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Filed pursuant to Rule 424(b)(2)
Registration Statement No. 33-59339
PROSPECTUS
800,000 SHARES
COMPRESSION LABS, INCORPORATED
COMMON STOCK
___________________
Compression Labs, Incorporated ("CLI" or the "Company") hereby offers
800,000 shares of Common Stock, par value $.001 per share, on terms and at a
price as set forth herein. See "Plan of Distribution."
The Common Stock of the Company is traded on the Nasdaq National Market
under the Symbol "CLIX." Any Common Stock offered will be listed, subject to
notice of issuance, on such exchange. On June 16, 1995 the last reported sale
price of the Common Stock was $8.875 per share.
____________________
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 19, 1995.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's following Regional Offices: Chicago Regional Office, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661; and New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Company's Common Stock is quoted for trading on
the Nasdaq National Market and reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the National
Association of Securities Dealers, 1735 K. Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Offered Securities. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain portions of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Offered Securities, reference is made to the Registration Statement and the
exhibits and schedules thereto, which may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 filed with the Commission are hereby incorporated
by reference in this Prospectus except as superseded or modified herein.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering covered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
any document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
or may be incorporated by reference herein (other than exhibits to such
documents which are not specifically incorporated by reference into such
documents). Such requests should be directed to the Chief Financial Officer at
the Company's principal executive offices at 2860 Junction Avenue, San Jose,
California 95134, telephone number (408) 435-3000.
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THE COMPANY
The Company's executive offices are located at 2860 Junction Avenue,
San Jose, California 95134, and its telephone number at that location is (408)
435-3000.
CLI is a registered trademark of the Company. Magnitude, Radiance and
eclipse are trademarks of the Company. This Prospectus also includes
trademarks of other companies.
RISK FACTORS
The following are risk factors that should be carefully considered in
evaluating the Company and its business before purchasing the securities
offered by this Prospectus.
NET LOSS/FLUCTUATIONS IN QUARTERLY PERFORMANCE
The Company has experienced, and may continue to experience,
significant fluctuations in operating results due to a variety of factors. The
Company sustained a net (loss) income of ($3.3 million) in 1992, ($3.5 million)
in 1993, $107,000 in 1994 and ($2.1 million) in the first quarter of 1995.
There is no assurance that the Company will be able to achieve a profit in 1995
or in subsequent quarters and years.
The Company's product sales have historically been derived primarily
from the sale of videoconferencing systems and related equipment, the market
for which is still developing. In addition, the Company is moving into
broadcast applications and has announced or introduced several new products,
and the markets for these products and applications may not develop as
anticipated or may develop later than anticipated. Most of the Company's
products are complex capital equipment systems and/or involve significant
equipment deployment; and as such, these products typically involve long sales
and order cycles. Additionally, the Company's revenues have occurred
predominantly in the third month of each fiscal quarter. The Company believes
that this is due in some part to the timing of the capital equipment budget
procedures of its customers. The Company is not certain of the other reasons
for the occurrence of a large portion of its sales in the third month of each
fiscal quarter. Accordingly, the Company's quarterly results of operations are
difficult to predict and delays in the introduction or acceptance of new
products, delays in orders for existing products in anticipation of new
products, or delays in the closing of sales near the end of the quarter could
cause quarterly revenues and, to a greater degree, operating and net income to
fall substantially short of anticipated levels. The Company's total revenues
and results of operations could also be adversely affected by delays in
achievement of planned cost reductions, cancellations of orders, interruptions
or delays in supply of key components, failure of new products to meet
specifications or performance expectations, changes in customer base or product
mix, seasonal patterns of capital spending by customers, delays in purchase
decisions due to new product announcements by the Company or its competitors,
increased competition and reductions in average selling prices. Historically,
the Company has received significant revenue from research and development
contracts, which accounted for 14%, 17%, 14% and 14% of total revenues in the
first quarter of 1995 and in 1994, 1993 and 1992, respectively. If the Company
is unable to generate comparable revenue from research and development
contracts, operating results could be adversely affected.
HIGH LEVELS OF INVENTORY AND ACCOUNTS RECEIVABLE
The concentration of customer orders in the third month of each
quarter, together with relatively long manufacturing lead times and the
Company's growth, have required the Company to maintain high levels of
inventory in order to deliver products on a timely basis. The Company also
maintains equipment in inventory to provide demonstration systems to customers
or potential customers on a short-term loan basis or on a monthly rental basis.
At March 31, 1995, the Company's inventory totalled $28.8 million, consisting
of $6.6 million in raw materials, $5.5 million in work-in-process inventory and
$16.7 million in finished products, including $5.1 million in products lent or
rented on a monthly basis. Due to the rapid rate of change in CLI's industry,
a large inventory
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poses the risk of inventory obsolescence or delay in realization of
manufacturing cost improvements, either of which could have an adverse effect
on the Company's financial results. In addition, the Company's accounts
receivable were $57.8 million at March 31, 1995. CLI expects accounts
receivable and inventory balances to fluctuate in the future. Among other
things, introduction of new products requires the purchase and accumulation of
significant amounts of inventory prior to the realization of revenue from the
new products. Accordingly, the Company has in place a number of ongoing and
planned measures to manage both inventories and accounts receivable; however,
there can be no assurance that the Company can maintain its level of asset
utilization in the future. Any significant increases in accounts receivable
and inventories would result in a significant use of cash. The Company
continues to finance accounts receivable and inventories through public and
private offerings of equity securities, sale and leaseback arrangements and
bank credit lines. There can be no assurance that the Company will be able to
reduce or maintain its inventory and accounts receivable levels in the future.
PRODUCT DEVELOPMENT AND RAPID TECHNOLOGICAL CHANGE
The videoconferencing market and the broadcast and cable markets are
characterized by rapid and significant change in technology and user needs,
requiring substantial product development expenditures. These changes have
resulted in frequent product introductions generally characterized by improved
video and audio performance, added functionality, and reduced prices. The
Company's future success will depend to a large extent on its ability to
maintain its competitive technological position and to continue to develop, on
a cost-effective and timely basis, technologically advanced products that meet
changing user needs. There can be no assurance that the Company's product
development efforts will be successful. In addition, customers may delay
purchase decisions on existing products in anticipation of new products, which
in turn could negatively impact sales of existing products. New products
typically have higher initial manufacturing costs, higher initial component
costs and lower initial overall gross margins than more mature products. The
introduction of new products by the Company or its competitors may also pose
the risk of inventory obsolescence.
ENTRY INTO NEW MARKETS
In January 1994, the Company introduced the Radiance family of
videoconferencing systems, and in November 1994, the Company introduced several
new models to the eclipse family group videoconferencing systems for the small
group video conferencing market. In March 1994, the Company introduced the
Magnitude product family for use in direct broadcast satellite services which
is expected to deliver entertainment and information directly to homes through
the use of compact satellite dishes; video-on-demand services offering dial-up
access to movies, live sports, and other entertainment over twisted pair,
optical fiber and satellites; cable head-end applications that supply
programming to distribution sites; and traditional commercial television
broadcast applications. These markets are relatively new, and there can be no
assurance that they will develop or that the Company's new products will
achieve customer acceptance. In addition, there can be no assurance that the
Company's efforts to enter into new markets will not divert resources from the
Company's present business in a manner which will adversely affect the
Company's results of operations.
A number of technical, manufacturing and marketing risks are
associated with the Company's entry into new markets. There can be no
assurance that the Company will not encounter technical difficulties with
recently introduced or future new products. Many of the recently introduced
products are directed primarily at higher volume markets and have lower unit
prices than the Company's current products. In addition, the Company believes
that the gross margin of products for the broadcast and cable market is likely
to be lower than the gross margin of products for the videoconferencing market.
In order to successfully compete in these new markets. The Company believes it
will have to manufacture or have manufactured in high volume quality products
at competitive costs. While the Company has engaged subcontractors who are
experienced in high volume manufacturing and has experienced initially
favorable results with its subcontractors, the Company has limited experience
with the management of high volume manufacturing and there can be no assurance
that the Company will be able to consistently achieve its quality and cost
objectives for its subcontracted high volume manufacturing operations.
Marketing and selling these new products will require new marketing and
distribution strategies, including increased reliance on value-added resellers,
distributors, system integrators and partners.
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HIGHLY COMPETITIVE INDUSTRY
Competition in the video communications markets is intense. In the
videoconferencing market, the Company's primary competitors are PictureTel
Corporation, General Plessey Telecommunications, British Telecom and VTEL
Corporation, and the Company expects other competitors to enter the
videoconferencing market. Some of these competitors have significantly greater
technical and financial resources than the Company. In particular, the Company
expects competition from Japanese manufacturers, including Mitsubishi Ltd.,
Nippon Electric Corporation, Sony Corporation, Hitachi Limited and Fujitsu Ltd.
If the Company cannot continue to offer new videoconferencing products with
improved performance and reduced cost, its competitive position will erode.
Moreover, competitive price reductions may adversely affect the Company's
results of operations.
In the broadcast and cable markets, the Company expects competition
from a number of companies, some with significantly greater technical and
financial resources, including Scientific-Atlanta, Inc. and General Instrument
Corporation. Additionally, a number of large companies such as AT&T, IBM
Corporation, Hewlett-Packard, Apple Computer and EURODEC have announced digital
entertainment set-top terminals that would compete with products that the
Company offers or may in the future offer for video-on-demand applications.
Some of these and other future competitors have significantly greater technical
and financial resources than the Company. There can be no assurance that these
markets will develop or continue to develop, or that the Company's products
will gain or maintain significant market share.
Adoption of standards in the videoconferencing and broadcast and cable
markets may make the advantage of the Company's proprietary technology less
significant. In particular, emergence of industry standards may lower barriers
to entry and result in increased price competition. There can be no assurance
that the Company will be able to conform present or future products to industry
standards as they evolve.
DIFFICULTIES IN MANAGING GROWTH
The Company has experienced growth that has placed, and will continue
to place, a significant strain on the Company's management, operational and
financial resources. The Company's future operating results will depend on its
ability to continue to broaden and develop its management and to attract and
retain skilled employees, as well as on the ability of its management and key
employees to manage its growth successfully. In particular, the Company must
maintain appropriate management information systems and financial controls and
carefully manage inventories to meet rapidly changing product demand.
Inaccuracies in demand forecasts can result in either insufficient or excessive
inventories and disproportionate overhead expenses. There can be no assurance
that the Company will be successful in managing its continued growth or that
the Company will be able to maintain its historical growth rate.
The Company's historical growth rate and extensive product development
activities have required significant cash funding. The Company anticipates
that existing cash and lines of credit, together with other sources of
additional liquidity such as private or public offerings, sale and leaseback
arrangements, equipment lease lines and bank credit lines, will be sufficient
to meet cash requirements through the next twelve months. In February 1993,
the Company obtained $13.9 million, net of commission and issuance costs,
through a private sale of Preferred Stock to Thomson Consumer Electronics S.A.,
which Preferred Stock was converted to Common Stock in January 1994. In
December 1993, the Company obtained $9.7 million, net of commission and
issuance costs, in connection with a sale of its Common Stock to Fletcher
Capital Markets, Inc. In May 1994, the Company obtained $2.0 million, net of
issuance costs, in connection with a sale of its Common Stock to Intel
Corporation. Should additional funding be required, however, there can be no
assurance that such funding will be available on acceptable terms as and when
required by the Company.
DEPENDENCE ON KEY VENDORS
Several of the critical components used in the Company's products,
including certain custom and programmable semiconductors, such as the Vision
Processor and MPEG 2 chipset, are currently available only from
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single or limited sources. In addition, the Company relies on a few key
vendors for sourcing or turnkey manufacturing of certain of its products. The
Company has not executed master purchase agreements with some of its component
distributors and suppliers who provide the kits and component parts for
videoconferencing products and broadcast and cable products. While the Company
has experienced few material disruptions to date, there can be no assurance
that the Company will be able to obtain a sufficient quantity of products or
components for existing products on acceptable terms to enable it to meet
demand for those products. An interruption or reduction in supply of any key
components, excessive rework costs associated with defective components or
process errors, or a failure to continually decrease vendor prices can
adversely affect the Company's operating results and damage customer
relationships.
RELIANCE ON KEY PERSONNEL
The success of the Company depends to a large extent on a small number
of key senior technical and managerial personnel, the loss of one or more of
whom could have a material adverse effect on the business of the Company.
Typically these individuals do not have employment contracts with the Company.
The Company believes that its future success will depend in part on its ability
to continue to attract, retain and motivate additional highly skilled
personnel, who are in great demand.
VOLATILITY OF STOCK PRICE
The Company's Common Stock has historically been subject to
substantial price volatility, particularly as a result of announcements of new
products by the Company or its competitors, quarter-to-quarter variations in
the financial results of the Company or its competitors and changes in earnings
estimates by industry analysts. In addition, the stock market has experienced,
and continues to experience, price and volume fluctuations which have affected
the market price of many technology companies in particular and which have
often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic and political
conditions, may adversely affect the market price of the Common Stock.
LEGAL PROCEEDINGS
In July, August and December 1992, twelve complaints were filed in the
United States District Court against the Company and certain of its officers
and directors. In the aggregate, the complaints alleged that defendants
misrepresented or failed to disclose to investors material facts concerning the
Company's products, its accounting policies and its relationship with SkyPix,
Inc. and that certain of the defendants improperly sold shares of Company stock
at prices that were artificially inflated by these nondisclosures or
misrepresentations. No specific amount of damages was alleged. As amended and
consolidated into a single class action, the matter now consists of a complaint
of a single claim for violation of Section 10(b) of the Securities Exchange Act
of 1934. The matter is set for trial on July 24, 1995.
The defendants have reached a settlement with the plaintiffs, subject
to court approval, that provides that the plaintiffs will dismiss all claims
with prejudice in exchange for a cash payment in the amount of $4,800,000.
Pursuant to an agreement between the Company and its directors and officers
liability insurance carrier, the settlement of the class action will be funded
in its entirety by the carrier. The carrier will receive from the Company a
warrant for the purchase of 195,000 shares of Common Stock, exercisable for
three years at a price above the market price on the date the agreement was
reached.
On August 24, 1993, the Company filed a complaint against Oklahoma
State University Education and Research Fund, Inc. ("OSUERF") in United States
District Court claiming that OSUERF breached an exclusive subcontract for the
Company to provide equipment to OSUERF under OSUERF's prime contract with the
United States Army, TRADOC Division. On November 18, 1993, the Company amended
the complaint to add Federal Leasing, Inc. ("FLI") as a defendant. FLI is a
third-party leasing company that acquired the Company's right, title and
interest in equipment installed under the contract pursuant to a Federal
Government Financing Agreement ("Financing Agreement") effective September 30,
1991 and leased the equipment to TRADOC. An assertion of
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entitlement to indemnification has ben received by the Company from FLI. The
amended complaint asserted a single cause of action for breach of contract
against OSUERF and two causes of action against FLI for (i) breach of contract
and (ii) declaratory judgment. By the amended complaint, the Company claimed
general and consequential damages in an unspecified amount against OSUERF and
FLI, and sought a judicial declaration on the question of whether the Company
is obligated to indemnify FLI for OSUERF's failure to continue making monthly
payments to FLI.
On April 19, 1995, the Court granted the Company's motion to amend its
complaint to state additional causes of action against OSUERF for (i) fraud,
(ii) interference with contractual relations and (iii) declaratory judgment
that OSUERF is obligated to indemnify the Company pursuant to an Addendum to
the contract. The Company filed its Second Amended Complaint on April 21,
1995.
On February 4, 1994, the CIT Group/Equipment Financing Inc. ("CIT"),
as an assignee of FLI's rights under the Financing Agreement, filed a complaint
against the Company in United States District Court claiming entitlement or
indemnification from the Company. The Company responded to the complaint by
denying the material charging allegations of the complaint and stating certain
affirmative defenses. In addition, the Company stated two counterclaims
against CIT for (i) breach of contract and (ii) declaratory judgment. Pursuant
to court order, the OSUERF and CIT actions have been consolidated.
On February 14, 1995, CIT filed a motion for summary judgment against
the Company on its claims of breach of contract and indemnity, seeking payment
of $2,100,000 (updated on April 11, 1995 by CIT's reply brief to $2,300,000).
FLI also filed a motion for summary judgment against the Company on February
17, 1995, revised and refiled on March 14, 1995, asserting that CIT is the real
party in interest, that CIT is entitled to summary judgment and that FLI is
therefore entitled to judgment as a matter of law on the Company's claims
against it. The Court took the motions under submission without oral argument
and a decision is expected in May 1995. If any of CIT's claims were to be
decided adversely to the Company, the Company would be liable to pay monetary
damages to CIT. The Company believes that the ultimate resolution of this
matter will not have a material adverse impact on the Company's financial
position.
Trial of this matter is set for September 18, 1995. The discovery
cut-off is set for July 14, 1995. Settlement has been considered, however, no
settlement has been reached. Thus, discovery is continuing, and depositions of
the Company's witnesses commenced on May 9, 1995. There can be no assurance
that the Company will defeat the motions or prevail ultimately or obtain
indemnity for any recovery from OSUERF.
In a complaint filed December 20, 1993, in the United States District
Court, Datapoint Corporation ("Datapoint") alleged that the Company had
infringed two United States patents owned by Datapoint and relating to video
conferencing networks. The complaint seeks a judgment of infringement,
monetary damages, injunctive relief and reasonable attorneys' fees. The
Company responded to the complaint on February 16, 1994 by denying the material
allegations of the complaint and asserting affirmative defenses. Pursuant to
court order, the parties have participated in mediation before a
court-appointed mediator. Discovery in the case has commenced. The Company
believes that it has meritorious defenses to the allegations of the complaint,
and is pursuing an aggressive defense; however, there can be no assurance that
the Company will prevail. If any of the claims were to be decided adversely to
the defendants, the Company could be liable for monetary damages to the
plaintiff and be subject to injunctive relief. The Company believes that the
ultimate resolution of this matter will not have a material adverse impact on
the Company's financial position.
The Company and Voicecraft, Inc. ("Voicecraft") are parties to a
License Agreement dated December 3, 1987 pursuant to which the Company licenses
certain technology from Voicecraft in exchange for the payments of royalties.
At various times since the inception of the license/royalty relationship,
disputes have arisen between the Company and Voicecraft relating to the scope
of the license, as well as the amount of royalties due. By letter dated May 6,
1994, Voicecraft purported to terminate the Company's license as of July 5,
1994 for its alleged failure to remit royalties as required by the License
Agreement. Voicecraft has further asserted that the Company is infringing
certain patent rights belonging to Voicecraft. The Company disputes
Voicecraft's assertions. At present,
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the Company and Voicecraft are in discussion to resolve the issues outstanding
between them so as to avoid litigation. The Company believes that the ultimate
resolution of this matter will not have a material adverse impact on the
Company's financial position.
In the normal course of business, the Company receives and makes
inquiries with regard to other possible patent infringement. Where deemed
advisable, the Company may seek or extend licenses or negotiate settlements.
Outcomes of such negotiations may not be determinable at any point in time;
however, management does not believe that such licenses or settlements will,
individually or in the aggregate, have a material adverse affect on the
Company's financial position or results of operations.
USE OF PROCEEDS
The Company currently anticipates that the net proceeds of the
offering will be used for general corporate purposes. Although the Company
has no current specific plans for the proceeds of the sale of Offered
Securities, it believes that success in its industry requires substantial
financial strength and flexibility. In addition, the Company from time to time
considers acquisitions of complementary businesses, assets or technologies, and
although there are no current agreements or understandings with respect to any
such acquisition, the Company desires to be able to respond to opportunities as
they arise. The Company is not negotiating, discussing or planning any
potential material acquisition at this time. Pending such uses, the Company
will invest the net proceeds in investment-grade, interest-bearing securities.
The Company may provide additional information as to the use of proceeds in the
Prospectus Supplement.
DESCRIPTION OF CAPITAL STOCK
CLI's Restated Certificate of Incorporation authorizes the issuance of
25,153,658 shares of Common Stock, $.001 par value, and 4,000,000 shares of
Preferred Stock, $.001 par value.
COMMON STOCK
As of May 12, 1995, there were 14,718,569 shares of Common Stock
outstanding held of record by approximately 1,500 holders of record. A total
of 4,401,528 shares were reserved on that date for issuance upon exercise of
outstanding options and outstanding warrants. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to
a vote of stockholders. Subject to preferences that may be applicable to any
Preferred Stock which may be outstanding, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available therefor. In the event of a liquidation,
dissolution or winding up of CLI, holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation preference of any outstanding Preferred Stock. Holders of Common
Stock have no preemptive rights and have no rights to convert their Common
Stock into any other securities. The outstanding shares of Common Stock are
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue the Preferred Stock
in one or more series, to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued shares of Preferred
Stock and to fix the number of shares constituting any series and the
designations of such series, without any further vote or action by the
stockholder. Although it has no present intention to do so, the Board of
Directors, without stockholder approval, can issue Preferred Stock with voting
and conversion rights which could adversely affect the voting power of the
holders of Common Stock. The issuance of Preferred Stock may have the effect
of delaying, deferring or preventing a change in control of the Company.
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As of May 12, 1995, 14,900 shares were designated Series B Redeemable
Convertible Preferred Stock, none of which were outstanding.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock and Preferred
Stock is The First National Bank of Boston.
CLASSIFIED BOARD 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 selected may serve
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.
The Board of Directors is presently comprised of six members.
STOCKHOLDER RIGHTS PLAN - SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
In July 1991, the Board of Directors of the Company declared a
dividend of one preferred share purchase right for each outstanding share of
Common Stock held as of August 15, 1991. The description and terms of such
rights are set forth in an Amended and Restated Rights Agreement dated as of
January 29, 1993, between the Company and The First National Bank of Boston, as
successor Rights Agent (the "Rights Plan"). The Rights Plan is designed to
deter coercive or unfair takeover tactics and to prevent an acquiring entity
from gaining control of the Company without offering a fair price to all of the
Company's stockholders.
Each right entitles holders of the Company's Common Stock to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $100.00, subject to adjustment in certain cases to
prevent dilution. The rights are not exercisable or transferable apart from
the Common Stock until the earlier of 10 days after the date on which a person
or group has acquired beneficial ownership of 15% or more of the Common Stock
(an "Acquiring Entity") or 10 business days after the public announcement of
the commencement of a tender or exchange offer that would result in the
Acquiring Entity owning 15% or more of the Common Stock. Further, the rights
generally entitle each right holder (except the Acquiring Entity) to purchase
that number of shares of the Company's Common Stock which have a market value
equal to twice the exercise price of the right, if any person becomes the
beneficial owner of 15% or more of the Common Stock. If an Acquiring Entity
purchases at least 15% of the Company's Common Stock, but has not acquired 50%,
the Board of Directors may exchange the rights (except those of the Acquiring
Entity) for one share of Common Stock per right. In addition, under certain
circumstances, if the Company is involved in a merger or other business
combination in which the Company is not the surviving corporation, the rights
entitle the holder to buy common stock of the Acquiring Entity with a market
value of twice the exercise price of each right.
The Company is generally entitled to redeem the rights for $.01 per
right at any time until 20 days following a public announcement that a 15%
stock position has been acquired and in certain other circumstances. The
Company may amend the rights in any manner until such time as a person becomes
an Acquiring Entity; after such time, the Company may amend the rights in any
manner which would not adversely effect the interests of the holders of the
rights. The rights, which do not have voting rights, will expire on August 15,
2001, unless redeemed or exchanged earlier by the Company pursuant to the
Rights Plan.
There can be no assurance that the Rights Plan would be enforceable as
currently in effect.
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PLAN OF DISTRIBUTION
On June 16, 1995, CLI and Fletcher Asset Management, Inc., a Delaware
corporation ('Fletcher"), entered into an investment agreement (the "Investment
Agreement") which provides for the purchase by Fletcher of from 565,000 to
765,000 shares of Common Stock of CLI (the "Shares") including one Right, as
defined in the Amended and Restated Rights Agreement between CLI and the First
National Bank of Boston, dated January 29, 1993, for each Share. See
"Description of Capital Stock."
The Investment Agreement provides that the aggregate sale and purchase of
the Shares shall occur on the Initial Closing Date, Interim Closing Date and
Final Closing Date (as described below).
Fletcher will purchase 500,000 shares of the Company's Common Stock (the
"Initial Share Quantity") on July 10, 1995 (the "Initial Closing Date"), subject
to the Company's right to accelerate the sale to June 30, 1995, against payment
per share of the average of the three lowest per share daily low sale prices of
the Common Stock as reported by the Nasdaq National Market in the period
beginning June 16, 1995 and ending one business day prior to the Initial Closing
Date.
The Interim Closing Date shall be the first business day following the
Interim Trading Period. The Interim Trading Period shall be the period beginning
June 16, 1995 and ending August 7, 1995, provided, however, that the period
shall be extended to include an additional trading day for each day during the
period throughout which trading in the Common Stock had been suspended. The
Interim Share Price shall be equal to the average of the daily volume-weighted
trade price of the Common Stock as reported by Bloomberg for the days on which
the Common Stock is trading during the Interim Trading Period. On the Interim
Closing Date, if the Interim Share Price is less than the Initial Share Price,
then the Company shall issue the Interim Share Quantity (as defined below)
number of shares of Common stock, if any, to Fletcher. Alternatively, on the
Interim Closing Date, if the Interim Share Price is greater than the Initial
Share Price, then Fletcher shall make payment of the Interim Payment (as defined
below) to the Company. The Interim Share Quantity shall be the nearest whole
number greater than or equal to zero to the quantity:
(Initial Share Price - Interim Share Price) x Initial Share Quantity
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Interim Share Price
The Interim Payment, if any, shall be the dollar amount equal to:
(Interim Share Price - Initial Share Price) x Initial Share Quantity
The Final Closing Date shall be the first business day following the
Final Trading Period. The Final Trading Period shall be the period beginning
June 16, 1995 and ending September 28, 1995, provided, however, that the ending
date shall be extended to include an additional trading day for the Common Stock
for each day during the period throughout which trading in the Common Stock had
been suspended. The Final Share Price shall be equal to the average of the
daily volume-weighted average trade price of the Common Stock as reported by
Bloomberg for the days on which the Common Stock is trading during the Final
Trading Period. On the Final Closing Date, the Company will issue the Final
Share Quantity (as defined below) number of shares of Common Stock, if any,
to Fletcher. The Final Share Quantity shall be the nearest whole number
greater than or equal to zero to the quantity:
(Interim Share Price - Final Share Price) x (Initial Share Quantity + Interim
Share Quantity)
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Final Share Price
In addition, on the Final Closing Date, the Company shall deliver a
number of shares of Common Stock equal to the Supplemental Share Quantity, if
any, to Fletcher against payment by Fletcher therefor of the Supplemental
Payment to the Company. The Supplemental Share Quantity shall be the nearest
whole number greater than or equal to zero to (i) the Minimum Share Quantity
minus (ii) the sum of the Initial Share Quantity, Interim Share Quantity and
Final Share Quantity. The Minimum Share Quantity shall be equal to 565,000,
provided, that Fletcher shall have to option, to be exercised by written notice
to the Company two business days before the Final Closing Date, to increase the
Minimum Share Quantity to a whole number up to and including 765,000. The
Supplemental Payment shall be the dollar amount equal to
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the product of (i) the Supplemental Share Quantity and (ii) the lower of the
Interim Share Price or the Final Share Price.
Under no circumstances shall the maximum number of shares issuable to
Fletcher pursuant to the Investment Agreement exceed 765,000 shares of Common
Stock.
The consummation of these transactions is subject to certain conditions,
including (i) the absence of a stop order suspending the Registration Statement
for the Shares, (ii) authorization of the Shares for trading on the Nasdaq
National Market and (iii) other conditions as described in the Investment
Agreement.
The Investment Agreement provides that, for a five year period from June
16, 1995, neither Fletcher nor its affiliates will (i) purchase, acquire or own
or offer to agree to purchase, acquire or own any Voting Securities or options
to acquire Voting Securities of the Company, if after such acquisitions, it
would hold, beneficially or of record, more than 9.99% of the Voting Securities
of the Company or (ii) propose to enter into any merger or business combination
of the Company or in any way seek control of the management, policies or Board
of Directors of the Company. "Voting Securities" means (i) any securities which
are entitled to vote generally in the election of directors of the Company and
(ii) any securities of the Company convertible or exchangeable for any security
described in clause (i) of this sentence.
The Investment Agreement may be terminated (i) by mutual consent of CLI and
Fletcher; (ii) by Fletcher if the Initial Closing has not occurred by July 15,
1995 or (iii) automatically if the Initial Closing has not occurred by August 1,
1995.
LEGAL MATTERS
The validity of the issuance of the Offered Securities will be passed upon
for the Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto,
California ("Cooley Godward").
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EXPERTS
The consolidated financial statements and schedule of Compression
Labs, Incorporated, as of December 31, 1994 and 1993 and for each of the years
in the three-year period ended December 31, 1994, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick, LLP, independent certified public accounts, incorporated
by reference herein and upon the authority of said firm as experts in
accounting and auditing.
NO SALESPERSON
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation not contained in this Prospectus
in connection with the offer made hereby. If given or made, such information
or representation must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Shares or an
offer to sell or solicitation of an offer to buy to any person in any
jurisdiction in which such an offer or solicitation would be unlawful. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
MATERIAL CHANGES
As of the date of this Prospectus, no material changes in the
Company's affairs, which have not been described in this Prospectus or in a
report filed on Form 10-Q, 10-K, 10-K/A or 8-K filed under the Securities
Exchange Act of 1934, have occurred since the end of the latest fiscal year for
which audited financial statements were included in the latest annual report to
stockholders.
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