturing
production levels in the third quarter of fiscal 1994. The Company was able to
satisfy a substantial portion of its third fiscal quarter deliveries of
digital systems with units that had been completed as of the end of the second
fiscal quarter.
As a result of the restructuring in early March 1994, engineering and
product development and selling, general and administrative expenses combined
were $1.5 million lower in the third quarter of fiscal 1994 than in the second
quarter of fiscal 1994.
Net interest expense increased $0.1 million in the third quarter of
fiscal 1994 over the second quarter of fiscal 1994 as a result of higher
average bank borrowings and lower interest income on lower average cash balances
in the third quarter of fiscal 1994.
There was no tax provision in the second and third quarters of fiscal
1994 due to the net loss in both periods.
The Company's Japanese subsidiary had a net loss in the second and
third quarters of fiscal 1994. The minority interest in the net loss of
subsidiary represents the minority partner's share of the Company's
Japanese subsidiary's loss in both periods.
The Company reduced its net loss in the third quarter of fiscal 1994 to
$4.3 million, from $24.0 million in the second quarter of fiscal 1994. The net
loss of $24.0 million in the second quarter included a $14.4 million
restructuring charge and a $3.5 million provision for excess inventories.
Liquidity and Capital Resources
For the nine months ended April 30, 1994, the Company used $17.7 million
in cash for operating activities, primarily as a result of the net loss for the
period, before non-cash restructuring charges and provisions for excess
inventories. At July 31, 1993, the Company had sold $5.1 million in accounts
receivable to its domestic bank under a factoring agreement. Excluding this
factoring, accounts receivable decreased $0.7 million from July 31, 1993 to
April 30, 1994. Inventories increased $9.1 million in the first six months of
fiscal 1994 (before a $3.5 million provision for excess inventories) as a result
of the lower than anticipated shipment level in this period and inventory
purchases for future deliveries of the Company's new generation of digital test
systems. However, the Company reduced its inventory level by $4.4 million in
the three months ended April 30, 1994 by consuming a portion of its excess
inventories through product shipments in this quarterly period. Accounts payable
increased $4.2 million in the first six months of fiscal 1994, as a result of
the high level of inventory purchases in this period in combination with a
longer payment cycle to suppliers. Accounts payable fell $6.1 million in
the three months ended April 30, 1994, as a result of lower inventory purchases
and payments on outstanding balances during this quarterly period.
- 8 -
<PAGE> 11
Capital equipment additions for the nine months ended April 30, 1994
were $11.1 million and exceeded depreciation charges of $6.9 million.
The capital equipment additions in the period consisted primarily of LTX
test systems for engineering programs and customer support requirements.
During the nine months ended April 30, 1994, the Company financed $3.5 million
of the capital equipment additions with lease financing.
As of April 30, 1994, the Company had $4.1 million in borrowings
outstanding under its domestic bank line. There were no borrowings outstanding
under this bank line at July 31, 1993. The Company is in default of its
financial covenants under this line and is currently negotiating with its
bank to restructure the agreement. This line matures in mid-August 1994, is
available solely for the purpose of financing certain designated foreign
accounts receivable and export inventories and is secured by substantially all
of the Company's accounts receivable, inventories and equipment. This line
currently bears interest at prime plus 5%. An additional $3.9 million was
outstanding at April 30, 1994 under an accounts receivable factoring agreement
with its domestic bank and is included in notes payable. Since April 30, 1994,
the Company has repaid this amount, changed the repayment procedures for its
factoring arrangements, and has factored an additional $3.8 million of accounts
receivable with its domestic bank.
The Company's Japanese subsidiary reduced its bank borrowings, which
are payable upon demand, from $9.9 million at July 31, 1993 to $6.9
million at April 30, 1994. All of the reduction in bank borrowings
occurred in the third quarter of fiscal 1994. The Company's minority partner
has guaranteed the $6.9 million in borrowings outstanding at April 30,
1994. The Company's Japanese subsidiary had an unused demand bank line of
$2.0 million available at April 30, 1994 which is guaranteed by the
Company.
The Company continued to have two issues of convertible subordinated
debentures outstanding at April 30, 1994: $15.7 million (face
amount) of 13 1/2% Convertible Subordinated Debentures Due 2011 and $7.3
million of 7 1/4% Convertible Subordinated Debentures Due 2011.
Interest is payable on these debentures semi-annually. Annual sinking fund
payments, in the amounts of $785,000 and $366,000, respectively, are due
on those two debenture issues commencing April 15, 1996.
In January 1994, the Company received $4.0 million from the sale of
970,000 shares of its common stock to several private investors. The Company
used the proceeds from this sale for working capital requirements. In the
third quarter of fiscal 1993, the Company received $8.9 million from the sale
of 2,238,000 shares of common stock to a private investor.
The Company plans to continue to reduce its cash requirements for the
balance of the fiscal year primarily by minimizing working capital
requirements. The Company's ability to meets its cash requirements in the near
term will depend on the availability of existing credit arrangements (bank and
trade) and future debt or equity financings. There can be no assurance that
the Company will be able to maintain its existing credit arrangements or obtain
necessary additional financings as and when required or on terms that are
acceptable to the Company.
- 9 -
<PAGE> 12
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)
10.1 Forbearance Agreement, between the Company and Silicon
Valley Bank, dated as of April 22, 1994.
10.2 Sample Standard Form of Purchase Agreement which the Company uses
to factor receivables with its domestic bank.
(b) There were no reports on Form 8-K filed during the three months
ended April 30, 1994.
- 10 -
<PAGE> 13
SIGNATURES
LTX Corporation
<TABLE>
<S> <C>
June 10, 1994 By: /s/ Roger W. Blethen
- - ------------------------- -----------------------------
Roger W. Blethen
President
By:
- - ------------------------- -----------------------------
Martin S. Francis
President
June 10, 1994 By: /s/ John J. Arcari
- - ------------------------- -----------------------------
John J. Arcari
Treasurer
Chief Financial Officer
(Principal Financial Officer)
June 10, 1994 By: /s/ Glenn W. Meloni
- - ------------------------- -----------------------------
Glenn W. Meloni
Controller
(Principal Accounting Officer)
</TABLE>
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<PAGE> 1
FORBEARANCE AGREEMENT
AGREEMENT dated as of April 22, 1994 by and among LTX CORPORATION and
LTX (Foreign Sales Corporation) B.V., a Massachusetts corporation (the
"Borrowers") and SILICON VALLEY BANK, a California-chartered bank (the
"Bank").
PRELIMINARY STATEMENT
1. The Bank issued and the Borrowers accepted and agreed to a
Commitment Letter dated August 16, 1993 as amended by a First Amendment to
Commitment Letter dated as of December 31, 1993 (the "Commitment Letter")
pursuant to which the Bank agreed to make available to the Borrowers a working
capital line of credit in a principal amount up to $5,000,000. Unless otherwise
defined herein, capitalized terms used herein shall have the same respective
meanings as set forth in the Commitment Letter.
2. The Borrowers and the Bank acknowledge and agree that Events of
Default have occurred and currently exist under the Commitment Letter because
the Borrowers are in breach of financial covenants with respect to minimum
quick ratio, minimum profitability, maximum leverage and minimum capital base
as set forth in Paragraphs 21, 22, 23 and 24 respectively, of Schedule II to
the Commitment Letter (the "Existing Defaults"). As a result of, inter alia,
the Existing Defaults, the Bank is entitled to enforce its remedies under the
Commitment Letter and is not required to make any further advances under the
Commitment Letter.
NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Conditions of Effectiveness.
This Amendment shall be deemed effective as of April 22, (the
"Effective Date") provided that the Bank shall have received on or before April
29, 1994 (a) the counterparts of this Agreement executed by the Borrowers, (b)
the payment of a restructuring fee of $15,000, and (c) the following documents
in form and substance satisfactory to the Bank in its sole discretion,
provided, however, this Agreement shall in no event become effective until
signed by an officer of the Bank in California:
<PAGE> 2
(a) a letter amendment to the Purchase Agreements in the form of
Exhibit A hereto (the Amendment to Purchase Agreements") duly
executed by LTX Corporation; and
(b) the items required to be furnished to the Bank in accordance
with the Amendment to Purchase Agreements.
In addition, the Borrowers agree to furnish to the Bank on or before April 29,
1994 a certificate of the Clerk of the corporation as to votes of the Board of
Directors authorizing this Agreement and the Amendment to Purchase Agreements
and the transactions contemplated hereby and thereby.
Section 2. Confirmation of Representations.
The Borrower hereby confirms that its representations set forth in the
Loan Documents (including without limitation those set forth in Schedule I to
the Commitment Letter as qualified by Exhibit A thereto) are true and correct
as of the date hereof.
Section 3. Release and Discharge of Bank.
In consideration for the Bank's entering into this Amendment, the
Borrowers do hereby release and forever discharge the Bank and its affiliates,
officers, directors, agents, attorneys, employees, successors and assigns, of
and from all manner of actions, causes of action, suits, judgments, claims and
demands, whatsoever, in law or in equity, which have arisen from the beginning
of time up to the Effective Date; whether arising in connection with the
transactions contemplated hereby or by the Commitment Letter, or otherwise.
The Borrowers acknowledge that immediately prior to the Effective Date they
have no right of set-off, counterclaim or defense with respect to any
Indebtedness under the Commitment Letter.
Section 4. Agreement to Forbear.
Subject to the terms and conditions hereof, and effective only upon the
Effective Date, the Bank agrees to forebear from enforcing any of its rights
and remedies under the Commitment Letter or any of the other Loan Documents
solely as a result of the Existing Defaults for the period from the Effective
Date to and including May 15, 1994, provided, however, the Bank may at any time
and with or without notice to the Borrower terminate the foregoing agreement
to forebear if, in the reasonable judgment of the Bank, there occurs any other
Event of Default (other than an Existing Default) or there exists any
condition which has a Material Adverse Effect.
<PAGE> 3
Section 5. Effect on the Commitment Letter and
the other Loan Documents
A. The Commitment Letter and the Note shall remain in full force and
effect and are hereby ratified and confirmed. Each of the other Loan Documents
is in full force and effect and is hereby ratified and confirmed.
B. This Agreement (i) does not constitute a waiver or modification of
any term, condition or covenant of the Commitment Letter, the Note, any other
Loan Documents, the Purchase Agreements or any of the instruments or documents
referred to by the foregoing documents, other than as expressly set forth
herein, and (ii) shall not prejudice any rights which the Bank may now or
hereafter have under or in connection with the Commitment Letter, the Note, the
other Loan Documents, the Purchase Agreements or any of the instruments or
documents referred to therein.
Section 6. Cost and Expenses.
The Borrowers agree to pay on demand all costs and expenses of the Bank
in connection with the preparation, reproduction, execution and delivery of
this Agreement and the other instruments and documents to be delivered
hereunder (including without limitation the Note), including the reasonable
fees and reasonable out-of-pocket expenses of Sullivan & Worcester, special
counsel for the Bank with respect thereto.
Section 7. Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND WILL, UPON ACCEPTANCE,
CONSTITUTE AN AGREEMENT UNDER SEAL BETWEEN THE PARTIES.
Section 8. Counterparts; Integration.
This Amendment may be signed in one or more counterparts each of which
taken together shall constitute one and the same instrument. This Amendment
constitutes the entire agreement of the parties as to the subject matter
hereof and except as otherwise expressly provided herein, supersedes any and
all prior agreements and understandings, oral and written, of the parties.
Section 9. Waiver of Jury Trial.
EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH CANNOT BE WAIVED, THE
BORROWER HEREBY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY ACTION OR
PROCEEDING OF NATURE WHATSOEVER ARISING UNDER, OUT OF OR IN CONNECTION WITH
THIS AMENDMENT, THE COMMITMENT LETTER OR ANY OF THE OTHER LOAN DOCUMENTS OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY, WHETHER ARISING UNDER STATUTE
(INCLUDING ANY FEDERAL OR STATE CONSTITUTION) OR UNDER THE LAW OF CONTRACT,
TORT OR OTHERWISE AND INCLUDING, WITHOUT
<PAGE> 4
LIMITATION ANY CHALLENGE TO THE LEGALITY, VALIDITY, BINDING EFFECT OR
ENFORCEABILITY OF THIS PARAGRAPH OR THIS RESTATED COMMITMENT LETTER OR ANY OF
THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
executed under seal by their respective officers thereunto duly authorized as
of the date first above written.
ATTEST: LTX CORPORATION
HELEN L. DORGAN JOHN J. ARCARI
By: ____________________________ By: ______________________________
Name: Helen L. Dorgan Name: John J. Arcari
Title: Corporate Secretary Title: Chief Financial Officer
[CORPORATE SEAL]
LTX (FOREIGN SALES)
CORPORATION
ATTEST:
HELEN L. DORGAN ROGER W. BLETHEN
By: ____________________________ By: ____________________________
Name: Roger W. Blethen
Title: Director
SILICON VALLEY EAST, a
Division of Silicon Valley Bank
By: ____________________________
Name: Kenneth P. Wilcox
Title: Senior Vice President
SILICON VALLEY BANK
By: ____________________________
Name:
Title:
(signed in Santa Clara, California)
<PAGE> 5
EXHIBIT:
A - Amendment to Purchase Agreement
<PAGE> 6
EXHIBIT A
April 22, 1994
Via Fax and
Federal Express
LTX Corporation
LTX Park at University Avenue
Westwood, MA 02090
Attn: John J. Arcari
Chief Financial Officer
Gentlemen:
Reference is made to Purchase Agreement dated as of January 14, 1994
and to the Purchase Agreement dated as of January 28, 1994 (the "Purchase
Agreements") between LTX Corporation (the "Company") and Silicon Valley Bank
(the "Bank"). Capitalized terms used in this letter, unless otherwise defined
in this letter, shall have the respective meanings assigned to them in the
Purchase Agreements.
The purpose of this letter is to restate your payment obligations to
the Bank as set forth in the last sentence of Section 5.1 of each of the
Purchase Agreements under the Purchase Agreements as follows:
1. The Company shall pay to the Bank by wire transfer of immediately
available funds any monies previously collected by the Company
with respect to the Obligations (the "Collected Funds") upon
the sooner to occur of: (a) the date upon which the Company closes
the contemplated issuance of subordinated notes; or (b) the date
upon which the Company factors with the Bank eligible domestic
receivables sufficient in amount to pay all or a portion of the
Collected Funds, provided, however, in no event shall the
Collected Funds be repaid in full later than May 7, 1994.
2. In addition to the foregoing, the Company shall pay to the Bank
interest on any such Collected Funds at a per annum rate equal
the Silicon Valley
<PAGE> 7
Bank Prime Rate plus 5% during the period from and including March
23, 1994 to but excluding the date upon which the Bank receives
such Collected Funds from the Company, such interest to be payable
contemporaneously with the payment of the Collected Funds to which
such interest relates. The Company agrees to promptly notify the
Bank as to the date of its receipt of any Collected Funds.
This letter shall be deemed effective as of the date hereof, provided
that the Bank shall have received two copies of this letter duly executed by
you on or before April 25, 1994 and' provided further that the Company
satisfies the following conditions on or before April 26, 1994:
The Company shall provide the Bank with evidence satisfactory to it
that the Company has (i) directed its depositories, State Street Bank
and Trust Company, Bank of America and Shawmut Bank, N.A. to forward
all items received by such banks to accounts designated by the Bank
for collection and (ii) directed all account debtors to make all
payments to a lockbox account designated by the Bank.
The Company further confirms that the obligations of the Company to the
Bank under the Purchase Agreements (including without limitation, the
obligation to pay the "Collected Funds") constitute "Secured Obligations"
under that certain Security Agreement by and between the Company and the Bank
dated as of August 16, 1993.
Except as expressly set forth above, the Purchase Agreements shall
remain in full force and effect and are hereby ratified and confirmed. The
amendments set forth above (a) do not constitute a waiver or, other than as
expressly set forth above, a modification of any term, condition or covenant
of the Purchase Agreements and (b) shall not prejudice any rights or remedies
which the Bank may now or hereafter have under or in connection with the
Purchase Agreements. Nothing herein shall obligate the Bank to extend any
further credit to the Company.
You agree to pay on demand all costs and expenses of the Bank in
connection with the preparation, reproduction, execution and delivery of this
letter amendment and the other instruments and documents to be delivered
hereunder, including the reasonable fees and out-of-pocket expenses of
Sullivan & Worcester, special counsel for the Bank with respect thereto.
This letter amendment may be signed in one or more counterparts each of
which taken together shall constitute one and the same instruments.
<PAGE> 8
THIS LETTER AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Please signify your agreement to the foregoing by causing this
agreement to be executed by your duly executed officer where indicated below.
Very truly yours,
SILICON VALLEY EAST, a Division of
Silicon Valley Bank
By:_____________________________
Name: Kenneth P. Wilcox
Title: Senior Vice President
SILICON VALLEY BANK
By:_____________________________
Name:
Title:
(signed in Santa Clara,
California)
Accepted and Agreed to:
LTX CORPORATION
By:____________________________
Name:
Title:
<PAGE> 1
PURCHASE AGREEMENT
------------------
AGREEMENT made as of the th day of , 1994 among LTX
CORPORATION, a Massachusetts corporation (hereinafter called the "Seller") and
SILICON VALLEY BANK (hereinafter called the "Buyer" ).
WITNESSETH THAT:
----------------
WHEREAS, the Seller owns certain payment obligations arising out of the
sale of their products and services; and
WHEREAS, the Seller desires to sell and the Buyer is willing to
purchase from the Seller such obligations on the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby mutually covenant and agree as follows:
1. Sale and Purchase. Subject to all of the terms and conditions of
this Agreement, the Seller agrees to sell to the Buyer and the Buyer agrees to
purchase from the Seller all right, title and interest of the Seller in and to
(but none of the obligations of the Seller under) the payment of all monies
due and to become due and payable from the account debtors in respect of the
transactions evidenced by the respective purchase orders and invoice numbers
listed on Exhibit A attached hereto and made a part hereof (the right of the
Seller to the payment of such amounts is hereinafter called the
"Obligations").
The sale of the Obligations shall take place at the office of Sullivan
& Worcester, counsel to the Buyer or such other place as may be agreed upon as
of the close of business on , 1994 (said date is hereinafter
called the "Closing Date"). On the Closing Date, the Seller shall deliver to
Buyer a bill of sale and assignment in the form of Exhibit B attached hereto
(the "Assignment"), dated the Closing Date, selling, transferring and assigning
to the Buyer all right, title and interest of such Seller in and to the
Obligations, executed on behalf of such Seller.
1.1 Purchase Price, Etc. The purchase price for the Obligations shall
be $ . Such purchase price shall be
<PAGE> 2
paid by the Buyer on the Closing Date in lawful money of the United States by
the deposit of such sum in the demand deposit account maintained by the Seller
at the Buyer's Santa Clara, California office or by such other means as the
parties agree.
1.2 Limited Recourse. Except in the event of a breach by the Seller
of its representations and warranties and covenants contained in this Agreement
(including without limitation the obligations of the Seller under Section 5
below), the purchase of the Obligations hereunder is made by the Buyer without
recourse to the Seller and the Seller shall have no liability, obligation,
responsibility or accountability to the Buyer for any failure by any Obligor
(as defined in Section 2.2) to pay the Obligations when the same are due and
payable under the terms of the Obligations Documentation (as defined in Section
2.2).
1.3 Use of Proceeds. The Seller covenants that the proceeds of the
sale of its Obligations will be used for general corporate purposes.
2. Representations and Warranties. In order to induce the Buyer to
enter into this Agreement, the Seller hereby represents and warrants that:
2.1 Corporate Existence and Authority, Etc. The Seller is a
corporation duly organized and validly existing under the laws of
Massachusetts. The Seller is in good standing in its jurisdiction of
incorporation and has all necessary power for the execution, delivery and
performance of this Agreement. The Seller has taken all corporate action
necessary to make this Agreement and the transactions listed on Exhibit A, as
the case may be, the valid, binding and enforceable obligation each purports to
be, and neither the execution and delivery of this Agreement nor the
consummation of any of the transactions herein referred to or contemplated
hereby nor the fulfillment of the terms hereof (a) has constituted or resulted
in or will constitute or will result in a breach of the provisions of any
contract or agreement to which the Seller is a party or by which it or any of
its properties or assets is bound, or of the charter or by-laws of the Seller
or the violation of any presently existing applicable judgment, writ,
injunction, decree or order or any applicable law or governmental order, rule
or regulation, and (b) has resulted in or will result in the creation or
imposition of any security interest, lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Seller, except for the
interest of the Buyer hereunder. The Seller maintains, and until the payment in
full of the Obligations will maintain, its accounting and other records in
respect of the Obligations at the chief executive office of the Seller, LTX
Park at University Avenue, Westwood, Massachusetts, 02090-2306.
<PAGE> 3
2.2 The Obligations. Exhibit A attached hereto contains a true and
correct list of the customer and account debtor (each herein called an
"Obligor" and collectively the "Obligors"), the purchase order number, the
invoice number (the purchase order, invoice and all documentation relating to
the Obligations is herein called the "Obligations Documentation"), and the
unpaid amounts due in respect thereof which comprise the Seller's Obligations.
True and correct original copies of all the Obligations Documentation relating
to each of the Obligations has heretofore been delivered to the Buyer. None of
the Obligations are currently evidenced by chattel paper or instruments. Each
of the Obligations is in full force and effect and is the valid and binding
obligation of the parties thereto, enforceable in accordance with its terms,
and, without limiting the generality of the foregoing, constitutes the legal,
valid and binding obligation of the Obligor to pay to the Seller the
Obligations, subject to no set-off or counterclaim or discounts or deductions.
Neither the Seller, nor any of the Obligors, is in default in the performance
of any of the provisions of the documentation applicable to its transactions
included within the Obligations. The Seller hereby further represents and
warrants to the Buyer as follows:
(a) As of the date hereof, the aggregate unpaid balance of the
Obligations is $ .
(b) The Seller has heretofore delivered to its Obligors all equipment
and related materials and services required to be so delivered
by the terms of the Obligations Documentation for the Obligations
in question to be due and payable as indicated on Exhibit A.
2.3 The Assignments; No Offset; No Liens. When executed and delivered
pursuant hereto, the Assignment, in the form of Exhibit B hereto will vest in
the Buyer all the right, title and interest of the Seller in and to the
Obligations, provided that the Assignments will not impose upon the Buyer any
liability or obligation for the performance of any obligation on the part of
the Seller under the Obligations Documentation. The Obligations are not subject
to any offset, counterclaim or other defense, whether arising out of the
transactions contemplated by the Obligations Documentation or independently
thereof. The Seller's Obligations are owned by the Seller free and clear of
all security interests, liens, charges or encumbrances, except for (a) the
security interest in accounts granted to Silicon Valley Bank by LTX in
connection with that certain Credit Agreement, dated as of August 16, 1993
(and amended as of December 31, 1993 and April 22, 1994), among LTX, LTX
(Foreign Sales Corporation) B.V. and the Bank pursuant to a Security Agreement
dated as of August 16, 1993 between LTX and Silicon Valley Bank, which
security interests are to be released (to the
<PAGE> 4
extent of the Obligations) following the execution and delivery of this
Purchase Agreement, and (b) the interest of the Buyer hereunder.
2.4 Survival of Representations and Warranties. The representations
and warranties contained in this Section 2 shall survive the payment of the
Obligations. The Buyer will and may rely upon such representations and
warranties notwithstanding any independent inquiry, investigation or
examination of the Obligations Documentation and other documents that may have
been made or may hereafter be made by Buyer.
3. Covenants. The Seller hereby covenants and agrees on a joint and
several basis with the Buyer as follows:
3.1 Performance under Obligations Documentation. The Seller shall
promptly and faithfully perform or cause to be performed all of its obligations
under the Obligations Documentation, and shall not do or omit to do anything as
a result of which the obligation of the Obligors to make payment of the
Obligations under the Obligations Documentation might be reduced or released.
The Seller will not permit the Obligations to become subject to any offset,
counterclaim or other defense, whether arising out of the transactions
contemplated by the Obligations Documentation or independently thereof, and the
Seller will not agree to any amendment of or modification to or waiver of any
of the provisions of the Obligations Documentation without the prior written
consent of the Buyer.
3.2 Representations and Warranties on Closing Date. The
representations and warranties contained in Section 2 hereof shall be true and
correct on and as of the Closing Date with the same force as though made on and
as of the Closing Date.
4. Indemnification.
(a) The Seller hereby agrees that in the event any Obligor is released
from all or part of its Obligations under the relevant Obligations
Documentation to pay the Obligations by reason of:
(i) any act or omission of the Seller; or
(ii) the operation of any of the provisions of the Obligations
Documentation which result in the termination of the Obligor's
obligation to pay all or any part of the Obligations,
then, upon the happening of any such event, the Seller shall thereafter pay to
the Buyer on the date when the Obligor would otherwise have paid the Obligations
to the Buyer an amount equal to the amount of the Obligations not payable by
the Obligor as a
<PAGE> 5
result of such event.
(b) The Seller hereby agrees to pay, and to indemnify and hold
harmless the Buyer from and against, any taxes which may at any time be
asserted in respect of this transaction or the subject matter thereof
(including, without limitation, any sales, occupational, excise, gross
receipts, general corporation, personal property, privilege or license taxes,
but not including taxes imposed upon the Buyer or any such participant with
respect to its income arising out of this transaction) and costs, expenses and
reasonable counsel fees in defending against the same, whether arising by
reason of the acts to be performed by the Seller hereunder or imposed against
the Buyer, such participant, the Seller, the property involved or otherwise;
provided, however, that with respect to any of the foregoing for which the
Seller shall be liable, the Seller shall receive reasonably prompt notice from
the Buyer of the assertion of any such taxes on the Buyer of which the Buyer
has notice.
5. Collection.
5.1 Collection by Seller. In order to facilitate the collection of
the Obligations in the ordinary course of business, the Seller agrees to act as
the Buyer's agent for collection. Accordingly, the Buyer hereby constitutes the
Seller attorney-in-fact to ask for, demand, take, collect, sue for and receive
all payments made in respect of its respective Obligations and to enforce all
rights and remedies thereunder, and hereby assigns such Obligations to the
Seller as agent for collection; provided, however, that such appointment of the
Seller as such attorney-in-fact and such assignment for collection by the Buyer
may be revoked by the Buyer at any time. The Seller, as such attorneys-in-fact,
shall use due diligence and reasonable lawful means to collect all amounts
owed by the Obligors on each Obligation when the same become due. In the
enforcement or the collection of Obligations, the Seller shall commence any
legal proceedings only in its own name as an assignee for collection or
enforcement of the Buyer or, with the Buyer's prior written consent, in the
Buyer's name. In no event shall the Seller take any action which would make the
Buyer a party to any litigation or arbitration proceeding without the Buyer's
prior written consent. Seller represents and warrants that the Obligors under
the Obligations have been instructed by the Seller to remit any payments into
lockboxes at the respective banks identified on Exhibit A and the Seller has
instructed each of Bank of America, State Street Bank and Trust Company and
Shawmut Bank, N.A. to provide the Buyer with a copy of each remittance advice
or other evidence of the receipt of funds provided by such bank to the Seller
on the day of such receipt and to remit such funds to the Seller's operating
account with the Buyer on or before the next banking day. The Seller shall not
modify or cancel the aforementioned instructions to the
<PAGE> 6
Obligors or the lockbox banks without the consent of the Buyer. The Seller
shall not commingle cash and instruments collected as payments on and proceeds
of Obligations with its other assets and funds. The Seller shall (i) hold in
trust for the Buyer and turn over to the Buyer forthwith upon receipt any
payments made to the Seller by Obligors with respect to Obligations and not
previously paid to the Buyer, and (ii) turn over to the Buyer forwith on
receipt all instruments and other proceeds of the Obligations. Any payments in
respect of the Obligations which are not paid to the Buyer on or before the
second banking day following receipt by the Seller shall bear interest from
such date until paid in full at a per annum rate equal to the Prime Rate p]us
5%. The Prime Rate shall mean the per annum rate of interest from time to time
announced and made effective by the Buyer as its Prime Rate (which rate may or
may not be the lowest rate available from the Buyer at any given time).
5.2 Collection by the Buyer. Upon the purchase of the Obligations,
the Buyer shall have full power and authority to ask for, demand, take,
collect, sue for and receive all payments in respect of the Obligations which
the Seller, except for the execution hereof, could ask for, demand, take,
collect, sue for and receive for its own use, and to enforce all rights and
remedies thereunder which the Seller could enforce if =his Agreement had not
been made and the Seller hereby ratifies any actions which the Buyer shall
lawfully take to enforce its rights hereunder. Without limiting the foregoing,
the Buyer may enforce the payment of each of the Obligations in its own name,
and may endorse the name of the Seller on all checks, drafts, money orders and
other instruments tendered to or received in payment of any such Obligations.
The Seller hereby authorizes the Buyer to notify any and all Obligors with
respect to such Obligations of the purchase and sale contemplated hereby, and
to cause all payments in respect thereof to be made directly to the Buyer.
Whether or not the Buyer shall have so notified any Obligors, upon the Buyer's
request the Seller shall at its expense so notify the Obligors, cause all
payments in respect thereof to be made directly to the Buyer and render all
reasonable assistance to the Buyer in collecting such items and in enforcing
claims thereof. All sums collected or received and all property recovered and
possessed by the Buyer in connection with the Obligations shall belong to the
Buyer absolutely. All sums collected or received and all property recovered or
possessed by the Seller in connection with Obligations shall be received and
held by the Seller in trust for and on the Buyer's behalf; and upon receipt of
any such sum or property, the Seller shall forthwith deliver the same to the
Buyer, or upon its order. In connection with their obligations under this
Section 5.2, the Seller agrees to execute such instruments (including without
limitation applications to governmental authorities for the delivery of mail
through an agent) and to adopt such procedures, including the appointment of
trustees or the institution of
<PAGE> 7
depositary or collateral account procedures, as the Buyer may from time to
time request, to provide for the direct collection by it of amounts due under
the Obligations.
5.3 No Obligation to Take Action. The Buy.er shall have no obligation
to perform any of the obligations of the Seller under any Obligations
Documentation or to take any action or commence any proceedings to realize
upon any Obligations (including without limitation any defaulted Obligations),
or to enforce any of its rights or remedies with respect thereto.
6. Collateral Security. As collateral security for payment of the
Obligations, the Seller hereby grants to Buyer a continuing security interest
in and to all right, title and interest of the Seller (if any and whether
currently held or arising in the future) in the goods and prod ducts giving
rise to any of the Obligations, all security interests or liens (and property
subject thereto) from time to time purporting to secure payment of any
Obligation, and all guarantees, insurance and other agreements or arrangements
of whatever character from time to time supporting or securing payment of any
Obligation. The Seller also acknowledges that all of its obligations to the
Buyer hereunder shall be secured pursuant to that certain Security Agreement
dated as of August 16, 1993 between the Seller and the Buyer and pursuant to
that certain supplemental Security Agreement of even date herewith.
7. Further Assurances. The Seller agrees, from time to time, to do and
perform any and all acts and to execute any and all further instruments
required or reasonably requested by the Buyer more fully to effect the
purposes of this Agreement and the sale of the Obligations hereunder,
including, without limitation, the execution of any financing statements or
continuation statements relating to the Obligations for filing under the
provisions of the Uniform Commercial Code of any applicable jurisdiction.
8. Expenses. The Seller agrees to pay all out-of-pocket costs and
expenses of the Buyer in connection with (i) the preparation, execution and
delivery of this Agreement and any participation agreements contemplated
hereby, (ii) the sale of the Obligations hereunder, (iii) the perfection as
against all third parties whatsoever of Buyer's right, title and interest in,
to and under the Obligations sold hereunder and (iv) the enforcement of this
Agreement, including in all cases reasonable fees and disbursements of
Sullivan & Worcester, special counsel to the Buyer.
9. Conditions to Buyer's Obligations. The obligation of the Buyer to
purchase the Obligations hereunder is subject to the condition that all legal
matters incident to the execution and delivery of this Agreement and the
purchase by the Buyer of the
<PAGE> 8
Obligations shall be satisfactory to the Buyer and its special counsel.
10. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of The Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of the
date and year first above written.
LTX CORPORATION
By:_______________________________
Name: John J. Arcari
Title: Chief Financial Officer
SILICON VALLEY BANK
By:_______________________________
Name: Frank Tower
Title: Loan Officer
<PAGE> 9
EXHIBIT A
LTX CORPORATION
List of Accounts Receivable
to Factor at May 13, 1994
<TABLE>
<CAPTION>
INVOICE CUSTOMER LOCKBOX
CUSTOMER NUMBER AMOUNT P.O. # BANK
- - -------- ------- ------ -------- -------
<S> <C> <C> <C> <C>
-----------
TOTAL ................................................................... $
===========
</TABLE>
<PAGE> 10
EXHIBIT B
Bill of Sale and Assignment
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer unto Silicon Valley Bank, its successors or assigns, all the right,
title and interest of the undersigned in and to the accounts specified in
Exhibit A attached hereto and incorporated herein by reference, and all rights
of the undersigned to the payment of money due and payable from the
transactions evidenced thereby, but none of undersigned's obligations
thereunder (such accounts and the rights to such payment being defined as the
Obligations in the Purchase Agreement dated as of , 1994, among the
undersigned and Silicon Valley Bank), effective as of the close of business
on , 1994.
This Bill of Sale and Assignment is made without recourse but subject
to provisions of and pursuant to and upon all the warranties, representations,
covenants and agreements on the part of the undersigned contained in said
Purchase Agreement and is to be governed by, and construed and interpreted in
accordance with, said Purchase Agreement and the laws of The Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed this th day of , 1994.
Attest: LTX CORPORATION
__________________________ By:_________________________
Name: John J. Arcari
Title: Chief Financial Officer
(Corporate Seal)
