LTX CORP, S-3, 2000-03-15

LTX CORP
S-3, 2000-03-15
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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<PAGE>

As filed with the Securities and Exchange Commission on March 15, 2000

File No. 333-

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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LTX Corporation
(Exact name of Registrant as specified in its charter)

MASSACHUSETTS 04-2594045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
organization)
LTX Park
University Avenue
Westwood, Massachusetts 02090
(781) 461-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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DAVID G. TACELLI
Executive Vice President and Chief Financial Officer
LTX Corporation
LTX Park
University Avenue
Westwood, Massachusetts 02090
(781) 461-1000
(Address, including zip code, and telephone number, including area code, of
agent for service)

---------------
Copies of all communications to:
MICHAEL P. O'BRIEN, ESQ. GORDON H. HAYES, JR., ESQ.
Bingham Dana LLP Testa, Hurwitz & Thibeault, LLP
150 Federal Street 125 High Street
Boston, Massachusetts 02110 Boston, Massachusetts 02110

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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CALCULATION OF REGISTRATION FEE

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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Securities Amount to Offering Price Aggregate Amount of
to be Registered be Registered Per Share* Offering Price* Registration Fee
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.05 2,875,000
per share............ shares $46.375 $133,328,125 $35,198.63
</TABLE>
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* Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c), based on the offering of up to
2,875,000 shares, including 375,000 shares that the underwriters have an
option to purchase from the Registrant to cover over-allotments, at a
purchase price of $46.375 per share, which is the average of the high and low
prices reported on the Nasdaq National Market on March 8, 2000.

---------------

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS (Subject to Completion)
Issued March , 2000

2,500,000 Shares

[LOGO OF LTX CORPORATION]
COMMON STOCK

-----------

LTX Corporation is offering 2,500,000 shares.

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Our common stock is listed on the Nasdaq National Market under the symbol
"LTXX." On March 14, 2000, the reported last sale price of our common stock on
the Nasdaq National Market was $47 per share.

-----------

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.

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PRICE $ A SHARE

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<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions LTX Corporation
----------- ------------ ---------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total.................................. $ $ $
</TABLE>

LTX Corporation has granted the underwriters the right to purchase up to an
additional 375,000 shares to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on , 2000.

-----------

MORGAN STANLEY DEAN WITTER
NEEDHAM & COMPANY, INC.

, 2000
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 6
Special Note Regarding Forward-
Looking Statements................. 10
Use of Proceeds..................... 11
Price Range of Common Stock......... 11
Dividend Policy..................... 11
Capitalization...................... 12
Selected Consolidated Financial
Data............................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 14
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business........................... 26
Management......................... 35
Principal Stockholders............. 37
Description of Common Stock........ 38
Underwriting....................... 39
Legal Matters...................... 41
Experts............................ 41
Where You Can Find More
Information....................... 41
Incorporation of Certain Documents
by Reference...................... 42
Index to Consolidated Financial
Statements........................ F-1
</TABLE>

----------------

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of common stock
and seeking offers to buy shares of common stock only in jurisdictions where
the offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or any sale of the common stock. In
this prospectus, the "Company", "we", "us", "our", ""or "LTX" refer to LTX
Corporation.

<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our consolidated financial statements and notes thereto appearing
elsewhere or incorporated by reference in this prospectus.

LTX CORPORATION

LTX designs, manufactures, markets and services semiconductor test equipment.
We sell our test systems worldwide to designers and manufacturers of
semiconductor devices, such as Texas Instruments, STMicroelectronics, Samsung,
Philips Semiconductor, Motorola, Lucent Technologies, Infineon Technologies and
Hitachi. These devices are incorporated in a wide range of products, including
data communications equipment such as switches, routers and servers, broadband
access products such as cable modems and Ethernet accessories, personal
communication devices such as cell phones and personal digital assistants,
consumer products such as televisions, videogame systems, digital cameras, and
automobile electronics, and personal computer accessory products such as disk
drives and 3D graphics accelerators.

Today, our products are focused on testing semiconductor devices that
incorporate multiple device technologies and functions into a single
semiconductor device, referred to as system-on-a-chip, or SOC. SOC provides the
benefits of lower cost, smaller size, and higher performance by combining
advanced digital, mixed signal (a combination of digital and analog) and
embedded memory technologies on a single device. These distinct technologies
were, until recently, available only on several separate semiconductor devices,
each performing a specific function. SOC enables the development of smaller,
cheaper, and more advanced electronic products such as cellular phones, laptop
computers, and mobile Internet terminals, as well as sophisticated consumer and
automobile electronics. Historically, device manufacturers used several
narrowly focused testers, each designed to test only digital, only memory, or
only mixed signal devices, but incapable of testing all three. SOC does not fit
into any one of these categories because it represents the convergence of these
three technologies and requires new testing technology. We believe the
inability to fully and efficiently test SOC devices has slowed advancements in
the design and development of more sophisticated electronic products.

With the introduction of the LTX Fusion(R) test platform, we now offer a test
system capable of testing SOC devices, as well as more traditional analog,
digital, and mixed signal semiconductor devices, on a single, integrated
platform. Fusion allows our customers to use a single, integrated hardware and
software system to test all of these devices, rather than resorting to the
multiple test systems typically required. By using a single testing platform,
our customers are able to optimize their asset utilization, thereby increasing
their manufacturing flexibility and lowering the overall cost of their testing
processes. Fusion provides:

. a single test platform;

. multi-site test capability;

. a full range of mixed signal instrumentation;

. state of the art digital test capability; and

. easy-to-use software for test program development.

We intend to capture a significant share of the semiconductor test equipment
market by:

. extending our technological lead in single platform testing;

. maintaining our focus on the SOC test market;

. concentrating our sales, applications consulting and service efforts on
key accounts;

. further improving the flexibility of our business model; and

. building on our strategic alliances.

Our principal executive offices and manufacturing operations are located at
LTX Park, University Avenue, Westwood, Massachusetts 02090. Our telephone
number is (781) 461-1000. We also have sales and service facilities throughout
North America, Europe, and Asia. Our corporate web site is www.ltx.com. The
information in our web site is not incorporated by reference in this
prospectus.

3
<PAGE>

The Offering

<TABLE>
<S> <C>
Common stock offered................. 2,500,000 shares
Common stock to be outstanding after 46,169,972 shares
this offering.......................
Over-allotment option................ 375,000 shares
Use of proceeds...................... For general corporate purposes,
including working capital, capital
expenditures, potential acquisitions and
investments, and possible repayment of
outstanding debt.
Nasdaq National Market Symbol........ LTXX
</TABLE>

The above information is based on 43,669,972 shares outstanding as of
February 29, 2000. This information does not include 4,553,335 shares of common
stock exercisable pursuant to outstanding options as of February 29, 2000 at a
weighted average exercise price of $5.61 per share, under our 1999 Stock Plan,
1990 Stock Option Plan and 1995 LTX (Europe) Ltd. Approved Stock Option Plan
and does not include 399,055 shares issuable upon conversion of our 7 1/4%
Convertible Subordinated Debentures due 2011 which were called for redemption
on March 24, 2000.

Summary Consolidated Financial Data
(in thousands, except per share data)

Consolidated Statements of Operations Data:

<TABLE>
<CAPTION>
Six Months Ended
Fiscal Years ended July 31, January 31,
--------------------------------------------------- ------------------
1995 1996 1997 1998 1999 1999 2000
--------- --------- --------- --------- --------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 210,319 $ 266,476 $ 194,343 $ 196,227 $ 157,326 $ 60,709 $130,215
Income (loss) from
operations............. 14,840 31,368 (15,926) (77,129) (2,470) (9,283) 18,765
--------- --------- --------- --------- --------- -------- --------
Net income (loss)....... $ 10,694 $ 30,270 $ (15,909) $ (78,280) $ 375 $ (5,753) $ 18,910
========= ========= ========= ========= ========= ======== ========
Net income (loss) per
share:
Basic................. $ .37 $ .89 $ (.45) $ (2.15) $ .01 $ (0.16) $ 0.47
Diluted............... $ .36 $ .82 $ (.45) $ (2.15) $ .01 $ (0.16) $ 0.44
Weighted-average common
shares:
Basic................. 28,805 34,011 35,476 36,401 35,696 35,477 39,816
Diluted............... 29,787 36,755 35,476 36,401 36,958 35,477 43,258
</TABLE>

4
<PAGE>

The "Pro Forma" column in the summary consolidated balance sheet data below
assumes that all of the convertible subordinated debentures, which were called
for redemption on March 24, 2000 and have a conversion price of $18.00, have
been converted into 399,055 shares of common stock. The "Pro Forma As Adjusted"
column in the summary consolidated balance sheet data below gives effect to the
sale of the 2,500,000 shares of common stock in this offering, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.

Consolidated Balance Sheet Data:

<TABLE>
<CAPTION>
As of January 31, 2000
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Working capital.................................. $146,557 $146,557 $257,932
Property and equipment, net...................... 33,717 33,717 33,717
Total assets..................................... 265,778 265,778 377,153
Long-term debt, less current portion............. 13,859 13,859 13,859
Convertible subordinated debentures.............. 7,183 -- --
Total stockholders' equity....................... 160,577 167,760 279,135
</TABLE>

Except as set forth in the Consolidated Financial Statements and Notes
thereto, or as otherwise indicated, all information in this prospectus assumes
no exercise of the underwriters' over-allotment option. LTX(R) and Fusion(R)
are our registered trademarks, and enVision(TM), enVision++(TM) and the LTX
logo are our trademarks. This prospectus also contains the trademarks and trade
names of other companies.

5
<PAGE>

RISK FACTORS

You should consider carefully the risks described below before you decide to
buy our common stock. The risks and uncertainties described below are not the
only ones facing us. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.

Our Sole Market Is the Highly Cyclical Semiconductor Industry, Which Causes a
Cyclical Impact On Our Financial Results.

We sell capital equipment to companies that design, manufacture, assemble,
and test semiconductor devices. The semiconductor industry is highly cyclical,
causing in turn a cyclical impact on our financial results. Any significant
downturn in the markets for our customers' semiconductor devices or in general
economic conditions would likely result in a reduction in demand for our
products and would hurt our business.

Most recently, our revenue and operating results declined in fiscal 1998 as a
result of a sudden and severe downturn in the semiconductor industry
precipitated by the recession in several Asian countries. Downturns in the
semiconductor test equipment industry have been characterized by diminished
product demand, excess production capacity and accelerated erosion of selling
prices. We believe the markets for newer generations of devices, including SOC,
will also experience similar characteristics. In the past, we have experienced
delays in commitments, delays in collecting accounts receivable and significant
declines in demand for our products during these downturns, and we cannot be
certain that we will be able to maintain or exceed our current level of sales.
Additionally, as a capital equipment provider, our revenue is driven by the
capital expenditure budgets and spending patterns of our customers who often
delay or accelerate purchases in reaction to variations in their businesses.
Because a high proportion of our costs are fixed, we are limited in our ability
to reduce expenses quickly in response to revenue short-falls. In a
contraction, we may not be able to reduce our significant fixed costs, such as
continued investment in research and development and capital equipment
requirements.

We May Not Be Able to Deliver Custom Hardware Options and Software
Applications to Satisfy Specific Customer Needs in a Timely Manner.

We must develop and deliver customized hardware and software to meet our
customers' specific test requirements. Our test equipment may fail to meet our
customers' technical or cost requirements and may be replaced by competitive
equipment or an alternative technology solution. Our inability to provide a
test system that meets requested performance criteria when required by a device
manufacturer would severely damage our reputation with that customer. This loss
of reputation may make it substantially more difficult for us to sell test
systems to that manufacturer for a number of years. We have, in the past,
experienced delays in introducing some of our products and enhancements.

Our Dependence on International Sales and Non-U.S. Suppliers Involves
Significant Risk.

International sales have constituted a significant portion of our net sales
in recent years, and we expect that this composition will continue.
International sales accounted for 69.5% of our net sales for the six month
period ending January 31, 2000, 60.8% of our net sales in fiscal year 1999,
60.2% of our net sales in fiscal year 1998, and 67.3% of our net sales in
fiscal year 1997. In addition, we rely on non-U.S. suppliers for several
components of the equipment we sell. As a result, a major part of our net sales
and the ability to manufacture our products are subject to the risks associated
with international commerce. A reduction in net sales or a disruption or
increase in the cost of our manufacturing materials could hurt our operating
results. These international relationships make us particularly sensitive to
changes in the countries from which we derive sales and obtain supplies.
International sales and our relationships with suppliers may be hurt by many
factors, including:

. changes in law or policy resulting in burdensome government controls,
tariffs, restrictions, embargoes or export license requirements;

6
<PAGE>

. political and economic instability in our target international markets;

. longer payment cycles common in foreign markets;

. difficulties of staffing and managing our international operations;

. less favorable foreign intellectual property laws making it harder to
protect our technology from appropriation by competitors; and

. difficulties collecting our accounts receivable because of the distance
and different legal rules.

In the past, we have incurred expenses to meet new regulatory requirements
in Europe, experienced periodic difficulties in obtaining timely payment from
non-U.S. customers, and been affected by the recession in several Asian
countries.

Our foreign sales are typically invoiced and collected in U.S. dollars. A
strengthening in the dollar relative to the currencies of those countries
where we do business would increase the prices of our products as stated in
those currencies and could hurt our sales in those countries. Significant
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies could cause us to lower our prices and thus reduce our
profitability. These fluctuations could also cause prospective customers to
push out or delay orders because of the increased relative cost of our
products. In the past, there have been significant fluctuations in the
exchange rates between the dollar and the currencies of countries in which we
do business.

Our Sales and Operating Results Have Fluctuated Significantly From Period to
Period, Including From One Quarter to Another, and They May Continue to Do So.

Our quarterly and annual operating results are affected by a wide variety of
factors that could adversely affect sales or profitability or lead to
significant variability in our operating results or our stock price. This may
be caused by a combination of factors, including the following:

. sales of a limited number of test systems account for a substantial
portion of our net sales in any particular fiscal quarter, and a small
number of transactions could therefore have a significant impact;

. order cancellations by customers;

. lower gross margins in any particular period due to changes in:

-- our product mix,

-- the configurations of test systems sold, or

-- the customers to whom we sell these systems;

. the high selling prices of our test systems (which typically result in a
long selling process); and

. changes in the timing of product orders due to:

-- unexpected delays in the introduction of products by our customers,

-- shorter than expected lifecycles of our customers' semiconductor
devices, or

-- uncertain market acceptance of products developed by our customers.

We cannot predict the impact of these and other factors on our sales and
operating results in any future period. Results of operations in any period,
therefore, should not be considered indicative of the results to be expected
for any future period. Because of this difficulty in predicting future
performance, our operating results may fall below expectations of securities
analysts or investors in some future quarter or quarters. Our failure to meet
these expectations would likely adversely affect the market price of our
common stock.

7
<PAGE>

The Market for Semiconductor Test Equipment is Highly Concentrated, and We
Have Limited Opportunities to Sell Our Products.

The semiconductor industry is highly concentrated, and a small number of
semiconductor device manufacturers and contract assemblers account for a
substantial portion of the purchases of semiconductor test equipment generally,
including our test equipment. Sales to our ten largest customers accounted for
73.8% of net sales for the six months ended January 31, 2000, 59.7% of net
sales in fiscal year 1999, 55.2% of net sales in fiscal year 1998, and 43.5% of
net sales in fiscal year 1997. Our customers may cancel orders with few or no
penalties. If a major customer reduces orders for any reason, our net sales,
operating results, and financial condition will be hurt. In addition, our
ability to increase our sales will depend in part upon our ability to obtain
orders from new customers. Semiconductor manufacturers select a particular
vendor's test system for testing the manufacturer's new generations of devices
and make substantial investments to develop related test program software and
interfaces. Once a manufacturer has selected one test system vendor for a
generation of devices, that manufacturer is more likely to purchase test
systems from that vendor for that generation of devices, and, possibly,
subsequent generations of devices as well.

Our Future Rate of Growth is Highly Dependent on the Growth of the SOC
Market.

In 1996, we refocused our business strategy on the development of our Fusion
HF product, which is primarily targeted towards addressing the needs of the SOC
market. If the SOC market fails to grow as we expect, our ability to sell our
Fusion HF product will be hampered.

Our Market Is Highly Competitive, and We Have Limited Resources to Compete.

The test equipment industry is highly competitive in all areas of the world.
Many other domestic and foreign companies participate in the markets for each
of our products, and the industry is highly competitive. Our principal
competitors in the market for semiconductor test equipment are Agilent
Technologies (formerly a division of Hewlett-Packard), Credence Systems,
Schlumberger Limited, and Teradyne. Most of these major competitors have
substantially greater financial resources and more extensive engineering,
manufacturing, marketing, and customer support capabilities.

We expect our competitors to enhance their current products and to introduce
new products with comparable or better price and performance. The introduction
of competing products could hurt sales of our current and future products. In
addition, new competitors, including semiconductor manufacturers themselves,
may offer new testing technologies, which may in turn reduce the value of our
product lines. Increased competition could lead to intensified price-based
competition, which would hurt our business and results of operations. Unless we
are able to invest significant financial resources in developing products and
maintaining customer support centers worldwide, we may not be able to compete.

Development of Our Products Requires Significant Lead-Time, and We May Fail
to Correctly Anticipate the Technical Needs of Our Customers.

Our customers make decisions regarding purchases of our test equipment while
their devices are still in development. Our test systems are used by our
customers to develop, test and manufacture their new devices. We therefore must
anticipate industry trends and develop products in advance of the
commercialization of our customers' devices, requiring us to make significant
capital investments to develop new test equipment for our customers well before
their devices are introduced. If our customers fail to introduce their devices
in a timely manner or the market does not accept their devices, we may not
recover our capital investment through sales in significant volume. In
addition, even if we are able to successfully develop enhancements or new
generations of our products, these enhancements or new generations of products
may not generate revenue in excess of the costs of development, and they may be
quickly rendered obsolete by changing customer preferences or the introduction
of products embodying new technologies or features by our competitors.
Furthermore, if we were to make announcements of product delays, or if our
competitors were to make announcements of new test systems, these announcements
could cause our customers to defer or forego purchases of our existing test
systems, which would also hurt our business.

8
<PAGE>

Our Success Depends on Attracting and Retaining Key Personnel.

Our success will depend on our ability to attract and retain highly qualified
managers and technical personnel. Competition for such specialized personnel is
intense, and it may become more difficult for us to hire or retain them. Our
volatile business cycles only aggravate this problem. Our layoffs in the last
industry downturn could make it more difficult for us to hire or retain
qualified personnel.

Our Dependence on Subcontractors and Sole Source Suppliers May Prevent Us
From Delivering an Acceptable Product on a Timely Basis.

We rely on subcontractors to manufacture many of the components and
subassemblies for our products, and we rely on sole source suppliers for
certain components. Our reliance on subcontractors gives us less control over
the manufacturing process and exposes us to significant risks, especially
inadequate capacity, late delivery, substandard quality, and high costs.

In addition, the manufacture of certain of these components and subassemblies
is an extremely complex process. If a supplier became unable to provide parts
in the volumes needed or at an acceptable price, we would have to identify and
qualify acceptable replacements from alternative sources of supply, or
manufacture such components internally. The process of qualifying
subcontractors and suppliers is a lengthy process. We are dependent on two
semiconductor device manufacturers, Vitesse Semiconductor and Maxtech
Components. Each is a sole source supplier of components manufactured in
accordance with our proprietary design and specifications. We have no written
supply agreements with these sole source suppliers and purchase our custom
components through individual purchase orders. Vitesse Semiconductor is also a
Fusion customer.

Economic Conditions in Asia May Hurt Our Sales.

Asia is an important region for our customers in the semiconductor industry,
and many of them have operations there. In recent years, Asian economies have
been highly volatile and recessionary, resulting in significant fluctuations in
local currencies and other instabilities. These instabilities may continue or
worsen, which could have a material adverse impact on our financial position
and results of operations, as approximately 53% of our net sales for the six
months ended January 31, 2000 and 45% of our net sales in fiscal 1999 were
derived from this region. In light of the recent economic downturn in Asia, we
may not be able to obtain additional orders and may experience cancellations of
orders. If conditions do not continue to improve, our future financial
condition, revenues, and operating results could be hurt.

We May Not Be Able to Protect Our Intellectual Property Rights.

Our success depends in part on our ability to obtain intellectual property
rights and licenses and to preserve other intellectual property rights covering
our products and development and testing tools. To that end, we have obtained
certain domestic patents and may continue to seek patents on our inventions
when appropriate. We have also obtained certain trademark registrations. To
date, we have not sought patent protection in any countries other than the
United States, which may impair our ability to protect our intellectual
property in foreign jurisdictions. The process of seeking intellectual property
protection can be time consuming and expensive. We cannot ensure that:

. patents will issue from currently pending or future applications;

. our existing patents or any new patents will be sufficient in scope or
strength to provide meaningful protection or any commercial advantage to
us;

. foreign intellectual property laws will protect our intellectual
property rights; or

. others will not independently develop similar products, duplicate our
products or design around our technology.

If we do not successfully enforce our intellectual property rights, our
competitive position could suffer, which could harm our operating results.

9
<PAGE>

We also rely on trade secrets, proprietary know-how and confidentiality
provisions in agreements with employees and consultants to protect our
intellectual property. Other parties may not comply with the terms of their
agreements with us, and we may not be able to adequately enforce our rights
against these people.

Third Parties May Claim We Are Infringing Their Intellectual Property, and We
Could Suffer Significant Litigation Costs, Licensing Expenses or Be Prevented
from Selling Our Products.

Intellectual property rights are uncertain and involve complex legal and
factual questions. We may be unknowingly infringing on the intellectual
property rights of others and may be liable for that infringement, which could
result in significant liability for us. If we do infringe the intellectual
property rights of others, we could be forced to either seek a license to
intellectual property rights of others or alter our products so that they no
longer infringe the intellectual property rights of others. A license could be
very expensive to obtain or may not be available at all. Similarly, changing
our products or processes to avoid infringing the rights of others may be
costly or impractical.

We are responsible for any patent litigation costs. If we were to become
involved in a dispute regarding intellectual property, whether ours or that of
another company, we may have to participate in legal proceedings. These types
of proceedings may be costly and time consuming for us, even if we eventually
prevail. If we do not prevail, we might be forced to pay significant damages,
obtain licenses, modify our products or processes, stop making products or stop
using processes.

Our Stock Price Is Volatile.

In the twelve month period ended January 31, 2000, the closing sale price per
share of our stock ranged from a low of $3.43 to a high of $33,13. The price of
our common stock has been and likely will continue to be subject to wide
fluctuations in response to a number of events and factors, such as:

. quarterly variations in operating results;

. variances of our quarterly results of operations from securities analyst
estimates;

. changes in financial estimates and recommendations by securities
analysts;

. announcements of technological innovations, new products, or strategic
alliances; and

. news reports relating to trends in our markets.

In addition, the stock market in general, and the market prices for
semiconductor-related companies in particular, have experienced significant
price and volume fluctuations that often have been unrelated to the operating
performance of the companies affected by these fluctuations. These broad market
fluctuations may adversely affect the market price of our common stock,
regardless of our operating performance.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This prospectus includes or incorporates forward-looking statements that
involve substantial risks and uncertainties and fall within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. You can identify these forward-looking statements by our
use of the words "believes," "anticipates," "plans," "expects," "may," "will,"
"would," "intends," "estimates," and similar expressions, whether in the
negative or affirmative. We cannot guarantee that we actually will achieve
these plans, intentions or expectations. Actual results or events could differ
materially from the plans, intentions and expectations disclosed in the
forward-looking statements we make. We have included important factors in the
cautionary statements, particularly under the heading "Risk Factors," that we
believe could cause our actual results to differ materially from the forward-
looking statements that we make. We do not assume any obligation to update any
forward-looking statement we make.

10
<PAGE>

USE OF PROCEEDS

The net proceeds to us from the sale of the shares of common stock offered
with this prospectus are estimated to be approximately $111,375,000, assuming a
public offering price of $47.00 per share (the closing price of our common
stock on March 14, 2000) and after deduction of the estimated underwriting
discounts and commissions and estimated offering expenses we must pay. See
"Underwriting."

We expect to use the net proceeds for general corporate purposes, including
working capital and capital expenditures. We may use a portion of the net
proceeds to acquire businesses, make investments in products or technologies
that are complementary to our business, or to repay outstanding debt. We have
no plans to make any specific acquisitions, investments or to make any such
repayment. Prior to using the proceeds in the manner described above, we plan
to invest the net proceeds of this offering in short-term, interest-bearing
investment-grade securities.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"LTXX". The following table shows the high and low closing sale prices per
share of our common stock, as reported on the Nasdaq National Market, for the
periods indicated:

<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
Fiscal Year Ended July 31, 1997:
First Quarter...................................... $ 5 3/4 $ 3 15/16
Second Quarter..................................... 7 3/8 3 15/16
Third Quarter...................................... 7 4 1/8
Fourth Quarter..................................... 7 3/4 4 7/8
Fiscal Year Ended July 31, 1998:
First Quarter...................................... $ 8 1/4 $ 5 1/4
Second Quarter..................................... 6 3/4 4 3/16
Third Quarter...................................... 5 1/2 4 1/4
Fourth Quarter..................................... 5 1/2 3 1/2
Fiscal Year Ended July 31, 1999:
First Quarter...................................... $ 3 7/8 $ 1
Second Quarter..................................... 4 7/16 2
Third Quarter...................................... 6 29/32 3 7/16
Fourth Quarter..................................... 14 1/2 6 1/8
Fiscal Year Ending July 31, 2000:
First Quarter...................................... $16 11/16 $10 3/8
Second Quarter..................................... 33 1/8 15 15/16
Third Quarter (through March 14, 2000)............. 50 1/4 29 1/2
</TABLE>

On March 14, 2000, the reported last sale price of the common stock on the
Nasdaq National Market was $47.00 per share. As of February 29, 2000, we had
approximately 1,122 stockholders of record of our common stock.

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings to fund the development and growth of our
business. In addition, our credit agreement with a bank contains certain
covenants which prohibit us from paying cash dividends.

11
<PAGE>

CAPITALIZATION

The following table shows our capitalization as of January 31, 2000, and as
adjusted to give effect to the sale of the 2,500,000 shares of common stock
offered in this offering and after deducting the underwriting discount and
estimated offering expenses payable by us. The outstanding share information
excludes 4,805,207 shares of common stock issuable on exercise of outstanding
options as of January 31, 2000 with a weighted average exercise price of $5.39
per share.

<TABLE>
<CAPTION>
As of January 31, 2000
---------------------------------
Pro Forma
Actual Pro Forma as Adjusted
--------- --------- -----------
(unaudited)
(in thousands, except
share amounts)
<S> <C> <C> <C>
Short-term debt:
Notes payable to banks..................... $ 11,458 $ 11,458 $ 11,458
Current portion of long-term debt.......... 672 672 672
--------- --------- ---------
Total short-term debt.................... $ 12,130 $ 12,130 $ 12,130
Long-term debt:
Lease purchase obligations................. $ 2,531 $ 2,531 $ 2,531
Subordinated note payable.................. 12,000 12,000 12,000
7 1/4% Convertible Subordinated Debentures
Due 2011.................................. 7,183 -- --
--------- --------- ---------
Total long-term debt..................... 21,714 14,531 14,531
Less current portion..................... (672) (672) (672)
--------- --------- ---------
Total.................................. 21,042 13,859 13,859
Stockholder's equity:
Common stock, $0.05 par value:
100,000,000 shares authorized; 43,188,767
shares issued and outstanding; 43,587,822
shares issued and outstanding pro forma;
46,087,822 shares issued and outstanding
pro forma as adjusted..................... 2,287 2,307 2,432
Additional paid-in capital............... 282,166 289,329 400,579
Accumulated deficit...................... (112,115) (112,115) (112,115)
Treasury stock........................... (11,761) (11,761) (11,761)
--------- --------- ---------
Total stockholder's equity............. 160,577 167,760 279,135
--------- --------- ---------
Total capitalization................. $ 181,619 $ 181,619 $ 292,994
========= ========= =========
</TABLE>

12
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table contains our selected consolidated financial data and is
qualified by the more detailed consolidated financial statements and notes
thereto included elsewhere in this prospectus. The selected consolidated
financial data for and as of the end of each of the five fiscal years in the
period ended July 31, 1999 are derived from our consolidated financial
statements, which have been audited by Arthur Andersen LLP, independent public
accountants. Prior period financial statements have been reclassified to
conform to the fiscal year 2000 presentation. The reclassification had no
impact on earnings for any period. The data for the six months ended January
31, 1999 and 2000 has been derived from the unaudited financial statements
appearing elsewhere in this prospectus. The unaudited financial statements, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the results for
the unaudited periods. The results for the six months ended January 31, 2000
are not necessarily indicative of results to be expected for the full fiscal
year. The following data should be read in conjunction with the financial
statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and other financial information
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
Six Months Ended
Fiscal Years ended July 31 January 31,
------------------------------------------------- ------------------
1995 1996 1997 1998 1999 1999 2000
-------- --------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data and statistics)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Sales................... $210,319 $266,476 $194,343 $196,227 $157,326 $ 60,709 $130,215
Cost of sales........... 130,277 150,319 119,699 127,837 93,451 38,291 70,051
Inventory provisions.... -- 3,600 9,250 40,718 -- -- --
Engineering and product
development expenses... 26,249 34,402 35,521 47,757 34,828 16,577 23,126
Selling, general and
administrative
expenses............... 38,953 46,787 39,049 50,772 31,517 15,124 18,273
Restructuring charges... -- -- 6,750 6,272 -- -- --
-------- --------- -------- -------- -------- -------- --------
Income (loss) from
operations............. 14,840 31,368 (15,926) (77,129) (2,470) (9,283) 18,765
Net interest (expense)
income................. (3,774) 297 433 (21) (941) (256) 175
Gain on liquidation/sale
of business units...... -- -- -- -- 3,786 3,786 --
Provision for income
taxes.................. 372 1,395 416 1,130 -- -- 30
-------- --------- -------- -------- -------- -------- --------
Net income (loss)....... $ 10,694 $ 30,270 $(15,909) $(78,280) $ 375 $ (5,753) $ 18,910
======== ========= ======== ======== ======== ======== ========
Net income (loss) per
share:
Basic................. $ 0.37 $ 0.89 $ (0.45) $ (2.15) $ 0.01 $ (0.16) $ 0.47
Diluted............... $ 0.36 $ 0.82 $ (0.45) $ (2.15) $ 0.01 $ (0.16) $ 0.44
Weighted-average common
shares used in
computing net income
(loss) per share:
Basic................. 28,805 34,011 35,476 36,401 35,696 35,477 39,816
Diluted............... 29,787 36,755 35,476 36,401 36,958 35,477 43,258
Consolidated Balance
Sheet Data:
Working capital......... $ 62,182 $ 137,619 $115,118 $ 33,958 $ 47,915 $ 37,881 $146,557
Property and equipment,
net.................... 28,407 37,880 42,958 35,427 31,942 31,714 33,717
Total assets............ 145,917 235,319 213,546 141,019 147,993 123,665 265,778
Total debt.............. 37,083 36,348 32,372 25,476 27,477 20,087 33,172
Stockholders' equity.... 65,407 155,039 140,198 55,950 58,928 50,203 160,577
Other Information
(unaudited):
Current ratio........... 2.20 3.44 3.19 1.49 1.71 1.71 2.74
Asset turnover.......... 1.44 1.13 0.91 1.39 1.06 0.98 0.98
Debt as a percentage of
total capitalization... 36.2% 19.0% 18.8% 31.3% 31.8% 28.6% 17.1%
Additions to property
and equipment (net).... $ 10,222 $ 20,006 $ 16,116 $ 8,795 $ 9,636 $ 2,699 $ 8,370
Depreciation and
amortization........... 9,701 10,533 11,038 12,510 11,291 5,811 5,548
</TABLE>

13
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this prospectus.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in
such forward-looking statements.

Overview

We design, manufacture, market and service semiconductor test equipment. We
sell our test systems worldwide to customers in the semiconductor industry. Our
most recently introduced product, Fusion HF, can test a broad range of analog,
digital, mixed signal (a combination of analog and digital) and system-on-a-
chip, or SOC, devices, all on a single test platform. We design and assemble
our test systems in Westwood, Massachusetts and San Jose, California and
operate globally with sales, service and support centers in North America,
Europe, and Asia.

The demand for our equipment is dependent upon growth in the semiconductor
industry. Three primary factors ultimately drive this demand:

. increases in unit production of semiconductor devices;

. increases in the complexity of devices used in electronic products; and

. the emergence of next generation device technologies, such as SOC.

Strategic Realignment. In September 1996, we changed our strategic focus to
develop a solution for the testing needs of the then emerging SOC market. At
that time, we realigned our separate digital and mixed signal research and
development organizations to work together to develop a single test platform
incorporating our mixed signal test expertise with our extensive digital test
technology and embedded memory test capability. We restructured our operations
and reorganized our management consistent with our new strategic focus on the
SOC market. For the remainder of fiscal 1997 and into fiscal 1998, we
implemented the transition to Fusion, our SOC test platform, to meet the
requirements of the SOC market.

During the second half of fiscal 1998, the semiconductor and semiconductor
test equipment industries experienced a significant decline in demand. This was
due to overcapacity and also to the Asia currency revaluations and the economic
slowdown in Asia. As a result of this steep decline and our product transition
to Fusion, we had lower than expected revenues and consequently experienced
losses from operations.

In fiscal 1999, we completed a number of initiatives to maximize benefits
from our strategic realignment. During the year, we consolidated our test
equipment assembly functions from our San Jose, California facility into our
Westwood, Massachusetts facility, liquidated our majority-owned Japanese
subsidiary, completed the restructuring of our sales channels in Japan and
other parts of Asia, developed strategic service and repair alliances with
business partners and initiated several key outsourcing programs. In fiscal
1999, we accomplished three major objectives:

. completed our restructuring plan centered around our Fusion product
strategy;

. reduced operating costs and implemented a more flexible business model;
and

. focused our Fusion sales efforts on key accounts.

In the first two quarters of fiscal 2000, we have continued to execute our
single platform, SOC test strategy and to align our internal operations with
the initiatives mentioned above.

Restructuring. Semiconductor test equipment manufacturing operations are
capital intensive. Because a high proportion of a semiconductor test equipment
manufacturer's operating costs are fixed and remain relatively constant,
operating profit increases or decreases, as sales volume increases or
decreases. In each of fiscal 1997 and 1998, we restructured our operations to
better align them with our business strategy and to minimize the impact of
downturns in the test equipment market.

14
<PAGE>

We recorded charges totaling $16.0 million in the first quarter of fiscal
1997 related to our efforts to enhance our manufacturing efficiency with
respect to existing products, and to the overall downturn in the test equipment
market that began in the third quarter of fiscal 1996. These charges included
$6.7 million of restructuring charges and $9.3 million of inventory provisions.
We also reorganized our management team and initiated a new marketing and
product development strategy that produced a reduction in the realizable value
of inventories relating to non-strategic products. The bulk of our inventory
provisions of $9.3 million in the first quarter of fiscal 1997 was a direct
result of product obsolescence in our Delta 50 and Delta 100 products.

In fiscal 1998, the Asian financial crisis, which had begun in January 1998,
created a major impact on the global economy, precipitating a further drop in
demand for semiconductor test equipment. At the same time, we were developing
Fusion to meet the requirements of the SOC market. We implemented a
restructuring plan in the fourth quarter of fiscal 1998 to align our sales,
marketing and support operations with our Fusion product strategy, to lower our
fixed costs to adjust to the downturn in the semiconductor industry and to
position us for stronger financial performance when the industry recovered. We
recorded restructuring and other charges totaling $47.0 million during fiscal
1998. These charges included $6.3 million for restructuring charges, including
$3.1 million of severance and $2.9 million related to the impairment of fixed
assets, and inventory provisions of $40.7 million. The $6.3 million
restructuring charge included the costs of consolidating our San Jose,
California, manufacturing operations with our Westwood, Massachusetts
operations, restructuring our sales channels in Japan and other parts of Asia
and the estimated costs of our planned divestiture of our iPTest division in
the U.K. These actions reduced our workforce by approximately 30%, which
affected all functions of our business. The inventory provisions of $40.7
million were due to significant excess and obsolete inventory related to the
drop in demand for our products and the introduction of our Fusion product
line. In anticipation of a higher level of demand for our existing products,
inventory purchases in the second and third quarters of fiscal 1998 included a
large amount of custom and semi-custom inventory that became obsolete or
difficult to sell due to the declining business conditions within the industry
in the third and fourth quarter of fiscal 1998. The inventory provisions of
$40.7 million taken in the fourth quarter of 1998 consisted of a write-down of
the Delta Series product line for $25.3 million, the Synchro and 77/90 product
lines for $11.8 million, and $3.6 million for service parts deemed excess or
obsolete.

Ando Alliance. We have had a strategic alliance with Ando Electric Co., Ltd.,
a subsidiary of NEC Corporation, for over seven years. In 1993, we entered into
commercial agreements with Ando relating to our prior generation of digital
test products. In 1994, Ando loaned us $20.0 million, and in connection with
this loan, we issued Ando a common stock purchase warrant for 2.0 million
shares of our common stock. We expanded our alliance with Ando in 1998 with a
new six year agreement, providing Ando with rights to manufacture, market and
develop our Fusion products for Japanese customers. In exchange for these
rights, Ando paid us $10.0 million and assigned back to us 1.6 million of the
2.0 million shares of our common stock that had been issued to Ando upon the
exercise of the warrant. These shares were valued at $7.4 million, the market
value of our stock at the time the agreement was executed. Relying on a
percentage of completion method based on the development of the Fusion product
line, we recognized as revenue in fiscal 1998 $7.4 million of the $17.4 million
in aggregate consideration relating to this transaction and deferred the
remaining $10.0 million of revenue. This $10.0 million in revenue will be
recognized ratably over the period in which we complete the transfer of the
manufacturing and technology rights. We recognized $8.5 million of the deferred
revenue in fiscal 1999 and the remaining $1.5 million in the first quarter of
fiscal 2000. Ando has also agreed to pay royalties to us on future sales of
Fusion in Japan and reduced the interest rate from 8.0% to 5.5% on the
outstanding balance of the loan, effective March 30, 1998. At January 31, 2000,
the outstanding balance on the Ando debt was $12.0 million.

15
<PAGE>

Results of Operations

The following table sets forth for the periods indicated the principal items
included in the Consolidated Statement of Operations as percentages of total
net sales.

<TABLE>
<CAPTION>
Percentage of Net
Sales Six Months
Year Ended July Ended
31, January 31,
------------------- ------------
1997 1998 1999 1999 2000
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 61.6 65.1 59.4 63.1 53.8
Inventory provisions....................... 4.8 20.8 -- -- --
Gross profit............................... 33.6 14.1 40.6 36.9 46.2

Engineering and product development ex-
penses.................................... 18.3 24.3 22.1 27.3 17.8
Selling, general and administrative ex-
penses.................................... 20.1 25.9 20.0 24.9 14.0
Restructuring charges...................... 3.5 3.2 -- -- --
Income (loss) from operations.............. * * * * 14.4

Interest expense........................... * * * 1.2 0.8
Interest income............................ 1.5 1.0 0.4 0.7 0.9
Gain on liquidation/sale of business
units..................................... -- -- 2.4 6.3 --
Income (loss) before income taxes.......... * * 0.2 (9.5) 14.5
Provision for income taxes................. 0.2 0.6 -- -- --
Net income (loss).......................... * * 0.2 (9.5) 14.5
</TABLE>
- --------
* Not meaningful

Six Months Ended January 31, 2000 Compared to Six Months Ended January 31,
1999.

Net Sales. Our net sales for the six months ended January 31, 2000 were
$130.2 million as compared to $60.7 million for the same period of the prior
year, an increase of 114.5%. The increase in net sales is primarily a result of
the STE, or semiconductor test equipment, and semiconductor industries
experiencing an increase in demand, as well as increasing acceptance of our
Fusion product strategy. Service revenue accounted for $15.2 million, or 11.7%
of net sales, and $13.5 million, or 22.2% of net sales, for the six months
ended January 31, 2000 and 1999, respectively. Geographically, sales to
customers outside of North America were 69.5% and 59.5% of total net sales in
the six months ended January 31, 2000 and January 31, 1999, respectively.

Cost of Sales. Cost of sales was 53.8% of net sales for the six months ended
January 31, 2000 as compared to 63.1% of net sales for the six months ended
January 31, 1999. Cost of sales as a percentage of net sales decreased as a
result of gaining the full benefits of our consolidation of our manufacturing
operations and lower product cost as a percentage of net sales for our Fusion
product line. Net sales of our Fusion products increased sequentially in each
quarter in fiscal 1999 and fiscal 2000 which resulted in improved profit
margins. Effective November 1, 1999, we changed our accounting policy to
classify certain applications and engineering development costs previously
reported in cost of sales to research and development expenses in our quarter
ending January 31, 2000. Financial results for all prior periods have been
reclassified to conform to the January 31, 2000 presentation. Under the prior
method of classification, cost of sales would have been 59.2% and 71.0% of net
sales for the six months ended January 31, 2000 and January 31, 1999,
respectively.

Engineering and Product Development Expenses. Engineering and product
development expenses were $23.1 million, or 17.8% of net sales, in the six
months ended January 31, 2000 as compared to $16.6 million, or 27.3% of net
sales, in the six months ended January 31, 1999. The increase in expenditure is
principally a result of a higher level of development expenses and key account
support costs for our Fusion product line. Engineering and product development
expenses include the reclassified applications and engineering development
costs described in the previous paragraph. Under the prior method of
classification, engineering

16
<PAGE>

and product development expenses would have been $16.1 million, or 12.4 % of
net sales, and $11.8 million, or 19.4% of net sales, for the six months ended
January 31, 2000 and January 31, 1999, respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $18.3 million, or 14.0% of net sales, in the six
months ended January 31, 2000 as compared to $15.1 million, or 24.9% of net
sales, in the six months ended January 31, 1999. The increase in the selling,
general and administrative expenses of $3.2 million for the six months ended
January 31, 2000 related to the development and selling expenses of the Fusion
product line and support of key accounts.

Interest Expense. Interest expense for the six months ended January 31, 2000
was $1.0 million as compared to $707,000 for the six months ended January 31,
1999. The increase in expense is a result of an increase in outstanding bank
loan balances with our domestic bank. The increased borrowings were used to
support growth in working capital.

Interest Income. Interest income was $1.2 million for the six months ended
January 31, 2000 as compared to $451,000 for the six months ended January 31,
1999. The increase in interest income occurred because of the increase in our
cash balance.

Other. We recorded gains of $3.8 million during the second quarter of fiscal
1999. These transactions consisted of the liquidation of our majority-owned
Japanese subsidiary, a joint venture with Sumitomo Metal Industries, Ltd.,
which resulted in a gain of $1.7 million and the sale of a portion of our
legacy board repair business in Singapore which resulted in a gain of $2.1
million. Both transactions are consistent with our strategic commitment to the
Fusion strategy and its focus on reducing costs.

Income Tax. We had a tax provision of $30,000 for the six months ended
January 31, 2000 and no tax provision for the six months ended January 31,
1999.

Net Income. We had net income of $18.9 million, or $0.44 per share, in the
six months ended January 31, 2000, as compared to a net loss of $5.8 million,
or $(0.16) per share, for the same period last year.

Fiscal 1999 Compared to Fiscal 1998.

Net Sales. Net sales consist of both semiconductor test equipment and related
hardware and software support and maintenance services, net of returns and
allowances. Net sales decreased $38.9 million to $157.3 million in fiscal 1999
from $196.2 million in fiscal 1998. The decrease in net sales was principally
due to the industry-wide slowdown in the semiconductor industry which began in
the latter half of fiscal 1998 and carried over to the first half of fiscal
1999. Net sales increased each quarter in fiscal 1999, as conditions in the
semiconductor industry began to improve and as we began shipping Fusion
products in increasing volumes to customers. Net sales in the four quarters of
fiscal 1999 were $27.0 million, $33.7 million, $43.2 million, and $53.4
million. The last two quarters of fiscal 1999 reflected an industry-wide
increase in demand for test equipment in general and an increase in demand for
Fusion in particular. Net sales from our strategic alliance with Ando were $8.5
million of revenue in fiscal 1999 and $7.4 million in fiscal 1998, relating to
the transfer of technology. Service revenue, consisting of sales of replacement
and spare parts and labor charges, totaled $28.9 million, or 18.4% of net
sales, in fiscal 1999 and $32.2 million, or 16.4% of net sales, in fiscal 1998.
Geographically, sales to customers outside the United States were $95.7
million, or 60.8% of net sales, in fiscal 1999 and $118.3 million, or 60.2% of
net sales, in fiscal 1998.

Cost of Sales. Cost of sales consists of material, labor, depreciation and
associated overhead. Cost of sales decreased by $34.3 million to $93.5 million
in fiscal 1999 from $127.8 million in fiscal 1998. As a percentage of net
sales, cost of sales was 59.4% of net sales in fiscal 1999 as compared to 65.1%
in fiscal 1998. The major reason for the year-to-year improvement in cost
percentage on lower sales volume relates to consolidations of operations and
workforce reductions, which resulted in a reduction in fixed overhead expenses
and improved product margins as we began to ship Fusion products in increasing
volumes starting in the second quarter of fiscal 1999.

17
<PAGE>

Effective November 1, 1999, we changed our accounting policy to classify
certain applications and engineering development costs previously reported in
cost of sales to research and development expenses in our quarter ending
January 31, 2000. Financial results for all prior periods have been
reclassified to conform to the January 31, 2000 presentation. Under the prior
method of classification, cost of sales would have been 65.5% and 72.0% for the
fiscal years ended July 31, 1999 and July 31, 1998, respectively.

Engineering and Product Development Expenses. Engineering and product
development expenses decreased by $13.0 million to $34.8 million, or 22.1% of
net sales, in fiscal 1999 from $47.8 million, or 24.3% of net sales, in fiscal
1998. During fiscal 1998, we invested resources in the development of our
Fusion single test platform for testing SOC devices. The level of development
expenditures decreased year to year as important Fusion-related projects were
completed. We intend to maintain and enhance our SOC test position by
continuing to concentrate our future engineering and product development
expenses on advanced functions and options for Fusion.

Engineering and product development expenses include the reclassified
applications and engineering development costs described in the previous
paragraph. Under the prior method of classification, engineering and product
development expenses would have been $25.2 million, or 16.0% of net sales, and
$34.3 million, or 17.5% of net sales, for the fiscal years ended July 31, 1999
and July 31, 1998, respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $19.3 million to $31.5 million, or 20.0%
of net sales, in fiscal 1999 from $50.8 million, or 25.9% of net sales, in
fiscal 1998. In fiscal 1999, we continued our focus on reducing expense levels,
which included reduction of 48 employees in our sales and administration
organization, elimination of major trade show expenditures, and decreased
travel expenses and sales commissions. During fiscal 1998, there was also a
higher level of expenses, such as travel, promotional activities, and trade
show expenditures, related to the marketing of Fusion.

Income Tax. We did not record a tax provision in fiscal 1999. The fiscal 1998
provision related to the write-off of a deferred asset previously recorded by
us, net of certain tax adjustments.

Fiscal 1998 Compared to Fiscal 1997

Net Sales. Our net sales increased by $1.9 million to $196.2 million in
fiscal 1998, from $194.3 million in fiscal 1997. This increase included $7.4
million of revenue relating to our alliance with Ando. Excluding this $7.4
million, revenues for fiscal 1998 decreased by $5.5 million, or 2.8%. The
decrease in revenue occurred during the latter half of fiscal 1998 as the test
equipment and semiconductor industries experienced significant decline in
activity due to overcapacity and currency revaluations and economic slowdowns
in Asia. Geographically, sales to customers outside of the United States were
$118.3 million, or 60.3% of total net sales, in fiscal 1998, and $130.2
million, or 67.0% of total net sales, in fiscal 1997.

Cost of Sales. Cost of sales increased by $8.1 million to $127.8 million, or
65.1% of net sales in fiscal 1998 from $119.7 million, or 61.6% of net sales,
in fiscal 1997. The increase in cost of sales as a percentage of net sales is a
result of the change in our product mix combined with lower sales prices due to
the slowdown in the semiconductor test equipment industry and costs associated
with our transition to our Fusion product line. This increase also results from
a lower level of sales relative to fixed manufacturing costs.

18
<PAGE>

Effective November 1, 1999, we changed our accounting policy to classify
certain applications and engineering development costs previously reported in
cost of sales to research and development expenses in our quarter ending
January 31, 2000. Financial results for all prior periods have been
reclassified to conform to the January 31, 2000 presentation. Under the prior
method of classification, cost of sales would have been 72.0% and 67.9% for the
fiscal years ended July 31, 1998 and July 31, 1997, respectively.

In fiscal 1998, the Asian financial crisis (which began in January 1998),
created a major impact on the global economy, precipitating a further drop in
demand than LTX and the industry had been previously experiencing. As a result,
our net sales dropped to $32.8 million in the fourth quarter of fiscal 1998,
compared to $54.1 million in the third quarter of fiscal 1998. Simultaneously,
our development and introduction of the Fusion product line was occurring. The
sudden drop in demand for our products, combined with the introduction of the
Fusion product line, resulted in significant excess and obsolete inventory.
Management determined to restructure our operations during the fourth quarter
of fiscal 1998, in line with our strategy of focusing on the Fusion product
line. As a result of the combined rapid and sudden decline in global demand for
semiconducter testing equipment and the transition to the Fusion product line,
we recorded a $40.7 million inventory charge in the fourth quarter of fiscal
1998. Inventory purchases in the second and third quarters of fiscal 1998 in
anticipation of a higher level of demand for our existing products consisted of
a large amount of custom and semi-custom inventory that would become obsolete
or difficult to sell due to the declining business conditions within the
industry in the third and fourth quarter of that same fiscal year.

The $40.7 million inventory charge taken in fiscal 1998 consisted of a write-
down of the Delta Series product line for $25.3 million, the Synchro and 77/90
product lines for $11.8 million, and $3.6 million for service parts deemed
excess or obsolete.

Our inventory provision of $9.3 million in the first quarter of fiscal 1997
was a result of our new strategy for our Digital product line. During the first
quarter of fiscal 1997, we restructured our Digital Products Division
management team and initiated a new marketing and product development strategy
that produced an anticipated reduction in the realizable value of existing
inventories relating to non-strategic products.

The bulk of this inventory charge of $9.3 million related to product
obsolescence in our Delta 50 and Delta 100 test systems, which were replaced
with the Delta STE line.

Excluding inventory provisions of $40.7 million and $9.3 million in fiscal
1998 and fiscal 1997, respectively, and the $7.4 million of revenue relating to
our alliance with Ando in fiscal 1998, cost of sales increased by $9.4 million
to $141.3 million, or 74.8% of net sales, in fiscal 1998 from $131.8 million,
or 67.8% of net sales, in fiscal 1997.

Engineering and Product Development Expenses. Engineering and product
development expenses increased by $12.3 million to $47.8 million, or 24.3% of
net sales, in fiscal 1998 from $35.5 million, or 18.3% of net sales, in fiscal
1997. During fiscal 1998, we invested resources in the development of our
Fusion SOC testing platform.

Engineering and product development expenses include the reclassified
applications and engineering development costs described in the previous
paragraph. Under the prior method of classification, engineering and product
development expenses would have been $34.3 million, or 17.5% of net sales, and
$23.4 million, or 12.0% of net sales, for the fiscal years ended July 31, 1998
and July 31, 1997, respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $11.8 million, or 25.9% of net sales, to
$50.8 million in fiscal 1998, from $39.0 million, or 20.1% of net sales, in
fiscal 1997. This increase relates primarily to the expansion of our sales
organization, increased advertising and promotion costs and the consolidation
of our operations. The majority of these costs are associated with the product
introduction of Fusion and the downturn in the semiconductor test equipment and
semiconductor industries.

19
<PAGE>

Restructuring Charge. The $6.3 million restructuring charge recorded in the
fourth quarter of fiscal 1998 included $3.2 million in employee separation
costs, $2.9 million in asset impairment write-offs and $200,000 in lease
terminations and other contractual obligations. The workforce reduction
impacted 259 employees, of which 211 were in production and engineering, 33 in
sales and marketing and 15 in administration. Asset impairment write-offs of
$2.9 million related to the write off of capitalized Master and Delta Series
testers and test equipment at our San Jose and Korean facilities. We no longer
manufacture the Master Series line, and this equipment was written down to zero
value and depreciation expense permanently ceased. These assets were disposed
of or sold in fiscal 1999. The remaining balance of $3.3 million at July 31,
1998 includes $3.2 million related to employee separation costs, which were all
paid by February 1999.

In fiscal 1997, we redirected our product strategy to focus primarily on SOC.
As a result, we restructured our Digital Products Division and began
emphasizing sales of our Delta/STE mixed technology test systems. In fiscal
1997, we recorded a restructuring charge of $6.8 million, consisting of $4.0
million for cancelled non-strategic development projects and technology
upgrades to customers, $1.8 million in severance costs relating to workforce
reductions, $600,000 of asset impairments and $300,000 in equipment lease
cancellations. The workforce reduction totaled 180 employees, of which 166 were
in production and engineering, 10 in administration and 4 in sales.

The remaining accrued balance as of July 31, 1998 of $2.0 million relates to
the estimated cost to replace certain board modules. In fiscal 1999,
approximately $500,000 of cash expenditures were made on this project.

Income Tax. Our tax provision in fiscal 1998 was $1.1 million as compared to
$416,000 in fiscal 1997. The 1998 provision relates to the write-off of a
deferred tax asset we previously recorded, net of certain tax adjustments.

Fiscal 1997 Compared to Fiscal 1996

Net Sales. Our net sales decreased by $72.2 million to $194.3 million in
fiscal 1997 from $266.5 million in fiscal 1996. The decline in sales in fiscal
1997 reflected a significant decline in demand for semiconductor test
equipment, which began in the third quarter of fiscal 1996 and was the result
of over-capacity of test equipment in the semiconductor device industry. Net
sales of both our mixed signal and digital test systems were down
significantly, while remaining at approximately the same proportion of total
sales year-to-year. Geographically, net sales to customers outside North
America were $130.2 million, or 67% of total net sales, in fiscal 1997, as
compared to $170.6 million, or 64% of net sales, in fiscal 1996. While net
sales in all geographic regions were lower year-to-year, we experienced a
substantial improvement in orders from Japan in the fourth quarter of fiscal
1997.

Cost of Sales. Cost of sales decreased by $25.0 million to $119.7 million, or
61.6% of net sales, in fiscal 1997 from $150.3 million, or 56.4% of net sales,
in fiscal 1996. In fiscal 1997, the increase in cost of sales as a percentage
of net sales was primarily due to the lower level of sales relative to fixed
manufacturing costs and relative to the cost of our software applications
assistance and customer support organizations.

Effective November 1, 1999, we changed our accounting policy to classify
certain applications and engineering development costs previously reported in
cost of sales to research and development expenses in our quarter ending
January 31, 2000. Financial results for all prior periods have been
reclassified to conform to the January 31, 2000 presentation. Under the prior
method of classification, cost of sales would have been 67.9% and 60.7% for the
fiscal years ended July 31, 1997 and July 31, 1996, respectively.

20
<PAGE>

Our charge for excess inventory of $3.6 million in fiscal 1996 was the direct
result of our new strategy for our digital product line, which produced an
anticipated reduction in the realizable value of existing inventories relating
to non-strategic products. Excluding inventory provisions of $9.3 million in
fiscal 1997 and $3.6 million in fiscal 1996, cost of sales decreased by $30.0
million to $131.9 million, or 67.8% of net sales, in fiscal 1997, from $161.8
million, or 60.7% of net sales, in fiscal 1996.

Engineering and Product Development Expenses. Engineering and product
development expenses increased by approximately $1.1 million to $35.5 million,
or 18.3% of net sales, in fiscal 1997, from $34.4 million, or 12.9% of net
sales, in fiscal 1996. Engineering expenditures remained at essentially the
same level year-to-year, which reflected our commitment to maintaining our
investment in developing products required to fully test SOC devices.

Engineering and product development expenses include the reclassified
applications and engineering development costs described in the previous
paragraph. Under the prior method of classification, engineering and product
development expenses would have been $23.4 million, or 12.0% of net sales, and
$22.9 million, or 8.6% of net sales, for the fiscal years ended July 31, 1997
and July 31, 1996, respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $7.7 million to $39.0 million, or 20.1% of
net sales, in fiscal 1997 as compared to $46.8 million, or 17.5% of net sales,
in fiscal 1996. The lower level of expenses is a result of a combination of
lower variable selling costs and variable compensation, and reduced
discretionary spending, as well as a workforce reduction and the required use
of vacation during a holiday shutdown, which occurred in the first half of
fiscal 1997.

Restructuring Charge. In fiscal 1997, we redirected our product strategy to
focus primarily on SOC. As a result, we restructured our Digital Products
Division and began emphasizing sales of our Delta/STE mixed technology test
systems. In fiscal 1997, we recorded a restructuring charge of $6.8 million,
consisting of $4.0 million for cancelled non-strategic development projects and
technology upgrades to customers, $1.8 million in severance costs relating to
workforce reductions, $600,000 of asset impairments and $300,000 in equipment
lease cancellations. The workforce reduction totaled 180 employees, of which
166 were in production and engineering, 10 in administration and 4 in sales.

The remaining accrued balance as of July 31, 1998 of $2.0 million relates to
the estimated cost to replace certain board modules.

Income Tax. Our tax provision in fiscal 1997 was $400,000, as compared to
$1.4 million in fiscal 1996. The fiscal 1997 provision primarily reflects only
certain state and foreign provisions.

Net Income (Loss). Including the provision for excess inventory of $9.3
million and product line restructuring charges of $6.7 million in the first
quarter of fiscal 1997, we had a net loss of $15.9 million, or $0.45 per share.
On a quarterly basis, we improved our financial performance each subsequent
quarter in fiscal 1997, beginning with net income of $400,000, or $0.01 per
share, in the second quarter and ending with net income of $1.8 million, or
$0.05 per share, in the fourth quarter.

21
<PAGE>

Quarterly Results

The following table presents our unaudited quarterly operating results for
each of the eight quarters ended January 31, 2000 both in absolute dollars and
as a percentage of our total revenue for each quarter. This information has
been derived from our unaudited consolidated financial statements. The
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements contained in this
prospectus and include all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of such
information. You should read this information in conjunction with our
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
prospectus. You should not draw any conclusions about our future results from
the results of operations for any quarter.

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------
Apr. 30, Jul. 31, Oct. 31, Jan. 31, Apr. 30, Jul. 31, Oct. 31, Jan. 31,
1998 1998 1998 1999 1999 1999 1999 2000
-------- -------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales............... $54,130 $ 32,759 $27,018 $33,691 $43,210 $53,407 $60,005 $70,210
Cost of sales........... 36,297 27,634 17,351 20,940 25,012 30,148 33,069 36,982
Charge for excess
inventory.............. -- 40,718 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Gross profit............ 17,833 (35,593) 9,667 12,751 18,198 23,259 26,936 33,228
Engineering and product
development expenses... 11,819 14,846 8,492 8,085 8,450 9,801 11,008 12,118
Selling, general and
administrative
expenses............... 12,812 16,005 7,869 7,255 7,781 8,612 8,698 9,575
Restructuring charges... -- 6,272 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (6,798) (72,716) (6,694) (2,589) 1,967 4,846 7,230 11,535
Interest (income)
expense, net........... 132 (27) 198 58 173 512 356 (531)
Gain on liquidation/sale
of business units...... -- -- -- 3,786 -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (6,930) (72,689) (6,892) 1,139 1,794 4,334 6,874 12,066
Provision (Benefit) for
income taxes........... (596) 1,130 -- -- -- -- -- 30
------- -------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(6,334) $(73,819) $(6,892) $ 1,139 $ 1,794 $ 4,334 $ 6,874 $12,036
======= ======== ======= ======= ======= ======= ======= =======
Earnings (loss) per
share:
Basic.................. $ (0.17) $ (2.09) $ (0.19) $ 0.03 $ 0.05 $ 0.12 $ 0.19 $ 0.28
Diluted................ $ (0.17) $ (2.09) $ (0.19) $ 0.03 $ 0.05 $ 0.11 $ 0.17 $ 0.26
Weighted average shares:
Basic.................. 36,797 35,334 35,477 35,477 35,643 36,185 37,029 42,603
Diluted................ 36,797 35,334 35,477 36,131 37,195 39,029 40,422 46,093
As a Percentage of Net Sales:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 67.1 84.4 64.2 62.2 57.9 56.4 55.1 52.7
Charge for excess
inventory.............. -- 124.3 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Gross profit............ 32.9 (108.7) 35.8 37.8 42.1 43.6 44.9 47.3
Engineering and product
development expenses... 21.8 45.3 31.4 24.0 19.5 18.5 18.3 17.3
Selling, general and
administrative
expenses............... 23.7 48.9 29.2 21.5 18.0 16.1 14.5 13.6
Restructuring charges... -- 19.1 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (12.6) (222.0) (24.8) (7.7) 4.6 9.0 12.1 16.4
Interest (income)
expense, net........... 0.2 0.1 0.7 -- 0.4 0.9 0.6 (0.8)
Gain on liquidation/sale
of business units...... -- -- -- (11.1) -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (12.8) (221.9) (25.5) 3.4 4.2 8.1 11.5 17.2
Provision (benefit) for
income taxes........... (1.1) 3.4 -- -- -- -- -- --
------- -------- ------- ------- ------- ------- ------- -------
Net income (loss)....... (11.7)% (225.3)% (25.5)% 3.4% 4.2% 8.1% 11.5% 17.2%
======= ======== ======= ======= ======= ======= ======= =======
</TABLE>

22
<PAGE>

Net sales dropped significantly in the quarter ended July 31, 1998 to $32.8
million from $54.1 million in the prior quarter ended April 30, 1998. The
decrease in net sales reflected a significant decline in demand for
semiconductor devices and semiconductor test equipment that began during the
second half of fiscal 1998. This was due to industry-wide overcapacity and also
to the currency revaluations and economic slowdowns in Asia.

During the same periods, we were in the early production phase of our new
Fusion test systems. Net sales increased sequentially each quarter in fiscal
1999 and 2000 as industry conditions improved and we began recording new orders
for our Fusion test platforms. Beginning with the quarter ended October 31,
1998, net sales increased sequentially from $27.0 million to $70.2 million for
the quarter ended January 31, 2000. The increase in quarterly net sales from
one year ago is principally due to increased revenue from sales of our new
Fusion HF testers to SOC manufacturers and greater demand for our Fusion HT
test platforms from the telecommunications and computer peripherals sectors of
the semiconductor industry.

Cost of sales before inventory provisions increased from 67.1% of net sales
in the quarter ended April 30, 1998 to a peak of 84.4% in the quarter ended
July 31, 1998. The increase over this period was primarily attributable to the
lower levels of net sales relative to our fixed manufacturing costs. Cost of
sales as a percentage of net sales began to decrease in fiscal 1999 as a result
of the consolidation and restructuring of operations and increasing sales
volume in each quarter of fiscal 1999 and 2000. Beginning with the quarter
ended October 31, 1998, cost of sales as a percentage of net sales decreased
sequentially from 64.2% to 52.7% for the quarter ended January 31, 2000.

Engineering and product development expenses increased in every quarter
during fiscal 1998 and reached a high of $14.8 million, or 45.3 % of net sales,
in the quarter ended July 31, 1998 before decreasing to lower levels in fiscal
1999 and the first two quarters of fiscal 2000. The absolute dollar amounts of
research and development spending in fiscal 1998 were greater than in fiscal
1999 as we were at an earlier stage of development of our Fusion test platform.
Beginning with the quarter ended October 31, 1998, the spending levels
decreased sequentially as a percentage of net sales as we began the production
phase of the Fusion line during late fiscal 1998 and early fiscal 1999.

Selling, general and administrative expenses peaked at $16.1 million, or
48.9% of net sales, in the quarter ended July 31, 1998, before decreasing to
lower levels in fiscal 1999 and the first two quarters of fiscal 2000. Spending
for travel, trade shows, marketing development and promotion relating to the
Fusion product line were higher in fiscal 1998 than in fiscal 1999 and the
first two quarters of fiscal 2000. A higher level of Fusion related expenses,
combined with lower operating expenses resulting from our restructuring
strategy, were the major reasons for the decrease in selling, general and
administrative expense throughout fiscal 1999 from the levels of the prior
year. Beginning with the quarter ended October 31, 1998, total selling, general
and administrative expenses decreased sequentially as a percentage of net sales
from 29.2% to 13.6% of net sales for the quarter ended January 31, 2000.

Net income decreased in each quarter of fiscal 1998, as we suffered the full
effect of the semiconductor industry slowdown, while developing the Fusion
product platform. In fiscal 1999, we continued our strategic realignment to
Fusion. Our net income decreased in fiscal 1998, primarily due to inventory
provisions of $40.7 million. Net income increased in each quarter of fiscal
1999 and 2000, as industry conditions improved and as we began selling Fusion
in higher volume.

Liquidity and Capital Resources

At January 31, 2000, we had $100.9 million in cash and equivalents and
working capital of $146.6 million, as compared to $19.9 million of cash and
equivalents and $47.9 million of working capital at July 31, 1999. The increase
in cash balance is primarily a result of cash proceeds received from a follow-
on public offering of common stock totaling approximately $80.0 million, which
was completed in October 1999.

Accounts receivable from trade customers were $60.1 million at January 31,
2000, as compared to $37.0 million at July 31, 1999. The principal reason for
the increase is a result of increasing sales revenue for Fusion

23
<PAGE>

products to new and existing accounts, along with increased sales as a result
of higher demand generally in the STE and semiconductor industries. The reserve
for sales returns allowances and doubtful accounts was $1.6 million, or 2.5% of
gross accounts receivable, on January 31, 2000 and $2.0 million, or 5.1% of
gross accounts receivable, on July 31, 1999.

Inventories increased by $9.3 million to $57.9 million at January 31, 2000 as
compared to $48.6 million at July 31, 1999. The increase is directly
attributable to the production ramp in the Fusion product as sales in that
product line have increased sequentially each quarter since the quarter ended
October 31, 1998.

Capital expenditures totaled $4.3 million for the three months ended January
31, 2000 as compared to $2.2 million for the three months ended January 31,
1999. Capital expenditures were $8.3 million and $2.7 million for the six
months ended January 31, 2000 and January 31, 1999, respectively. The principal
reason for the increases relate to the addition of board test equipment and
system test cell capacity supporting the growth of the Fusion product line.

On October 1, 1999, we renegotiated our $10.0 million domestic credit
facility with our current lender. The facility is secured by all of our assets
and bears interest at the bank's prime rate plus .5%. Borrowing availability
under the facility is based on a formula of eligible domestic accounts
receivable. In addition, we entered into an agreement with the same bank that
provides us with a $5.0 million line of credit that bears interest at prime
plus .5%. Borrowing availability under this facility is based on a formula of
eligible foreign accounts receivable and inventories and is guaranteed by the
Export-Import Bank of the United States. Outstanding borrowings at January 31,
2000 were $6.4 million under the domestic credit facility and $5.0 million
under the foreign accounts receivable line facility. We anticipate that cash
flow from operations combined with available cash balances and credit facility
enhancements will be adequate to fund our currently proposed operating
activities for the next twelve months.

Year 2000

We did not experience any material adverse problems resulting for Year 2000.
We established a program to address Year 2000 software failure issues, which is
overseen by a senior manager who updated our officers and directors regularly
prior to January 1, 2000. We have incurred costs of approximately $400,000 to
make our products Year 2000 compliant, most of which was represented by current
engineering staff who were assigned to the project, and approximately $400,000
in ensuring compliance of our internal business systems and those of our
suppliers, most of which was represented by current administrative personnel
assigned to the project.

Quantitative and Qualitative Disclosures About Market Risk

Financial instruments that potentially subject us to concentrations of
credit-risk consist principally of investments in cash equivalents, short-term
investments and trade receivables. We place our investments with high-quality
financial institutions, limit the amount of credit exposure to any one
institution and have established investment guidelines relative to
diversification and maturities designed to maintain safety and liquidity.

Our primary exposures to market risks include fluctuations in interest rates
on our short-term and long-term debt of approximately $33.2 million as of
January 31, 2000 and $27.5 million as of July 31, 1999, and in foreign currency
exchange rates. Generally, we do not use derivative financial instruments. We
are subject to interest rate risk on our short-term borrowings under our credit
facilities. Our short term bank debt bears interest at a variable rate of prime
plus .5%. Long term debt interest rates are fixed for the term of the notes.

Foreign Exchange Risk

Operating in international markets involves exposure to movements in currency
exchange rates. Currency exchange rate movements typically also reflect
economic growth, inflation, interest rates, government actions

24
<PAGE>

and other factors. We transact business in various foreign currencies and,
accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. As currency exchange rates fluctuate, translation of
the statements of operations of our international businesses into U.S. dollars
may affect year-over-year comparability and could cause us to adjust our
financing and operating strategies. To date, the effect of changes in foreign
currency exchange rates on revenues and operating expenses have not been
material. Substantially all of our revenues are invoiced and collected in U.S.
dollars. Our trade receivables result primarily from sales to semiconductor
manufacturers located in North America, Japan, the Pacific Rim and Europe. In
the six months ended January 31, 2000, our net sales derived from sales outside
the United States constituted 69.5% of our total net sales. Net sales invoiced
and collected in currencies other than U.S. dollars comprised 3.7% of our last
quarter fiscal net sales. Receivables are from major corporations or are
supported by letters of credit. We maintain reserves for potential credit
losses and such losses have been immaterial.

Based on a hypothetical ten percent adverse movement in interest rates and
foreign currency exchange rates, the potential losses in future earnings, fair
value of risk-sensitive financial instruments, and cash flows are immaterial,
although the actual effects may differ materially from the hypothetical
analysis.

We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates. We intend to assess the need to
utilize financial instruments to hedge currency exposures on an ongoing basis.

Interest Rate Risk

Historically, we have had no material interest rate risk associated with debt
used to finance our operations due to limited borrowings. Subsequent to this
offering, we intend to manage our interest rate exposure using a mix of fixed
and floating interest rate debt and, if appropriate, financial derivative
instruments.

Our $10.0 million domestic credit facility bears an interest rate of prime
plus 1.0%. On January 31, 2000, $11.4 million was outstanding under our
domestic bank facility and the interest rate was 9.0%. Based on this balance,
an immediate change of 1.0% in the interest rate would cause a change in
interest expense of approximately $114,000 on an annual basis. Our objective in
maintaining these variable rate borrowings is the flexibility obtained
regarding early repayment without penalties and lower overall cost as compared
with fixed-rate borrowings.

25
<PAGE>

BUSINESS

Introduction

LTX designs, manufactures, markets and services semiconductor test
equipment. We sell our test systems to semiconductor designers and
manufacturers worldwide, such as Texas Instruments, STMicroelectronics,
Samsung, Philips Semiconductor, Motorola, Lucent Technologies, Infineon
Technologies and Hitachi. These customers use semiconductor test equipment to
test every semiconductor device at two different stages during the
manufacturing process. These devices are incorporated in a wide range of
products, including data communications equipment such as switches, routers
and servers, broadband access products such as cable modems and Ethernet
accessories, personal communication devices such as cell phones and personal
digital assistants, consumer products such as televisions, videogame systems,
digital cameras and automobile electronics, and personal computer accessory
products such as disk drives and 3D graphics accelerators.

We offer our customers the LTX Fusion platform, which combines our
enVision++ software with either our Fusion HF or Fusion HT/AC products. We
believe that Fusion HF is the first of a new class of test systems that can
test system-on-a-chip, or SOC, devices in a single test step. With Fusion HF,
we believe we have the only test system capable of testing a broad range of
analog, digital, and mixed signal (a combination of digital and analog)
devices, and most importantly, SOC devices, on a single platform. We have over
100 customers in more than 15 countries, to which we provide test systems,
global applications consulting, repair services and operational support. We
design and assemble our test systems in Westwood, Massachusetts and in San
Jose, California.

In late 1996, we changed our strategic focus to develop a solution for the
testing needs of the then emerging SOC market. Building on our twenty-year
semiconductor test experience, we realigned our separate digital and mixed
signal research and development organizations to work together to develop and
deliver a single test platform incorporating our mixed signal test expertise
with our extensive digital test technology and embedded memory test
capability. We also restructured our operations and reorganized our management
consistent with our new strategic focus. Our Fusion platform is the result of
this change in strategy.

Industry Overview

The testing of devices is a critical step during the semiconductor
production process. Typically, semiconductor companies test each device at two
different stages during the manufacturing process to ensure its functional and
electrical performance prior to shipment to the device user. These companies
use semiconductor testing equipment to first test a device after it has been
fabricated but before it has been packaged to eliminate non-functioning parts.
Then, after the functioning devices are packaged, they are tested again to
determine if they fully meet performance specifications. Testing is an
important step in the manufacturing process because it allows devices to be
fabricated at both maximum density and performance--a key to the
competitiveness of semiconductor manufacturers. Shown below is a schematic
depiction of the major steps in the semiconductor fabrication and test
process.

[CHART]
Two rectangular fields, the first representing the front end of the
manufacturing process and the second representing the back end of the
manufacturing process, each step represented by a particular graphic. The
process begins with "wafer fabrication," proceeds to a "wafer," through the
"probe test tester," to a "wafer cut," and ends with a "sorted die." The back
end field includes a second five-step process which continues the front end
process, each step also represented by a particular graphic. The back end
process begins with "device assembly and packaging," proceeds to a "packaged
device," through the "final test tester," to a "good device," and ends in
"shipment."

26
<PAGE>

Three primary factors ultimately drive demand for semiconductor test
equipment:

. increases in unit production of semiconductor devices;

. increases in the complexity and performance level of devices used in
electronic products; and

. the emergence of next generation device technologies, such as SOC.

In recent years, increases in unit production resulted primarily from the
proliferation of the personal computer and the continued growth of the
telecommunications industry, particularly as a result of upgrades to the public
network infrastructure. We expect that future unit production growth will be
led by continued expansion and enhanced performance of public network
bandwidth, a series of Internet hardware and software applications and Internet
access device simplification and miniaturization. We also expect the continued
proliferation of, and new applications in, communication products and consumer
electronics. These increases in unit production in turn lead to a corresponding
increase in the need for test equipment. According to Prime Research Group, in
1997 device manufacturers spent over $3 billion on test equipment. Prime
Research Group expects such spending to grow to over $5 billion in 2001.

Furthermore, demand is increasing worldwide for smaller, more sophisticated
electronic products, such as cellular phones, laptop computers, camcorders,
wireless networking equipment and mobile Internet terminals. This has led to
ever higher performance and more complex semiconductor devices, which, in turn,
results in a corresponding increase in the demand for equally sophisticated
test equipment.

Finally, the introduction and adoption of a new generation of end-user
products requires the development of next generation device technologies. For
example, access to information is migrating from the standalone desktop
computer, which might be physically linked to a local network, to the seamless,
virtual network of the Internet, which is accessible from anywhere by a variety
of new portable electronic communication products. A critical enabling
technology for this network and multimedia convergence is SOC. SOC provides the
benefits of lower cost, smaller size and higher performance by combining
advanced digital, analog and embedded memory technologies on a single device.
These discrete technologies were, until recently, available only on several
separate semiconductor devices, each performing a specific function. By
integrating these functions on a single device, SOC enables lower cost, smaller
size, higher performance, and lower power consumption.

According to Gartner Group's DataQuest, SOC market size was $9.1 billion in
1998 and is expected to grow to $32.0 billion by 2003 (August, 1999). The
demand for SOC test equipment is projected to experience comparable growth
rates. In 1997, SOC test equipment accounted for approximately 30% of the
greater than $3 billion semiconductor test equipment market, according to Prime
Research Group. In 2001, SOC test equipment is expected to account for greater
than 40% of this market, which Prime Research Group forecasts to be greater
than $5 billion.

Although the SOC concept had been in development for several years, until
recently manufacturers did not have an efficient and comprehensive method of
testing these devices. Historically, device manufacturers used several narrowly
focused testers, each designed to test only digital, only memory, or only mixed
signal devices, but incapable of testing all three. SOC does not fit into any
one of these categories because it represents the convergence of these three
technologies and requires new testing technology.

The increases in unit production of devices, the increase in complexity of
those devices, and, ultimately, the emergence of new semiconductor device
technology have mandated changes in the design, architecture and complexity of
such test equipment. Semiconductor device manufacturers must still be able to
test the increasing volume and complexity of devices in a reliable, cost-
effective, efficient and flexible manner. However, the increased pace of
technological change, together with the large capital investments required to
achieve economies of scale, are changing the nature and urgency of the
challenges faced by device designers and manufacturers.

Designers and manufacturers historically have not been able to use their test
floors at peak efficiency because they had to use several separate digital and
mixed signal testers to perform all of their required testing.

27
<PAGE>

This increases their costs of ownership due to increased working hours, greater
floor space, decreased utilization and slower throughput. Furthermore,
manufacturers cannot fully test new SOC designs because their current testing
equipment cannot test a sufficiently broad range of mixed signal
instrumentation. Manufacturers are subject to further increased testing costs
if their testing equipment lacks the flexibility and capacity to run parallel
tests on multiple devices at one time, or multi-site testing. These problems
are exacerbated when volume production of devices increases.

Fusion(R), the LTX Solution

Our solution is the Fusion test platform. Fusion tests new generations of
highly-integrated mixed signal devices, advanced digital devices, and most
importantly, SOC devices, which incorporate these technologies. The testing
requirements of digital and mixed signal devices are essentially a subset of
the testing requirements of SOC devices. The test requirements of all of these
semiconductor devices are well within the range of Fusion's capability. The
Fusion HF single test platform allows our customers to use a single integrated
hardware and software system to test all of these devices, rather than the
multiple test systems typically required. By using a single testing platform,
our customers are able to optimize their asset utilization, thereby increasing
their manufacturing flexibility and lowering the overall cost of their testing
processes.

Fusion is a unique solution to the SOC test challenge because it provides all
of the following:

A single test platform. Thoroughly testing an SOC device on more than one
tester is either technically infeasible, because the device is not
partitioned for its mixed signal, digital and embedded memory functions to
operate independently from each other, or economically impractical due to
the significantly more expensive cost of multiple testers and insertions
required for comprehensive testing. Our Fusion test platform combines our
test station hardware with our enVision++ software to provide a flexible,
scalable test environment. By integrating the testing of mixed signal,
digital and embedded memory functions, Fusion provides better test
performance and lower cost of ownership for our customers. Our customers
are also using Fusion to raise the utilization rates of their test floors
in testing their digital and mixed signal devices. Not only have these
customers selected Fusion as part of their SOC strategy, but they are also
purchasing Fusion for capacity expansion on these traditional devices,
eliminating the need for separate digital and mixed signal testers.

Multi-site test capability. Multi-site testing, the parallel testing of
more than one device (of the same type) on one testing machine at a given
time, lowers the overall cost of testing devices by making possible the
more efficient use of each testing machine. We designed Fusion to make
multi-site testing easier for the test designer. Earlier generations of
testing equipment required testing engineers to write specific software
programs to run tests in parallel. Our enVision++ software allows testing
engineers to expand single-site testing programs into multi-site testing
programs with ease. Fusion can also be configured with a sufficient number
of instruments to perform multi-site testing even on highly complex SOC
devices.

A full range of mixed signal instrumentation. Testing different types of
SOC input/output interfaces requires radio frequency (RF), digital signal
processing (DSP), power, time measurement, and other instruments. Fusion
provides customers with the broad range of mixed signal instrumentation
necessary to test these devices to the customer's desired specifications.
Mixed signal test expertise is in short supply in the industry and one of
our strengths in SOC testing is the depth of our mixed signal intellectual
property, based on our heritage as a pioneer in this field.

State of the art digital test capability. SOC devices require the
advanced digital testing performance, including embedded memory testing,
found in traditional high-end, standalone digital testers. Fusion delivers
this capability in an integrated platform.

Easy-to-use software for test program development. Our enVision++
software provides the customer's test engineer with an expandable library
of prepackaged, reusable test program modules and debugging tools, all
accessible through an easy-to-use graphical user interface. In most other
testers, test engineers can reuse test code only by cutting and pasting
lines of program code. enVision++ encapsulates

28
<PAGE>

test techniques into software objects that are added to the library for
reuse in subsequent test programs. The test engineer can use these software
objects when designing new test programs simply by dragging them with a
mouse into the program flow. The ease-of-use of our software accelerates
our customers' development process, which allows them to introduce their
semiconductor devices to market more rapidly.

The LTX Business Strategy

LTX's objective is to be the leading supplier of semiconductor test
equipment. Key elements of our strategy include:

Extend our technological lead in single platform testing. We intend to
continue to focus our resources on a single integrated hardware and
software test platform solution. Rather than diluting our resources with a
multiple platform strategy, we believe our resources will provide a higher
return on investment by focusing on a single test platform for the advanced
digital, mixed signal, and SOC markets. In addition, we believe our
customers' requirements are better served by employing a single test
platform solution to address the test requirements of their various
devices.

Maintain our focus on the SOC test market. We believe that the fastest
growing segment of the semiconductor industry over the next several years
will be SOC. We designed our Fusion test platform specifically to provide
optimal test capability for this class of devices. We intend to maintain
and enhance our SOC test position by continuing to concentrate our
development efforts on advanced functions and options for Fusion.

Concentrate our sales, applications consulting, and service efforts on
key accounts. We have organized our selling, field service, and field
applications organizations around key customers, and located these
resources close to their facilities. We recognize that large, diversified
semiconductor device manufacturers and certain offshore test and assembly
companies purchase most of the world's test equipment, and that the level
of support we are able to provide to them has a direct impact on future
business. We believe that focusing our sales and support resources on these
customers is the most efficient way to maximize revenue. We have also
developed collaborative relationships with key customers and vendors that
help guide us in developing future applications and system options. We have
also begun the second phase of our Fusion selling strategy by focusing
selling efforts on key accounts in the subcontract test and assembly
market. We believe this market represents an area of potential growth for
us that will be at least partially driven by our success with the
integrated diversified semiconductor manufacturers that use subcontract
test and assembly services since they substantially influence what test
systems are purchased by test and assembly companies.

Further improve the flexibility of our business model. To improve our
responsiveness to customer needs, reduce fixed costs and working capital
requirements, and manage the cyclicality of our industry more effectively,
we have implemented a more flexible business model. In the past year, we
consolidated our manufacturing operations to our Westwood, Massachusetts
facility and transformed it into an assembly, system integration, and test
operation, with most other manufacturing functions outsourced to third
parties. We engage contract employees to address periods of peak demand. We
have implemented additional international distribution and sub-contracted
repair and support functions. We intend to continue to identify and
implement programs which improve our customer responsiveness and reduce
costs.

Build on our strategic alliances. Ando Electric Company, Ltd., a
subsidiary of NEC Corporation, Japan's largest semiconductor manufacturer,
is a leading test equipment manufacturer in Japan. We entered into a
strategic alliance with Ando in April 1998 to expand the market in Japan
for the Fusion testing platform, increase our research and development
capacity, and obtain the benefits of their research and development
activities. With Ando, Fusion became, we believe, the first and only test
platform that will be produced by two suppliers, reducing the risk to our
customers that their production requirements would not be met. In addition
to Ando, we have established strategic alliances with companies
specializing in

29
<PAGE>

different aspects of our business such as board repair and local sales and
service. These alliances allow us to focus our resources on the development
of Fusion, maintain flexibility in our business model, and expand our
ability to provide our customers throughout the world with local support.

Product Overview

Since late 1996, we have focused on designing, developing, marketing and
servicing the Fusion test platform with its enabling technology for testing a
broad range of devices, including SOC.

Fusion Test Platform

Fusion offers a unique solution for testing the full spectrum of SOC, mixed
signal, and digital devices. The Fusion test platform provides customers with
the highly reliable test performance and cost-efficiency in their efforts to
accelerate their time-to-market for SOC, mixed signal, and digital devices.

The Fusion test platform combines our test station hardware with our
enVision++ software. The Fusion platform is available in the Fusion HF and
Fusion HT/AC configurations. These configurations depend primarily on the
complexity of the device to be tested.

enVision++

Our enVision++ software helps customers design device test programs faster
and more efficiently by providing a customer's test engineer with an expandable
library of prepackaged, reusable test program modules and debugging tools, all
accessible through an easy-to-use graphical user interface. In most other
testers, test engineers can reuse test code only by cutting and pasting lines
of program code. enVision++ software circumvents much of this laborious process
by encapsulating test techniques into software objects that are added to the
library for reuse in subsequent test programs. The test engineer can use these
software objects when designing new test programs simply by dragging them with
a mouse into the program flow.

Fusion HF

Introduced in July 1998, our Fusion HF is one of the most advanced testers
available. Before the advent of Fusion HF, semiconductor manufacturers required
several narrowly focused testers, designed to test only digital, only memory,
or only mixed signal devices, but not all three. Since the Fusion HF single
platform can efficiently test complex devices ranging from mixed signal to
digital to SOC, it eliminates the need for mutually exclusive testers.

The Fusion HF test system offers the broadest range of leading-edge test
capability in a single platform, including advanced mixed signal, high-speed
digital, digital signal processing, RF wireless, embedded memory, power, and
time measurement. This range of instrumentation on a single platform allows
semiconductor manufacturers to optimize their asset utilization, thereby
increasing their manufacturing flexibility and lowering the overall cost of
their testing processes.

Fusion's modular architecture has been designed so that it can keep pace with
today's rapid changes in test technology. As new generations of devices require
more advanced test capabilities, customers can easily upgrade their Fusion
testers to accommodate these requirements.

Fusion HT/AC

The Fusion HT/AC test systems are used for high throughput testing of mixed
signal devices primarily to satisfy capacity needs of customers using our prior
generation Synchro HT and Synchro AC products. These manufacturers are
producing the advanced mixed signal devices that are the precursors to, and the
foundations of, the next generation of SOC devices. As with Fusion HF, Fusion
HT and Fusion AC use the enVision++ development software, allowing customers to
easily upgrade to Fusion HF.

30
<PAGE>

The Fusion HT features up to 48 digital pins, RF test instruments, and power
management test technology. Typical device types tested on the Fusion HT
include radio frequency/wireless, power management and consumer video and
audio. The Fusion HT, powered by enVision++, is fully compatible with our
previous generation mixed signal product, the Synchro HT.

The Fusion AC features up to 96 digital pins and high-speed DSP instruments.
Typical device types tested on the Fusion AC include those used in high-speed
local area networks, disk drives and data communications. The Fusion AC is also
powered by enVision++, and is fully compatible with our previous generation
mixed signal product, the Synchro AC.

Other Products

The Delta/STE, introduced in 1995, is our previous generation digital tester.
The Synchro HT and Synchro AC testers are our previous generation of mixed
signal products. While still supported by our service organization, we no
longer manufacture or market the Synchro HT and Synchro AC. All of the
installed base of Synchro applications are fully compatible with Fusion HT/AC
testers.

iPTest Division

Our iPTest division manufactures systems that are used to test specialized
semiconductor components, such as power transistors. The percentage of net
sales contributed by iPTest, compared to our total net sales, was 2.8%, or $3.7
million for the six months ended January 31, 2000, 3.0%, or $5.1 million, for
the fiscal year ended July 31, 1999, 2.9%, or $5.6 million, for the fiscal year
ended July 31, 1998 and 3.1%, or $6.1 million, for the fiscal year ended July
31, 1997. Consistent with our business strategy to focus on the Fusion product
family, we are exploring the possible disposition of the iPTest product line.

Service

We consider service to be an important aspect of our business. Our worldwide
service organization is capable of performing installations and all necessary
maintenance of test systems sold by us, including routine servicing of
components manufactured by third parties. We provide various parts and labor
warranties on test systems or options designed and manufactured by us, and
labor warranties on components that have been purchased from other
manufacturers and incorporated into our test systems. We also provide training
on the maintenance and operation of test systems we sell. Service revenue
totaled $15.2 million, or 11.7% of net sales, for the six months ended January
31, 2000, $28.9 million, or 18.4% of net sales, in fiscal 1999, $32.2 million,
or 16.4% of net sales, in fiscal 1998, and $27.4 million, or 14.1% of net
sales, in fiscal 1997.

We offer a wide range of service contracts, which gives our customers the
flexibility to select the maintenance program best suited to their needs.
Customers may purchase service contracts which extend maintenance beyond the
initial warranty provided. Many customers enter into annual or multiple-year
service contracts over the life of the equipment. The pricing of contracts is
based upon the level of service provided to the customer and the time period of
the service contract. As the installed base of our test systems has grown,
service revenues have been increasing on an annual basis. We believe that
service revenues should be less affected by the cyclical nature of the
semiconductor industry than sales of test equipment. We maintain service
centers around the world.

Engineering and Product Development

The test equipment market is characterized by rapid technological change and
new product introductions, as well as advancing industry standards. Our
competitive position will depend upon our ability to successfully enhance
Fusion and develop new instrumentation, and to introduce these new products on
a timely and cost-effective basis. We devote a significant portion of personnel
and financial resources to the continued development of our single platform SOC
capabilities, including embedded memory, digital and mixed signal core
competencies. We also seek to maintain close relationships with our customers
in order to be responsive to

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<PAGE>

their product needs. Our expenditures for engineering and product development
were $3.1 million for the six months ended January 31, 2000, and $35.1 million,
$47.8 million, and $35.5 million during fiscal 1999, 1998, and 1997,
respectively. In addition, through our alliance with Ando, we benefit from the
engineering and product development resources that Ando is applying to the
development of new options for Fusion at no incremental expense to us.

Our engineering strategy is to focus on development of the Fusion HF single
test platform. We also intend to develop our future test systems in an
evolutionary manner so that they may be progressively upgraded. This approach
preserves our customers' substantial investments in our pre-existing test
programs, and, in general, helps us maintain market acceptance for our test
systems. We work closely with our customers to define new product features and
to identify emerging applications for our products.

Sales and Distribution

We sell our products primarily through a worldwide sales organization. Our
sales organization is structured around key accounts, with a sales force of 28
people. In Japan, we sell, service and support Fusion and digital products
through our alliance with Ando. We use a small number of independent sales
representatives and distributors in certain other regions of the world.

Our net sales to customers outside the United States are primarily
denominated in United States dollars. Net sales outside North America were
69.5% for the six months ended January 31, 2000, and 60.8%, 60.2%, and 67.3% of
total net sales in fiscal 1999, 1998, and 1997, respectively.

Strategic Alliances

We entered into a development, manufacturing and marketing agreement with
Ando, a Japanese test equipment manufacturer and subsidiary of NEC Corporation,
in April 1998. The agreement has an initial term of six years. We granted Ando
exclusive rights to manufacture and sell Fusion in Japan but retained exclusive
rights to manufacture and sell Fusion to certain customers in Japan and to
manufacture and sell Fusion outside of Japan. We also granted Ando a license to
develop Fusion improvements for certain specific purposes, and, subject to
certain conditions, a license to use, manufacture, and sell these improvements
in Japan. We were granted rights to use, improve or modify these Ando
improvements outside Japan. Under the terms of the agreement, Ando paid us
$10.0 million, delivered 1,600,000 shares of LTX common stock owned by Ando to
us and reduced the interest rate on our loan from 8.0% to 5.5%. Ando is also
required to pay quarterly royalties on sales of Fusion in Japan.

Ando has established a new SOC division, charged with marketing, sales,
applications, engineering and customer support for the Fusion product line in
Japan. The division employs over 45 people who are developing digital test
options for Fusion HF and software enhancements for enVision++, without
additional expense to us. Other benefits of the alliance include a united
research and development effort to develop jointly new options and capabilities
for Fusion and a joint marketing plan for Fusion in Japan. In addition, we each
represent a second supply source for the other's customers.

We have also established additional alliances that we believe will allow us
to achieve strategic goals such as focusing our resources on the further
development of Fusion, maintaining flexibility in our business model and
expanding our ability to provide our customers throughout the world with local
support. These alliances have also allowed us to provide more localized
support. For example, DI Corporation, our partner in Korea, provides local
sales and support to the Korean market resulting in improved communications for
our customers and better market access for us. Flextech Holdings, based in
Singapore, provides board repair services for our customers, providing quick
repair turnarounds for our Asian customers and allowing us to focus on new
product development.

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<PAGE>

Customers

Our customers include many of the world's leading semiconductor device
manufacturers. No single customer accounted for 10% or more of net sales in
fiscal 1999 or 1998. In fiscal 1997, Intel accounted for 13% and National
Semiconductor accounted for 12% of net sales. Customers that have ordered
Fusion products include the following:

<TABLE>
<S> <C> <C>
Acer Labs Linear Technology Qlogic
Amkor Lucent Technologies Samsung
AMS International Motorola Siliconware
ASE Multitech STATS
Hitachi National Semiconductor STMicroelectronics
Hyundai On Semiconductor Texas Instruments
Infineon Technologies Philips Semiconductor Vitesse Semiconductor
</TABLE>

Because the semiconductor industry consists of a small number of device
manufacturers, we believe that sales to a limited number of customers will
continue to account for a high percentage of net sales for the foreseeable
future. The loss of or reduction or delay in orders from a significant customer
could hurt our business and financial results.

Manufacturing and Supply

Our principal manufacturing operations consist of final assembly, system
integration, and testing at our facilities in Westwood, Massachusetts. We also
perform some limited testing and assembly in our San Jose, California facility.
During times of peak demand, we anticipate that the alliance with Ando will
enable us to satisfy customers requirements as a second supply source for
Fusion. We outsource certain components and subassemblies to contract
manufacturers. We use standard components and prefabricated parts manufactured
to our specifications. We assemble these components and subassemblies to
produce testers in configurations specified by our customers. Most of the
components for our products are available from a number of different suppliers;
however, certain components are purchased from a single supplier or a limited
group of suppliers. Although we believe that all single source components
currently are available in adequate amounts, we cannot be certain that
shortages will not develop in the future. We are dependent on two semiconductor
device manufacturers, Vitesse Semiconductor and Maxtech Components, who are
sole source suppliers of custom components for our products, although Vitesse
has two separate manufacturing facilities capable of manufacturing our custom
components. We have no written supply agreements with these sole suppliers and
purchase our custom components through individual purchase orders. We are in
the process of evaluating sources for our custom components. We cannot assure
you that such alternative sources will be qualified or available to us.

Competition

Many other domestic and foreign companies participate in the markets for each
of our products and the industry is highly competitive. We compete principally
on the basis of performance, cost of test, reliability, customer service,
applications support, price and ability to deliver our products on a timely
basis. Our principal competitors in the market for test systems are Agilent
Technologies (formerly a division of Hewlett-Packard), Credence Systems,
Schlumberger Limited, and Teradyne. Most of our major competitors are also
suppliers of other types of automatic test equipment and have greater financial
and other resources than we do. We expect our competitors to enhance their
current products and they may introduce new products with comparable or better
price and performance. In addition, new competitors, including semiconductor
manufacturers themselves, may offer new technologies, which may in turn reduce
the value of our product lines.

Backlog

At January 31, 2000, our backlog of unfilled orders for all products and
services was $156.1 million, compared with $116.6 million at July 31, 1999. In
current business conditions, test systems generally ship

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<PAGE>

within six months of receipt of a customer's purchase order. While backlog is
calculated on the basis of firm orders, all orders are subject to cancellation
or delay by the customer with limited or no penalty. Our backlog at any
particular date, therefore, is not necessarily indicative of actual sales which
may be generated for any succeeding period. Historically, our backlog levels
have fluctuated based upon the ordering patterns of our customers and changes
in our manufacturing capacity.

Proprietary Rights

The development of our products is largely based on proprietary information.
We rely upon a combination of contract provisions, copyright, trademark and
trade secret laws to protect our proprietary rights in products. We also have a
policy of seeking U.S. patents on technology considered of particular strategic
importance. Although we believe that the copyrights, trademarks and U.S.
patents we own are of value, we believe that they will not determine our
success, which depends principally upon our engineering, manufacturing,
marketing and service skills. However, we intend to protect our rights when, in
our view, these rights are infringed upon.

We license some software programs from third party developers and incorporate
them in our products. Generally, these agreements grant us non-exclusive
licenses with respect to the subject program and terminate only upon a material
breach by us. We believe that such licenses are generally available on
commercial terms from a number of licensors.

The use of patents to protect hardware and software has increased in the test
equipment market industry. We have at times been notified of claims that we may
be infringing patents issued to others. Although there are no pending actions
against us regarding any patents, no assurance can be given that infringement
claims by third parties will not negatively impact our business and results of
operations. As to any claims asserted against us, we may seek or be required to
obtain a license under the third party's intellectual property rights. There
can be no assurance, however, that a license will be available under reasonable
terms or at all. In addition, we could decide to resort to litigation to
challenge such claims or a third party could resort to litigation to enforce
such claims. Such litigation could be expensive and time consuming and could
negatively impact our business and results of operations.

Employees

At February 29, 2000, we employed 718 people. None of our employees are
represented by a labor union, and we have experienced no work stoppages. Many
of our employees are highly skilled, and we believe our future success will
depend in large part on our ability to attract and retain these employees. We
have not experienced any work stoppages and consider relations with our
employees to be good.

Facilities

All of our facilities are leased. We have achieved worldwide ISO 9001
certification at our facilities. We maintain our headquarters in Westwood,
Massachusetts, where corporate administration, sales and customer support and
manufacturing and engineering are located in a 167,500 square foot facility
under a lease which expires in 2009. In May 1995, we subleased to a third party
a 208,000 square foot facility in Westwood, Massachusetts for a ten year term.
Our lease of this facility expires in 2010. We also maintain an additional
development facility in a 71,000 square foot building in San Jose, California.
Our lease of this facility expires in 2004. We also lease sales and customer
support offices at various locations in the United States totaling
approximately 40,000 square feet.

Our European headquarters is located in Woking, United Kingdom. We also
maintain sales and support offices at other locations in Europe. The
manufacturing and engineering facilities for our iPTest systems are located in
Guildford, United Kingdom. We also maintain sales and support offices in
locations in Asia. Office space leased in Asia and Europe totals approximately
113,816 square feet.

We believe that our existing facilities are adequate to meet our current and
foreseeable future requirements.

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<PAGE>

MANAGEMENT

The following table lists our executive officers, directors and key employees
(who are not executive officers) as of February 29, 2000.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Roger W. Blethen........ 48 President, Chief Executive Officer and Director
David G. Tacelli........ 40 Executive Vice President, Chief Financial Officer and Treasurer
Richard L. Bove......... 46 Vice President, Human Resources
Joseph A. Hedal......... 41 General Counsel
Mukesh Mowji............ 41 Vice President, North America Sales and Support
Edward J. Terrenzi...... 50 Vice President, Fusion Products Division
Thomas J. Young......... 43 Vice President of Operations
Neil Kelly.............. 41 Vice President of Marketing
Samuel Rubinovitz....... 69 Chairman of the Board
Robert J. Boehlke....... 58 Director
Jacques Bouyer.......... 71 Director
Stephen M. Jennings..... 39 Director
Roger J. Maggs.......... 53 Director
Robert E. Moore......... 61 Director
</TABLE>

Roger W. Blethen was appointed our Chief Executive Officer in September 1996.
Mr. Blethen was a President of LTX from 1994 to 1996. Mr. Blethen has been a
Director since 1980 and was 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 since its formation in 1976.

David G. Tacelli was appointed Executive Vice President of LTX in December
1999 and has been Chief Financial Officer and Treasurer since 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.

Richard L. Bove was appointed Vice President of Human Resources in September
1997. Mr. Bove joined LTX in 1988 as the Director of Compensation and Benefits
and became the Director of Human Resources in 1990. Before joining LTX, he
spent five years with Data General and five years with M/A Com in a variety of
Human Resources positions.

Joseph A. Hedal has been General Counsel of LTX since 1996. He served as
Assistant General Counsel of LTX from 1991 through 1996. Prior to joining LTX,
Mr. Hedal was an associate with Foley, Hoag & Eliot, LLP from 1990 to 1991 and
an associate with Bingham Dana LLP from 1986 through 1990.

Mukesh Mowji was appointed Vice President of North America and Asia/Pacific
Sales and Support in February 1999. In addition to North America and
Asia/Pacific sales activities, Mr. Mowji is responsible for field applications
and service resources in those regions. He joined LTX in 1988 as a Sales
Engineer and has held a variety of sales and marketing management positions
since that time. Prior to joining LTX, he worked for seven years in
Schlumberger Limited's automatic test equipment business.

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

35
<PAGE>

Applications. In 1994 he was promoted to General Manager of the Mixed Signal
Division and became Vice President of that Division in 1996. 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.

Thomas J. Young was appointed Vice President of Operations in February 1999.
He has also been Vice President and General Manager for the Asia/Pacific
Region, responsible for all sales and operations activities in that area. Mr.
Young has held a variety of field service and technical support management
positions in our Westwood, Massachusetts facility since 1981. Mr. Young joined
LTX in February 1979 as our first Customer Training Manager in San Jose,
California. Prior to joining LTX, Mr. Young was employed by the Fairchild Test
Systems Group.

Neil Kelly is Vice President of Marketing, responsible for marketing our
Fusion product, long-term planning of test platform strategy and tracking
technology trends in the semiconductor industry, particularly as they relate to
testing and SOC development. Previously, Mr. Kelly led LTX's introduction of
the Synchro mixed signal platform. He has also served as Worldwide Telecom
Product Manager, leading a group of application engineers in developing
innovative test solutions for advanced new telecom devices. Mr. Kelly joined
LTX in 1980 as an applications engineer. Prior to joining LTX, Mr. Kelly worked
for SAFT (UK) Ltd., where he designed standby power systems and emergency
lighting units.

Samuel Rubinovitz has been Chairman of the Board of LTX since December 1997.
He was elected a Director of LTX in 1994. He was Executive Vice President of
EG&G, responsible for the aerospace, optoelectronics and instrument product
groups from 1989 until his retirement in 1994. He is a director of Richardson
Electronics, KLA-Tencor and Kronos.

Robert J. Boehlke was elected a Director of LTX 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 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 from 1971 until 1983.

Jacques Bouyer was elected a Director of LTX 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 from 1986 until his
retirement from that company in 1990. He is also a director of Richardson
Electronics.

Stephen M. Jennings was elected a Director of LTX 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.

Roger J. Maggs was elected a Director of LTX in June 1994. Mr. Maggs is
currently President of Celtic House Investment Partners, a private investment
firm. Mr. Maggs was a Vice President of Alcan Aluminum from 1986 until June
1994.

Robert E. Moore has been a Director of LTX since 1989. Mr. Moore is currently
President and Chairman of the Board of Reliable Power Meters, a company he
founded 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, and served as a director of that company
from 1982 until 1990 and as a Senior Vice President responsible for marketing
and sales from 1985 until 1990.

36
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table shows information known to us about the beneficial
ownership of our common stock as of March 10, 2000, and as adjusted to reflect
the sale of common stock offered hereby by each named executive officer of LTX,
each director of LTX and all directors and executive officers as a group. No
stockholders were known by us to own beneficially more than 5% of our common
stock as of such date. As of March 10, 2000, there were 44,182,548 shares of
common stock outstanding.

The following table assumes that the underwriters do not exercise their
option to purchase additional shares in the offering. Beneficial ownership is
determined by the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after March
10, 2000 are considered outstanding, but such shares are not considered
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting and investment power as to all shares
beneficially owned, subject to community property laws where applicable.

<TABLE>
<CAPTION>
Percentage
Beneficially Owned
----------------------
Shares
Beneficially Before After
Name and Address Owned (1) Offering Offering
---------------- ------------ --------- ---------
<S> <C> <C> <C>
Directors and Executive Officers
Roger W. Blethen........................ 372,193 * *
Samuel Rubinovitz....................... 75,100 * *
Robert J. Boehlke....................... 42,775 * *
Jacques Bouyer.......................... 10,000 * *
Stephen M. Jennings..................... 1,000 * *
Roger J. Maggs.......................... 68,000 * *
Robert E. Moore......................... 7,500 * *
David G. Tacelli........................ 33,250 * *
All directors and executive officers as
a group (8 persons).................... 609,818 1.4 1.3
</TABLE>
- --------
* Represents beneficial ownership of less than one percent of the outstanding
common stock as of March 10, 2000.
(1) Shares owned by Messrs. Blethen, Rubinovitz, Boehlke, Bouyer, Maggs,
Tacelli and by all executive officers and directors as a group include
315,075 shares, 53,100 shares, 22,775 shares, 4,000 shares, 68,000 shares,
13,500 shares, and 476,450 shares, respectively, under stock options which
are presently exercisable or become so within sixty days.

37
<PAGE>

DESCRIPTION OF COMMON STOCK

Our By-laws provide that holders of common stock are entitled to one vote per
share on all matters to be voted upon by the stockholders. Stockholders are not
entitled to cumulative voting in the election of directors. Holders of common
stock are entitled to receive any dividends as may be declared from time to
time by the Board of Directors out of legally available funds. In the event of
the liquidation, dissolution or winding up of LTX, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities. The common stock has no preemptive or conversion rights and is not
subject to further calls or assessments by LTX. There are no redemption or
sinking fund provisions that apply to the common stock. The common stock
currently outstanding is, and the common stock to be issued upon closing of
this offering will be, validly issued, fully paid and non-assessable. Under our
By-laws, a special meeting of stockholders may be called by stockholders only
if called by one or more stockholders who hold at least 40% in interest of our
capital stock entitled to vote at such meeting. Our By-laws also require
approval of a super-majority of our stockholders for any transaction between us
and any stockholder who owns 10% or more of our outstanding common stock.

The transfer agent and registrar for the common stock is EquiServe.

We furnish to our stockholders annual reports containing financial statements
that have been examined and reported upon, with an opinion expressed, by our
independent public accountants and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year.

Rights Agreement

Our Board of Directors adopted a Rights Agreement on April 30, 1999 with
BankBoston, N.A. as rights agent. The Board issued one common share purchase
right for each share of common stock then or thereafter outstanding. The rights
will become exercisable only if a person or group acquires 15% or more of our
common stock or announces a tender offer that would result in ownership of 15%
or more of our common stock. Initially, each right will entitle a stockholder
to buy one share of our common stock at a purchase price of $45.00 per share,
subject to adjustment depending upon the occurrence of certain events.

Generally, in the event that a person or group becomes the beneficial owner
of 15% or more of our common stock, each right, other than rights owned by that
person or group, will thereafter entitle the holder to receive, upon exercise
of the right, shares of our common stock having a value equal to two times the
exercise price of the right. In the event that, at any time after the rights
become exercisable, we are (1) acquired in a merger or other business
combination transaction or (2) more than 50% of our assets or earning power is
sold or transferred, each right, other than rights owned by that person or
group, will thereafter entitle the holder to receive, upon the exercise of the
right, shares of common stock of the acquirer having a value equal to two times
the exercise price of the right.

Before any person or group has acquired 15% or more of our common stock, we
may redeem these rights at $0.001 per right. The rights will expire on April
30, 2009, unless we make such a redemption before that date.

Classified Board

Our Board of Directors is divided into three classes, with one class
consisting of three directors and two classes consisting of two directors. Each
class serves three years, with the terms of office of the respective classes
expiring in successive years.

Certain Effects

The above described provisions regarding our By-laws, the Rights Agreement
and the classified board may discourage potential takeover attempts. Our Rights
Agreement, in particular, may discourage a future acquisition of us not
approved by the Board of Directors in which our stockholders might otherwise
receive a higher value for their shares or which a substantial number, and
perhaps even a majority, of our stockholders believes to be in the best
interests of all stockholders. As a result, stockholders who might desire to
participate in such a transaction may not have the opportunity to do so. These
provisions could have an adverse effect on the market price of the common
stock.

38
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in the underwriting
agreement, the underwriters named below, for whom Morgan Stanley & Co.
Incorporated and Needham & Company, Inc. are acting as representatives, have
severally agreed to purchase, and LTX has agreed to sell to the underwriters,
the respective number of shares of common stock set forth opposite the names of
the underwriters below:

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Needham & Company, Inc. ....................................
---------
Total..................................................... 2,500,000
=========
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from LTX and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for
all of the shares of common stock offered in this offering, other than those
covered by the over-allotment option described below, if any such shares are
taken.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page of this prospectus and part to dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other underwriters or to other dealers. After the initial
offering of the shares of common stock, the offering price and other selling
terms may from time to time be varied by the representatives of the
underwriters.

LTX has granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 375,000
additional shares of common stock at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
overallotments, if any, made in connection with this offering of common stock.
To the extent such option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
additional shares of common stock as the number set forth next to such
underwriter's name in the preceding table bears to the total number of shares
of common stock set forth next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised in full, the total
price to the public would be $ , the total underwriters' discounts and
commissions would be $ , and the total proceeds to us would be $ before
deducting estimated offering expenses.

LTX and each of our directors and executive officers have agreed, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, during the period ending 90 days after the date of this
prospectus, subject to certain exceptions, not to, directly or indirectly:

. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock
(whether such shares or any such securities are then owned by such
person or are thereafter acquired directly from us); or

39
<PAGE>

. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.

The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.

In order to facilitate the offering of the common stock, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares
of common stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common stock
above independent market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.

40
<PAGE>

LEGAL MATTERS

The validity of the shares of common stock we are offering will be passed
upon for us by Bingham Dana LLP. Attorneys at Bingham Dana LLP own
approximately 4,200 shares of our common stock. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.

EXPERTS

The financial statements and schedules of LTX as of July 31, 1999 and for
each of the years in the three-year period ended July 31, 1999 incorporated by
reference in this prospectus and in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report, and are incorporated by reference herein in reliance upon the
authority of that firm as experts in giving these reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 under the Securities Act with respect to the common stock
we propose to sell in this offering. This prospectus, which is a part of the
registration statement, does not contain all of the information set forth in
the registration statement. For further information about us and the common
stock we propose to sell in this offering, we refer you to the registration
statement and the exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that has been filed. The registration statement, including
exhibits, may be inspected without charge at the principal office of the
Securities and Exchange Commission in Washington, D.C. and copies of all or any
part of which may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained at
prescribed rates by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the public reference room by calling the Commission at 1-800-
SEC-0330. In addition, the Securities and Exchange Commission maintains a
website at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission.

41
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate into this prospectus information we file
with the SEC in other documents. The information incorporated by reference is
considered to be part of this prospectus and information we later file with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of
1934 until all of the shares of common stock that are part of this offering
have been sold. The documents we have incorporated by reference are:

. our Annual Report on Form 10-K for the year ended July 31, 1999;

. our Quarterly Reports on Form 10-Q for the quarters ended October 31,
1999 and January 31, 2000;

. our Current Report on Form 8-K filed with the SEC on May 3, 1999;

. our Proxy Statement, dated November 9, 1999; and

. the description of our common stock contained in our Registration
Statement on Form 8-A filed on November 24, 1982 as amended on September
20, 1993.

You may request a copy of these filings at no cost by writing or telephoning
LTX Corporation, LTX Park, University Avenue, Westwood, Massachusetts 02090,
Attention: Investor Relations; Telephone: (781) 461-1000.

This prospectus is part of a registration statement that we filed with the
SEC. You should rely only on the information incorporated by reference in or
provided or incorporated by reference in this prospectus and the registration
statement. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.

42
<PAGE>

LTX CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.................................. F-2

Consolidated Balance Sheet as of July 31, 1998 and 1999 and January 31,
2000 (unaudited)......................................................... F-3

Consolidated Statements of Operations for the three years ended July 31,
1997, 1998 and 1999
and the six months ended January 31, 1999 (unaudited) and 2000
(unaudited).............................................................. F-4

Consolidated Statement of Stockholder's Equity for the three years ended
July 31, 1997, 1998 and 1999 and the six months ended January 31, 2000
(unaudited).............................................................. F-5

Consolidated Statements of Cash Flows for the three years ended July 31,
1997, 1998 and 1999
and six months ended January 31, 1999 (unaudited) and 2000 (unaudited)... F-6

Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of LTX Corporation:

We have audited the accompanying consolidated balance sheets of LTX
Corporation and subsidiaries as of July 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended July 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LTX Corporation
and subsidiaries as of July 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
July 31, 1999, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Boston, Massachusetts
August 24, 1999

F-2
<PAGE>

LTX CORPORATION

CONSOLIDATED BALANCE SHEET
(in thousands, except share data)

<TABLE>
<CAPTION>
July 31,
--------------------
January 31,
1998 1999 2000
--------- --------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents....................... $ 25,109 $ 19,936 $100,994
Accounts receivable, net of allowances of
$2,200 and $2,027 and $1,582.............. 33,871 37,043 60,052
Accounts receivable--other................. 2,044 4,324 3,442
Inventories................................ 38,264 48,551 57,877
Other current assets....................... 3,633 5,795 8,351
--------- --------- --------
Total current assets..................... 102,921 115,649 230,716
Property and equipment, net.................. 35,427 31,942 33,717
Other assets................................. 2,671 402 1,345
--------- --------- --------
Total assets............................. $ 141,019 $ 147,993 $265,778
========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.............................. $ 4,827 $ 5,472 $ 11,458
Current portion of long-term debt.......... 5,106 674 672
Accounts payable........................... 25,020 37,439 34,893
Deferred revenues and customer advances.... 15,045 11,391 24,811
Accrued restructuring charges.............. 5,786 2,263 2,263
Other accrued expenses..................... 13,179 10,495 10,062
--------- --------- --------
Total current liabilities................ 68,963 67,734 84,159
Long-term debt, less current portion......... 8,235 14,023 13,859
Other long-term liabilities.................. 563 -- --
Convertible subordinated debentures.......... 7,308 7,308 7,183
Stockholders' equity:
Common stock, $0.05 par value:
100,000,000 shares authorized; 38,024,440,
38,732,540 and 45,736,267 shares issued;
35,476,940, 36,185,040 shares and
43,188,767 outstanding.................... 1,902 1,936 2,287
Additional paid-in capital................... 197,209 199,778 282,166
Accumulated deficit.......................... (131,400) (131,025) (112,115)
Less--Treasury stock (2,547,500 shares), at
cost........................................ (11,761) (11,761) (11,761)
--------- --------- --------
Total stockholders' equity............... 55,950 58,928 160,577
--------- --------- --------
Total liabilities and stockholders'
equity.................................. $ 141,019 $ 147,993 $265,778
========= ========= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-3
<PAGE>

LTX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
Six Months Ended
Year Ended July 31, January 31,
---------------------------- -----------------
1997 1998 1999 1999 2000
-------- -------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales..................... $194,343 $196,227 $157,326 $60,709 $130,215
Cost of sales................. 119,699 127,837 93,451 38,291 70,051
Inventory provisions.......... 9,250 40,718 --
-------- -------- -------- ------- --------
Gross profit.................. 65,394 27,672 63,875 22,418 60,164
Engineering and product
development expenses......... 35,521 47,757 34,828 16,577 23,126
Selling, general and
administrative expenses...... 39,049 50,772 31,517 15,124 18,273
Restructuring charges......... 6,750 6,272 --
-------- -------- -------- ------- --------
Income (loss) from
operations................... (15,926) (77,129) (2,470) (9,283) 18,765
Other income (expense):
Interest expense............ (2,443) (1,898) (1,526) 707 1,029
Interest income............. 2,876 1,877 585 451 1,204
Gain on liquidation/sale of
business units............. -- -- 3,786 3,786 --
-------- -------- -------- ------- --------
Income (loss) before income
taxes........................ (15,493) (77,150) 375 (5,753) 18,940
Provision for income taxes.... 416 1,130 -- -- 30
-------- -------- -------- ------- --------
Net income (loss)............. $(15,909) $(78,280) $ 375 $(5,753) $ 18,910
======== ======== ======== ======= ========
Net income (loss) per share:
Basic....................... $ (0.45) $ (2.15) $ 0.01 $ (0.16) $ 0.47
Diluted..................... $ (0.45) $ (2.15) $ 0.01 $ (0.16) $ 0.44
Weighted-average common shares
used in computing net income
(loss) per share:
Basic....................... 35,476 36,401 35,696 35,477 39,816
Diluted..................... 35,476 36,401 36,958 35,477 43,258
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-4
<PAGE>

LTX CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)

<TABLE>
<CAPTION>
For the Three Years
Ended July 31, 1999
and the
Six Months Ended
January 31, 2000
(unaudited)
-------------------
Common Stock Additional Total
------------------ Paid-In Accumulated Treasury Stockholders'
Shares Amount Capital Deficit Stock Equity
---------- ------ ------------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31,
1996................... 35,795,796 $1,800 $191,455 $ (37,211) $ (1,005) $155,039
---------- ------ -------- --------- -------- --------
Exercise of stock
options................ 333,955 16 764 -- -- 780
Exercise of stock
warrant................ 1,000,000 50 2,260 -- -- 2,310
Issuance of shares under
employees' stock
purchase plan.......... 294,917 15 1,319 -- -- 1,334
Purchase of treasury
stock.................. (747,500) -- -- -- (3,356) (3,356)
Net loss................ -- -- -- (15,909) -- (15,909)
---------- ------ -------- --------- -------- --------
Balance at July 31,
1997................... 36,677,168 1,881 195,798 (53,120) (4,361) 140,198
Exercise of stock
options................ 108,515 6 301 -- -- 307
Issuance of shares under
employees' stock
Purchase plan.......... 291,257 15 1,110 -- -- 1,125
Purchase of treasury
stock.................. (1,600,000) -- -- -- (7,400) (7,400)
Net loss................ -- -- -- (78,280) -- (78,280)
---------- ------ -------- --------- -------- --------
Balance at July 31,
1998................... 35,476,940 1,902 197,209 (131,400) (11,761) 55,950
Exercise of stock
options................ 411,854 20 975 -- -- 995
Issuance of shares under
employees' stock
Purchase plan.......... 296,246 14 969 -- -- 983
Amortization of deferred
compensation........... -- -- 625 -- -- 625
Net profit.............. -- -- -- 375 -- 375
---------- ------ -------- --------- -------- --------
Balance at July 31,
1999................... 36,185,040 1,936 199,778 (131,025) (11,761) 58,928
Common Stock Offering... 6,210,000 311 79,594 -- -- 79,905
Exercise of stock
options................ 724,092 37 2,006 -- -- 2,043
Issuance of shares,
under employees' stock
purchase plan.......... 69,635 3 788 -- -- 791
Net profit.............. -- -- -- 18,910 -- 18,910
---------- ------ -------- --------- -------- --------
Balance at January 31,
2000 (unaudited)....... 43,188,767 $2,287 $282,166 $(112,115) $(11,761) $160,577
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-5
<PAGE>

LTX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)

<TABLE>
<CAPTION>
Six Months Ended
Year Ended July 31, January 31,
---------------------------- -----------------
1997 1998 1999 1999 2000
-------- -------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income (loss)............ $(15,909) $(78,280) $ 375 $(5,753) $ 18,910
Add (deduct) non-cash items:
Depreciation and
amortization.............. 11,038 12,510 11,291 5,811 5,548
Gain on liquidation/sale of
business units............ -- -- (3,786) (3,786) --
Charge for excess
inventory................. 9,250 40,718 -- -- --
Translation loss (gain).... (100) (47) 737 308 (230)
(Increase) decrease in:
Accounts receivable......... 4,762 2,842 (2,983) 5,958 (21,829)
Inventories................. 2,299 (21,529) (11,204) 2,132 (10,264)
Other current assets........ 1,191 383 (2,154) (1,064) (2,549)
Other assets................ 530 313 (51) (60) (956)
Increase (decrease) in:
Accounts payable............ (4,533) 1,753 11,560 (3,854) (2,641)
Accrued expenses and
restructuring charges...... 2,985 1,124 (8,322) (3,493) (492)
Deferred revenues and
customer advances.......... (1,273) 9,889 (9,449) (5,499) 9,428
-------- -------- -------- ------- --------
Net cash (used in) provided
by operating activities.... 10,240 (30,324) (13,986) (9,300) (5,075)
-------- -------- -------- ------- --------
Cash Flows from Financing
Activities:
Proceeds from sale of
business unit............... -- -- 2,000 2,000 --
Maturities of held-to-
maturity securities, net.... 9,941 -- -- -- --
Expenditures for property and
equipment................... (16,116) (8,795) (9,636) (2,699) (8,370)
-------- -------- -------- ------- --------
Net cash used in investing
activities.................. (6,175) (8,795) (7,636) (699) (8,370)
-------- -------- -------- ------- --------
Cash Flows from Financing
Activities:
Proceeds from stock plans:
Employees' stock purchase
plan....................... 1,334 1,124 983 483 791
Exercise of stock options... 780 308 995 -- 2,043
Exercise of stock warrant.... 2,310 -- -- -- --
Proceeds from stock equity
offering.................... -- -- -- -- 79,905
Purchase of treasury stock... (3,356) -- -- -- --
Advances of short-term notes
payable..................... -- -- 33,204 -- 33,008
Payment of short-term notes
payable..................... (993) (520) (28,499) (767) (27,358)
Proceeds from lease
financing................... 2,975 1,451 10,615 3,850 5,922
Payments of long-term debt... (5,090) (5,253) (1,174) (895) 43
-------- -------- -------- ------- --------
Net cash provided by (used
in) financing activities.... (2,040) (2,890) 16,124 2,671 94,354
-------- -------- -------- ------- --------
Effect of exchange rate
changes on cash.............. (294) (682) 325 614 149
-------- -------- -------- ------- --------
Net (decrease) increase in
cash and equivalents........ 1,731 (42,691) (5,173) (6,714) 81,058
Cash and equivalents at
beginning of year............ 66,069 67,800 25,109 25,109 19,936
-------- -------- -------- ------- --------
Cash and equivalents at end of
year......................... $ 67,800 $ 25,109 $ 19,936 $18,395 $100,994
======== ======== ======== ======= ========
Supplemental Disclosures of
Cash Flow Information:
Cash paid (received) during
the year for:
Interest.................... $ 2,451 $ 2,062 $ 1,263 $ 702 $ 1,520
Income taxes................ $ 725 $ 716 $ 757 $ (786) $ 300
Supplemental Disclosure of
Non-Cash Financing
Activities:
1,600,000 shares of LTX
Common Stock received by LTX
as consideration for certain
marketing, sales and
manufacturing rights and
held in treasury............ $ -- $ 7,400 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements

F-6
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

LTX Corporation ("LTX" or the "Company") designs, manufactures, and markets
automatic test equipment for the semiconductor industry that is used to test
system-on-a-chip, digital, analog, and mixed signal (a combination of digital
and analog) integrated circuits ("ICs"). The Company's newly introduced Fusion
product is a single test platform that can be configured to test system-on-a-
chip devices, digital VLSI devices including microprocessors and
microcontrollers, and analog/mixed signal devices. The Company also sells
hardware and software support and maintenance services for its test systems.
The semiconductors tested by the Company's systems are widely used in the
communications, computer, automotive and consumer electronics industries. The
Company markets its products worldwide to manufacturers of system-on-a-chip,
digital, analog and mixed signal ICs. The Company is headquartered, and has
development and manufacturing facilities, in Westwood, Massachusetts, a
development facility in San Jose, California, and worldwide sales and service
facilities to support its customer base.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company and
its wholly owned domestic subsidiaries and wholly owned and majority-owned
foreign subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.

Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of income and expenses during the reporting periods.
Operating results in the future could vary from the amounts derived from
management's estimates and assumptions.

Foreign Currency Translation

The financial statements of the Company's foreign subsidiaries are translated
in accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation". The Company's functional currency is the U.S. dollar.
Accordingly, the Company's foreign subsidiaries translate monetary assets and
liabilities at year-end exchange rates while non-monetary items are translated
at historical rates. Income and expense accounts are translated at the average
rates in effect during the year, except for sales, cost of sales and
depreciation, which are primarily translated at historical rates. Net realized
and unrealized gains and losses resulting from foreign currency remeasurement
and transaction gains and losses were a loss of $737,000 and gains of $47,000
and $100,000 in fiscal 1999, 1998, and 1997 respectively. The loss of $737,000
in fiscal 1999 was principally due to transaction losses relating to
fluctuations in the Japanese yen. Transaction gains and losses are included in
the consolidated results of operations.

Revenue Recognition

Revenue from product sales and related warranty costs are recognized at the
time of shipment. Service revenues are recognized over the applicable
contractual periods or as services are performed. Service revenue totaled $28.9
million, or 18.4% of net sales, in fiscal 1999, $32.2 million, or 16.4% of net
sales, in fiscal 1998, and $27.4 million, or 14.1% of net sales, in fiscal
1997. Revenue from engineering contracts are recognized over the contract
period on a percentage of completion basis.

During April 1998 Ando Electric Co., Ltd. (Ando) paid the Company $17.4
million in cash and LTX Common Stock for the rights to manufacture, market and
develop LTX's Fusion product for Japanese

F-7
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

customers. The Company recognized $7.4 million of revenue during fiscal 1998
for the sale of its marketing and development rights. The Company deferred
$10.0 million of revenue related to the manufacturing rights and transfer of
technology knowledge. The $10.0 million is being recognized on a percentage of
completion basis over the period in which the Company completes the transfer of
the manufacturing and technology rights. The Company recognized $8.5 million of
the deferred revenue in fiscal 1999 and expects the remaining $1.5 million to
be recognized in the first quarter of fiscal 2000. In addition, the Company
will receive future royalty payments which will be recognized as revenue in the
period earned.

Engineering and Product Development Costs

The Company expenses all engineering, research and development costs as
incurred. Expenses subject to capitalization in accordance with the Statement
of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software To Be Sold, Leased or Otherwise Marketed," relating to certain
software development costs, were insignificant.

Income Taxes

Deferred income taxes are recorded for temporary differences between the
financial reporting and tax basis of assets and liabilities. Research and
development tax credits are recognized for financial reporting purposes to the
extent that they can be used to reduce the tax provision. The Company has not
provided for federal income taxes on the cumulative undistributed earnings of
its foreign subsidiaries, which were not significant, in the past since it
reinvested those earnings. At July 31, 1999, most of the Company's foreign
subsidiaries had accumulated deficits.

Net Income (Loss) per Share

In July 1998, the Company adopted Statement of Financial Accounting
Standards, "Earnings Per Share," (SFAS 128). All previously reported earnings
per share information presented has been restated to reflect the impact of
adopting SFAS 128. Under SFAS 128, basic net income (loss) per common share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
income (loss) per common share reflects the maximum dilution that would have
resulted from the assumed exercise and share repurchase related to dilutive
stock options and is computed by dividing net income (loss) by the weighted
average number of common shares and all dilutive securities outstanding.

A reconciliation between basic and diluted earnings per share is as follows:

<TABLE>
<CAPTION>
Fiscal Year Ended July
31,
---------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
Net income (loss)............................... $(15,909) $(78,280) $ 375
Basic EPS
Basic common shares........................... 35,476 36,401 35,696
Basic EPS..................................... $ (0.45) $ (2.15) $ .01
Diluted EPS
Basic common shares........................... 35,476 36,401 35,696
Plus: impact of stock options and warrants.... -- -- 1,262
-------- -------- -------
Diluted common shares........................... 35,476 36,401 36,958
Diluted EPS................................... $ (0.45) $ (2.15) $ .01
</TABLE>

Options to purchase 60,000 shares of common stock in 1999, 3,966,793 shares
in 1998, and 3,260,283 in 1997 were outstanding during the years then ended,
but were not included in the year to date calculation of

F-8
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

diluted net income per share because either the options' exercise price was
greater than the average market price of the common shares during those
periods, or the effect of including the options would have been anti-dilutive
in effect.

Financial Instruments

Cash and Short-Term Investments

The Company considers all highly liquid investments that are readily
convertible to cash and that have original maturity dates of three months or
less to be cash equivalents. Cash equivalents consist primarily of repurchase
agreements and commercial paper. In accordance with the Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", investments in debt securities are classified as trading,
available-for-sale or held-to-maturity. Investments are classified as held-to-
maturity when the Company has the positive intent and ability to hold those
securities to maturity. Held-to-maturity securities are stated at amortized
cost with premiums and discounts amortized to interest income over the life of
the investment.

The Company has no short-term investments as of July 31, 1999 and July 31,
1998. The fair market value of cash equivalents and short-term investments is
substantially equal to the amortized cost, due to the short period of time to
maturity, which is less than one year.

Fair Value

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires that disclosure be made of estimates
of the fair value of financial instruments. The fair value of the Company's
notes payable and long-term liabilities is estimated based on quoted market
prices for the same or similar issues or on current rates offered to the
Company for debt of the same remaining maturities. At July 31, 1999 and 1998,
the carrying value of $5,472,000 and $4,827,000, respectively, for short-term
bank debt and $14,697,000 and $13,904,000, respectively, for long-term
liabilities, including current portion, approximates fair value. At July 31,
1999, and 1998, the Company's 7 1/4% Convertible Subordinated Debentures due
2011 had a carrying value of $7,308,000 and the estimated fair value of
approximately $4,092,000. For all other balance sheet financial instruments,
the carrying amount approximates fair value.

Inventories

Inventories are stated at the lower of cost or market, cost being determined
on the first-in, first-out method, and include materials, labor and
manufacturing overhead. Inventories consist of the following:

<TABLE>
<CAPTION>
As of July 31,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
Raw materials...................................... $14,400,000 $22,380,000
Work-in-process.................................... 19,419,000 18,107,000
Finished goods..................................... 4,445,000 8,064,000
----------- -----------
$38,264,000 $48,551,000
=========== ===========
</TABLE>

F-9
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Property and Equipment

Property and equipment is recorded at cost. The Company provides for
depreciation and amortization on the straight-line method. Charges are made to
operating expenses in amounts that are sufficient to amortize the cost of the
assets over their estimated useful lives. Property and equipment are summarized
as follows:

<TABLE>
<CAPTION>
As of July 31,
-------------------------- Depreciable
1998 1999 Life in Years
------------ ------------ -------------------
<S> <C> <C> <C>
Machinery and equipment....... $100,519,000 $ 97,670,000 3-5
Office furniture and
equipment.................... 9,219,000 11,395,000 3-7
Leasehold improvements........ 8,783,000 7,638,000 10 or term of lease
------------ ------------
118,521,000 116,703,000
Less: Accumulated depreciation
and amortization............. (83,094,000) (84,761,000)
------------ ------------
$ 35,427,000 $ 31,942,000
============ ============
</TABLE>

Reclassifications

Prior year financial statements have been reclassified to conform to the 1999
presentation. The reclassification had no impact on earnings for the prior
period.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The
statement is effective for fiscal 1999 and requires comprehensive income to be
reported with the same prominence as other financial statements. Comprehensive
income would include any unrealized gains or losses on available-for-sale
securities, foreign currency translation adjustments and minimum pension
liability adjustments. The adoption of FASB 130 did not have a material effect
on the consolidated financial statements.

In June 1997, the Financial Accounting Standards Board also issued Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131). The statement is effective for
fiscal 1999. SFAS 131 changes the definition and reporting of segments and
requires disclosure by operating segment of information such as profit and
loss, assets and capital expenditures, major customers and types of products
from which revenues are derived, (see Note 9).

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter).
SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to
(a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued, acquired, or substantively modified after
December 31, 1997 (and, at the company's election, before January 1, 1998).
This statement could increase volatility in earnings and other comprehensive
income for companies with applicable contracts. LTX does not have any
derivative instruments at this time.

F-10
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. NOTES PAYABLE

The Company's Japanese subsidiary had borrowings outstanding of $4.8 million
at July 31, 1998, under demand lines of credit. Borrowings of $4.5 million, at
the local prime rate plus 0.25%, were guaranteed by the Company's minority
partner in Japan, and borrowings of $0.3 million, at the local prime rate of
prime plus 0.75% under a $1.4 million demand bank line, were guaranteed by the
Company. The Company recorded two transactions as other income aggregating to
$3.8 million in the second quarter of fiscal 1999. The Japanese prime rate of
interest was 2.5% at July 31, 1998. These transactions consisted of the
liquidation of a joint venture with Sumitomo Metal Industries, Ltd. in Japan,
which resulted in a gain of $1.7 million and the sale of a portion of the
Company's legacy board repair business in Singapore, which resulted in a gain
of $2.1 million. The Company's Japanese subsidiary was liquidated during the
second quarter of fiscal 1999 and the outstanding bank debt that was guaranteed
by the minority partner was paid in full by the Company's minority partner as
part of the liquidation process. The $0.3 million guaranteed by the Company was
paid in full and there are no outstanding borrowings in Japan at July 31, 1999.

On October 26, 1998, the Company obtained a $10.0 million domestic credit
facility from a bank, which expires on October 26, 1999. The facility is
secured by all assets of the Company and bears interest at the bank's prime
rate plus 1% as of July 31, 1999. The borrowing base of the facility is based
on a formula of eligible accounts receivable. The agreement requires the
Company to maintain a certain minimum net worth. On August 19, 1999, the
Company has signed a letter of intent that will extend its $10.0 million credit
facility by one year at a reduced interest rate of prime plus 0.5%. Amounts
outstanding under this line of credit were $5.5 million at July 31, 1999.
Additionally, the Bank has agreed to open a $5.0 million foreign accounts
receivable credit line backed by foreign accounts receivables at an interest
rate of prime plus 0.5%. During fiscal 1998, the Company had a $20.0 million
domestic credit facility and a $5.0 million equipment lease line. The $20.0
million credit facility has no outstanding borrowings and expired in July 1998.
The effective rate of interest on the equipment lease facility was 8.3% at July
31, 1998. The facility was terminated on October 31, 1998. The $5.0 million
equipment lease line was repaid in full in November 1998.

4. LONG-TERM LIABILITIES

Long-term liabilities consist of the following:

<TABLE>
<CAPTION>
As of July 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Subordinated note payable........................ $12,000,000 $12,000,000
Lease purchase obligations at various interest
rates, net of deferred interest................. 1,341,000 2,697,000
----------- -----------
13,341,000 14,697,000
Less: current portion............................ (5,106,000) (674,000)
----------- -----------
$ 8,235,000 $14,023,000
=========== ===========
</TABLE>

The subordinated note payable bears interest at 5.5% at July 31, 1999 and at
July 31, 1998, which is payable semi-annually and has semi-annual principal
payments of $2,000,000, which began in January 1997. The Company renegotiated
the terms of the note in fiscal 1999 and principal payments were deferred until
January 2001 at which time semi-annual installments in the amount of $2.0
million will begin until the note's maturity date of July 2003. The note is
unsecured and is subordinated in right of payment to senior indebtedness of the
Company. In connection with this note, the Company issued a warrant to purchase
up to 2,000,000 shares of common stock during the term of the note (see Note
7). Lease purchase obligations of $2,697,000 and $1,341,000 at July 31, 1999
and July 31, 1998 represent capital leases on LTX equipment.

F-11
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. CONVERTIBLE SUBORDINATED DEBENTURES

On April 25, 1986, the Company issued and sold at par $35,000,000 of 7 1/4%
Convertible Subordinated Debentures due 2011. A total of $7,308,000 of the
original issue of $35,000,000 remains outstanding at July 31, 1999 and 1998.
The debentures are subordinated in right of payment to senior indebtedness and
are convertible by the holders into common stock at $18.00 per share at any
time prior to redemption or maturity. The debentures are redeemable at the
Company's option at any time, in whole or in part, at 100% of the principal
amount. No sinking fund payments are required before the maturity date of the
debentures in 2011. Interest is payable semi-annually on April 15 and October
15.

6. INCOME TAXES

The components of the provision for income taxes consist of the following:

<TABLE>
<CAPTION>
Year Ended July 31,
------------------------------
1997 1998 1999
----------- ----------- ----
<S> <C> <C> <C>
Currently payable:
Federal..................................... $ 1,000,000 $ (818,000) --
State....................................... 200,000 (526,000) --
Foreign..................................... 216,000 274,000 --
----------- ----------- ----
Total current................................. $ 1,416,000 $(1,070,000) --
----------- ----------- ----
Deferred:
Federal..................................... $(1,000,000) $ 2,200,000 --
State....................................... -- -- --
Foreign..................................... -- -- --
----------- ----------- ----
Total deferred................................ $(1,000,000) $ 2,200,000 --
----------- ----------- ----
Total tax provision........................... $ 416,000 $ 1,130,000 --
=========== =========== ====
</TABLE>

Reconciliations of the U.S. federal statutory rate to the Company's effective
tax rate are as follows:

<TABLE>
<CAPTION>
Year Ended July 31,
------------------------
1997 1998 1999
----- ----- --------
<S> <C> <C> <C>
U.S. Federal statutory rate...................... (35.0)% (35.0)% 35.0%
State income taxes, net of Federal income tax
effect.......................................... 0.8 (0.7) 6.0
Foreign income taxes............................. -- 0.4 1.3
Change in valuation allowance.................... 17.9 31.5 2,490.0
Net foreign losses not benefited/(gains) not
provided........................................ 17.4 4.5 (2,532.3)
Tax credits...................................... (2.1) -- --
Other, net....................................... 3.7 0.8 --
Effective tax rate............................... 2.7% 1.5% 0.0%
</TABLE>

F-12
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The temporary differences and carryfowards that created the deferred tax
assets and liabilities as of July 31, 1999, and 1998 are as follows:

<TABLE>
<CAPTION>
As of July 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward................ $ 13,616,000 $ 24,655,000
Tax credits.................................... 2,388,000 2,400,000
Inventory valuation reserves................... 10,329,000 5,654,000
Restructuring charges.......................... 3,144,000 774,000
Spares amortization............................ 3,228,000 2,446,000
Net capital loss carryforward.................. -- 6,621,000
Unearned service revenues...................... 3,500,000 2,364,000
Other.......................................... 2,186,000 2,495,000
------------ ------------
Total deferred tax assets.................... 38,391,000 47,409,000
Valuation allowance............................ (37,997,000) (47,335,000)
------------ ------------
Net deferred tax assets.......................... 394,000 74,000
Deferred tax liabilities:
Depreciation................................... (394,000) (74,000)
Other.......................................... -- --
------------ ------------
Total deferred tax liabilities............... (394,000) (74,000)
------------ ------------
Net deferred taxes recorded...................... $ -- $ --
============ ============
</TABLE>

The valuation allowance relates to uncertainty surrounding the realization of
the deferred tax assets.

7. STOCKHOLDERS' EQUITY

Stock Repurchase Program

In June 1996, the Board of Directors authorized a stock repurchase program
under which the Company could acquire up to 3,500,000 shares of its common
stock over a 12-month period. Under this program, the Company purchased 747,500
shares during fiscal 1997 which are held in treasury at a cost of $3,356,000.
The stock repurchase program expired in June 1997.

In April 1998, the Company entered into an agreement with the subordinated
note holder to market and develop the Company's Fusion product line. As part of
this agreement, the subordinated note holder delivered to the Company 1,600,000
shares of the Company's common stock. The Company recorded this stock in
treasury at its then fair market value of $7,400,000.

Warrants

In July 1994, in connection with the issuance of a subordinated note, the
Company issued a warrant to purchase up to 2,000,000 shares of common stock at
the then fair market value of $2.31 per share during the term of the note (see
Note 4). In June 1996, 1,000,000 shares of common stock were exercised under
this warrant. In July 1997, the remaining 1,000,000 shares under this warrant
were exercised.

Rights Agreement

The Board of Directors of the Company adopted a Rights Agreement, dated as of
April 30, 1999, between the Company and Bank Boston, N.A., as rights agent, to
replace its 1989 rights plan. In connection therewith,

F-13
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the Board distributed one common share purchase right for each share of common
stock then or thereafter outstanding. The rights will become exercisable only
if a person or group acquires 15% or more of the Company's common stock or
announces a tender offer that would result in ownership of 15% or more of the
common stock. Initially, each right will entitle a stockholder to buy one share
of common stock of the Company at a purchase price of $45.00 per share, subject
to significant adjustment depending on the occurrence thereafter of certain
events. Before any person or group has acquired 15% or more of the common stock
of the Company, the rights are redeemable by the Board of Directors at $0.001
per right. The rights expire on April 30, 2009 unless redeemed by the Company
prior to that date.

8. EMPLOYEE BENEFIT PLANS

Stock Option Plans

The Company has three stock option plans: the 1999 Stock Plan (1999 Plan),
the 1990 Stock Option Plan (1990 Plan) and the 1995 LTX (Europe) Ltd. Approved
Stock Option Plan (U.K. Plan).

The 1999 Plan, 1990 Plan and the U.K. Plan provide for the granting of
options to employees to purchase shares of common stock at not less than 100%
of the fair market value of the date of grant. The 1999 Plan and the 1990 Plan
also provide for the granting of options to an employee, director or consultant
of the Company or its subsidiaries to purchase shares of common stock at prices
to be determined by the Board of Directors. Compensation expense relating to
shares granted under this plan at less than fair market value has been charged
to operations over the applicable vesting period. Options under the plans are
exercisable over vesting periods, which are typically three years beginning one
year from the date of grant. In December 1997, the stockholders of the Company
approved an increase to the number of shares of common stock that may be
granted under the 1990 Plan, through October 2000, from 3,700,000 shares to
5,225,000 shares. At July 31, 1999, 445,500 shares were subject to future grant
under the 1999 Plan, 239,136 shares were subject to future grant under the 1990
Plan and 35,626 shares were subject to future grant under the U.K. Plan.

On December 14, 1998, the Company repriced stock options representing
1,580,510 shares with an average exercise price of $4.57 to $2.81, the market
price at December 14. A total of 1,051,857 options representing 1,051,857
shares of common stock granted to the directors and executive officers of the
Company were not repriced.

F-14
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Compensation Expense

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), which requires employee stock-based compensation to be either recorded or
disclosed at its fair value. As permitted by SFAS 123, the Company has elected
to continue to account for employee stock-based compensation under Accounting
Principles Board Opinion No. 25. Had compensation costs for awards in fiscal
1999 and 1998 the Company's stock-based compensation plans been determined
based on the fair value at the grant dates consistent with the method set forth
under SFAS 123, the effect on the Company's net income (loss) and net income
(loss) per share would have been as follows:

<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
Net gain (loss):
As reported................................... $(15,909) $(78,280) $ 375
Pro forma..................................... (17,535) (81,154) (8,735)
Net gain (loss) per share:
Basic
As reported.................................. (0.45) (2.15) .01
Pro forma.................................... (0.49) (2.23) (.25)
Diluted
As reported.................................. (0.45) (2.15) .01
Pro forma.................................... $ (0.49) $ (2.23) $ (.24)
</TABLE>

Since the method prescribed by SFAS 123 has not been applied to options
granted prior to August 1, 1995, the resulting pro forma compensation expense
may not be representative of the amount to be expected in future years. Pro
forma compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.

The fair value of each option grant is estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions.

<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Volatility.................................. 83% 79% 80%
Dividend yield.............................. 0% 0% 0%
Risk-free interest rate..................... 5.88% 4.44% 6.18%
Expected life of options.................... 5.02 years 7.95 years 7.36 years
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions. Because the Company's employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.

F-15
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock Option Activity

<TABLE>
<CAPTION>
1997 1998 1999
------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year...... 2,025,227 $ 3.35 3,260,283 $ 3.94 4,186,793 $ 4.26
Granted/repriced........ 1,753,750 4.82 1,178,250 4.57 3,683,967 4.88
Exercised............... (333,955) 2.51 (108,515) 2.83 (411,854) 2.49
Forfeited/repriced...... (184,739) 7.15 (143,225) 4.96 (2,163,351) 4.51
Options outstanding, end
of year................ 3,260,283 3.94 4,186,793 4.26 5,295,555 4.74
Options exercisable..... 1,707,496 2.88 1,612,478 3.46 1,492,123 3.38
Options available for
grant.................. 636,846 1,105,626 720,262
Weighted average fair
value of options
granted during year.... $ 3.38 $ 3.55 $ 3.81
</TABLE>

As of July 31, 1999, the status of the Company's outstanding and exercisable
options is as follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------------
Weighted Average
Range of Number Remaining Weighted Average Number Weighted Average
Exercise Price ($) Outstanding Contractual Life Exercise Price ($) Exercisable Exercise Price ($)
------------------ ----------- ---------------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C>
0.00- 1.26 134,000 5.7 0.96 134,000 0.96
1.26- 2.53 373,998 3.2 1.94 371,998 1.94
2.53- 3.79 2,202,557 8.7 2.89 603,450 3.06
3.79- 5.05 984,500 8.0 4.58 149,000 4.43
5.05- 6.31 265,250 7.1 5.71 161,525 5.74
6.31- 7.58 20,750 8.1 7.38 4,150 7.38
7.58- 8.84 1,254,500 9.8 8.79 8,000 8.06
8.84-10.10 -- -- -- -- --
10.10-12.63 60,000 6.2 11.44 60,000 11.44
--------- --- ----- --------- -----
5,295,555 8.3 4.74 1,492,123 3.38
========= === ===== ========= =====
</TABLE>

Employees' Stock Purchase Plan

In December 1993, the stockholders of the Company approved the adoption of
the 1993 Employees' Stock Purchase Plan, which replaced the 1983 Employees'
Stock Purchase Plan, which expired in December 1993. Under this plan, eligible
employees may contribute up to 15% of their annual compensation for the
purchase of common stock of the Company up to $25,000 of fair market value of
the stock per calendar year. The plan limited the number of shares which can be
issued for any semi-annual plan period to 150,000 shares. In 1999, the
shareholders of the Company increased the number of shares which can be issued
over the term of the plan to 3,000,000 shares. At July 31, 1999, 1,288,972
shares were available for future issuance under this plan.

Other Compensation Plans

In fiscal 1996, the Company established a Profit Sharing Bonus Plan, wherein
a percentage of pretax profits are distributed semi-annually to all employees.
In addition, the Company has a 401(k) Growth and Investment Program. Eligible
employees may make voluntary contributions to this plan through a salary
reduction contract up to the statutory limit or 15% of their annual
compensation. In fiscal 1996, the Company began matching employees' voluntary
contributions to the plan, up to certain prescribed limits. These Company

F-16
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

contributions vest at a rate of 20% per year. The Company ceased matching
contributions in October of fiscal 1999 and there was a charge to expense in
fiscal 1999 for $151,979 for August through September 1998. The total charge to
expense under these plans was $1,056,000 in fiscal 1998 and $1,035,000 in
fiscal 1997.

9. INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION

The Company operates predominantly in one industry segment: the design,
manufacture and marketing of automated test equipment for the semiconductor
industry that is used to test system-on-a-chip, digital, analog and mixed
signal (a combination of digital and analog) integrated circuits ("ICs").

No single customer accounted for greater than 10% of total sales revenue in
fiscal 1999 and fiscal 1998. In fiscal 1997, sales to two customers accounted
for 13% and 12% of net sales, respectively. Sales to the top ten customers were
60%, 55%, and 44% of net sales in fiscal 1999, fiscal 1998 and fiscal 1997,
respectively.

The Company's operations by geographic segment for the three years ended July
31, 1999 are summarized as follows:

<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States......................... $ 64,183,000 $ 77,905,000 $ 61,603,000
Taiwan................................ 46,008,000 37,070,000 27,799,000
Japan................................. 13,285,000 26,655,000 11,645,000
Singapore............................. 27,826,000 20,270,000 18,156,000
All other countries................... 43,041,000 34,327,000 38,123,000
------------ ------------ ------------
Total sales to unaffiliated customers... 194,343,000 196,227,000 157,326,000
------------ ------------ ------------
Long-lived assets:
United States......................... 31,905,000 24,342,000 24,965,000
Taiwan................................ 591,000 1,300,000 1,175,000
Japan................................. 2,465,000 2,116,000 59,000
Singapore............................. 4,540,000 4,702,000 3,695,000
All other countries................... 3,457,000 2,967,000 2,048,000
------------ ------------ ------------
Total long-lived assets................. $ 42,958,000 $ 35,427,000 $ 31,942,000
============ ============ ============
</TABLE>

Transfer prices on products sold to foreign subsidiaries are intended to
produce profit margins that correspond to the subsidiary's sale and support
efforts. Sales to customers in North America are 99% within the United States.

F-17
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. COMMITMENTS

The Company has operating lease commitments for certain facilities and
equipment and capital lease commitments for certain equipment. Minimum lease
payments net of sublease proceeds under noncancelable leases at July 31, 1999,
are as follows:

<TABLE>
<CAPTION>
Total Total
Operating Capital
Year ended July 31, Real Estate Equipment Leases Leases
------------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
2000...................... $ 3,756,000 $ 5,042,000 $ 8,798,000 $ 897,000
2001...................... 2,836,000 3,938,000 6,774,000 897,000
2002...................... 2,617,000 1,564,000 4,181,000 897,000
2003...................... 2,501,000 429,000 2,930,000 897,000
2004...................... 2,175,000 417,000 2,592,000 --
2005 and thereafter......... 5,158,000 1,465,000 6,623,000 --
----------- ----------- ----------- ----------
Total minimum lease
payments................... $19,043,000 $12,855,000 $31,898,000 $3,588,000
Less: amount representing
interest................... $ 893,000
----------
Present value of total
capital leases............. $2,695,000
</TABLE>

Total rental expense for fiscal 1999, 1998 and 1997 was $6,832,000,
$6,713,000, and $7,257,000 respectively.

11. RESTRUCTURING AND INVENTORY CHARGES

Fiscal 1998 Restructuring

In fiscal 1998, the Asian financial crisis (which began in January 1998)
created a major impact on the global economy, precipitating a further drop in
demand than the Company and the industry had been previously experiencing. As a
result, the Company's sales dropped to $33 million in the fourth quarter of
fiscal 1998, compared to $54 million in the third quarter of fiscal 1998.
Simultaneously, the Company's development and introduction of the Fusion
product line was occurring. The sudden drop in demand for the Company's
products, combined with the introduction of the Fusion product line, resulted
in significant excess and obsolete inventory. Management determined to
restructure the Company's operations during the fourth quarter of fiscal 1998,
in line with its strategy of focusing on the Fusion product line. As a result
of the combined rapid and sudden decline in global demand for Semiconductor
Test Equipment and the transition to the Fusion product line, the Company
recorded a $40.7 million inventory charge in the fourth quarter of fiscal 1998.
Inventory purchases in the second and third quarters of fiscal 1998 in
anticipation of a higher level of demand for its existing products consisted of
a large amount of custom and semi-custom inventory that would become obsolete
or difficult to sell due to the declining business conditions within the
industry in the third and fourth quarter of that same fiscal year.

The $6.3 million restructuring charge recorded in the fourth quarter of
fiscal 1998 included: $3.2 million in employee separation costs, $2.9 million
in asset impairment write-offs and $.2 million in lease terminations and other
contractual obligations. The workforce reduction impacted 259 employees, of
which 211 were in Production & Engineering, 33 in Sales & Marketing and 15 in
Administration. Asset impairment write-offs of $2.9 million related to the
write off of capitalized Master and Delta Series testers and test equipment at
its facilities in San Jose and Korea. The Company no longer manufactures the
Master series line and this equipment was written down to zero value and
depreciation expense permanently ceased. The assets were disposed of or sold in
fiscal

F-18
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1999. The company received $.3 million in cash and short term notes for the
sale of these assets. There is no remaining accrued liability balance to be
paid that relates to the fiscal 1998 restructuring plan as of July 31, 1999.

Fiscal 1997 Restructuring

The Company's charge for excess inventory of $9.3 million in the first
quarter of fiscal 1997 was a result of management's new strategy for its
Digital product line. During the first quarter of fiscal 1997, the Company
restructured its Digital Products Division management team and initiated a new
marketing and product development strategy that produced an anticipated
reduction in the realizable value of existing inventories relating to non-
strategic products.

The bulk of this charge for excess inventory of $9.3 million related to
product obsolescence in the Company's Delta 50 and Delta 100 Test Systems,
which were replaced with the Delta STE line.

In fiscal 1997, the Company redirected its product strategy to focus
primarily on functionally complex devices known as "systems-on-a chip". As a
result, the Company restructured its Digital Products Division and began
emphasizing sales of its Delta/STE mixed technology test systems. In fiscal
1997, the Company recorded a restructuring charge of $6.8 million consisting of
$4.0 million for cancelled non-strategic development projects and technology
upgrades to the customers, $1.7 million in severance costs relating to
workforce reductions, $.6 million of asset impairments and $.3 million in
equipment lease cancellations. The workforce reduction totaled 180 employees,
of which 166 were in production and engineering, 10 in administration and 4 in
sales and marketing.

The remaining accrued balance as of July 31, 1999 of $1.7 million relates to
the estimated cost to replace certain board modules. In fiscal 1999,
approximately $.2 million of cash expenditures were made on this project.

Restructuring Cost
($000's)

Charges: (See Note)

<TABLE>
<CAPTION>
From the From the From the
Pre-Fiscal 1996 Plan Fiscal 1997 Plan Fiscal 1998 Plan
-------------------- ---------------- ----------------
<S> <C> <C> <C>
Employee separation
cost................... $ 1,900 $1,750 $3,145
Cancelled engineering
projects............... -- 1,250 --
New system board
modules................ -- 2,850 --
Fixed asset write-
downs.................. -- 600 2,908
Termination of leases
and other contractual
obligations............ 12,500 300 219
------- ------ ------
Total................. 14,400 6,750 6,272
======= ====== ======
Incurred through July
31, 1999............... 13,887 5,000 6,272
Ending accrual at July
31, 1999............... 513 1,750 --
Actual cash payments in
fiscal 1999............ -- 228 3,295
</TABLE>
- --------
Note: Charges represent cash items except for the fixed asset write-downs which
is a non-cash item.

F-19
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Headcount Reduction

<TABLE>
<CAPTION>
From the From the
Fiscal 1997 Plan Fiscal 1998 Plan
---------------- ----------------
<S> <C> <C>
Sales and marketing...................... 4 33
Administration........................... 10 15
Production and engineering............... 166 211
--- ---
Total reduction........................ 180 259
</TABLE>

12. QUARTERLY RESULTS OF OPERATIONS (unaudited)

QUARTERLY RESULTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)

<TABLE>
<CAPTION>
Year Ended July 31, 1999
------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net sales.................................. $27,018 $33,691 $43,210 $ 53,407
Gross profit............................... 9,667 12,751 18,198 23,259
Net income (loss).......................... (6,892) 1,139 1,794 4,334
Net income (loss) per share:
Basic.................................... (.19) .03 .05 .12
Diluted.................................. (.19) .03 .05 .11

<CAPTION>
Year Ended July 31, 1998
------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net sales.................................. $54,206 $55,132 $54,130 $ 32,759
Gross profit............................... 22,099 23,333 17,833 (35,593)
Net income (loss).......................... 1,108 765 (6,334) (73,819)
Net income (loss) per share:
Basic.................................... 0.03 0.02 (0.17) (2.09)
Diluted.................................. 0.03 0.02 (0.17) (2.09)
</TABLE>
- --------
(1) The Company recorded a charge for excess inventory of $40.7 million and a
restructuring charge of $6.3 million in its fourth quarter results of
operations.

13. ADDITIONAL INTERIM INFORMATION (unaudited)

Reclassification

Effective November 1, 1999, the Company changed its accounting policy to
classify certain applications and engineering development costs previously
reported in cost of sales as research and development expense. The change was
made effective for the quarter ended January 31, 2000. The expenses that were
reclassified relate to development activities by our application engineering
group for future enhancements of existing products and initial application
development of new products. Prior period financial statements have been
reclassified to conform to the 2000 presentation. The reclassification had no
impact on earnings for any prior period.

F-20
<PAGE>

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

APPLICATIONS ENGINEERING RECLASSIFICATION
($ in thousands)

<TABLE>
<CAPTION>
For the Six Months
Ended
Fiscal Years Ended July 31, January 31,
----------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
------ ------- ------- ------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ Amount reclassified... $6,471 $11,475 $12,171 $13,437 $9,654 $4,784 $7,028
Gross profit % of sales
--Previously
reported............. 35.0% 37.9% 27.4% 7.3% 34.5% 29.0% 40.8%
--As reclassified..... 38.1% 42.2% 33.6% 14.1% 40.6% 36.9% 46.2%
Engineering and product
development expenses %
of sales
--Previously
reported............. 9.4% 8.6% 12.0% 17.5% 16.0% 19.4% 12.4%
--As reclassified..... 12.5% 12.9% 18.3% 24.3% 22.1% 27.3% 17.8%
</TABLE>

Convertible Debentures

The Company announced that it intends to call for redemption on March 24,
2000 all of its outstanding 7 1/4% Convertible Subordinated Debentures Due
2011. On that date, the debentures will be redeemable at a redemption price
equal to 100% of their principal amount plus accrued interest. The debentures
are convertible into shares of LTX Common Stock until 5:00 p.m. Eastern
Standard Time on March 24, 2000 at a conversion price of $18.00 per share of
Common Stock. Accrued and unpaid interest will not be paid to holders who
convert their debentures. Any debentures not surrendered for redemption prior
to 5:00 p.m. Eastern Standard Time on March 24, 2000 shall cease to accrue
interest. On February 25, 2000, $7,183,000 in principal amount of debentures
was outstanding.

New Accounting Pronouncements

The Securities and Exchange Commission released Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition in Financial Statements", on December 3,
1999. The SAB provides additional guidance on the accounting for revenue
recognition, including both broad conceptual discussions as well as certain
industry-specific guidance. The new guidance concerning customer acceptance and
installation terms may have an impact on the timing of the Company's revenue
recognition. The guidance is effective for the first quarter of fiscal year
2001 and would be adopted by recording the effect of any prior revenue
transaction affected as a "cumulative effect of change in accounting principle"
as of August 1, 2000.

F-21
<PAGE>

[LOGO OF LTX CORPORATION]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth a reasonably itemized statement of all
expenses in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions. All amounts shown are estimates except the Securities and Exchange
Commission registration fee and the National Association of Securities Dealers,
Inc. fees.

<TABLE>
<S> <C>
SEC registration fee............................................ $ 35,199
NASD filing fee................................................. 13,833
Nasdaq National Market fee...................................... 17,500
Blue sky fees and expenses...................................... 10,000
Transfer agent and registrar fees............................... 5,000
Legal fees and expenses......................................... 20,000
Accounting fees and expenses.................................... 35,000
Printing and engraving expenses................................. 100,000
Miscellaneous................................................... 13,468
--------
Total....................................................... $250,000
========
</TABLE>

Item 15. Indemnification of Directors and Officers

Chapter 156B of the Massachusetts General Laws, under which LTX is organized,
permits a Massachusetts corporation to adopt a provision in its Articles of
Organization eliminating or limiting the liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such liability does not arise from certain
proscribed conduct (including intentional misconduct and breach of duty of
loyalty).

On December 8, 1987, the stockholders approved an amendment to the Company's
Articles of Organization. The amendment to the Articles of Organization, which
became effective on April 8, 1988, is as follows:

"No director shall be personally liable to the corporation or any of its
stockholders for monetary damages for any breach of fiduciary duty as a
director notwithstanding any provision of law imposing such liability;
provided, however, that this provision shall not eliminate or limit the
liability of a director for (i) any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
authorizing distributions to stockholders in violation of the corporation's
Articles of Organization or which render the corporation insolvent or bankrupt,
and approving loans to officers or directors of the corporation which are not
repaid and which were not approved or ratified by a majority of disinterested
directors or stockholders, or (iv) any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged
liability of any director of the corporation for or with respect to any acts or
omissions of such director occurring prior to the effective date of such
amendment."

The By-laws of the registrant provide for indemnification of officers and
directors as follows:

Section 6.5 Indemnification.

The Corporation shall indemnify each director and officer against all
judgments, fines, settlement payments and expenses, including reasonable
attorneys' fees, paid or incurred in connection with any claim, action, suit or
proceeding, civil or criminal, to which he may be made a party or with which he
may be threatened by reason of his being or having been a director or officer
of the corporation, or, at its request, a director, officer,

II-1
<PAGE>

stockholder or member of any other corporation, firm, association or other
organization or by reason of his serving or having served, at its request, in
any capacity with respect to any employee benefit plan, or by reason of any
action or omission by him in such capacity, whether or not he continues to be a
director or officer at the time of incurring such expenses or at the time the
indemnification is made. No indemnification shall be made hereunder (i) with
respect to payments and expenses incurred in relation to matters as to which he
shall be finally adjudged in such action, suit or proceeding not to have acted
in good faith and in the reasonable belief that his action was in the best
interests of the corporation (or, to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interest of the
participants or beneficiaries of such employee benefit plan), or (ii) otherwise
prohibited by law. The foregoing right of indemnification shall not be
exclusive of other rights to which any director or officer may otherwise be
entitled and shall inure to the benefit of the executor or administrator of
such director or officer. The Corporation may pay the expenses incurred by any
such person in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding, upon
receipt of an undertaking by such person to repay such payment if it is
determined that such person is not entitled to indemnification hereunder.

The Board of Directors may, without stockholder approval, authorize the
Corporation to enter into agreements, including any amendments or modification
thereto, with any of its directors, officers or other persons described in
paragraph (a) above providing for indemnification of such persons to the
maximum extent permitted under applicable law and the Corporation's Articles of
Organization and By-laws.

No amendment to or repeal of this section shall have any adverse effect on
(i) the right of any director or officer under any agreement entered into prior
thereto, or (ii) the rights of any director or officer hereunder relating to
his service, for which he would otherwise be entitled to indemnity hereunder,
during any period prior to such amendment or repeal.

Item 16. Exhibits

1.1 Form of Underwriting Agreement
3.1 Articles of Organization, as amended (Exhibit 3.1 to the Company's
Amendment No. 1 to Registration Statement No. 33-62125 on Form S-3
filed September 11, 1995)*
3.3 By-laws, as amended (Exhibit 3-B to the Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997).*
4.1 Indenture dated April 15, 1986 between the Company and The First
National Bank of Boston (Exhibit 4-A to the Company's Registration
Statement No. 33-35401 on Form S-4 filed June 26, 1990)*
4.2 Indenture dated June 15, 1990 between the Company and The First
National Bank of Boston (Exhibit 4 (A) (ii) to the Company's Annual
Report on Form 10-K for the year ended July 31, 1990)*
4.3 Rights Agreement dated as of April 30, 1999 between the Company and
BankBoston, N.A. (Exhibit 4.1 to the Company's Current Report on Form
8-K, filed May 3, 1999)*
5.1 Opinion of Bingham Dana LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bingham Dana LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page II-4)
27.1 Financial Data Schedules
* Previously filed

Item 17. Undertakings

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

The undersigned registrant hereby undertakes that:

For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Westwood and Commonwealth of Massachusetts on the
15th day of March, 2000.

LTX Corporation

/s/ David G. Tacelli
By: _________________________________
David G. Tacelli
Chief Financial Officer
and Executive Vice President

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Roger W. Blethen and David G. Tacelli,
and each of them, his true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any amendments or post-effective
amendments to this Registration Statement, and any and all registration
statements (including any amendments thereto) relating to the offering covered
hereby which may be filed with the Securities and Exchange Commission pursuant
to Rule 462(b) under the Securities Act of 1993, and to file any of the
foregoing with all exhibits thereto and other documents in connection therewith
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitutes or substitutes, may do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Roger W. Blethen Chief Executive Officer, March 15, 2000
______________________________________ President and Director
Roger W. Blethen (Principal Executive
Officer)
/s/ David G. Tacelli Chief Financial Officer March 15, 2000
______________________________________ (Principal Financial &
David G. Tacelli Accounting Officer)
/s/ Samuel Rubinovitz Chairman of the Board March 15, 2000
______________________________________
Samuel Rubinovitz
/s/ Robert J. Boehlke Director March 15, 2000
______________________________________
Robert J. Boehlke
/s/ Jacques Bouyer Director March 15, 2000
______________________________________
Jacques Bouyer
/s/ Stephen M. Jennings Director March 15, 2000
______________________________________
Stephen M. Jennings
/s/ Roger J. Maggs Director March 15, 2000
______________________________________
Roger J. Maggs
/s/ Robert E. Moore Director March 15, 2000
______________________________________
Robert E. Moore
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

1.1 Form of Underwriting Agreement
3.1 Articles of Organization, as amended (Exhibit 3.1 to the Company's
Amendment No. 1 to Registration Statement No. 33-62125 on Form S-3
filed September 11, 1995)*
3.3 By-laws, as amended (Exhibit 3-B to the Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997).*
4.1 Indenture dated April 15, 1986 between the Company and The First
National Bank of Boston (Exhibit 4-A to the Company's Registration
Statement No. 33-35401 on Form S-4 filed June 26, 1990)*
4.2 Indenture dated June 15, 1990 between the Company and The First
National Bank of Boston (Exhibit 4 (A) (ii) to the Company's Annual
Report on Form 10-K for the year ended July 31, 1990)*
4.3 Rights Agreement dated as of April 30, 1999 between the Company and
BankBoston, N.A. (Exhibit 4.1 to the Company's Current Report on Form
8-K, filed May 3, 1999)*
5.1 Opinion of Bingham Dana LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bingham Dana LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
27.1 Financial Data Schedules
* Previously filed

<PAGE>

2,500,000 Shares

LTX CORPORATION

COMMON STOCK, $.05 PAR VALUE

UNDERWRITING AGREEMENT
----------------------

April __, 2000
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April __, 2000

Morgan Stanley & Co. Incorporated
Needham & Company, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Dear Sirs and Mesdames:

LTX Corporation, a Massachusetts corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") 2,500,000 shares of its Common Stock, $.05 par value (the "FIRM
SHARES"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 375,000 shares of its Common Stock,
$.05 par value (the "ADDITIONAL SHARES") if and to the extent that you, as
Managers of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "SHARES." The shares of Common
Stock, $.05 par value, of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK."

The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement (including, in the case of all references to the
Registration Statement and the Prospectus, documents incorporated therein by
reference).

1. Representations and Warranties. The Company represents and warrants to
and agrees with each of the Underwriters that:

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(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.

(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.

(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(d) Each subsidiary of the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.

(e) This Agreement has been duly authorized, executed and delivered by the
Company.

(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.

(g) The shares of Common Stock outstanding prior to the issuance of the
Shares have been duly authorized and are validly issued, fully paid and non-
assessable. Except

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as disclosed in the Prospectus and the financial statements of the Company, and
the related notes thereto, included in the Prospectus, neither the Company nor
any subsidiary has outstanding any options to purchase, or any preemptive rights
or other rights to subscribe for or purchase any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations.

(h) The Shares have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.

(i) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.

(j) There has not occurred any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement).

(k) There are no (i) legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or (ii) any statutes, regulations, contracts
or other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.

(l) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, and each document, filed or to be
filed pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") and incorporated by reference in the Prospectus complied or will comply
when so filed in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder.

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(m) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.

(n) The Company and its subsidiaries (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.

(o) There are no costs or liabilities of the Company or its subsidiaries
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

(p) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement other than
those that have been complied with.

(q) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.

(r) The Company and its subsidiaries have good and marketable title to all
property described in the Registration Statement and Prospectus as being owned
by it, in each case free and clear of all liens, claims, security interests or
other encumbrances except such as are described in the Registration Statement
and the Prospectus; the property held under lease by the Company and its
subsidiaries is held under a valid, subsisting and enforceable lease with only
such exceptions as do not interfere in any material respect with the conduct of
the business of the Company and its subsidiaries; the Company is not aware of
the need for any acquisition or license of rights under patents, patent
applications, patent rights, inventions, trade secrets, know-how, trademarks,
trademark applications, service marks, service mark applications, tradenames,
copyrights, or other information or similar rights (collectively, the
"INTELLECTUAL PROPERTY") necessary for the conduct of the business of the
Company as currently carried on and as described in the Registration Statement
and Prospectus. Except as stated in the

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Registration Statement and Prospectus, no name which the Company or its
subsidiaries uses and, to the Company's knowledge, no other aspect of the
business of the Company or its subsidiaries will involve or give rise to any
infringement of, or license or similar fees for, any Intellectual Property of
others material to the business or prospects of the Company.

(s) Except as set forth in the Prospectus, the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company by others with respect to any Intellectual
Property; the Company has not received any notice of, and has no knowledge of,
any infringement of or conflict with asserted rights of others with respect to
any Intellectual Property other than as described in the Prospectus, which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a material adverse effect on the condition (financial or
otherwise) or business of the Company; to the knowledge of the Company, none of
the patents owned or licensed by the Company are unenforceable or invalid. The
Company has duly and properly filed or caused to be filed with the United States
Patent and Trademark Office (the "PTO") all patent applications covering the
Company' s products described or referred to in the Prospectus that the Company
in its business judgment deemed appropriate, and believes it has complied with
the PTO's duty of candor and disclosure for the Company Patent Applications (as
set forth in the opinions to be delivered pursuant to section 5(e) herein); the
Company is unaware of any facts material to a determination of patentability
regarding the Company Patent Applications not called to the attention of the
PTO; the Company is unaware of any facts not called to the attention of the PTO
which would preclude the grant of a patent for the Company Patent Applications;
the Company has no knowledge of any facts which would preclude it from having
clear title to its patent applications covering the Company `s products
referenced in the Prospectus; and the Company has not terminated or breached and
is not in violation of any agreement covering its Intellectual Property rights,
which agreement, if terminated, could have a material adverse effect on the
condition (financial or otherwise) or business of the Company. The Company is
not aware of the granting of any patents to third parties or the filing of
patent applications by third parties or any other rights of third parties to any
of the Company's Intellectual Property other than as described in the
Prospectus.

(t) The Company has reviewed its operations and that of its subsidiaries to
evaluate the extent to which the business or operations of the Company or any of
its subsidiaries have been or will be affected by the Year 2000 Problem (that
is, any significant risk that computer hardware or software applications used by
the Company and its subsidiaries will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000); as a result
of such review, (i) the Company has no reason to believe, and does not believe,
that (A) there are any issues related to the Company's preparedness to address
the Year 2000 Problem that are of a character required to be described or
referred to in the Registration Statement or Prospectus which have not been
accurately described in the Registration Statement or Prospectus and (B) the
Year 2000 Problem will have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, or result in any material loss
or interference with the

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business or operations of the Company and its subsidiaries, taken as a whole;
and (ii) the Company believes, after due inquiry, that the suppliers, vendors,
customers or other material third parties used or served by the Company and such
subsidiaries are not addressing or will not address the Year 2000 Problem in a
timely manner, except to the extent that a failure to address the Year 2000
Problem by any supplier, vendor, customer or material third party would not have
a material adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.

(u) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus (i) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (iii) there has not been any material change in
the capital stock, short-term debt or long-term debt of the Company and its
subsidiaries, except in each case as described in the Prospectus.

(v) No material labor dispute with the employees of the Company or any of
its subsidiaries exists, except as described in the Prospectus, or, to the
knowledge of the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

(w) The Company and its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as,
in the Company's reasonable judgment, are prudent and customary in the
businesses in which they are engaged; neither the Company nor any of its
subsidiaries has been refused any insurance coverage sought or applied for; and
neither the Company nor any of its subsidiaries has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole, except as
described in the Prospectus.

(x) The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and

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warranties herein contained, but subject to the conditions hereinafter stated,
agrees, severally and not jointly, to purchase from the Company the respective
numbers of Firm Shares set forth in Schedule I hereto opposite its name at $[ ]
a share (the "PURCHASE PRICE").

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 375,000 Additional
Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Company in writing not later than
30 days after the date of this Agreement, which notice shall specify the number
of Additional Shares to be purchased by the Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.

The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (ii) enter into any swap, hedging or arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder or (B) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof as disclosed in the Prospectus or (C)
the grant of options that are not exercisable during the period ending 90 days
after the date of the Prospectus pursuant to option plans existing on the date
hereof, as any such plan may be amended after the date hereof.

3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$[ ] a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected
by you at a price that represents a concession not in excess of $[ ] a share
under the Public Offering Price, and that any Underwriter may allow, and such

<PAGE>

dealers may reallow, a concession, not in excess of $[ ] a share, to any
Underwriter or to certain other dealers.

4. Payment and Delivery. Payment for the Firm Shares shall be made to the
Company in Federal or other funds immediately available in New York City against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on April __, 2000, or at such
other time on the same or such other date, not later than April __, 2000, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE". The closing of the offering and
sale of the Firm Shares will be held at the offices of Testa, Hurwitz &
Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110.

Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2 or at such other time on the same or on such other date, in any event
not later than April __, 2000, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE". The closing of the offering and sale of the Additional Shares will be
held at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
Massachusetts 02110.

Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.

5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:30 p.m. (New York City time) on the date hereof.

The several obligations of the Underwriters are subject to the following
further conditions:

(a) Subsequent to the execution and delivery of this Agreement and prior to
the Closing Date:

(i) if any of the Company's securities are rated by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act,
there shall not have occurred any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any
review for a

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possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act;
and

(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.

(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in Section 5(a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.

The officer signing and delivering such certificate may rely upon the best
of his or her knowledge as to legal or governmental proceedings threatened.

(c) The Underwriters shall have received on the Closing Date an opinion of
Bingham Dana LLP, outside counsel for the Company, dated the Closing Date, to
the effect that:

(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing as
a foreign corporation in each jurisdiction in which its ownership or
leasing of real property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;

(ii) each subsidiary of the Company that is a "significant
subsidiary" as the term is defined in Rule 1-02 of Regulation S-X has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification;

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(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;

(iv) all of the issued shares of capital stock of each
subsidiary of the Company have been duly authorized and are validly
issued, are fully paid and non-assessable and are owned directly by
the Company, free and clear of all liens, encumbrances, equities or
claims;

(v) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and to such counsel's
knowledge, the issuance of such Shares will not be subject to any
preemptive or similar rights;

(vi) this Agreement has been duly authorized, executed and
delivered by the Company;

(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Shares;

(viii) the statements (A) in the Prospectus under the captions
"Description of Common Stock" and the first, second, fourth, fifth and
eighth paragraphs under "Underwriting" and (B) in the Registration
Statement in Item 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information required with
respect to such legal matters, documents and proceedings and fairly
summarize in all material respects the matters required to be
disclosed therein;

(ix) without having undertaken a docket search, such counsel
does not know of any legal or governmental proceedings pending or
overtly threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
of any statutes, regulations, contracts or other documents that are
required to be described

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in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed
as required;

(x) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended;

(xi) such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and notes
thereto and schedules and other financial and statistical data
included therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder. Such counsel shall also state that, although
they are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus and they did not participate in
the preparation of documents incorporated by reference in the
Registration Statement or Prospectus, no facts have come to their
attention that have caused them to believe that the Registration
Statement (excluding documents incorporated by reference therein
solely to the extent superceded by the Registration Statement and
except for the financial statements and notes thereto, schedules and
other statistical or financial data included therein, as to which such
counsel express no belief), as of its effective date, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus
(excluding documents incorporated by reference therein solely to the
extent superceded by the Prospectus and except for the financial
statements and notes thereto, schedules and other statistical or
financial data included therein, as to which such counsel express no
belief) contained any untrue statement of a material fact or omitted
to state any material fact necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made or that, as of the Closing Date, the Prospectus (excluding
documents incorporated by reference therein solely to the extent
superceded by the Prospectus and except for the financial statements
and notes thereto, schedules and other statistical or financial data
included therein, as to which such counsel express no belief)
contained an untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made.

(d) The Underwriters shall have received on the Closing Date an opinion of
Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix)
(but only as to the statements in the Prospectus under "Description of Common
Stock" and "Underwriting") and 5(c)(xi).

12
<PAGE>

With respect to Section 5(c)(xi) above, Testa, Hurwitz & Thibeault, LLP may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (other than documents incorporated by reference) and review
and discussion of the contents thereof (other than documents incorporated by
reference), but are without independent check or verification, except as
specified.

The opinion of Bingham Dana LLP described in Section 5(c) above shall be
rendered to the Underwriters at the request of the Company and shall so state
therein. Such counsel may rely as to questions of law not involving the United
States or the Commonwealth of Massachusetts upon the opinions of local counsel.
Copies of any such opinion shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' counsel.

(e) The Underwriters shall have received on the Closing Date or the Option
Closing Date, as the case may be, an opinion of (i) Lappin & Kusmer, and (ii)
Blakeley, Sokoloff, Taylor & Zafman, dated on the Closing Date or the Option
Closing Date, as the case may be, each in form and substance satisfactory to you
and addressing such legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require.

(f) The Underwriters shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to the Underwriters, from Arthur
Andersen LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Registration
Statement and the Prospectus; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.

(g) The "lock-up" agreements, each substantially in the form of Exhibit A
hereto, between you and officers and directors of the Company relating to sales
and certain other dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.

(h) The Underwriters shall have received on the Closing Date or the Option
Closing Date, as the case may be, an opinion of Joseph A. Hedal, the Company's
General Counsel, dated on the Closing Date or the Option Closing Date, as the
case may be, each in form and substance satisfactory to you and addressing such
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require.

The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.

13
<PAGE>

6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:

(a) To furnish to you, without charge, four (4) signed copies of the
Registration Statement (including exhibits thereto and documents incorporated by
reference) and to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto but including documents incorporated by
reference) and to furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 6(c) below, as many
copies of the Prospectus, any document incorporated therein by reference, and
any supplements and amendments thereto or to the Registration Statement as you
may reasonably request. The terms "supplement" and "amendment" or "amend" as
used in this Agreement shall include all documents subsequently filed by the
Company with the Commission pursuant to the Exchange Act that are deemed to be
incorporated by reference in the Prospectus.

(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.

(c) If, during such period after the first date of the public offering of
the Shares as in the opinion of counsel for the Underwriters the Prospectus is
required by law to be delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.

(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.

(e) To make generally available to the Company's security holders and to
you as soon as practicable an earnings statement covering the three-month
period ending January 31, 2000 that satisfies the provisions of Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder.

14
<PAGE>

(f) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and delivery
of the Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated there-with, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
provided in Section 6(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association of
Securities Dealers, Inc., (v) all costs and expenses incident to listing the
Shares on the Nasdaq National Market, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and fifty percent (50%) of the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that the
costs described in Section 6(f)(iii) and the reasonable fees and disbursement of
counsel to the Underwriters as to matters described in Section 6(f)(iv) shall
not exceed $10,000 in the aggregate, and except as provided in this Section,
Section 7 entitled "Indemnity and Contribution", and the last paragraph of
Section 9 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Shares by them and any advertising expenses connected
with any offers they may make.

7. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in

15
<PAGE>

connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein; provided, however, that
-------- -------
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered at or prior to written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.

(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Underwriter,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.

(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to Section 7(a) or 7(b), such person (the "INDEMNIFIED PARTY") shall
promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such

16
<PAGE>

indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated, in the case of parties indemnified pursuant to Section 7(a),
and by the Company, in the case of parties indemnified pursuant to Section 7(b).
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed or indicated its good faith
willingness to reimburse the indemnified party in accordance with such request
and with such paragraph prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

(d) To the extent the indemnification provided for in Section 7(a) or 7(b)
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 7(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 7(d)(i) above but also the relative
fault of the Company on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received by
the Company and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to

17
<PAGE>

contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.

(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(f) The indemnity and contribution provisions contained in this Section 7
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.

8. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.

18
<PAGE>

9. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
number of Shares without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement (not, in any case,
including the condition in Section 5(a)(ii) if and only if any change or any
development involving a prospective change as set forth therein is attributable
solely to material and adverse conditions affecting the semiconductor industry
generally, or the conditions in the first two paragraphs of Section 5(d)), or if
for any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.

19
<PAGE>

10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

11. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.

12. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.

20
<PAGE>

Very truly yours,

LTX Corporation

By:
-----------------------------
Name:
Title:

Accepted as of the date hereof

Morgan Stanley & Co. Incorporated
Needham & Company, Inc.

Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.

By: Morgan Stanley & Co. Incorporated

By:
----------------------------
Name: Timothy Harned
Title: Vice President

21
<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
- ----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated [ ]
Needham & Company, Inc. [ ]

_______________
Total [ ]
===============
</TABLE>

22
<PAGE>

EXHIBIT A

[FORM OF LOCK-UP LETTER]

_____________, 2000

Morgan Stanley & Co. Incorporated
Needham & Company, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036

Dear Sirs and Mesdames:

The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING
AGREEMENT") with LTX Corporation, a Massachusetts corporation (the "COMPANY"),
providing for the public offering (the "PUBLIC OFFERING") by the several
Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of ___ shares (the
"SHARES") of the Common Stock, $.05 par value, of the Company (the "COMMON
STOCK").

To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap, hedging or arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares
to the Underwriters pursuant to the Underwriting Agreement or (b) transactions
relating to shares of Common Stock or other securities acquired in open market
transactions after the completion of the Public Offering. In addition, the
undersigned agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the Prospectus, make any demand
for or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable for
Common Stock.

Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.

Very truly yours,

_________________________
(Name)

_________________________
(Address)

<PAGE>
EXHIBIT 5

March 15, 2000

LTX Corporation
LTX Park
University Avenue
Westwood, Massachusetts 02090

Re: Registration Statement on Form S-3

Ladies and Gentlemen:

We have acted as counsel for LTX Corporation, a Massachusetts corporation
(the "Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of 2,875,000 shares (including up to 375,000
shares that may be offered solely in order to cover over-allotments, if any) of
Common Stock, $.05 par value per share, of the Company (the "Shares"), pursuant
to a Registration Statement on Form S-3 (the "Registration Statement"), to be
filed by the Company with the Securities and Exchange Commission today.

We have reviewed the corporate proceedings of the Company with respect to
the authorization of the issuance of the Shares. We have also examined and
relied upon originals or copies of such corporate records, agreements,
certificates, and other documents as we have deemed necessary or appropriate as
a basis for the opinion expressed below. In our examination, we have assumed the
genuineness of all signatures, the conformity to the originals of all documents
reviewed by us as copies, the authenticity and completeness of all original
documents reviewed by us in original or copy form, and the legal competence of
each individual executing any document.

We have also assumed that an Underwriting Agreement substantially in the
form of Exhibit 1.1 to the Registration Statement, by and among the Company and
the underwriters named therein (the "Underwriting Agreement"), will have been
duly executed and delivered pursuant to the authorizing resolutions of the Board
of Directors of the Company and that the Shares will be sold and transferred
only upon the payment therefor as provided in the Underwriting Agreement. We
have further assumed that the registration requirements of the Act and all
applicable requirements of state laws regulating the sale of securities will
have been duly satisfied.

This opinion is limited solely to the Massachusetts Business Corporation
Law, as applied by courts located in the Commonwealth of Massachusetts.

Based upon and subject to the foregoing, we are of the opinion that the
Shares, when delivered and paid for in accordance with the provisions of the
Underwriting Agreement, will be validly issued, fully paid, and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the prospectus included in the Registration Statement.

Very truly yours,

BINGHAM DANA LLP

<PAGE>

Exhibit 23.1

Consent of Independent Public Accountants

To the Board of Directors and Stockholders of LTX Corporation:

As independent public accountants, we hereby consent to the use of our report
dated August 24, 1999 included in or made part of this Registration Statement
and to all references to our Firm included in this Registration Statement.

Arthur Andersen LLP
Boston, Massachusetts
March 14, 2000

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 100,994
<SECURITIES> 0
<RECEIVABLES> 65,076
<ALLOWANCES> (1,582)
<INVENTORY> 57,877
<CURRENT-ASSETS> 230,716
<PP&E> 123,114
<DEPRECIATION> (89,397)
<TOTAL-ASSETS> 265,778
<CURRENT-LIABILITIES> 84,159
<BONDS> 21,042
0
0
<COMMON> 2,287
<OTHER-SE> 158,290
<TOTAL-LIABILITY-AND-EQUITY> 265,778
<SALES> 117,343
<TOTAL-REVENUES> 130,215
<CGS> 64,318
<TOTAL-COSTS> 70,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (175)
<INCOME-PRETAX> 18,940
<INCOME-TAX> 30
<INCOME-CONTINUING> 18,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,910
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.44

</TABLE>