<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COMPRESSION LABS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
COMPRESSION LABS, INC.
MONTEREY, CA 93640
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or
14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1995
TO THE STOCKHOLDERS OF
COMPRESSION LABS, INCORPORATED
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Compression Labs, Incorporated (the "Company"), a Delaware corporation, will be
held on Wednesday, May 10, 1995 at 1:00 p.m. local time at the Company's
offices at 2860 Junction Avenue, San Jose, California, for the following
purposes:
1. To elect one (1) director to hold office until the 1998 Annual
Meeting.
2. To approve amendments to each of the Company's 1980 Stock
Option Plan, 1984 Supplemental Stock Option Plan and 1984
Employee Stock Purchase Plan that will increase the aggregate
number of shares reserved under such plans by 700,000 shares
and will make certain other amendments to the 1984 Employee
Stock Purchase Plan.
3. To ratify the selection of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1995.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 17,
1995 as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF
RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING,
YOU MUST OBTAIN A LEGAL PROXY FROM YOUR BROKER, BANK OR OTHER NOMINEE.
By Order of the Board of Directors
John E. Tyson, President
San Jose, California
April 4, 1995
<PAGE> 3
COMPRESSION LABS, INCORPORATED
2860 Junction Avenue
San Jose, California 95134
________________
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Compression Labs, Incorporated, a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held on May 10, 1995 at 1:00 p.m.
local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth therein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Company's offices at
2860 Junction Avenue, San Jose, California. The Company intends to mail this
proxy statement and accompanying proxy card on or about April 4, 1995 to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation material will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. In addition, the Company may
reimburse persons representing beneficial owners of shares for their expenses
in forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by one or more of
telephone, telegram or personal solicitation by directors, officers or other
regular employees of the Company or, at the Company's request, D.F. King & Co.,
Inc. No additional compensation will be paid to directors, officers or other
regular employees for any such services. D.F. King & Co., Inc. has been
retained to assist in soliciting proxies in favor of the proposals set forth
herein and will receive a fee estimated to be approximately $6,500 for its
services plus reasonable expenses incurred.
VOTING
Only holders of record of Common Stock at the close of business on
March 17, 1995 will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on March 17, 1995, the Company had issued and
outstanding 14,672,430 shares of Common Stock. Each holder of record on such
date will be entitled to one vote for each share of Common Stock held.
The required quorum for the meeting, which must be represented in
person or by proxy, is a majority of the outstanding shares of Common Stock on
the record date. All votes will be tabulated by the inspectors of election
appointed for the meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes. Abstentions will be counted
towards the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose of determining whether a
matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company at the Company's principal executive office, 2860
Junction Avenue, San Jose, California 95134, a written notice of revocation or
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person. Attendance at the meeting will not, by itself, revoke a
proxy.
<PAGE> 4
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the
Board of Directors is divided into three classes, each class consisting, as
nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Each director serves for a term ending on the
date of the third annual meeting of stockholders following the annual meeting
at which the director is elected, or until his earlier death, resignation or
removal. In the event of a vacancy on the Board of Directors, unless the Board
of Directors otherwise determines, the Restated Certificate of Incorporation
permits the remaining members of the Board of Directors or the holders of a
majority of the outstanding shares of the Company entitled to vote on the
election of directors to fill such vacancy, and the director so chosen shall
hold office for the remainder of the full term of the class of directors in
which the vacancy occurred and until such director's successor is elected and
qualified, or until his earlier death, resignation or removal.
The Board of Directors is presently comprised of six members. Dr.
Edward E. David, Jr. and David A. Wegmann are the two directors in the class
whose term of office expires in 1995. Dr. David has advised the Company that he
does not wish to stand for re-election to the Board of Directors. As a result,
the Board has reduced the number of authorized directors to five, effective as
of the date of the Annual Meeting.
Mr. Wegmann is the sole nominee for election to the class of directors
to be elected at the Annual Meeting. He is currently a director of the Company
and was previously elected by the stockholders. If elected at the Annual
Meeting, such nominee would serve until the 1998 annual meeting and until his
successor is elected and qualified, or until his death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. It is the intention
of the persons named in the enclosed proxy, unless authorization to do so is
withheld, to vote the proxies received by them for the election of the nominee
named below. If prior to the Annual Meeting the nominee should become
unavailable for election, an event which is not now anticipated by the Board,
the proxies will be voted for the election of such substitute nominee as the
Board of Directors may propose. The nominee has agreed to serve if elected and
management has no reason to believe that such nominee will be unable to serve.
Set forth below is biographical information for the person nominated
and each person whose term of office as a director will continue after the
Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE CLASS
---- --- -------- -----
<S> <C> <C> <C>
Dr. Arthur G. Anderson(2) 68 1984 III
Robert J. Casale(1)(2) 56 1986 II
Robert B. Liepold(2) 69 1988 III
John E. Tyson 52 1981 II
David A. Wegmann(1) 48 1981 I
</TABLE>
__________________________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
2.
<PAGE> 5
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING
- -- CLASS I DIRECTORS
DAVID A. WEGMANN
Mr. Wegmann has served as a member of the Board of Directors of the
Company since May 1981. He has been a private investor since 1988. Prior to
that, he was a Vice President of Citicorp Venture Capital Ltd. Mr. Wegmann is
also a director of MMI Medical, Inc. and Plantronics, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THE NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1996 ANNUAL MEETING -- CLASS II
DIRECTORS
ROBERT J. CASALE
Mr. Casale has served as a member of the Board of Directors since
October 1986. He is currently Group President of the Brokerage Information
Services Group of Automatic Data Processing, Inc., a provider of computer and
data processing services. From 1986 to 1987 he served as Managing Director for
the Mergers and Acquisitions Division of Kidder Peabody & Co., Incorporated, a
securities brokerage and investment banking firm. Mr. Casale is also a director
of Provident Mutual Life Insurance Co., Tricord Systems, Inc., and Quantum
Corporation.
JOHN E. TYSON
Mr. Tyson has been President, Chief Executive Officer and Chairman of
the Board of Directors of the Company since April 1981.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING -- CLASS III
DIRECTORS
DR. ARTHUR G. ANDERSON
Dr. Anderson has served as a member of the Board of Directors of the
Company since August 1984. Dr. Anderson held various positions with
International Business Machines Corporation ("IBM") from 1951 to June 1984,
including IBM Director of Research, General Products Division President, Group
Executive and IBM Vice President. He retired from IBM in June 1984.
ROBERT B. LIEPOLD
Mr. Liepold has served as a member of the Board of Directors of the
Company since May 1988. Since 1984, he has served as President of Robert B.
Liepold, Inc., an advisor to senior corporate management for strategic
planning, marketing and organization. Mr. Liepold is also a director of
Interdigital Communications Corp.
3.
<PAGE> 6
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1994, the Board of Directors held
six meetings. The Board has standing Audit and Compensation Committees. The
Board has no standing nominating committee or any committee performing the
functions of such committee.
The Audit Committee recommends the engagement of the Company's
independent auditors, reviews and approves services performed by such auditors,
reviews and evaluates the Company's accounting system and its system of
internal controls and performs other related duties delegated to such committee
by the Board. The Audit Committee is composed of three non-employee directors:
Messrs. Wegmann and Casale and Dr. David. Dr. David has indicated that he does
not wish to stand for re-election to the Board of Directors at the Annual
Meeting. As a result, Dr. David will not be a member of the Audit Committee
after the Annual Meeting. The Audit Committee met three times during fiscal
year 1994.
The Compensation Committee makes recommendations concerning salaries
and incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. The Compensation Committee is composed of three non-employee
directors: Dr. Anderson and Messrs. Casale and Liepold. The Compensation
Committee met six times during fiscal year 1994.
During the year ended December 31, 1994, each director attended at
least 75% of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
4.
<PAGE> 7
MANAGEMENT
Set forth below is information regarding executive officers who are not also
directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William A. Berry 56 Senior Vice President, Finance and Administration, Chief Financial Officer, Secretary and
Treasurer
Dr. Wen H. Chen 56 Senior Vice President, Research and Chief Scientist
Wayne R. Lasson 48 Senior Vice President and General Manager, Videoconferencing Products
T. Gary Trimm 47 Senior Vice President and President, Broadcast Products
John J. Walsh 50 Senior Vice President, Corporate Planning and Strategy
Ted S. Augustine 54 Vice President, Worldwide Sales, Videoconferencing Products
Michael A. Hess 47 Vice President, Broadcast Products
James D. Lakin 51 Vice President, Sales and Marketing, Broadcast Products
Bonnie L. Nunke 47 Vice President, Human Resources
Anthony Pilarinos 44 Vice President, Engineering, Videoconferencing Products
Steven E. Richardson 43 Vice President, Product Marketing, Videoconferencing Products
Paul P. Romeo 46 Vice President, Operations, Videoconferencing Products
Robert A. Silver 40 Vice President, Marketing, Videoconferencing Products
</TABLE>
Mr. Berry has been Senior Vice President, Finance and Administration,
Chief Financial Officer, Secretary and Treasurer of the Company since April
1992. Prior to joining the Company, he was President of Optical Shields, Inc.
from September 1989 to January 1992. Mr. Berry is a director of FAFCO, Inc.
Dr. Chen has been Senior Vice President, Research and Chief Scientist
of the Company since September 1989.
Mr. Lasson has been Senior Vice President and General Manager,
Videoconferencing Products of the Company since March 1992. Prior to joining
the Company, from January 1976 to March 1992, Mr. Lasson held various positions
at Northern Telecom Ltd., most recently as Vice President of Global Operations.
Mr. Trimm has been Senior Vice President and President, Broadcast
Products since February 1995. From March 1994 to February 1995, he was
President of the North American Division of Scientific-Atlanta, Inc. ("S-A"),
which supplies advanced analog and digital video systems to the cable and
telephone industry. From January 1990 to March 1994, he held the position of
President of the Subscriber Systems Division at S-A, where he had general
management responsibility for S-A's analog and digital settop business. From
April 1988 to March 1990, Mr. Trimm held other senior management positions at
S-A, including President of the Spectral Dynamics Division.
5.
<PAGE> 8
Mr. Walsh has been Senior Vice President, Corporate Planning and
Strategy since January 1995. From September 1991 to January 1995, he was both
Senior Vice President, Corporate Planning and Strategy, and Senior Vice
President and General Manager, Multimedia and Personal Video Products. He was
Executive Vice President, Sales and Marketing from January 1987 to September
1991.
Mr. Augustine has been Vice President, Worldwide Sales,
Videoconferencing Products of the Company since December 1993. From January
1987 to December 1993 he was Vice President, North American Sales,
Videoconferencing Products.
Mr. Hess has been Vice President, Broadcast Products since March 1995.
From November 1994 to March 1995, he held the position of Acting General
Manager, Broadcast Products. He was the Executive Director, Finance, from
October 1992 to November 1994. Prior to joining the Company, from 1988 to
1992, Mr. Hess was Vice President, International Operations of Raynet
International Corporation, a developer and manufacturer of fiber optics
telecommunications systems.
Mr. Lakin has been Vice President, Sales and Marketing, Broadcast
Products of the Company since September 1991. From March 1991 to September
1991, he was the Company's Eastern Region Sales Director for Business
Television. Prior to joining the Company, Mr. Lakin was President and Chief
Executive Officer of Videoconferencing Systems, Inc. from March 1989 to March
1991.
Ms. Nunke has been Vice President, Human Resources of the Company
since December 1989.
Mr. Pilarinos has been Vice President, Engineering, Videoconferencing
Products of the Company since August 1993. Prior to joining the Company, from
1974 to 1993, he held various positions in the Engineering, Marketing and
Manufacturing Departments at Hewlett-Packard Co., most recently as Research and
Development Manager, Workstation Graphics and Multimedia Technology Lab since
1989.
Mr. Richardson has been Vice President, Product Marketing,
Videoconferencing Products of the Company since June 1993. Mr. Richardson
joined the Company in December 1987, serving as Director, Technical Marketing
from December 1987 to February 1992 and as Executive Director, Technical
Marketing, Videoconferencing Products from February 1992 to June 1993.
Mr. Romeo has been Vice President, Operations, Videoconferencing
Products of the Company since September 1991. From January 1989 until September
1991, he was the Company's Executive Director of Manufacturing.
Mr. Silver has been Vice President, Marketing, Videoconferencing
Products, since April 1994. From March 1993 to February 1994, he was Director
of Sales and Channel Development, North, AT&T/EO, Inc., a designer and
manufacturer of wireless handheld personal communications systems and software.
From August 1992 to March 1993, Mr. Silver was General Manager, Special Markets
Division of Apple Computer, Inc. He held the position of Manager, U.S.
Reseller Channel Development at Apple Computer, Inc. from September 1989 to
August 1992.
6.
<PAGE> 9
PROPOSAL 2
APPROVAL OF AMENDMENTS TO
THE 1980 STOCK OPTION PLAN, THE
1984 SUPPLEMENTAL STOCK OPTION PLAN
AND THE 1984 EMPLOYEE STOCK PURCHASE PLAN
On March 6, 1995, the Company's Board of Directors adopted an
amendment, subject to stockholder approval, to increase the number of shares
reserved for issuance on a combined basis under the 1980 Stock Option Plan and
the 1984 Supplemental Stock Option Plan (the "Option Plans") and the 1984
Employee Stock Purchase Plan (the "Purchase Plan") (the Option Plans and the
Purchase Plan collectively, the "Plans") by 700,000 shares, from 6,700,000 to
7,400,000 shares and to replace the current fixed limit on the number of shares
of Common Stock available for purchase under the Purchase Plan of 25,000 shares
per calendar quarter with a limit to be set from time to time at the discretion
of the Board of Directors. At February 1, 1995, options (net of cancelled or
expired options) covering an aggregate of 6,032,132 shares of the Company's
Common Stock had been granted under the Option Plans, an aggregate of 525,013
shares of the Company's Common Stock had been purchased under the Purchase
Plan, and 142,855 shares (plus any shares that might in the future be returned
to the plans as a result of cancellations or expiration of options) remained
available for future grant or purchase under the Plans. A general description
of the Plans is set forth below.
Stockholders are requested in this Proposal 2 to approve the Plans, as
amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote will be required
to approve the Plans, as amended.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
THE OPTION PLANS
GENERAL
The Option Plans provide a means by which selected officers and
employees of and, in the case of the 1984 Supplemental Stock Option Plan (the
"Supplemental Plan"), consultants and directors to the Company and its
affiliates can be given an opportunity to purchase stock in the Company, thus
assisting the Company to retain the services of employees holding key
positions, to secure and retain the services of persons capable of filling such
positions and to provide incentives for such persons to exert maximum efforts
for the success of the Company. The stock options granted under the 1980 Stock
Option Plan (the "ISO Plan") are intended to be eligible for the tax treatment
accorded "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); options granted under the Supplemental
Plan are not so intended. A total of 6,700,000 shares of the Company's Common
Stock have previously been authorized for issuance under the Plans on a
combined basis.
During the year ended December 31, 1994, Messrs. Tyson, Chen, Lakin,
Pilarinos and Lasson, all current executive officers as a group, and all
employees as a group (excluding such executive officers) were granted options
exercisable for 40,000, 15,000, 7,500, 0, 15,000, 197,700 and 1,180,862 shares
(includes 671,727 shares in connection with option repricing offered to
non-officer employees), respectively, under the Option Plans at exercise prices
ranging from $6.50 to $13.75 per share. See "-Terms of Options-Option
Repricing."
ADMINISTRATION
The Option Plans are administered by the Board of Directors of the
Company. The Board has the power to construe and interpret the Option Plans
and, subject to the provisions of the Option Plans, to determine the persons to
whom and the dates on which options will be granted, the number of shares to be
subject to each option, the time or times during the term of each option within
which all or a portion of such option may be exercised, the
7.
<PAGE> 10
exercise price, the type of consideration and other terms of the option. The
Board of Directors has the power, which it has exercised, to delegate
administration of the Option Plans to a committee composed of not fewer than
three disinterested members of the Board. The Board may abolish any such
committee at any time and revest in the Board the administration of the Option
Plans. The Board of Directors has delegated its administrative functions over
the Options Plans to the Compensation Committee.
ELIGIBILITY
Incentive stock options may be granted under the ISO Plan only to
selected key employees (including officers) of the Company and its affiliates.
Options may be granted to directors of the Company under the ISO Plan only if
such directors are also key employees of the Company or any of its affiliates.
Nonstatutory stock options may be granted under the Supplemental Plan only to
key employees (including officers) of, directors of, or consultants to the
Company or its affiliates.
No option may be granted under the ISO Plan to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than ten
percent (10%) of the total combined voting power of the Company or any
affiliate of the Company, unless the option exercise price is at least one
hundred ten percent (110%) of the fair market value of the stock subject to the
option on the date of grant, and the term of the option does not exceed five
years from the date of grant. For options granted under the ISO Plan after
1986, the aggregate fair market value, determined at the time of grant, of the
shares of Common Stock with respect to which such options are exercisable for
the first time by an optionee during any calendar year (under all such plans of
the Company and its affiliates) may not exceed $100,000.
No director may be granted an option under either of the Option Plans
unless (i) the number of shares subject to the option, (ii) the number of
shares acquired by such director under the Option Plans and the Purchase Plan,
and (iii) the aggregate number of shares held by such director subject to
outstanding options granted under the Plans does not exceed 20% of the total
aggregate number of shares reserved for issuance under the Plans.
Each of the Option Plans imposes a per-employee, per-calendar year
option grant limitation equal to 400,000 shares of Common Stock. The purpose
of these limitations is to ensure that the Company generally will continue to
be able to deduct for tax purposes the compensation attributable to the
exercise of options granted under the Option Plans. As of February 1, 1995,
approximately 548 officers and employees were eligible to participate in the
Option Plans.
STOCK SUBJECT TO THE OPTION PLANS
If options granted under the Option Plans expire or otherwise
terminate without being exercised, the Common Stock not purchased pursuant to
such options again becomes available for issuance under the Plans.
TERMS OF OPTIONS
The following is a description of the permissible terms of options
under the Option Plans. Individual option grants may be more restrictive as to
any or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock
options under the ISO Plan may not be less than the fair market value of the
Common Stock subject to the option on the date of the option grant, and in some
cases (see "Eligibility" above), may not be less than 110% of such fair market
value. The exercise price of nonstatutory options under the Supplemental Plan
may not be less than 85% of the fair market value of the Common Stock subject
to the option on the date of the option grant. At March 17, 1995, the closing
price of the Company's Common Stock as reported on the Nasdaq National Market
was $9.3125 per share. The exercise price of options granted under the Option
Plans must be paid either: (i) in cash at the time the option is exercised;
(ii) by delivery of other Common Stock of the Company; (iii) pursuant to a
deferred payment arrangement; or (iv) in any other form of legal consideration
acceptable to the Board.
8.
<PAGE> 11
Option Repricing. In the event of a decline in the value of the
Company's Common Stock, the Board has the authority to offer employees the
opportunity to replace outstanding higher priced options, whether incentive or
nonstatutory, with new lower priced options. In November 1994, the Company
agreed to exchange outstanding options to purchase the Company's Common Stock
held by non-officer employees for an equal number of options with an exercise
price of $7.63, the then-current fair market value of the Company's Common
Stock. In return, participating employees who chose to exchange their options
agreed to vesting schedules for the new options which were delayed compared to
vesting schedules for their original options. Options covering a total of
671,727 shares were exchanged under this program.
Option Exercise. Options granted under the Option Plans may become
exercisable in cumulative increments ("vest") as determined by the Board.
Shares covered by currently outstanding options under the Option Plans
typically vest in eight equal semiannual installments during an optionee's
employment or service as a consultant. Shares covered by options granted in
the future under the Option Plans may be subject to different vesting terms.
The Board has the power to accelerate the time during which an option may be
exercised. In addition, options granted under the Option Plans may permit
exercise prior to vesting, but in such event the optionee will be required to
enter into an early exercise stock purchase agreement that allows the Company
to repurchase shares not yet vested at their exercise price should the optionee
leave the employ of the Company before vesting.
Term. The maximum term of options under the Option Plans is 10 years,
except that in certain cases (see "Eligibility") the maximum term is five
years. Options under the Option Plans terminate three months after the
optionee ceases to be employed by the Company or any affiliate of the Company,
unless (i) the termination of employment is due to such person's permanent and
total disability (as defined in the Code), in which case the option may, but
need not, provide that it may be exercised at any time within one year of such
termination; (ii) the optionee dies while employed by the Company or any
affiliate of the Company, or within three months after termination of such
employment, in which case the option may, but need not, provide that it may be
exercised (to the extent the option was exercisable at the time of the
optionee's death) within 18 months of the optionee's death by the person or
persons to whom the rights to such option pass by will or by the laws of
descent and distribution; or (iii) the option by its terms specifically
provides otherwise. Individual options by their terms may provide for exercise
within a longer period of time following termination of employment or the
consulting relationship. The option term may also be extended in the event
that exercise of the option within these periods is prohibited for specified
reasons.
ADJUSTMENT PROVISION
If there is any change in the stock subject to the Option Plans or
subject to any option granted under the Option Plans (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure, or otherwise), the
Option Plans and options outstanding thereunder will be appropriately adjusted
as to the class and the maximum number of shares subject to such plan and the
class, number of shares and price per share of stock subject to such
outstanding options.
EFFECTS OF CERTAIN CORPORATE EVENTS
The Option Plans provide that, in the event of a dissolution or
liquidation of the Company, specified type of merger or other corporate
reorganization, to the extent permitted by law, any surviving corporation will
be required to either assume options outstanding under the Option Plans or
substitute similar options for those outstanding under such plans. In addition,
under the ISO Plan, such outstanding options may continue in full force and
effect. In the event that any surviving corporation declines to assume or
continue options outstanding under the Option Plans, or to substitute similar
options, then the time during which such options may be exercised will be
accelerated and the options terminated if not exercised during such time. The
acceleration of an option in the event of an acquisition or similar corporate
event may be viewed as an antitakeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
9.
<PAGE> 12
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Option Plans without
stockholder approval or ratification at any time or from time to time. Unless
sooner terminated, the ISO Plan and the Supplemental Plan will terminate in
December 1999.
The Board may also amend the Option Plans at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company within 12 months before or after its adoption by
the Board if the amendment would: (i) increase the number of shares reserved
for issuance under the Option Plans; or (ii) materially modify the requirements
as to eligibility for participation in the Option Plans; or (iii) materially
increase the benefits accruing to participants under the Option Plans. The ISO
Plan expressly contemplates that the Board may adopt amendments in any respect
to provide optionees with the maximum benefits under the Code relating to
incentive stock options or to bring the ISO Plan into compliance with the Code.
The Board may submit any other amendments to the Option Plans for stockholder
approval, including, but not limited to, amendments intended to satisfy the
requirements of Section 162(m) of the Code relating to the exclusion of
performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the Option Plans, an option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution and,
during the lifetime of an optionee, may be exercised only by the optionee.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the ISO Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are transferred
to the optionee upon the exercise of the option, any gain or loss on a
disposition of such stock will be a long-term capital gain or loss. Generally,
if the optionee disposes of the stock before the expiration of either of these
holding periods (a "disqualifying disposition"), at the time of the disposition
the optionee will realize taxable ordinary income equal to the lesser of (i)
the excess of the stock's fair market value on the date of exercise over the
exercise price, or (ii) the optionee's actual gain, if any, on the purchase and
sale. The optionee's additional gain, or any loss, upon the disqualifying
disposition will be a capital gain or loss which will be long-term or
short-term depending on whether the stock was held for more than one year.
Long-term capital gains currently are generally subject to lower tax rates than
ordinary income. The maximum capital gains rate for federal income tax
purposes is currently 28% while the maximum ordinary income rate is effectively
39.6% at the present time. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, (the "1934
Act").
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition
occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under
the Supplemental Plan generally have the following federal income tax
consequences:
10.
<PAGE> 13
There are no tax consequences to the optionee or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code and
the satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long-
or short-term depending on whether the stock was held for more than one year.
Slightly different rules apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the 1934 Act.
Potential Limitation on Company Deductions. As part of the Omnibus
Budget Reconciliation Act of 1993, the U.S. Congress amended the Code to add
Section 162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Code Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that the option is granted by a compensation committee
comprised solely of "outside directors" and either: (i) the option plan
contains a per-employee limitation on the number of shares for which options
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the option is no less
than the fair market value of the stock on the date of grant; or (ii) the
option is granted (or exercisable) only upon the achievement (as certified in
writing by the compensation committee) of an objective performance goal
established by the compensation committee while the outcome is substantially
uncertain, and the option is approved by stockholders.
11.
<PAGE> 14
THE 1984 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Purchase Plan provides a means by which employees of the Company
and its affiliates can be given an opportunity to purchase Common Stock of the
Company through payroll deductions, thus assisting the Company to retain the
services of its employees, and providing incentives for such persons to exert
maximum efforts for the success of the Company. A total of 6,700,000 shares of
the Company's Common Stock have previously been authorized for issuance under
the Plans, on a combined basis. As of February 1, 1995, a total of 142,855
shares were available for future grant or purchase under the Plans (plus any
shares that might in the future be returned to the Plans as a result of
cancellation or expiration of options).
During the year ended December 31, 1994, Messrs. Tyson, Chen, Lakin,
Pilarinos and Lasson, all current executive officers as a group, and all
employees as a group (excluding such executive officers) purchased 240, 403,
692, 0, 0, 6,281 and 93,307 shares, respectively, under the Purchase Plan at
purchase prices ranging from $6.80 to $10.09 per share.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has
the final power to construe and interpret the Purchase Plan and the rights
granted under it. The Board has the power, subject to the provisions of the
Purchase Plan, to determine when and how rights to purchase Common Stock of the
Company will be granted, the provisions of each offering of such rights (which
need not be identical), and whether any parent or subsidiary of the Company
shall be eligible to participate in such plan. The Board has the power, which
it has exercised, to delegate administration of such plan to a committee of
Board members. The Board may abolish any such committee at any time and revest
in the Board the administration of the Purchase Plan. The Board has delegated
its administrative functions over the Purchase Plan to the Compensation
Committee.
GRANT OF RIGHTS; OFFERINGS
The Board has the power to grant rights to purchase stock of the
Company under the Purchase Plan to eligible employees (an "Offering") on a date
or dates selected by the Board (the "Offering Date(s)"). Each Offering will be
in the form and contain terms and conditions established by the Board, subject
to the required provisions of the Purchase Plan which are described in this
proxy statement. The provisions of separate Offerings need not be identical.
The Board has currently authorized continuous Offerings coinciding with the
Company's fiscal quarters. The Offering Date for each such Offering is the
first day of the applicable fiscal quarter. Subject to stockholder approval of
this Proposal 2, the Board of Directors has replaced the fixed limit on the
aggregate number of shares of Common Stock available for purchase under the
Purchase Plan of 25,000 shares per calendar quarter with a limit to be set from
time to time at the discretion of the Board of Directors. If the quarterly
limit is exceeded, the Board will make a pro rata allocation of shares
available in a uniform and equitable manner.
ELIGIBILITY
Any person who is customarily employed by the Company or its
affiliates (subject to certain minimum requirements) on an Offering Date is
eligible to participate in the Purchase Plan. Mr. Tyson, President, Chief
Executive Officer and Chairman of the Board of Directors of the Company, has
been expressly declared eligible to participate by required action of the
Board.
No employee is eligible for the Purchase Plan if, immediately after
those rights are granted, the employee would own or be deemed to own stock of
the Company possessing five percent (5%) or more of the total combined voting
power or value of stock of the Company or any affiliate of the Company. No
rights may be granted that would permit an employee to purchase stock with a
fair market value in excess of $25,000 (determined at the time the rights are
granted) under all employee stock purchase plans of the Company in any calendar
year. As of February 1, 1995, approximately 548 employees of the Company were
eligible to participate in the Purchase Plan.
12.
<PAGE> 15
TERMS OF RIGHTS
In order to participate in the Purchase Plan, an eligible employee
must authorize payroll deductions of up to a maximum of fifteen percent (15%)
of a participant's total compensation. In connection with each Offering, the
Board of Directors specifies the maximum number of shares any employee may be
granted the right to purchase and the maximum aggregate number of shares which
may be purchased by all participants pursuant to the Offering, within the
limits prescribed by the Purchase Plan. The purchase price of stock acquired
pursuant to rights granted under the Purchase Plan will not be less than
eighty-five percent (85%) of the lower of: (i) the fair market value of a share
of Common Stock on the date of commencement of the Offering, or (ii) the fair
market value of a share of Common Stock on the last day of the Offering period.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Purchase Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Purchase Plan will be appropriately adjusted as to
the class and the maximum number of shares subject to the Purchase Plan and the
class, number of shares and price per share of stock subject to outstanding
rights.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may suspend or terminate the Purchase Plan
without stockholder approval or ratification at any time. Unless sooner
terminated, the Purchase Plan will terminate in December 1999.
The Board may also amend the Purchase Plan at any time. However, no
amendment will be effective unless approved by the stockholders of the Company
within 12 months of its adoption by the Board, if the amendment would: (i)
increase the number of shares of Common Stock reserved for issuance under the
Purchase Plan; (ii) modify the requirements relating to eligibility for
participation in the Purchase Plan; or (iii) modify any other provision of the
Purchase Plan in any other way, if such modification requires stockholder
approval in order for the Purchase Plan to obtain employee stock purchase
treatment under Section 423 of the Code or to comply with the requirements of
Rule 16b-3 under the 1934 Act.
FEDERAL INCOME TAX CONSEQUENCES OF RIGHTS UNDER THE PURCHASE PLAN
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of
shares as if such amounts were actually received. Other than this, no income
will be taxable to a participant until disposition of the shares acquired, and
the method of taxation will depend upon the holding period of the purchase
shares.
If the stock is disposed of at least two years after the beginning of
the offering period and at least one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the
excess of the fair market value of the stock as of the beginning of the
offering period over the exercise price (determined as of the beginning of the
offering period) will be treated as ordinary income. Any further gain or any
loss will be taxed as a long-term capital gain or loss. Capital gains
currently are generally subject to lower tax rates than ordinary income. The
maximum capital gains rate for federal income tax purposes is 28% while the
maximum ordinary rate is effectively 39.6% at the present time.
If the stock is sold or disposed of before the expiration of either of
the holding periods described above, then the excess of the fair market value
of the stock on the exercise date over the exercise price will be treated as
ordinary income at the time of such disposition, and the Company may, in the
future, be required to withhold income taxes relating to such ordinary income
from other payments made to the participant. The balance of any
13.
<PAGE> 16
gain will be treated as capital gain. Even if the stock is later disposed of
for less than its fair market value on the exercise date, the same amount of
ordinary income is attributed to the participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the stock on such exercise date. Any capital gain or loss will be
long- or short-term depending on whether the stock has been held for more than
one year.
There are no federal income tax consequences to the Company by reason
of the grant or exercise of rights under the Purchase Plan. The Company is
entitled to a deduction to the extent amounts are taxed as ordinary income to a
participant by reason of a disposition before the expiration of the holding
periods described above (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation).
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31, 1995, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. KPMG Peat Marwick
LLP and its predecessor have audited the Company's financial statements since
1981. Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick LLP as
the Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
LLP to the stockholders for ratification as a matter of good corporate
practice. In the event the stockholders fail to ratify the selection, the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
stockholders. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required to ratify the selection of KPMG Peat Marwick LLP.
Abstentions will be counted toward total shares voted; broker non-votes will
not be counted toward the total.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
14.
<PAGE> 17
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
ownership of the Company's class of voting securities as of February 1, 1995 by
(i) all those known by the Company to be beneficial owners of more than 5% of
its voting securities, (ii) all directors and nominees, (iii) each of the
persons identified in the compensation table below under the heading
"Compensation of Executive Officers" and (iv) all officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
DIRECTORS, NOMINEES, BENEFICIAL APPROXIMATE
OFFICERS, AND 5% OWNERSHIP OF PERCENT
STOCKHOLDERS COMMON STOCK(1) OF CLASS(1)
-------------------- --------------- -----------
<S> <C> <C>
Entities Affiliated With 1,589,700 10.8%
Loomis, Sayles & Company, L.P.(2)
One Financial Center
Boston, MA 02111
Thomson Consumer Electronics S.A.(3) 883,599 6.0%
9, place de Vosges, La Defense 5
Courbevoie, Cedex 66
92050 Paris La Defense, France
Dr. Arthur G. Anderson(4) 98,700 *
Robert J. Casale(4) 80,500 *
Dr. Wen H. Chen(4) 228,437 1.5%
Dr. Edward E. David, Jr.(4) 37,750 *
James D. Lakin(4) 61,063 *
Wayne R. Lasson(4) 96,875 *
Robert B. Liepold(4) 74,000 *
Anthony Pilarinos(4) 22,501 *
John E. Tyson(4) 288,583 1.9%
David A. Wegmann(4) 81,000 *
All officers and directors
as a group (17 persons)(4) 1,734,905 10.6%
</TABLE>
__________________
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise
indicated in the footnotes to this table and subject to community
property laws where applicable, the Company believes that each of the
stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned. Applicable
percentages are based on 14,666,099 shares of Common Stock outstanding on
February 1, 1995, adjusted as required by rules promulgated by the SEC.
(2) Loomis, Sayles & Company, L.P. ("Loomis Sayles") is an investment advisor
registered under the Investment Advisers Act of 1940 and may be deemed to
be the beneficial owner of the shares. Loomis Sayles shares investment
authority of such shares and has sole voting authority with respect to
900,900 of such shares. Based on an amended Schedule 13G filing with the
SEC containing share ownership information as of December 31, 1994.
(3) Based on an amended Schedule 13D filing with the SEC containing share
ownership information as of March 2, 1994.
(4) Includes shares that certain executive officers and directors of the
Company have the right to acquire within 60 days after February 1, 1995
pursuant to exercise of outstanding options as follows: Dr. Arthur G.
Anderson, 72,750 shares; Robert J. Casale, 79,000 shares; Dr. Wen H.
Chen, 224,876 shares; Dr. Edward E. David, Jr., 37,750 shares; James D.
Lakin, 61,063 shares; Wayne R. Lasson, 96,875 shares; Robert B. Liepold,
74,000 shares; Anthony Pilarinos, 22,501 shares; John E. Tyson, 251,500
shares; David A. Wegmann, 79,000 shares; and all executive officers and
directors as a group, 1,645,417 shares.
15.
<PAGE> 18
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and certain written representations that
no other reports were required, during the fiscal year ended December 31, 1994,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, covering one transaction, was filed late by each of Messrs. Liepold and
Richardson.
16.
<PAGE> 19
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company pays non-management members of the Board of Directors fees
consisting of $5,000 annually plus $750 for each Board of Directors meeting and
for each Audit and Compensation Committee meeting attended. Directors are also
eligible for reimbursement in accordance with Company policy for their expenses
incurred in connection with attending meetings of the Board of Directors and
the Audit and Compensation Committees.
Each Non-Employee Director (a person that is elected as a director of
the Company or an affiliate of the Company and that is not otherwise employed
by the Company or an affiliate of the Company) of the Company also receives
stock option grants under the 1992 Non-Employee Directors' Stock Option Plan
(the "Directors' Plan"). Only Non-Employee Directors of the Company or an
affiliate of the Company (as defined in the Code) are eligible to receive
options under the Directors' Plan. Options granted under the Directors' Plan
are intended by the Company not to qualify as incentive stock options under the
Code.
Options granted under the Directors' Plan are non-discretionary.
Pursuant to the terms of the Directors' Plan, a Non-Employee Director will
automatically be granted an option to purchase 6,000 shares of Common Stock
(subject to adjustment as provided in the Directors' Plan) upon the date of his
or her election to the Board, and each person that was serving as a
Non-Employee Director on the date the Directors' Plan was adopted by the
stockholders was granted an option to purchase 6,000 shares of Common Stock in
May 1992. Each Non-Employee Director thereafter will be granted automatically
an option to purchase 6,000 shares of Common Stock (subject to adjustment as
provided in the Directors' Plan) upon the date of the Annual Meeting of
Stockholders each year, commencing in 1993, provided that such person has
served as a Non-Employee Director for at least the preceding 180 days.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. Options granted under the
Directors' Plan will vest with respect to each optionee in six equal semiannual
installments commencing on the date that is six months after the date of grant
of the option, provided that the optionee has, during the six-month period
prior to such vesting date, continuously served as a Non-Employee Director or
employee of or consultant to the Company or any affiliate of the Company. The
exercise price of options under the Directors' Plan must equal the fair market
value of the Common Stock on the date of grant. Options granted under the
Directors' Plan are generally non-transferable. Unless otherwise terminated by
the Board of Directors, the Directors' Plan automatically terminates in March
2002. Pursuant to the Directors' Plan, options to purchase 6,000 shares of the
Company's Common Stock at an exercise price of $12.625 per share were granted
in May 1994 to each of Messrs. Anderson, Casale, David, Liepold and Wegmann. As
of February 1, 1995, no options to purchase shares of the Company's Common
Stock had been exercised under the Directors' Plan.
17.
<PAGE> 20
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ending December 31,
1994, 1993 and 1992, compensation paid by the Company, including salary,
bonuses, stock options, and certain other compensation, to its Chief Executive
Officer and each of its four other most highly compensated executive officers
at December 31, 1994 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS(1) COMPENSATION(2) OPTIONS(3) COMPENSATION(4)
POSITION YEAR ($) ($) ($) (#) ($)
- ----------------------- ---- ---------- -------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John E. Tyson 1994 244,500 -- -- 40,000 95,442
President, Chief 1993 206,813 -- -- 35,000 --
Executive Officer and 1992 209,808 -- -- 15,000 --
Chairman of the Board
Dr. Wen H. Chen 1994 198,775 -- -- 15,000 11,387
Senior Vice President, 1993 182,891 -- -- 27,500 15,815
Research and Chief Scientist 1992 188,880 -- -- 7,500 --
Wayne R. Lasson 1994 179,931 -- -- 15,000 --
Senior Vice President, 1993 159,358 -- -- 67,500 --
General Manager, 1992 135,569 -- 93,244 125,000 --
Videoconferencing Products
James D. Lakin 1994 147,194 47,097 -- 7,500 --
Vice President, 1993 134,781 -- -- 10,000 --
Sales and Marketing, 1992 98,727 37,500 -- 5,000 --
Broadcast Products
Anthony Pilarinos 1994 167,385 15,000 79,550 -- --
Vice President, Engineering, 1993 36,462 -- 152,509 60,000 --
Videoconferencing Products(5)
</TABLE>
__________________
(1) Amounts shown for Mr. Lakin consist of bonus of $25,000 and
commissions of $22,097 in 1994 and bonus of $10,000 and commissions of
$27,500 in 1992.
(2) As permitted by rules promulgated by the SEC, no amounts are shown
with respect to certain prerequisites where such amounts do not exceed
the lesser of 10% of bonus plus base salary or $50,000. Amounts shown
for 1994 and 1993 include payments to Mr. Pilarinos in connection with
his relocation of $43,401 and $95,299, respectively, and related tax
gross-up payments of $30,149 and $54,210, respectively. Amount shown
for 1992 includes payments to Mr. Lasson in connection with his
relocation of $60,035 and related tax gross-up payments of $26,209.
(3) The Company has no stock appreciation rights (SARs).
(4) Amounts shown for 1994 consist of payments to Messrs. Tyson and Chen
of $95,442 and $11,387, respectively in lieu of accrued and unused
paid time off. Amount shown for 1993 consists of a payment to Mr.
Chen of $15,815 in lieu of accrued and unused paid time off.
(5) Mr. Pilarinos joined the Company in August 1993.
18.
<PAGE> 21
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the fiscal year ended December 31, 1994
certain information regarding options granted to, exercised by and held at year
end by the Named Executive Officers:
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(3)
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES PRICE EXPIRATION
NAME (#)(1) IN 1994(2) ($/SH) DATE 5% ($) 10% ($)
- ---- ---------- ---------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John E. Tyson 40,000 2.9% 12.625 05/05/04 317,592 804,840
Dr. Wen H. Chen 15,000 1.1% 12.625 05/05/04 119,097 301,815
Wayne R. Lasson 15,000 1.1% 12.625 05/05/04 119,097 301,815
James D. Lakin 7,500 0.5% 12.625 05/05/04 59,548 150,907
Anthony Pilarinos -- -- -- -- -- --
</TABLE>
__________________
(1) Options generally vest in equal installments every six months over a
four-year period beginning on the date six months after the date of
grant. The options will fully vest upon a change of control, as
defined in the Company's option plans, unless the acquiring company
assumes the options or substitutes similar options. The Board of
Directors may reprice the options under the terms of the Company's
option plans.
(2) Based on options for 1,378,562 shares granted in 1994.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (10 years). It is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate, compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for
the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term.
19.
<PAGE> 22
AGGREGATED OPTION EXERCISES IN 1994 AND DECEMBER 31, 1994 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
SHARES 1994(#) 1994($)(2)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
John E. Tyson - 0 - $ - 0 - 249,000/65,000 360,750/0
Dr. Wen H. Chen - 0 - - 0 - 223,626/34,374 196,000/0
Wayne R. Lasson 8,437 36,912 96,875/102,188 0/0
James D. Lakin - 0 - - 0 - 53,563/28,937 0/0
Anthony Pilarinos - 0 - - 0 - 15,000/45,000 0/0
</TABLE>
__________________________
(1) Value realized is based on the fair market value of the Company's
Common Stock on the date of exercise minus the exercise price and does
not necessarily indicate that the optionee sold such stock.
(2) Based on the closing price on December 30, 1994 of the Common Stock on
the Nasdaq National Market of $8.00 per share.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee")
consists of Dr. Anderson and Messrs. Liepold and Casale. The Committee is
responsible for setting and administering the Company's policies governing
employee compensation. The Committee evaluates the performance of management
and determines compensation policies and levels. The full Board of Directors,
with the exception of Mr. Tyson, reviews the Committee's recommendations
regarding the compensation of executive officers.
The Company's executive compensation programs are designed to attract
and retain executives capable of leading the Company to meet its business
objectives and to motivate them to enhance long-term stockholder value. Annual
compensation for the Company's executive officers consists of three elements:
cash salary, cash bonus and equity incentives. In addition, executive officers
responsible for sales and marketing functions are eligible to participate in
sales incentive programs.
Compensation Philosophy
The Company's compensation program is based on the following
principles:
__________________________________
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended (the "1933 Act") or
the 1934 Act whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
20.
<PAGE> 23
o Compensation programs should be competitive to help attract
and retain the best people in the industry.
o Compensation programs should reflect and promote the Company's
values and reward individuals for outstanding contributions to
the Company's success.
o Compensation programs should be understandable to employees
and should be administered with fairness.
o Compensation programs should provide a variable element that
reflects both the Company's and the individual's performance.
The Company has amended its option plans so that compensation
attributable to stock options will qualify as performance-based compensation
under Treasury Regulations issued under Internal Revenue Code Section 162(m).
Therefore, compensation expense associated with such options will not be
subject to the limitation under Section 162(m) on the deductibility of certain
compensation that might otherwise be deemed "excess," and therefore
non-deductible.
Cash Compensation
Base Salary. The Committee generally reviews compensation levels for
all employees, including executive officers, and establishes new levels in the
first half of each year. The Compensation Committee conducted its annual
review of executive officers' salaries at its meeting in May 1994. The Company
is currently in transition from a fixed cash compensation plan to a fixed plus
variable cash compensation plan, with average base salary targeted at
approximately the 60th percentile for U.S.-based high technology companies of
comparable size.
Base salaries for executive officers are determined with reference to
a benchmark salary range established for each executive position. These ranges
are determined annually by evaluating the duties and responsibilities of each
position and benchmarking each position description against the job categories
published in a salary survey of U.S.-based high technology companies conducted
by a nationally recognized compensation consultant. The companies included in
this salary survey vary somewhat from year to year, and thus do not correspond
exactly with companies included in either of the indices shown in the
performance measurement comparison.
In determining whether to adjust the base salary of an executive, the
Committee takes into account individual performance, performance of the
organization directed by that executive and the position of the executive's
compensation in relation to the established salary range determined as
described above. The Company does not attempt to assign a weight to any
particular factor or factors.
Variable Compensation. Variable compensation consists of sales
incentive awards that are available to sales and marketing executives, and a
cash bonus plan in which all employees at director-level and above participate
if they are not eligible for sales incentive awards.
The Company's sales incentive plans are normally tied to actual sales
performance compared to sales targets. In general, sales targets are set at
levels greater than or equal to the Company's internal revenue targets, and the
variable cash payoff from these plans is designed to be competitive with the
variable cash compensation for sales executives of other high technology
companies of similar size, as determined using published national survey data
such as that described above. Two of the Company's executive officers received
compensation under sales incentive plans in 1994.
The bonus plan for 1994 was based on achieving specified percentages
of the profits forecasted for the Videoconferencing Products Division, the
Broadcast Products Division, and for the Company as a whole in the Company's
internal business plan, adopted at the beginning of the year. Profits were
defined as operating income for each division and pre-tax income for the
company as a whole. The bonus plan specified that no accrual of bonus was to
occur until the bonus-generating organization (either of the two divisions or
the Company as a whole) achieved a minimum specified percentage of its planned
profit. Had the minimum threshold of profitability been reached for any
bonus-generating organization, thereafter, bonus would have accrued at a rate
such that the target average bonus level would be achieved when the bonus-
generating organization achieved its planned profitability.
21.
<PAGE> 24
Target average bonus levels were set in light of the variable pay component
determined from the above mentioned salary surveys.
Half of any bonus amounts accrued would have been guaranteed to each
bonus plan participant pro rata as a percentage of base compensation, with the
other half awarded based upon individual achievement of objectives. For 1994,
no bonus amounts were accrued or paid because the minimum thresholds of planned
performance were not achieved.
Equity Incentives
The Company uses its stock option program and employee stock purchase
plan to further align the interests of stockholders and employees by creating
common incentives related to the possession by employees of a substantial
economic interest in the long-term appreciation of the Company's Common Stock.
In general, all employees are eligible to participate in the Company's stock
option program and in the stock purchase plan. New options are generally
granted not more frequently than annually to existing members of management to
provide a continuing financial incentive. The size of an option grant is
related to (i) the officer's level, e.g., a Senior Vice President would
generally be eligible for a larger grant than a Vice President, who would be
eligible for a larger grant than a director-level employee, (ii) the number of
shares already owned by such executive, (iii) the number of shares of
previously granted options which are unvested, and (iv) such employee's overall
contribution level. The relative weight given to each of the foregoing factors
may vary significantly depending on individual circumstances. Significant
grants are also made to new officers upon joining the Company. The Company
uses vesting periods (generally four years) to encourage employees to continue
in the employ of the Company.
Section 162(m) of the Internal Revenue Code (the "Code") limits the
Company to a deduction for federal income tax purposes of no more than $1.0
million of compensation paid to certain Named Executive Officers in a taxable
year. Compensation above $1.0 million may be deducted if it is
"performance-based compensation" within the meaning of the Code. The
Compensation Committee believes that at the present time it is quite unlikely
that the compensation paid to any Named Executive Officer in a taxable year
which is subject to the deduction limit will exceed $1.0 million. However, the
Compensation Committee has determined that stock awards granted under the
Company's Option Plans with an exercise price at least equal to the fair market
value of the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation."
Compensation of Chief Executive Officer
The Committee uses the same philosophy and procedures described above
with respect to the other executive officers in setting the cash compensation
and equity incentives for the Chief Executive Officer.
The Committee reviewed Mr. Tyson's 1994 performance based upon the
Company's financial performance in terms of revenue growth, earnings per share,
and return on equity, as well as the complexity of managing a high technology,
multinational company doing business in markets undergoing rapid change. The
Committee also based its review on Mr. Tyson's contribution with respect to
improving the Company's gross margins and implementing appropriate cost
controls as well as progress in strengthening the Company's management team,
continuing the pursuit of quality and reliability as exemplified by the
Company's design and manufacturing process receiving ISO 9001 certification,
the establishment of key strategic alliances in the emerging Broadcast market,
and the strengthening of the Company's international sales operations. The
Committee noted that Mr. Tyson's 1993 base salary was well below the targeted
60th percentile for Chief Executive Officers of U.S.-based high technology
companies of comparable size. Based on these considerations, the Committee
decided that Mr. Tyson merited an increase in base salary. The increase
awarded still leaves Mr. Tyson below the Company's targeted base salary levels
described above.
Mr. Tyson was a participant in the Company's 1994 Bonus Plan as
described above. No bonus amounts were accrued for 1994 as a result of failure
to reach the minimum specified level of profitability required under the plan.
As a result, no bonus was paid to Mr. Tyson for 1994.
22.
<PAGE> 25
Mr. Tyson received a grant of an option to purchase 40,000 shares of
Common Stock in 1994 based on his position as Chief Executive Officer, the
progress made by the Company in the areas cited above, the other equity
incentives held by him and the desire to provide him with a continued economic
interest in the long term appreciation of the Company's Common Stock, in
descending order of importance.
Dr. Arthur G. Anderson, Chairman
Robert J. Casale
Robert B. Liepold
23.
<PAGE> 26
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows total stockholder return of the Standard &
Poors 500, the H&Q Technology Index and for the Company:
COMPARISON OF FIVE YEAR TOTAL CUMULATIVE RETURN ON INVESTMENT(2)
<TABLE>
<CAPTION>
CLI H&Q S&P
- -------------------------------------------------------------------
<S> <C> <C> <C>
12/31/89 100.00 100.00 100.00
12/31/90 118.42 91.42 96.90
12/31/91 261.84 135.14 126.42
12/31/92 131.58 155.45 136.05
12/31/93 128.95 169.64 149.76
12/31/94 84.21 196.90 151.74
</TABLE>
__________________________________
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing of
the Company under the 1933 Act or the 1934 Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
(2) The total return on investment (change in year end stock price plus
reinvested dividends) for the Company, the S&P 500 Stock Index and the H&Q
Technology Index, based on December 31, 1989 = 100.
24.
<PAGE> 27
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1996 Annual Meeting of Stockholders must be
received by the Company no later than December 5, 1995 in order to be included
in the proxy statement and proxy relating to that meeting.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain
officers and directors which provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements
he may be required to pay in actions or proceedings which he is or may be made
a party be reason of his position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's Bylaws.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
However, if any other matters are properly presented to the meeting in
accordance with the Company's Bylaws, it is the intention of the persons named
in the accompanying proxy to vote in respect thereof in accordance with their
best judgment.
The Board of Directors hopes that stockholders will attend the
meeting. Whether or not you plan to attend, you are urged to complete, sign and
return the enclosed proxy in the accompanying envelope. A prompt response will
greatly facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
John E. Tyson
President, Chief Executive Officer
and Chairman of the Board
April 4, 1995
25.
<PAGE> 28
PROXY
COMPRESSION LABS, INCORPORATED
PROXY SOLICITED BY BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1995
John E. Tyson and William A. Berry, or each of them, each with the power
of substitution and revocation, are hereby authorized to represent the
undersigned as proxies, with all powers that the undersigned would possess if
personally present, to vote the Compression Labs, Incorporated Common Stock of
the undersigned at the Annual Meeting of Stockholders of Compression Labs,
Incorporated to be held at the Company's offices at 2860 Junction Avenue, San
Jose, California 95134, on Wednesday, May 10, 1995 at 1:00 p.m. and any
postponements or adjournments of that meeting, as set forth on the reverse side,
and in their discretion upon any other business that may properly come before
the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
(See reverse side.)
- -----------------------------------------------------------------------------
/X/ Please mark votes as in this example.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, WILL
BE VOTED FOR THE ELECTION OF THE NOMINEE NAMED AND FOR EACH OF THE OTHER
PROPOSALS SPECIFIED HEREIN.
The Board of Directors recommends a vote FOR the nominee for director
listed below.
1. To elect one (1) director:
Class I (Term expiring 1998): David A. Wegmann
FOR WITHHELD
/ / / /
The Board of Directors recommends a vote FOR proposals 2 and 3 listed below.
2. To approve amendments to the Company's 1980 Stock Option Plan, 1984
Supplemental Stock Option Plan, and 1984 Employee Stock Purchase Plan,
as more specifically described in the Proxy Statement.
FOR WITHHELD ABSTAIN
/ / / / / /
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1995.
FOR WITHHELD ABSTAIN
/ / / / / /
4. To transact any other business as may properly come before the meeting
or any adjournment thereof unless authority is withheld.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
Please sign exactly as your name appears hereon.
If all shares are issued in the names of two or more persons, each of them
should sign the proxy. If the proxy is executed by a corporation, it should
be signed in the corporate name by an authorized officer. When signing as
attorney, administrator, trustee or guardian, or in any other representative
capacity, give full title as such.
Signature: ____________________________________ Date ______________________
Signature: ____________________________________ Date ______________________
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED POSTPAID ENVELOPE.
