The KeraVision, Inc. Stockholder Rights Plan
"The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive a corporation's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the
corporation."
In August of 1997, KeraVison filed a Stockholder Rights Plan, commonly called a "poison pill", with the SEC. In this
filing, the company declared a dividend of one preferred share purchase right for each common share. These rights become exercisable
if another company acquires or offers to acquire 20% or more of KeraVision, Inc. These rights are exercisable by owners of KeraVision stock
other than the potential acquirer.
There are several ways the stockholder rights plan may operate.
First of all, ten days after an offer has been made to the company, and before the subsequent
options have opened up,
the plan allows shareholders of common stock to purchase 1/1000 of a share of KeraVision
Participating Preferred A shares for each common share they own. Each 1/1000 of a Preferred A Share is currently priced at $60, a price which
the board of directors can adjust. There are 30,000 Preferred A Shares authorized; none are currently issued. They exist
only to be used as part of this "poison pill." They are valued at 1000 times the price of the common shares, and have 1000 times the voting rights as well.
This would create much more equity for an acquirer to buy in, and alter the "balance of power" through
the voting rights. The purpose of these shares is to require an acquirer to negotiate with the board of directors and not be able to
simply buy in the common stock.
Secondly, after an acquirer has made its intentions known, but prior to its having acquired 15% of KeraVision,
the company may exchange one share of KERA common stock for each right; i.e., each shareholder may be issued an additional share of common stock
for each share which they own.
The plan also describes a third possibility: that shareholders of common stock would be able to exercise the rights either to purchase KERA
stock at half the price which the acquirer is offering, or, under certain
conditions, to receive stock in the acquiring company having twice the value of their offer for KeraVision stock.
In the first instance,
if Company X offered $30 for each KERA share, other shareholders would have the right to
purchase two new shares for $15 each, and then could sell those shares to Company X for $30.
The company may choose to accept offer from an acquirer without invoking the "poison pill." If the board considers
an offer to be reasonable, shareholders would be able to tender their shares in exchange for the price which the acquiring company
has proposed.
|