<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1995
REGISTRATION NO. 33-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
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 NUMBER)
</TABLE>
LTX PARK AT UNIVERSITY AVENUE
WESTWOOD, MASSACHUSETTS 02090
(617) 461-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN J. ARCARI
LTX CORPORATION
LTX PARK AT UNIVERSITY AVENUE
WESTWOOD, MASSACHUSETTS 02090
(617) 461-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
PAMELA A. KEATING, ESQ. EDWIN L. MILLER, JR., ESQ.
LTX CORPORATION TESTA, HURWITZ & THIBEAULT
LTX PARK AT UNIVERSITY AVENUE 53 STATE STREET
WESTWOOD, MASSACHUSETTS 02090 BOSTON, MASSACHUSETTS 02109
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Common Stock ($.05 par value)..... 4,600,000 shares(2) $11.375 $52,325,000 $18,044
===========================================================================================================
<FN>
(1) Pursuant to Rule 457(c) of the Securities Act of 1933, and solely for the
purpose of calculating the amount of the registration fee, the proposed
maximum offering price per share and the proposed maximum aggregate offering
price are based on the average of the high and low sale prices of $11.75 and
$11 on August 22, 1995 on the Nasdaq National Market of LTX Corporation
Common Stock.
(2) Includes 600,000 shares which the Underwriters have the option to purchase
from the Registrant to cover over-allotments.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated August 25, 1995
PROSPECTUS
4,000,000 SHARES
[LOGO]
LTX CORPORATION
COMMON STOCK
---------------------------
All of the shares of Common Stock offered hereby are being sold by LTX
Corporation ("LTX" or the "Company"). On August 23, 1995, the last reported sale
price on the Nasdaq National Market for the Common Stock was $11.50 per share.
See "Price Range of Common Stock." The Common Stock is quoted on the Nasdaq
National Market under the symbol "LTXX."
---------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING AT PAGE 6.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
Price to Underwriting Proceeds to
Public Discounts and Company(2)
Commissions(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
-------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
=================================================================================================
<FN>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $240,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Common Stock to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ , and $ , respectively. See "Underwriting."
</TABLE>
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made at the offices of Lehman Brothers Inc., New York, New York, on or
about , 1995.
---------------------------
LEHMAN BROTHERS NEEDHAM & COMPANY, INC.
,1995
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
------------------------
LTX(R), Hiper(R) and enVision(TM) are all trademarks of the Company.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) included or
incorporated by reference in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
LTX Corporation designs, manufactures and markets automatic test equipment
for the semiconductor industry that is used to test digital, linear and mixed
signal (a combination of digital and linear) integrated circuits ("ICs") and
discrete semiconductor components. The Company currently offers three lines of
test systems: digital test systems, which test digital ICs, including
microprocessors and microcontrollers; linear/mixed signal test systems, which
test a wide range of linear and mixed signal ICs; and discrete component test
systems, which test small signal and high-power semiconductor components. The
Company also sells service and applications support for its test systems. The
semiconductors tested by the Company's systems are widely used in the computer,
communications, automotive and consumer electronics industries. The Company
markets its products worldwide to both manufacturers and users of digital,
linear and mixed signal ICs and discrete semiconductor components. The Company
sells its test systems to most of the major worldwide semiconductor
manufacturers. The Company's customers include AT&T, Hitachi, Intel, Motorola,
National Semiconductor, Philips, Samsung, SGS Thomson, Silicon Systems and Sony.
All semiconductor manufacturers use semiconductor test equipment ("STE") to
design and manufacture semiconductors. Demand for STE is driven by capacity
expansion in the semiconductor industry and advances in semiconductor
technology. Advances in semiconductor technology have permitted the design and
manufacture of increasingly complex semiconductors with improved performance at
lower cost. As a result, semiconductors have become more widely used across a
broad spectrum of industries, including the computer, communications, automotive
and consumer electronics industries. The resulting business expansion in the
semiconductor industry, together with more advanced semiconductor technology,
have created a demand for STE that is faster, more versatile, more accurate,
more productive and easier to program and maintain. STE that meets this demand
also reduces the customer's total cost of testing.
The Company's strategy is to produce and supply high performance, modular
test systems using leading-edge technology. In addition, the Company's strategy
is to provide complete test solutions to its worldwide customer base through its
substantial group of engineers located throughout the world. This strategy
enables the Company to provide STE that is capable of testing advanced
semiconductors in the design phase and testing these devices at lower cost in
the production phase. The Company believes its strategy enables it to build
strong long-term alliances with its customers and to meet their demand for
higher performance, more cost effective test systems.
The Company's test systems are also used by semiconductor manufacturers for
design verification, characterization, qualification and failure analysis of
ICs. In addition, certain large electronic equipment manufacturers use the
Company's test systems for incoming inspection and for further classification of
ICs. All of the Company's test systems are comprised of multiple
computer-controlled instruments which send signals to a device under test and
measure the responses of that device to classify the device by performance
characteristics and to ensure conformance with quality standards. The Company's
test system instrumentation is controlled by operating system software which is
developed by the Company. Current prices for the Company's test systems range
from approximately $400,000 for certain low pin count systems to approximately
$4,000,000 for a high pin count Delta Series test system.
The Company markets its products through its direct sales force in most
parts of the world. In Japan, the second largest market for STE, the Company
encounters significant competition from local STE manufacturers. In order to
better penetrate the Japanese market, the Company has entered into strategic
alliances with Sumitomo Metal Industries, Ltd., Ando Electric Co. Ltd., a
Japanese STE manufacturer and majority-owned subsidiary of Nippon Electric
Corporation, Ltd. (NEC), and Asia Electronics, Inc., a Japanese STE manufacturer
which is 50% owned by Toshiba Corporation.
LTX was incorporated in Massachusetts in August 1976. The Company's
principal executive offices are located at LTX Park at University Avenue,
Westwood, Massachusetts 02090, and its telephone number at that location is
(617) 461-1000.
3
<PAGE> 5
<TABLE>
------------------------------------------------------------------------------
THE OFFERING
<S> <C>
Common Stock offered by the Company....................... 4,000,000 shares
Common Stock to be outstanding after the offering(1)...... 33,326,589 shares
Use of proceeds by the Company............................ Working capital, capital expenditures,
debt repayment and other general
corporate purposes.
Nasdaq National Market symbol............................. LTXX
<FN>
---------------
(1) Based on the number of shares of Common Stock outstanding as of August 23,
1995 and excluding 2,327,392 shares of Common Stock reserved for issuance
pursuant to outstanding stock options, 2,042,017 shares of Common Stock
reserved for issuance pursuant to outstanding warrants and 406,556 shares of
Common Stock reserved for issuance upon conversion of the Company's 7 1/4%
Convertible Subordinated Debentures Due 2011.
</TABLE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED JULY 31 ENDED APRIL 30
-------------------------------------------- --------------------
1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales..................... $200,361 $149,106 $172,932 $168,326 $125,499 $150,378
Gross profit.................. 78,972 43,032 59,406 47,887 33,894 52,021
Restructuring charges......... -- 2,800 -- 14,376 14,376 --
Income (loss) from
operations.................. 11,165 (23,240) (2,886) (28,401) (27,932) 9,242
Net income (loss)............. 6,128 (24,260) (4,309) (31,304) (29,941) 5,614
Net income (loss) per share... $ 0.36 $ (1.22) $ (0.20) $ (1.23) $ (1.18) $ 0.20
Weighted average shares....... 21,963 19,888 21,089 25,485 25,295 28,631
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------
FISCAL 1994 FISCAL 1995
------------------------------------------------ -------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30,
1993 1994 1994 1994 1994 1995 1995
----------- ----------- --------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $47,164 $38,119 $ 40,216 $ 42,827 $46,790 $50,017 $ 53,571
Gross profit.............. 14,945 7,455 11,494 13,993 15,861 17,469 18,691
Restructuring charges..... -- 14,376 -- -- -- -- --
Income (loss) from
operations.............. (754) (23,525) (3,653) (469) 2,037 3,135 4,070
Net income (loss)......... (1,605) (24,005) (4,331) (1,363) 786 1,917 2,911
Net income (loss) per
share................... $ (0.06) $ (0.96) $ (0.17) $ (0.05) $ 0.03 $ 0.07 $ 0.10
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1995
-----------------------------
PRO FORMA(1) AS ADJUSTED(2)
------------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................................... $ 55,317 $ 98,708
Total assets....................................................... 140,704 184,095
Short-term debt.................................................... 8,019 8,019
Long-term debt..................................................... 28,354 28,354
Stockholders' equity............................................... 59,052 102,443
<FN>
---------------
(1) Stated on a pro forma basis to reflect the conversion of the Company's
13 1/2% Convertible Subordinated Debentures Due 2011 into Common Stock in
July 1995.
(2) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $11.50 per share
(the closing price of the Common Stock on August 23, 1995) and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
-------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 6
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be carefully considered in evaluating the Company and its
business before purchasing any of the shares of Common Stock offered hereby.
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The Company's business is largely dependent upon the capital expenditures
of semiconductor manufacturers. The semiconductor industry is highly cyclical
and has historically experienced recurring periods of oversupply, which often
have had a severely detrimental effect on such industry's demand for test
equipment. Over the past two to three years, the semiconductor industry has been
experiencing significant growth, although there can be no assurance that such
growth will continue or that the Company's business and results of operations
will not be adversely affected by future downturns in the semiconductor
industry. The Company attempts to mitigate the risk of cyclicality in the
semiconductor industry and changes in particular segments of the industry by
offering products to a wide geographic base of customers in the digital, linear
and mixed signal IC and discrete component markets. However, any factor
adversely affecting any particular market or segment would adversely affect the
Company's business and results of operations. No assurance can be given that the
Company's business and results of operations will not be materially and
adversely affected if downturns or changes in any particular market segments of
the semiconductor industry occur in the future, especially if all of the market
segments in which the Company participates experience downturns at the same
time.
OPERATING LOSSES; FLUCTUATIONS IN SALES AND OPERATING RESULTS
The Company incurred net losses in fiscal years 1992, 1993 and 1994,
primarily as a result of semiconductor industry cyclicality and reductions in
orders from certain major customers. The loss in fiscal 1994 also included a
significant restructuring charge. Although the Company recognized a net profit
of $5,614,000 in the first nine months of fiscal 1995, there can be no assurance
that the Company will be profitable in the future.
The Company's sales and operating results have fluctuated and could in the
future fluctuate significantly from period to period, including from one
quarterly period to another, due to a combination of factors, including the
cyclical demand of the semiconductor industry, the large selling prices of the
Company's test systems (which typically result in a long selling process),
competitive pricing pressures and the mix between and configuration of digital
and linear/mixed signal and discrete component test systems sold in a particular
period. The Company has also experienced significant fluctuations in its gross
margin on product sales. Given the relatively large selling prices of the
Company's test systems, sales of a limited number of test systems account for a
substantial portion of sales in any particular fiscal quarter and a small number
of transactions could therefore have a significant impact on sales and gross
margins for that fiscal quarter. The impact of these and other factors on the
Company's sales and operating results in any future period cannot be forecast
with accuracy. In addition, the need for continued investment in research and
development, for capital equipment requirements and for extensive worldwide
customer support capability results in significant fixed costs which would be
difficult to reduce in the event that the Company does not meet its sales
objectives. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."
IMPORTANCE OF NEW PRODUCT INTRODUCTIONS
The STE market is subject to rapid technological change and new product
introductions, as well as advancing industry standards. The development of
increasingly complex semiconductors and the utilization of semiconductors in a
broader spectrum of products has driven the need for more advanced test systems
to test such devices at an acceptable cost. The Company's ability to remain
competitive in the digital, linear and mixed signal IC and discrete component
markets will depend upon its ability to successfully enhance existing test
systems and develop new generations of test systems and to introduce these new
products on a timely and cost effective basis. The Company also has to
manufacture its products in volume at a competitive price and
5
<PAGE> 7
on a timely basis to enable customers to integrate them into their operations as
they begin to produce their next generation of semiconductors. The Company's
failure to have a competitive test system available when required by a
semiconductor manufacturer would make it substantially more difficult for the
Company to sell test systems to that manufacturer for a number of years. The
Company has in the past experienced delays in introducing certain of its
products and enhancements, and there can be no assurance that it will not
encounter technical or other difficulties that could in the future delay the
introduction of new products or enhancements. If new products have reliability
or functionality problems, reduced orders, higher manufacturing costs, delays in
collecting accounts receivable and additional warranty expense may result, which
could reduce gross margins on new product sales. The Company's newly introduced
Delta Series of products is subject to the risks associated with new product
introductions, including the risk that reliability or functionality problems
could increase expenses and reduce gross margins on new product sales.
Furthermore, announcements by the Company or its competitors of new products
could cause customers to defer or forego purchases of the Company's existing
products, which would also adversely affect the Company's business and results
of operations. There can be no assurance that the Company will be successful in
the introduction and volume manufacture of its new products, that such
introduction will coincide with the development by semiconductor manufacturers
of their next generation semiconductors or that such products will satisfy
customer needs or achieve market acceptance. The failure to do so could
materially and adversely affect the Company's business and results of
operations.
HIGHLY COMPETITIVE INDUSTRY
The STE industry is highly competitive in all areas of the world. Most of
the Company's major competitors have substantially greater financial resources
and some have more extensive engineering, manufacturing, marketing and customer
support capabilities than the Company. The Company expects its competitors to
continue to improve the performance of their current products and to introduce
new products with improved price and performance characteristics. The Company's
major competitors in the market for digital test systems are Schlumberger
Limited, Teradyne, Inc. and Credence Systems Corporation, except in Japan where
the Company's major competitor is Advantest Corporation (an affiliate of Fujitsu
Limited). The Company's principal competitor for linear/mixed signal test
systems is Teradyne, Inc., except in Japan where the Company's major competitor
is Yokogawa Electric Works. The Company principally competes on the basis of
performance, cost of test, reliability, customer service, applications support,
price and ability to deliver its products on a timely basis. New product
introductions by the Company's competitors could cause a decline in sales or
loss of market acceptance of the Company's existing products and could prevent
the successful introduction of the Company's new products. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and adversely affecting the Company's
business and results of operations. In particular, at the end of a product life
cycle and as the Company and its competitors introduce more technologically
advanced products, it becomes more difficult to maintain established prices for
the earlier introduced product. From time to time, the Company's test systems
are sold by third parties as used equipment at prices substantially below the
prices of new test systems sold by the Company. Such sales of used test systems
may adversely affect the Company's sales of new test systems.
Certain of the Company's customers have also developed test equipment. The
Company believes that to remain competitive it will require significant
financial resources for investment in new product development and for the
maintenance of customer support centers worldwide. There can be no assurance
that the Company will be able to compete successfully in the future. See
"Business -- Competition."
CUSTOMER CONCENTRATION
Although the composition of the Company's largest customers has changed
from year to year, sales to the Company's top ten customers accounted for 58% of
net sales in both fiscal 1994 and fiscal 1993 and approximately 66% of net sales
in fiscal 1992. The loss of a major customer or reduction in orders by major
customers, including reductions due to market or competitive conditions in the
semiconductor industry, has had in the past and would have in the future an
adverse effect on the Company's business and results of operations. In addition,
the Company's ability to increase its sales will depend in part upon its ability
to obtain orders from new customers. Once a semiconductor manufacturer has
selected a particular semiconductor test
6
<PAGE> 8
equipment vendor's test system for a generation of semiconductors and made a
substantial investment to develop related test program software and interfaces,
the manufacturer is more likely to continue to purchase test systems from that
vendor for the entire generation of semiconductors and, possibly, subsequent
generations of semiconductors as well. The loss of one or more of its top ten
customers could have a material adverse effect on the Company's business and
results of operations. See "Business -- Customers."
INTERNATIONAL BUSINESS
Approximately 47% and 61% of the Company's sales for fiscal 1993 and fiscal
1994, respectively, were attributable to sales outside the United States. The
Company expects that international sales will continue to represent a
significant portion of its total sales. Sales to customers outside the United
States are subject to risks, including the imposition of governmental controls,
the need to comply with a wide variety of foreign and United States export laws,
political and economic instability, trade restrictions, changes in tariffs and
taxes, longer payment cycles typically associated with international sales, and
the greater difficulty of administering business overseas as well as general
economic conditions. Although substantially all of the Company's international
sales are denominated in United States dollars, a portion of all costs of the
Company's foreign operations are denominated in foreign currencies and,
accordingly, the Company's business and results of operations may be affected by
fluctuations in interest and currency exchange rates. The Company periodically
enters into foreign exchange contracts to hedge the risk that eventual net cash
flows will be adversely affected by changes in exchange rates. Furthermore,
although the Company endeavors to meet technical standards established by
foreign regulatory bodies, there can be no assurance that the Company will be
able to comply with changes in foreign standards in the future. The inability of
the Company to design products to comply with foreign standards could have a
material adverse effect on the Company. In addition, the laws of certain foreign
countries may not protect the Company's intellectual property to the same extent
as do the laws of the United States.
ACQUISITIONS
The Company from time to time may acquire technologies, product lines or
businesses that are complementary to those of the Company. Although the Company
believes that integration of acquired technologies, product lines and businesses
will result in long-term growth and profitability, there can be no assurance
that the Company will be able to successfully negotiate, finance or integrate
such acquired technologies, product lines or businesses. Furthermore, the
integration of an acquired company or business may cause a diversion of
management time and resources. There can be no assurance that a given
acquisition, if consummated, would not materially adversely affect the Company.
DEPENDENCE UPON KEY PERSONNEL
The Company's success is dependent upon certain key management and
technical personnel. There is intense competition for qualified employees among
companies in the semiconductor test equipment industry, and the loss of certain
of the Company's employees or an inability to attract and motivate highly
skilled employees could adversely affect its business.
PROPRIETARY RIGHTS
The Company's future success depends in part upon its proprietary
technology. Although the Company attempts to protect its proprietary technology
through a combination of contract provisions, trade secrets, copyrights and
patents, it believes that its future success depends more upon its engineering,
manufacturing, marketing and service skills. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or the independent development by
others of similar technology.
The use of patents to protect hardware and software has increased in the
STE industry. The Company has at times been notified of claims that it may be
infringing patents issued to others. Although there are no pending actions
against the Company regarding any patents, no assurance can be given that
infringement
7
<PAGE> 9
claims by third parties will not have a material adverse effect on the Company's
business and results of operations. As to any claims asserted against the
Company, the Company may seek or be required to obtain a license under the third
party's intellectual property rights. There can be no assurance, however, that a
license will be available under reasonable terms or at all. In addition, the
Company could decide to resort to litigation to challenge such claims or a third
party could resort to litigation to enforce such claims. Such litigation could
be expensive and time consuming and could materially adversely affect the
Company's business and results of operations. See "Business -- Proprietary
Rights."
DEPENDENCE ON KEY SUPPLIERS
Most of the components for the Company's products are available from a
number of different suppliers; however, certain components are purchased from a
single supplier. Although LTX believes that all single-source components are
currently available in adequate amounts, there can be no assurance that
shortages will not develop in the future. Any disruption or termination of
supply of certain single-source components could have an adverse effect on the
Company's business and results of operations. See "Business -- Manufacturing and
Supply."
VOLATILITY OF STOCK PRICE
The Company's Common Stock has experienced substantial price volatility,
particularly as a result of quarter to quarter variations in the actual or
anticipated financial results of, or announcements by, the Company, its
competitors or its customers concerning technological innovations, new products
or developments concerning patents or proprietary rights. In addition, the stock
market has experienced extreme price and volume fluctuations which have
particularly affected the market price of many technology companies and which
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political conditions,
may have an unfavorable effect on the market price of the Company's Common
Stock.
8
<PAGE> 10
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be $43,391,000 ($49,936,000 if
the Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $11.50 per share (the closing price of the Common Stock on
August 23, 1995) and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company. The net proceeds will
be used to finance working capital, to fund capital expenditures and for other
general corporate purposes. The Company may apply a portion of the net proceeds
to redeem all or a portion of its 7 1/4% Convertible Subordinated Debentures Due
2011. Whether the Company redeems these obligations will depend upon a number of
factors, including the market price of the Company's Common Stock and interest
rates at the time. The Company also may apply a portion of the proceeds to
acquire complementary businesses, assets or technologies. Although there are no
current negotiations, agreements or understandings with respect to any such
acquisition, the Company desires to be able to respond to opportunities as they
arise. In addition, the Company believes that success in its industry requires
substantial financial flexibility to fund future growth. Pending such uses, the
Company will invest the net proceeds in short-term investment-grade,
interest-bearing securities.
PRICE RANGE OF COMMON STOCK
<TABLE>
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "LTXX". The following table sets forth for the periods indicated the
actual high and low sales prices per share of Common Stock, as reported on the
Nasdaq National Market:
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended July 31, 1993:
First Quarter........................................................ $ 2 1/16 $1 3/8
Second Quarter....................................................... 4 1/2 1 3/4
Third Quarter........................................................ 5 7/8 3 1/8
Fourth Quarter....................................................... 6 1/2 4 5/8
Fiscal Year Ended July 31, 1994:
First Quarter........................................................ $ 8 1/4 $4 3/4
Second Quarter....................................................... 5 5/8 3 1/8
Third Quarter........................................................ 4 1/2 2
Fourth Quarter....................................................... 3 3/4 2
Fiscal Year Ended July 31, 1995:
First Quarter........................................................ $ 4 3/4 $3
Second Quarter....................................................... 5 11/16 3 1/2
Third Quarter........................................................ 6 7/16 4 7/8
Fourth Quarter....................................................... 11 5/8 6
Fiscal Year Ended July 31, 1996:
First Quarter (through August 23, 1995).............................. $12 1/8 $9 1/2
</TABLE>
See the cover page of this Prospectus for a recent last reported sale price
of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on the shares of
Common Stock and does not anticipate paying any cash dividends on the shares of
Common Stock in the foreseeable future. The Company currently intends to retain
future earnings to fund the development and growth of its business. Moreover,
the Company's credit agreement with a bank contains certain covenants which
prohibit the payment of cash dividends by the Company.
9
<PAGE> 11
<TABLE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
the Company at April 30, 1995, stated on a pro forma basis to reflect the
conversion of the Company's 13 1/2% Convertible Subordinated Debentures Due 2011
into Common Stock in July 1995, and as adjusted to give effect to the proposed
sale by the Company of the 4,000,000 shares of Common Stock being offered hereby
and the application of the net proceeds therefrom, assuming a public offering
price of $11.50 per share (the closing price of the Common Stock on August 23,
1995) and after deducting the estimated underwriting discounts and commissions
and offering expenses payable by the Company.
<CAPTION>
APRIL 30, 1995
---------------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Short-term debt:
Notes payable to banks.............................. $ 7,530 $ 7,530
Current portion of long-term debt................... 489 489
-------- --------
Total short-term debt....................... $ 8,019 $ 8,019
======== ========
Long-term debt:
Lease purchase obligations.......................... $ 1,535 $ 1,535
Subordinated note payable........................... 20,000 20,000
7 1/4% Convertible Subordinated Debentures Due
2011............................................. 7,308 7,308
-------- --------
Total long-term debt............................. 28,843 28,843
Less current portion............................. (489) (489)
-------- --------
Total....................................... 28,354 28,354
-------- --------
Stockholders' equity:
Common stock, $0.05 par value: 100,000,000 shares
authorized; 28,788,437 shares issued and
outstanding pro forma; 32,788,437 shares issued
and outstanding, as adjusted(1).................. 1,440 1,640
Additional paid-in capital.......................... 130,173 173,364
Accumulated deficit................................. (72,561) (72,561)
-------- --------
Total stockholders' equity....................... 59,052 102,443
-------- --------
Total capitalization........................ $ 87,406 $ 130,797
======== ========
<FN>
---------------
(1) Excludes approximately 2,200,000 shares of Common Stock reserved for
issuance pursuant to stock options outstanding at April 30, 1995, 2,042,017
shares of Common Stock reserved for issuance pursuant to outstanding
warrants and 406,556 shares of Common Stock reserved for issuance upon
conversion of the Company's 7 1/4% Convertible Subordinated Debentures Due
2011.
</TABLE>
10
<PAGE> 12
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company for and as of the end of each of the fiscal years in the four-year
period ended July 31, 1994 and for and as of the end of each of the nine months
ended April 30, 1994 and 1995. The selected consolidated financial data for and
as of the end of each of the four fiscal years in the period ended July 31, 1994
are derived from the consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. The
selected consolidated financial data for and as of the end of each of the nine
months ended April 30, 1995 and 1994 are unaudited. These selected consolidated
financial data should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included or incorporated by reference
into this Prospectus.
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JULY 31 APRIL 30
----------------------------------------- -------------------
1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Product.......................... $187,887 $134,353 $154,392 $145,688 $109,541 $132,010
Service.......................... 12,474 14,753 18,540 22,638 15,958 18,368
-------- -------- -------- -------- -------- --------
Total net sales.......... 200,361 149,106 172,932 168,326 125,499 150,378
Cost of sales:
Product.......................... 113,124 96,024 102,005 104,189 78,742 87,743
Service.......................... 8,265 10,050 11,521 12,750 9,363 10,614
Provision for excess
inventories................... -- -- -- 3,500 3,500 --
-------- -------- -------- -------- -------- --------
Total cost of sales...... 121,389 106,074 113,526 120,439 91,605 98,357
-------- -------- -------- -------- -------- --------
Gross profit....................... 78,972 43,032 59,406 47,887 33,894 52,021
Engineering and product development
expenses......................... 21,859 21,943 19,744 19,604 14,927 14,514
Selling, general and administrative
expenses......................... 45,948 41,529 42,548 42,308 32,523 28,265
Restructuring charges.............. -- 2,800 -- 14,376 14,376 --
-------- -------- -------- -------- -------- --------
Income (loss) from operations...... 11,165 (23,240) (2,886) (28,401) (27,932) 9,242
Interest expense, net.............. 5,550 3,520 3,979 3,874 2,745 3,429
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and minority interest............ 5,615 (26,760) (6,865) (32,275) (30,677) 5,813
Provision for income taxes......... 1,095 -- -- -- -- 199
-------- -------- -------- -------- -------- --------
Income (loss) before minority
interest......................... 4,520 (26,760) (6,865) (32,275) (30,677) 5,614
Minority interest in net loss of
subsidiary....................... 1,608 2,500 2,556 971 736 --
-------- -------- -------- -------- -------- --------
Net income (loss).................. $ 6,128 $(24,260) $ (4,309) $(31,304) $(29,941) $ 5,614
======== ======== ======== ======== ======== ========
Net income (loss) per share........ $ 0.36 $ (1.22) $ (0.20) $ (1.23) $ (1.18) $ 0.20
Weighted average shares............ 21,963 19,888 21,089 25,485 25,295 28,631
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................... $ 73,578 $ 49,019 $ 55,624 $ 48,853 $ 29,056 $ 55,684
Total assets....................... 144,829 118,284 138,257 130,636 130,916 141,727
Short-term debt.................... 4,044 9,430 10,047 7,307 15,341 8,019
Long-term debt..................... 25,956 26,056 21,003 41,399 21,427 41,438
Stockholders' equity............... 76,793 53,084 66,476 40,593 41,450 46,997
</TABLE>
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry. The Company sells and supports its products worldwide to
both manufacturers and users of semiconductor components. LTX has been selling
equipment to test linear/mixed signal ICs since 1977 and digital ICs since 1985.
The Company's business is largely dependent upon the capital expenditures of
semiconductor manufacturers. The semiconductor industry is highly cyclical and
has historically experienced recurring periods of oversupply, which often have
had a severely detrimental effect on such industry's demand for test equipment.
Primarily as a result of semiconductor industry cyclicality and a reduction in
orders from certain major customers, the Company incurred losses in fiscal years
1992, 1993 and 1994. The loss in fiscal 1994 also included a significant
restructuring charge.
The Company has recently taken certain steps to attempt to mitigate the
effect on its business of the cyclicality of the semiconductor industry. In
February 1994, the Company initiated a major restructuring program, including a
reorganization of senior management. This restructuring program lowered the
Company's break-even level of sales and aligned management responsibilities and
objectives along the Company's product lines. The Company consolidated
operations in Massachusetts and California, implemented a workforce reduction of
approximately 100 employees and eliminated several levels of management. Largely
as a result of these actions, quarterly operating expense levels were reduced
$2.1 million in the second half of fiscal 1994. In addition, product reliability
and product cost reduction programs were initiated to improve the Company's
gross margins.
In fiscal 1995, the Company began delivering its Delta Series digital test
systems and its Synchro ProductionPAC mixed signal test system. The Delta 50 and
Delta/ST systems were developed to meet the test requirements of newer high
volume, lower cost devices such as microcontrollers. The Synchro Production PAC
systems are lower cost, focused configurations aimed at the production
requirements of a variety of new mixed signal devices. In July 1994, the Company
strengthened its relationship with Ando Electric Company Ltd. ("Ando"), a
Japanese STE manufacturer and majority-owned subsidiary of Nippon Electric
Corporation, Ltd. (NEC). The Company received $20.0 million from Ando under a
term loan agreement that extends through July 2001. In fiscal 1993, the Company
entered into a development, manufacturing and marketing agreement with Ando
relating to the Delta 50.
Since the second quarter of fiscal 1994, the Company's operating results
have improved significantly. The Company returned to profitability in the first
quarter of fiscal 1995 and had net income for the first nine months of fiscal
1995 of $5.6 million. The Company has substantially increased its backlog
position, while increasing quarterly sales from $38.1 million in the second
quarter of fiscal 1994 to $53.6 million in the third quarter of fiscal 1995.
With the higher level of backlog, the Company has been able to manufacture and
deliver its test systems more evenly within a quarter. Largely as a result of
this, the Company generated $16.5 million in net cash flow from operations in
the first nine months of fiscal 1995.
12
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the items included
in the Consolidated Statement of Operations as percentages of total net sales.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------
NINE MONTHS
YEAR ENDED JULY 31 ENDED APRIL 30
------------------------- ---------------
1992 1993 1994 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales:
Product.......................................... 90.1% 89.3% 86.6% 87.3% 87.8%
Service.......................................... 9.9 10.7 13.4 12.7 12.2
----- ----- ----- ----- -----
Total net sales............................ 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Product.......................................... 64.4 59.0 61.9 62.7 58.3
Service.......................................... 6.7 6.6 7.6 7.5 7.1
Provisions for excess inventories................ -- -- 2.1 2.8 --
----- ----- ----- ----- -----
Total cost of sales........................ 71.1 65.6 71.6 73.0 65.4
----- ----- ----- ----- -----
Gross profit....................................... 28.9 34.4 28.4 27.0 34.6
Engineering and product development expenses....... 14.7 11.5 11.6 11.9 9.7
Selling, general and administrative expenses....... 27.9 24.6 25.1 25.9 18.8
Restructuring charges.............................. 1.9 -- 8.6 11.5 --
----- ----- ----- ----- -----
Income (loss) from operations...................... (15.6) (1.7) (16.9) (22.3) 6.1
Interest expense, net.............................. 2.3 2.3 2.3 2.1 2.3
----- ----- ----- ----- -----
Income (loss) before income taxes and minority
interest......................................... (17.9) (4.0) (19.2) (24.4) 3.8
Provision for income taxes......................... -- -- -- -- 0.1
----- ----- ----- ----- -----
Income (loss) before minority interest............. (17.9) (4.0) (19.2) (24.4) 3.7
Minority interest in net loss of subsidiary........ 1.6 1.5 0.6 0.5 --
----- ----- ----- ----- -----
Net income (loss).................................. (16.3)% (2.5)% (18.6)% (23.9)% 3.7%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended April 30, 1995 Compared to Nine Months Ended April 30, 1994
Net sales were $150.4 million in the nine months ended April 30, 1995 as
compared to $125.5 million in the nine months ended April 30, 1994, an increase
of approximately 20%. Strong semiconductor industry conditions during fiscal
1995 resulted in an increase in demand for the Company's linear and mixed signal
systems. Sales of these products were about 43% higher during the nine months
ended April 30, 1995 as compared to the nine months ended April 30, 1994.
Shipments of linear and mixed signal systems increased across all geographic
regions, particularly to European customers. Sales to various worldwide
facilities of two European customers accounted for approximately 24% of total
sales for the nine months ended April 30, 1995. Service revenues also increased
$2.4 million in the nine months ended April 30, 1995 over the nine months ended
April 30, 1994. Although sales of digital systems were substantially lower in
the first quarter of fiscal 1995 as compared to the first quarter of fiscal
1994, shipments increased 38% during the second and third quarters of fiscal
1995, combined, as compared to the second and third quarters of fiscal 1994.
The gross profit margin was 34.6% of net sales in the nine months ended
April 30, 1995 as compared to 27.0% of net sales in the nine months ended April
30, 1994. The improvement in the gross profit margin was largely a result of
proportionately lower fixed manufacturing costs on the higher shipment levels
and the increase in linear and mixed signal shipments at higher margins. In the
nine months ended April 30, 1994, a provision for excess inventories reduced the
gross profit margin by 2.8% of net sales.
Engineering and product development expenses were $14.5 million, or 9.7% of
net sales, in the nine months ended April 30, 1995 as compared to $14.9 million,
or 11.9% of net sales, in the nine months ended
13
<PAGE> 15
April 30, 1994. The reduction in engineering and product development expenses of
$0.4 million was a result of the Company's restructuring and cost reduction
measures initiated in March 1994.
Selling, general and administrative expenses were $28.3 million, or 18.8%
of net sales, in the nine months ended April 30, 1995 as compared to $32.5
million, or 25.9% of net sales, in the nine months ended April 30, 1994. The
reduction in selling, general and administrative expenses of $4.2 million was
largely a result of the Company's restructuring measures. The Company took a
$14.4 milllion charge in the second quarter of fiscal 1994 as a result of this
restructuring program.
Net interest expense was $3.4 million in the nine months ended April 30,
1995 as compared to $2.7 million in the nine months ended April 30, 1994. The
increase of $0.7 million was the result of the $20.0 million term loan the
Company received in July 1994. This increase was partially offset by lower
average bank borrowings in the nine months ended April 30, 1995 as compared to
the nine months ended April 30, 1994.
The tax provision of $0.2 million in the nine months ended April 30, 1995
relates to certain state and foreign tax provisions. The Company is in a net
operating loss carry forward position in most tax jurisdictions. There was no
tax provision in the nine months ended April 30, 1994 due to the loss for the
period.
The Company's Japanese subsidiary's results of operations were
approximately break-even in the nine months ended April 30, 1995 and the
minority partner's share of the subsidiary's results was insignificant. In the
nine months ended April 30, 1994, the minority partner's share of the Company's
Japanese subsidiary's results was $0.7 million.
In the nine months ended April 30, 1995, the Company had net income of $5.6
million as compared to a net loss of $29.9 million in the nine months ended
April 30, 1994. The loss for the nine months ended April 30, 1994 included a
restructuring charge of $14.4 million and a provision for excess inventories of
$3.5 million.
Fiscal 1994 Compared to Fiscal 1993
Net sales were $168.3 million in fiscal 1994 as compared to $172.9 million
in fiscal 1993, a decrease of approximately 3%. Sales of the Company's linear
and mixed signal products increased by over 30% in fiscal 1994 as compared to
fiscal 1993, and service revenues increased by over 20% year-to-year. However,
this improvement was offset by a reduction of over 30% in sales of the Company's
digital product line in fiscal 1994 as compared to fiscal 1993. The decline in
shipments of the Company's digital product line was due to lower demand from
customers, particularly in North America, for testing microprocessor and other
personal computer-related devices.
The gross profit margin was 28.4% of net sales in fiscal 1994 as compared
to 34.4% in fiscal 1993. In the second quarter of fiscal 1994, the Company
recorded a $3.5 million provision for excess inventories primarily as a result
of lower than anticipated shipment levels in the first half of fiscal 1994. This
provision lowered the gross profit margin by 2.1% of net sales in fiscal 1994.
In fiscal 1993, the gross profit margin was increased by 2.6% as a result of a
$6.5 million payment made by Ando under the terms of a development contract that
was included in product sales. There was no similar contract revenue in fiscal
1994. The gross profit margin in fiscal 1994 was also adversely affected by
proportionately higher fixed manufacturing costs on lower digital product sales
and by lower average selling prices for the Company's digital products.
Engineering and product development expenses were $19.6 million, or 11.6%
of net sales, in fiscal 1994 as compared to $19.7 million, or 11.5% of net
sales, in fiscal 1993. Engineering expenses in both fiscal 1994 and fiscal 1993
included significant development costs for the Company's new generation of
digital products, the Delta Series, as well as enhancements to the mixed signal
product line.
In March 1994, the Company announced a major restructuring program. The
restructuring consisted of a consolidation of facilities, primarily involving
the Company's leased facilities in Westwood, Massachusetts, and a workforce
reduction of approximately 100 employees. As a result of those decisions, the
Company took a $14.4 million restructuring charge to its second quarter results
of operations. The restructuring charge largely related to the Company's plan to
eliminate excess leased facilities and included amounts for severance
14
<PAGE> 16
payments and outplacement benefits for terminated employees. Largely as a result
of the restructuring, engineering and product development expenses and selling,
general and administrative expenses, combined, were $2.1 million lower in the
fourth quarter of fiscal 1994 as compared to the second quarter of fiscal 1994.
Selling, general and administrative expenses were $42.3 million, or 25.1%
of net sales, in fiscal 1994 as compared to $42.5 million, or 24.6% of net
sales, in fiscal 1993. The decrease of $0.2 million was due to a translation
loss of $1.5 million in fiscal 1993, which was partially offset by personnel
additions and higher costs for sales activities in the first half of fiscal
1994.
Net interest expense was $3.9 million in fiscal 1994 as compared to $4.0
million in fiscal 1993. A decrease in interest expense in fiscal 1994 as a
result of the conversion of the Company's 10 1/2% Convertible Subordinated
Debentures Due 2010 into Common Stock in July 1993 was largely offset by an
increase in interest expense on higher average bank borrowings in fiscal 1994.
The Company's Japanese subsidiary had a net loss in fiscal 1994 and fiscal
1993. The minority interest in net loss of subsidiary represents the minority
partner's share of the Company's Japanese subsidiary's loss in both years. The
net loss in fiscal 1994 was reduced substantially from the prior fiscal year
primarily as a result of an increase in sales and gross margin in fiscal 1994
over fiscal 1993.
There was no tax provision in fiscal 1994 or fiscal 1993 due to the net
loss in both years.
The Company had a net loss of $31.3 million in fiscal 1994 as compared to a
net loss of $4.3 million in fiscal 1993. The Company reported a net loss of $1.6
million in the first quarter of fiscal 1994 and a net loss of $24.0 million in
the second quarter of fiscal 1994, including the restructuring charge of $14.4
million and a provision for excess inventories of $3.5 million. The Company
reduced its net loss to $4.3 million in the third quarter of fiscal 1994 and to
$1.4 million in the fourth quarter of fiscal 1994 as a result of a combination
of lower operating expenses from the restructuring effort initiated in March
1994 and an increase in the Company's shipment level and gross profit margin.
Fiscal 1993 Compared to Fiscal 1992
Net sales rose to $172.9 million in fiscal 1993 as compared to $149.1
million in the prior fiscal year, an increase of approximately 16%. Net sales of
the Company's digital products in fiscal 1993 increased 30% over the prior
fiscal year. Although sales of linear/mixed signal systems were down slightly
year-to-year, the Company experienced significant growth in orders for these
products in the second half of fiscal 1993. Service revenues in fiscal 1993
increased 26% over the prior fiscal year to $18.5 million, reflecting the
Company's service coverage of its growing base of installed equipment.
The gross profit margin in fiscal 1993 was 34.4% of net sales as compared
to 28.9% in fiscal 1992. The majority of the improvement in gross profit margin
(2.9%) was the result of higher service revenues, better coverage of fixed
manufacturing costs and lower provisions for excess inventories in fiscal 1993,
as compared to the prior fiscal year. These improvements were partially offset
by lower average selling prices for the Company's digital products in fiscal
1993, primarily as a result of changes in product mix. The balance of the
improvement (2.6%) resulted from a $6.5 million payment made by Ando under the
terms of a development contract that was included in North American product
sales.
Engineering and product development expenses were $19.7 million, or 11.5%
of net sales, in fiscal 1993 as compared to $21.9 million, or 14.7% of net
sales, in fiscal 1992. The decrease was due to cost reduction measures initiated
in fiscal 1992. Expenses in both years included substantial development costs
relating to the Delta Series generation of test systems, the enVision test
system software and significant enhancements to the Synchro product line. The
Delta 50 efforts were partially funded in fiscal 1993 by the Ando development
contract.
Selling, general and administrative expenses were $42.5 million, or 24.6%
of net sales, in fiscal 1993 as compared to $41.5 million, or 27.9% of net
sales, in fiscal 1992. The decrease as a percentage of net sales was primarily a
result of cost reduction measures taken in fiscal 1992 and the increased level
of net sales in fiscal 1993. The decrease as a percentage of net sales was
partially offset by a translation loss of $1.5 million in fiscal
15
<PAGE> 17
1993. The loss was a result of the adverse effect of exchange rates on the
Company's foreign operations, primarily in Japan.
In fiscal 1992, the Company took a $2.8 million charge for severance and
restructuring costs associated with the cost reduction measures initiated in
that fiscal year. There was no provision for severance and restructuring charged
to operations in fiscal 1993.
Net interest expense was $4.0 million in fiscal 1993 as compared to $3.5
million in fiscal 1992. The increase was due to higher average bank borrowings,
lower average cash balances and lower interest rates on cash balances.
The minority interest in net loss of subsidiary of $2.6 million represents
the minority partner's share of the Company's Japanese subsidiary's loss for
fiscal 1993. While the minority partner's original investment in the Company's
Japanese subsidiary was consumed in fiscal 1993, the minority partner made an
additional contribution in fiscal 1993 in the form of guarantees of a portion of
the subsidiary's bank lines.
There was no tax provision in fiscal 1993 or fiscal 1992 as the Company
operated at a loss.
For the fiscal year, the Company had a net loss of $4.3 million as compared
to a net loss of $24.3 million in fiscal 1992.
16
<PAGE> 18
<TABLE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial
information for each of the Company's last seven fiscal quarters, including such
amounts expressed as a percentage of total net sales. The Company believes that
this information includes all necessary adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such quarterly
information when read in conjunction with the consolidated financial statements
included or incorporated elsewhere herein. The operating results for any quarter
are not necessarily indicative of results of any future period. Generally,
orders are lower in the first quarter of the Company's fiscal year than in other
quarters of that fiscal year as a result of buying patterns in the semiconductor
industry, although the Company's net sales in a particular fiscal quarter are a
function of both orders and backlog.
<CAPTION>
FISCAL 1994 FISCAL 1995
------------------------------------------------ -------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30,
1993 1994 1994 1994 1994 1995 1995
----------- ----------- --------- -------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales:
Products............................. $42,466 $ 32,911 $34,164 $36,147 $40,828 $43,864 $47,318
Service.............................. 4,698 5,208 6,052 6,680 5,962 6,153 6,253
------- ------- ------- ------- ------- ------- -------
Total net sales................. 47,164 38,119 40,216 42,827 46,790 50,017 53,571
Cost of sales:
Products............................. 29,275 23,982 25,485 25,447 27,409 28,883 31,451
Service.............................. 2,944 3,182 3,237 3,387 3,520 3,665 3,429
Provision for excess inventories..... -- 3,500 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total cost of sales............. 32,219 30,664 28,722 28,834 30,929 32,548 34,880
------- ------- ------- ------- ------- ------- -------
Gross profit........................... 14,945 7,455 11,494 13,993 15,861 17,469 18,691
Engineering and products development
expenses............................. 5,041 5,092 4,794 4,677 4,722 4,715 5,077
Selling, general and administrative
expenses............................. 10,658 11,512 10,353 9,785 9,102 9,619 9,544
Restructuring charges.................. -- 14,376 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations.......... (754) (23,525) (3,653) (469) 2,037 3,135 4,070
Interest expense, net.................. 851 900 994 1,129 1,251 1,123 1,055
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes and
minority interest.................... (1,605) (24,425) (4,647) (1,598) 786 2,012 3,015
Provision for income taxes............. -- -- -- -- -- 95 104
------- ------- ------- ------- ------- ------- -------
Income (loss) before minority
interest............................. (1,605) (24,425) (4,647) (1,598) 786 1,917 2,911
Minority interest in net loss of
subsidiary........................... -- 420 316 235 -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)...................... $(1,605) $(24,005) $(4,331) $(1,363) $ 786 $ 1,917 $ 2,911
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share............ $ (0.06) $ (0.96) $ (0.17) $ (0.05) $ 0.03 $ 0.07 $ 0.10
PERCENTAGE OF NET SALES:
Net sales:
Products............................. 90.0% 86.3% 85.0% 84.4% 87.3% 87.7% 88.3%
Service.............................. 10.0 13.7 15.0 15.6 12.7 12.3 11.7
----- ----- ----- ----- ----- ----- -----
Total net sales................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Products............................. 62.1 62.9 63.4 59.4 58.6 57.8 58.7
Service.............................. 6.2 8.3 8.0 7.9 7.5 7.3 6.4
Provision for excess inventories..... -- 9.2 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Total cost of sales............. 68.3 80.4 71.4 67.3 66.1 65.1 65.1
----- ----- ----- ----- ----- ----- -----
Gross profit........................... 31.7 19.6 28.6 32.7 33.9 34.9 34.9
Engineering and products development
expenses............................. 10.7 13.4 11.9 10.9 10.1 9.4 9.5
Selling, general and administrative
expenses............................. 22.6 30.2 25.8 22.9 19.4 19.2 17.8
Restructuring charges.................. -- 37.7 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Income (loss) from operations.......... (1.6) (61.7) (9.1) (1.1) 4.4 6.3 7.6
Interest expense, net.................. 1.8 2.4 2.5 2.6 2.7 2.3 2.0
----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes and
minority interest.................... (3.4) (64.1) (11.6) (3.7) 1.7 4.0 5.6
Provision for income taxes............. -- -- -- -- -- 0.2 0.2
----- ----- ----- ----- ----- ----- -----
Income (loss) before minority
interest............................. (3.4) (64.1) (11.6) (3.7) 1.7 3.8 5.4
Minority interest in net loss of
subsidiary........................... -- 1.1 0.8 0.5 -- -- --
----- ----- ----- ----- ----- ----- -----
Net income (loss)...................... (3.4)% (63.0)% (10.8)% (3.2)% 1.7% 3.8% 5.4%
===== ==== ==== ==== ==== ==== ====
</TABLE>
17
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents were $27.6 million at April 30, 1995 as compared to
$17.2 million at July 31, 1994. The increase in cash and equivalents of $10.4
million in the first nine months of fiscal 1995 was a result of $16.5 million of
net cash provided by operating activities, $7.0 million of net cash used for
property and equipment expenditures, $0.3 million of net cash provided by
financing activities, and the favorable effect of exchange rates changes on cash
of $0.6 million.
Accounts receivable declined $3.8 million from July 31, 1994 to April 30,
1995, although sales were $10.7 million higher in the three months ended April
30, 1995 as compared to the three months ended July 31, 1994. The improvement in
accounts receivable is primarily due to more even shipments during the first
nine months of fiscal 1995, which has resulted in a higher level of collections
on shipments made during the period. In the first nine months of fiscal 1995,
inventories increased $3.2 million to meet the higher sales levels and to allow
for more even shipments during the period. The increase in accounts payable of
$2.9 million in the first nine months of fiscal 1995 relates to the higher level
of inventory purchases during the period. During the third quarter of fiscal
1995, the Company received approximately $4.0 million in advance payments for
systems to be delivered after April 30, 1995. At April 30, 1995, the Company had
a restructuring reserve of $8.8 million remaining to cover the estimated future
cash flows relating primarily to excess leased facilities. Cash outflows in the
first nine months of fiscal 1995 were $2.9 million for excess leased facilities
and $0.6 million for severance payments. At April 30, 1995, the Company had
working capital of $55.7 million and its current ratio was 2.05.
Additions to property and equipment of $7.0 million in the first nine
months of fiscal 1995 were about equal to depreciation charges of $7.1 million.
Equipment additions during the period were primarily used in product development
and customer support activities. The Company anticipates that expenditures for
property and equipment in fiscal 1996 will be approximately $15.0 million.
At April 30, 1995 and July 31, 1994, the Company's Japanese subsidiary had
$7.7 million and $6.9 million in bank borrowings outstanding, respectively. The
Company had no borrowings outstanding under its domestic bank line at April 30,
1995 or July 31, 1994.
In July 1995, the Company improved its capital structure and reduced future
interest payments by completing the conversion of its 13 1/2% Convertible
Subordinated Debentures Due 2011 into Common Stock. The outstanding principal
amount of $15.7 million of Debentures was converted into 2,241,000 shares of
Common Stock at the conversion price of $7.00 per share. As a result, long-term
debt was reduced by $13.1 million for the book value of the Debentures and
stockholders' equity was increased by $12.1 million.
Management believes that the Company has sufficient cash resources to meet
its near-term cash requirements. These resources include existing cash balances,
borrowing availability under domestic and Japanese bank lines and future cash
flows from operations.
18
<PAGE> 20
BUSINESS
LTX designs, manufactures and markets automatic test equipment for the
semiconductor industry that is used to test digital, linear and mixed signal (a
combination of digital and linear) ICs and discrete semiconductor components.
The Company currently offers three lines of test systems: digital test systems,
which test digital ICs, including microprocessors and microcontrollers;
linear/mixed signal test systems, which test a wide range of linear and mixed
signal ICs; and discrete component test systems, which test small signal and
high-power semiconductor components. The Company also sells service and
applications support for its test systems. The semiconductors tested by the
Company's systems are widely used in the computer, communications, automotive
and consumer electronics industries. The Company markets its products worldwide
to both manufacturers and users of digital, linear and mixed signal ICs and
discrete semiconductor components.
INDUSTRY BACKGROUND
All semiconductor manufacturers use STE in the design and manufacture of
ICs. During design, STE is used for design verification, characterization,
qualification and failure analysis of ICs. During manufacture, STE is used
during wafer probing to select usable ICs and after packaging to classify ICs by
performance characteristics and to assure conformance with quality standards.
Typically, all ICs are tested two or more times during the manufacturing
process. In addition, certain large electronic equipment manufacturers employ
STE for incoming inspection and for further classification of ICs.
Demand for STE is driven by overall business expansion in the semiconductor
industry and advances in semiconductor technology. When demand for
semiconductors increases, semiconductor manufacturers will often purchase STE to
meet their growing capacity requirements. Advances in semiconductor technology
have allowed for increasingly complex semiconductor devices with improved
performance, lower cost and greater reliability than earlier generations of
devices. As a result, the use of semiconductors has proliferated across many
industries, particularly in applications for the computer, communications,
automotive and consumer electronics industries. In turn, semiconductor
manufacturers are demanding STE that is faster, more versatile, more accurate,
more productive and easier to program and maintain.
According to industry sources, worldwide sales of STE totaled approximately
$2.3 billion in 1994. Sales of STE for testing of digital, linear and mixed
signal ICs and discrete components, which are the markets in which the Company
participates, accounted for approximately $1.5 billion of this total. STE for
testing of memory ICs accounted for the balance. Worldwide semiconductor
shipments increased by approximately 29% and 35% in 1993 and 1994, respectively,
and by approximately 45% in the first six months of 1995 over the comparable
1994 period. Worldwide shipments of STE increased by approximately 37% in 1994.
Prices of STE systems generally increase as their capabilities increase.
The acquisition of STE represents a significant investment on the part of the
Company's customers, who typically consider both the capital and long term
operating costs of the test system in the acquisition process. Factors that can
vary from one test system to another, and thereby affect the total cost of
testing, include:
Speed. A test system that offers faster test times or that is able to test
more than one device at a time is able to test a greater number of devices over
its product life, thus increasing the system's efficiency and reducing the
customer's cost of testing.
Accuracy. Superior accuracy improves the yield of the semiconductor
production process because it reduces the number of good devices that are
improperly rejected and permits the selection of a higher number of premium
devices.
Efficiency. Greater efficiency in test program preparation, loading and
debugging leads to faster time to market for newly-designed semiconductors.
Software. Test system operating software which is easier to use and more
powerful reduces the amount of engineering resources needed to develop test
programs and operate test systems.
19
<PAGE> 21
Reliability. A test system that operates with minimal downtime allows the
customer's production and engineering work to proceed without frequent
intervention and provides more cost-effective operation.
System Architecture. Test system architecture that is modular extends the
product life of a test system because the system can be adapted to meet the
customer's new requirements while largely retaining compatibility with existing
test programs.
Customer Support. Customer specific applications programs, worldwide
service and customer training contribute to the efficient use of STE and
minimize the customer's cost of testing.
COMPANY STRATEGY
LTX's objective is to be the leading supplier of STE in the markets in
which it participates. The key elements of the Company's strategy are as
follows:
Focus on Leading-Edge Devices
The Company's test systems are designed to meet the design and production
test requirements of leading-edge digital, linear and mixed signal ICs and
discrete components. Testing of these devices requires high performance test
systems. The Company believes that only STE manufacturers with sophisticated
technological ability are able to compete effectively in this sector of the STE
market. Moreover, the Company believes that by focusing on testing advanced
devices, it is able to gain valuable insight into future market opportunities.
Develop Adaptable Test Systems
The Company designs its test systems so that they may be adapted and
improved to meet its customers' future needs. This philosophy is reflected in
the modular architecture of many of the Company's products, which permits both
capacity additions and upgrading of performance as the Company develops new
modular options and associated software. When possible, the Company also seeks
to enable its customers to bridge different generations of the Company's
products. For example, the Company's enVision software has been designed to
operate on its new Delta Series products, as well as on its Master Series
products.
Provide Application Specific Solutions
The Company is committed to providing complete test solutions to its
customers by having a substantial group of engineers strategically located at
customer support centers throughout the world. By actively participating in the
application of its test systems, the Company is able to learn more about
requirements for new devices and to improve the design of future test systems.
LTX also believes that its participation in the application of its test systems
enables its customers to get devices to market more rapidly and builds stronger
ties with these customers.
Leverage Worldwide Presence
The semiconductor business is a worldwide industry, with well-established
manufacturers in the United States, Europe and the Far East. The Company has
nine offices in the United States, and in Europe maintains sales and support
offices in the United Kingdom, France, Italy and Germany. In recent years, an
increasing portion of semiconductor test and assembly operations has been
conducted in the Pacific Rim by manufacturers based in the United States and
Europe, as well as by local manufacturers. LTX has established sales and support
offices in Korea, Taiwan and Singapore to focus on the specific needs of the
markets within the Pacific Rim. In addition, through a majority-owned
subsidiary, the Company provides sales and support services at three locations
in Japan. The Company believes that this network of sales and support centers
improves its ability to sell and support its products to the world's major
semiconductor manufacturers.
20
<PAGE> 22
Execute Strategic Alliances in Japan
The Japanese semiconductor industry represents the second largest market in
the world for STE. In Japan, the Company encounters significant competition from
local STE manufacturers. In fiscal 1990, the Company strengthened its resources
and presence in Japan by forming a joint venture with Sumitomo Metal Industries,
Ltd. ("SMI") through which the Company currently sells and services its products
in Japan. In addition, in fiscal 1993, the Company entered into a development,
manufacturing and marketing agreement with Ando, a Japanese STE manufacturer and
majority owned subsidiary of NEC, relating to the Delta 50, a new digital test
system that the Company introduced in fiscal 1994. The Company believes that its
alliance with Ando will better enable it to penetrate the Japanese digital
production STE market. Moreover, since the Delta 50 is compatible with other
Delta Series machines, the Company believes that sales of Delta 50 test systems
to key Japanese semiconductor manufacturers will increase the Company's
opportunities to sell other Delta Series test systems to these same
manufacturers. In fiscal 1995, the Company entered into a development,
manufacturing and marketing agreement with Asia Electronics, Inc. ("Asia"), a
Japanese STE manufacturer which is 50% owned by Toshiba Corporation ("Toshiba"),
relating to a new discrete component test system for testing integrated power
modules that the Company plans to introduce in 1996. The Company believes that
its alliance with Asia will increase LTX's penetration of the market for
discrete component test systems in Japan.
Emphasize Quality and Reliability
The Company's People Driven Quality (PDQ) Program is designed to
continually improve all of its processes and increase the satisfaction of its
customers. The Company believes that this program will lead to: more efficient
and timely performance in engineering projects; improvement in manufacturing
costs through the reduction of defective products and manufacturing cycle time;
better on-time delivery performance; and greater reliability of its test
systems.
PRODUCTS AND MARKETS
Product Overview
The Company offers products in three broad product categories:
- Systems that are used to test linear and mixed signal devices, which
include the Synchro Series and Ninety;
- Systems that are used to test digital devices, which include the Delta
Series and Master Series, and enVision test development software; and
- Discrete component test systems, marketed as the iPTest product line.
Since its inception, the Company has shipped over $1.7 billion of products,
including approximately $1.1 billion of linear/mixed signal test systems and
approximately $600 million of digital test systems. In fiscal 1994, sales of
linear/mixed signal test systems, digital test systems and discrete component
test systems represented approximately 50%, 35% and 2%, respectively, of total
net sales of the Company with service revenues representing 13%.
The Company's test systems are used by semiconductor manufacturers for
design verification, characterization, qualification and failure analysis of
ICs. In addition, certain large electronic equipment manufacturers use the
Company's test systems for incoming inspection and for further classification of
ICs. All of the Company's test systems are comprised of multiple
computer-controlled instruments which send signals to a device under test and
measure the responses of that device to classify the device by performance
characteristics and to ensure conformance with quality standards. The Company's
test system instrumentation is controlled by operating system software which is
developed by the Company. The Company also develops and sells test programs for
specific devices and offers software packages for use by semiconductor
manufacturers for test simulation in engineering design and test program
generation, data collection and statistical analysis in manufacturing.
21
<PAGE> 23
Linear and Mixed Signal ICs
Linear ICs are used in almost every electronic application. Physical
occurrences, such as sound, images, temperature, pressure, speed, acceleration,
position and rotation, consist of continuously varying information. Linear ICs
are used to amplify, filter and shape this information. Mixed signal ICs convert
the signals from linear ICs into digital signals that can be processed by a
computer. Mixed signal devices also convert processed digital information into a
linear form to control physical phenomena or to improve sound and images.
Linear and mixed signal ICs are widely used in automobiles, appliances,
personal computers, telephones, personal communication products and home
entertainment products such as video cassette recorders, cameras, compact disc
players and video games. The complexity and density of these ICs have increased
rapidly over the past several years, as the demand for portable,
battery-operated products has required IC manufacturers to integrate more
functions on each chip and reduce size and power consumption. These
technological advances have resulted in increased demand for higher performance
linear/mixed signal test systems.
Listed in the following table are certain customers for the Company's
linear/mixed signal test systems by market segment.
<TABLE>
--------------------------------------------------------------------------------------------
<CAPTION>
DEVICE APPLICATIONS CUSTOMERS
<S> <C>
--------------------------------------------------------------------------------------------
Automotive General Motors, Motorola,
National Semiconductor
--------------------------------------------------------------------------------------------
Consumer Motorola, National Semiconductor, Siemens,
Sony, SGS Thomson
--------------------------------------------------------------------------------------------
Datacommunications Austria Mikro Systeme ("AMS"),
Newbridge Networks, Rockwell
--------------------------------------------------------------------------------------------
Disk drives National Semiconductor, Philips, Silicon
Systems, SGS Thomson
--------------------------------------------------------------------------------------------
Industrial Cardiac Pacemakers, Maxim,
National Semiconductor, Sony
--------------------------------------------------------------------------------------------
Telecommunications AMS, AT&T, Philips, SGS Thomson
--------------------------------------------------------------------------------------------
Wireless communications AMS, AT&T, Motorola, National Semiconductor
--------------------------------------------------------------------------------------------
</TABLE>
Digital ICs
Digital ICs include microprocessors, microcontrollers, programmable DSPs
(digital signal processing), microperipherals and logic/ASIC (application
specific IC) devices. These ICs are used for computing, controlling and
calculating functions, and are at the heart of most electronic products. The
most well known of these devices is the microprocessor, which is the enabler of
personal computer technology. Microcontrollers, however, are much more broadly
used in automobiles, appliances, home entertainment products, and many other
electronic products which utilize electronic control functions. According to
industry statistics, fewer than 200 million microprocessors were manufactured
worldwide during 1994, while more than 2.5 billion microcontrollers were
manufactured that year. The unit growth alone from 1993 to 1994 in
microcontrollers shipped was approximately double the total production for
microprocessors in 1994. Microprocessors can cost hundreds or even thousands of
dollars, while microcontrollers typically cost tens of dollars. However, testing
of microcontrollers can be as complex as microprocessors and requires high
performance test systems.
22
<PAGE> 24
The following table sets forth types of devices tested by certain customers
of the Company's digital test systems.
<TABLE>
--------------------------------------------------------------------------------------------
<CAPTION>
DEVICE APPLICATIONS CUSTOMERS
<S> <C>
--------------------------------------------------------------------------------------------
ASICs National Semiconductor, Silicon Systems,
Symbios Logic, Western Digital
--------------------------------------------------------------------------------------------
Logic ASAT, Gould/AMI, Harris, Lucky Goldstar,
Silicon Systems
--------------------------------------------------------------------------------------------
Microcontrollers Microchip Technology, National Semiconductor
--------------------------------------------------------------------------------------------
Microprocessors Motorola, NEC, Symbios Logic
--------------------------------------------------------------------------------------------
PC chip sets ACER, ASE Test, Samsung,
Taiwan Semiconductor (TSMC)
--------------------------------------------------------------------------------------------
</TABLE>
LINEAR/MIXED SIGNAL PRODUCTS
LTX offers two product lines for testing linear/mixed signal ICs, the
Syncho Series and Ninety, introduced in 1990 and 1986, respectively.
Synchro Series
The Synchro is the latest generation of the Company's linear/mixed signal
test systems. Synchro test systems are designed for high throughput testing of
linear devices and for testing mixed signal devices that require high digital
pattern rates and high digital pin counts along with analog signal generation
and measurement requirements. The Synchro features DSP(digital signal
processor) - per-pin architecture which allows for concurrent control of both
linear and digital resources at each pin of the IC under test. This design
permits the generation of test signals and measurements on many device pins at
the same time, producing faster test times on high pin count ICs. The Synchro
systems are modular in design which enables customers to add new options to
their systems in the future. This allows customers to increase the capability of
their Synchro system to meet their new test requirements. Since its
introduction, the Company has significantly upgraded the performance and
capabilities of the Synchro through the introduction of new hardware and
software.
The Synchro Series includes the Synchro II, Synchro Plus and Synchro
ProductionPAC test systems:
Synchro II. The configuration of the Synchro II test system is flexible.
This permits LTX customers to choose from a wide array of options to meet the
test requirements of a broad range of linear/mixed signal devices.
Synchro Plus. The Synchro Plus test system is configured with SuperSpeed
Data Pins which can test mixed signal devices at data rates of up to 400 MHz.
The Synchro Plus system addresses the test requirements of new, high speed
devices used in applications such as disk drives for personal computers and
advanced ATM(Asynchronous Transfer Mode) interface boards used to support the
development of the information superhighway.
Synchro ProductionPAC. The Synchro ProductionPAC test systems are lower
cost, smaller footprint, specifically-focused configurations that address the
production requirements of high volume, low cost mixed signal devices. The RFPAC
system is configured to test devices used in the rapidly expanding wireless
communications market. The PowerPAC addresses "smart" power devices that are
being increasingly used in automobiles and consumer electronics. The TelePAC
addresses commodity ICs used in telecommunications. The ConverterPAC is focused
on devices used in multimedia applications.
All Synchro Series test systems are fully compatible in hardware, software
and specification. Current prices range from approximately $400,000 for a
Synchro ProductionPAC system to approximately $2,000,000 for a high pin count
Synchro Plus system.
23
<PAGE> 25
Ninety
The Ninety system is an improved version of the LTX77, the Company's first
linear/mixed signal test system introduced in 1977. Although the Synchro has
largely superseded the Ninety, the Company continues to manufacture the Ninety,
primarily for customers who are already using the Ninety or LTX77 systems and
desire to expand capacity. Many of the Ninety or LTX77 systems the Company has
previously sold are currently still in use. In the past, the Company has
upgraded the performance and capabilities of the Ninety system through the
introduction of new hardware and software. As with the Synchro, a wide array of
options are available. The current prices for a Ninety system range from
approximately $200,000 to approximately $700,000, depending on the system
configuration.
Software Tools
The Company offers software for test program generation and debugging in
manufacturing, called Device Tool, with its Synchro test systems. The Company
also offers data collection and statistical analysis software, called
dataVision. This software is test system independent and provides customers with
solutions for integrated yield management in manufacturing and engineering
device characterization. Device Tool typically sells for approximately $25,000
and dataVision typically sells for approximately $100,000.
DIGITAL PRODUCTS
LTX offers two product lines for testing digital ICs, the Delta Series and
Master Series, which are marketed under the Trillium name. The Delta Series and
Master Series product lines are based on a resource-per-pin architecture which
allows for a complete set of the test system's key features (timing generators,
waveform formatting and pattern memory) for each pin channel of the test system.
The Company believes that this architecture provides for faster, simpler
characterization and engineering debugging of new ICs, better system timing
accuracy, and simplified interfacing with computer-aided design systems. The
Company's enVision test development software is sold with both the Delta Series
and Master Series product lines.
Delta Series
The Company's new line of digital test systems, the Delta Series, includes
the Delta 50, Delta/ST and the Delta 100. Introduced in 1994, the Delta 50 was
designed to meet the production test requirements of newer high volume, lower
cost devices such as microcontrollers. The Delta 50 has a compact design and is
capable of testing 512 pins at data rates of up to 50 MHz or 256 pins at data
rates of up to 100 MHz. The Delta/ST, introduced in 1995, incorporates Synchro
mixed signal technology with Delta Series digital technology to address the test
requirements of a new generation of devices with high performance analog signal
interfaces to complex digital functions. These new devices are enabling the
development of powerful, yet low cost consumer electronic products in areas such
as multimedia and portable communications. The Delta 100, also introduced in
1994, was designed to test high performance microprocessors and the ICs that
make up the chip sets that are used with them. The Delta 100 can test up to 512
pins at data rates of up to 100 MHz with timing accuracy of 150 pico seconds.
The Delta 50, Delta/ST, and Delta 100 operate with the Company's enVision
software providing customers with compatibility among these systems. The current
prices for the Delta Series test systems range from approximately $500,000 for a
low pin count Delta 50 to approximately $4,000,000 for a high pin count Delta
100.
In fiscal 1993, the Company entered into a development, manufacturing and
marketing agreement with Ando, a Japanese STE manufacturer and majority owned
subsidiary of NEC, relating to the Delta 50. The Company has developed the Delta
50 in conjunction with Ando and has granted Ando exclusive rights to manufacture
the Delta 50 in Japan. The Company has retained exclusive rights to manufacture
the Delta 50 outside of Japan. Ando has the exclusive right to sell the Delta 50
in Japan and the Company has exclusive marketing rights for the rest of the
world, with certain exceptions in each case. In connection with this agreement,
the Company has received a payment of $6.5 million from Ando, and the Company
will receive royalty payments on sales of the Delta 50 by Ando. In July 1994,
the Company amended its development agreement with Ando to allow for further
development enhancements to the Delta 50.
24
<PAGE> 26
Master Series
The Master Series product line includes the Deltamaster and Micromaster
test systems, which are enhanced versions of the Company's original digital test
system. The Deltamaster, introduced in 1990, is a high-performance system with
the capability of testing up to 256 pins at data rates of up to 80 MHz. The
Micromaster, introduced in 1987, is a lower-priced system that can test up to
256 pins at data rates of up to 40 MHz. The Micromaster is device interface and
software compatible with the Deltamaster. Although the Delta Series product line
is expected to eventually replace the Master Series, the Company will continue
to sell the Master Series test systems, primarily to customers who are already
using these systems and desire to expand capacity. The current prices for the
Master Series range from approximately $400,000 for a low pin count Micromaster
to approximately $2,000,000 for a high pin count Deltamaster.
enVision
In fiscal 1993, the Company completed the development of its new
object-oriented enVision programming software for use on all its digital test
systems. In earlier generation software languages, programming commands made
direct reference to the hardware of the test system, which required the user to
have a detailed knowledge of the system's hardware. In contrast, this detailed
knowledge is not required when using enVision, thereby allowing the programmer
to focus attention on refining the test program for the specific IC under test.
Thus, the Company has designed enVision to be more device oriented than tester
oriented. enVision permits a user to test multiple devices at the same time,
significantly improving the throughput of the Company's digital test systems.
enVision is an integral feature of the Delta Series product line and can be
purchased by customers of the Master Series product line. The current price for
enVision is approximately $15,000 per workstation.
DISCRETE PRODUCTS
The Company's iPTest systems are used to test discrete semiconductor
components, such as diodes, small signal transistors and power transistors, as
well as arrays of these components. These discrete components are used in every
area of electronics. For example, diodes are used in consumer, industrial and
automotive applications; small signal transistors are used in consumer
electronics, such as hearing aids and portable radios; and power transistors are
used in audio amplifiers, radios and televisions. iPTest systems are also
capable of accurately measuring the characteristics of transient voltage
suppression components, which are widely used to protect personal computers and
telecommunications products from harmful voltage spikes or surges.
The Company expects that arrays of discrete components, such as
multi-device modules, will replace transistors in electric motor control and
will permit a wider use of semiconductors in extremely high power applications,
such as air conditioners, domestic appliances, electric locomotives and
automobiles. These arrays of discrete components are mostly constructed from
high power transistors of IGBT (insulated gate bipolar transistor) technology.
In 1995, the Company introduced new options to its iPTest systems for high
volume production testing of these discrete power components. The Company
believes that these newer components may become the most significant market for
discrete component test systems. In 1995, the Company entered into a
development, manufacturing and marketing agreement with Asia, a Japanese STE
manufacturer which is 50% owned by Toshiba, relating to a new discrete component
test system.
Prices of iPTest systems currently range from approximately $100,000 to
approximately $700,000, depending on the system configuration and testing
specifications.
SERVICE
The Company considers service to be an important aspect of its business.
The Company's worldwide service organization is capable of performing
installations and all necessary maintenance of test systems sold by the Company,
including routine servicing of components manufactured by third parties. The
Company includes a one-year parts and three-month labor warranty on test systems
or options designed and manufactured by the Company, and a three-month labor
warranty on components that have been purchased
25
<PAGE> 27
from other manufacturers and incorporated into the Company's test systems. The
Company also provides training on the maintenance and operation of test systems
sold to its customers.
The Company offers a wide range of service contracts which gives its
customers flexibility to select the maintenance program best suited to their
needs. Customers may purchase service contracts which extend maintenance beyond
the initial warranty provided by the Company with the sale of its test systems.
Many customers enter into annual or multiple-year service contracts over the
life of the equipment. The pricing of contracts is based upon the level of
service provided to the customer and the time period of the service contract. As
the installed base of LTX test systems has grown, service revenues have been
increasing on an annual basis. The Company believes that service revenues should
be less affected by the cyclicality of the semiconductory industry than sales of
test equipment. The Company maintains 22 service centers around the world.
SALES AND DISTRIBUTION
The Company sells its products primarily through its worldwide sales
organization. In Japan, the Company sells, services and supports its products
through its joint venture with SMI, except that Ando has the right to
manufacture and sell the Delta 50 to certain customers in Japan and to sell the
Delta 100 to these customers. The Company will share with its SMI joint venture
specified portions of the royalties to be paid by Ando on any sales by it of the
Delta 50 and of the revenues received on the Delta 100. In the future, Asia will
be selling the Company's iPTest systems to certain customers in Japan. The
Company uses a small number of independent sales representatives in certain
other regions of the world.
CUSTOMERS
<TABLE>
The Company's customers include many of the world's leading semiconductor
manufacturers. The Company's major customers in fiscal 1994 included:
<S> <C>
AT&T Philips
Hitachi Samsung
Intel SGS Thomson
Motorola Silicon Systems
National Semiconductor Sony
</TABLE>
Sales to these major customers accounted for approximately 58% of net sales
in fiscal 1994. No single customer accounted for 10% or more of net sales in
fiscal 1994. Sales to Intel accounted for approximately 22% and 16% of net sales
in fiscal 1992 and 1993, respectively. Sales to National Semiconductor accounted
for approximately 10% of net sales in fiscal 1992. See "Risk Factors -- Customer
Concentration."
GEOGRAPHIC SALES
<TABLE>
The following table sets forth the Company's net sales by geographic area
as a percentage of total net sales for each of the Company's last three fiscal
years:
<CAPTION>
% OF TOTAL NET SALES
------------------------
FISCAL FISCAL FISCAL
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
North America.......................................................... 57.0% 52.7% 38.8%
Europe................................................................. 13.9 12.0 14.5
Japan.................................................................. 10.0 5.5 12.5
Rest of world (principally Pacific Rim)................................ 19.1 29.8 34.2
------ ------ ------
Total........................................................ 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Sales to customers outside the United States are subject to risks,
including the imposition of governmental controls, the need to comply with a
wide variety of foreign and United States export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes, longer payment
cycles typically associated
with international sales, and the greater difficulty of administering business
overseas as well as general economic conditions. For information about the
Company's foreign operations and export sales, see "Risk
26
<PAGE> 28
Factors -- International Business" and Note 10 of Notes to the Company's
Consolidated Financial Statements.
ENGINEERING AND PRODUCT DEVELOPMENT
The STE market is characterized by rapid technological change and new
product introductions, as well as advancing industry standards. The Company's
ability to remain competitive in the digital, linear and mixed signal IC and
discrete component markets will depend upon its ability to successfully enhance
existing test systems and develop new generations of test systems and to
introduce these new products on a timely and cost effective basis. Accordingly,
the Company devotes a significant portion of its personnel and financial
resources to engineering and product development programs and seeks to maintain
close relationships with its customers in order to be responsive to their
product needs. The Company's expenditures for engineering and product
development were $21.9 million, $19.7 million and $19.6 million during fiscal
1992, 1993 and 1994, respectively. See "Risk Factors -- Importance of New
Product Introductions."
The Company's engineering strategy is to develop its test systems in an
evolutionary manner so that they may be progressively upgraded. This approach
preserves its customers' substantial investments in test programs, and, in
general, maintains market acceptance for the Company's test systems. In order to
implement this strategy, the Company works closely with its customers to define
new product features and to identify emerging applications for its products.
MANUFACTURING AND SUPPLY
LTX's principal manufacturing operations consist of component parts
assembly, final assembly and testing at its manufacturing facilities in
Westwood, Massachusetts and San Jose, California. Over the past year, the
Company has significantly increased its outsourcing of certain subassemblies to
contract manufacturers. The Company uses standard components and prefabricated
parts manufactured to the Company's specifications. Most of the components for
the Company's products are available from a number of different suppliers;
however, certain components are purchased from a single supplier. Although LTX
believes that all single-source components currently are available in adequate
amounts, there can be no assurance that shortages will not develop in the
future. Any disruption or termination of supply of certain single-source
components could have an adverse effect on the Company's business and results of
operations. See "Risk Factors -- Dependence on Key Suppliers."
COMPETITION
The STE industry is highly competitive, with many other domestic and
foreign companies participating in the markets for each of the Company's
products. The Company's major competitors in the market for digital test systems
are Schlumberger Limited, Teradyne, Inc. and Credence Systems Corporation,
except in Japan where the Company's major competitor is Advantest Corporation
(an affiliate of Fujitsu Limited). The Company's principal competitor for
linear/mixed signal test systems is Teradyne, Inc., except in Japan where the
Company's major competitor is Yokogawa Electric Works. The Company's principal
competitor for discrete component test systems is Tesec, Ltd. Most of the
Company's major competitors are also suppliers of other types of automatic test
equipment and have significantly greater financial and other resources than the
Company.
The Company principally competes on the basis of performance, cost of test,
reliability, customer service, applications support, price and ability to
deliver its products on a timely basis. Although the Company believes that it
competes favorably with respect to each of these factors, new product
introductions by the Company's competitors could cause a decline in sales or
loss of market acceptance of the Company's existing products. In addition,
increased competitive pressure could lead to intensified price-based
competition, resulting in lower prices and adversely affecting the Company's
business and results of operations. See "Risk Factors -- Highly Competitive
Industry."
27
<PAGE> 29
BACKLOG
At July 31, 1994, the Company's backlog of unfilled orders for all products
and services was approximately $71.8 million, compared with approximately $42.2
million at July 31, 1993. While backlog is calculated on the basis of firm
orders, no assurance can be given that customers will purchase the equipment
subject to such orders. As a result, the Company's backlog at a particular date
is not necessarily indicative of actual sales for any succeeding period.
PROPRIETARY RIGHTS
The development of the Company's products is largely based on proprietary
information. The Company relies upon a combination of contract provisions,
copyright, trademark and trade secret laws to protect its proprietary rights in
products. It also has a policy of seeking patents on technology considered of
particular strategic importance. Although the Company believes that the
copyrights, trademarks and patents it owns are of value, the Company believes
that they will not determine the Company's success, which depends principally
upon its engineering, manufacturing, marketing and service skills. However, the
Company intends to protect its rights when, in its view, these rights are
infringed upon.
The Company licenses some software programs from third party developers and
incorporates them in the Company's products. Generally, such agreements grant to
the Company non-exclusive licenses with respect to the subject program and
terminate only upon a material breach by the Company. The Company believes that
such licenses are generally available on commercial terms from a number of
licensors.
The use of patents to protect hardware and software has increased in the
STE industry. The Company has at times been notified of claims that it may be
infringing patents issued to others. Although there are no pending actions
against the Company regarding any patents, no assurance can be given that
infringement claims by third parties will not have a material adverse effect on
the Company's business and results of operations. As to any claims asserted
against the Company, the Company may seek or be required to obtain a license
under the third party's intellectual property rights. There can be no assurance,
however, that a license will be available under reasonable terms or at all. In
addition, the Company could decide to resort to litigation to challenge such
claims or a third party could resort to litigation to enforce such claims. Such
litigation could be expensive and time consuming and could materially adversely
affect the Company's business and results of operations. See "Risk
Factors -- Proprietary Rights".
EMPLOYEES
At July 31, 1994, the Company had a total of 880 employees, including 219
in engineering and product development, 180 in service and customer support, 293
in manufacturing and 188 in sales, marketing and administration. Many of the
Company's employees are highly skilled, and the Company believes its future
success will depend in large part on its ability to attract and retain such
employees. None of the Company's employees are represented by a labor union, and
the Company has experienced no work stoppages. The Company believes that its
employee relations are excellent.
FACILITIES
All of the Company's facilities are leased. The Company maintains its
headquarters in Westwood, Massachusetts, where corporate administration, sales
and customer support and manufacturing and engineering for its linear/mixed
signal products are located. In May 1995, the Company subleased a 208,000 square
foot facility at this location for a ten year term. The Company's lease of this
facility expires in 2010. The Company is currently consolidating its operations
into an adjacent 167,000 square foot facility. The lease of that facility
expires in 2007. Manufacturing and engineering for the Company's digital
products are located in a 70,000 square foot facility in San Jose, California.
The lease of this facility expires in 1999. The Company also leases seven sales
and customer support offices at various locations in the United States totaling
approximately 40,000 square feet.
28
<PAGE> 30
The Company's European headquarters is located in Woking, United Kingdom.
The Company also maintains sales and support offices in facilities at four other
locations in Europe. The manufacturing and engineering facilities for the
Company's iPTest systems are located in Guildford, United Kingdom. The Company
also maintains sales and support offices in six locations in the Far East.
Office space leased in Europe and the Far East totals approximately 100,000
square feet.
The headquarters of LTX Co., Ltd., the Company's joint venture with SMI, is
located in Kawasaki, Japan. The joint venture also leases additional offices in
four other locations in Japan. Office space leased in Japan totals approximately
15,000 square feet.
The Company believes that its existing facilities are adequate to meet its
current and foreseeable future requirements.
29
<PAGE> 31
MANAGEMENT
<TABLE>
The executive officers and Directors of the Company are as follows:
<CAPTION>
NAME AGE POSITION
------ --- ----------
<S> <C> <C>
Roger W. Blethen................................... 44 President and Director
Martin S. Francis.................................. 49 President and Director
John J. Arcari..................................... 49 Chief Financial Officer and Treasurer
Kenneth E. Daub.................................... 59 Senior Vice President
Graham C.C. Miller................................. 64 Chairman of the Board
Jacques Bouyer..................................... 67 Director
Fred J. Butler..................................... 66 Director
Roger J. Maggs..................................... 49 Director
Robert E. Moore.................................... 57 Director
Samuel Rubinovitz.................................. 65 Director
</TABLE>
Executive officers are chosen by and serve at the discretion of the Board
of Directors of the Company. Directors of the Company are elected at the annual
stockholders' meeting for staggered three-year terms and serve until their
successors are duly elected and qualified.
Roger W. Blethen was elected a President of the Company in February 1994.
Mr. Blethen has been a Director since 1980 and had been a Senior Vice President
of the Company from 1985 until February 1994. Mr. Blethen was a founder of LTX
and has served in a number of senior management positions with the Company since
its formation in 1976.
Martin S. Francis was elected a President of the Company in February 1994.
Mr. Francis has been a Director since 1991 and had been a Senior Vice President
of the Company from 1991 until 1994. Prior to 1991, Mr. Francis had held senior
management positions in the Company's European and Japanese operations from the
time that he joined LTX in 1982.
John J. Arcari has been Chief Financial Officer and Treasurer of the
Company since 1987. He had been Controller of LTX since joining the Company in
1981. Prior to joining LTX, Mr. Arcari spent ten years with the public
accounting firm of Price Waterhouse as a certified public accountant.
Kenneth E. Daub was appointed a Senior Vice President of the Company in
1991 and is responsible for North American and Pacific Rim sales. From the time
he joined the Company in 1987 until 1991, Mr. Daub served as Vice President
responsible for North American Sales. Prior to joining the Company in 1987, Mr.
Daub held various senior positions with Schlumberger Limited.
Graham C. C. Miller has been the Chairman of the Board of the Company since
its formation in 1976. Mr. Miller was a founder of the Company and was President
of the Company from 1976 until February 1994. Mr. Miller is also a director of
Newbridge Networks Corporation.
Jacques Bouyer was elected a Director of the Company in 1991. Mr. Bouyer
has been a management consultant since 1990. Mr. Bouyer was Chairman of the
Board and Chief Executive Officer of Philips Composants S.A., an electronics
company which is a wholly-owned subsidiary of Philips Electronics N.V. from 1986
until his retirement from that company in 1990. He is also a director of
Richardson Electronics, Ltd.
Fred J. Butler was elected a Director of the Company in 1993. Mr. Butler
was Vice President Finance of Thinking Machines Corporation, a manufacturer of
supercomputers, from 1988 until his retirement in 1994. From 1980 until 1988 Mr.
Butler was Senior Vice President Finance and Treasurer of Compugraphic
Corporation, a supplier of phototypesetting equipment.
Roger J. Maggs was elected a Director of the Company in 1994. Mr. Maggs is
currently President of Celtic House Investment Partners, a private investment
firm. Mr. Maggs was a Vice President of Alcan Aluminium Limited from 1986 until
June 1994.
30
<PAGE> 32
Robert E. Moore has been a Director of the Company since 1989. Mr. Moore is
currently President and Chairman of the Board of Reliable Power Meters, Inc., a
company founded by him in 1992 which manufacturers and sells power measurement
instruments. He also was a founder of Basic Measuring Instruments, Inc., which
manufactures and sells power measurement instruments, and served as a director
of that company from 1982 until 1990 and as a Senior Vice President responsible
for marketing and sales from 1985 until 1990.
Samuel Rubinovitz was elected a Director of the Company in September 1994.
He was Executive Vice President of EG&G, Inc., responsible for the aerospace,
optoelectronics and instrument product groups from 1989 until his retirement in
1994. He is a director of EG&G, Inc., Richardson Electronics, Ltd., KLA
Instruments Inc. and Kronos Inc.
31
<PAGE> 33
DESCRIPTION OF COMMON STOCK
The Company's By-laws provide that holders of the Common Stock are entitled
to one vote per share on all matters to be voted upon by the stockholders.
Stockholders are not entitled to cumulative voting in the election of directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities.
The Common Stock has no preemptive or conversion rights and is not subject to
further calls or assessments by the Company. There are no redemption or sinking
fund provisions applicable to the Common Stock. The Common Stock currently
outstanding is, and the Common Stock offered by this Prospectus will be, validly
issued, fully paid and non-assessable. Under the Company's By-laws, a special
meeting of stockholders may be called by stockholders only if called by one or
more stockholders who hold at least 40% in interest of the Company's capital
stock entitled to vote at such meeting.
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
The Company furnishes to its stockholders annual reports containing
financial statements that have been examined and reported upon, with an opinion
expressed, by its independent public accountants and quarterly reports
containing unaudited financial information for the first three quarters of each
fiscal year.
RIGHTS AGREEMENT
The Board of Directors of the Company adopted a Rights Agreement, dated as
of May 11, 1989, between the Company and The First National Bank of Boston, as
rights agent (the "Rights Agreement") and in connection therewith issued one
common share purchase right for each share of Common Stock then or thereafter
outstanding. The rights will become exercisable (the "Stock Acquisition Date")
only if a person or group acquires 20% or more of the Company's Common Stock or
announces a tender offer that would result in ownership of 30% or more of the
Common Stock. Initially, each right will entitle a stockholder to buy one share
of Common Stock of the Company at a purchase price of $30.00 per share, subject
to adjustment depending upon the occurrence thereafter of certain events.
Generally, in the event that a person or group becomes the beneficial owner of
20% or more of the Company's outstanding Common Stock (a "Flip-In Event"), each
right, other than rights owned by the acquirer, will thereafter entitle the
holder to receive, upon exercise of the right, Common Stock having a value equal
to two times the exercise price of the right. In the event that, at any time
after the Stock Acquisition Date, the Company is acquired in a merger or other
business combination transaction or more than 50% of the Company's assets or
earning power is sold or transferred (a "Flip-Over Event"), each right, other
than rights owned by the acquirer, will thereafter entitle the holder to
receive, upon the exercise of the right, common stock of the acquirer having a
value equal to two times the exercise price of the right.
Before any person or group has acquired 20% or more of the Common Stock of
the Company, the rights are redeemable by the Company at $0.01 per right. The
rights will expire on May 11, 1999, unless redeemed by the Company prior to that
date.
CLASSIFIED BOARD
The Company's Board of Directors is divided into three classes, with two
classes consisting of three directors and one class consisting of two directors.
Each class serves three years, with the terms of office of the respective
classes expiring in successive years.
MASSACHUSETTS LAW
Under Chapter 110F of the Massachusetts General Laws, a Massachusetts
corporation with more than 200 stockholders may not engage in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless (i) the interested stockholder obtains the approval of the
Board of Directors prior to becoming an interested
32
<PAGE> 34
stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder or (iii) the
business combination is approved by both the Board of Directors and the holders
of two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time within
the prior three years did own) 5% (or, for persons eligible to use SEC Schedule
13G, 15%) or more of the outstanding voting stock of the corporation. A
"business combination" includes a merger, stock or asset sale, and certain other
specified transactions resulting in a financial benefit to the interested
stockholder.
CERTAIN EFFECTS
The above described provisions of the Company's By-laws, the Rights
Agreement, the classified board and Massachusetts law may discourage potential
takeover attempts. The Company's Rights Agreement, in particular, may discourage
a future acquisition of the Company not approved by the Board of Directors in
which stockholders might otherwise receive a higher value for their shares or
which a substantial number and perhaps even a majority of the Company's
stockholders believes to be in the best interests of all stockholders. As a
result, stockholders who might desire to participate in such a transaction may
not have the opportunity to do so. These provisions could have an adverse effect
on the market price of the Common Stock.
33
<PAGE> 35
UNDERWRITING
<TABLE>
Subject to the terms and conditions of the Underwriting Agreement, each of
the Underwriters named below, for whom Lehman Brothers Inc., and Needham &
Company, Inc. are acting as Representatives (the "Representatives"), has
severally agreed to purchase from the Company, and the Company has agreed to
sell to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite their respective names in the table below:
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Lehman Brothers Inc. .....................................................
Needham & Company, Inc. ..................................................
---------
Total........................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to certain conditions precedent, and that the Underwriters are committed
to purchase and pay for all shares if any shares are purchased.
The Company has been advised that the Underwriters propose initially to
offer the shares of Common Stock to the public at the offering price set forth
on the cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession to
certain other dealers (who may include the Underwriters) not in excess of
$ per share. After the initial offering to the public, the offering
price and other selling terms may be changed by the Representatives.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 600,000 shares Common Stock at the public offering price per share, less the
underwriting discounts and commissions, set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares of Common Stock to be purchased by such Underwriter as shown in the above
table bears to the total shown.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection with
this offering, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Company, the directors and executive officers of the Company, and Ando
have agreed that, without prior consent of Lehman Brothers Inc., they will not
directly or indirectly offer to sell, sell, or otherwise dispose of shares of
Common Stock or any securities convertible or exchangeable therefor, for a
period of 90 days following the date of this Prospectus, subject to certain
limited exceptions. Consent to earlier sale of such shares may be granted by
Lehman Brothers Inc. at its discretion.
In connection with this offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on the Nasdaq
National Market may engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market in accordance with Rule
10b-6A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") during the two business day period before commencement of offers or sales
of the Common Stock. The passive market making transactions must comply with
applicable volume and price limits and be identified as such. In general, a
passive market maker may display its bid at a price not in excess of the highest
independent bid for the security; if all independent bids are lowered below the
passive market maker's bid, however, such bid must then be lowered when certain
purchase limits are exceeded.
34
<PAGE> 36
LEGAL MATTERS
The validity of the Common Stock will be passed upon for the Company by
Pamela A. Keating, General Counsel of the Company. Ms. Keating owns or has the
right to acquire pursuant to stock options 13,625 shares of the Company's Common
Stock. Certain legal matters will be passed upon for the Underwriters by Testa,
Hurwitz & Thibeault, Boston, Massachusetts.
EXPERTS
The financial statements and schedules of the Company as of July 31, 1994
and 1993 and for each of the years in the three-year period ended July 31, 1994
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.,
at prescribed rates. The Common Stock is traded on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
office of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
A Registration Statement on Form S-3 relating to the Common Stock offered
hereby has been filed by the Company with the Commission. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the securities offered
hereby, reference is made to such Registration Statement and exhibits.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission,
each such statement being qualified in all respects by such reference. A copy of
the Registration Statement may be inspected without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part thereof may
be obtained from the Commission upon the payment of certain fees prescribed by
the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1994, the Company's Quarterly Reports on Form 10-Q for the quarters ended
October 31, 1994, January 31, 1995 and April 30, 1995, the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A filed on November 24, 1982, as amended by the Company's Form 8-A/A filed
with the Commission on September 30, 1993, and the description of the Company's
Common Stock Purchase Rights (the "Rights") contained in the Company's
Registration Statement on Form 8-A filed with the Commission on May 17, 1989, as
amended by the Company's Form 8-A/A filed with the Commission on September 30,
35
<PAGE> 37
1993, are incorporated herein by reference. All documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Common Stock offered hereby shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the respective dates of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request from such person, a copy of any and all of the documents that have been
incorporated by reference in this Prospectus, other than exhibits to such
documents not specifically incorporated by reference. Written or telephone
requests for such documents should be directed to LTX Corporation, LTX Park at
University Avenue, Westwood, Massachusetts 02090 (Telephone (617) 461-1000),
Attention: John J. Arcari, Chief Financial Officer.
36
<PAGE> 38
------------------------------------------------------
------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND ANY
INFORMATION OR REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE HEREIN
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 9
Price Range of Common Stock........... 9
Dividend Policy....................... 9
Capitalization........................ 10
Selected Consolidated Financial
Data................................ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 19
Management............................ 30
Description of Common Stock........... 32
Underwriting.......................... 34
Legal Matters......................... 35
Experts............................... 35
Available Information................. 35
Incorporation of Certain Documents by
Reference........................... 35
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
4,000,000 SHARES
[LOGO]
LTX CORPORATION
COMMON STOCK
--------------------------
PROSPECTUS
, 1995
--------------------------
LEHMAN BROTHERS
NEEDHAM & COMPANY, INC.
------------------------------------------------------
------------------------------------------------------
<PAGE> 39
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
The following table sets forth a reasonably itemized statement of all
expenses in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions. All amounts shown are estimates except the Securities and Exchange
Commission registration fee and the National Association of Securities Dealers,
Inc. fees.
<S> <C>
SEC registration fee...................................................... $ 18,044
NASD filing fee........................................................... 5,733
Nasdaq National Market fee................................................ 17,500
Blue sky fees and expenses................................................ 7,500
Transfer agent and registrar fees......................................... 3,500
Legal fees and expenses................................................... 40,000
Accounting fees and expenses.............................................. 35,000
Printing and engraving expenses........................................... 95,000
Miscellaneous............................................................. 17,723
-------
Total........................................................... $240,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 156B of the Massachusetts General Laws, under which the Company is
organized, permits a Massachusetts corporation to adopt a provision in its
Articles of Organization eliminating or limiting the liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such liability does not arise from certain
proscribed conduct (including intentional misconduct and breach of duty of
loyalty).
On December 8, 1987, the stockholders approved an amendment to the
Company's Articles of Organization. The amendment to the Articles of
Organization, which became effective on April 8, 1988, is as follows:
"No director shall be personally liable to the corporation or any of
its stockholders for monetary damages for any breach of fiduciary duty as a
director not withstanding any provision of law imposing such liability;
provided, however, that this provision shall not eliminate or limit the
liability of a director for (i) any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) authorizing distributions to stockholders in
violation of the corporation's Articles of Organization or which render the
corporation insolvent or bankrupt, and approving loans to officers or
directors of the corporation which are not repaid and which were not
approved or ratified by a majority of disinterested directors or
stockholders, or (iv) any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this provision
shall apply to or have any effect on the liability or alleged liability of
any director of the corporation for or with respect to any acts or
omissions of such director occurring prior to the effective date of such
amendment."
The By-laws of the registrant provide for indemnification of officers
and directors as follows:
SECTION 6.5 INDEMNIFICATION.
(a) The Corporation shall indemnify each director and officer against
all judgments, fines, settlement payments and expenses, including
reasonable attorneys' fees, paid or incurred in connection with any claim,
action, suit or proceeding, civil or criminal, to which he may be made a
party or with which he may be threatened by reason of his being or having
been a director or officer of the corporation,
II-1
<PAGE> 40
or, at its request, a director, officer, stockholder or member of any other
corporation, firm, association or other organization or by reason of his
serving or having served, at its request, in any capacity with respect to
any employee benefit plan, or by reason of any action or omission by him in
such capacity, whether or not he continues to be a director or officer at
the time of incurring such expenses or at the time the indemnification is
made. No indemnification shall be made hereunder (i) with respect to
payments and expenses incurred in relation to matters as to which he shall
be finally adjudged in such action, suit or proceeding not to have acted in
good faith and in the reasonable belief that his action was in the best
interests of the corporation (or, to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interest of
the participants or beneficiaries of such employee benefit plan), or (ii)
otherwise prohibited by law. The foregoing right of indemnification shall
not be exclusive of other rights to which any director or officer may
otherwise be entitled and shall inure to the benefit of the executor or
administrator of such director or officer. The Corporation may pay the
expenses incurred by any such person in defending a civil or criminal
action, suit or proceeding in advance of the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by such person
to repay such payment if it is determined that such person is not entitled
to indemnification hereunder.
(b) The Board of Directors may, without stockholder approval,
authorize the Corporation to enter into agreements, including any
amendments or modification thereto, with any of its directors, officers or
other persons described in paragraph (a) above providing for
indemnification of such persons to the maximum extent permitted under
applicable law and the Corporation's Articles of Organization and By-laws.
(c) No amendment to or repeal of this section shall have any adverse
effect on (i) the right of any director or officer under any agreement
entered into prior thereto, or (ii) the rights of any director or officer
hereunder relating to his service, for which he would otherwise be entitled
to indemnity hereunder, during any period prior to such amendment or
repeal.
The Company has a directors and officers liability policy that insures the
Company's directors and officers against certain liabilities.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification and contribution by the Underwriters with
respect to certain liabilities of directors, officers and other controlling
persons of the Company.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement
*3.1 -- Articles of Organization, as amended, of the Registrant.
*3.3 -- By-laws, as amended, of the Registrant.
**4.1 -- Rights Agreement, as amended, of the Registrant is incorporated herein by
reference to Exhibit 1 of the Registrant's Form 8-A/A filed with the Commission
on September 30, 1993 amending the Registrant's Registration Statement on
Form 8-A filed with the Commission on May 17, 1989.
*5.1 -- Opinion of Pamela A. Keating, Esq.
23.1 -- Consent of Arthur Andersen LLP.
*23.2 -- Consent of Pamela A. Keating, Esq. (included in Exhibit 5.1).
24.1 -- Power of Attorney (included on page II-4).
<FN>
---------------
* To be filed by amendment.
** Incorporated herein by reference.
</TABLE>
II-2
<PAGE> 41
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Westwood and Commonwealth of Massachusetts on the
25th day of August, 1995.
LTX Corporation
/S/ ROGER W. BLETHEN
BY:
------------------------------------
Roger W. Blethen
Director and President
<TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Roger W. Blethen, Martin S. Francis, and
Glenn Meloni, and each of them, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any amendments or
post-effective amendments to this Registration Statement, and any and all
registration statements (including any amendments thereto) relating to the
offering covered hereby which may be filed with the Securities and Exchange
Commission pursuant to Rule 462(b) under the Securities Act of 1933, and to file
any of the foregoing with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------ ---------------------------- ----------------
<S> <C> <C>
/S/ GRAHAM C. C. MILLER Chairman of the Board August 25, 1995
------------------------------------------
(Graham C. C. Miller)
/S/ ROGER W. BLETHEN President and Director August 25, 1995
------------------------------------------ (Principal Executive
(Roger W. Blethen) Officer)
/S/ MARTIN S. FRANCIS President and Director August 25, 1995
------------------------------------------ (Principal Executive
(Martin S. Francis) Officer)
/S/ JOHN J. ARCARI Chief Financial Officer and August 25, 1995
------------------------------------------ Treasurer (Principal
(John J. Arcari) Financial Officer)
/S/ GLENN W. MELONI Controller (Principal August 25, 1995
------------------------------------------ Accounting Officer)
(Glenn W. Meloni)
Director , 1995
------------------------------------------
(Jacques Bouyer)
</TABLE>
II-4
<PAGE> 43
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------ ---------------------------- ----------------
<S> <C> <C>
/S/ FRED J. BUTLER Director August 25, 1995
------------------------------------------
(Fred J. Butler)
/S/ ROGER J. MAGGS Director August 25, 1995
------------------------------------------
(Roger J. Maggs)
/S/ ROBERT E. MOORE Director August 25, 1995
------------------------------------------
(Robert E. Moore)
/S/ SAMUEL RUBINOVITZ Director August 25, 1995
------------------------------------------
(Samuel Rubinovitz)
</TABLE>
II-5
<PAGE> 1
TH&T DRAFT 8/25/95
4,000,000 SHARES
LTX CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
_____ __, 1995
LEHMAN BROTHERS INC.
NEEDHAM & COMPANY, INC.,
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
LTX Corporation, a Massachusetts corporation (the "Company"), proposes
to sell 4,000,000 shares (the "Firm Stock") of the Company's Common Stock, par
value $.05 per share (the "Common Stock"). In addition, the Company proposes to
grant to the Underwriters named in Schedule 1 hereto (the "Underwriters") an
option to purchase up to an additional 600,000 shares of the Common Stock on the
terms and for the purposes set forth in Section 3 (the "Option Stock"). The
Firm Stock and the Option Stock, if purchased, are hereinafter collectively
called the "Stock." This is to confirm the agreement concerning the purchase of
the Stock from the Company by the Underwriters.
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 with respect to the
Stock has (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933 (the
"Securities Act") and the rules and regulations (the "Rule and
Regulations") of the United States Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission under
the
<PAGE> 2
- 2 -
Securities Act and (iii) become effective under the Securities Act.
Copies of such registration statement and any amendments thereto have
been delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement,
"Effective Time" means the date and the time as of which such
registration statement, or the most recent post- effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement, or
amendments thereof, before it became effective under the Securities Act
and any prospectus filed with the Commission by the Company with the
consent of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement,
as amended at the Effective Time, including any documents incorporated
by reference therein at such time and all information contained in the
final prospectus filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations and deemed to be a part of the registration
statement as of the Effective Time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Rules and
Regulations; and "Prospectus" means (i) such final prospectus, as first
filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations or (ii) the term sheet or
abbreviated term sheet described in Rule 434(b) of the Rules and
Regulations, as first filed pursuant to paragraph (7) of Rule 424(b) of
the Rules and Regulations together with the last preliminary prospectus
included in the Registration Statement filed prior to the Effective Time
or filed pursuant to Rule 424(a) of the Rules and Regulations that is
delivered by the Company to the Underwriters for delivery to purchasers
of the Stock. Reference made herein to any Preliminary Prospectus or to
the Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Securities Act, as of the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any document filed under the United
States Securities Exchange Act of 1934 (the "Exchange Act") after the
date of such Preliminary Prospectus or the Prospectus, as the case may
be, and incorporated by reference in such Preliminary Prospectus or the
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to include any annual report
of the Company filed with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act after the Effective Time that is incorporated
by reference in the Registration Statement. The Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus.
<PAGE> 3
- 3 -
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and do
not and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided that no
representation or warranty is made as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to the Company
through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(c) The documents incorporated by reference in the Prospectus,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder; and any further documents so
filed and incorporated by reference in the Prospectus, when such
documents are filed with the Commission will conform in all material
respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(d) The Company and each of its subsidiaries (as defined in
Section 15) have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in
which their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification, and have all
power and authority necessary to own or hold their respective properties
and to conduct the businesses in which they are engaged, except for any
non-qualification or the like that would not have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole ("Material Adverse Effect"); and none of
the subsidiaries of the Company is a "significant subsidiary", as such
term is defined in Rule 405 of the Rules and Regulations.
(e) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have
<PAGE> 4
- 4 -
been duly and validly authorized and issued, are fully paid and
non-assessable and conform, in all material respects, to the
description thereof contained in the Prospectus; and all of the issued
shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable and (except for directors' qualifying shares and except
as set forth in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.
(f) The unissued shares of the Stock to be issued and sold by
the Company to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued, fully paid and
non-assessable; and the Stock will conform to the description thereof
contained in the Prospectus.
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which any
of the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the provisions
of the charter or by-laws of the Company or any of its subsidiaries or
any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and except for
the registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable state securities
laws in connection with the purchase and distribution of the Stock by
the Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby.
(i) There are no contracts, agreements or understandings
between the Company and any person granting such person the right
(other than rights which have been waived or satisfied) to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company
<PAGE> 5
- 5 -
to include such securities in the securities registered pursuant
to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under
the Securities Act.
(j) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, stock option
plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants.
(k) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such
date, there has not been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus.
(l) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included or incorporated by reference in the Prospectus present fairly
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved.
(m) Arthur Andersen LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus or is
incorporated by reference therein and who have delivered the initial
letter referred to in Section 9(g) hereof, are independent public
accountants as required by the Securities Act and the Rules and
Regulations.
(n) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service
mark registrations, copyrights and licenses necessary for the conduct of
their respective businesses and have no reason to believe that the
conduct of their respective businesses will conflict
<PAGE> 6
- 6 -
with, and have not received any notice of any claim of conflict with,
any such rights of others.
(o) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property or assets of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; and to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(p) The conditions for use of Form S-3, as set forth in the
General Instructions thereto, have been satisfied.
(q) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed as
exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.
(r) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(s) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which might be expected
to have a Material Adverse Effect.
(t) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof
and has paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or any of its subsidiaries which has
had nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company or any of its subsidiaries, would
have a Material Adverse Effect.
(u) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or granted
any securities, other than pursuant to options, rights or warrants or
employee benefit plans, stock option plans or other employee
compensation plans outstanding as of the date of the
<PAGE> 7
- 7 -
Prospectus, (ii) incurred any material liability or obligation, direct
or contingent, other than liabilities and obligations which were
incurred in the ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv) declared or
paid any dividend on its capital stock.
(v) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary
to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(w) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any material
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which
any of its properties or assets is subject or (iii) is in violation in
any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its
business.
(x) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person acting on behalf of
the Company or any of its subsidiaries, has used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(y) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder.
<PAGE> 8
- 8 -
(z) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and
the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking
and Finance (the "Department"), whichever date is later, or if the
information reported in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba
changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable
to the Department.
2. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 4,000,000 shares of
the Firm Stock, severally and not jointly, to the several Underwriters and each
of the Underwriters, severally and not jointly, agrees to purchase the number of
shares of the Firm Stock set opposite that Underwriter's name in Schedule 1
hereto. The respective purchase obligations of the Underwriters with respect to
the Firm Stock shall be rounded among the Underwriters to avoid fractional
shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option to
purchase up to 600,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 5 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set opposite the name of such Underwriters in
Schedule 1 hereto. The respective purchase obligations of each Underwriter
with respect to the Option Stock shall be adjusted by the Representatives so
that no Underwriter shall be obligated to purchase Option Stock other than in
100 share amounts. The price of both the Firm Stock and any Option Stock shall
be $_____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.
3. Offering of Stock by the Underwriters. Upon authorization by
the Representatives of the release of the Firm Stock, the several Underwriters
propose to offer the Firm Stock for sale upon the terms and conditions set forth
in the Prospectus.
4. Delivery of and Payment for the Stock. Delivery of and payment for
the Firm Stock shall be made at the office of Bingham, Dana & Gould, Boston,
Massachusetts, at
<PAGE> 9
- 9 -
10:00 A.M., Eastern time, on ___________, 1995, or at such other date or place
as shall be determined by agreement between the Representatives and the
Company. This date and time are sometimes referred to as the First Delivery
Date." On the First Delivery Date, the Company shall deliver or cause to be
delivered certificates representing the Firm Stock to the Representatives
for the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by certified or official bank check or checks
payable in next-day funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock
shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking
and packaging of the certificates for the Firm Stock, the Company shall make the
certificates representing the Firm Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 3 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; provided, however, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been
exercised. The date and time the shares of Option Stock are delivered are
sometimes referred to as the "Second Delivery Date" and the First Delivery
Date and the Second Delivery Date are sometimes each referred to as a
"Delivery Date".
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 5 (or at
such other place as shall be determined by agreement between the Representatives
and the Company) at 10:00 A.M., Eastern time, on the Second Delivery Date. On
the Second Delivery Date, the Company shall deliver or cause to be delivered the
certificates representing the Option Stock to the Representatives for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by certified or official bank check or checks payable in
next-day funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall
be registered in such names and in such denominations as the Representatives
shall request in the aforesaid written notice. For the purpose of expediting
the checking and packaging of the certificates for the Option Stock, the Company
shall make the certificates representing the Option Stock available for
<PAGE> 10
- 10 -
inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Second Delivery Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than Commission's close of business
on the second business day following the execution and delivery of this
Agreement or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Securities Act; to make no further amendment
or any supplement to the Registration Statement or to the Prospectus
prior to the last Delivery Date except as permitted herein; to advise
the Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Stock; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending any such qualification, to use promptly
its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement
as originally filed with the Commission, and each amendment thereto
filed with the Commission, including all consents and exhibits filed
therewith;
(c) To deliver promptly to the Representatives such number of
the following documents as the Representatives shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement), (ii) each
Preliminary Prospectus, the Prospectus
<PAGE> 11
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and any amended or supplemented Prospectus and (iii) any document
incorporated by reference in the Prospectus (excluding exhibits
thereto); and, if the delivery of a prospectus is required at any
time after the Effective Time in connection with the offering or sale of
the Stock or any other securities relating thereto and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary to amend or supplement
the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, to notify the Representatives and,
upon their request, to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as
many copies as the Representatives may from time to time reasonably
request of an amended or supplemented Prospectus which will correct such
statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the reasonable judgment of the Company or the
Representatives, be required by the Securities Act;
(e) A reasonable period of time prior to filing with the
Commission any amendment to the Registration Statement or supplement to
the Prospectus, any document incorporated by reference in the Prospectus
or any Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representatives and counsel for the
Underwriters and not to make such filing if the Representatives shall
have objected thereto in good faith;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver to
the Representatives an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Common Stock may be listed pursuant
to requirements of or
<PAGE> 12
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agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Stock;
provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(i) For a period of 90 days from the date of the Prospectus,
not to offer for sale, sell or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in the
disposition by any person of), directly or indirectly, any shares of
Common Stock (other than the Stock and shares issued pursuant to
employee benefit plans, stock option plans or other employee
compensation plans existing on the date hereof, as any such plan may be
amended after the date hereof, or pursuant to currently outstanding
options, warrants or rights), or sell or grant options, rights or
warrants with respect to any shares of Common Stock (other than the
grant of options pursuant to option plans existing on the date hereof,
as any such plan may be amended after the date hereof), without the
prior written consent of Lehman Brothers Inc.; and to cause each
executive officer and director of the Company to furnish to the
Representatives, prior to the First Delivery Date, a letter or letters,
in form and substance satisfactory to counsel for the Underwriters,
pursuant to which each such person shall agree not to offer for sale,
sell or otherwise dispose of (or enter into any transaction which is
designed to, or could be expected to, result in the disposition by any
person of), directly or indirectly, any shares of Common Stock for a
period of 90 days from the date of the Prospectus, without the prior
written consent of Lehman Brothers Inc., other than pursuant to gifts,
or transfers as settlors of trust, to persons who agree in writing to be
bound by the provisions of this clause;
(j) To apply for the inclusion of the Stock on the National
Market System and to use its best efforts to complete that inclusion;
and
(k) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
filing under the Securities
<PAGE> 13
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Act of the Registration Statement and any amendments and exhibits thereto; (c)
the costs of distributing the Registration Statement as originally filed and
each amendment thereto and any post-effective amendments thereof (including, in
each case, exhibits), any Preliminary Prospectus, the Prospectus and any
amendment or supplement to the Prospectus or any document incorporated by
reference therein, all as provided in this Agreement; (d) the costs of
producing and distributing this Agreement and any other related documents in
connection with the offering, purchase, sale and delivery of the stock; (e) the
filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of sale of the Stock; (f)
any applicable listing or other fees; (g) the fees and expenses of qualifying
the Stock under the securities laws of the several jurisdictions as provided in
Section 6 (h) and of preparing, printing and distributing a Blue Sky Memorandum
(including related fees and expenses of counsel to the Underwriters); and (h)
all other costs and expenses incident to the performance of the obligations of
the Company under this Agreement; provided that, except as provided in this
Section 6 and in Section 8 and Section 11 the Underwriters shall pay their own
costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Stock which they may sell and the expenses of advertising
any offering of the Stock made by the Underwriters.
7. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when
made and on each Delivery Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a); no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of Testa,
Hurwitz & Thibeault, counsel for the Underwriters, is material or omits
to state a fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Stock,
the Registration Statement and the Prospectus, and all other legal
matters relating to this
<PAGE> 14
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Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Underwriters,
and the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
(d) Pamela A. Keating, Esq. shall have furnished to the
Representatives her written opinion, as counsel to the Company,
addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect
that:
(i) The Company and each of its Significant
Subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their
respective businesses requires such qualification (except where
non-qualification would not have a Material Adverse Effect) and
have all corporate power and authority necessary to own or hold
their respective properties and conduct the businesses in which
they are engaged;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the shares of Stock
being delivered on such Delivery Date) have been duly and
validly authorized and issued, are fully paid and non-assessable
and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid, non-assessable and
(except for directors' qualifying shares and except as set forth
in the Prospectus) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(iii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the
voting or transfer of, any shares of the Stock pursuant to the
Company's charter or by-laws or any agreement or other
instrument known to such counsel;
(iv) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or assets
of the Company or any of its subsidiaries is the subject which,
if determined adversely to the
<PAGE> 15
- 15 -
Company or any of its subsidiaries, would have a material
adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and, to the best
of such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others;
(v) The Registration Statement was declared effective
under the Securities Act as of the date and time specified in
such opinion, the Prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified
therein and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of
such counsel, no proceeding for that purpose is pending or
threatened by the Commission;
(vi) The Registration Statement and the Prospectus
and any further amendments or supplements thereto made by the
Company prior to such Delivery Date (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act
and the Rules and Regulations; and the documents incorporated by
reference in the Prospectus (other than the financial statements
and related schedules therein, as to which such counsel need
express no opinion), when they were filed with the Commission,
complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
of the Commission thereunder;
(vii) To the best of such counsel's knowledge, there
are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described or filed as exhibits
to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations;
(viii) This Agreement has been duly authorized,
executed and delivered by the Company;
(ix) The issue and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the
<PAGE> 16
- 16 -
consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets; and, except
for the registration of the Stock under the Securities Act and
such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase
and distribution of the Stock by the Underwriters, no consent,
approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions
contemplated hereby; and
(x) To the best of such counsel's knowledge, there
are no contracts, agreements or understandings between the
Company and any person granting such person the right (other
than rights which have been waived or satisfied) to require the
Company to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Securities Act.
In rendering such opinion, such counsel may state that her opinion is
limited to matters governed by the Federal laws of the United States of
America and the laws of Massachusetts. Such counsel shall also have
furnished to the Representatives a written statement, addressed to the
Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that (x) such counsel
is the General Counsel of the Company and has acted as counsel to the
Company in connection with the preparation of the Registration
Statement, and (y) based on the foregoing, no facts have come to the
attention of such counsel which lead her to believe that (I) the
Registration Statement, as of the Effective Date, contained any untrue
statement of a
<PAGE> 17
- 17 -
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or that the Prospectus contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading or (II)
any document incorporated by reference in the Prospectus, when it was
filed with the Commission, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel does not
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus except for the statements made in the Prospectus under the
caption "Description of Common Stock" insofar as such statements relate
to the Stock and concern legal matters.
(e) The Representatives shall have received from Testa,
Hurwitz & Thibeault, counsel for the Underwriters, such opinion or
opinions, dated such Delivery Date, with respect to the issuance and
sale of the Stock, the Registration Statement, the Prospectus and other
related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(f) At the time of execution of this Agreement, the
Representatives shall have received from Arthur Andersen LLP a letter,
in form and substance satisfactory to the Representatives, addressed to
the Underwriters and dated the date hereof (i) confirming that they are
independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as
of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date hereof), the
conclusions and findings of such firm with respect to the financial
information and other matters ordinarily covered by accountants'
"comfort letters" to underwriters in connection with registered public
offerings.
(g) With respect to the letter of Arthur Andersen LLP referred
to in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
Underwriters and dated such Delivery Date
<PAGE> 18
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(i) confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule
2-01 of Regulation S-X of the Commission, (ii) stating, as of the date
of the bring-down letter (or, with respect to matters involving changes
or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more
than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set
forth in the initial letter.
(h) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its President and its chief
financial officer stating that:
(i) The representations, warranties and
agreements of the Company in Section 1 are true and correct in
all material respects as of such Delivery Date; the Company has
complied with all its agreements contained herein; and the
conditions set forth in Sections 7(a) and 7(i) have been
fulfilled; and
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of
the Effective Date, the Registration Statement and Prospectus
did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and
(B) since the Effective Date no event has occurred which should
have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus that has not been so
set forth.
(i) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (ii) since such
date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is, in the
judgment of the Representatives, so material and adverse as to
<PAGE> 19
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make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Stock being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared
by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest
of the several Underwriters, impracticable or inadvisable to proceed
with the public offering or delivery of the Stock being delivered on
such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(k) The National Market System shall have approved the Stock
for inclusion, subject only to official notice of issuance.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
Stock), to which that Underwriter, officer, employee or controlling
person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of,
or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or
supplement thereto or (B)
<PAGE> 20
- 20 -
in any blue sky application or other document prepared or executed by
the Company (or based upon any written information furnished by the
Company) specifically for the purpose of qualifying any or all
of the Stock under the securities laws of any state or other
jurisdiction (any such application, document or information being
hereinafter called a "Blue Sky Application"), (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact
required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Stock or the offering contemplated
hereby, and which is included as part of or referred to in any loss,
claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall
not be liable under this clause (iii) to the extent that it is
determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly
from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful
misconduct), and shall reimburse each Underwriter and each such
officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Underwriter,
officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or
action (i) arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus,
or in any such amendment or supplement, or in any Blue Sky Application,
in reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein
or (ii) pertains to any preliminary prospectus, to the extent that any
such loss, claim, damage, liability or action results from the fact
that such Underwriter sold Stock to a person to whom there was not
given or sent, at or prior to the written confirmation of such sale, a
copy of the Prospectus (or of the Prospectus as then amended or
supplemented if the Company has previously furnished copies thereof to
such Underwriter) and such statement or omission contained in a
preliminary prospectus was corrected in the Prospectus. The foregoing
indemnity agreement is in addition to any liability which the Company
may otherwise have to any Underwriter or to any officer, employee or
controlling person of that Underwriter.
<PAGE> 21
- 21 -
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees,
each of its directors, and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or
(ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information concerning such Underwriter furnished to the
Company through the Representatives by or on behalf of that Underwriter
specifically for inclusion therein, and shall reimburse the Company and
any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director,
officer, employee or controlling person.
(c) Promptly after receipt by an)indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 8. If
any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that
it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action,
<PAGE> 22
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the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided,
however, that the Representatives shall have the right to employ
counsel to represent jointly the Representatives and those other
Underwriters and their respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Underwriters against
the Company under this Section 8 if, in the reasonable judgment of the
Representatives, it is advisable for the Representatives and those
Underwriters, officers, employees and controlling persons to be jointly
represented by separate counsel on account of the availability of
different or additional legal defenses to any such person or the
existence of a conflict or potential conflict between any such person
and the indemnifying party, and in that event the fees and expenses of
such separate counsel shall be paid by the Company. No indemnifying
party shall (i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but
if settled with the consent of the indemnifying party or if there be a
final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from
and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as
shall be appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from the
offering of the Stock or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other with respect to the statements
or
<PAGE> 23
- 23 -
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement
(before deducting expenses) received by the Company, on the one hand,
and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Stock purchased under
this Agreement, on the other hand, bear to the total gross proceeds
from the offering of the shares of the Stock under this Agreement, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability,
or action in respect thereof, referred to above in this Section 8(d)
shall be deemed to include, for purposes of this Section 8(d), any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Stock underwritten by it and
distributed to the public was offered to the public exceeds the amount
of any damages which such Underwriter has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute as provided in this Section 8(d) are several
in proportion to their respective underwriting obligations and not
joint.
(e) The Underwriters severally(confirm that the statements
with respect to the public offering of the Stock by the Underwriters
set forth on the cover page of, the legend concerning over-allotments
on the inside front cover page and the concession and reallowance
figures appearing under the caption "Underwriting" in, the Prospectus
are correct and constitute the only
<PAGE> 24
information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion
in the Registration Statement and the Prospectus.
9. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non- defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such date exceeds 9.09% of the total number of
shares of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 2. If the foregoing maximums are
exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Stock to be purchased on such Delivery Date. If
the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such Delivery
Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Stock)] shall terminate without liability on the part of any
non-defaulting Underwriter or the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 6 and 11. As used in this Agreement, the term "Underwriter" includes,
for all purposes of this Agreement unless the context requires otherwise, any
party not listed in Schedule 1 hereto who, pursuant to this Section 9,
purchases Firm Stock which a defaulting Underwriter agreed but failed to
purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel
for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
<PAGE> 25
- 25 -
10. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 7(i) or 7(j) shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Company shall
fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled (which shall not, however, include the occurrence of any event
described in Section 7(j)), the Company will reimburse the Underwriters for
all reasonable out-of-pocket expenses (including fees and disbursements of
counsel) incurred by the Underwriters in connection with this Agreement and the
proposed purchase of the Stock, and upon demand the Company shall pay the full
amount thereof to the Representatives. If this Agreement is terminated
pursuant to Section 9 by reason of the default of one or more Underwriters,
the Company shall not be obligated to reimburse any defaulting Underwriter on
account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212- 526-6588), with a copy, in the case of any notice
pursuant to Section 8(c), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th
Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth
in the Registration Statement, Attention: General Counsel (Fax:
617-329-8836);
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf
of the Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective
<PAGE> 26
- 26 -
successors. This Agreement and the terms and provisions hereof are for the
sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 13, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations, warranties
and agreements of the Company and the Underwriters contained in this Agreement
or made by or on behalf on them, respectively, pursuant to this Agreement,
shall survive the delivery of and payment for the Stock and shall remain in
full force and effect, regardless of any investigation made by or on behalf of
any of them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" and
"Significant Subsidiary" have the respective meanings set forth in the Rules
and Regulations.
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE> 27
- 27 -
If the foregoing correctly sets forth the agreement between the Company
and the Underwriters, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
LTX CORPORATION
By
-----------------------------
Title:
Accepted:
LEHMAN BROTHERS INC.
NEEDHAM & COMPANY, INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
-----------------------------
Authorized Representative
<PAGE> 28
<TABLE>
SCHEDULE 1
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Needham & Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
=========
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated September 13, 1994
(except with respect to the matter discussed in Note 4, as towhich the date is
October 6, 1994) included in LTX Corporation's Form 10-K for the year ended
July 31, 1994 and to all references to our Firm included in this registration
statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
August 25, 1995
