<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [Section]240.14a-11(c) or
[Section]240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
LTX Corporation
(Name of Registrant as Specified In Its Charter)
LTX Corporation
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
[LOGO]
LTX CORPORATION
LTX PARK AT UNIVERSITY AVENUE
WESTWOOD, MASSACHUSETTS 02090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 10, 1996
The Annual Meeting of Stockholders of LTX Corporation will be held at the
Hilton at Dedham Place, 95 Dedham Place, Exit 14, Allied Drive off I-95 (Rte.
128), Dedham, Massachusetts, on December 10, 1996, beginning at 10:00 a.m. local
time, for the following purposes:
1. To elect two members to the Board of Directors to serve for
three-year terms as Class I Directors.
2. To consider and act upon a proposed amendment to the 1990 Stock
Option Plan to provide that the vesting of nonstatutory options issued
under the Plan is accelerated upon a "change of control" as defined in the
Plan.
3. To consider and act upon a proposed amendment to the 1990 Stock
Option Plan to provide that options granted in the future be exercisable
for two years after termination of employment in the event employment of
the optionee terminates as a result of death or disability.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on October 31, 1996
as the record date for the Annual Meeting. All holders of common stock of record
at that time are entitled to vote at the meeting.
By Order of the Board of Directors
RICHARD M. HARTER, Clerk
November 8, 1996
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE> 3
LTX CORPORATION
PROXY STATEMENT
November 8, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of LTX Corporation ("LTX" or the "Company") of proxies
for use at the Annual Meeting of Stockholders to be held on December 10, 1996,
and any adjournments thereof (the "1996 Annual Meeting"). Shares as to which a
proxy has been executed will be voted as specified in the proxy. A majority in
interest of the outstanding shares represented at the meeting in person or by
proxy shall constitute a quorum for the transaction of business. Votes withheld
from any nominee, abstentions and broker "non-votes" are counted as present or
represented for purposes of determining the presence or absence of a quorum for
the meeting. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. Abstentions are included in the number
of shares present or represented and voting on each matter. Broker "non-votes"
are not so included. A proxy may be revoked at any time by notice in writing
received by the Clerk of the Company before it is voted.
Solicitation of proxies by mail is expected to commence on November 8,
1996, and the cost thereof will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc., a proxy
solicitation firm, to whom the Company will pay a fee of $4,000 plus
reimbursement for mailing and out-of-pocket expenses. Copies of solicitation
material will also be furnished to brokerage firms, fiduciaries and custodians
to forward to their principals, and the Company will reimburse them for their
reasonable expenses.
VOTING SECURITIES
The Company's only issued and outstanding class of voting securities is its
common stock, par value $0.05 per share. Each stockholder of record on October
31, 1996, is entitled to one vote for each share registered in such
stockholder's name. As of that date there were 35,578,453 shares of common stock
issued and outstanding.
CERTAIN STOCKHOLDERS
<TABLE>
The following table sets forth, as of October 1, 1996, the amount and
percentage of outstanding common stock of the Company beneficially owned by (i)
each person known by the Company to beneficially own 5% of the Company's
outstanding common stock, (ii) each executive officer named in the Summary
Compensation Table under the heading "Compensation of Executives" on page 5,
(iii) each director and (iv) all directors and executive officers of the Company
as a group, on the basis of information supplied to the Company.
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) COMMON STOCK
------------------- --------------------- ------------
<S> <C> <C>
State of Wisconsin Investment Board..................... 3,255,900 9.1%
Gruber & McBaine Capital Management, Inc.(3)............ 2,266,500 6.3%
Ando Electric Co., Ltd.................................. 2,000,000 5.4%
Graham C. C. Miller..................................... 628,603 1.7%
Roger W. Blethen........................................ 173,008 *
Martin S. Francis....................................... 155,282 *
Kenneth E. Daub......................................... 83,356 *
John J. Arcari.......................................... 53,690 *
Jacques Bouyer.......................................... 21,334 *
Samuel Rubinovitz....................................... 16,333 *
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF
NAME AND ADDRESS(1) BENEFICIALLY OWNED(2) COMMON STOCK
------------------- --------------------- ------------
<S> <C> <C>
Roger J. Maggs.......................................... 13,666 *
Robert E. Moore......................................... 11,000 *
All directors and executive officers as a group
(9 persons)........................................... 1,156,272 3.1%
<FN>
- ---------------
* Less than 1%
(1) The address of State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707, Gruber & McBaine Capital Management, Inc. is 50
Osgood Place, San Francisco, California 94133 and Ando Electric Co., Ltd.
is 19-7, Kamata 4-chome, Ota-ku, Tokyo, 144 Japan.
(2) Of the total shares shown as owned by Ando Electric Co., Ltd., 1,000,000 are
under a warrant presently exercisable by Ando. Shares owned by Messrs.
Miller, Blethen, Francis, Daub, Arcari, Bouyer, Rubinovitz, Maggs and
Moore, and by all executive officers and directors as a group include
265,100 shares, 96,163 shares, 130,750 shares, 78,100 shares, 52,650
shares, 15,334 shares, 12,333 shares, 13,666 shares, 8,500 shares and
672,596 shares, respectively, under stock options which are presently
exercisable or become so within sixty days.
(3) These shares represent the aggregate holdings of Gruber & McBaine Capital
Management, Inc. and various related parties as a group.
</TABLE>
ITEM 1. ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Each class
serves three years, with the terms of office of the respective classes expiring
in successive years. The present term of office for the Class I Directors
expires at the 1996 Annual Meeting. The nominees for election as Class I
Directors are Messrs. Miller and Moore. Mr. Miller and Mr. Moore were elected
Directors at the Annual Meeting of Stockholders held in December 1993. If
re-elected, the Class I nominees will hold office until the Annual Meeting of
Stockholders to be held in 1999.
Unless a proxy is marked to withhold authority for the election of either
or both of the nominees for Class I Directors, then the persons named in the
proxy will vote the shares represented by the proxy for the election of both of
the nominees for Class I Directors. If the proxy indicates that the stockholder
wishes to withhold a vote from either or both nominees for Class I Directors,
such instructions will be followed by the persons named in the proxy. Management
has no reason to believe that either of the nominees will be unable to serve. In
the event that a nominee should not be available, the persons named in the
proxies will vote for the other nominee and may vote for a substitute for such
nominee.
<TABLE>
Set forth below is information for each of the nominees for Class I
Directors to be elected at the 1996 Annual Meeting, and for each of the Class II
Directors and Class III Directors who will continue to serve until the Annual
Meetings of the Stockholders to be held in 1997 and 1998, respectively.
NOMINEES TO SERVE AS DIRECTORS FOR A THREE-YEAR TERM EXPIRING AT THE 1999 ANNUAL
MEETING (CLASS I DIRECTORS)
<CAPTION>
NAME BUSINESS AFFILIATIONS
---- ---------------------
<S> <C>
Graham C. C. Miller.......... Mr. Miller, age 65, 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 1994. Mr. Miller is also a director of
Newbridge Networks Corporation.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Robert E. Moore.............. Mr. Moore, age 58, 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 manufactures and sells power
measurement instruments. He also was a founder
of Basic Measuring Instruments, Inc., which
manufactures and sells power measurement
instruments. He 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.
</TABLE>
<TABLE>
DIRECTORS SERVING A THREE-YEAR TERM EXPIRING AT THE 1997 ANNUAL MEETING (CLASS
II DIRECTORS)
<CAPTION>
NAME BUSINESS AFFILIATIONS
---- ---------------------
<S> <C>
Roger W. Blethen............. Mr. Blethen, age 45, has been a Director since
1980. Mr. Blethen was appointed Chief Executive
Officer of the Company in September 1996. Mr.
Blethen has been a President of the Company
since he was elected to that office in 1994 and
was a Senior Vice President of the Company from
1985 until 1994. Mr. Blethen was a founder of
the Company and served in a number of senior
management positions with the Company since its
formation in 1976.
Roger J. Maggs............... Mr. Maggs, age 50, 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 1994.
</TABLE>
<TABLE>
DIRECTORS SERVING A THREE-YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING (CLASS
III DIRECTORS)
<CAPTION>
NAME BUSINESS AFFILIATIONS
---- ---------------------
<S> <C>
Jacques Bouyer............... Mr. Bouyer, age 68, 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 currently an Honorary Chairman of
that company. He is also a director of
Richardson Electronics, Ltd.
Martin S. Francis............ Mr. Francis, age 50, has been a Director since
1991. Mr. Francis was a President of the
Company from 1994 until 1996 and was a Senior
Vice President from 1991 until 1994. Prior to
1991, Mr. Francis held senior management
positions in the Company's international
operations from the time that he joined LTX in
1982. Mr. Francis has indicated that he will
resign as a Director of the Company after the
1996 Annual Meeting.
Samuel Rubinovitz............ Mr. Rubinovitz, age 66, was elected a Director of
the Company in 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 also a director of Richardson
Electronics, Ltd., KLA Instruments Inc. and
Kronos Inc.
</TABLE>
3
<PAGE> 6
RECOMMENDED VOTE
The affirmative vote of the holders of a plurality of the Company's
outstanding common stock present in person or by proxy and voting at the 1996
Annual Meeting is required to elect the Class I Directors. The Board of
Directors recommends you vote "FOR" the election of its nominees for Class I
Directors.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a retainer of
$12,000 per year, payable on a quarterly basis, a fee of $1,000 for each
directors' meeting attended and a fee of $1,000 for attendance at each meeting
of a committee approved by the Board of Directors. Directors are also reimbursed
for travel expenses for attending meetings. In addition, directors who are not
employees of the Company receive an option to purchase 20,000 shares on the date
first elected to the Board, 6,000 additional shares in each year served as a
member of the Board, 3,000 additional shares in each year served as chairman of
a committee of the Board and 1,500 additional shares in each year served as a
member of a committee of the Board. All of such options have a fair market value
exercise price. In addition, directors who are not employees of the Company will
receive on the day of the 1996 Annual Meeting a one-time grant of an option to
purchase 10,000 shares at a fair market value exercise price in consideration
for changing the exercise price of options to be granted in the future to such
directors from $1.00 to fair market value. In addition, directors who are not
employees of the Company may elect to pay premiums and receive benefits under
the Company's group health insurance plans. In fiscal 1996, Mr. Miller received,
in addition, $121,500 for his services as Chairman of the Board through January
1996. Mr. Miller will receive an additional one-time grant of an option to
purchase 6,000 shares at an exercise price of $1.00 per share and, for as long
as he continues to serve as Chairman of the Board, he will receive an annual
retainer and fees equal to twice that received by the other directors who are
not employees of the Company. In fiscal 1996, Mr. Bouyer received, in addition,
$20,000 for services as a consultant to the Company's French subsidiary and LTX
has agreed to pay any uninsured medical expenses he may have while in the United
States attending to business of the Company. Employee directors receive no
separate, additional compensation or options for their services as directors.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors of the Company held fifteen meetings during the
fiscal year ended July 31, 1996, and took other actions by unanimous consent of
the Board of Directors. All directors attended at least 75% of the meetings of
the Board and of the committees of the Board on which they respectively served.
The Board has a standing Compensation Committee which meets periodically and met
six times during the fiscal year ended July 31, 1996. The Compensation Committee
determines the compensation of all executive officers of the Company and
recommends the compensation policies for other officers and employees. The
members of the Compensation Committee are Messrs. Rubinovitz and Bouyer. The
Board has a standing Audit Committee which meets periodically and met four times
during the fiscal year ended July 31, 1996. The Audit Committee reviews and
makes recommendations to the Board of Directors with respect to the accounting
and financial functions of the Company, including the appointment of the
Company's independent auditors. The members of the Audit Committee are Messrs.
Maggs and Moore. The Board has a standing Strategic Planning Committee which
meets periodically and met four times during the fiscal year ended July 31,
1996. The Strategic Planning Committee is responsible for developing and
reviewing long-term strategic plans for the Company. The members of the
Strategic Planning Committee are Messrs. Blethen, Bouyer, Francis, Miller, Moore
and Rubinovitz. The Board has a standing Directors' Affairs Committee which
meets periodically and met seven times during the fiscal year ended July 31,
1996. The Directors' Affairs Committee is responsible for review of the make-up
of the Board, proposals for new candidates to be members of the Board and review
of compensation of directors. The members of the Directors' Affairs Committee
are Messrs. Bouyer, Maggs, Moore and Rubinovitz.
4
<PAGE> 7
<TABLE>
COMPENSATION OF EXECUTIVES
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long term compensation of the Company's Presidents and the two other
most highly compensated executive officers of the Company in fiscal 1996, for
the past three fiscal years (such executive officers are sometimes collectively
referred to herein as the "named executive officers"):
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------------ COMPENSATION
OTHER ---------------
NAME ANNUAL OPTIONS ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY BONUS(3) COMPENSATION(5) GRANTED(#) COMPENSATION(8)
---------------------- ---- ------ -------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger W. Blethen......... 1996 $300,000 $316,650 $ 0 50,000 $ 6,210
President(1) 1995 240,000 158,210(4) 0 30,000 1,380
1994 260,000 0 0 55,000 670
Martin S. Francis........ 1996 300,000 316,650 50,100(6) 50,000 89,414
President(2) 1995 240,000 158,210 0 30,000 57,740
1994 201,500 4,702 26,000(7) 45,000 29,176
John J. Arcari........... 1996 191,000 116,855 0 15,000 5,226
Chief Financial Officer 1995 184,000 70,581 0 10,000 453
1994 175,000 0 0 8,000 425
Kenneth E. Daub.......... 1996 226,270 99,303 0 0 5,762
Senior Vice President 1995 218,000 119,464 0 10,000 924
1994 208,000 52,438 0 8,000 840
<FN>
- ---------------
(1) Mr. Blethen was appointed Chief Executive Officer in September 1996.
(2) Mr. Francis resigned as a President of the Company after the fiscal year
end.
(3) Amounts shown under "Bonus" column for fiscal year 1994 represent, for Mr.
Francis, bonuses paid under the Executive Bonus Plan in effect for the first
two quarters and represent, for Mr. Daub, commission payments.
(4) Amount of bonus was $158,210; the amount actually paid in fiscal 1995 was
reduced by $20,000 to adjust for an advance on Mr. Blethen's fiscal 1995
bonus which was paid as salary in fiscal 1994.
(5) Amounts shown under "Other Annual Compensation" column exclude perquisites
if the aggregate amount of the named executive officer's perquisites was
less than the lesser of $50,000 or 10% of such officer's salary plus bonus.
(6) Amount shown includes tax equalization payment of $45,379 and a $4,721
automobile allowance.
(7) Amount shown includes relocation costs payable to Mr. Francis of $19,000 and
a $7,000 automobile allowance.
(8) Amounts shown under "All Other Compensation" column represent, for Messrs.
Blethen, Arcari and Daub, taxable amounts in respect of term life insurance
and 401(k) plan matching contributions made by the Company and, for Mr.
Francis, amounts contributed to benefit plans generally available to
employees of the Company who are citizens of the United Kingdom.
</TABLE>
5
<PAGE> 8
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted during the fiscal year ended July 31, 1996 by the Company to each of the
named executive officers:
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------- VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR OPTION TERM(B)
GRANTED --------------------------------
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED(A) IN FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- -------------- -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Roger W. Blethen............ 50,000 30% $11.4375 10/6/05 $359,709 $911,569
Martin S. Francis........... 50,000 30% $11.4375 10/6/05 359,709 911,569
John J. Arcari.............. 15,000 9% $11.4375 10/6/05 107,913 273,471
Kenneth E. Daub............. 0 0 -- -- -- --
<FN>
- ---------------
(A) These options become exercisable in three installments. Twenty percent
become exercisable one year from the grant date, thirty-five percent become
exercisable two years from the grant date and forty-five percent become
exercisable three years from the grant date.
(B) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock appreciation exercises will
depend on the future performance of the common stock and the date on which
the options are exercised.
</TABLE>
<TABLE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table sets forth the aggregate dollar value of all options
exercised during the fiscal year ended July 31, 1996 and the total number of
unexercised options held on July 31, 1996, by each of the named executive
officers:
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END(A)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger W. Blethen.......... 0 -- 86,163 92,812 $ 127,764 $19,931
Martin S. Francis......... 0 -- 120,750 94,250 $ 210,234 $17,578
John J. Arcari............ 0 -- 49,650 26,600 $ 100,669 $ 8,550
Kenneth E. Daub........... 0 -- 78,100 11,600 $ 142,150 $ 8,550
<FN>
- ---------------
(A) The closing price for the Company's common stock as reported by the Nasdaq
National Market on July 31, 1996, the last business day of fiscal 1996, was
$4.50. Value is calculated on the basis of the difference between the option
exercise price and $4.50 multiplied by the number of shares of common stock
underlying the option.
</TABLE>
CHANGE OF CONTROL ARRANGEMENTS
Options granted to the named executive officers contain provisions pursuant
to which, under certain circumstances, they shall become fully vested and
immediately exercisable upon a "change of control event" as defined in such
options.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of two
directors who are not employees of the Company. The Committee has met six times
since the last Annual Meeting of Stockholders of the Company. The Compensation
Committee is responsible for establishing compensation policies with respect to
all executive officers of the Company and determining on an annual basis the
compensation of these individuals.
6
<PAGE> 9
The Compensation Committee has identified six goals for its work on behalf
of the Company:
1. Insure appropriate linkage between executive compensation and creation
of stockholder value.
2. Insure that the total compensation program can attract, motivate and
retain executives with outstanding abilities.
3. Determine the competitiveness of current cash and equity incentive
opportunities.
4. Evaluate the components of fixed salary and flexible compensation.
5. Adopt and implement a cash bonus plan.
6. Evaluate the effectiveness of the Company's equity opportunities for
executives.
In order to fulfill these goals, the Committee has reviewed salary surveys
commissioned by the American Electronics Association, and has reviewed proxy
statements from nine companies believed by the Committee to be comparable in
size and complexity.
EXECUTIVE BONUS PLAN
The Compensation Committee adopted an Executive Bonus Plan for fiscal 1996,
after reviewing the operation of the Executive Bonus Plan in effect during
fiscal 1995 in order to determine whether adjustments to the arrangements were
warranted. Based on the review, the Plan was adjusted in several respects for
fiscal 1996. The Executive Bonus Plan provided for a quarterly cash bonus based
upon a percentage of profits, except for Mr. Daub, who received incentive
compensation under a commission plan based on a percentage of orders. Specific
participation percentages for each executive officer were established with
reference to the officer's area and scope of responsibility within the Company.
CHIEF EXECUTIVE OFFICERS' COMPENSATION
The Compensation Committee determined that it continued to be appropriate
that base compensation for Messrs. Blethen and Francis be identical, and
provided other compensation consistent with the goal of equal total compensation
for the two Presidents. The Committee determined that it was appropriate that
the Presidents' base salaries for fiscal 1996 be increased by 25% from the level
set by the Committee during fiscal
1995, and that any additional increase in total compensation of the Presidents
should derive from their participation in the Executive Bonus Plan and from
stock options. The Committee also provided that each President receive a stock
option at a fair market value exercise price for a number of shares based on the
achievement of certain targeted increases in revenue in fiscal 1996 over fiscal
1995. The decisions made with respect to the fiscal 1996 compensation of the
Presidents were intended to more closely align the interests of the Presidents
with the interests of the Company and its stockholders.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
The Committee determined the appropriate portion of each other executive
officer's total potential cash compensation to be contingent upon performance
and payable under the Executive Bonus Plan which was in effect for fiscal 1996.
Bonuses were paid in fiscal 1996 to the two other executive officers under this
Executive Bonus Plan. The bonuses ranged from approximately 31% to 38% of the
executive officer's total compensation. The Committee set base salaries with
reference to both the base salary of the Presidents and the salaries of officers
with comparable responsibilities in the comparable companies. The average
increase in base salaries, approximately four percent over fiscal 1995, was
deemed appropriate by the Committee.
EQUITY ARRANGEMENTS
The Company maintains two stock option plans and one employee stock
purchase plan. Each executive officer is eligible for stock option grants under
one of the stock option plans. In determining the size of grants to be made to
executive officers, the Committee seeks to implement its stated goal that there
be appropriate linkage between executive compensation and the creation of
stockholder value. If executive officers are able to increase the market
capitalization of the Company, their stock options will achieve significant
value and the
7
<PAGE> 10
stockholders will benefit generally. There is no fixed ratio between Company
performance and size of grants or between base salary and size of grants.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. The
Committee believes that any compensation deemed paid to an executive officer
when he or she exercises an outstanding option granted under that Plan with an
exercise price equal to the fair market value of the option share on the grant
date will qualify as performance-based compensation which will not be subject to
the $1 million limitation. Otherwise, it is not expected that the compensation
to be paid to the Company's executive officers for fiscal 1997 will exceed the
$1 million limit per officer.
Samuel Rubinovitz
Jacques Bouyer
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Company's common stock during the five years
ended July 31, 1996 with the total return on the Standard & Poor's 500 Composite
Index and the Standard & Poor's High Technology Composite Index. The comparison
assumes $100 was invested on July 31, 1991 in the Company's common stock and in
each of the foregoing indices and assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
<TABLE>
<CAPTION>
S&P 500 S&P TECH-
MEASUREMENT PERIOD LTX CORPO- COMPOSITE NOLOGY SECTOR
(FISCAL YEAR COVERED) RATION INDEX INDEX
<S> <C> <C> <C>
7/91 100.00 100.00 100.00
7/92 33.00 113.00 106.00
7/93 123.00 123.00 115.00
7/94 68.00 129.00 163.00
7/95 223.00 163.00 223.00
7/96 90.00 190.00 239.00
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and certain of its officers and persons holding more than
ten percent of the Company's Common Stock are required to report their ownership
of the Common Stock and any changes in such ownership to the Securities and
Exchange Commission and the Company. Based on the Company's review of copies of
such reports, no untimely reports were made during the fiscal year ended July
31, 1996.
8
<PAGE> 11
ITEMS 2 AND 3. PROPOSALS TO AMEND THE 1990 STOCK OPTION PLAN
The Board of Directors has adopted an amendment to the 1990 Stock Option
Plan (as amended, the "1990 Plan"), subject to approval by the stockholders, to
provide that the vesting of nonstatutory options issued under the 1990 Plan is
accelerated upon the occurrence of a "change of control" as defined in the Plan.
The Board of Directors has, in addition, subject to stockholder approval,
adopted an amendment to the 1990 Plan to provide that options granted under the
1990 Plan in the future be exercisable for two years after termination of
employment in the event employment of the optionee terminates as a result of
death or disability. Prior to this amendment, the 1990 Plan provided that the
exercise period was three months after termination of employment in the event
employment of the optionee terminates as a result of disability and that the
exercise period was six months in the event employment of the optionee
terminates as a result of the death of the optionee.
The 1990 Plan is intended to advance the interests of the Company and its
stockholders by improving the Company's ability to attract and retain qualified
individuals who are in a position to contribute to the management and growth of
the Company and its subsidiaries and to provide incentive for such individuals
to contribute to the Company's future success.
The 1990 Plan provides that the Company may grant options for not more than
3,700,000 shares of its common stock, subject to increase or decrease in the
event of subsequent stock splits or other capital changes. In the event that any
option expires or terminates for any reason without being exercised in full, the
unpurchased shares covered thereby will be available for reoffering under the
1990 Plan. Options under the 1990 Plan may be granted on or after October 24,
1990 but not later than October 23, 2000. As of October 1, 1996, 1,800,507
shares of common stock remain subject to future grant under the 1990 Plan.
An option under the 1990 Plan may be granted only to an employee, director
or consultant of the Company or its subsidiaries. The aggregate fair market
value of common stock for which incentive options held by any participant may
first become exercisable in any calendar year (determined as of the time the
incentive option is granted) shall not exceed $100,000.
The exercise price under each incentive option granted pursuant to the 1990
Plan shall not be less than 100% of the fair market value of the common stock on
the date of grant. The exercise price of each nonstatutory option is not so
limited.
The 1990 Plan is administered by the Board of Directors of the Company or
by a committee composed of members of the Board (the Board of Directors or any
such committee being hereinafter referred to as the "Committee"). The Committee
will have complete authority, subject to the limitations described in the 1990
Plan, to determine which eligible employees will be granted options, the time at
which options will be granted, the number of shares covered by each option, and
the option period.
The 1990 Plan provides that each director who is not an employee of the
Company will receive options to purchase 20,000 shares of the Company's common
stock on the date first elected to the Board, and, at each Annual Meeting, 6,000
additional shares in each year served as a member of the Board, 3,000 additional
shares in each year served as a chairman of a committee of the Board and 1,500
additional shares in each year served as a member of a committee of the Board.
Each such option will have a fair market value exercise price and will be
exercisable, cumulatively, to the extent of twenty percent of the option shares
on the first anniversary date of the grant of the option, thirty-five percent of
the option shares on the second anniversary date of the option grant and
forty-five percent of the option shares on the third anniversary date of the
option grant. In the event any director standing for re-election is not
re-elected to the Board, all of such director's unexercisable option shares will
become exercisable immediately. The Plan also provides that on the day of the
1996 Annual Meeting, as consideration for changing the exercise price of future
options from $1.00 to fair market value, each director who is not an employee of
the Company and has served as a director for at least one year, will receive a
one-time grant of an option to purchase 10,000 shares of the Company's common
stock at a fair market value exercise price, which option will be immediately
exercisable. The provisions of the 1990 Plan relating to directors who are not
employees of the Company cannot be amended more than once every six
9
<PAGE> 12
months, other than to comply with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules and regulations
thereunder.
Each option under the 1990 Plan will be evidenced by a written option
agreement in such form as may be approved by the Committee. Each option will be
exercisable in one or more installments at the time provided in the option
agreement, except that no incentive option may be exercised later than 10 years
from the date of its grant. Each incentive option will provide that the option
will become immediately exercisable in full in the event of a change of control.
Options granted under the 1990 Plan are not transferable other than by will or
the laws of descent and distribution, and may be exercised during the life of an
optionee only by the optionee. All rights to purchase shares will cease to
accrue upon the death or other termination of employment of an optionee, and any
accrued rights not then exercised are exercisable only within a limited period
thereafter.
The 1990 Plan is intended to qualify as an "incentive stock option plan"
within the meaning of Section 422 of the Internal Revenue Code of 1986, but not
all options granted under the 1990 Plan are required to be incentive options.
Under the applicable Code provisions, an employee will recognize no income
subject to federal income taxation upon either the grant or exercise of an
incentive option under the 1990 Plan, and the Company will not be entitled to a
deduction for federal income tax purposes as a result of the grant or exercise
of an incentive option. Generally, if an optionee disposes of the incentive
option shares more than two years after the date the option was granted and more
than one year after the exercise of the option, the gain or loss on a sale of
the incentive option shares, equal to the difference between the sales price and
the option exercise price, will be treated as long-term capital gain or loss. In
that case the Company will not be entitled to a deduction at the time the
optionee sells the option shares. If the optionee sells the incentive option
shares within two years after the date the option is granted or within one year
after the date the option is exercised, the optionee will generally be taxed on
an ordinary income basis on the sale of the shares on an amount equal to the
difference between the fair market value at exercise and the incentive option
exercise price. The Company will be allowed a deduction at that time in an
amount equal to the ordinary income realized by the employee. In addition, some
optionees may be subject to a minimum tax on tax preference income. No taxable
income will be recognized by an individual upon the grant of a nonstatutory
option under the 1990 Plan. Upon the exercise of the nonstatutory option,
however, the amount, if any, by which the fair market value of the shares at
exercise exceeds the option exercise price will be treated as ordinary income to
the individual in the year of exercise. In that case the Company will be allowed
an income tax deduction in an amount equal to the amount the individual
recognizes as ordinary income.
RECOMMENDED VOTES
An affirmative vote of a majority of the Company's common stock represented
in person or by proxy at the meeting is necessary to approve the amendment to
the 1990 Stock Option Plan to provide that the vesting of nonstatutory options
issued under the 1990 Plan is accelerated upon a "change of control" as defined
in the 1990 Plan. The Board of Directors recommends that you vote 'FOR' this
proposal.
An affirmative vote of a majority of the Company's common stock represented
in person or by proxy at the meeting is necessary to approve the amendment to
the 1990 Stock Option Plan to provide that options granted in the future be
exercisable for two years after termination of employment in the event
employment of the optionee terminates as a result of death or disability. The
Board of Directors recommends that you vote "FOR" this proposal.
10
<PAGE> 13
INFORMATION CONCERNING AUDITORS
Arthur Andersen LLP, who have been selected by the Board of Directors as
independent public accountants to audit the financial statements of the Company
for the 1997 fiscal year, have served as auditors for the Company since 1980.
Representatives of Arthur Andersen LLP are expected to be at the 1996 Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. Such representatives are also expected to be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals to be submitted for vote at the 1997 Annual Meeting
must be delivered to the Company on or before July 12, 1997. In order to
minimize controversy as to the date on which a proposal was received by the
Company, it is suggested that proponents submit their proposals by Certified
Mail -- Return Receipt Requested.
OTHER MATTERS
As of this date, management knows of no business which may properly come
before the 1996 Annual Meeting other than that stated in the Notice of Meeting
accompanying this Proxy Statement. Should any other business arise, proxies
given in the accompanying form will be voted in accordance with the discretion
of the person or persons voting them.
RICHARD M. HARTER, Clerk
11
<PAGE> 14
DETACH HERE LTX 2
LTX CORPORATION
LTX PARK AT UNIVERSITY AVENUE
WESTWOOD, MASSACHUSETTS 02090
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X The undersigned hereby appoints Roger W. Blethen and John J. Arcari or
Y either of them as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote as designated below, all
of the shares of common stock of LTX Corporation held of record by the
undersigned on October 31, 1996, at the annual meeting of stockholders to be
held on December 10, 1996, and any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK
ANY BOXES. HOWEVER, YOU MUST SIGN AND RETURN THIS CARD TO ASSURE
REPRESENTATION OF YOUR SHARES.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 15
DETACH HERE LTX 1
[X] Please mark
votes as in
this example.
PLEASE MARK, SIGN, DATE AND RETURN THIS FORM OF WRITTEN CONSENT PROMPTLY,
USING THE ENCLOSED ENVELOPE.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS CONSENT TO PROPOSALS NO.
1, 2 AND 3.
1. To Elect Class I Directors for three-year terms ending 1999.
NOMINEES: Graham C.C. Miller and Robert E. Moore
[ ] FOR [ ] WITHHOLD
BOTH FROM BOTH
NOMINEES NOMINEES
MARK HERE
FOR ADDRESS [ ]
[ ]__________________________________ CHANGE AND
For, except vote withheld from the NOTE BELOW
nominee noted above.
2. Approval of the amendment to the FOR AGAINST ABSTAIN
1990 Stock Option Plan to provide
that the vesting of nonstatutory [ ] [ ] [ ]
options issued under the Plan is
accelerated upon a "change of
control" as defined in the Plan.
3. Approval of the amendment to the FOR AGAINST ABSTAIN
1990 Stock Option Plan to provide
that options granted in the future [ ] [ ] [ ]
be exercisable for two years after
termination of employment in the
event employment of the optionee
terminates as a result of death or
disability.
4. To transact such other business as may properly come before the meeting and
any adjournments thereof.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature: Date: Signature: Date:
----------------- -------- ----------------- --------
<PAGE> 16
LTX CORPORATION
1990 STOCK OPTION PLAN
1. DEFINITIONS. As used in this 1990 Stock Option Plan, the following
terms shall have the following meanings:
1.1 BOARD means the Company's Board of Directors.
1.2 CODE means the Federal Internal Revenue Code of 1986, as
amended.
1.3 COMPANY means LTX Corporation.
1.4 FAIR MARKET VALUE means the value of a share of Stock of the
Company on any date as determined by the Board.
1.5 GRANT DATE means the date on which an Option is granted, as
specified in Section 7.
1.5A INCENTIVE OPTION means an Option intended to be an incentive
stock option with the meaning of Section 422 of the Code.
1.5B NONSTATUTORY OPTION means any option that is not an Incentive
Option.
1.6 MARKET VALUE means, as of a particular date, the average
closing bid and asked prices of the Stock in the Over the
Counter Market, as reported by the National Association of
Securities Dealers, Inc., or if the Stock is listed on an
exchange, the closing price of the Stock.
1.7 OFFICER means any person who has been identified by the Board
as an "officer" for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended.
1.8 OPTION means an option to purchase shares of the stock granted
under the Plan.
1.9 OPTION AGREEMENT means an agreement between the Company and an
Optionee, setting forth the terms and conditions of an Option.
1.10 OPTION PRICE means the price paid by an Optionee for an Option
under this Plan.
1.11 OPTION SHARE means any share of Stock of the Company
transferred to an Optionee upon exercise of an Option pursuant
to this Plan.
<PAGE> 17
1.12 OPTIONEE means a person eligible to receive an Option, as
provided in Section 6, to whom an Option shall have been
granted under the Plan.
1.13 PLAN means this 1990 Stock Option Plan of the Company, as
amended.
1.14 STOCK means commons stock, par value $0.05 per share, of the
Company.
1.15 VESTING YEAR for any portion of any Option means the calendar
year in which that portion of the Option first becomes
exercisable.
2. PURPOSE. This 1990 Incentive Stock Option Plan is intended to advance
the interests of the Company and its stockholders by improving the Company's
ability to attract and retain qualified individuals who are in a position to
contribute to the management and growth of the Company and its subsidiaries and
to provide additional incentive for such individuals to contribute to the
Company's future success. The Plan is intended to be an incentive stock
option plan within the meaning of Section 422 of the Code, but not all
Options granted hereunder are required to be Incentive Options.
3. TERM OF THE PLAN. Options under the Plan may be granted on or after
October 24, 1990, but not later than October 23, 2000.
4. STOCK SUBJECT TO THE PLAN. At no time shall the number of shares of the
Stock then outstanding which are attributable to the exercise of Options
granted under the Plan, plus the number of shares then issuable upon exercise
of the outstanding Options granted under the Plan exceed 3,700,000 shares,
SUBJECT, HOWEVER, to the provisions of Section 15 of the Plan. Shares to be
issued upon the exercise of Options granted under the Plan may be either
authorized but unissued shares or shares held by the Company in its treasury.
If any Option expires or terminates for any reason without having been
exercised in full, the shares not purchased thereunder shall again be
available for Options thereafter to be granted. Each Director who is not an
employee of the Company or a subsidiary thereof shall receive a Nonstatutory
Option to purchase 20,000 shares of Common Stock on the date on which he or she
is first elected to the Board of Directors of the Company and an additional
Nonstatutory Option to purchase 6,000 shares of Common Stock on the date of
each annual meeting at which he or she is re-elected or after which he
continues to serve as a Director. Each Director who is not an employee of the
Company or a subsidiary thereof shall also receive a Nonstatutory Option to
purchase 3,000 shares of Common Stock in each year served as a chairman of a
Committee of the Board of Directors and a Nonstatutory Option to purchase 1,500
shares of Common Stock in each year served as a member of a Committee of the
Board of Directors, such options to be issued on the date the Committees are
established annually by the Board of Directors. Each Option granted to a
Director under this Section 4 shall have a fair market value exercise price per
share and shall be exercisable, cumulatively, to the extent of twenty percent
of
2
<PAGE> 18
the stock covered thereby on the first anniversary date of the grant of the
Option, thirty-five percent of the stock covered thereby on the second
anniversary date of the grant of the Option and forty-five percent of the stock
covered thereby on the third anniversary date of the grant of the Option. In
addition, on the day of the 1996 Annual Meeting of Stockholders, each Director
who is not an employee of the Company who has served as an outside director for
at least one year will receive a one-time grant of a Nonstatutory Option to
purchase 10,000 shares of Common Stock at a fair market value exercise price,
which Option will be immediately exercisable. In the event any Director
standing for re-election is not re-elected to the Board of Directors at any
meeting, all of such Director's unexercisable Options granted prior to the date
of that meeting will become exercisable immediately.
5. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company or by a committee composed of members of the Board
(the Board of Directors or any such committee being hereinafter referred to as
the "Committee"). With respect to directors and Officers eligible to receive an
Option under this Plan, the Plan shall be administered by a special committee
(the "Special Committee") of the Board of Directors of the Company who are
"disinterested persons" as defined in Rule 16b-3(c) (2) (i) under Section 16 of
the Securities Exchange Act of 1934 and who are also not an employee of one or
more of the Company and its subsidiaries. Only the Special Committee may grant
Options to directors and Officers eligible to receive Options under this Plan.
Subject to the provisions of the Plan, the Committee or the Special Committee,
as the case may be, shall have complete authority, in its discretion, to make
the following determinations with respect to each Option to be granted by the
Company: (a) the employee, director or consultant to receive the Option; (b)
the time of granting the Option; (c) the number of shares subject thereto; (d)
the Option Price; and (e) the Option period. In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective employees, directors and consultants their present and potential
contributions to the success of the Company and its subsidiaries, and such
other factors as the Committee in its discretion shall deem relevant. Subject
to the provisions of the Plan, the Committee shall also have complete authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the respective Option
Agreements (which need not be identical), and to make all other determinations
necessary or advisable for the administration of the Plan. The Committee's
determination on the matters referred to in this Section 5 shall be conclusive.
6. ELIGIBILITY. An Option may be granted only to an employee, director, or
consultant of one or more of the Company and its subsidiaries. A Director of
one or more of the Company and its subsidiaries shall not be eligible to
receive an Incentive Option. Any person who, within the meaning of Section
422A(b) (6) of the Code, is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or its
parent or subsidiary corporations) shall not be eligible to receive an Option.
In
3
<PAGE> 19
any given fiscal year, no Optionee may receive Incentive Options covering more
than 30,000 shares of Stock (such number of shares to be adjusted in accordance
with Section 15).
7. TIME OF GRANTING OPTIONS. The granting of an Option shall take place at
the time specified by the Committee. Only if expressly so provided by the
Committee, shall the Grant Date be the date on which an Option Agreement shall
have been duly executed and delivered by the Company and the Optionee.
8. OPTION PRICE. The Option Price under each Incentive Option shall be not
less than 100% of the Fair Market Value of Stock on the Grant Date; the Option
Price under each Nonstatutory Option shall not be so limited.
9. OPTION PERIOD. No Incentive Option may be exercised later than the
tenth anniversary of the Grant Date. The period during which a Nonstatutory
Option may be exercised shall not be so limited. An Option may be exercisable
in such installments, cumulative or noncumulative, as the Committee may
determine. In the case of an Option not otherwise immediately exercisable in
full, the Committee may accelerate the exercisability of such Option in whole
or in part at any time, provided the acceleration of the exercisability of any
Incentive Option would not cause the Option to fail to comply with the
provisions of Section 422 of the Code.
10. LIMIT ON INCENTIVE OPTION CHARACTERIZATION. No Incentive Option shall
be considered an Incentive Option to the extent pursuant to its terms it would
permit the Optionee to purchase for the first time in any Vesting Year more
than the number of shares of Stock calculated by dividing the current limit by
the Fair Market Value on the Grant Date. The current limit for any Optionee for
any Vesting Year shall be $100,000 minus the aggregate Fair Market Value at the
date of grant of the number of shares of Stock available for purchase for the
first time in such Vesting Year under each other Incentive Option granted to
the Optionee under the Plan and each other incentive stock option plan of the
Company (and its parent and subsidiary corporations).
11. EXERCISE OF OPTION. An Option may be exercised in accordance with its
terms by written notice of intent to exercise the Option, specifying the number
of shares with respect to which the Option is then being exercised. The notice
shall be accompanied by payment in the form of cash or shares of the Stock with
a Market Value on the date of exercise equal to the Option Price of the shares
to be purchased. Within 20 days thereafter, the Company shall deliver or cause
to be delivered to the Optionee evidence of ownership of the number of shares
then being purchased. Such shares shall be fully paid and nonassessable. If any
law or applicable regulation of the Securities and Exchange Commission or other
public regulatory authority shall require the Company or the Optionee to
register or qualify under the Securities Act of 1933, as amended, any similar
federal statute then in force or any state law regulating the sale of
securities, any Option Shares with respect to
4
<PAGE> 20
which notice of intent to exercise shall have been delivered to the Company or
to take any other action in connection with such shares, the delivery of the
certificate or certificates or such shares shall be postponed until completion
of the necessary action, which the Company shall take in good faith and without
delay. All such action shall be taken by the Company at its own expense.
12. TERMINATION OF EMPLOYMENT. In the event that the Optionee's employment
or association with the Company is terminated, whether voluntarily or by reason
of dismissal or retirement, the Option, to the extent exercisable at the date
of termination, may be exercised by the Optionee within three months after he
or she ceases to be an employee, director or consultant. In the event that the
Optionee's employment or association with the Company terminates as a result of
the death or disability of the Optionee, the Option may be fully exercised by
the Optionee or, in the event of the death of the Optionee by the person to
whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within two years after the date of termination,
unless terminated earlier by its terms. Military or sick leave shall not be
deemed a termination of employment provided that it does not exceed the longer
of 90 days or the period during which the absent employee's reemployment rights
are guaranteed by statute or by contract. In the event that the Optionee's
employment or association with the Company terminates as a result of death or
disability of the Optionee, the exercisability of any Option not otherwise
immediately exercisable in full held by such Optionee shall be accelerated and
such Options shall be fully exercisable as of the date of termination.
13. TRANSFERABILITY OF OPTIONS. Options shall not be transferable, otherwise
than by will or the laws of descent and distribution, and may be exercised
during the life of the Optionee only be the Optionee.
14. TRANSFERABILITY OF OPTION SHARES. The Optionee agrees that he or she
will not transfer any of the Option Shares at any time purchased upon the
exercise of any potion of the Option unless (i) such shares are registered
under the provisions of the Securities Act of 1933, as amended, or (ii) at the
request of the Company, the transferee represents, in form satisfactory to
counsel for the Company, that he or she will not transfer, sell or otherwise
dispose of the Optioned Shares at any time purchased by him or her in a manner
which would violate the Securities Act of 1933, as amended (the "Act"), and the
regulations of the Securities and Exchange Commission thereunder. The Optionee
agrees that the Company may, at its discretion, make a notation on any
certificates issued upon exercise of any portion of the Option to the effect
that such certificate may not be transferred except after receipt by the
Company of an opinion of counsel satisfactory to it to the effect that such
transfer will not violate the Act and the regulations thereunder, and may issue
"stop transfer" instructions to its transfer agent, if any, and make a "stop
transfer" notation on its books as appropriate.
15. ADJUSTMENT OF NUMBER OF OPTION SHARES. Each Option Agreement shall
provide that in the event of any stock dividend payable in the
5
<PAGE> 21
Stock or any split-up or contraction in the number of shares of the Stock
occurring after the date of the Agreement and prior to the exercise in full of
the Option or the repurchase by the Company pursuant to Section 14, the number
of shares subject to such Agreement shall be proportionately adjusted and the
price to be paid for each share subject to the Option shall be proportionately
adjusted. Each such agreement shall also provide that in case of any
reclassification or change of outstanding shares of the Stock or in case of
any consolidation or merger of the Company with or into another company or in
case of any sales or conveyance to another company or entity of the property of
the Company as a whole or substantially as a whole, shares of Stock or other
securities shall be delivered equivalent in kind and value to those shares an
Optionee would have been received if the Option had been exercised in full or
the repurchase consummated immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and no disposition had subsequently
been made. Each Agreement shall further provide that upon dissolution or
liquidation of the Company, the Option shall terminate, but the Optionee (if
at the time in the employ of the Company or any of its subsidiaries) shall have
the right, immediately prior to such dissolution or liquidation, to exercise
the Option to the extent not theretofore exercised. No fraction of a share
shall be purchasable or deliverable upon exercise, but in the event any
adjustment hereunder of the number of shares covered by the Option shall cause
such number to include a fraction of a share, such fraction shall be adjusted
to the nearest smaller whole number of shares. In the event of changes in the
outstanding Stock by reason of any stock dividend, split-up, contraction,
reclassification, or change of outstanding shares of the Stock of the nature
contemplated by this Section 15, the number of shares of the Stock available
for the purpose of the Plan as stated in Section 4 shall be correspondingly
adjusted.
16. RESERVATION OF STOCK. The Company shall at all times during the term of
the Option reserve and keep available such number of shares of the Stock as
will be sufficient to satisfy the requirements of this Plan and shall pay all
fees and expenses necessarily incurred by the Company in connection therewith.
17. LIMITATION OF RIGHTS IN THE OPTION SHARES. The Optionee shall not be
deemed for any purpose to be a stockholder of the Company with respect to any
of the Option Shares except to the extent that the Option shall have been
exercised with respect thereto and, in addition, a certificate shall have been
issued therefore and delivered to the Optionee. Any Stock issued pursuant to
the Option shall be subject to all restrictions upon the transfer thereof which
may be now or hereafter imposed by the Articles of Organization or the By-laws
of the Company.
18. TERMINATION AND AMENDMENT OF THE PLAN. The Board may at any time
terminate the Plan or make such modifications of the Plan as it shall deem
advisable; PROVIDED that no modification shall be effective or increase the
number of shares of Stock subject to the Plan or change the number or
classification of employees eligible to receive Options until such modification
is approved by the holders of a majority of the
6
<PAGE> 22
voting capital stock of the Company. No termination or amendment of the Plan
may, without the consent of the Optionee to whom any Option shall theretofore
have been granted, adversely affect the rights of such Optionee under such
Option. In no event may the Board amend the Plan more than once every six months
other than to comply with changes in the Code, the Employee Retirement Income
Security Act of 1974 or the rules thereunder.
19. NOTICES. Any communication or notice required or permitted to be given
under the Plan shall be in writing, and mailed by registered or certified mail
or delivered in hand, if to the Company, to its Treasurer at LTX Park at
University Avenue, Westwood Massachusetts 02090 and, if to the Optionee, to the
address as the Optionee shall last have furnished to the communicating party.
20. WITHHOLDING; NOTICE OF DISPOSITION OF STOCK PRIOR TO EXPIRATION OF
SPECIFIED HOLDING PERIOD.
(a) Whenever shares are to be issued in satisfaction of an Option
granted hereunder, the Company shall have the right to require
the Optionee to remit to the Company an amount sufficient to
satisfy federal, state, local or other withholding tax
requirements if and to the extent required by law (whether so
required to secure for the Company an otherwise available tax
deduction or otherwise) prior to the delivery of any
certificate or certificates for such shares.
(b) The Company may require as a condition to the issuance of
shares covered by an Incentive Option that the party exercising
such Option give a written representation to the Company which
is satisfactory in form and substance to its counsel and upon
which the Company may reasonably rely, that he or she will
report to the Company any disposition of such shares prior to
the expiration of the holding periods specified by Section
422(a)(1) of the Code. If and to the extent that the
realization of income in such a disposition imposes upon the
Company federal, state, local or other withholding tax
requirements, or any other available tax deduction, the
Company shall have the right to require that the recipient
remit to the Company an amount sufficient to satisfy those
requirements; and the Company may require as a condition to the
issuance of shares covered by an Incentive Option that the
party exercising such option give a satisfactory written
representation promising to make such a remittance.
1990 Stock Option Plan of LTX/Stock Plans Master
7
