<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definition Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(C) or (S)240.14a-12
LTX Corporation
-------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] 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:
________________________________________________________________________
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________________________________________________________________________
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________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
University Avenue
Westwood, Massachusetts 02090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 7, 1999
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 7, 1999, beginning at 4:00 p.m. local
time, for the following purposes:
1. To elect two members of the Board of Directors to serve for three-year
terms as Class I Directors.
2. To consider and act upon a proposal to approve the LTX Corporation 1999
Stock Plan.
3. 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 29, 1999 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
Joseph A. Hedal, Clerk
November 9, 1999
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>
LTX CORPORATION
PROXY STATEMENT
November 9, 1999
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 7, 1999, and
any adjournments thereof (the "1999 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, by executing a proxy
with a later date or by attending and voting at the 1999 Annual Meeting.
Solicitation of proxies by mail is expected to commence on November 9, 1999,
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 $7,000 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
29, 1999, is entitled to one vote for each share registered in such
stockholder's name. As of that date, there were 42,524,408 shares of common
stock issued and outstanding.
1
<PAGE>
CERTAIN STOCKHOLDERS
The following table sets forth, as of October 22, 1999, 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 Executive Officers" on
page 6, (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.
<TABLE>
<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.......................... 2,997,000 7.0%
Roger W. Blethen................ 402,893 *
David G. Tacelli................ 56,350 *
Edward J. Terrenzi.............. 76,471 *
Robert E. Moore................. 88,500 *
Samuel Rubinovitz............... 85,100 *
Roger J. Maggs.................. 68,000 *
Jacques Bouyer.................. 52,000 *
Robert J. Boehlke............... 47,275 *
Stephen M. Jennings............. 20,587 *
All directors and executive
officers as a group (9
persons)....................... 897,176 2.1%
</TABLE>
- --------
* Less than 1%.
(1) The address of State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707.
(2) Shares owned by Messrs. Blethen, Tacelli, Terrenzi, Moore, Rubinovitz,
Maggs, Bouyer, Boehlke, Jennings, and by all executive officers and
directors as a group include 310,075 shares, 48,850 shares, 50,750 shares,
81,000 shares, 63,100 shares, 68,000 shares, 46,000 shares, 22,775 shares,
19,587 shares, and 710,137 shares, respectively, under stock options which
are presently exercisable or become so within sixty days.
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 1999 Annual Meeting. The nominees for election as Class I
Directors are Messrs. Jennings and Moore. Mr. Jennings was elected a Director
by the Board of Directors in September 1997. Mr. Moore was elected a Director
at the Annual Meeting of Stockholders held in December 1996. If re-elected, the
Class I nominees will hold office until the Annual Meeting of Stockholders to
be held in the year 2002.
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 Class I Director nominee, 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. The By-laws of the Company provide that a stockholder wishing to
nominate a person to serve as a director of the Company must provide the
Company with at least sixty days' written notice in advance of an annual
meeting, together with such information concerning the identity, background and
experience of the nominee as the Board of Directors may require.
2
<PAGE>
Set forth below is information for each of the nominees for Class I
Directors to be elected at the 1999 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 2000 and 2001, respectively.
Nominees to Serve a Three-Year Term Expiring at the 2002 Annual Meeting
(Class I Directors)
Name Business Affiliations
---- ---------------------
Stephen M. Jennings.............. Mr. Jennings, age 38, was elected a
Director of the Company in September 1997.
Mr. Jennings has been a Director of Monitor
Company, a strategy consulting firm, since
1996. From 1992 to 1996, he was a
consultant to that company.
Robert E. Moore.................. Mr. Moore, age 61, 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.
Directors Serving a Three-Year Term Expiring at the Year 2000 Annual Meeting
(Class II Directors)
Name Business Affiliations
---- ---------------------
Roger W. Blethen................. Mr. Blethen, age 48, has been a Director
since 1980. Mr. Blethen was appointed Chief
Executive Officer of the Company in
September 1996. Mr. Blethen was a President
of the Company from 1994 to 1996 and a
Senior Vice President 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.
Robert J. Boehlke................ Mr. Boehlke, age 58, was elected a Director
of the Company in June 1997. Mr. Boehlke is
currently Executive Vice President and
Chief Financial Officer of KLA-Tencor
Corporation, a position he has held since
1990. Between 1983 and 1990, he held a
variety of general management positions
with that company. Prior to his employment
by KLA-Tencor, Mr. Boehlke was a partner at
the investment banking firm of Kidder,
Peabody & Company, Inc. from 1971 until
1983.
Roger J. Maggs................... Mr. Maggs, age 53, was elected a Director
of the Company in 1994. Mr. Maggs is
currently Chairman of Celtic House
Investment Partners, a private investment
firm. Mr. Maggs was a Vice President of
Alcan Aluminium Limited from 1986 until
1994.
3
<PAGE>
Directors Serving a Three-Year Term Expiring at the Year 2001 Annual Meeting
(Class III Directors)
Name Business Affiliations
---- ---------------------
Jacques Bouyer................... Mr. Bouyer, age 71, 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.
Samuel Rubinovitz................ Mr. Rubinovitz, age 69, has been Chairman
of the Board of the Company since December
1997. He 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 a director of
Richardson Electronics, Ltd., KLA-Tencor
Corporation and Kronos Inc.
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 1999
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. Directors who are not employees of
the Company may also elect to pay premiums and receive benefits under the
Company's group health insurance plans. For as long as Mr. Rubinovitz
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 1999, Mr. Bouyer received, in
addition, $4,000 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 seven meetings during the fiscal
year ended July 31, 1999, 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 five times during the fiscal year
4
<PAGE>
ended July 31, 1999. 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. Boehlke, Bouyer, Jennings and Maggs. The Board has a standing
Audit Committee which meets periodically and met four times during the fiscal
year ended July 31, 1999. 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. Boehlke,
Jennings, Moore and Rubinovitz. The Board has a standing Strategic Planning
Committee which meets periodically and met four times during the fiscal year
ended July 31, 1999. 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, Boehlke,
Bouyer, Jennings, Maggs, Moore and Rubinovitz. The Board has a standing
Directors' Affairs Committee which meets periodically and met four times
during the fiscal year ended July 31, 1999. 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. Boehlke, Bouyer,
Jennings, Maggs, Moore and Rubinovitz.
Executive Officers of the Company
The executive officers of the Company, as of October 16, 1999, are as follows:
<TABLE>
<CAPTION>
Executive Officer Age Position
- ----------------- --- --------
<S> <C> <C>
Roger W. Blethen..... 48 President, Chief Executive Officer and Director
David G. Tacelli..... 40 Vice President, Chief Financial Officer and Treasurer
Edward J. Terrenzi... 50 Vice President, Fusion Products Division
</TABLE>
Executive officers are appointed by and serve at the discretion of the Board
of Directors of the Company.
Roger W. Blethen was appointed Chief Executive Officer of the Company in
September 1996 and has been a Director since 1980. Mr. Blethen was a President
of the Company from 1994 to 1996 and a Senior Vice President 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.
David G. Tacelli was appointed Chief Financial Officer and Treasurer of LTX in
December 1998. Prior to that, Mr. Tacelli was Vice President, Operations from
October 1996 to December 1998. Mr. Tacelli's previous responsibilities at LTX
included Director of Manufacturing of the Mixed Signal Division, a position he
held from 1994 to 1996. From 1992 to 1994, he was Director of Customer
Service. He served as Controller and Business Manager for Operations from 1990
to 1992 and was Controller for Sales and Support from 1989 to 1990. Prior to
joining LTX, Mr. Tacelli was employed by Texas Instruments for seven years in
various management positions.
Edward J. Terrenzi was appointed Vice President, Fusion Products Division in
June 1998. Mr. Terrenzi joined LTX in 1984, and has held a variety of
management positions in Marketing, Engineering and Applications. In 1994, he
was promoted to General Manager of the Mixed Signal Division and became Vice
President of that Division in 1996. From 1991 to 1994, he was Director of
Marketing and Applications and from 1987 to 1991, he was Director of Worldwide
Applications. Before joining LTX, he spent five years at Digital Equipment
Corporation as a Senior Engineering Manager in the LSI Group, and eight years
at Raytheon Company Equipment Division in various engineering positions.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth certain information with respect to the
annual and long term compensation of the Company's President and Chief
Executive Officer and the two other most highly compensated executive officers
of the Company who were serving as executive officers at the end of fiscal 1999
(such executive officers are sometimes collectively referred to herein as the
"named executive officers"):
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------- ------------
Name Other Annual Options All Other
and Principal Position Year Salary Bonus Compensation(2) Granted (#) Compensation(3)
---------------------- ---- -------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger W. Blethen....... 1999 $450,000 0 0 625,000 1,400
President and Chief 1998 450,000 0 0 40,000 6,600
Executive Officer 1997 389,166 100,000 0 290,000 5,520
David G. Tacelli(1).... 1999 205,000 0 0 120,000 1,065
Vice President, Chief 1998 195,833 0 0 50,000 4,690
Financial
Officer and Treasurer
Edward J. Terrenzi(1).. 1999 205,000 0 0 55,000 838
Vice President 1998 195,833 0 0 50,000 4,764
Fusion Products
Division
</TABLE>
- --------
(1) Each of Messrs. Tacelli and Terrenzi became executive officers of the
Company in June 1998 as a result of a restructuring of the Company.
(2) 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.
(3) Amounts shown under "All Other Compensation" column represent taxable
amounts in respect of term life insurance and 401(k) plan matching
contributions made by the Company.
Option Grants in Last Fiscal Year
<TABLE>
The following table sets forth certain information regarding options granted
during the fiscal year ended July 31, 1999 by the Company to each of the named
executive officers:
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term(C)
----------------------------------- ---------------------------------
% of Total
Options
Granted Exercise
Options to Employees Price Expiration
Name Granted in Fiscal Year Per Share Date 5% 10%
- ---- ------- -------------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger W. Blethen........ 500,000(A) 13.27% $8.8125 06/04/09 $2,771, 067 $7,022,428
125,000(B) 3.32% $ 3.93 09/01/05 $ 0 $ 136,992
David G. Tacelli........ 120,000(A) 3.19% $8.8125 06/04/09 $ 665,056 $1,685,383
Edward J. Terrenzi...... 55,000(A) 1.46% $8.8125 06/04/09 $ 304,817 $ 772,467
</TABLE>
- --------
(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) These options will be fully exercisable on September 1, 2005, but are
subject to earlier vesting if the Company achieves certain financial
targets.
(C) 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.
6
<PAGE>
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, 1999 and the total number of
unexercised options held on July 31, 1999, by each of the named executive
officers:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End 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........ 900 $8,944 263,105 886,500 $2,193,528 $5,941,500
David G. Tacelli........ 0 -- 44,350 238,000 $ 417,219 $1,683,531
Edward J. Terrenzi...... 0 -- 46,250 153,000 $ 432,313 $1,183,844
</TABLE>
- --------
(A) The closing price for the Company's common stock as reported by the Nasdaq
National Market on July 29, 1999, the last business day of fiscal 1999, was
$12.8125. Value is calculated on the basis of the difference between the
option exercise price and $12.8125 multiplied by the number of shares of
common stock underlying the option.
Employment Contracts and Change in Control Arrangements
The Company has entered into change of control employment agreements with
each of the named executive officers and with six other officers. The change of
control employment agreements have three year terms, which terms extend for one
year upon each anniversary unless a notice not to extend is given by the
Company. If a Change of Control (as defined in the agreements) occurs during
the term of an agreement, then the agreements become operative for a fixed
three year period. The agreements provide generally that the executive's terms
and conditions of employment (including position, location, compensation and
benefits) will not be adversely changed during the three year period after a
Change of Control of the Company. If the Company terminates the executive's
employment (other than for cause, death or disability) or if the executive
terminates for good reason during such three year period or for any reason
during the 30 day period following the first anniversary of the Change of
Control (or upon certain terminations prior to a Change of Control or in
connection with or in anticipation of a Change of Control), the executive is
generally entitled to receive (i) three times in the case of the Chief
Executive Officer, and two times in the case of the other officers (a) the
executive's annual base salary plus (b) the executive's annual bonus amount (as
defined in the agreement), (ii) accrued but unpaid compensation for the period
before the date of termination, (iii) continued welfare benefits for three
years in the case of the Chief Executive Officer and for two years in the case
of the other officers, and (iv) outplacement services. In addition, the
executive is entitled to receive an additional payment, if any, in an amount
sufficient to make the executive whole for any excise tax on excess parachute
payments imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended.
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.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of four
outside directors who are not employees of the Company. The Committee met five
times during the fiscal year ended July 31, 1999. 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.
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 various salary
surveys conducted by consultants as well as proxy statements from other
semiconductor and technology companies.
Executive Bonus Plan
The Compensation Committee reviewed the operation of the Executive Bonus
Plan in effect during fiscal 1998 in order to determine whether bonuses in
fiscal 1999 were warranted. Based on that review, as well as the Company's
business condition and financial performance at the time, the Committee decided
that no cash bonuses should be paid to executive officers in fiscal 1999.
Chief Executive Officer's Compensation
The Compensation Committee determined that it was appropriate to fix Mr.
Blethen's base salary for fiscal 1999 at the same level set by the Committee
during fiscal 1998. The Committee engaged the benefits consulting firm of
Watson Wyatt to analyze and make recommendations regarding the compensation of
the Chief Executive Officer in order to evaluate the appropriate range of
equity incentives for Mr. Blethen. The consultant conducted a competitive
assessment of compensation of the executive officers, including base salary,
annual cash incentives and long-term (stock option) incentives, compared to
market data in published surveys and the proxy statements of 21 peer companies.
Based on the information presented by the consultant, which indicated that Mr.
Blethen's percentage ownership was significantly below that of his peers, and
also based on the stage of the Company's restructuring and strategic re-
positioning, the Committee decided that during fiscal 1999 more substantial
stock option grants for the Chief Executive Officer were appropriate compared
to prior years. The decisions made with respect to the fiscal 1999 compensation
of the Chief Executive Officer were intended to continue the Company's
philosophy of aligning the interests of the Chief Executive Officer with the
interests of the Company and its stockholders.
Compensation of Other Executive Officers
The Committee determined that it was appropriate to fix the base salary of
each of the other executive officer's for fiscal 1999 at the same level as was
in effect for fiscal 1998 and no bonuses should be paid in fiscal 1999 based on
the Company's financial performance.
8
<PAGE>
Equity Arrangements
The Company maintains three 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 stockholders will benefit generally. There is no fixed ratio
between Company performance and size of grants or between base salary and size
of grants. In determining the size of grants, the Committee considers a number
of factors, including market ranges for the position, individual performance,
prior option grant history and Company performance.
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
compensation paid to the Company's executive officers for fiscal 1999 did not
exceed the $1 million limit per officer and it is not expected that the
compensation to be paid to the Company's executive officers for fiscal 2000
will exceed the $1 million limit per officer.
Roger J. Maggs
Robert J. Boehlke
Jacques Bouyer
Stephen M. Jennings
9
<PAGE>
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, 1999 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, 1994 in the Company's common
stock and in each of the foregoing indices and assumes reinvestment of
dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG LTX CORPORATION, THE S &P 500 INDEX AND
THE S&P TECHNOLOGY SECTOR INDEX
Cumulative Total Return
----------------------------------
7/94 7/95 7/96 7/97 7/98 7/99
LTX CORPORATION 100 330 133 211 115 407
S & P 500 100 126 147 224 267 321
S & P TECHNOLOGY SECTOR 100 167 180 336 400 630
$100 INVESTED ON 7/31/94 IN STOCK OR INDEX-INCLUDING
REINVESTMENT OF DIVIDENS.
FISCAL YEAR ENDING JULY 31.
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, 1999.
ITEM 2. PROPOSAL TO APPROVE THE LTX CORPORATION
1999 STOCK PLAN
The Board of Directors adopted the LTX Corporation 1999 Stock Plan (the
"1999 Plan") on June 4, 1999. The 1999 Plan will replace the LTX Corporation
1990 Stock Option Plan, as amended (the "1990 Plan"), which expires on October
23, 2000. Under the terms of the 1990 Plan, there is no provision for extending
its life beyond that date. The 1999 Plan has been established with
substantially the same terms as the 1990 Plan to continue the benefits that
have been achieved by the 1990 Plan. The following is a summary of the material
provisions of the 1999 Plan.
10
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The 1999 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 1999 Plan provides that the Company may grant options and awards of
Restricted Shares (as defined below) for not more than 2,100,000 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 1999 Plan.
Options and Restricted Share awards under the 1999 Plan may be granted on or
after June 4, 1999 but not later than June 4, 2009. As of November 1, 1999,
1,257,000 shares of common stock remain subject to further grant under the 1999
Plan. Of the options to purchase 843,000 shares of common stock previously
granted, options to purchase a total of 325,000 shares were granted to the
Company's Chief Executive Officer at a fair market value exercise price and
options to purchase 518,000 shares were granted to non-executive officer
employees at a fair market value exercise price. See the Option Grants in Last
Fiscal Year Table on page 6 for additional information on the Chief Executive
Officer's option grant.
An option or Restricted Share award under the 1999 Plan may be granted only
to an employee, director or consultant of the Company or its subsidiaries. Each
option and Restricted Share award under the 1999 Plan will be evidenced by a
written agreement in such form as may be approved by the Committee. The Company
may award shares of common stock to an employee, director or consultant of the
Company or its subsidiaries, subject to provisions affecting retention and
transferability (the "Restricted Shares"). The Restricted Shares may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until satisfaction of the conditions specified by the Committee. All rights
with respect to Restricted Shares are available only to the recipient during
his or her lifetime. Recipients holding Restricted Shares may exercise full
voting rights with respect to such shares and will receive such cash dividends
paid with respect to the Restricted Shares as may be declared while they are so
held.
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. No optionee may receive incentive stock options covering more than
500,000 shares in any fiscal year. The exercise price under each incentive
option granted pursuant to the 1999 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 in not so limited.
The 1999 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 1999
Plan, to determine which eligible employees will be granted options or
Restricted Share awards, the time at which options will be granted, the number
of shares covered by each option and the option period.
The 1999 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 provisions of the 1999 Plan relating
to directors who are not employees of the Company cannot be amended more than
once every six months, other than to comply with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules and
regulations thereunder.
11
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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 1999 Plan are not
transferable other than by the optionee. All rights to purchase shares will
cease to accrue upon the death, disability or other termination of employment
of an optionee, and any accrued rights not then exercised are exercisable
within certain time periods depending on the nature of the termination.
The 1999 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 1999 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 1999 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 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
holders of options may be subject to a minimum tax upon exercise of those
options. No taxable income will be recognized by an individual upon the grant
of a nonstatutory option under the 1999 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 Vote
An affirmative vote of a majority of the Company's common stock present in
person or by proxy and voting at the 1999 Annual Meeting is necessary to
approve the LTX Corporation 1999 Stock Plan. The Board of Directors recommends
that you vote "FOR" this proposal.
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 2000 fiscal year, have served as auditors for the Company since 1980.
Representatives of Arthur Andersen LLP are expected to be at the 1999 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 2000 Annual Meeting
pursuant to Rule 14a-8 promulgated under the Exchange Act must be delivered to
the Company on or before July 13, 2000. 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.
If a proponent fails to notify the Company by September 26, 2000 of a non-Rule
14a-8 shareholder proposal which such proponent intends to submit at the
Company's 2000 Annual Meeting, the proxy solicited by the Board of Directors
with respect to such meeting may grant discretionary authority to the proxies
named therein to vote on such matter.
12
<PAGE>
OTHER MATTERS
As of this date, management knows of no business which may properly come
before the 1999 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.
ANNUAL REPORT ON FORM 10-K
Copies of the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1999 as filed with the Securities and Exchange Commission are
available to stockholders without charge upon written request addressed to
Investor Relations, Direct Report Corporation, 12 Clock Tower Place, Maynard,
Massachusetts 01754.
JOSEPH A. HEDAL, Clerk
13
<PAGE>
LTX CORPORATION
1999 STOCK PLAN
1. Definitions. As used in this 1999 Stock 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 or Restricted Share award
----------
is granted, as specified in Section 7.
1.6 Incentive Option means an Option intended to be an incentive stock
----------------
option with the meaning of Section 422 of the Code.
1.7 Market Value means, as of a particular date, the closing price of the
------------
Stock on the NASDAQ National Market on that date.
1.8 Nonstatutory Option means any option that is not an Incentive Option.
-------------------
1.9 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.
1.10 Option means an option to purchase shares of the stock granted under
------
the Plan.
1.11 Option Agreement means an agreement between the Company and an
----------------
Recipient, setting forth the terms and conditions of an Option.
1.12 Option Price means the price paid by an Recipient for an Option Share
------------
under this Plan.
1.13 Option Share means any share of Stock of the Company transferred to
------------
an Recipient upon exercise of an Option pursuant to this Plan.
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<PAGE>
1.14 Plan means this 1999 Stock Plan of the Company, as amended.
----
1.15 Recipient means a person eligible to receive an Option or award, as
---------
provided in Section 6, to whom an Option or award shall have been
granted under the Plan.
1.16 Restricted Share means a share of the Stock awarded to a Recipient,
----------------
but subject to provisions affecting retention and transferability.
1.17 Stock means common stock, par value $ 0.05 per share, of the Company.
-----
1.18 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 1999 Stock 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 and Restricted Share awards under the Plan may be
----------------
granted on or after June 4, 1999, but not later than June 4, 2009.
4. Stock Subject to the Plan. Subject to the provisions of Section 14 of the
-------------------------
Plan, the number of shares of the Stock attributable to the exercise of Options
granted under the Plan plus the number the number of shares then issuable upon
exercise of outstanding options granted under the Plan plus the number of
Restricted Shares awarded under the Plan shall at no time exceed 2,100,000
shares. Shares to be issued upon the exercise of Options granted under the Plan
and Restricted Shares 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
2
<PAGE>
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 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 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
Options or Restricted Shares under this Plan, the Plan shall be administered by
a special committee (the "Special Committee") of the Board of Directors of the
Company all of whom are "Non-Employee Directors" as defined in Rule 16b-
3(b)(2)(i) under Section 16 of the Securities Exchange Act of 1934 and "outside
directors" as defined in Section 162(m) of the Code. 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 and all Restricted Shares to be awarded by the Company: (a) the
employee, director or consultant to receive the Option or award; (b) the time of
granting the Option or award; (c) the number of shares subject thereto; (d) the
Option Price; (e) the Option period; and (f) the restrictions. 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 or awards (which need not be identical), and to
make all other determinations necessary or advisable for the administration of
the Plan. The Committee's determinations on the matters referred to in this
Section 5 shall be conclusive.
6. Eligibility. An Option or award 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 who is not also an
employee 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 422(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
3
<PAGE>
(or of its parent or subsidiary corporations) shall not be eligible to receive
an Option. In any given fiscal year, no Recipient may receive Options or awards
or both covering more than 500,000 shares of Stock (such number of shares to be
adjusted in accordance with Section 14).
7. Time of Granting Options. The granting of an Option or an award 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 or
Restricted Share award shall have been duly executed and delivered by the
Company and the Recipient.
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 become exercisable in such
installments, cumulative or non-cumulative, 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 Recipient 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 Recipient
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 Recipient under the Plan and each other incentive stock option granted to
the Recipient under any 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 (a) full payment for such shares in the form of check or
bank draft payable to the order of the Company, or (b) certificates representing
shares of the Stock with a current Market Value equal to the Option Price of the
shares to be purchased, or (c) irrevocable instructions to a brokerage firm to
sell a sufficient number of the Option Shares to generate the full exercise
price plus all applicable withholding taxes and to pay over to the Company such
proceeds of sale. Within 20 days thereafter, the Company shall deliver or cause
to be delivered to the Recipient evidence of ownership of the number of shares
then being purchased. Such shares shall be fully paid and
4
<PAGE>
nonassessable. If any law or applicable regulation of the Securities and
Exchange Commission or other public regulatory authority shall require the
Company or the Recipient 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 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 for 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 Recipient'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 Recipient within three months after he or
she ceases to be an employee, director or consultant. In the event that the
Recipient's employment or association with the Company terminates as a result of
the death or disability of the Recipient, the Option may be fully exercised by
the Recipient or, in the event of the death of the Recipient 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 Recipient's
employment or association with the Company terminates as a result of the death
or disability of the Recipient, the exercisability of any Option not otherwise
immediately exercisable in full held by such Recipient 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 Recipient only by the Recipient.
14. Adjustment of Number of Option Shares. In the event of any change in
-------------------------------------
corporate capitalization, such as a stock split or a corporate transaction, such
as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Section 368
of the Code) or any partial or complete liquidation of the Company, the
Committee or Board may make such substitution or adjustments in the aggregate
number and kind of shares reserved for issuance under the Plan, in the number,
kind and Option Price of shares subject to outstanding Options, and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion; provided, however, that the number of shares
subject to any Option shall always be a whole number.
5
<PAGE>
15. Restricted Shares. Each Restricted Share award shall be evidenced by a
-----------------
Restricted Share award agreement that shall specify the number of Restricted
Shares awarded and such other provisions as the Board or Committee shall
determine. The Restricted Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until satisfaction of the
conditions as specified by the Board or Committee and set forth in the
Restricted Share award agreement. All rights with respect to Restricted Shares
granted to a Recipient under the Plan shall be available during his or her
lifetime only to the Recipient. Recipients holding Restricted Shares may
exercise full voting rights with respect to those Restricted Shares. Recipients
holding Restricted Shares will receive such cash dividends paid with respect to
the Restricted Shares as may be declared while they are so held. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Shares granted to a Recipient is designed to comply with the
requirements of the performance-based exception under Section 162(m) of the
Code, the Board or Committee may apply any restrictions it deems appropriate to
the payment of dividends declared with respect to such Restricted Shares, such
that the dividends and/or the Restricted Shares maintain eligibility for the
performance-based exception.
16. Transferability. The Recipient agrees that he or she will not transfer any
---------------
of the Option Shares or Restricted Shares 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 Option 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 Recipient
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.
17. Change of Control.
-----------------
(a) Vesting of Options. In the event of a Change of Control, any Options
-------------------
outstanding as of the date such Change of Control is determined to have
occurred, and which are not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the original grant.
(b) Elimination of Restrictions. In the event of a Change of Control, all
------------------------------
restrictions with respect to all Restricted Shares outstanding as of the date
such Change of Control is determined to have occurred shall be eliminated.
(c) Change of Control Cash-Out. During the 60-day period from and after a
--------------------------
Change of Control (the "Exercise Period"), unless the Committee shall
6
<PAGE>
determine otherwise at the time of grant of an Option, each Recipient who is an
employee or consultant of one or more of the Company and its subsidiaries shall
have the right, whether or not the Option is fully exercisable and in lieu of
the payment of the Option Price for the shares of Stock being purchased under
the Option and by giving notice to the Company, to elect (within the Exercise
Period) to surrender all or part of the Option to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change of Control Price per share of Stock on the date of such election
shall exceed the Option Price per share of Stock under the Option (the "Spread")
multiplied by the number of shares of Stock as to which the right granted under
this Section 17 shall have been exercised. Notwithstanding the foregoing, if any
right granted pursuant to this Section 17 would make a Change of Control
transaction ineligible for pooling-of-interests accounting under APB No. 16 that
but for the nature of such grant would otherwise be eligible for such accounting
treatment, the Committee shall have the ability to substitute for the cash
payable pursuant to such right Stock or other securities with a fair market
value equal to the cash that would otherwise be payable hereunder.
(d) Definition of Change of Control Price. "Change of Control Price" means
-------------------------------------
the higher of (i) the highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock Exchange Composite Tape
or other national exchange on which such shares are listed or on NASDAQ National
Market during the 60-day period prior to and including the date of a Change of
Control or (ii) if the Change of Control is the result of a tender or exchange
offer or a Corporate Transaction, the highest price per share of Stock paid in
such tender or exchange offer or Corporate Transaction; provided, however, that
in the case of Incentive Options, the Change of Control Price shall be in all
cases the fair market value of the Stock on the date the right under Section
16(b) associated with such Incentive Option is exercised. To the extent that
the consideration paid in any such transaction described above consists all or
in part of securities or other noncash consideration, the value of such
securities or other noncash consideration shall be determined in the sole
discretion of the Board.
(e) Definition of Change of Control. For purposes of the Plan, a "Change of
-------------------------------
Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (a) the then outstanding shares of Stock (the "Outstanding Company Common
Stock") or (b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any
7
<PAGE>
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (d) any acquisition pursuant to
a transaction which complies with clauses (A), (B) and (C) of subsection (iii)
of this Section 16; or
(ii) Individuals who, as of June 8, 1999, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
June 8, 1999 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another entity (a "Corporate
Transaction"), in each case, unless, following such Corporate Transaction, (A)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
then outstanding voting of such corporation except to the extent that such
ownership existed prior to the Corporate Transaction and (C) at least a majority
of the members of the board of directors of the corporation resulting from such
Corporate Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Corporate Transaction; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
8
<PAGE>
18. Reservation of Stock. The Company shall at all times 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.
19. Limitation of Rights in the Option Shares. A Recipient 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 Recipient. 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.
20. 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 to 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 Company's common stock represented in person or by
proxy and voting at a meeting. No termination or amendment of the Plan may,
without the consent of the Recipient to whom any Option shall theretofore have
been granted, adversely affect the rights of such Recipient under such Option.
21. 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 University Avenue,
Westwood, Massachusetts 02090 and, if to the Recipient, to the address as the
Recipient shall last have furnished to the communicating party.
22. Withholding; Notice of Disposition of Stock Prior to Expiration of
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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 Recipient 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
9
<PAGE>
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.
10
<PAGE>
DETACH HERE
PROXY
LTX CORPORATION
UNIVERSITY AVENUE
WESTWOOD, MASSACHUSETTS 02090
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Roger W. Blethen and David G. Tacelli or 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
29, 1999, at the annual meeting of stockholders to be held on December 7, 1999,
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 AND 2.
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.
- ------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
DETACH HERE
[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 and 2.
1. To elect two members to the Board of Directors to serve for three-year terms
as Class I Directors.
Nominees: Stephen M. Jennings and Robert E. Moore
FOR BOTH WITHELD FROM
NOMINEES [_] [_] BOTH NOMINEES
[_]
---------------------------------------
For both nominees except as noted above
2. To approve the LTX Corporation FOR AGAINST ABSTAIN
1999 Stock Plan. [_] [_] [_]
3. To transact such other business as may properly come before the meeting and
any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
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.
