<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KeraVision, Inc.
-----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
KERAVISION, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
KERAVISION, INC. (the "Company") will be held on Tuesday, May 6, 1997, at 9:30
a.m., local time, at the Company's principal executive office, located at
48630 Milmont Drive, Fremont, California 94538 for the following purposes:
1. To elect two directors to Class II of the Board of Directors to serve
for a term of three years and until their successors are elected and
qualified; and
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997; and
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 17, 1997
("Record Date") are entitled to notice of and to vote at the meeting and any
adjournment(s) thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder returned a Proxy.
FOR THE BOARD OF DIRECTORS
Michael W. Hall
Secretary
Fremont, California
April 2, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE
MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE>
KERAVISION, INC.
PROXY STATEMENT
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
KeraVision, Inc. (the "Company"), for use at the Annual Meeting of
Stockholders to be held on Tuesday, May 6, 1997, at 9:30 a.m., local time, or
at any postponement or adjournment(s) thereof, for the purposes set forth
herein and in an accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's principal executive office,
located at 48630 Milmont Drive, Fremont, California 94538. The Company's
telephone number at that location is (510) 353-3000.
These proxy solicitation materials were mailed to stockholders on or about
April 2, 1997. The cost of soliciting these proxies will be borne by the
Company.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use either (i) by delivering to the Company
(Attention: Mark Fischer-Colbrie) a written notice of revocation or a duly
executed proxy bearing a later date or (ii) by attending the meeting of
stockholders and voting in person.
VOTING AND SOLICITATION
Each share of Common Stock entitles its holder to one vote on matters to be
acted upon at the meeting, including the election of directors. Votes cast by
proxy or in person at the Annual Meeting will be tabulated by the Inspector of
Elections (the "Inspector") with the assistance of the Company's transfer
agent. The Inspector will also determine whether or not a quorum is present.
Except in certain specific circumstances, the affirmative vote of a majority
of shares present in person or represented by proxy at a duly held meeting at
which a quorum is present is required under Delaware law for approval of
proposals presented to stockholders. In general, Delaware law also provides
that a quorum consists of a majority of the shares entitled to vote and
present in person or represented by proxy. The Inspector will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and as negative votes for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. Any proxy which is returned using the form of proxy enclosed and which
is not marked as to a particular item will be voted for the election of
directors, for ratification of the appointment of the designated independent
auditors and, as the proxy holders deem advisable, on other matters that may
come before the meeting, as the case may be with respect to the item not
marked. If a broker indicates on the enclosed proxy or its substitute that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present with respect
to that matter. The Company believes that the tabulation procedures to be
followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on March 17, 1997 are
entitled to notice of and to vote at the meeting. At the record date,
12,482,624 shares of the Company's Common Stock, $0.001 par value, were issued
and outstanding.
1
<PAGE>
PROPOSAL NO. 1: ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors is divided into three classes, with two or three
directors in each class. Class I consists of three directors who are serving a
three-year term expiring at the Annual Meeting of Stockholders to be held in
1999. Class II consists of two directors who are serving a three-year term
expiring at this Annual Meeting. Class III consists of two directors who are
serving a three-year term expiring at the Annual Meeting of Stockholders in
1998. In each case, a director serves for the designated term and until his or
her respective successor is elected and qualified.
The following table sets forth certain information with respect to the
directors of the Company as of March 17, 1997:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE CLASS
---------------- --- -------------------- -------- -----
<C> <C> <S> <C> <C>
Kshitij Mohan........... 52 Corporate Vice President for 1997 I
research and technical services
at Baxter International, Inc.
Arthur M. Pappas........ 49 Founder of A.M. Pappas & 1997 I
Associates
Steven N. Weiss......... 50 Partner of Montgomery Medical 1987 I
Ventures
Charles Crocker......... 58 Chairman, President and CEO BEI 1987 II
Electronics, Inc.
Lawrence A. Lehmkuhl.... 59 Former Chairman, President and 1992 II
Chief Executive Officer of St.
Jude Medical, Inc.
John R. Gilbert......... 60 Vice-Chairman of the Board of 1992 III
Directors of the Company
Thomas M. Loarie........ 50 President, Chief Executive 1987 III
Officer and Chairman of the
Board of Directors of the
Company
</TABLE>
Thomas M. Loarie has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since September 1987. From
1985 until joining KeraVision, Mr. Loarie served as President of ABA
BioManagement, a management service firm specializing in medical technology
start-ups, and from 1984 to 1985 he served as President of Novacor Medical
Corporation, a manufacturer of cardiovascular implants. Prior to 1984, Mr.
Loarie held management positions in four divisions of American Hospital Supply
Corporation, a manufacturer of healthcare products (now Baxter International),
serving most recently as President of the American Heyer-Schulte Division,
where he was responsible for bringing several new implantable devices to the
markets of neurosurgery, oncology, urology, plastic surgery and wound
management as well as rebuilding the company's international business. Mr.
Loarie holds a B.S. degree in engineering from the University of Notre Dame
and has completed graduate work in business administration at the Universities
of Chicago and Minnesota. Mr. Loarie also serves as a director of the Health
Industry Manufacturers Association.
Charles Crocker has served as a director of the Company since January 1987.
Since 1974 he has served as Chairman of the Board and since 1995 as President
and CEO of BEI Electronics, Inc., a diversified technology company. He has
also served as President, from 1985 to 1995, of Crocker Capital, a private
venture capital firm specializing in small business investments. Mr. Crocker
holds a B.S. degree from Stanford University and an M.B.A. from the University
of California at Berkeley. Mr. Crocker serves as a director of BEI
Electronics, Inc., Pope & Talbot, Inc., Fiduciary Trust Company International
and Superconductor Technologies, Inc. and a number of private companies.
John R. Gilbert has served as a director of the Company since April 1992.
Mr. Gilbert retired from a 30-year career at Johnson & Johnson, where he
served as Vice Chairman of IOLAB Corporation and Vice President of Johnson &
Johnson International. From 1981 to 1987, Mr. Gilbert was President of IOLAB
Corporation, an international manufacturer and distributor of ophthalmic
products. Mr. Gilbert holds a B.S. degree in Industrial Technology from Texas
A&M University.
Lawrence A. Lehmkuhl has served as a director of the Company since August
1992. From 1985 to 1994, Mr. Lehmkuhl was the Chairman, President and Chief
Executive Officer of St. Jude Medical, Inc., a medical
2
<PAGE>
device manufacturer. Prior to 1985, Mr. Lehmkuhl spent 18 years in management
positions with American Hospital Supply Corporation. Mr. Lehmkuhl holds a
B.B.A. from the University of Iowa. Mr. Lehmkuhl is also a director of St.
Jude Medical, Inc., Nutrition Medical, Inc. and Fisher Imaging Inc. and a
number of private companies.
Kshitij Mohan has served as a director of the Company since January 1997.
From 1995 to present, Dr. Mohan has served as Corporate Vice President for
research and technical services at Baxter International Inc. Dr. Mohan
previously served as a director of device evaluation at the Food and Drug
Administration's Center for Devices and Radiological Health. Dr. Mohan holds a
B.S. in Physics from Patna University, a M.S. in Physics from University of
Colorado, and a Ph.D. in Physics from Georgetown University.
Arthur M. Pappas has served as a director of the Company since January 1997.
In 1994, Mr. Pappas founded the life science and high technology consulting
and investment firm of A.M. Pappas & Associates LLC. Mr. Pappas is a former
board member of Glaxo Holdings plc and past chairman of Glaxo Far East Ltd.,
Glaxo Latin America Inc. and Glaxo Canada Inc. Mr. Pappas holds a B.S. in
Biology form Ohio State University and a M.B.A. in Finance from Xavier
University.
Steven N. Weiss has served as a director of the Company since January 1987.
Since 1985 he has been a partner of Montgomery Medical Ventures, a venture
capital firm. Mr. Weiss has held a number of senior management positions in
the medical device industry and holds B.S. and M.S. degrees from City College
of New York and an M.B.A. from Fordham University. Mr. Weiss also serves as a
director of Innerdyne, Inc. and a number of private companies.
NOMINEES
Two directors are to be elected at this Annual Meeting. The Board has
nominated the two current members of the Board constituting Class II to be re-
elected and to serve a three-year term expiring at the Annual Meeting of
Stockholders to be held in 2000. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for the nominees named below,
regardless of whether any other names are placed in nomination by anyone other
than one of the proxy holders. In the event that any such nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxy
holders will vote in their discretion for a substitute nominee. It is not
expected that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a director will
continue until his term expires and until his successor has been elected and
qualified.
The names of the nominees, their ages as of March 17, 1997, and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<C> <C> <S> <C>
Charles Crocker............. 58 Chairman, President and CEO BEI 1987
Electronics, Inc.
Lawrence A. Lehmkuhl........ 59 Former Chairman, President and 1992
Chief Executive Office of St.
Jude Medical, Inc.
</TABLE>
Except as set forth above, each of the nominees has been engaged in the
principal occupation set forth next to his name during the past five years.
There are no family relationships among the directors or executive officers of
the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the year ended December 31, 1996. The Board of Directors has an Executive
Committee, an Audit Committee and a Compensation Committee. It does not have a
nominating committee or a committee performing the functions of a nominating
committee.
3
<PAGE>
The Executive Committee currently consists of directors Crocker, Gilbert,
Loarie and Weiss, and held 3 meetings during the year ended December 31, 1996.
The Executive Committee has much of the authority of the full Board of
Directors (subject to certain limitations).
The Audit Committee of the Board of Directors currently consists of
directors Pappas and Weiss, and held one meeting during the year ended
December 31, 1996. The Audit Committee reviews the Company's internal controls
and meets periodically with management and the independent auditors.
The Compensation Committee of the Board of Directors currently consists of
directors Crocker and Lehmkuhl, and held six meetings during the year ended
December 31, 1996. The Compensation Committee is responsible for setting and
administering the policies for executive compensation and short-term and long-
term incentive programs.
None of the incumbent directors attended fewer than 75% of the aggregate
number of meetings of the Board of Directors and of the committees upon which
such director served during 1996.
DIRECTOR COMPENSATION
The Company currently pays each director who is not an employee $1,000 for
each meeting attended of the Board of Directors, $500 if attended by
telephone, an annual retainer of $12,000 and reimburses each director for out-
of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors. For 1996, Mr. Gilbert, Mr. Crocker and Mr. Lehmkuhl
received $5,000, $5,000 and $4,500, respectively. Nonemployee directors
participate in the Company's 1995 Director Stock Option Plan (the "Directors'
Plan"), pursuant to which such directors are automatically granted options to
purchase shares of Common Stock of the Company on the terms and conditions set
forth in the Directors' Plan. During 1996, Messrs. Chonette and Henos (former
directors of the Company who both resigned on January 1, 1997) and Messrs.
Crocker, Gilbert, Lehmkuhl and Weiss each were granted options to purchase
2,500 shares of Common Stock of the Company under the Directors' Plan at an
exercise price of $15.50 per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2: APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent auditors, to audit the financial statements of the Company for the
year ending December 31, 1997. In the event the stockholders do not ratify
such appointment, the Board of Directors will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have the opportunity to respond to appropriate questions and
to make a statement if they desire.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPROVAL OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 1997.
4
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 17, 1997 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's current directors, (iii) each of the
executive officers named in the Summary Compensation Table beginning on page
7, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
5% STOCKHOLDERS, DIRECTORS, OWNED(1)
NAMED EXECUTIVE OFFICERS, ----------------------
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT
----------------------------------------------- ----------- ----------
<S> <C> <C>
Aspen Venture Partners, L.P.............................. 955,767 7.66%
c/o Alliance Technology Ventures
3343 Peachtree Road, N.E.
East Tower, Suite 1140
Atlanta, GA 30326
Goldman Sachs & Co....................................... 1,573,771 12.61%
85 Broad Street
New York, NY 10004
J.P. Morgan & Co. Incorporated........................... 662,150 5.30%
60 Wall Street
New York, NY 10260
Montgomery Medical Ventures, L.P......................... 633,736 5.08%
600 Montgomery Street
San Francisco, CA 94111
Oak Investment Partners V, L.P........................... 672,165 5.38%
One Gorham Island
Westport, CT 06880
The Capital Group Companies, Inc......................... 795,000 6.37%
333 South Hope Street
Los Angeles, CA 90071
Charles Crocker(2)....................................... 172,879 1.38%
Darlene E. Crockett-Billig(3)............................ 171,704 1.38%
Mark D. Fischer-Colbrie(4)............................... 93,471 *
John R. Gilbert(5)....................................... 52,570 *
Lawrence A. Lehmkuhl(6).................................. 7,936 *
Thomas M. Loarie(7)...................................... 535,723 4.29%
Kshitij Mohan............................................ -- *
Arthur Pappas............................................ 2,000 *
Patrick Sabaria(8)....................................... 18,333 *
Thomas A. Silvestrini(9)................................. 220,292 1.76%
Steven N. Weiss (10)..................................... 644,634 5.16%
All directors and officers as a group (13 persons)(11)... 1,943,634 15.57%
</TABLE>
- --------
*Less than 1%
(1) Information with respect to beneficial ownership is based upon information
furnished by each director and officer or contained in filings made with
the Securities and Exchange Commission. Except as indicated in the
footnotes to this table, the stockholders named in this table have sole
voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to community property laws
where applicable.
(2) Includes 55,215 shares held by Fund FBO Charles Crocker and 13,136 shares
subject to options exercisable within 60 days after March 17, 1997.
(3) Includes 42,926 shares subject to options exercisable within 60 days after
March 17, 1997.
(4)Includes 76,953 shares subject to options exercisable within 60 days after
March 17, 1997.
5
<PAGE>
(5) Represents 51,570 shares subject to options exercisable within 60 days
after March 17, 1997.
(6) Represents 7,936 shares subject to options exercisable within 60 days after
March 17, 1997.
(7) Includes 85,500 shares subject to options exercisable within 60 days after
March 17, 1997.
(8) Includes 18,333 shares subject to options exercisable within 60 days after
March 17, 1997.
(9) Includes 22,400 shares subject to options exercisable within 60 days after
March 17, 1997.
(10) Includes 3,332 shares subject to options exercisable within 60 days after
March 17, 1997. 633,763 of the shares indicated as owned by Mr. Weiss are
owned directly by Montgomery Medical Ventures, L.P. and are included
because Mr. Weiss is a partner of such entity. Mr. Weiss disclaims
"beneficial ownership" of these shares within the meaning of Rule 13d-3
under the Exchange Act.
(11) Includes an aggregate of 345,836 shares subject to options held by
officers and directors which options are exercisable within 60 days after
March 17, 1997. In addition, this total includes an aggregate of 633,736
shares held by certain directors, beneficial ownership for such shares is
disclaimed within the meaning of Rule 13d-3 under the Exchange Act.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by the Company's Chief
Executive Officer and the four most highly compensated executive officers of
the Company for 1996, and the compensation received by each such individual
for 1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION ALL
COMPENSATION AWARDS OTHER(3)
-------------- ------------ --------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(2)
--------------------------- ---- --------- ------------
<S> <C> <C> <C> <C>
Thomas M. Loarie (1).................... 1996 $ 309,272(4) -- $50,000
1995 $ 205,000 40,000 --
1994 $ 199,271 -- --
Thomas A. Silvestrini................... 1996 $ 181,757(4) -- $12,500
1995 $ 150,000 32,000 --
1994 $ 141,667 -- --
Darlene E. Crockett-Billig (1).......... 1996 $ 143,481(4) -- $12,500
1995 $ 120,000 32,000 --
1994 $ 113,943 -- --
Mark D. Fischer-Colbrie (1)............. 1996 $ 125,926(4) -- $ 5,000
1995 $ 115,000 28,000 --
1994 $ 110,047 -- --
Patrick Sabaria (5)..................... 1996 $ 125,484 80,000 --
1995 -- -- --
1994 -- -- --
</TABLE>
- --------
(1)Includes amounts earned but deferred at the election of the executive under
the Company's 401(k) Plan.
(2) Consists of incentive stock options ("ISO") granted pursuant to the
Company's 1987 and 1995 Stock Option Plans, of which 6.25% are exercisable
at the end of each three month period from the grant date. The maximum
term of each option under the 1987 Plan is five years from the date of
grant and under the 1995 Plan is ten years from the date of grant. The
exercise price is equal to the market value of the stock on the grant
date.
(3) This amount represents forgiveness of outstanding principal on certain
promissory notes owed to the Company.
(4) These amounts reflect retroactive compensation adjustments made by the
Board of Directors in 1996.
(5) Mr. Sabaria joined the Company on April 8, 1996.
7
<PAGE>
The following tables set forth information for the named executive officers
with respect to grants of options to purchase Common Stock of the Company made
in the year ended December 31, 1996 and the value of all options held by such
executive officers on December 31, 1996.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(2)
OPTIONS DURING BASE PRICE EXPIRATION ---------------------
NAME GRANTED YEAR(1) ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Patrick Sabaria......... 80,000 18.58% $12.25 3/28/2006 $ 270,756 $ 598,300
</TABLE>
- --------
(1) Based on an aggregate total of 430,500 options granted to employees in
1996, under the Company's 1995 stock option plan.
(2) Potential realizable values are reported net of the option exercise price,
but before taxes associated with the exercise, if any. These amounts
represent certain assumed rates of appreciation only, in accordance with
regulations of the Securities and Exchange Commission. Actual gains, if
any, on stock option exercises and Common Stock holdings are dependent on
the future performance of the Common Stock and overall market conditions,
as well as executives continued employment through the vesting period.
There is no assurance that the amounts reflected will be realized.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
DECEMBER 31, 1996 AND YEAR-END OPTION VALUES NAME
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTION AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- --------------------- --------------------
<S> <C> <C> <C> <C>
Thomas M. Loarie........ 44,000 $577,500 77,333/22,667 $753,329/$159,171
Thomas A. Silvestrini... 20,000 $262,500 45,915/14,582 $413,241/$ 85,161
Darlene E. Crockett-
Billig................. 10,400 $136,500 38,443/14,083 $324,511/$ 79,236
Mark D. Fischer-Colbrie. -- -- 71,763/15,465 $736,686/$106,647
Patrick Sabaria......... -- -- 7,500/72,500 $ 11,250/$108,750
</TABLE>
- --------
(1) The fair market value of the Company's Common Stock (as reported on the
Nasdaq National Market) at the close of business on December 31, 1996 was
$13.75.
8
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Compensation Report and the Performance Graph shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the year ended December 31, 1996. The
Committee recommends salaries, incentives and other forms of compensation for
directors, officers and other employees of the Company, administers the
Company's various incentive compensation and benefit plans (including stock
plans) and recommends policies relating to such incentive compensation and
benefit plans. Executive officers who are also directors have not participated
in deliberations or decisions involving their own compensation.
COMPENSATION POLICY
The Company's executive officer compensation philosophies are designed to
attract, motivate and retain senior management by providing an opportunity for
competitive, performance-based compensation. Executive officer compensation
consists of competitive base salaries and stock-based incentive opportunities
in the form of options to purchase the Company's Common Stock. The Company
currently does not contribute to any retirement programs on behalf of its
employees, including executive officers.
BASE SALARIES FOR 1996
In establishing compensation guidelines with respect to base salary, the
Company utilized data from various surveys prepared by independent firms to
assist it in setting salary levels competitive with those of other medical
industry companies. While it is the Committee's intent to continue to review
periodically base salary information to monitor competitive ranges within the
applicable market, including consideration of the Company's geographic
location and individual job responsibilities, it is further the intent of the
Committee to maintain a close relationship between the Company's performance
and the base salary component of its executive officers' compensation.
STOCK OPTION AWARDS FOR 1996
The Company's 1995 Stock Option Plan provides for the issuance of stock
options to officers and employees of the Company to purchase shares of the
Company's Common Stock at an exercise price equal to the fair market value of
such stock on the date of grant. The Company's stock options typically vest
ratably over a period of four years. Stock options are granted to the
Company's executive officers and other employees both as a reward for past
individual and corporate performance and as an incentive for future
performance. The Committee believes that stock-based performance compensation
arrangements are essential in aligning the interests of management and the
stockholders in enhancing the value of the Company's equity.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation for Thomas M. Loarie, the Company's Chief Executive Officer
("CEO") is determined based on a number of factors, including comparative
salaries of CEO's of medical companies in the Company's peer group, the CEO's
individual performance and the Company's performance as measured against the
stated objectives. The CEO's total compensation package includes stock option
grants with the goal of motivating leadership for long-term Company success
and providing significant reward upon achievement of Company objectives and
enhancing stockholder value. As with other executives, size of option grants
is also based on a review of competitive survey data. The 1996 compensation of
Mr. Loarie consisted of base salary and forgiveness of a certain amount of
indebtedness to the Company. See "Executive Compensation -- Summary
Compensation Table".
9
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993,
which section disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the CEO
and four other most highly compensated executive officers, unless such
compensation meets the requirements for the "performance-based" exception to
the general rule. Since the cash compensation paid by the Company to each of
its executive officers is expected to be well below $1 million and the Company
believes that options granted under the Company's 1987 and 1995 Stock Option
Plans will meet the requirements for qualifying as performance-based, the
Committee believes that this section will not affect the tax deductions
available to the Company. It will be the Committee's policy to qualify, to the
extent reasonable, the executive officers' compensation for deductibility
under applicable tax law.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
Charles Crocker
Lawrence A. Lehmkuhl
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return,
assuming reinvestment of all dividends, for the Company's Common Stock at
December 31, 1996 since July 28, 1995 (the date on which the Company's stock
was first registered under Section 12 of the Securities Exchange Act of 1934)
to the cumulative return over such period of (i) the U.S. Index for the Nasdaq
National Market and (ii) the S&P Health Care Composite Index. The graph assumes
that $100 was invested on July 28, 1995 in the Common Stock of the Company and
in each of the comparative indices. The graph further assumes that such amount
was initially invested in the Common Stock of the Company at a price per share
of $13.50, the price to which such stock was first offered to the public by the
Company on that date. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
COMPARISON OF TOTAL RETURN
AMONG KERAVISION, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE S&P HEALTH CARE SECTOR INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period NASDAQ STOCK S&P HEALTH
(Fiscal Year Covered) KERAVISION MARKET-US CARE SECTOR
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-01/28/95 $100 $100 $100
FYE 12/31/95 $93 $113 $129
FYE 12/31/96 $102 $140 $156
</TABLE>
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has issued 394,678 shares of Common Stock to Thomas M. Loarie,
149,495 shares of Common Stock to Thomas A. Silvestrini, 108,121 shares of
Common Stock to Darlene Crockett-Billig and 15,000 shares of Common Stock to
Mark D. Fischer-Colbrie, each of whom is an executive officer of the Company,
in exchange for promissory notes at interest rates ranging from 3.7% to 7.4%.
As of March 17, 1997 pursuant to the terms of such promissory notes, the
officers were indebted to the Company in the amounts of $429,674.44,
$197,699.33, $127,457.13 and $26,668.27, respectively. In October, 1996, the
Board of Directors forgave principal in the amount of $50,000, $12,500, $5,000
and $12,500 owed to the Company by each of Messrs. Loarie, Silvestrini,
Fischer-Colbrie and Ms. Crockett-Billig, respectively under certain promissory
notes. The shares were issued pursuant to restricted stock purchase agreements
under the Company's 1987 Stock Purchase Plan at the fair market value of the
Common Stock of the Company on the date of grant.
In January 1997, the Company entered into a three year employment agreement
with Thomas M. Loarie. Pursuant to the terms of the agreement, Mr. Loarie is
entitled to receive annual base salary of $250,000, an option to purchase
7,827 of common stock, performance bonus of up to 50% of base salary,
additional benefits and 18 months base salary compensation in the event of
involuntary termination of employment.
In January 1996, the Company entered into a Consulting Agreement with John
R. Gilbert, one of the Company's directors. This agreement provides for an
annual consulting fee of $80,000 to be paid to Mr. Gilbert. For the year ended
December 31, 1996, the Company paid Mr. Gilbert $80,000.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers that may require the Company, among
other things, to indemnify them against certain liabilities that may arise by
reason of their status or services as director or officer and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.
The terms of the transactions described above were negotiated at arms length
such that the terms were as favorable to the Company as could have been
obtained from an unaffiliated third party.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange 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 Securities and Exchange Commission (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 upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required,
during the fiscal year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
DEADLINE FOR RECEIPT OF STOCKHOLDER
PROPOSAL FOR 1998 ANNUAL MEETING
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1998 Annual Meeting must be received by the
Company no later than December 2, 1997 in order that such proposals may be
included in the proxy statement and form of proxy relating to that meeting.
12
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the
persons named in the enclosed form of proxy will vote the shares they
represent in such manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Michael W. Hall
Secretary
Dated: April 2, 1997
13
<PAGE>
1421-PS-97
<PAGE>
DETACH HERE KRVF
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KERAVISION, INC.
P
1997 ANNUAL MEETING OF STOCK HOLDERS
R
The undersigned stockholder of KeraVision, Inc., a
Delaware corporation, hereby acknowledges receipt of the
O Notice of Annual Meeting of Stockholders and Proxy
Statement, each dated April 2, 1997, and appoints Thomas M.
Loarie and Mark D. Fischer-Colbrie, or either of them, as
X proxies and attorneys-in-fact with full power to each of
substitution, on behalf and in the names of the undersigned,
to represent the undersigned at the 1997 Annual Meeting of
Y Stockholders of KeraVision, Inc. to be held on Tuesday, May
6, 1997 at 9:30a.m., local time, at 48630 Milmont Drive,
Fremont, California, and at any adjournment(s) or
postponements(s) thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then
and there personally present, on the matters set forth on the
reverse side, and in their descretion, upon such other matter
or matters that may properly come before the meeting and any
adjournments(s) thereof.
SEE REVERSE
SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
DETACH HERE KRVF
[X]Please mark
votes as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF THE CLASS II
DIRECTORS TO SERVE FOR A TERM OF THREE YEARS; (2) FOR RATIFICATION OF THE
APPOINMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
<TABLE>
<CAPTION>
<C> <S>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] NOMINEES: 2.to ratify the appointment of [_] [_] [_]
Class II Charles Crocker Ernst & Yound LLP as the Comapny's
Directors Lawrence A. Lehmkuhl independent auditors for the year
ending December 31, 1997.
[_]______________________________________ MARK HERE
For both nominees except as noted above FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
NOTE: This Proxy should be marked, dated, signed by the
stockholder(s) exactly as his or her name appears
hereon, and returned in the enclosed envelope.
Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or
as community property, both should sign.
Signature:_________________________________Date:________________________Signature:_____________________________Date:_______________
</TABLE>
