<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Vivra Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
--------------------------------------------------------------------
<PAGE> 2
(LOGO)
VIVRA INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 28, 1995
TO THE STOCKHOLDERS:
The annual meeting of the stockholders of VIVRA Incorporated, a Delaware
corporation, will be held on Tuesday, May 9, 1995, at 11:00 a.m. Pacific
Daylight Time, at the Radisson Hotel San Francisco Airport, 1177 Airport
Boulevard, Burlingame, California 94010, for the following purposes:
1. To elect three directors for three-year terms;
2. To approve the amendment and restatement of the Company's 1989 Stock
Incentive Plan, including the reservation of an additional 700,000
shares for issuance thereunder; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on Tuesday, March 21, 1995,
will be entitled to vote at the meeting.
If you plan to attend the meeting, the Radisson Hotel is located
approximately three miles south of the San Francisco Airport. Take the Broadway
exit east off Highway 101 over the freeway to Airport Boulevard and the hotel
will be immediately on your right.
If you do not expect to attend the meeting in person, please date and sign
the enclosed proxy and return it promptly by mail in the envelope provided.
By Order of the Board of Directors
LEANNE M. ZUMWALT
Secretary
<PAGE> 3
VIVRA INCORPORATED
MAILING ADDRESS:
400 PRIMROSE, SUITE 200
BURLINGAME, CA 94010
------------------------------------
PROXY STATEMENT
TO THE STOCKHOLDERS:
The proxy accompanying this statement is solicited on behalf of the Board
of Directors of VIVRA Incorporated (the "Company") for use at the annual meeting
of its stockholders to be held on Tuesday, May 9, 1995, and at any adjournment
or postponement thereof. The proxy will be used for the purposes described in
the foregoing notice of meeting. This Proxy Statement and the accompanying proxy
will initially be mailed to stockholders on or about March 28, 1995.
The proxy may be revoked at any time by delivery to the Company at the
above address of written notice of revocation or a later dated properly executed
proxy, or if the stockholder is present at the annual meeting and elects to vote
in person. If not so revoked, the proxy, when executed and returned to the
Company, will be voted in accordance with the instructions thereon specified by
the stockholder and, if no specification is made, for the director nominees
listed in this Proxy Statement and in favor of the amendment and restatement to
the Company's 1989 Stock Incentive Plan.
Stockholders of record at the close of business on March 21, 1995, will be
entitled to vote at the meeting. The Company has outstanding only its $.01 par
value Common Stock of which 23,327,232 shares were outstanding and entitled to
vote at the close of business on March 21, 1995. Each stockholder is entitled to
one vote for each share held, and there is no right to cumulative voting.
Directors are elected by a plurality of the votes. Therefore, the nominees,
up to the number of directors to be elected, receiving the highest number of
votes, will be elected. Approval of the amendment to the Company's 1989 Stock
Incentive Plan require the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy at the meeting
and entitled to vote on the subject matter, provided a quorum is present.
Abstention votes are counted in determining the presence or absence of a quorum
for the meeting and have the effect of a negative vote. Broker non-votes are not
entitled to vote, and thus are not considered in determining whether a proposal
was approved.
ELECTION OF DIRECTORS
Stephen G. Pagliuca, Kent J. Thiry and LeAnne M. Zumwalt, each of whom is
presently a member of the Board of Directors, will be nominees for election to
hold office until the annual meeting in 1998, and until their successors are
elected. If the enclosed proxy is duly executed and received in time for the
meeting and, if no direction to withhold the vote is made, shares represented by
it will be voted for these three persons. If any nominee should refuse or be
unable to serve, the proxy will be voted for such other person as shall be
designated by the Board of Directors to replace the nominee, but management has
no knowledge that any nominee will refuse or be unable to serve.
<PAGE> 4
INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
The following information is furnished with respect to each nominee and the
continuing directors:
<TABLE>
<CAPTION>
DIRECTOR
OCCUPATION AND CONTINUOUSLY TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
- ----------------------------- --- ----------------------------------------------------- -------
<S> <C> <C> <C> <C>
David G. Connor, M.D......... 54 Physician in private practice in Daly 1989 1997
City, California since 1973, specializing
in nephrology and internal medicine;
Medical Director of the Company's dialysis
center in Daly City, California, since
1977; 1986-1988, President of the Medical
Staff of Seton Medical Center, a general
hospital in Daly City, California, not
affiliated with the Company.
Richard B. Fontaine.......... 51 Independent health care consultant since 1992 1997
1992; 1988-1992, Senior Vice President of
CR&R Incorporated, a waste management
company; 1984- 1988, Vice President,
Business Development, Caremark, Inc., a
health care company, neither of which
corporations are affiliated with the Com-
pany.
John M. Nehra................ 46 Managing General Partner of Catalyst 1989 1996
Ventures L.P., a venture capital
partnership since 1989; 1983-1989,
Managing Director of Alex. Brown & Sons,
Inc., investment bankers, responsible for
its Capital Markets Group, including
health care corporate finance, neither of
which entities are affiliated with the
Company.
Stephen G. Pagliuca.......... 39 Managing General Partner of Information 1992 1995
Partners, a venture capital firm since
1989; 1986-1989, Vice President, Bain &
Company, a management consulting company,
neither of which entities are affiliated
with the Company.
Kent J. Thiry................ 39 President and Chief Executive Officer of 1991 1995
the Company since September 1992;
April-August 1992, President and Co-Chief
Executive Officer; September 1991-March
1992, President and Chief Operating
Officer; 1983-1991, Senior Consultant,
then Vice President, Director of U.S.
Health Care Consulting, Bain & Company,
Inc., San Francisco, California.
LeAnne M. Zumwalt............ 36 Treasurer and Secretary since March 1995, 1994 1995
Vice President, Finance since November
1993, joined the Company in 1991; senior
audit manager with Ernst & Young, prior
thereto.
</TABLE>
2
<PAGE> 5
BOARD COMMITTEES
During fiscal 1994 the Board of Directors met five times. All directors
attended at least 75% of their scheduled Board meetings and meetings held by
Committees of which they were members. Directors meet their responsibilities not
only by attending Board and Committee meetings, but also through communication
with the Chief Executive Officer and other members of management on matters
affecting the Company.
The Company has two standing committees of the Board: Audit and
Compensation. In 1995, three additional committees were formed: Compliance,
Governance and Clinical Care, none of which have yet had a meeting. Recently the
Company has asked its nonemployee directors to assume added responsibilities and
an increased role in guiding the Company and enhancing shareholder value,
reflected in part by their appointment to the aforementioned new committees.
The Audit Committee, consisting of John M. Nehra, Chair, David G. Connor,
M.D., Richard B. Fontaine and Stephen G. Pagliuca, met once in fiscal 1994. Mr.
Fontaine will not continue as a member of this committee in 1995. The Committee
recommends the appointment of the Company's independent accountants; reviews the
scope and results of the audit plans of the independent accountants; oversees
the scope and adequacy of the Company's internal accounting control and
record-keeping systems; confers independently with the independent accountants;
and determines the appropriateness of fees for audit and non-audit services
performed by the independent accountants.
The Compensation Committee, consisting of Richard B. Fontaine, Chair, John
M. Nehra and Stephen G. Pagliuca, met twice in fiscal 1994. The Committee
reviews and recommends to the Board salary and incentive compensation, including
bonus, stock options and restricted stock, for the Chief Executive Officer;
reviews salaries and incentive compensation for all corporate officers and
senior executives; reviews incentive compensation to be allocated to employees;
and administers and authorizes awards under the 1989 Stock Incentive Plan.
A Chair and members have not yet been appointed to the Compliance
Committee. Its purpose is to ensure that the Company is monitoring and
exercising prudent judgment in interpreting and complying with government
regulations.
The Governance Committee consists of Stephen G. Pagliuca, Chair, and
Richard B. Fontaine. Its purpose is to create policies for and make
recommendations to the Board regarding the organization and structure of the
Board; the role and effectiveness of the Board and each Committee in the
Company's corporate governance process; and the qualifications of and candidates
for directorships, including the Chair.
The Clinical Quality Committee consists of Richard B. Fontaine, Chair.
Other members are yet to be named. Its purpose is to monitor quality of care
issues, oversee progress in the improvement of clinical care and review and
measure outcomes of care in comparison to medical guidelines and industry
standards.
3
<PAGE> 6
REMUNERATION OF DIRECTORS
Those directors who are not employed by the Company receive a fee of $1,500
for each Board meeting attended, plus travel expenses, if any. Nonemployee
directors also receive an annual automatic grant of an option to purchase 3,375
shares of Common Stock, and a related Limited Stock Appreciation Right ("SAR")
under the Company's 1989 Stock Incentive Plan. During 1994 nonemployee directors
received fees ranging from $500 to $2,500 per additional committee meeting and
for other Board related duties. If the amendment and restatement of the 1989
Stock Incentive Plan is approved, nonemployee directors will receive grants of
stock options and restricted stock in lieu of fees for committee meetings.
Officers of the Company who serve as directors receive no fee, but are
reimbursed for expenses incurred in attending meetings.
BENEFICIAL OWNERSHIP
The following tables show beneficial ownership of the Company's Common
Stock, $.01 par value, by the directors and executive officers:
BENEFICIAL OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED PERCENT
NAME OF AS OF FEBRUARY 28, OF
BENEFICIAL OWNER 1995 CLASS(1)
------------------------------------ ------------------- --------
<S> <C> <C>
David G. Connor, M.D. ................. 22,687(2)
Richard B. Fontaine.................... 10,125(3)
John M. Nehra.......................... 26,418(4)
Stephen G. Pagliuca.................... 10,125(5)
Kent J. Thiry.......................... 248,000(6) 1.1%
David P. Barry......................... 48,250(7)
Ernst A. Blackwelder................... 4,100(8)
Michael W. Castaldi.................... 130,500(9)
John M. Morse.......................... 97,903(10)
Ronald G. Perkins...................... 62,978(11)
Robert A. Prosek....................... 4,000(12)
LeAnne M. Zumwalt...................... 19,826(13)
All directors and executive officers
as a group (12 persons).............. 684,912(14) 3.0
</TABLE>
- ------------
(1) In all cases except Mr. Thiry and the group, the holdings represent less
than 1% of the outstanding shares of Common Stock.
(2) Includes 21,000 shares subject to options which are currently exercisable.
(3) All shares are subject to options which are currently exercisable.
(4) Includes 20,250 shares subject to options which are currently exercisable.
(5) All shares are subject to options which are currently exercisable.
(6) All shares are subject to options which are currently exercisable.
4
<PAGE> 7
(7) All shares are subject to options which are currently exercisable or will
become exercisable within 60 days.
(8) All shares are subject to options which are currently exercisable.
(9) All shares are subject to options which are currently exercisable.
(10) Includes 75,000 shares subject to options which are currently exercisable.
(11) Includes 52,500 shares which are currently exercisable or will become
exercisable within 60 days.
(12) All shares are subject to options which are currently exercisable.
(13) Includes 19,075 shares subject to options which are currently exercisable.
(14) Includes 642,074 shares which are currently exercisable or will become
exercisable within 60 days.
OTHER BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED PERCENT
NAME AND ADDRESS OF AS OF DECEMBER 31, OF
BENEFICIAL OWNER(1) 1994(1) CLASS
- ------------------------------------------------- ----------------- --------
<S> <C> <C>
Nicholas Company, Inc.............................. 1,955,002(2) 9.4%
700 North Water Street
Milwaukee, WI 53202
Firstar Investment Research & Management Company... 1,463,369(3) 7.1
777 East Wisconsin Avenue
Milwaukee, WI 53202
</TABLE>
- ------------
(1) Information based on Schedule 13D dated December 31, 1994, filed with the
Securities and Exchange Commission by each named owner.
(2) Sole investment power.
(3) Sole voting and investment power, 667,675 and 732,375 shares, respectively;
shared voting and investment power, 726,444 and 730,994 shares,
respectively.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table lists and provides biographical data about the
executive officers of the Company.
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME AGE TITLE BUSINESS EXPERIENCE
- ----------------------- --- -------------------- -----------------------------------------------
<S> <C> <C> <C>
Kent J. Thiry.......... 39 President and Chief Appointed September 1992. April-August 1992,
Executive Officer President and Co-Chief Executive Officer;
September 1991-March 1992, President and Chief
Operating Officer; 1983-1991, Senior
Consultant, then Vice President, Director of
U.S. Health Care Consulting, Bain & Company,
Inc., San Francisco, California.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME AGE TITLE BUSINESS EXPERIENCE
- ----------------------- --- -------------------- -----------------------------------------------
<S> <C> <C> <C>
Michael W. Castaldi.... 51 Senior Vice Appointed June 1989. December 1989, appointed
President, national President of Community Dialysis Centers, a
dialysis operations subsidiary of the Company. 1985-1989, Vice
President, then Senior Vice President,
Community Psychiatric Centers, responsible for
dialysis operations.
David P. Barry......... 36 Vice President, Appointed May 1992. March 1995, Executive Vice
dialysis services President, Community Dialysis Centers,
responsible for operations; December 1993,
President, Nephrology Services, responsible for
specialty dialysis services; May 1992-November
1993, President, Personal Care Health Services,
responsible for operations of home health care
business; 1984-1992, Homedco, an infusion
therapy company, since 1990 District Manager
for California.
Ernest A. Blackwelder.. 35 Vice President, Appointed November 1994. August 1994, appointed
specialty physician President of Specialty Partners of America, a
networks subsidiary of the Company, responsible for the
specialty physician network business and
separately in charge of Surgical Partners of
America, the ambulatory surgery business; 1991
to 1994, District Manager and Assistant to the
President of BMC West Corporation, a building
supply company; 1988 to 1991, a consultant with
Bain & Company, specializing in the health care
industry.
John H. Morse.......... 52 Vice President, Appointed April 1994. President of Vivra
physician practice Physician Services; previously a senior
management executive with Humana, Inc. for 22 years.
Ronald G. Perkins...... 42 Vice President, Appointed May 1992. President of Health
diabetes management Advantage, Inc., responsible for diabetes
services management services business; 1987-1992,
founder and President of Health Advantage,
Inc., Nashville, Tennessee.
Robert A. Prosek....... 51 Vice President, Appointed Vice President December 1994 and
asthma and allergy President of Asthma and Allergy CareAmerica, a
services subsidiary of the Company. During 1994
President of of America; 1991 to 1993,
President of Care Partners, a homecare com-
pany; and from 1989 to 1991, President of
PSICOR, provider of contract clinical services
for cardiac surgery.
LeAnne M. Zumwalt...... 36 Treasurer, Secretary Appointed Treasurer and Secretary March 1995,
and Vice President, Vice President November 1993. 1991-1993, senior
finance accountant; prior thereto, senior audit manager
with Ernst & Young.
</TABLE>
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the cash and certain other compensation paid by
the Company to the Chief Executive Officer for his service for fiscal 1994, 1993
and during fiscal 1992, the year he was appointed Chief Executive Officer, and
to each of the four other most highly compensated executive officers in all
executive capacities in which they served during the fiscal years ending
November 30, 1994, 1993 and 1992:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME --------------------- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#) SATION($)
- -------------------------------- ----- --------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Kent J. Thiry,.................. 1994 225,000 200,000 100,000 17,072(2)
President and Chief Executive 1993 225,000 200,000 (1) 150,000
Officer 1992 214,340 100,000 (1) 150,000
Michael W. Castaldi,............ 1994 177,406 160,000 24,012(2)
Senior Vice President 1993 175,000 150,000 150,000 17,604(2)
1992 174,908(3) 75,000 28,500 11,997(2)
David P. Barry.................. 1994 115,000 120,725 7,000 7,893(2)
Vice President 1993 110,789 85,000 11,250
1992 48,307 5,000 75,000 72,661(4)
Ronald G. Perkins............... 1994 140,584 33,000 9,248(2)
Vice President 1993 140,687 26,837 7,004(2)
1992 91,438 52,500
LeAnne M. Zumwalt............... 1994 107,725 60,000 12,000 5,770(2)
Vice President
</TABLE>
- ------------
(1) Mr. Thiry was granted contingent cash bonuses of $200,000 and $100,000 for
fiscal 1993 and 1992 respectively, which will be paid after November 30,
1996, if the Company's earnings per share as of that date are at least
$1.87, which represents a 17.5% compound annual growth rate over earnings
per share reported for fiscal 1992.
(2) Share of Company's contribution to Profit Sharing Plan.
(3) Includes $13,450 cash payment in lieu of vacation time accrued during fiscal
1992.
(4) Consists of $38,399 paid for reimbursement of relocation expenses, $19,262
paid to compensate Mr. Barry for loss of options on previous employer's
common stock and $15,000 paid as recruitment compensation to induce Mr.
Barry to accept employment with the Company.
7
<PAGE> 10
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning stock options with
tandem limited SARs granted to the named executives under the 1989 Stock
Incentive Plan during the fiscal year ended November 30, 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES
UNDERLYING OPTIONS/SARS OF STOCK PRICE
OPTIONS/ GRANTED TO APPRECIATION
SARS EMPLOYEES EXERCISE OR FOR OPTION TERM
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------
NAME(1) (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------- ---------- ------------ ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kent J. Thiry........... 100,000(2) 25.2 27.75 11/02/04 1,745,183 4,422,635
David P. Barry.......... 2,000(2) 0.5 27.75 11/02/04 34,904 88,453
5,000(3) 1.3 27.75 11/02/04 87,259 221,132
LeAnne M. Zumwalt....... 4,000(2) 1.0 27.75 11/02/04 69,808 176,906
8,000(3) 2.0 27.75 11/02/04 139,615 353,811
</TABLE>
- ------------
(1) Neither Messers. Castaldi or Perkins, included in the Summary Compensation
Table on page 7, received a grant.
(2) Vest 20% on November 3, 1995, and 80% on November 3, 1997 and a 100% in the
event of change of control.
(3) Vest 20% on November 3, 1994, and 20% each year on November 3, 1995, through
1998 and 100% in the event of a change of control.
8
<PAGE> 11
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executives concerning the exercise of options and/or limited SARs during the
last fiscal year and unexercised options and limited SARs held as of the end of
the fiscal year, November 30, 1994:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END(#) YEAR-END($)(1)
------------ --------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------- --------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Kent J. Thiry.................. 52,000 501,137 323,000/ 3,815,700/
310,000 2,558,200
Michael W. Castaldi............ 122,400/ 1,423,620/
96,600 1,140,765
David P. Barry................. 35,500/ 347,980/
57,750 499,680
Ronald G. Perkins.............. 39,375/ 392,175/
13,125 130,725
LeAnne M. Zumwalt.............. 19,075/ 164,394/
30,425 182,699
</TABLE>
- ------------
(1) The closing price of the Company's Common Stock on the New York Stock
Exchange at fiscal year end, November 30, 1994, was $28.63 per share.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors was
established in 1992 and is currently composed of three nonemployee directors.
The Committee regularly meets once each year and holds special meetings as
required.
Compensation Objectives
The Company has two primary objectives in setting executive officer
compensation:
- Attract and retain outstanding leadership
- Align executive compensation with the yearly and long-term goals of
the Company, with emphasis on the payment of performance bonuses.
The Company's basic financial goal is to increase shareholder value an
average of 15% to 20% each year over the long-term.
Executive Compensation
Towards the end of each fiscal year, a compensation review is conducted by
the Chief Executive Officer for each executive officer. Annual salary and bonus
recommendations are then made to, reviewed and voted upon by the Compensation
Committee at its regular November meeting.
Included in the Committee's criteria for approval of recommended salary
adjustments, and particularly bonuses, are achievements against annual financial
and non-financial targets set at the beginning of the fiscal year for each
executive. The financial objectives consist of improvements in Company and
subsidiary net operating profit, return on total capital and revenue growth. The
non-financial objectives consist of improvements in quality of care, management
information systems and development of managed care products.
For fiscal 1994, compensation for executive officers, as listed in the
Information Concerning Executive Officers table starting on page 5, was weighted
heavily in favor of cash bonuses, with the long term objective of shifting to
more variable pay for performance. Bonuses ranged from $0 to $160,000 and
averaged $62,000, excluding that for the Chief Executive Officer.
CEO Compensation
To focus and relate Mr. Thiry's compensation to the Company's basic long
term financial goal of increases in earnings per share, he was, at the time of
his employment in September 1991, granted stock options on a total of 450,000
shares of Common Stock. In 1992, Mr. Thiry received a cash performance bonus of
$100,000, options on 150,000 shares of Common Stock and was awarded a contingent
bonus of $100,000, the latter payable after November 30, 1996, if the Company's
earnings per share for the fiscal year ending November 30, 1996, are $1.87, or
more. The $1.87 represents a 17.5% compound annual growth rate over earnings per
share of $.98 for 1992. If this goal is not met, the contingent bonus will be
forfeited.
10
<PAGE> 13
For fiscal 1993, the Committee awarded Mr. Thiry a cash performance bonus
of $200,000, options on 150,000 shares of Common Stock and a contingent bonus of
$200,000 on the same terms as the 1992 contingent bonus, but no salary increase,
consistent with the Committee's objective of shifting to more variable pay for
performance. The bonuses were based in part on achievement of earnings per share
that exceeded the targeted range of 15% to 20%. In 1993, the Company's earnings
per share increased 23% over 1992. In addition, the bonuses were based on
progress on quality of care initiatives and strategic positioning of the Company
with respect to managed care cost reduction and restructuring pressures on the
healthcare industry.
For fiscal 1994, the Committee awarded Mr. Thiry a cash performance bonus
of $200,000, options on 100,000 shares of Common Stock and an increase in annual
base salary of $25,000 to $250,000, effective December 1, 1994. In determining
Mr. Thiry's base and performance bonus compensation, the Committee considered
the compensation of CEO's of comparable healthcare companies, as well as Mr.
Thiry's performance against specific performance objectives. The objectives
were, in order of importance, growth in shareholder value, improved strength of
the balance sheet, progress on strategic initiatives to position the Company for
success in future years in the managed healthcare environment, quality of care
improvements and development of organizational management depth.
Within the framework of Mr. Thiry's employment contract the Committee has
latitude in setting salary and bonus levels and granting stock options.
Philosophically, the Committee is attempting to relate executive compensation to
those variables over which the individual executive generally has control. The
chief executive officer has the primary responsibility for improving shareholder
value for the whole Company. Therefore, the Committee deemed it appropriate to
relate a part of Mr. Thiry's compensation specifically to this objective.
Long Term Incentive Compensation
To be competitive in attracting and retaining qualified executive officers
and to provide them with performance incentives in addition to salary and
bonuses, the Company adopted the 1989 Stock Incentive Plan. In approving stock
option grant recommendations, the Committee considers primarily the impact the
executive is expected to have on increasing shareholder value, and recent
performance toward specific goals that contribute to that result. Such specific
goals differ among executives, but all relate to the speed and effectiveness
with which the Company and its subsidiaries are positioned for the increasing
influence of managed care in the various markets they serve.
$1 million Pay Cap
In 1993, the Internal Revenue Code was amended to add section 162(m), which
generally disallows a tax deduction for compensation paid to a company's senior
executive officers in excess of $1 million per person in any year. Excluded from
the $1 million limitation is compensation which
11
<PAGE> 14
meets pre-established performance criteria or results from the exercise of stock
options which meet certain criteria. While the Company generally intends to
qualify payment of compensation under section 162(m) the Company reserves the
right to pay compensation to its executives from time to time that may not be
tax deductible.
Profit Sharing Plan Compensation
The Company has a profit sharing plan to which annual discretionary
contributions are made on behalf of the participants by the Company as
determined by the Board of Directors. Executive officers are eligible to
participate in the plan on the same basis as other employees after one year of
employment that includes at least 1,000 hours of service. For fiscal 1994, the
Company made profit sharing contributions on behalf of Messrs. Thiry, Barry,
Castaldi and Perkins and Ms. Zumwalt.
THE COMPENSATION COMMITTEE
RICHARD B. FONTAINE
JOHN M. NEHRA
STEPHEN G. PAGLIUCA
12
<PAGE> 15
PERFORMANCE GRAPH
The following is a comparison of the five-year cumulative total investment
return of the Company, the Dow Jones Equity Market Index and the Dow Jones
Health Care Providers Industry Index. It assumes $100 invested on December 1,
1989, the beginning of the Company's first full fiscal year, in the Company's
Stock and the above two indices.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG VIVRA, INCORPORATED, DOW JONES EQUITY MARKET INDEX AND DOW
JONES HEALTHCARE PROVIDERS INDEX
FISCAL YEAR ENDING NOVEMBER 30
<TABLE>
<CAPTION>
DOW JONES DOW JONES
MEASUREMENT PERIOD VIVRA INCOR- EQUITY MAR- HEALTH CARE
(FISCAL YEAR COVERED) PORATED KET INDEX PROVI DER
<S> <C> <C> <C>
1989 100 100 100
1990 145 95 109
1991 241 117 104
1992 263 139 131
1993 269 153 184
1994 385 154 230
</TABLE>
13
<PAGE> 16
EMPLOYMENT CONTRACTS
The following is a summary of the material provisions of the employment
contracts between the Company and Mr. Thiry and of employment contracts between
the Company and the other named executive officers, which are substantially
identical to each other except for salary.
Mr. Thiry's contract provides for an annual salary of at least $225,000 and
expires November 30, 1996. The Company may award discretionary bonuses under the
contract. Mr. Thiry may receive a contingent bonus equal to any discretionary
bonus awarded to him during the term of the contract if the Company's earnings
per share reach $1.87 for the fiscal year ending November 30, 1996, and, except
as described below, he was employed as its Chief Executive Officer throughout
the term of the contract. There is no limit on the size of discretionary and
contingent bonuses that may be awarded. Mr. Thiry's contract contains
nondisclosure, noncompetition and nonsolicitation covenants. The Company may
terminate employment upon 30 days' written notice (i) upon Mr. Thiry's breach of
the contract or neglect of his duties; (ii) for cause or (iii) upon his
permanent disability. The contract terminates immediately upon his death. If
employment terminates due to Mr. Thiry's permanent disability or death, the
Company will be obligated to pay an amount equal to one year's salary, plus any
contingent bonuses awarded during the term of the contract, as to which the
contingency shall be waived. If Mr. Thiry terminates due to the Company's breach
of the contract, he will be entitled to receive an amount equal to one half of
his aggregate salary which would have been paid to him from the date of
termination through November 30, 1996, plus one half of the contingent bonuses
awarded during the term of the contract as to which contingency will be waived.
If employment terminates within one year of a change of control other than for
Mr. Thiry's breach or neglect or termination for cause, Mr. Thiry will receive
payments and benefits, which include (a) a payment equal to three times the sum
of his salary and any discretionary bonus paid for the fiscal year immediately
preceding the change of control; (b) a payment equal to the contingent bonuses
awarded during the term of the contract as to which the contingency will be
waived; (c) continuation of existing or comparable life and health insurance
coverage for three years; (d) acceleration of the exercisability of stock
options and related stock appreciation rights and vesting of any other stock
related awards; and (e) outplacement counseling services and use of office
facilities for one year. Under the contract a "change of control" means a change
of control that would be required to be reported pursuant to Item 6(e) of
Schedule 14A of Rule 14 under the Exchange Act. A "change of control" is deemed
to have occurred if (i) any Person (as defined in the contract) becomes the
beneficial owner, directly or indirectly, of at least 30% of the combined voting
power of the Company's outstanding securities, or (ii) during any consecutive
two year period individuals who at the beginning of such period constitute the
Board of Directors cease to constitute at least a majority thereof, unless the
election of other directors has been approved in advance by at least two-thirds
of the directors at the beginning of such period.
14
<PAGE> 17
The Company also has employment contracts with Messrs. Castaldi and Perkins
which provide for salaries, which are subject to annual review by the Board of
Directors. The Company may terminate employment at any time by giving not less
than 60 days' (120 days after a change in control) written notice, immediately
for cause (as defined in the contracts) and upon 30 days' written notice for
disability. Employment terminates in any event at age 65. Under the contracts
the executives are eligible to receive bonuses, stock options and other forms of
incentive compensation and will also be eligible to participate in employee
benefit and fringe benefit programs. The executives' contracts contain
nondisclosure, nonsolicitation and noninterference covenants. If employment
terminates within three years after a change in control of the Company, other
than for cause, such executive will be entitled to receive certain payments and
benefits which include (a) a payment equal to three times the base compensation
being paid at the time of the change of control, (b) continuation of existing or
comparable life and health insurance coverage for three years, (c) acceleration
of the exercisability of stock options and related stock appreciation rights and
vesting of any other stock related awards, and (d) outplacement counseling
services and use of office facilities for one year. For purposes of the
contracts, a "change in control" means (1) any person becoming the beneficial
owner, directly or indirectly, of at least 50% of the combined voting power of
the Company's voting securities; (2) a sale of all or substantially all of the
Company's assets; (3) a change in the composition of the Board of Directors as a
result of which fewer than one-half of incumbent directors have been nominated
by management; and (4) liquidation of the Company.
15
<PAGE> 18
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT
OF THE COMPANY'S 1989 STOCK INCENTIVE PLAN
In February 1995, the Board of Directors amended and restated the Company's
1989 Stock Incentive Plan (the "1989 Plan"), subject to approval by the
stockholders, to: (i) increase the shares of Common Stock subject to awards
granted under the 1989 Plan by 700,000 shares, (ii) change the provisions for
grant of nonstatutory stock options ("NSO's") to non-employee directors, (iii)
permit consultants to receive discretionary grants of awards other than
incentive stock options (ISOs), (iv) include technical changes to conform the
1989 Plan to the deductibility requirements of section 162(m) of the Code as
described below and to Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, the "Exchange Act," and (v) make certain other technical changes
described below.
An explanation of the 1989 Plan and a summary of the changes are set forth
below. A copy of the full plan may be reviewed by stockholders by contacting
Mary E. Chico at the offices of the Company, 400 Primrose, Suite 200,
Burlingame, California 94010, telephone 415-348-8200. The following summary is
qualified in its entirety by referral to the plan document itself.
Stock Options. Options may include NSOs as well as ISO's. The term of an
ISO cannot exceed 10 years and the exercise price of an ISO must be equal to or
greater than the fair market value of the common stock on the date of grant. The
1989 Plan permits the grant of NSO's with an exercise price of at least 50% of
fair market value on the date of grant. However, to date the Company has not
granted NSOs below fair market value. The closing price per share of the
Company's Common Stock as reported on the New York Stock Exchange on March 21,
1995 was $35.50.
The exercise price of an option may be paid in any lawful form permitted by
the Compensation Committee (the Committee) and, for an ISO, by the stock option
agreement. Permitted forms include, without limitation, cash, the surrender of
shares of Common Stock or restricted shares owned by the optionee more than six
months, or such lesser period as may be required by the Committee. The 1989 Plan
also allows the optionee to pay the exercise price of an option by giving
"exercise/sale" or "exercise/pledge" directions. If exercise/sale directions are
given, a number of option shares sufficient to pay the exercise price and any
withholding taxes is issued directly to a securities broker who, in turn, sells
these shares in the open market. The broker remits to the Company the proceeds
from the sale of these shares, and the optionee receives the remaining option
shares or cash, less any taxes withheld. If exercise/pledge directions are
given, the option shares are issued directly to a securities broker or other
lender. The broker or other lender will hold the shares as security and will
extend credit to the Optionee. The loan proceeds will be paid to the Company to
the extent necessary to pay the exercise price and any withholding taxes.
16
<PAGE> 19
Stock Appreciation Rights. A SAR permits the participant to elect to
receive any appreciation in the value of the underlying stock from the Company
in cash. The amount payable on exercise of an SAR is measured by the difference
between the market value of the underlying stock at exercise and the exercise
price. SARs may only be granted in conjunction with options, and may only be
exercised to the extent that the option to which the SAR is attached is
exercisable. A SAR can only be granted in conjunction with an ISO at the time of
ISO grant, but can be granted in conjunction with a NSO at any time that is at
least six months before the expiration of the NSO.
A SAR may be exercised by written notice to the Company, and will be deemed
exercised if it has value, i.e., option exercise price exceeds fair market
value, on the date when the attached option expires without exercise. Upon
exercise of an SAR, the corresponding portion of the related option must be
surrendered and cannot thereafter be exercised. Conversely, upon exercise of an
option to which an SAR is attached, the SAR may no longer be exercised to the
extent that the corresponding option has been exercised. All options and SARs
are nontransferable prior to the optionee's death.
The Committee selects the key employees of the Company who will receive
awards, and determines the size of the award, the vesting period, term and other
conditions. Key employees and nonemployee directors of the Company are eligible
to participate in the 1989 Plan, although incentive stock options may be granted
only to employees and the participation of nonemployee directors is limited to
automatic annual grants of NSOs. As of March 21, 1995, there were 140 persons
participating in the 1989 Plan.
Shares Available for Issuance. The Company proposes to amend the 1989 Plan
to increase the shares of Common Stock available for award by 700,000. As of
March 21, 1995, a total of 3,553,591 shares had been authorized under the 1989
Plan for award and only 156,254 remain available for grant. Including the
700,000 shares added by the proposed amendment, 4,253,591 would be authorized
and 856,254 available for grant. If any options or stock units granted under the
1989 Plan are forfeited, or if any options or stock units granted under the 1989
Plan terminate for any other reason prior to exercise, then the underlying
shares of Common Stock again become available for awards. In addition, Common
Stock underlying options surrendered upon the exercise of related SARs shall
again become available for awards.
17
<PAGE> 20
Nonemployee Director Grants. The Company proposes to amend the 1989 Plan
to permit additional grants summarized below following the 1995 Annual Meeting
to compensate nonemployee directors for the added work and responsibility
involved in serving on the following committees:
<TABLE>
<CAPTION>
VALUE OF
GRANT OF RESTRICTED
OPTIONS GRANT OF COMMON STOCK
FOR ANNUAL OPTIONS FOR GRANTED FOR
COMMITTEE ADDITIONAL ADDITIONAL
COMMITTEE MEETING MEETINGS(1) MEETINGS(1)(2)
---------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
AUDIT
Chair..................... 1,000 500
Members................... 500 500
COMPENSATION
Chair..................... 2,000 500
Members................... 500 500
COMPLIANCE
Chair..................... 2,000 $ 1,500
Members................... 500 $ 1,000
GOVERNANCE
Chair..................... 2,000 $ 2,000
Members................... 1,000 $ 1,500
CLINICAL QUALITY
Chair..................... 2,000 $ 1,000
Members................... 500 $ 500
</TABLE>
- ---------------
(1) For meetings in addition to annual committee meeting.
(2) The Restricted Common Stock vests after six months.
Each nonemployee member of the Board of Directors of the Company currently
receives, and will continue to receive an automatic annual grant of an NSO for
3,375 shares of the Company's Common Stock and a tandem limited SAR which is
exercisable only upon change of control of the Company. These automatic grants
are made on and as of the first day of December of each year during the term of
the director. The option price is the fair market value of the Company's Common
Stock on the date of each annual grant. The term of such options is ten years.
NSOs and SARs so granted to nonemployee directors will otherwise be subject to
all the terms and conditions of the 1989 Plan. All NSOs granted to nonemployee
directors are exercisable in full on the date of grant.
18
<PAGE> 21
The Company further proposes to amend the 1989 Plan to provide that
automatic annual grants made after the 1995 annual meeting will expire 30 days
after the date that the optionee ceases to be a nonemployee director for any
reason other than death or disability, rather than on the date of termination.
Grants to Consultants and Other Third Parties. The Company proposes to
amend the 1989 Plan to permit awards other than ISOs be granted by the Committee
to nonemployee consultants and other third parties on a discretionary basis,
including nonemployee members of the Board who do not serve on the Compensation
Committee. The Company wishes to expand its flexibility to reward and compensate
such non-employee parties for valuable services rendered.
Deductibility Requirements of Section 162(m). The Company proposes to
amend the 1989 Plan to provide that no key employee shall receive options for
more than 250,000 shares of Common Stock during any award year. The Company also
proposes to amend the 1989 Plan to provide that no key employee shall receive
SARs for more than 250,000 shares of Common Stock during any award year. In
1993, the Code was amended to add section 162(m) which places a limit of
$1,000,000 on the amount of compensation that may be deducted by the Company in
any tax year with respect to each of the Company's highest paid executives,
including compensation relating to the exercise of stock options and SARs.
However, such compensation is not subject to deduction limits if certain
limitations approved by stockholders are applied to stock options and SARs
granted to executives. In order to maximize the deductibility of compensation
relating to stock options and SARs awarded to executive officers, the Company is
requesting stockholders to approve these amendments to the 1989 Plan.
The Company proposes to amend the 1989 Plan to reduce the number of
disinterested persons required to serve on the Committee from three to two
persons to conform the 1989 Plan to recent changes under Rule 16b-3 under the
Exchange Act.
Restrictions on Transfer. The Company proposes to amend the 1989 Plan to
provide that awards may be transferred by a key employee, if the award agreement
so provides. This is an exception to the 1989 Plan's general rule that such
transfers, other than by will or the laws of descent and distribution, are void.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of the ISOs
and NSOs under the 1989 Plan is intended to be a summary of applicable federal
law. State and local tax consequences may differ. Because the federal income tax
rules governing options and related payments are complex
19
<PAGE> 22
and subject to frequent change, optionees are advised to consult their tax
advisors prior to exercise of options or dispositions of stock acquired pursuant
to option exercise.
ISOs and NSOs are treated differently for federal income tax purposes. ISOs
are intended to comply with the requirements of Section 422 of the Code. NSOs
need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an ISO. The difference
between the exercise price and the fair market value of the shares on the
exercise date will, however, be a preference item for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon exercise
of an ISO for at least two years following grant and at least one year following
exercise, the optionee's gain, if any, upon a subsequent disposition of such
shares is a long-term capital gain. The measure of the gain is the difference
between the proceeds received on disposition and the optionee's basis in the
shares, which generally equals the exercise price. If an optionee disposes of
stock acquired pursuant to exercise of an ISO before satisfying the one and
two-year holding periods described above, the optionee will recognize both
ordinary income and capital gain in the year of disposition. The amount of the
ordinary income will be the lesser of (i) the amount realized on disposition
less the optionee's adjusted basis in the stock, usually the option price, or
(ii) the difference between the fair market value of the stock on the exercise
date and the option price. The balance of the consideration received on such a
disposition will be long-term capital gain if the stock had been held for at
least one year following exercise of the ISO. The Company is not entitled to an
income tax deduction on the grant or exercise of an ISO or on the optionee's
disposition of the shares after satisfying the holding period requirement
described above. If the holding periods are not satisfied, the Company will be
entitled to a deduction in the year the optionee disposes of the shares, in an
amount equal to the ordinary income recognized by the optionee.
An optionee is not taxed on the grant of an NSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the shares on the date of exercise. The
Company is entitled to an income tax deduction in the year of exercise in the
amount recognized by the optionee as ordinary income. Any gain on subsequent
disposition of the shares is long-term capital gain if the shares are held for
at least one year following exercise. The Company does not receive a deduction
for this gain.
New Stock Plan Benefits
The Committee has full discretion to determine the number of options to be
granted to key employees under the 1989 Plan. Therefore, the benefits that will
be received by each of the named executive officers, the executive officers as a
group and all other key employees from the award of options are not
determinable. Details on stock options granted during the last three years to
the named executive officers are presented in the table entitled "Summary
Compensation Table."
20
<PAGE> 23
The number of options to be received by each nonemployee director is fixed
under the 1989 Plan, as discussed above, and may not be amended more frequently
than once every six months.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voting at the Annual Meeting is required to approve the
amended and restated 1989 Stock Incentive Plan. Unless marked to the contrary,
proxies received will be voted FOR approval of the amendment and restatement of
the Company's 1989 Stock Incentive Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE COMPANY'S 1989 STOCK INCENTIVE PLAN.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors intends to reappoint Ernst & Young as independent
accountants to audit the financial statements of the Company for the current
fiscal year.
A representative of Ernst & Young is expected to attend the annual meeting
of stockholders, will have an opportunity to make a statement and will be
available to respond to appropriate questions.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne in full by the Company, and in
the event an insufficient number of proxies are received to constitute a quorum,
there will be further solicitation of stockholders by mail, telephone or oral
communication. The Company will also request brokerage houses and other nominees
or fiduciaries to forward copies of its proxy material and annual report to
beneficial owners of stock held in their names, and the Company will reimburse
them for reasonable out-of-pocket expenses incurred in doing so.
TIME FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals to be presented at the next annual meeting which will
take place on or about April 26, 1996, must be received by the Company for
inclusion in its proxy statement not later than November 15, 1995, unless such
meeting date is changed by more than 30 calendar days, in which case such
proposals must be received a reasonable time prior to mailing of the proxy
statement.
21
<PAGE> 24
VIVRA INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders, May 9, 1995
The undersigned hereby appoints Kent J. Thiry, LeAnne M. Zumwalt, and
Mary E. Chico, and each of them, the attorneys and proxies of the undersigned
with full right of substitution to vote as designated below all the shares of
VIVRA INCORPORATED common stock held of record by the undersigned on March 21,
1995, at the annual meeting of stockholders of the Corporation to be held on
May 9, 1995 at 11:00 a.m. and at all adjournments thereof with the same force
and effect as the undersigned might or could do, if personally present at the
meeting.
Management knows of no other matters which may properly be, or which
are likely to be, brought before the meeting. However, if any of the matters
are properly brought before the meeting, the persons named in this proxy or
their substitutes will vote in accordance with their best judgment on such
matters.
This proxy when properly executed, will be voted in the manner directed
by the undersigned stockholder.
The proxies appointed may act by a majority of them present at the
meeting or if only one is present by that one.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE> 25
/x/ Please mark
votes as in
this example
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS NOMINATED AND IN FAVOR OF THE AMENDMENT AND RESTATEMENT OF THE 1989
STOCK INCENTIVE PLAN, WHICH INCLUDES AN INCREASE IN SHARES RESERVED THEREUNDER,
AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
1. Election of Directors:
Nominees: Stephen G. Pagliuca, Kent J. Thiry, and LeAnne M. Zumwalt
For all nominees / / Withheld from all nominees / /
/ / _________________________________________________
Vote withheld for above named nominee or nominees
2. Stock Incentive Plan amendment:
Amendment and restatment of the 1989 Stock Incentive Plan, including an
increase of 700,000 in number of shares reserved thereunder.
For / / Against / / Abstain / /
Mark here for address change and note at left / /
Please sign exactly as name appears on stock certificates. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If signer is a corporation, sign in full corporation name by
authorized officer. Joint owners should each sign personally.
Signature:_____________________________________________ Date__________________
Signature:_____________________________________________ Date__________________
