<PAGE> 1
As filed with the Securities and Exchange Commission on July 13, 1998.
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Registration No. 333
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KERAVISION, INC.
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(Exact name of Registrant as Specified in Its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation or Organization)
77-0328942
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(I.R.S. Employer Identification No.)
48630 MILMONT DRIVE
FREMONT, CA 94538
(510) 353-3000
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(Address, including zip code and telephone number,
including area code, of Registrant's
principal executive offices)
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Thomas M. Loarie
Chairman, President and Chief Executive Officer
KERAVISION, INC.
48630 MILMONT DRIVE
FREMONT, CA 94538
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
Michael W. Hall
Edmund S. Ruffin, Jr.
Stephen B. Thau
VENTURE LAW GROUP
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class Of Maximum Maximum Amount of
Securities to Amount To Be Offering Price Aggregate Registration
be Registered Registered (1) Per Unit (1) Offering Price(1) Fee
- ----------------- -------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C>
Common Stock, 2,565,000 $7.657 $19,640,205 $5,793.86
par value $0.001
</TABLE>
1) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the high and low closing price
of the Common Stock as reported on The Nasdag National Market on
July 7, 1998, pursuant to Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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KERAVISION, INC.
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Common Stock
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The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" on page 5 of this Prospectus for information that
should be considered by prospective investors.
All references herein to "KeraVision" or the "Company" mean
KeraVision, Inc. unless otherwise indicated by the context.
The 2,565,000 shares of KeraVision Common Stock, $0.001 par
value, covered by this Prospectus (the "Shares") are offered for the
account of certain stockholders of the Company (the "Selling
Stockholders"). The Shares are issuable upon conversion of Series B
Convertible Preferred Stock issued to the Selling Stockholders in
connection with a Series B Convertible Stock Purchase Agreement dated as
of June 12, 1998 between the Company and the Selling Stockholders. For
additional information concerning the Shares, see "Issuance of Common
Stock to Selling Stockholders." The Selling Stockholders may sell the
Shares from time to time on the over-the-counter market in regular
brokerage transactions, in transactions directly with market makers or
in certain privately negotiated transactions. See "Plan of
Distribution." Each Selling Shareholder has advised the Company that no
sale or distribution other than as disclosed herein will be effected
until after this Prospectus shall have been appropriately amended or
supplemented, if required, to set forth the terms thereof. The Company
will not receive any proceeds from the sale of the Shares by the Selling
Stockholders.
Each of the Selling Stockholders may be deemed to be an
"Underwriter," as such term is defined in the Securities Act of 1933, as
amended (the "Securities Act").
On July 7, 1998, the last sale price of the Company's Common Stock
on The Nasdaq National Market was $7.938 per share.
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.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions(1) Stockholders(1)
- -------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Per share ...... See Text Above See Text Above See Text Above
Total ..........
</TABLE>
(1) All expenses of registration of the Shares, estimated to be
approximately $1,360,958.70 shall be borne by the Company.
Selling commissions, brokerage fees, any applicable stock transfer
taxes and any fees and disbursements of counsel to the Selling
Stockholders are payable individually by the Selling Stockholders.
The date of this Prospectus is _____, 1998
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. 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.
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 proxy statements, reports and other
information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements, and other
information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the
Commission in Washington, D.C., and at its Regional Offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York
10048; and at the Public Reference Office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the registrant is an
electronic filer and copies of such material may be retrieved from the
Web site (http://www.sec.gov) maintained by the Commission.
Copies of such material can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Company's Common Stock is quoted on The
Nasdaq National Market under the symbol "KERA." Reports, proxy and
information statements and other information about the Company may be
inspected at The Nasdaq National Market, 1735 K Street, N.W.,
Washington, DC 20006-1506.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission
are incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 filed on March 30, 1998 pursuant to Section
13(a) of the Exchange Act. The Company's Annual Report on Form 10-K
contains audited financial statements for the Company's latest fiscal
year ended December 31, 1997.
2. The Company's Definitive Proxy Statement on Form 14A filed
on March 30, 1998 pursuant to Section 14(a) of the Exchange Act.
quarterly period ending on March 31, 1998 filed on May 12, 1998 pursuant
to Section 13 or 15(d) of the Exchange Act.
4. The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A filed on June 27, 1995,
pursuant to Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
All documents filed by the Company 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 of the Common Stock offered
hereby shall be deemed to be incorporated by reference in this
Prospectus. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in
any other subsequently filed document which also is incorporated by
reference herein) modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
The Company will furnish without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, on the
written or oral request of such person, a copy of any or all of the
documents incorporated by reference, other than exhibits to such
documents. Requests should be directed to Chief Financial Officer,
KeraVision, Inc., 48630 Milmont Drive, Fremont, California 94538,
telephone: (510) 353-3000.
THE COMPANY
The Company was founded in 1986 to develop and commercialize
proprietary medical products for the treatment of common vision
problems, including myopia (nearsightedness), hyperopia (farsightedness)
and astigmatism, which in the aggregate are believed to affect one-half
of the world's population. The Company's initial product, the
KeraVision Ring, is designed to reduce or eliminate the need for
eyeglasses or contact lenses to correct myopia by reshaping the
curvature of the cornea of the eye. The KeraVision Ring is composed of
two thin, half-circles that are inserted into the periphery of the
cornea in a simple outpatient procedure. The KeraVision Ring is made
from a common polymer that has been commonly used in intraocular lenses
for cataract surgery since 1952. The KeraVision Ring is designed to be
permanent; however, it can be removed if desired, resulting in a
potentially reversible refractive procedure. The currently available
refractive surgery procedures typically require irreversible cutting or
tissue removal in the central cornea. In addition to being reversible,
other benefits of the KeraVision Ring are expected to include (i) long-
term, convenient correction, (ii) rapid visual recovery, (iii)
predictable results, (iv) a simple, minimally-invasive, out-patient
procedure and (v) a standardized procedure.
The Company's objective is to commercialize the KeraVision Ring
technology for the treatment of common vision problems on a worldwide
basis. In the United States, the Company is currently conducting a
Phase III clinical trial for the treatment of mild myopia (-1.0 to -3.5
diopters). Preliminary results from this clinical trial indicate that
97% of the patients achieved 20/40 or better vision, the legal
requirement in most states to obtain a driver's license without
corrective lenses. To date, the KeraVision Ring has been well tolerated
in patients. The Company intends to submit a pre-market approval
("PMA") application to the FDA in 1998 to allow for the
commercialization of the KeraVision Ring in the U.S. market.
The Company has recently begun enrollment for the expanded Phase
III trial for myopia in the range of -3.5 to -5.0 diopters and myopia in
the range of -0.5 to -1.0 diopters.
The Company received approval to affix the CE mark and begin
commercialization in the European Union on the KeraVision Ring for both
mild and moderate myopia in late November 1996. To date, the Company
has primarily concentrated its selling efforts for the KeraVision Ring
and related instruments in France and Germany. The Company recently
received approval to market its product in Canada.
In April 1997, the Company began a feasibility study outside the
United States using KeraVision Ring technology for the treatment of
hyperopia. In addition, the Company continues its research and analysis
for the application of the KeraVision Ring technology for the treatment
of astigmatism and other common vision problems.
The Company's principal executive offices are located in Fremont,
California. The mailing address and telephone number are: 48630 Milmont
Drive, Fremont, California 94538, telephone: (510) 353-3000.
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should
carefully consider the following Risk Factors in addition to the other
information appearing in or incorporated by reference into this
Prospectus. Statements in this "Risk Factor" section regarding
expectations or future events and certain sections of documents
incorporated by reference (identified with more particularity in such
documents) may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section21E of
the Securities Exchange Act of 1934, as amended. All forward-looking
statements included in this document and incorporated by reference are
based on information available to the Company on the date hereof, and
the Company assumes no obligation to update any such forward-looking
statements. Actual results could differ materially from those projected
in the forward-looking statements as a result of the factors set forth
below and elsewhere in this document and in any documents incorporated
by reference.
Early Stage of Product Development; Operating Losses; Uncertainty of
Product Development and Future Revenue
KeraVision, founded in 1986, has only recently completed
development of one product for sale in Europe, has generated only
limited revenues to date and is continuing to develop its products for
the United States market. Accordingly, the Company is subject to the
uncertainties and risks associated with any company developing products
and beginning its sales efforts. The Company has experienced
significant operating losses every year since its incorporation. Such
losses have resulted principally from costs incurred in research and
development and clinical trials for the KeraVision Ring. The Company
expects to incur substantial and increasing operating losses for at
least the next year and until sufficient revenue and margin can be
generated to offset expenses. The amount of net losses and the time
required by the Company to reach profitability are highly uncertain.
There can be no assurance that the Company will be able to generate
product revenue or achieve profitability on a sustained basis or at all.
To obtain significant revenues, the Company, alone or with others,
must successfully develop, obtain regulatory approval for, manufacture
and market products. The time frame for achievement of market success
for any products and potential products is long and uncertain. The
KeraVision Ring will require additional clinical studies and significant
investment of capital prior to commercialization in the United States.
Although the Company has received approval to market one product in the
European Union and Canada, there can be no assurance that the Company's
research and development efforts will be successfully completed and
there can be no assurance that the KeraVision Ring will perform in the
manner anticipated, or that results observed in clinical trials will be
experienced in long-term use of the KeraVision Ring. There can be no
assurance that the KeraVision Ring will prove to be safe or effective
over the long term in correcting vision, that the product will be
approved for marketing by the FDA or any other government agency or that
the KeraVision Ring or any other product developed by the Company will
be commercially successful.
Government Regulation and Need for Product Approvals
The research, manufacture, sale and distribution of medical
devices such as the KeraVision Ring is subject to regulations imposed by
numerous governmental authorities, principally the FDA and corresponding
state and foreign agencies. The regulatory process is lengthy,
expensive and uncertain. Prior to commercial sale in the United States,
most medical devices, including the Company's KeraVision Ring, must be
cleared or approved by the FDA. Securing FDA approvals and clearances
will require the submission to the FDA of extensive clinical data and
supporting information. Current FDA enforcement policy strictly
prohibits the marketing of medical devices for uses other than those for
which the product has been approved or cleared. Product approvals and
clearances can be withdrawn for failure to comply with regulatory
standards or the occurrence of unforeseen problems following initial
marketing. FDA approval will be required for commencement of any
additional clinical studies for other product indications, which must be
conducted prior to applying for FDA approval to market the KeraVision
Ring in the United States. Although the Company believes that it will
submit a PMA application to the FDA in mid-1998, there can be no
assurance that such submission will be timely made by the Company or
accepted by the FDA for filing. Failure to obtain required FDA or non-
European regulatory agency approvals would prevent the Company from
marketing the KeraVision Ring in the jurisdiction regulated by such
agency.
Significant unforeseen delays in the approval process could occur
as a result of determinations by the FDA that the clinical data
collected are insufficient to support the safety and efficacy of one or
more of the devices for their intended uses, the FDA's failure to
schedule advisory review panels, changes in FDA guidelines, FDA
procedures, regulations or administrative interpretations. Delays in
obtaining requisite regulatory approvals, or the failure to obtain
required clearances or approvals in the United States and other
countries, would adversely affect or prevent the marketing of the
KeraVision Ring, impair the Company's ability to generate funds from
operations, and may furnish a competitive advantage to other companies
that compete with the Company. The Company may also be required to
demonstrate that the KeraVision Ring represents an improved form of
treatment over existing alternatives and/or that the expected benefits
of the KeraVision Ring outweigh any of the risks associated with its
use. There can be no assurance that the Company will be able to obtain
required approvals or clearances in the United States or certain foreign
countries for the intended use of the KeraVision Ring or any other of
its potential products.
If the KeraVision Ring is approved for the correction of myopia,
it may be subject to additional post-market testing and surveillance
programs required by the regulatory agencies. As the developer of the
KeraVision Ring, the Company is required to meet the Quality System
Regulation ("QSR") which includes extensive testing, control,
documentation and other quality assurance procedures and standards. The
Company would be required to adhere to additional FDA requirements for
the development and distribution of the KeraVision Ring. The Company
will be required to engage in extensive recordkeeping and reporting, and
possibly to conduct extensive post-market surveillance or other device
follow-up. Ongoing compliance with the QSR, labeling and other
applicable regulatory requirements are monitored through periodic
inspections by state and federal agencies, including the FDA, and
comparable agencies in other countries. In addition, regulatory
approval of devices is generally required in many foreign countries. For
example, the Company has obtained the right to affix the CE marking to
the KeraVision Ring in Europe. Failure to comply with the applicable
regulatory requirements can, among other things, result in the loss of
the CE marking, fines, injunctions, civil penalties, suspensions or
withdrawal of regulatory approvals, product recalls, product seizures,
including cessation of manufacturing and sales, operating restrictions
and criminal prosecution, and could have a material adverse effect on
the Company's business, financial condition and results of operations.
Sales of medical devices outside the United States are subject to
foreign regulatory requirements that vary widely from country to
country. The time required to obtain approvals required by foreign
countries may be longer or shorter than that required for FDA approval,
and requirements for licensing may differ from FDA requirements. Export
sales of investigational devices that have not received FDA marketing
approval may be subject to FDA export permit requirements. Failure to
comply with regulatory requirements could have a material adverse effect
on the Company's business, financial condition and results of
operations.
All of the above described government regulation and product
approval risks will apply to the KeraVision Ring and any future
potential product of the Company. Government regulation may become more
restrictive in the future. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws
and regulations in the future or that such laws and regulations will not
have a material adverse effect upon the Company's ability to conduct
business.
Need for Market Acceptance of the KeraVision Ring and Other Products;
Limitations on Potential Market
The Company's future performance will depend to a substantial
degree upon market acceptance of, and the Company's ability to
successfully manufacture, market, deliver and support, the KeraVision
Ring and related products. The extent of, and rate at which, market
acceptance and penetration are achieved by the KeraVision Ring and
future products is a function of many variables including, but not
limited to, price, safety, efficacy, reliability and marketing and sales
efforts, as well as general economic conditions affecting purchasing
patterns.
To be successful, the Company's KeraVision Ring will have to be
accepted by ophthalmic surgeons as well as patients. To date, the
Company's product has been sold primarily in France and Germany, and has
thus far received only limited acceptance and generated only limited
revenues. Many surgeons in these countries and throughout the world may
have already invested significant time and resources in developing
expertise in other corrective ophthalmic surgical techniques, and there
are currently no implantable corneal devices being marketed and sold to
treat refractive problems. Accordingly, there can be no assurance that
the KeraVision Ring or any future product will achieve or maintain
acceptance in their target markets. Similar risks may confront other
products developed by the Company in the future.
The Company's target market is limited to patients who have mild
to moderate myopia without significant astigmatism and there can be no
assurance that even this target population will prefer refractive
surgery to current and future alternatives for visual correction. In
addition to the degree of myopia, the Company believes that the
potential market for the KeraVision Ring may be further limited by the
inability of some patients to afford the procedure and the psychological
aversion of some patients to refractive surgery. The Company also
expects that the market will be affected by the relative attractiveness
and affordability of other refractive surgical techniques.
Lack of Long-Term Follow-Up Data; Complications and Visual Side Effects
The KeraVision Ring technology is relatively new technology. The
Company has therefore developed only limited clinical data to date on
the safety and efficacy of the KeraVision Ring in correcting myopia, and
has not yet developed any long-term safety or efficacy data. The first
procedure for the treatment of myopia using the KeraVision Ring was
performed in 1991, and to date only 1,371 procedures (excluding
commercial procedures conducted in Europe) have been conducted. The
KeraVision Ring is in United States Phase II and Phase III clinical
trials, and it cannot yet be determined if the KeraVision Ring will
prove to be effective for the predictable treatment of myopia. There
can be no assurance that the clinical trial results are necessarily
indicative of long-term results that will be achieved with the
KeraVision Ring in terms of both safety and efficacy.
All surgical procedures, including the KeraVision Ring procedure,
involve some inherent risk of complications. Certain complications have
been observed in a small number of patients who have received the
KeraVision Ring, but no patient has suffered any serious or lasting
injury to the eye or any material loss of either uncorrected or best
corrected visual acuity. The complications include, among other things:
induced astigmatism, infection, decentered placement and a temporary
reduction in central corneal sensation. In addition, patients
undergoing the KeraVision Ring procedure have reported certain visual
side effects. These include glare, haloes and other visual symptoms.
Although the Company believes these complications and visual side
effects have been observed in other ophthalmic surgeries and that the
KeraVision Ring complications and visual side effects may be mitigated,
no assurance can be given that these or other complications or side
effects will not be serious or lasting or will not impair or preclude
the Company from obtaining regulatory approval for its potential
products or the acceptance of the product by patients or
ophthalmologists.
Reliance on a Single Product
The Company has concentrated its efforts primarily on the
development of the KeraVision Ring for the correction of myopia and will
be dependent upon the successful development of that product to generate
revenues. The Company has performed only limited research on other
applications of the KeraVision Ring technology. There can be no
assurance that the KeraVision Ring technology will prove safe and
effective in vision correction, or that if proven safe and effective,
the technology will be successfully commercialized.
Dependence on Patents and Proprietary Technology
The Company has depended and will continue to depend substantially
on its technological expertise in the development and manufacture of the
KeraVision Ring and any other potential products. In addition, the
commercial success of the Company will depend in part on acquiring and
maintaining patent and trade secret protection with respect to the
KeraVision Ring technology, the KeraVision Ring and any other potential
products the Company seeks to develop. The Company currently has 180
pending patent applications worldwide and has been awarded 18 United
States patents and 24 foreign patents. There can be no assurance that
the Company will be successful in obtaining necessary patents or license
rights, that the Company's patent applications will result in the
issuance of patents, that the Company will develop additional
proprietary technology that is patentable, that any issued patents will
provide the Company with any competitive advantages or will withstand
challenges by third parties or that patents of others will not have an
adverse effect on the Company. A large company with refractive surgery
products and substantial resources holds a United States patent covering
a method for changing the curvature of the cornea by inserting a solid
ring in the cornea. Because this method requires the use of a solid
ring, it necessitates a continuous 360 degree incision around the entire
central zone of the cornea. A major United States university holds two
United States patents, one issued in 1992 and the other in 1994,
covering a method for changing the curvature of the cornea by injecting
hydrogel material into separated layers of the corneal tissue. The
Company believes the university may be seeking to commercialize this
technology. The Company does not believe it is infringing any of such
patents. Except as noted above, the Company is not aware of any other
commercial entity involved in intrastromal KeraVision Ring development,
although it is aware of ongoing academic research on both solid and
injectable forms of corneal inserts. There can be no assurance that
others will not independently develop similar products, duplicate the
Company's products or design products that circumvent any patents used
by the Company. No assurance can be given that the Company's processes
or products will not infringe patents or proprietary rights of others or
that any licenses required under any such patents or proprietary rights
would be made available on terms acceptable to the Company, if at all.
If the Company does not obtain such licenses, it could encounter delays
in product introductions while it attempts to design around such
patents, or it could find that the development, manufacture or sale of
products requiring such licenses could be enjoined. In addition, the
Company could incur substantial costs in defending itself in suits
brought against the Company on such patents or in bringing suits to
protect the Company's patents against infringement. If the outcome of
any such litigation is adverse to the Company, the Company's business
could be adversely affected. To determine the priority of inventions,
the Company may have to participate in proceedings before the U.S.
Patent and Trademark Office, which could result in substantial cost to
the Company and/or be decided adversely to the Company. The Company
currently is a party in an interference to determine the priority of
inventions relating to technology for forming corneal channels in which
an implant or implants may be placed. No assurances can be made that
the interference will be resolved favorable to the Company. However,
settlement discussions are in progress and the Company believes the
interference may settle.
The Company also relies on trade secrets and proprietary know-how
which it seeks to protect by confidentiality agreements with its
employees, consultants, investigators and advisors. There can be no
assurance that these agreements will not be breached, that the Company
will have adequate remedies for any breach, or that the Company's trade
secrets and proprietary know-how will not otherwise become known or be
independently discovered by competitors.
Limited Sales or Marketing Experience
The Company has only recently begun selling product in Europe,
primarily in France and Germany, and there are no implantable corneal
devices currently being marketed and sold to treat refractive problems.
The Company intends to market and sell the KeraVision Ring and related
technology through a direct sales force or a combination of a direct
sales force and distributors in certain additional foreign countries and
in the United States if and when required regulatory authorization is
obtained. Establishing sufficient marketing and sales capability will
require significant resources. There can be no assurance that the
Company will be able to recruit and retain skilled sales management,
direct salespersons or distributors, or that the Company's sales effort
will be successful. To the extent that the Company enters into
distribution arrangements for the sale of its products, the Company will
be dependent on the efforts of third parties. There can be no assurance
that such efforts will be successful.
International Sales and Operations Risks
The Company is currently selling the KeraVision Ring to customers
primarily in France and Germany. In addition, the Company may begin
manufacturing or operating activities outside of the United States. A
number of risks are inherent in international transactions.
International sales and operations may be limited or disrupted by the
imposition of the regulatory approval process, government controls,
export license requirements, political instability, price controls,
trade restrictions, changes in tariffs or difficulties in staffing and
managing international operations. Foreign regulatory agencies have or
may establish product standards different from those in the United
States and any inability to obtain foreign regulatory approvals on a
timely basis could have an adverse effect on the Company's international
business and its financial condition and results of operations.
Additionally, the Company's business, financial condition and results of
operations may be adversely affected by fluctuations in currency
exchange rates, increases in duty rates and difficulties in obtaining
export licenses. The impact of future exchange rate fluctuations cannot
be predicted adequately. To date, the Company has not found it
necessary to hedge the risk associated with fluctuations in exchange
rates. However, it is possible that the Company may undertake such
transactions in the future. There can be no assurance that any hedging
techniques implemented by the Company will be successful or that the
Company's results of operations will not be materially adversely
affected by exchange rate fluctuations. There can be no assurance that
the Company will be able to successfully commercialize the KeraVision
Ring or any future product in any foreign market.
Limited Manufacturing Experience; Dependence on Third Parties
The Company has limited volume manufacturing capacity and
experience in manufacturing medical devices or other products. To be
successful, the Company's products and potential products must be
manufactured in commercial quantities in compliance with regulatory
requirements at acceptable costs. Production of commercial-scale
quantities may involve technical challenges for the Company.
Establishing its own manufacturing capabilities would require
significant scale-up expenses and additions to facilities and personnel.
The Company may consider seeking collaborative arrangements with other
companies to manufacture certain of its products and potential products,
including the KeraVision Ring. In addition, the manufacturer of the
Company's products and potential products will be subject to periodic
inspection by regulatory authorities. Any such operations must undergo
QSR compliance inspections conducted by the FDA and equivalent
inspections, such as CE mark audits, conducted by state and foreign
officials. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals on a timely basis or at all.
Delays in receipt of or failure to receive such approvals or loss of
previously received approvals would have a material adverse effect on
the Company's business, financial condition and results of operations.
There can be no assurance that the Company will be able to develop
commercial-scale manufacturing capabilities at acceptable costs or enter
into agreements with third parties with respect to these activities.
When the Company is dependent upon third parties for the manufacture of
its products and proposed products, then the Company's profit margins
and its ability to develop and deliver such products on a timely basis
may be adversely affected. Moreover, there can be no assurance that
such parties will adequately perform and any failures by third parties
may delay the submission of products for regulatory approval, impair the
Company's ability to deliver products on a timely basis, or otherwise
impair the Company's competitive position.
Intense Competition and Rapid Technological Change
The Company is engaged in a rapidly evolving field. There are
many companies, both public and private, universities and research
laboratories engaged in activities relating to research on vision
correction alternatives, including laser assisted in situ keratamileusis
("LASIK"), photorefractive radial keratotomy ("PRK"), radial keratotomy
("RK"), implantable contact lens ("ICL"), Automated Lamellar
Keratoplasty ("ALK") and refractive intraocular lenses. Competition
from these companies, universities and laboratories is intense and
expected to increase. Two companies, Summit Technology and VISX, have
received approval in the United States to market their products using
PRK applications. In addition to Summit Technology and VISX, there are
a number of other entities that currently market and sell laser systems
overseas for use in refractive surgery, including Aesculap-Meditec GmBH
(Germany), Autonomous Technologies Corporation (United States), Chiron-
Technolas (Germany), LaserSight, Inc. (United States), Nidek (Japan) and
Schwind (Germany). Many of these companies and institutions have
substantially greater resources, research and development staffs,
facilities, experience in research and development, obtaining regulatory
approval and manufacturing and marketing medical device products than
the Company, and represent significant long-term competition for the
Company. In addition to those mentioned above, other recently developed
technologies or procedures are, or may in the future be, the basis of
competitive products. There can be no assurance that the Company's
competitors will not succeed in developing technologies, procedures or
products that are more effective or economical than those being
developed by the Company or that would render the Company's technology
and proposed product obsolete or noncompetitive. Furthermore, if the
Company is permitted to commence commercial sales of products, it will
also be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which the Company has no experience. Finally,
the Company intends to market its proposed products to people whose
vision can be corrected with eyeglasses or contact lenses. There can be
no assurance that these persons will elect to undergo surgical insertion
of the KeraVision Ring when such non-surgical vision-correction
alternatives are available.
Risk of Product Liability Litigation; Potential Unavailability of
Insurance
The testing, manufacture, marketing and sale of medical devices
entail the inherent risk of liability claims or product recalls. As a
result, the Company faces a risk of exposure to product liability claims
and/or product recalls in the event that the use of its KeraVision Ring
or other future potential products are alleged to have resulted in
serious adverse effects. In this regard, an individual who was formerly
enrolled as a patient in one of the Company's clinical trials has filed
a complaint alleging that he has suffered serious adverse effects due to
his participation in such trial. While the Company has taken, and
intends to continue to take, what it believes are appropriate
precautions to minimize exposure to this and other product liability
claims, there can be no assurance that it will avoid significant
liability. The Company currently maintains, product liability insurance
in the amount of $4.0 million. There can be no assurance that adequate
insurance coverage will continue to be available at an acceptable cost,
if at all, before or after commercialization of any of its products.
Consequently, a product liability claim, product recall or other claims
with respect to uninsured liabilities or in excess of insured
liabilities could have a material adverse effect on the business or
financial condition of the Company. See "Business Product Liability
Insurance."
Future Capital Requirements and Uncertainty of Future Funding
The Company will be required to commit substantial resources to
conduct the research and development, clinical studies and regulatory
activities necessary to bring any potential medical device products to
market and to establish production, marketing and sales capabilities.
There can be no assurance that the Company's current cash, cash
equivalents and available-for-sale investments will be sufficient to
fund the Company's operations to profitability or through completion of
the current United States Phase III clinical trial for the KeraVision
Ring for the treatment of mild myopia. The Company will need to raise
substantial additional funds for these purposes. The Company may seek
such additional funding through collaborative arrangements with
corporate partners and through public or private debt or equity
financings. Any additional equity financing may be dilutive to
stockholders, and any debt financing, if available, may involve
restrictions on the Company's ability to pay dividends on its capital
stock or the manner in which the Company conducts its business. The
Company currently has no commitments for any additional financings, and
there can be no assurance that any such financings, if needed, will be
available to the Company or that adequate funds for the Company's
operations, whether from the Company's revenues, financial markets,
collaborative or other arrangements with corporate partners or from
other sources, will be available when needed or on terms attractive to
the Company. The inability to obtain sufficient funds may require the
Company to delay, scale back or eliminate some or all of its research
and product development programs, clinical studies and/or regulatory
activities or to license third parties to commercialize products or
technologies that the Company would otherwise seek to develop itself.
Dependence on Sole Source Supplier
The raw materials used in manufacturing the KeraVision Ring and
several instruments are currently purchased from single sources.
Although the Company has not experienced difficulty acquiring this
material for the manufacture of its products for clinical trials, no
assurance can be given that interruptions in supplies will not occur in
the future or that the Company would not have to obtain substitute
vendors, which would require additional regulatory submissions. Any
such interruption of supply could have a material adverse effect on the
Company's ability to manufacture its products which could have a
material adverse effect on the Company's business, financial condition
or results of operations.
Dependence on and Need for Additional Key Personnel
The success of the Company and of its business strategy is
dependent in large part on the ability of the Company to attract and
retain key management, scientific and operating personnel. Such persons
are in high demand and are often subject to competing employment offers.
The Company will need to develop expertise and add skilled personnel or
retain consultants in such areas as research and development, clinical
testing, government approvals, sales, marketing and manufacturing in the
future. There can be no assurance that the Company will be able to
attract and retain the qualified personnel or develop the expertise
needed for its business. The Company currently has a small research and
management group with limited operating experience. The loss of the
services of one or more members of the research or management group or
the inability to hire additional personnel and develop expertise as
needed could have a material adverse effect on the Company.
Impact of Year 2000
Based on a recent assessment, the Company determined that it will
be required to modify a small portion of its software so that its
computer systems will function properly with respect to dates in the
year 2000 and thereafter. The Company determined that most of its
currently employed software is already Year 2000 compliant. The Company
presently believes that, with the required slight modifications, the
Year 2000 issue will not pose significant operational problems for its
computer systems.
The Company has initiated communications with key suppliers to
determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year
2000 issues. The Company is currently communicating with suppliers and
customers to determine their exposure to the Year 2000 issue. There can
be no guarantee that the systems of other companies on which the
Company's systems rely will be converted in a timely fashion and would
not have an adverse effect on the Company's systems.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders pursuant to this registration
statement.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation, as amended, limits the
liability of directors and officers for monetary damages arising from
breach of their fiduciary duty of care to the fullest extent permissible
under Delaware law, provided that such liability does not arise from
certain proscribed conduct (including intentional misconduct and breach
of the duty of loyalty). The Company's Bylaws further provide for
indemnification of directors, officers, employees and corporate agents
to the maximum extent permitted by the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements
with its officers and directors and maintains director and officer
liability insurance.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
persons controlling the registrant pursuant to the foregoing provisions,
the Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On June 12, 1998, the Company issued and sold to, or to entities
affiliated with, Sprout Group, Johnson & Johnson Development
Corporation, GMI/DRI Investment Trust, and Special Situations Fund (the
"Selling Stockholders"), pursuant to the terms of a Series B Convertible
Preferred Stock Purchase Agreement, 562,500 shares of the Company's
Series B Convertible Preferred Stock (the "Series B Shares") at $32.00
per share. The Series B Shares are entitled to receive quarterly
dividends at the rate of seven percent (7%) per annum, payable, at the
election of the Company, in either cash or additional Series B Shares,
as described in the Certificate of Designation of Rights, Preferences
and Privileges of Series B Convertible Preferred Stock (the "Certificate
of Designation"). Each Series B Share is convertible into Common Stock
at $8.00 per share. The Series B Shares are convertible at the
Company's option after two years if the price of the Company's Common
Stock exceeds $16.00 per share. The conversion rate is subject to
adjustment in the event of certain circumstances described in the
Certificate of Designation, including if the then-current value of the
Common Stock is below $8.00 per share on June 12, 2000. The Series B
Shares are redeemable at the option of the holders after five (5) years.
This Prospectus covers 2,565,000 shares of the Company's Common Stock
issuable to the Selling Stockholders upon conversion of the 562,500
Series B Shares issued and sold to the Selling Stockholders on June 12,
1998, and 78,750 Series B Shares that may be issued to the Selling
Stockholders as dividends in the two-year period ending on June 12,
2000.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell the Shares in whole or in part,
from time to time on the over-the-counter market at prices and on terms
prevailing at the time of any such sale. Any such sale may be made in
broker's transactions through broker-dealers acting as agents, in
transactions directly with market makers or in privately negotiated
transactions where no broker or other third party (other than the
purchaser) is involved. The Selling Stockholders will pay selling
commissions or brokerage fees, if any, with respect to the sale of the
Shares in amounts customary for the type of transaction effected. Each
Selling Shareholder will also pay all applicable transfer taxes and all
fees and disbursements of counsel for such Selling Shareholder incurred
in connection with the sale of shares.
The Selling Stockholders, and any other persons who participate in
the sale of the Shares, may be deemed to be "Underwriters" as defined in
the Securities Act. Any commissions paid or any discounts or
concessions allowed to any such persons, and any profits received on
resale of the Shares, may be deemed to be underwriting discounts and
commissions under the Securities Act.
The Company has agreed to maintain the effectiveness of this
Registration Statement for a period of (2) years commencing on June 12,
1998, or with respect to any Selling Shareholder, until such time as
Rule 144 of the Securities Act or another similar exemption under the
Securities Act is available for the sale of all such Selling
Shareholder's shares during a three (3) month period without
registration. The Company has certain rights to refuse the sale of
securities pursuant to this Registration Statement to prevent violation
of the federal securities laws. No sales may be made pursuant to this
Prospectus after such date unless the Company amends or supplements this
Prospectus to indicate that it has agreed to extend such period of
effectiveness.
The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities
Act.
SELLING STOCKHOLDERS
The following table sets forth certain information as of July 7, 1998,
as of which date 12,699,908 shares of the Company's Common Stock were issued
and outstanding, with respect to the Selling Stockholders. Information with
respect to beneficial ownership is base upon information contained in filings
made by certain Selling Stockholders with the Securities and Exchange
Commission, and information obtained from the Company's transfer agent and
certain of the Selling Stockholders.
<TABLE>
<CAPTION>
Shares Beneficially Shares of Shares Beneficially
Name of Selling Owned Prior Common Srock Owned After
Stockholders to the Offering(1) Offerred Hereby(1) to the Offering(1)(2)
------------------- --------------------- ------------------ ---------------------
Number Percent Number Percent
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
The Sprout Group (3) 1,710,000 11.2 1,710,000 0 *
3000 Sand Hill Road
Menlo Park, California
94025
Johnson & Johnson 427,500 2.8 427,500 0 *
Develpoment Corporation
One Johnson & Johnson
Plaza
New Brunswick, New Jersey
08933
GMI/DRI Investment Trust 142,500 * 142,500 0 *
P.O. Box 1113
Minneapolis, Minnesota
55440
Special Situtations Fund(4) 285,000 1.9 285,000 0 *
153 E 53rd Street
New York, New York 10022
__________________________
* Less than 1%
</TABLE>
(1) The shares of Common Stock that are set forth in this table
represent the number of shares of Common Stock issuable upon
conversion of the Series B Shares issued and sold to the Selling
Stockholders on June 12, 1998, and Series B Shares that may be
issued to the Selling Stockholders as dividends in the two-year
period ending on June 12, 2000.
(2) Assumes sale of all Shares offered hereby and no other purchases
or sales of the Company's Common Stock. See "Plan of
Distribution."
(3) Includes shares held by DLJ Capital Corporation, DLJ ESC II, L.P.,
Sprout Venture Capital, L.P. and The Sprout CEO Fund, L.P.
Kathleen D La Porte, general partner of the Sprout Group, is a
member of the Company's Board of Directors.
(4) Includes shares held by Special Situations Private Equity Fund,
L.P., Special Situations Fund III, L.P. and Special Situations
Cayman Fund, L.P.
Except as disclosed in footnote (3), no Selling Shareholder has
had any material relationship with the Company or any of its
predecessors or affiliates within the last three years.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance
of the Common Stock offered hereby will be passed upon for the Company
by Venture Law Group, A Professional Corporation, 2800 Sand Hill Road,
Menlo Park, California 94025. As of the date of this Registration
Statement, certain directors of Venture Law Group beneficially own
12,470 shares of the Registrant's Common Stock.
EXPERTS
The consolidated financial statements of KeraVision, Inc.
appearing in KeraVision, Inc.'s Annual Report (Form 10-K) for the year
ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of the Registration Statement
on Form S-3 (herein, together with all amendments and exhibits, referred
to as the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the
Securities Act. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the shares of
Common Stock offered hereby, reference is hereby made to the
Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of such
document filed with the Commission.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale and distribution of the Common
Stock being registered. Selling commissions and brokerage fees and any
applicable transfer taxes and fees and disbursements of counsel for the
Selling Stockholders are payable individually by the Selling Stockholders.
All amounts are estimated except the registration fee.
Amount
To Be Paid
Registration Fee....................................... $5,958.70
Legal Fees and Expenses................................ $50,000
Accounting Fees and Expenses........................... $5,000
Fees of Cowen & Company in connnection with the
Private Placement and related transactions........ $1,300,000
Total......................................... $1,360,958.70
Item 15. Indemnification of Directors and Officers
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation, as amended, limits the
liability of directors and officers for monetary damages arising from
breach of their fiduciary duty of care to the fullest extent permissible
under Delaware law, provided that such liability does not arise from
certain proscribed conduct (including intentional misconduct and breach
of the duty of loyalty). The Company's Bylaws further provide for
indemnification of directors, officers, employees and corporate agents
to the maximum extent permitted by the Delaware General Corporation Law.
In addition, the Company has entered into indemnification agreements
with its officers and directors and maintains director and officer
liability insurance.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
persons controlling the registrant pursuant to the foregoing provisions,
the Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits
Exhibit
Number Description of Exhibit
3.6 Certificate of Designation of Rights, Preferences and Privileges of
Series B Convertible Preferred Stock of KeraVision, Inc.
5.1 Opinion of Venture Law Group, A Professional Corporation
10.25 Series B Convertible Preferred Stock Purchase Agreement dated as of
June 12, 1998
10.26 Investors' Rights Agreement dated as of June 12, 1998
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.3 Power of Attorney (see Pages II-3 to II-4)
___________________________
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
referred to in Item 15 above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filling on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California on the 13th day of
July 1998.
KERAVISION, INC.
By: /s/Thomas M. Loarie
Thomas M. Loarie
President, Chief Executive Officer
and Chairman of the Board of
Directors
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, Thomas M. Loarie and Mark
Fishcher-Colbrie, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution, for him in any and
all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all
amendments to said Registration Statement. Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed
by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacities Date
- -------------------------- ----------------------------------- -----------------
<S> <C> <C>
/s/ Thomas Loarie President, Chief Executive Officer July 13, 1998
- ---------------------------and Chairman of the Board of
(Thomas M. Loarie) Directors
(Principal Executive Officer)
/s/ Mark Fischer-Colbrie Vice President, Finance and July 13, 1998
- --------------------------- Administration, Chief Financial
(Mark Fischer-Colbrie) Officer, and Assistant
Secretary (Principal Financial
and Accounting Officer)
/s/ Charles Crocker Director July 13, 1998
- ---------------------------
(Charles Crocker)
/s/ John R. Gilbert Director July 13, 1998
- ---------------------------
(John R. Gilbert)
/s/ Lawrence Lehmkuhl Director July 13, 1998
- ---------------------------
(Lawrence Lehmkuhl)
/s/ Kshitij Mohan Director July 13, 1998
- ---------------------------
(Kshitij Mohan)
/s/ Arthur M. Pappas Director July 13, 1998
- ---------------------------
(Arthur M. Pappas)
/s/ Steven N. Weiss Director July 13, 1998
- ---------------------------
(Steven N. Weiss)
</TABLE>
KERAVISION, INC.
INDEX TO EXHIBITS
Exhibit
Number
Description of Exhibit
3.6 Certificate of Designation of Rights, Preferences and Privileges of
Series B Convertible Preferred Stock of KeraVision, Inc.
5.1 Opinion of Venture Law Group, A Professional Corporation
10.25 Series B Convertible Preferred Stock Purchase Agreement dated as of
June 12, 1998
10.26 Investors' Rights Agreement dated as of June 12, 1998
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.3 Power of Attorney (see Page II-3)
EXHIBIT 3.6
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES B CONVERTIBLE PREFERRED STOCK OF KERAVISION, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
We, Mark Fischer-Colbrie and Michael W. Hall, the Vice President,
Finance and Administration and Chief Financial Officer and the
Secretary, respectively, of KeraVision, Inc., a Delaware corporation
(the "Corporation"), in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the said Corporation,
the Board of Directors on June 9, 1998 adopted the following resolution
creating a series of shares of Preferred Stock designated as Series B
Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Certificate of Incorporation, the
Board of Directors does hereby provide for the issue of a Series of
Preferred Stock, $0.001 par value, of the Corporation, to be designated
"Series B Convertible Preferred Stock", initially consisting of Six
Hundred and Sixty Two Thousand Five Hundred (662,500) shares and to the
extent that the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of
the Series B Convertible Preferred Stock are not stated and expressed in
the Certificate of Incorporation, does hereby fix and herein state and
express such designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings
provided therein):
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series B Participating Preferred Stock", par
value $0.001 per share, and the number of shares constituting such
series shall be Six Hundred Sixty Two Thousand and Five Hundred
(662,500).
Section 2. Dividends and Distributions. Subject to the rights of
series of Preferred Stock which may from time to time come into
existence, the holders of shares of Series B Convertible Preferred Stock
shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof
to receive, directly or indirectly, additional shares of Common Stock of
the Corporation) on the Common Stock of the Corporation, payable on the
last day of the Corporation's fiscal quarter in which any dividend is
declared, when, as and if declared by the Board of Directors, at the
rate of $2.24 per share (as adjusted for stock splits and combinations)
per annum, payable, at the election of the Corporation, in either cash
or shares of Series B Convertible Preferred Stock, the number of shares
of which shall equal the amount of any such dividend divided by the
product of (i) the average closing price of the Company's Common Stock
on the Nasdaq National Market for each of the twenty (20) trading days
prior to the declaration of such dividend multiplied by (ii) four (4).
Such dividends shall accrue on each share from June 12, 1998 and shall
accrue from day to day, whether or not earned or declared. Such
dividends shall be paid as soon as practicable at the end of each
quarter in either cash or shares of Series B Convertible Preferred Stock
as described above. Without limiting the foregoing, such dividends
shall be cumulative so that, if such dividends in respect of any current
quarterly dividend period, at the annual rate specified above, shall not
have been paid the deficiency shall first be fully paid before any
dividend or other distribution shall be paid on or declared and set
apart for the Common Stock. Any accumulation of dividends on the
Series B Convertible Preferred Stock shall not bear interest.
Cumulative dividends with respect to a share of Series B Convertible
Preferred Stock which are accrued, payable and/or in arrears shall, upon
conversion of such share to Common Stock, subject to the rights of
series of Preferred Stock which may from time to time come into
existence, be paid to the extent assets are legally available therefor
and any amounts for which assets are not legally available shall be paid
promptly as assets become legally available therefor; any partial
payment will be made pro rata among the holders of such shares. In the
event that the holders of the Corporation's Common Stock are entitled to
receive any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof
to receive, directly or indirectly, additional shares of Common Stock of
the Corporation), the holders of Series B Convertible Preferred Stock
shall be entitled to receive such dividend as if the shares of Series B
Convertible Preferred Stock had converted to Common Stock immediately
prior to the declaration of such dividend.
Section 3. Liquidation and Merger Preference.
(A) Liquidation, Dissolution or Winding Up. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation (a "Liquidation"), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B Convertible
Preferred Stock unless, prior thereto, the holders of shares of Series B
Convertible Preferred Stock shall have received an amount equal to
accrued and unpaid dividends and distributions thereon (the "Accrued
Dividends"), whether or not declared, to the date of such payment, plus
an amount equal to $32 per share (as adjusted for stock splits and
combinations) and, in the event such payment is made on or before June
12, 2000, an amount equal to $4.48 per share, less (i) the Accrued
Dividends and (ii) dividends previously paid pursuant to Section 2 above
(other than pursuant to the last sentence of Section 2), provided that,
in the event of a Change in Control (as defined in Section 3(B)(i)
below) in which the value of the consideration received by the holders
of the Common Stock of the Corporation exceeds $16 per share (as
adjusted for stock splits and combinations and as determined pursuant to
Section 3(B)(ii) below), then the holders of Preferred Stock shall
receive only the Accrued Dividends plus $32 per share (as adjusted for
stock splits and combinations), and provided further that in the event
the Corporation does not have sufficient assets, subject to the rights
of series of Preferred Stock which may from time to time come into
existence, the amount required to be paid under this Section 3 shall
equal the value of the amount of available assets divided by the number
of outstanding shares of Series B Convertible Preferred Stock (the
"Series B Liquidation Preference").
(B) Certain Acquisitions.
(i) Deemed Liquidation. For purposes of this
Section 3, a Liquidation shall be deemed to occur if the Corporation
shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any other transaction or series of
related transactions that results in the transfer of fifty percent (50%)
or more of the outstanding voting power of the Corporation or in which
the stockholders of the Corporation immediately prior to such
transaction or series of transactions own less than fifty percent (50%)
of the Corporation's voting power immediately after such transaction or
series of transactions (a "Change in Control").
(ii) Valuation of Consideration. In the event of a
Change in Control, if the consideration received by the Corporation is
other than cash, its value will be deemed its fair market value as
determined in good faith by the Corporation's Board of Directors.
Notwithstanding the foregoing, any securities shall be valued as
follows:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability:
(1) If traded on a securities exchange
or The Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange over
the thirty (30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
(3) If there is no active public market,
the value shall be the fair market value thereof, as determined in good
faith by the Corporation's Board of Directors.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability
(other than restrictions arising solely by virtue of a stockholder's
status as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above in
Section 3(B)(ii)(A) to reflect the approximate fair market value
thereof, as determined in good faith by the Corporation's Board of
Directors.
(iii) Notice of Transaction. The Corporation shall
give each holder of record of Series B Convertible Preferred Stock
written notice of such impending transaction not later than ten business
(10) days prior to the stockholders' meeting called to approve such
transaction, or ten business (10) days prior to the closing of such
transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 3, and the
Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner
than ten business (10) days after the Corporation has given the first
notice provided for herein or sooner than ten business (10) days after
the Corporation has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the
written consent of the holders of Preferred Stock that are entitled to
such notice rights or similar notice rights and that represent at least
a majority of the voting power of all then outstanding shares of such
Preferred Stock.
(iv) Effect of Noncompliance. In the event the
requirements of this Section 3(B) are not complied with, the Corporation
shall forthwith either cause the closing of the transaction to be
postponed until such requirements have been complied with, or cancel
such transaction, in which event the rights, preferences and privileges
of the holders of the Series B Convertible Preferred Stock shall revert
to and be the same as such rights, preferences and privileges existing
immediately prior to the closing of the transaction.
Section 4. Conversion. The holders of the Series B Convertible
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(A) Right to Convert. Subject to Section 4(C), each share
of Series B Convertible Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of
such share, at the office of the Corporation or any transfer agent for
such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $32.00 by the Conversion Price
applicable to such share, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion. The initial
Conversion Price per share of Series B Convertible Preferred Stock shall
be set as of the earlier of (i) June 12, 2000 (the "Anniversary Date"),
upon written request by the holders of a majority of the outstanding
Series B Convertible Preferred Stock on or before July 10, 2000, (ii)
the date immediately preceding a Liquidation or Change of Control prior
to the Anniversary Date as defined herein (the "Liquidation Date"),
(iii) the date the holder thereof elects to convert such Series B
Convertible Preferred Stock or (iv) the date the Corporation elects to
convert such Series B Convertible Preferred Stock pursuant to Section
4(B) below. The initial Conversion Price shall be the lower of (i)
$8.00, or (ii) if the price is set as of the Anniversary Date or the
Liquidation Date, the average closing price of shares of the
Corporation's Common Stock on the Nasdaq National Market (or equivalent
exchange) for each of the first five (5) and last five (5) trading days
of the three (3) months immediately prior to such date, subject to
adjustment as set forth in Section 4(D) without regard to whether the
event giving rise to such adjustment occurs prior to or after the time
at which the initial Conversion Price is set.
(B) Automatic Conversion. Each share of Series B
Convertible Preferred Stock shall be converted, at the election of the
Corporation, into shares of Common Stock at the Conversion Price at the
time in effect for such share at any time after June 12, 2000, if at the
time of such election the average closing price per share of the
Corporation's Common Stock on the Nasdaq National Market (or equivalent
exchange) for the immediately preceding twenty (20) consecutive trading
days exceeds $16 per share (as adjusted for stock splits and
combinations).
(C) Mechanics of Conversion. Before any holder of Series
B Convertible Preferred Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation
or of any transfer agent for the Series B Convertible Preferred Stock,
and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such
holder of Series B Convertible Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business (i) on the date of such
surrender of the shares of such series of Preferred Stock to be
converted or (ii) in case of a conversion pursuant to Section 4(B), on
the date the Corporation delivers notice of its intent to effect an
automatic conversion pursuant to Section 4(B). The person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
(D) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuances, Splits and Combinations. The Conversion
Price of the Series B Convertible Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) Issuance of Additional Stock below Purchase
Price. If the Corporation shall issue, after the date upon which any
shares of Series B Convertible Preferred Stock were first issued (the
"Purchase Date"), any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion
Price for such Series B Convertible Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the
Conversion Price for such Series B Convertible Preferred Stock in effect
immediately prior to each such issuance shall automatically be adjusted
as set forth in this Section 4(D)(i), unless otherwise provided in this
Section 4(D)(i).
(A) Adjustment Formula. Whenever the
Conversion Price is adjusted pursuant to this Section 4(D)(i), the new
Conversion Price shall be determined by multiplying the Conversion Price
then in effect by a fraction, (x) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
issuance (the "Outstanding Common") plus the number of shares of Common
Stock that the aggregate consideration received by the Corporation for
such issuance would purchase at such Conversion Price then in effect for
such series; and (y) the denominator of which shall be the number of
shares of Outstanding Common plus the number of shares of such
Additional Stock. For purposes of the foregoing calculation, the term
"Outstanding Common" shall include shares of Common Stock deemed issued
pursuant to Section 4(D)(i)(E) below.
(B) Definition of "Additional Stock". For
purposes of this Section 4(D)(i), "Additional Stock" shall mean any
shares of Common Stock issued (or deemed to have been issued pursuant to
Section 4(D)(i)(E)) by the Corporation after the Purchase Date) other
than
(1) Common Stock issued pursuant to a
transaction described in Section 4(D)(iii) hereof,
(2) Shares of Common Stock issuable or
issued to employees, consultants or directors of the Corporation
directly or pursuant to stock option plans or restricted stock plans
approved by the Board of Directors of the Corporation,
(3) Capital stock, or options or
warrants to purchase capital stock, issued to financial institutions or
lessors in connection with commercial credit arrangements, equipment
financings or similar transactions,
(4) Shares of Common Stock or Preferred
Stock issuable upon exercise of warrants outstanding as of Purchase
Date,
(5) Capital stock or warrants or options
to purchase capital stock issued in connection with bona fide
acquisitions, mergers or similar transactions, the terms of which are
approved by the Board of Directors of the Corporation, and
(6) Shares of Common Stock issued or
issuable upon conversion of the Series B Convertible Preferred Stock.
(C) No Fractional Adjustments. No adjustment
of the Conversion Price for the Series B Convertible Preferred Stock
shall be made in an amount less than one cent per share, provided that
any adjustments which are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of
the event giving rise to the adjustment being carried forward, or shall
be made at the end of three years from the date of the event giving rise
to the adjustment being carried forward.
(D) Determination of Consideration. In the
case of the issuance of Common Stock for cash, the consideration shall
be deemed to be the amount of cash paid therefor before deducting any
reasonable discounts, commissions or other expenses allowed, paid or
incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof. In the case of the
issuance of the Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash shall be deemed to be
the fair value thereof as determined in good faith by the Board of
Directors irrespective of any accounting treatment.
(E) Deemed Issuances of Common Stock. In the
case of the issuance (whether before, on or after the applicable
Purchase Date) of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 4(D)(i):
(1) The aggregate maximum number of
shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without
limitation, the passage of time, but without taking into account
potential antidilution adjustments) of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Section
4(D)(i)(D)), if any, received by the Corporation upon the issuance of
such options or rights plus the minimum exercise price provided in such
options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time, but
without taking into account potential antidilution adjustments) for any
such convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the Corporation for any
such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the
Corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in Section 4(D)(i)(D)).
(3) In the event of any change in the
number of shares of Common Stock deliverable or in the consideration
payable to the Corporation upon exercise of such options or rights or
upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series B
Convertible Preferred Stock, to the extent in any way affected by or
computed using such options, rights or securities, shall be recomputed
to reflect such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such consideration
upon the exercise of any such options or rights or the conversion or
exchange of such securities.
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price of the
Series B Convertible Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities or options or
rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible
or exchangeable securities which remain in effect) actually issued upon
the exercise of such options or rights, upon the conversion or exchange
of such securities or upon the exercise of the options or rights related
to such securities.
(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to
Sections 4(D)(i)(E)(1) and 4(D)(i)(E)(2) shall be appropriately adjusted
to reflect any change, termination or expiration of the type described
in either Section 4(D)(i)(E)(3) or 4(D)(i)(E)(4).
(F) No Increased Conversion Price.
Notwithstanding any other provisions of this Section 4(D)(i), except to
the limited extent provided for in Sections 4(D)(i)(E)(3) and
4(D)(i)(E)(4), no adjustment of the Conversion Price pursuant to this
Section 4(D)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such
adjustment.
(ii) Stock Splits and Dividends. In the event the
Corporation should at any time or from time to time after the Purchase
Date fix a record date for the effectuation of a split or subdivision of
the outstanding shares of Common Stock or the determination of holders
of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock
or the Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, unless
the holders of Series B Convertible Preferred Stock receive a pro rata
portion of such dividends on a basis as if they had converted
immediately prior to such dividend, as of such record date (or the date
of such dividend distribution, split or subdivision if no record date is
fixed), the Conversion Price of the Series B Convertible Preferred Stock
shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of the aggregate of shares of
Common Stock outstanding and those issuable with respect to such Common
Stock Equivalents with the number of shares issuable with respect to
Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Section 4(D)(i)(E).
(iii) Reverse Stock Splits. If the number of shares
of Common Stock outstanding at any time after the Purchase Date is
decreased by a combination of the outstanding shares of Common Stock,
then, following the record date of such combination, the Conversion
Price for the Series B Convertible Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased
in proportion to such decrease in outstanding shares.
(E) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other persons,
evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights not referred to
in Section 4(D)(iii), then, in each such case for the purpose of this
Section 4(E), the holders of Series B Convertible Preferred Stock shall
be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Preferred Stock are convertible
as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(F) Recapitalizations. If at any time or from time to
time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction
provided for elsewhere in Section 3 or this Section 4) provision shall
be made so that the holders of the Series B Convertible Preferred Stock
shall thereafter be entitled to receive upon conversion of such
Preferred Stock the number of shares of stock or other securities or
property of the Corporation or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 4 with respect
to the rights of the holders of such Preferred Stock after the
recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the
number of shares purchasable upon conversion of such Preferred Stock)
shall be applicable after that event and be as nearly equivalent as
practicable to what such holder would be entitled had the
recapitalization not been effected.
(G) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of
the holders of Preferred Stock against impairment.
(H) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series B Convertible Preferred
Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. The number of shares issuable upon
such conversion shall be determined on the basis of the total number of
shares of Series B Convertible Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series B Convertible Preferred
Stock pursuant to this Section 4, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of such Preferred
Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon the written request at any time
of any holder of Series B Convertible Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price for the Series B
Convertible Preferred Stock at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of the
Series B Convertible Preferred Stock.
(I) Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other distribution,
any right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, the Corporation shall mail to each holder of Series B
Convertible Preferred Stock, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(J) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of the Series B Convertible
Preferred Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
shares of such series of Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of
such series of Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to
this Certificate of Incorporation.
(K) Notices. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series B
Convertible Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of
record at his address appearing on the books of the Corporation.
Section 5. Redemption.
(A) Redemption Date and Price. Subject to the rights of
series of Preferred Stock which may from time to time come into
existence, at any time after June 12, 2003, but on a date (the
"Redemption Date") within thirty (30) days after receipt by the
Corporation of a written request (a "Redemption Election") from the
holders of not less than a majority of the then outstanding Series B
Convertible Preferred Stock that all or some of the shares of such
series held by such holders be redeemed, the Corporation shall, to the
extent it may lawfully do so, redeem the number of shares specified in
the Redemption Election and any additional shares tendered pursuant to
Section 5(B) below in accordance with the procedures set forth in this
Section 5 by paying in cash therefor a sum per share equal to $32 per
share of Series B Convertible Preferred Stock (as adjusted for stock
splits and combinations) plus all accrued but unpaid dividends on such
shares (the "Redemption Price").
(B) Procedure. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, within
fifteen (15) days following its receipt of the Redemption Election, the
Corporation shall mail a written notice, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of Series B Convertible
Preferred Stock at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to
be effected, the Redemption Date, the applicable Redemption Price, the
place at which payment may be obtained and calling upon such holder to
surrender to the Corporation, in the manner and at the place designated,
such holder's certificate or certificates representing the shares that
such holder desires to be redeemed (the "Redemption Notice"). The
Redemption Date shall be at least seven (7) days after the date of
mailing of the Redemption Notice. Any holder of Series B Convertible
Preferred Stock who has not made a Redemption Election and who wishes to
have some or all of its shares redeemed shall provide written notice to
the Corporation on or before three (3) days prior to the Redemption
Date, specifying the number of shares of Series B Convertible Preferred
such holder wishes to be redeemed. Except as provided in Section 5(C),
on or after the Redemption Date, each holder of Series B Convertible
Preferred Stock to be redeemed shall surrender to the Corporation the
certificate or certificates representing such shares, in the manner and
at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In
the event less than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(C) Effect of Redemption; Insufficient Funds. From and
after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Series B Convertible Preferred Stock designated for redemption in the
Redemption Notice (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever. Subject to the rights of
series of Preferred Stock which may from time to time come into
existence, if the funds of the Corporation legally available for
redemption of shares of Series B Convertible Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares of
Series B Convertible Preferred Stock to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum
possible number of such shares ratably among the holders of such shares
to be redeemed based upon the total Redemption Price applicable to each
such holder's shares of Series B Convertible Preferred Stock which are
subject to redemption on such Redemption Date. The shares of Series B
Convertible Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. Subject to
the rights of series of Preferred Stock which may from time to time come
into existence, at any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of
Series B Convertible Preferred Stock, such funds will immediately be
used to redeem the balance of the shares which the Corporation has
become obliged to redeem on any Redemption Date but which it has not
redeemed.
Section 6. Voting Rights. Except as otherwise expressly provided
herein or by law, the holder of each share of Series B Convertible
Preferred Stock shall have the right to one vote for each share of
Common Stock into which such Preferred Stock could then be converted,
and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of
Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the
bylaws of the Corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders
of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of
Series B Convertible Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half
being rounded upward). Notwithstanding anything to the contrary
contained herein, so long as 300,000 shares of Series B Convertible
Preferred Stock remain outstanding (as adjusted for stock splits and
combinations), the holders of a majority of the Series B Convertible
Preferred Stock shall be entitled to elect one (1) member of the Board
of Directors of the Corporation.
Section 7. Protective Provisions. Subject to the rights of
series of Preferred Stock which may from time to time come into
existence, so long as at least 30,000 shares of Series B Convertible
Preferred Stock are outstanding (as adjusted for stock splits, stock
dividends and combinations), the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law)
of the holders of at least a majority of the then outstanding shares of
Series B Convertible Preferred Stock, voting together as a class:
(A) alter or change the rights, preferences or privileges
of the shares of Series B Convertible Preferred Stock so as to affect
adversely the shares of such series;
(B) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series B
Convertible Preferred Stock;
(C) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security, having a preference over the
Series B Convertible Preferred Stock with respect to voting, dividends
or conversion; or
(D) reclassify the shares of Common Stock or any other
shares of any class of capital stock hereafter created junior to the
Series B Convertible Preferred Stock into shares of any class or series
of capital stock (i) ranking either as to payment of dividends,
distributions of assets or redemptions, prior to the Series B
Convertible Preferred Stock, or (ii) which in any manner adversely
affects the holders of Series B Convertible Preferred Stock.
Section 8. Reacquired Shares. Any shares of Series B Convertible
Preferred Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 9. Ranking. The Series B Convertible Preferred Stock
shall rank senior to the Corporation's Series A Preferred Stock, Common
Stock and, unless the terms of any such class or series shall provide
otherwise, all other classes of capital stock or series of the
Corporation's Preferred Stock as to dividend rights, rights of
liquidation, winding up or dissolution.
Section 10. Amendment. This Certificate of Designation shall not
be amended without the affirmative vote of the holders of a majority of
the outstanding shares of Series B Convertible Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of
perjury this 12th day of June, 1998.
/s/Mark Fischer-Colbrie
Mark Fischer-Colbrie, Vice
President,
Finance and Administration and
Chief Financial Officer
ATTEST:
/s/Michael W. Hall
Michael W. Hall, Secretary
EXHIBIT 5.1
VENTURE LAW GROUP
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA. 94025
July 13, 1998
KeraVision, Inc.
48630 Milmont Drive
Fremont, California 94538
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be
filed by you with the Securities and Exchange Commission on or about
July 13, 1998 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of a total of
2,565,000 shares of your Common Stock (the "Shares"). As your legal
counsel, we have examined the proceedings taken in connection with the
sale of the shares of Series B Convertible Preferred Stock that are
convertible into the Shares and are familiar with the proceeding
proposed to be taken by you, and the Selling Stockholders in connection
with the sale of the Shares under the Registration Statement.
It is our opinion that the Shares, when issued upon conversion of
shares of Series B Convertible Preferred Stock, will be legally and
validly issued, fully paid and nonassessable and when resold in the
manner referred to in the Registration Statement, the Shares will be
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name
whenever it appears in the Registration Statement and any amendments to
it.
Sincerely,
VENTURE LAW GROUP
A Professional
Corporation
/s/ Venture Law Group
EXHIBIT 10.25
KERAVISION, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
June 12, 1998
TABLE OF CONTENTS
Page
1. Purchase and Sale of Preferred Stock 1
1.1 Sale and Issuance of Series A Preferred Stock 1
1.2 Closing; Delivery 1
2. Representations and Warranties of the Company 1
2.1 Organization, Good Standing and Qualification 2
2.2 Capitalization 2
2.3 Subsidiaries 3
2.4 Authorization 3
2.5 Valid Issuance of Securities 4
2.6 Governmental Consents 4
2.7 Litigation 4
2.8 SEC Documents; Financial Statements 4
2.9 Changes 5
2.10 Title to Properties 6
2.11 Tax Matters 7
2.12 No Material Defaults 8
2.13 Patents and Trademarks 8
2.14 No Conflict 8
2.15 Securities Laws 8
2.16 Business 9
2.17 Certain Regulatory Matters 9
2.18 Registration Rights 9
2.19 Disclosure 9
2.20 Solvency; No Default 9
2.21 Solvency; No Default 9
3. Representations and Warranties of the Purchasers 10
3.1 Authorization 10
3.2 Purchase Entirely for Own Account 10
3.3 Disclosure of Information 10
3.4 Restricted Securities 10
3.5 No Public Market 11
3.6 Legends 11
3.7 Accredited Investor 11
3.8 Foreign Investors 11
4. Conditions of the Purchasers' Obligations at Closing 11
4.1 Representations and Warranties 12
4.2 Performance 12
4.3 Compliance Certificate 12
4.4 Qualifications 12
4.5 Opinion of Company Counsel 12
4.6 Board of Directors 12
4.7 Investors' Rights Agreement 12
4.8 Certificate of Designation 12
5. Conditions of the Company's Obligations at Closing 12
5.1 Representations and Warranties 13
5.2 Performance 13
5.3 Qualifications 13
6. Miscellaneous 13
6.1 Survival of Warranties 13
6.2 Transfer; Successors and Assigns 13
6.3 Governing Law 13
6.4 Counterparts 13
6.5 Titles and Subtitles 13
6.6 Notices 13
6.7 Finder's Fee 14
6.8 Attorney's Fees 14
6.9 Amendments and Waivers 14
6.10 Severability 14
6.11 Delays or Omissions 15
6.12 Entire Agreement 15
6.13 Corporate Securities Law 15
6.14 Confidentiality 15
6.15 Exculpation Among Purchasers 15
6.16 Waiver of Conflicts 16
6.17 Publicity 16
6.18 Expenses; Transfer Taxes 16
KERAVISION, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Series B Convertible Preferred Stock Purchase Agreement (the
"Agreement") is made as of the 12th day of June, 1998 by and between
KeraVision, Inc., a Delaware corporation (the "Company") and the
investors listed on Exhibit A attached hereto (each a "Purchaser" and
together the "Purchasers").
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1 Sale and Issuance of Series B Convertible Preferred
Stock.
(a) The Company shall adopt and file with the
Secretary of State of the State of Delaware on or before the Closing (as
defined below) the Certificate of Designation of Rights, Preferences and
Privileges of Series B Convertible Preferred Stock in the form attached
hereto as Exhibit B (the "Certificate of Designation").
(b) Subject to the terms and conditions of this
Agreement, each Purchaser agrees to purchase at the Closing and the
Company agrees to sell and issue to each Purchaser at the Closing that
number of shares of Series B Convertible Preferred Stock set forth
opposite each such Purchaser's name on Exhibit A attached hereto at a
purchase price of $32.00 per share. The shares of Series B Convertible
Preferred Stock issued to the Purchaser pursuant to this Agreement shall
be hereinafter referred to as the "Stock."
1.2 Closing; Delivery.
(a) The purchase and sale of the Stock shall take
place at the offices of Venture Law Group, 2800 Sand Hill Road, Menlo
Park, California, at 10:00 a.m., on June 12, 1998, or at such other time
and place as the Company and the Purchasers mutually agree upon, orally
or in writing (which time and place are designated as the "Closing").
(b) At the Closing, the Company shall deliver to
each Purchaser a certificate, registered in such Purchaser's name,
representing the Stock being purchased thereby against payment of the
purchase price therefor by wire transfer to the Company's designated
account or certified or cashier's check drawn on a United States bank
made payable to the order of KeraVision, Inc.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser that, except as
expressly indicated on a Schedule of Exceptions attached hereto as
Exhibit C (the "Schedule of Exceptions"), which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. Each of the
Company and its subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own
its property and assets and to carry on its business. The Company and
its subsidiary are duly qualified to transact business and are in good
standing in all jurisdictions where such qualification is required,
except for such failures to be so qualified or in good standing as would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company or its subsidiary. For purposes of this Agreement, a
"Material Adverse Effect" or a "Material Adverse Change" shall mean (i)
any change in, or effect on, a specified entity that is, or is
reasonably likely to be, materially adverse to the condition (financial
or other), business, results of operations, prospects, assets,
liabilities or operations of the entity or on the ability of the entity
to consummate any of the transactions contemplated hereby, or (ii) any
event or condition that would, with or without the passage of time,
constitute a "Material Adverse Effect" or a "Material Adverse Change" as
defined in clause (i) above. The copies of the Certificate of
Incorporation and Bylaws of the Company, as amended to date, have been
furnished to each Purchaser by the Company and are correct and complete
as so furnished.
2.2 Capitalization. The authorized capital of the Company
will consist, immediately prior to the Closing (unless another time
period is specified below), of:
(a) 2,000,000 shares of Preferred Stock, 30,000
shares of which have been designated Series A Preferred Stock and
662,500 shares of which have been designated Series B Convertible
Preferred Stock, none of which are issued and outstanding immediately
prior to the Closing, and 100,000 of which are reserved for the payment
of dividends to holders of the Stock. The rights, privileges and
preferences of the Series B Convertible Preferred Stock are as stated in
the Certificate of Designation.
(b) 30,000,000 shares of Common Stock, 12,672,950
shares of which are issued and outstanding as of May 31, 1998. All of
the outstanding shares of Common Stock have been duly authorized, fully
paid and are nonassessable and issued in compliance with all applicable
federal and state securities laws.
(c) The Company has reserved 2,650,000 shares of
Common Stock for issuance upon conversion of the Series B Convertible
Preferred Stock. The Company has reserved (i) 1,290,000 shares of
Common Stock for issuance to employees and consultants of the Company
pursuant to its 1995 Stock Plan duly adopted by the Board of Directors
and approved by the Company stockholders (the "1995 Stock Plan"), (ii)
200,000 shares of Common Stock for issuance to employees of the Company
pursuant to its 1995 Employee Stock Purchase Plan duly adopted by the
Board of Directors and approved by the Company stockholders (the
"ESPP"), (iii) 150,000 shares of Common Stock for issuance to employees
of the Company pursuant to its 1995 Directors Stock Option Plan duly
adopted by the Board of Directors and approved by the Company
stockholders (the "Directors' Plan") and (iv) 300,000 shares of Common
Stock for issuance to employees and consultants pursuant to its 1997
Stock Plan duly adopted by the Board of Directors (the "1997 Stock
Plan"). Of such reserved shares of Common Stock, as of May 31, 1998,
(i) 895,377 options to purchase shares have been granted under the 1995
Stock Plan and 504,225 shares of Common Stock remain available for
issuance pursuant to the 1995 Stock Plan, (ii) 41,202 shares have been
issued under the ESPP and 158,798 shares of Common Stock remain
available for issuance pursuant to the ESPP, (iii) 84,500 options to
purchase shares have been granted under the Directors' Plan and 85,500
shares of Common Stock remain available for issuance pursuant to the
Directors' Plan, and (iv) 141,215 options to purchase shares have been
granted under the 1997 Stock Plan and 184,430 shares of Common Stock
remain available for issuance pursuant to the 1997 Stock Plan. No
shares of Common Stock or Preferred Stock are held in the Company's
treasury.
(d) Except for outstanding options issued pursuant
to the 1995 Stock Plan, the 1997 Stock Plan, and the Director's Plan and
outstanding rights to purchase shares of Common Stock pursuant to the
ESPP, there are no outstanding securities, options, warrants, rights
(including conversion or preemptive rights and rights of first refusal
or similar rights) or agreements, orally or in writing, to purchase or
acquire, or exchangeable for or convertible into, any shares of the
Company's capital stock. To the Company's knowledge, there are no
outstanding stockholder agreements, voting trusts, proxies or other
arrangements or understandings among the stockholders of the Company
relating to the voting of their respective shares.
2.3 Subsidiaries. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant
in any joint venture or partnership.
2.4 Authorization. The Company has full power to execute,
deliver and perform this Agreement and the Investors' Rights Agreement,
in the form attached hereto as Exhibit D (the "Investors' Rights
Agreement" and collectively with this Agreement, the "Agreements"). All
corporate action on the part of the Company, its officers and directors
necessary for the authorization, execution and delivery of this
Agreement and the Investors' Rights Agreement, the performance of all
obligations of the Company hereunder and thereunder and the
authorization, sale, issuance and delivery of the Stock and the Common
Stock issuable upon conversion of the Stock (together, the "Securities")
has been taken or will be taken prior to the Closing, and the
Agreements, when executed and delivered by the Company, shall constitute
valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies or (ii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 Valid Issuance of Securities. The Stock that is being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein,
will be duly and validly issued and outstanding, fully paid and
nonassessable, free of any liens, encumbrances, preemptive rights or
rights of first refusal, and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights
Agreement and applicable state and federal securities laws. Based in
part upon the representations of the Purchasers in this Agreement and
subject to the provisions of Section 2.6 below, the Stock will be issued
in compliance with all applicable federal and state securities laws.
The Common Stock issuable upon conversion of the Stock has been duly and
validly reserved for issuance, and upon issuance in accordance with the
terms of the Certificate of Designation, shall be duly and validly
issued, fully paid and nonassessable, free of any liens, encumbrances,
preemptive rights or rights of first refusal, and free of restrictions
on transfer other than restrictions on transfer under this Agreement,
the Investors' Rights Agreement and applicable federal and state
securities laws and will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon
conversion of the Stock will be subject to the rights provided in the
Company's Preferred Shares Rights Agreement dated August 18, 1997, to
the extent applicable, as described therein.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental
authority on the part of the Company is required in connection with the
valid and lawful authorization, execution and delivery by the Company of
this Agreement or the Investors' Rights Agreement, and the consummation
of the transactions contemplated hereby or thereby, or for or in
connection with the valid and lawful authorization, issuance, sale and
delivery of the Stock and the Common Stock issuable upon conversion of
the Stock in accordance with this Agreement, other than filings pursuant
to Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), and the qualification (or taking of such action as
may be necessary to secure an exemption from qualification if available)
of the offer and sale of the Stock under all applicable state securities
laws, which filings and qualifications, if required, will be
accomplished in a timely manner so as to comply with such qualification
or exemption from qualification requirements.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company and its
subsidiary, currently threatened against or affecting the Company or its
subsidiary, its business or its assets, nor is the Company or its
subsidiary aware that there is any basis for the foregoing. Neither the
Company nor its subsidiary is a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or its subsidiary currently
pending or which the Company or its subsidiary intends to initiate.
2.8 SEC Documents; Financial Statements. Each complete or
partial statement, report, prospectus filed under the Securities Act of
1933, as amended ("Securities Act"), is a true and complete copy of or
excerpt from such document as filed by the Company with the Securities
and Exchange Commission ("SEC") (the "Security Act Documents"). The
Company has timely filed all the documents that it was required to file
with the SEC under the Securities Exchange Act of 1934, as amended
("Exchange Act") (the "Exchange Act Documents" and together with the
Securities Act Documents, the "SEC Documents"), since the date on which
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
was filed. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange
Act or the Securities Act, as applicable, and were duly and timely filed
with the SEC. None of the SEC Documents as of their respective dates
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of the
Company included in the SEC Documents (the "Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC
with respect thereto. Except as may be indicated in the notes to the
Financial Statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC, the Financial Statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the
Company and its subsidiary at the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end adjustments).
2.9 Changes Since March 31, 1998, there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company or its subsidiary from
that reflected in the Financial Statements, except changes in the
ordinary course of business that have not been, in the aggregate, a
Material Adverse Change for the Company or its subsidiary;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties, prospects, or financial condition of the Company or its
subsidiary;
(c) any waiver or compromise by the Company or its
subsidiary of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien,
claim, or encumbrance or payment of any obligation by the Company or its
subsidiary, except in the ordinary course of business and that is not
material to the business, properties, prospects or financial condition
of the Company;
(e) any material change to a material contract or
agreement by which the Company or its subsidiary or any of their assets
is bound or subject;
(f) any material change in any compensation
arrangement or agreement with any employee, officer, director or
stockholder;
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of
any officer or key employee of the Company or its subsidiary; and
neither the Company nor its subsidiary is aware of any impending
resignation or termination of employment of any such officer or key
employee;
(i) any mortgage, pledge, transfer of a security
interest in, or lien, created by the Company or its subsidiary, with
respect to any of its material properties or assets, except liens for
taxes not yet due or payable;
(j) any loans or guarantees made by the Company or
its subsidiary to or for the benefit of its employees, officers or
directors, or any members of their immediate families, other than travel
advances and other advances made in the ordinary course of its business;
(k) any declaration, setting aside or payment or
other distribution in respect to any of the capital stock of the Company
or its subsidiary, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock by the Company or its subsidiary;
(l) to the Company's knowledge, any other event or
condition of any character that might have a Material Adverse Effect on
the Company or its subsidiary;
(m) any borrowing of or agreement to borrow any
funds or any material liability (contingent or otherwise) incurred by
the Company or its subsidiary, other than obligations incurred in the
ordinary course of business and consistent with past practice;
(n) any issuance of any stock, bonds or other
securities of the Company or its subsidiary or options, warrants or
rights or agreements or commitments to purchase or issue such securities
or to grant such options, warrants or rights, except for the granting of
options to employees, directors and consultants in the ordinary course
of business and consistent with past practice;
(o) any change in the accounting methods or
practices followed by the Company or its subsidiary; or
(p) any arrangement or commitment (contingent or
otherwise) by the Company or its subsidiary to do any of the things
described in this Section 2.9.
Since March 31, 1998, neither the Company nor its subsidiary has
entered into any transaction or arrangement except in the ordinary
course of business and consistent with past practice, or entered into
any agreement (contingent or otherwise) to do so.
2.10 Title to Properties. Except as disclosed in the
Financial Statements, the Company or its subsidiary has good and
marketable title to, or has a valid leasehold interest in, or a valid
license for, all of the properties and assets reflected in the Financial
Statements, free and clear of all mortgages, security interests, liens,
restrictions or encumbrances (collectively, "Liens") other than (i)
liens for taxes not yet due and payable and (ii) Liens which,
individually or in the aggregate, do not materially detract from the
value of the property subject thereto or materially impair the
operations of the Company or its subsidiary, would not result in the
occurrence of a Material Adverse Change, and which have not arisen
otherwise than in the ordinary course of business.
2.11 Tax Matters.
(a) All taxes, including, without limitation,
income, excise, property, sales, transfer, use, franchise, payroll,
employees' income withholding and social security taxes imposed or
assessed by the United States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or of
any foreign country, or by any other taxing authority, which are due and
payable by the Company or its subsidiary, and all interest, penalties
and additions thereon, whether disputed or not, have been paid in full
or are adequately reserved for in the Financial Statements; all tax
returns or other documents required to be filed in connection therewith
have been accurately prepared and duly and timely filed, except for tax
returns the non-filing of which in the aggregate would not have a
Material Adverse Effect on the Company or its subsidiary; and neither
the Company nor its subsidiary is the beneficiary of any extension of
time within which to file any such returns. Neither the Company nor its
subsidiary has been delinquent in the payment of any foreign or domestic
tax, assessment or governmental charge or deposit and has no tax
deficiency or claim outstanding, assessed or, to its knowledge, proposed
against it, and there is no basis for any such deficiency or claim. No
issues have been raised (or are currently pending) by the Internal
Revenue Service or any other taxing authority in connection with any of
the returns and reports referred to above, and no waivers of statutes of
limitations have been given or requested with respect to the Company or
its subsidiary in connection therewith. The provisions for taxes in the
Financial Statements are sufficient for the payment of all accrued and
unpaid federal, state, county and local taxes of the Company or its
subsidiary.
(b) The Company is not now and has never been a
"United States real property holding corporation," as defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code"),
and Section 1.897-2(b) of the Regulations promulgated by the Internal
Revenue Service, and the Company has filed with the Internal Revenue
Service all statements, if any, with its United States income tax
returns which are required under Section 1.897-2(h) of such Regulations.
(c) Neither the Company nor its subsidiary is a
party to or bound by any tax indemnity, tax sharing or tax allocation
agreement.
(d) The Company is not presently a member of an
affiliated group of corporations within the meaning of Section 1504 of
the Code. The Company was formerly a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. As a
former member of such group, the Company did not assume any tax
liability or asset under a tax sharing arrangement for its share of a
consolidated tax liability or a consolidated tax loss, nor was there a
tax liability or asset assumed upon leaving the affiliated group.
2.12 No Material Defaults. Each of the Company and its
subsidiary is not in violation of or default under any provision of (a)
its Certificate of Incorporation or Bylaws or (b) any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise or license to which it is a party or by which it is bound or
(c) any federal or state judgment, order, decree, statue, law,
ordinance, rule or regulation applicable to the Company, except with
respect to clauses (b) and (c) above, such violations or defaults as
would not have a Material Adverse Effect on the Company.
2.13 Patents and Trademarks. To its knowledge, and except
as disclosed in the SEC Documents, the Company and its subsidiary owns
or possesses sufficient legal rights to all patents, trademarks, service
marks, tradenames, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted, without infringement of any
rights of a third party. Neither the Company nor its subsidiary has
received any communications alleging that it has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity,
which violation would have a Material Adverse Effect on the Company or
its subsidiary. Except as disclosed in the SEC Documents, neither the
Company nor its subsidiary has granted (nor has the Company or its
subsidiary licensed from a third party) any material rights to or
licenses to its patents, trademarks, service marks, tradenames,
copyrights, trade secrets or other proprietary rights or processes.
2.14 No Conflict. The execution and delivery of this
Agreement and the Investors' Rights Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will
not, (i) conflict with, or result in any violation of, or default (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to a loss
of a material benefit, under, any provision of the Certificate of
Incorporation or Bylaws of the Company or any mortgage, indenture, lease
or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statue, law, ordinance, rule or
regulation applicable to the Company, its properties or assets, which
conflict, violation, default or right would have a Material Adverse
Effect on the Company or (ii) result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Securities.
2.15 Securities Laws. Assuming that the Purchasers'
representations and warranties contained in Section 3 of this Agreement
are true and correct, the offer, issuance and sale of the Securities are
and will be exempt from the registration and prospectus delivery
requirements of the Securities Act and have been registered or qualified
(or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable
state securities laws.
2.16 Business. The Company and its subsidiary have
complied in all respects with all federal, state, local and foreign
laws, ordinances, regulations and orders applicable to the business of
the Company and its subsidiary as presently or previously conducted and
as proposed to be conducted, except where the noncompliance of which in
the aggregate would not have a Material Adverse Effect on the Company or
its subsidiary. The Company and its subsidiary have all federal, state,
local and foreign governmental licenses and permits that are required
for the conduct of its business as presently or previously conducted by
the Company or its subsidiary, except where the noncompliance of which
in the aggregate would not have a Material Adverse Effect on the Company
or its subsidiary, which licenses and permits are in full force and
effect, and no violations are outstanding or uncured with respect to any
such licenses or permits and no proceeding is pending or, to the
knowledge of the Company or its subsidiary, threatened to revoke or
limit any thereof.
2.17 Certain Regulatory Matters. There are no unfulfilled
outstanding agreements with or commitments to the United States
Department of Health, Food and Drug Administration (the "FDA") or any
other regulatory body (domestic or foreign) of any kind or character
with respect to any product sold or contemplated to be sold by the
Company or its subsidiary (the "Products"); there are no adverse
regulatory actions by the FDA or any other foreign or domestic
regulatory body pending with respect to any Product; and neither the
Company nor its subsidiary has any knowledge or information with respect
to the initiation, pendency or threat by the FDA or other such
regulatory body of any adverse regulatory action that could affect any
of the Products.
2.18 Registration Rights. The Company is not presently
under any obligation and has not granted any rights to register its
securities under the Securities Act with respect to any of its presently
outstanding securities or any of its securities that may hereafter be
issued, which rights would be implicated with respect to the
registration contemplated by the Investors' Rights Agreement and which
rights have not been waived by the holders thereof.
2.19 Disclosure. Neither this Agreement, nor any other
written document, certificate, instrument or statement furnished or made
available in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact known to the Company or
its subsidiary materially affecting the Company, its subsidiary or its
business or the existence of which could have a Material Adverse Effect
on the Company or its subsidiary, which has not been set forth in this
Agreement or in the other documents, certificates, instruments or
statements furnished to each Purchaser by or on behalf of the Company or
its subsidiary.
2.20 Solvency; No Default. As of this date the Company and
its subsidiary have sufficient funds and cash flow to pay their debts
and other liabilities as they become due, and neither the Company nor
its subsidiary is in default with respect to any material debt or
liability.
3. Representations and Warranties of the Purchasers. Each
Purchaser hereby represents and warrants to the Company that:
3.1 Authorization. Such Purchaser has full power and
authority to enter into this Agreement. The Agreements, when executed
and delivered by the Purchaser, will constitute valid and legally
binding obligations of the Purchaser, enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of
general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a
specific performance, injunctive relief, or other equitable remedies or
(ii) to the extent the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable federal or
state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is
made with the Purchaser in reliance upon the Purchaser's representation
to the Company, which by the Purchaser's execution of this Agreement,
the Purchaser hereby confirms, that the Securities to be acquired by the
Purchaser will be acquired for investment for the Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof.
3.3 Disclosure of Information. The Purchaser has had an
opportunity to discuss the Company's business, management, financial
affairs and the terms and conditions of the offering of the Stock with
the Company's management and has had an opportunity to review the
Company's facilities. The Purchaser understands that such discussions,
as well as the Business Plan and any other written information delivered
by the Company to the Purchaser, were intended to describe the aspects
of the Company's business which it believes to be material. The
foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of
the Purchasers to rely thereon.
3.4 Restricted Securities. The Purchaser understands that
the Securities have not been, and will not be, registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things,
the bona fide nature of the investment intent and the accuracy of the
Purchaser's representations as expressed herein. The Purchaser
understands that the Securities are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to
these laws, the Purchaser must hold the Securities indefinitely unless
they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration
and qualification requirements is available. The Purchaser acknowledges
that the Company has no obligation to register or qualify the Securities
for resale except as set forth in the Investors' Rights Agreement. The
Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale,
the holding period for the Securities, and on requirements relating to
the Company which are outside of the Purchaser's control, and, subject
to the Company's obligations under the Investors' Rights Agreement,
which the Company is under no obligation and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no
public market now exists for the Stock, and that the Company has made no
assurances that a public market will ever exist for the Stock.
3.6 Legends. The Purchaser understands that the
Securities and any securities issued in respect of or exchange for the
Securities, may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend set forth in the Investors' Rights
Agreement.
(c) Any legend required by the Blue Sky laws of any
state to the extent such laws are applicable to the shares represented
by the certificate so legended.
3.7 Accredited Investor. The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United
States person (as defined by Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended), such Purchaser hereby represents that it has
satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the
Stock or any use of this Agreement, including (i) the legal requirements
within its jurisdiction for the purchase of the Stock, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and
(iv) the income tax and other tax consequences, if any, that may be
relevant to the purchase, holding, redemption, sale, or transfer of the
Stock. Such Purchaser's subscription and payment for and continued
beneficial ownership of the Stock, will not violate any applicable
securities or other laws of the Purchaser's jurisdiction.
4. Conditions of the Purchasers' Obligations at Closing. The
obligations of each Purchaser to the Company under this Agreement are
subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived in writing by each
Purchaser:
4.1 Representations and Warranties. The representations
and warranties of the Company contained in Section 2 shall be true and
correct in all material respects (disregarding for this purpose any
qualifications with respect to materiality), on and as of the Closing
with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
4.2 Performance. The Company shall have performed and
complied with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
4.3 Compliance Certificate. The Vice President, Finance
and Administration and Chief Financial Officer of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that
the conditions specified in Sections 4.1, 4.2 and 4.4 have been
fulfilled.
4.4 Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the
lawful issuance and sale of the Stock pursuant to this Agreement shall
be obtained and effective as of the Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have
received from Venture Law Group, counsel for the Company, an opinion,
dated as of the Closing, in substantially the form of Exhibit E.
4.6 Board of Directors. As of the Closing, the number of
authorized directors shall be eight (8) members, and the Board shall be
comprised of Charles Crocker, John R. Gilbert, Kathleen La Porte,
Lawrence A. Lehmkuhl, Thomas M. Loarie, Kshitij Mohan, Arthur M. Pappas
and Steven N. Weiss.
4.7 Investors' Rights Agreement. The Company and each
Purchaser shall have executed and delivered the Investors' Rights
Agreement in substantially the form attached as Exhibit D.
4.8 Certificate of Designation. The Company shall have
filed the Certificate of Designation in substantially the form attached
as Exhibit B with the Secretary of State of Delaware on or prior to the
Closing Date, which shall continue to be in full force and effect as of
the Closing Date.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Purchaser under this Agreement are
subject to the fulfillment, on or before the Closing, of each of the
following conditions, unless otherwise waived in writing:
5.1 Representations and Warranties. The representations
and warranties of each Purchaser contained in Section 3 shall be true
and correct in all material respects on and as of the Closing with the
same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or
prior to the Closing shall have been performed or complied with in all
material respects.
5.3 Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the
lawful issuance and sale of the Stock pursuant to this Agreement shall
be obtained and effective as of the Closing.
6. Miscellaneous.
6.1 Survival of Warranties. Unless otherwise set forth in
this Agreement, the warranties, representations and covenants of the
Company and the Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement for
a period of two (2) years following the Closing and shall in no way be
affected by an investigation of the subject matter thereof made by or on
behalf of the Company or any such Purchaser.
6.2 Transfer; Successors and Assigns. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in
this Agreement.
6.3 Governing Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving
effect to principles of conflicts of law.
6.4 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one instrument.
6.5 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
6.6 Notices. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid,
addressed to the party to be notified at such party's address as set
forth on the signature page or Exhibit A hereto, or as subsequently
modified by written notice, and (a) if to the Company, with a copy to
Edmund S. Ruffin, Jr., Venture Law Group, 2800 Sand Hill Road, Menlo
Park, CA 94025 or (b) if to the Purchasers, with a copy to Scott
Dettmer, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, 155
Constitution Drive, Menlo Park, California 94025 and to Office of the
General Counsel, Johnson & Johnson, One Johnson & Johnson Plaza, New
Brunswick, New Jersey 08933.
6.7 Finder's Fee. Except for the fees and expenses owed
by the Company to Cowen & Company, each party represents that it neither
is nor will be obligated for any finder's fee or commission in
connection with this transaction. Each Purchaser agrees to indemnify
and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for
which each Purchaser or any of its officers, employees, or
representatives is responsible. The Company agrees to indemnify and
hold harmless each Purchaser from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses
of defending against such liability or asserted liability) for which the
Company or any of its officers, employees or representatives
is responsible.
6.8 Attorney's Fees. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms
of any of the Agreements, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
6.9 Amendments and Waivers. Any term of this Agreement
may be amended or waived only with the written consent of (i) the
Company, (ii) the holders of a majority of the shares of Common Stock
issuable or issued upon conversion of the Stock and each Purchaser
adversely affected in a manner different than the other Purchasers and
(iii) Johnson & Johnson Development Corporation if its obligations
hereunder are materially increased by such amendment. Any amendment or
waiver effected in accordance with this Section 6.9 shall be binding
upon the Purchasers and each transferee of the Stock (or the Common
Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
6.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that
the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
6.11 Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to any party under this Agreement,
upon any breach or default of any other party under this Agreement,
shall impair any such right, power or remedy of such non-breaching or
non-defaulting party nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of
any breach or default under this Agreement, or any waiver on the part of
any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not
alternative.
6.12 Entire Agreement. This Agreement, and the documents
referred to herein constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements relating to the subject matter hereof
existing between the parties hereto are expressly canceled.
6.13 Corporate Securities Law. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE
OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS
THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS
OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE
QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6.14 Confidentiality. Each party hereto agrees that,
except with the prior written permission of the other party, and except
as any Purchaser may be required to disclose under ERISA, it shall at
all times keep confidential and not divulge, furnish or make accessible
to anyone any confidential information, knowledge or data concerning or
relating to the business or financial affairs of the other parties to
which such party has been or shall become privy by reason of this
Agreement, discussions or negotiations relating to this Agreement, the
performance of its obligations hereunder or the ownership of Stock
purchased hereunder. The provisions of this Section 6.14 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.
6.15 Exculpation Among Purchasers. Each Purchaser
acknowledges that it is not relying upon any person, firm or
corporation, other than the Company and its officers and directors, in
making its investment or decision to invest in the Company. Each
Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the purchase of the Securities, except as provided in
the Investors' Rights Agreement.
6.16 Waiver of Conflicts. Each party to this Agreement
acknowledges that Venture Law Group, counsel for the Company, has in the
past performed and may continue to perform legal services for certain of
the Purchasers in matters unrelated to the transactions described in
this Agreement, including the representation of such Purchasers in
venture capital financings and other matters. Accordingly, each party
to this Agreement hereby (a) acknowledges that they have had an
opportunity to ask for information relevant to this disclosure; and
(b) gives its informed consent to Venture Law Group's representation of
certain of the Purchasers in such unrelated matters and to Venture Law
Group's representation of the Company in connection with this Agreement
and the transactions contemplated hereby.
6.17 Publicity. No party shall originate any publicity,
news release or other public announcement, written or oral (a
"Release"), whether relating to the performance under this Agreement or
the existence of any arrangement between the parties, without the prior
written consent of the other parties, except where such Release is
required by law (in which event, the Purchasers shall be consulted by
the Company in connection with any such Release prior to its release and
shall be provided with a copy thereof); provided that the parties hereby
agree that a Release substantially in the form attached hereto as
Exhibit F shall be released by the Company as promptly as practicable
following the execution of this Agreement.
6.18 Expenses; Transfer Taxes. Upon closing, the Company
shall reimburse the reasonable fees and expenses of Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, L.L.P., not to exceed $20,000,
incurred in connection with all transactions leading up to and including
the Closing. Except as provided in the foregoing sentence, each party
shall pay its own fees and expenses (including the fees of any
attorneys, accountants, investment bankers or others engaged by such
party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby
are consummated. Notwithstanding the foregoing, the Company shall pay,
and shall indemnify and hold harmless the Purchasers from and against,
all sales, use, transfer or similar taxes imposed as a result of the
transactions contemplated by this Agreement.
[Signature Page Follows]
The parties have executed this Series B Convertible Preferred
Stock Purchase Agreement as of the date first written above.
COMPANY:
KeraVision, Inc.
By: /s/Mark Fischer-Colbrie
Name: Mark Fischer-Colbrie
(print)
Title: VP Finance/Admin; CFO
PURCHASERS:
DLJ Capital Corp.
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
DLJ ESC II, L.P.
By: DLJ LBO Plans Management
Corporation
Its: Manager
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: Attorney In Fact
Sprout Capital VIII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:/s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
Sprout Venture Capital, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
The Sprout CEO Fund, L.P.
By: DLJ Capital Corp.
Its: General Partner
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
Johnson & Johnson Development
Corporation
By: /s/Blair M. Flicker
Name: Blair M. Flicker
Title: Vice President
GMI/DRI INVESTMENT TRUST
By: /s/David B. Van Benschoten
Name: David B. Van
Benschoten
Title: Executive Secretary -
Benefit
Finance Committee
of General Mills,
Inc. as Named
Financial Fiduciary
Special Situations Private
Equity Fund, LP
By: /s/Austin Marxe
Name: Austin Marxe
Title: Managing Director
Special Situations Fund III, LP
By: /s/Austin Marxe
Name: Austin Marxe
Title: Managing Director
Special Situations Cayman Fund,
LP
By: /s/Austin Marxe
Name: Austin Marxe
Title Managing Director
EXHIBIT 10.26
KERAVISION, INC.
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "Agreement") is made as of
the 12th day of June, 1998, by and among KeraVision, Inc., a Delaware
corporation (the "Company"), the investors listed on Exhibit A hereto,
each of which is herein referred to as an "Investor."
RECITALS
The Company and the Investors have entered into a Series B
Convertible Preferred Stock Purchase Agreement (the "Purchase
Agreement") of even date herewith pursuant to which the Company desires
to sell to the Investors and the Investors desire to purchase from the
Company shares of the Company's Series B Convertible Preferred Stock. A
condition to the Investors' obligations under the Purchase Agreement is
that the Company and the Investors enter into this Agreement in order to
provide the Investors with (i) certain rights to register shares of the
Company's Common Stock issuable upon conversion of the Series B
Convertible Preferred Stock held by the Investors and (ii) a right of
first offer with respect to certain issuances by the Company of its
securities. The Company and the Investors each desire to induce the
Investors to purchase shares of Series B Convertible Preferred Stock
pursuant to the Purchase Agreement by agreeing to the terms and
conditions set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. Registration Rights. The Company and the Investors covenant
and agree as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing
a registration statement or similar document in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the
declaration or ordering of effectiveness of such registration statement
or document;
(b) The term "Registrable Securities" means (i) the
shares of Common Stock issuable or issued upon conversion of the
Series B Convertible Preferred Stock and (ii) any other shares of Common
Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) or
by way of a dividend, a stock split or other distribution with respect
to, or in exchange for or in replacement of, the shares listed in (i) or
the Series B Convertible Preferred Stock or any shares of Common Stock
of the Company issued in connection with a combination of shares,
reclassification, recapitalization, merger, consolidation or
reorganization with respect to the shares listed in (i) or the Series B
Convertible Preferred Stock; provided, however, that the foregoing
definition shall exclude in all cases any Registrable Securities sold by
a person in a transaction in which his or her rights under this
Agreement are not assigned. Notwithstanding the foregoing, Common Stock
or other securities shall only be treated as Registrable Securities if
and so long as they have not been (A) sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation
of such sale;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common
Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which
are, Registrable Securities;
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 1.11 of this Agreement;
(e) The term "Form S-1" means such form under the
Securities Act as in effect on the date hereof or any successor form
under the Securities Act;
(f) The term "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any successor form
under the Securities Act; and
(g) The term "SEC" means the Securities and Exchange
Commission.
1.2 Form S-3 and Form S-1 Registration.
(a) Within thirty (30) days after the date hereof,
the Company shall file with the SEC a registration statement on Form S-3
covering all of the Registrable Securities and use its best efforts
thereafter to effect such registration and all such qualifications and
compliances as may be necessary and as would permit or facilitate the
sale and distribution of all of the Registrable Securities; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this
Section 1.2(a): (i) if Form S-3 is not available for such offering by
the Holders; or (ii) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance.
(b) In the event that a registration on Form S-3 is
not available to the Company or if the effectiveness of the Form S-3 is
suspended or terminated at any time within the two (2) year period
following the date hereof, then the Company shall give written notice to
all Holders and shall use its best efforts to effect as soon as
practicable the registration on Form S-1 of all Registrable Securities
which the Holders request to be registered pursuant to such request and
all such qualifications and compliances as may be necessary and as would
permit or facilitate the sale and distribution of all of the Registrable
Securities requested to be registered; provided, however, that the
Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 1.2(b): (i) if
Form S-1 is not available for such offering by the Holders; (ii) after
the Company has effected two (2) registrations pursuant to this
Section 1.2(b) and such registrations have been declared or ordered
effective; (iii) if one registration pursuant to this Section 1.2(b) has
been filed within the previous six (6) months of the date upon which a
demand pursuant to this Section 1.2(b) has been made and has been
declared or ordered effective; (iv) after the second anniversary of the
date hereof; or (v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance.
1.3 Company Registration. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the
Holders) any of its stock under the Securities Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants
in a Company stock plan or a transaction covered by Rule 145 under the
Securities Act, a registration in which the only stock being registered
is Common Stock issuable upon conversion of debt securities which are
also being registered, or any registration on any form which does not
include substantially the same information as would be required to be
included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give
each Holder written notice of such registration. Upon the written
request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.3, the Company
shall, subject to the provisions of Section 1.7, cause to be registered
under the Securities Act all of the Registrable Securities that each
such Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under
this Section 1 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective and
keep such registration statement effective until two (2) years after the
date hereof.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
until two (2) years after the date hereof.
(c) Furnish to the Holders (and to each underwriter,
if any) such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act,
and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any
such states or jurisdictions.
(e) Before filing the registration statement or
prospectus, or amendments or supplements thereto, furnish to counsel
selected by the participating Holders copies of such documents proposed
to be filed which shall be subject to the reasonable approval of such
counsel.
(f) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of
such offering. Each Holder participating in such underwriting shall
also enter into and perform its obligations under such an agreement.
(g) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and promptly
file such amendments and supplements as may be necessary so that, as
thereafter delivered to such Holders of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading and use its best efforts to cause each such amendment and
supplement to become effective.
(h) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number
for all such Registrable Securities, in each case not later than the
effective date of such registration.
(j) Use its best efforts to furnish, at the request
of any Holder requesting registration of Registrable Securities pursuant
to this Section 1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.5 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant
to this Section 1 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable
Securities.
1.6 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities
pursuant to Sections 1.2 or 1.3 for each Holder (which right may be
assigned as provided in Section 1.11), including (without limitation)
all registration, filing, and qualification fees, printers' and
accounting fees and fees and disbursements of counsel for the Company
shall be borne by the Company.
1.7 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required under Section 1.3 to include
any of the Holders' securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters
determine in good faith will not jeopardize the success of the offering
by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in good faith is compatible with the
success of the offering, then the Company shall be required to include
in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in good faith
will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions
as shall mutually be agreed to by such selling stockholders) but in no
event shall the amount of securities of the selling Holders included in
the offering be reduced below twenty-five percent (25%) of the total
amount of securities included in such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling
stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and
stockholders of such holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any
of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in
such "selling stockholder," as defined in this sentence.
1.8 Delay of Registration. No Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable
Securities are included in a registration statement under this
Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities
Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and each officer, director, employee or agent thereof, against
any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person and each officer, director,
employee or agent thereof, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this
subsection 1.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable to any Holder,
underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will severally (and not jointly) indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any
of the foregoing persons may become subject, under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 1.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that in no event shall any
indemnity under this subsection 1.9(b) exceed the net proceeds from the
offering received by such Holder, except in the case of willful fraud by
such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 1.9, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with
the reasonable fees and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.9, but the omission so to
deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than
under this Section 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability,
claim, damage or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in
such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations; provided, that in no event shall any
contribution by a Holder under this subsection 1.9(d) exceed the net
proceeds from the offering received by such Holder, except in the case
of willful fraud by such Holder. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1,
and otherwise (and, to the extent permitted by law, any investigation
made by or on behalf of the indemnified party or any officer, director
or controlling person of such indemnified party).
1.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of
the SEC that may at any time permit a Holder to sell securities of the
Company to the public without registration or pursuant to a registration
on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144 at all times;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act,
as is necessary to enable the Holders to utilize Form S-3 for the sale
of their Registrable Securities;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and
the Exchange Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of SEC Rule 144, the Securities Act and the Exchange Act or
that it qualifies as a registrant whose securities may be resold
pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration or
pursuant to such form.
1.11 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this
Section 1 may be assigned (but only with all related obligations) by a
Holder to a transferee or assignee of at least 100,000 shares or all of
such securities, provided the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which
such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act. For the purposes of
determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership
(including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not
qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights,
receiving notices or taking any action under Section 1.
1.12 Termination of Registration Rights. No Holder shall
be entitled to exercise any right provided for in this Section 1 after
the earlier of (i) two (2) years after the date hereof or (ii) such time
as Rule 144 or another similar exemption under the Securities Act is
available for the sale of all of such Holder's shares during a three (3)
month period without registration.
1.13 Restrictions on and Procedure for Sales. Each
Investor shall comply with following procedures:
(a) If any Investor shall propose to sell any
Registrable Securities pursuant to a registration statement filed by the
Company pursuant to Section 1.2 or 1.3, the Investor shall notify the
Company of its intent to do so at least three (3) full business days
prior to such sale (the "Notice of Sale"), and the provision of the
Notice of Sale to the Company shall conclusively be deemed to establish
an agreement by such Investor to comply with the registration provisions
herein described. The Notice of Sale shall be deemed to constitute a
representation that any information previously supplied by such Investor
is accurate as of the date of such Notice of Sale.
(b) The Notice of Sale in substantially the form
attached as Exhibit B shall be delivered to the Company at the address
shown on Exhibit A in writing in accordance with Section 3.3. However,
the Investor may give the Notice of Sale orally by telephoning Mark
Fischer-Colbrie or the then current Chief Financial Officer of the
Company at (510) 353-3000. An oral Notice of Sale shall be deemed to
have been received only at such time as the selling Investor speaks
directly with Mr. Fischer-Colbrie (or such then current Chief Financial
Officer). In addition, an oral Notice of Sale shall only be deemed
effective if it is followed by a written Notice of Sale received by the
Company by personal delivery or facsimile within twenty-four (24) hours
after giving the oral Notice of Sale.
(c) Unless the Company has notified the selling
Investor in writing that the Company will not refuse the sale of
Registrable Securities identified in a Notice of Sale pursuant to this
Section 1.13(c), at any time within such three (3) business-day period,
the Company may refuse to permit the Investor to sell any Restricted
Securities; provided, however, that in order to exercise this right, the
Company must deliver a certificate in writing from an officer of the
Company to the Investor to the effect that a delay in such sale is
necessary because a sale pursuant to the Registration Statement in its
then current form could constitute a violation of the federal securities
laws. In no event shall such delay exceed ten (10) trading days;
provided, however, that if, prior to the expiration of such ten (10)
trading day period, the Company delivers a certificate in writing from
an officer of the Company to the Investor to the effect that the Board
of Directors of the Company has determined in reasonable good faith that
a further delay in such sale beyond such ten (10) trading day period is
necessary because a sale pursuant to such Registration Statement in its
then current form could constitute a violation of the federal securities
laws, the Company may refuse to permit such Investor to resell any
Shares for an additional period not to exceed ten (10) trading days.
The Company shall not exercise this right of delay for more than twenty
(20) consecutive trading days or for more than thirty (30) trading days
in any six (6) month period, provided, however, that in the event the
ability of the Investors to sell Registrable Securities under the Form
S-3 or Form S-1 is delayed or suspended for any reason during the two-
year period following the date hereof, the aggregate thirty (30) trading
day limitation shall be reduced by the number of trading days the
Investors are restricted from selling the Registrable Securities.
(d) Unless the Company delivers a certificate in
writing to the selling Investor pursuant to Section 1.13(c), the selling
Investor shall have thirty (30) trading days after the Notice of Sale in
which to complete the transaction identified in the Notice of Sale (the
"Trading Window"). Any period of delay pursuant to Section 1.13(c)
shall extend the Trading Window on a day by day basis.
2. Right of First Offer. Subject to the terms and conditions
specified in this Section 2, the Company hereby grants to each Investor
(as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). An
Investor who chooses to exercise the right of first offer may designate
as purchasers under such right itself or its partners or affiliates in
such proportions as it deems appropriate. Each time the Company
proposes to offer any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock
("Shares"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail ("Notice") to the Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer such
Shares.
(b) Within 15 calendar days after delivery of the
Notice, the Investor may elect to purchase or obtain, at the price and
on the terms specified in the Notice, up to that portion of such Shares
which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all
convertible or exercisable securities then held, by such Investor bears
to the total number of shares of Common Stock then outstanding (assuming
full conversion and exercise of all convertible or exercisable
securities). The Company shall promptly, in writing, inform each
Investor that purchases all the shares available to it (each, a
"Fully-Exercising Investor") of any other Investor's failure to do
likewise. During the ten (10)-day period commencing after receipt of
such information, each Fully-Exercising Investor shall be entitled to
obtain that portion of the Shares for which Investors were entitled to
subscribe but which were not subscribed for by the Investors that is
equal to the proportion that the number of shares of Common Stock issued
and held, or issuable upon conversion and exercise of all convertible or
exercisable securities then held, by such Fully-Exercising Investor
bears to the total number of shares of Common Stock then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities).
(c) The Company may, during the 45-day period
following the expiration of the period provided in subsection 2(b)
hereof, offer and sell the remaining unsubscribed portion of the Shares
to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If
the Company does not enter into an agreement for the sale of the Shares
within such period and if such agreement is not consummated within such
period, the right provided hereunder shall be deemed to be revived and
such Shares shall not be offered unless first reoffered to the Investors
in accordance herewith.
(d) The right of first offer in this paragraph 2
shall not be applicable (i) to the issuance or sale of shares of Common
Stock (or options therefor) to employees, consultants and directors,
pursuant to plans or agreements approved by the Board of Directors, (ii)
to the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, (iii) to the issuance of
securities in connection with a bona fide business acquisition of or by
the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, (iv) to the issuance of securities to
financial institutions or lessors in connection with commercial credit
arrangements, equipment financings, or similar transactions or (v) to
the issuance of the Series A Participating Preferred Stock.
(e) Notwithstanding the foregoing, the right of
first offer in this Section 2 shall terminate (i) with respect to any
Investor whose shares of Series B Convertible Preferred Stock are
converted into shares of Common Stock of the Company, or (ii) when the
Company shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned
subsidiary corporation) or effect any other transaction or series of
related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided
in this Agreement, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties (including transferees of any of
the Series B Convertible Preferred Stock or any Common Stock issued upon
conversion thereof). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
3.2 Amendments and Waivers. Any term of this Agreement
may be amended or waived only with the written consent of (i) the
Company, (ii) the holders of a majority of the Registrable Securities
then outstanding, and (iii) Johnson & Johnson Development Corporation if
its obligations hereunder are materially increased by such amendment.
Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each future holder of all such Registrable Securities
and the Company.
3.3 Notices. Unless otherwise provided, any notice
required or permitted by this Agreement shall be in writing and shall be
deemed sufficient upon delivery, when delivered personally or by
overnight courier or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail,
with postage prepaid, and addressed to the party to be notified at such
party's address or fax number as set forth on the signature page on
Exhibit A hereto or as subsequently modified by written notice.
3.4 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that
the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be
excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.
3.5 Governing Law. This Agreement and all acts and
transactions pursuant hereto shall be governed, construed and
interpreted in accordance with the laws of the State of California,
without giving effect to principles of conflicts of laws.
3.6 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
3.7 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
3.8 Aggregation of Stock. All shares of the Preferred
Stock held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of
any rights under this Agreement.
[Signature Page Follows]
The parties have executed this Investors' Rights Agreement as of
the date first above written.
COMPANY:
KeraVision, Inc.
By: /s/Mark Fischer-Colbrie
Name: Mark Fischer-Colbrie
(print)
Title: VP Finance/Admin; CFO
INVESTORS:
DLJ Capital Corp.
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
DLJ ESC II, L.P.
By: DLJ LBO Plans Management
Corporation
Its: Manager
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: Attorney In Fact
Sprout Capital VIII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
Sprout Venture Capital, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
The Sprout CEO Fund, L.P.
By: DLJ Capital Corp.
Its: General Partner
By: /s/Kathleen D. LaPorte
Name: Kathleen D. LaPorte
Title: General Partner and
Attorney in Fact
Johnson & Johnson Development
Corporation
By: /s/Blair M. Flicker
Name: Blair M. Flicker
Title: Vice President
GMI/DRI INVESTMENT TRUST
By: /s/David B. Van Benschoten
Name: David B. Van
Benschoten
Title: Executive Secretary -
Benefit
Finance Committee
of General Mills,
Inc. as Named
Financial Fiduciary
Special Situations Private
Equity Fund, LP
By: /s/Austin Marxe
Name: Austin Marxe
Title: Managing Director
Special Situations Fund III, LP
By: /s/Austin Marxe
Name: Austin Marxe
Title: Managing Director
Special Situations Cayman Fund,
LP
By: /s/Austin Marxe
Name: Austin Marxe
Title: Managing Director
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of Keravision, Inc. for the registration of 2,565,000 shares
of its common stock and to the incorporation by reference therein of our
report dated February 5, 1998, with respect to the consolidated
financial statements of KeraVision, Inc. included in its Annual Report
(Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission
/s/Ernst &
Young LLP
San Jose, California
July 9, 1998
