<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:
(4) Date Filed:
<PAGE> 2
VIVRA INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 27, 1996
TO THE STOCKHOLDERS:
The annual meeting of the stockholders of VIVRA Incorporated, a Delaware
corporation, will be held on Thursday, May 2, 1996, at 4:00 p.m. Pacific
Daylight Time, at the Hyatt Lake Tahoe, Incline Village, California, for the
following purposes:
1. To elect three directors for three-year terms;
2. To approve the amendment to the Company's Revised 1989 Stock Incentive
Plan; 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 Thursday, March 21, 1996
will be entitled to vote at the meeting.
If you plan to attend the meeting, the Hyatt Lake Tahoe at Incline Village
is located on the North end of Lake Tahoe on the California/Nevada border. Take
U.S. Interstate 80 to the Highway 267/Central Truckee exit, take Highway 267
South to Highway 28 and take Highway 28 East to Country Club Drive. The hotel is
on Country Club Drive on the right side.
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 Thursday, May 2, 1996, 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 27, 1996.
The proxy may be revoked at any time prior to its use by delivering to the
Company at the above address a written notice of revocation or a later dated
properly executed proxy, or by voting in person at the meeting. 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 for the amendment to the Company's Revised 1989 Stock Incentive Plan.
Stockholders of record at the close of business on March 21, 1996 will be
entitled to vote at the meeting. The Company has outstanding only one class of
stock entitled to vote at the meeting, its Common Stock, $.01 par value of which
37,377,671 shares were outstanding at the close of business on March 20, 1996.
Each stockholder is entitled to one vote for each share held, and there is no
right to cumulate votes in the election of directors.
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 Revised 1989
Stock Incentive Plan requires the affirmative vote of the holders of a majority
of the 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.
Abstentions 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 a vote, and thus are not considered in determining whether a
proposal was approved.
ELECTION OF DIRECTORS
John M. Nehra, Alan R. Hoops and David L. Lowe, 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 1999, 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 DIRECTORS
The following information is furnished with respect to each nominee and the
directors:
<TABLE>
<CAPTION>
DIRECTOR
OCCUPATION AND CONTINUOUSLY TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
- ------------------------- --- ----------------------------------------- ------------ -------
<S> <C> <C> <C> <C>
Alan R. Hoops 47 Chief Executive Officer and Director of 1995 1996
PacifiCare Health Systems, which is not
affiliated with the Company, since 1993;
1991-1993, Chief Operating Officer of
PacifiCare Health Systems.
David L. Lowe 36 Chairman and Chief Executive Officer of 1995 1996
ADAC Laboratories, Inc., a medical
imaging and healthcare information
company, which is not affiliated with the
Company, since 1994; 1992-1994, Chief
Executive Officer of ADAC Laboratories,
Inc. and 1988-1994 President of ADAC
Laboratories, Inc.
John M. Nehra 47 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.
David G. Connor, M.D. 55 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 52 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 of Caremark, Inc., a
health care company, neither of which
corporations are affiliated with the
Company.
Stephen G. Pagliuca 40 Managing General Partner of Information 1992 1998
Partners, a venture capital firm since
1989; 1986-1989, Vice President of Bain &
Company, a management consulting company,
neither of which entities are affiliated
with the Company.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
OCCUPATION AND CONTINUOUSLY TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
- ------------------------- --- ----------------------------------------- ------------ -------
<S> <C> <C> <C> <C>
Kent J. Thiry 40 President and Chief Executive Officer of 1991 1998
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, Consultant, then Vice
President, Director of U.S. Health Care
Consulting, Bain & Company, Inc., San
Francisco, California. Mr. Thiry is also
a director of Summit Medical Services,
Inc., a medical information services
company, of which the Company owns
approximately 7.8% of the common stock.
LeAnne M. Zumwalt 37 Executive Vice President of the Company 1994 1998
since August 1995 and Treasurer and
Secretary since March 1995, November
1993-1995, Vice President, Finance,
joined the Company in 1991; prior thereto
Audit Senior Manager with Ernst & Young.
</TABLE>
BOARD COMMITTEES
During fiscal 1995, the Board of Directors met ten 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 four committees of the Board: Audit, Compensation,
Governance and Clinical Quality. The Governance Committee acts as the Company's
nominating committee.
The Audit Committee currently consists of Stephen G. Pagliuca, Chair, John
M. Nehra and David G. Connor, M.D. It met once in fiscal 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 currently consists of Richard B. Fontaine,
Chair, David L. Lowe and Stephen G. Pagliuca. It met four times in fiscal 1995.
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. The Chair of the Compensation Committee also conducts annual
reviews of the Company's executive officers, including collecting feedback from
subordinates of the executives.
The Governance Committee currently consists of John M. Nehra, Chair, and
Richard B. Fontaine. It met once in fiscal 1995. 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.
The Clinical Quality Committee currently consists of David L. Lowe, Chair
and David G. Connor, M.D. In fiscal 1995 the Clinical Quality Committee held
numerous meetings with physicians and others concerning the Company's Clinical
Quality Initiative. Its purpose is to monitor quality of care issues, oversee
progress in
3
<PAGE> 6
the improvement of clinical care and review and measure outcomes of care in
comparison to medical guidelines and industry standards.
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 5,062
shares of Common Stock, and a related limited stock appreciation right ("LSAR")
under the Company's Revised 1989 Stock Incentive Plan. During 1995, nonemployee
directors received fees payable in grants of stock, options or cash ranging from
$500 to $2,500 per additional committee meeting and for other Board related
duties. Officers of the Company who serve as directors receive no fee, but are
reimbursed for expenses incurred in attending meetings.
For fiscal 1996, the Board has approved, subject to stockholder approval of
the amendments to the Company's Revised 1989 Stock Incentive Plan, an increase
in fees for directors serving on committees. The new fees are (i) an annual
retainer of $40,000, with $20,000 in Restricted Stock and $20,000 in cash, for
the Chair of the Compensation Committee, with cash fees of $2,000 and $1,500 for
each meeting attended in person by the chair and committee members,
respectively; (ii) an annual retainer of $20,000 of Restricted Stock for the
Chair of the Audit Committee, with cash fees of $2,000 and $1,000 for each
meeting attended in person by the chair and committee members, respectively;
(iii) an annual retainer of $20,000 of Restricted Stock for the Chair of the
Governance Committee, with meeting fees of $2,000 and $1,000 for each meeting
attended in person by the Chair and committee members, respectively; and (iv) an
annual retainer of $10,000 of Restricted Stock for the Chair of the Clinical
Quality Committee, with fees of $2,000 and $1,000 for each meeting attended in
person by the Chair and committee members, respectively. Additionally, each
Chair and committee member will receive $500 cash for each meeting attended
telephonically, except that the Chair of the Governance Committee will receive
$1,500 cash for each meeting attended telephonically.
In fiscal 1995, Richard B. Fontaine provided consulting services to Vivra
Health Advantage, Inc., a subsidiary of the Company. Mr. Fontaine received
approximately $99,000 during a five-month period for such consulting services.
Mr. Fontaine was also paid $21,000 in connection with the numerous meetings held
by him as chairman of the Clinical Quality Committee regarding the establishment
of the Company's Clinical Quality Initiative. Additionally, John M. Nehra
provided consulting services to Vivra Specialty Partners, Inc., receiving
approximately $10,000 for periodic service over several months and options to
purchase 60,000 shares of Vivra Heart Services, Inc., a subsidiary of the
Company ("VHS"), at $.50 per share and options to purchase 50,000 shares of VHS
at $1.00 per share.
4
<PAGE> 7
BENEFICIAL OWNERSHIP
The following tables show beneficial ownership as of February 29, 1996 and
as of December 31, 1995, respectively of the Company's Common Stock, $.01 par
value, by the directors, executive officers and greater than 5% stockholders:
BENEFICIAL OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
SHARES OWNED PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OF CLASS(1)
- ------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
David G. Connor, M.D.............................................. 36,559(2)
Richard B. Fontaine............................................... 31,088(3)
Alan R. Hoops..................................................... 5,062(2)
David L. Lowe..................................................... 5,812(2)
John M. Nehra..................................................... 20,248(2)
Stephen G. Pagliuca............................................... 20,998(2)
Kent J. Thiry..................................................... 484,500(2) 1.3%
LeAnne M. Zumwalt................................................. 37,839(4)
David P. Barry.................................................... 63,800(5)
Ernest A. Blackwelder............................................. 21,100(6)
Michael W. Castaldi............................................... --
Robert A. Prosek.................................................. 12,000(2)
All directors and executive officers as a group (16 persons)...... 809,956(7) 2.2%
</TABLE>
- ---------------
(1) In all cases except Mr. Thiry and all directors and executive officers as a
group, the holdings represent less than 1% of the outstanding shares of
Common Stock.
(2) All shares are subject to options which are currently exercisable.
(3) Includes 26,248 shares subject to options which are currently exercisable.
(4) Includes 37,838 shares subject to options which are currently exercisable.
(5) All shares are subject to options which are currently exercisable or will
become exercisable within 60 days.
(6) Includes 21,000 shares subject to options which are currently exercisable or
will become exercisable within 60 days.
(7) Includes 802,015 shares subject to options which are currently exercisable
or will become exercisable within 60 days.
5
<PAGE> 8
OTHER BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARES OWNED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY CLASS
------------------------------------------------------------- ------------ ----------
<S> <C> <C>
RCM Capital Management....................................... 3,221,712(2) 8.8%
RCM Limited, L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, CA 94111
Nicholas Company, Inc. ...................................... 2,956,000(3) 8.1%
700 North Water Street
Milwaukee, WI 53202
Putnam Investments, Inc.(4).................................. 2,593,700(5) 7.2%
One Post Office Square
Boston, MS 02109
</TABLE>
- ---------------
(1) Information based on a Schedule 13D or Schedule 13G filed with the
Securities and Exchange Commission by each named owner.
(2) Sole voting and investment power, 2,536,487 and 3,174,212, respectively;
shared investment power, 47,500.
(3) Sole investment power.
(4) Certain Putnam investment managers (together with their parent corporation,
Putnam Investments, Inc.), are considered "beneficial owners" in the
aggregate of 2,593,700 shares, or 7.2% of shares outstanding of the
Company's voting common stock, which shares were acquired for investment
purposes by such investment managers for certain of their advisory clients.
(5) Shared voting and investment power, 128,700 and 2,593,700 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............ 40 President and Chief Appointed September 1992. April-August
Executive Officer 1992, President and Co-Chief Executive
Officer; September 1991-March 1992,
President and Chief Operating Officer;
1983-1991, Consultant, then Vice
President, Director of U.S. Health Care
Consulting, Bain & Company, Inc., San
Francisco, California.
David P. Barry........... 37 Vice President, Appointed May 1992. August 1995,
Dialysis Services President, Vivra Renal Care, Inc.,
responsible for operations; December
1993,
President, Specialty CareAmerica, Inc.,
responsible for specialty dialysis
services;
May 1992-November 1993, President,
Personal Care Health Services, Inc., a
former subsidiary of the Company,
responsible for operations of the home
health care business; 1984-1992,
Homedco, an infusion therapy company,
since 1990 District Manager for
California.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME AGE TITLE BUSINESS EXPERIENCE
- ------------------------- --- -------------------- ----------------------------------------
<S> <C> <C> <C>
Ernest A. Blackwelder.... 36 Vice President Appointed November 1994. August 1995,
appointed President, Vivra Heart
Services, Inc. August 1994 appointed
President of Specialty Partners of
America, Inc., a subsidiary of the
Company, and separately in charge of
Surgical Partners of America, Inc.;
1991-1994, District Manager and
Assistant to the President of BMC West
Corporation, a building supply company;
1988-1991, a consultant with Bain &
Company, Inc., specializing in the
health care industry.
Steven C. Bilt........... 30 Vice President, Appointed Vice President July 1995.
Finance 1993- 1995, Vice President South Coast
Rehabilitation Services, Inc., a
provider of rehabilitation services and
a majority owned subsidiary of the
Company until July 1995. Prior thereto,
Audit Manager with Ernst & Young.
Gregory M. Holcomb....... 45 Vice President, Appointed Vice President, Finance
Finance November 1993. Prior thereto, Director
of Finance for the Company.
Jacob Lazarovic, M.D. ... 46 Vice President Appointed October 1995 and also
appointed Vice President, Vivra
Specialty Partners, Inc., a subsidiary
of the Company; 1988-1995, Regional
Medical Director, Southern Region, Blue
Cross/Blue Shield of Florida/Health
Options.
Robert A. Prosek......... 51 Vice President, Appointed Vice President December 1994
Asthma and Allergy and President of Asthma & Allergy
Services CareAmerica, Inc., a subsidiary of the
Company. During 1994, President of
Allergy Care of America, Inc.;
1991-1993, President of Care Partners, a
healthcare company; and from 1989-1991,
President of PSICOR, provider of
contract clinical services for cardiac
surgery.
Thomas O. Usilton........ 44 Vice President, Appointed September 1995 and also
Vivra Specialty appointed Executive Vice President of
Partners Vivra Specialty Partners, Inc.;
1990-1994 founder and Chief Executive
Officer of Premier Allergy, Inc.
Robert A. Vraciu......... 48 Vice President, Appointed September 1995 and also
Diabetes Management appointed President of Vivra Health
Services Advantage, a subsidiary of the Company
providing diabetes management services.
Prior thereto, Vice President of
Strategic Planning of Health Trust Inc.
LeAnne M. Zumwalt........ 37 Executive Vice Appointed Executive Vice President
President, Treasurer August 1995 and Treasurer and Secretary
and Secretary March 1995, Vice President, Finance
November 1993-August 1995; joined the
Company in 1991. Prior thereto, Audit
Senior Manager with Ernst & Young.
</TABLE>
7
<PAGE> 10
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 1995, 1994
and 1993, to each of the four other most highly compensated current executive
officers in all executive capacities in which they served during the fiscal
years ending November 30, 1995, 1994 and 1993 and to a former executive officer
who would have been one of the four other most highly compensated executive
officers if such person was an executive officer as of November 30, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
NAME ------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
- ----------------------------------- ----- --------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Kent J. Thiry...................... 1995 250,000 275,000 150,000 24,546(2)
President and Chief 1994 225,000 200,000 150,000 17,072(2)
Executive Officer 1993 225,000 200,000(1) 225,000 --
LeAnne M. Zumwalt.................. 1995 124,200 75,000 84,000 8,956(2)
Executive Vice 1994 107,725 60,000 18,000 5,770(2)
President, Secretary and
Treasurer
David P. Barry..................... 1995 127,000 225,000 141,000 8,519(2)
Vice President 1994 115,000 120,725 10,500 7,893(2)
1993 110,789 85,000 16,875 --
Ernest A. Blackwelder.............. 1995 120,000 50,000 45,000 --
Vice President
Robert A. Prosek................... 1995 176,750 -- 30,000 --
Vice President
Michael W. Castaldi................ 1995 180,000 -- -- 24,546(2)
Former Senior Vice 1994 177,406 160,000 -- 24,012(2)
President 1993 175,000 150,000 225,000 17,604(2)
</TABLE>
- ---------------
(1) In addition, Mr. Thiry was granted a contingent bonus of $200,000 for fiscal
1993, which will be paid after November 30, 1996, if the Company's earnings
per share as of that date are at least $1.25, which represents a 17.5%
compound annual growth rate over earnings per share reported for fiscal
1992, and if the Board approves granting such bonus.
(2) Share of Company's contribution to Profit Sharing Plan.
8
<PAGE> 11
FISCAL 1995 VIVRA OPTION/SAR GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICES APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS/SARS EMPLOYEES IN OR BASE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
- ------------------------- ------------ ------------ ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kent J. Thiry............ 150,000(1) 16.9 23.25 11/09/00 963,532 2,129,154
LeAnne M. Zumwalt........ 9,000(2) 1.0 21.92 10/05/00 54,505 120,442
75,000(1) 8.4 23.25 11/09/00 481,766 1,064,577
David P. Barry........... 30,000(3) 3.4 21.92 03/30/00 181,683 401,472
15,000(4) 1.7 20.00 08/16/00 82,884 183,153
21,000(2) 2.4 21.92 10/05/00 127,178 281,030
75,000(1) 8.4 23.25 11/09/00 481,766 1,064,577
Ernest A. Blackwelder.... 45,000(3) 5.1 21.92 03/30/00 272,524 602,208
Robert A. Prosek......... 30,000(5) 3.4 19.08 11/30/99 158,144 349,455
Michael W. Castaldi...... 0 0 N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Vests 25% each year on November 9, 1996 through 1999 and 100% in the event
of a change of control.
(2) Vests 20% on October 5, 1995, and 20% each year on October 5, 1996 through
1999 and 100% in the event of a change of control.
(3) Vests 20% on March 30, 1996, and 80% on March 30, 1998 and 100% in the event
of a change of control.
(4) Vests 20% on August 16, 1996, and 40% each year on August 16, 1998 through
1999 and 100% in the event of a change of control.
(5) Vests 20% on December 1, 1994, and 20% each year on December 1, 1995 through
1998 and 100% in the event of a change of control.
9
<PAGE> 12
FISCAL 1995 VIVRA 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, 1995:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)(1)
SHARES ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Kent J. Thiry........................ 187,500 2,097,848 484,500/ 5,117,895/
427,500 2,321,885
LeAnne M. Zumwalt.................... 11,812 98,996 37,838/ 310,611/
108,600 180,601
David P. Barry....................... 54,375 430,036 69,300/ 625,262/
157,200 242,700
Ernest A. Blackwelder................ -- -- 12,000/ 81,000/
63,000 159,000
Robert A. Prosek..................... -- -- 6,000/ 22,000/
24,000 88,000
Michael W. Castaldi.................. 228,937 2,581,091 -- --
</TABLE>
- ---------------
(1) The closing price of the Company's Common Stock on the New York Stock
Exchange at fiscal year end, November 30, 1995, was $22.75 per share.
SUBSIDIARY OPTIONS
The Company has granted options to employees and other individuals in
various operating subsidiaries. The purpose of such option grants is to motivate
individuals directly responsible for the subsidiary's success. Under the
subsidiary option programs, options are granted pursuant to a stock option plan
adopted by the subsidiary. Each option is reflected by an option agreement which
provides for the grant of options at fair market value typically with a term of
the earlier of 5 years or a period after death, disability or termination of
employment. The subsidiary may also compel the exercise of options under certain
circumstances. The options generally vest over a four year term in equal annual
installments. Optionholders are also required to be bound by the terms of a
Stockholders Agreement. The Stockholders Agreement contains rights of first
refusal on transfers by stockholders, a right of repurchase (the "Call Right")
in the event the employee is no longer employed by the subsidiary, and a right
of the employee to compel the subsidiary to repurchase (a "Put Right") the
shares in 1999. The Call Right and the Put Right may be satisfied by the Company
by the payment of cash, a promissory note, or, in some cases, an equivalent
value of Vivra Common Stock. The Stockholder Agreement also contains various
other rights and restrictions, including "piggyback" registration rights to
include shares in registration statements filed by the subsidiary under the
Securities Act of 1933, as amended.
In fiscal 1995, Vivra Heart Services, Inc., a subsidiary of the Company,
granted options to Messrs. Blackwelder, Barry, Nehra and Prosek, Ms. Zumwalt and
Dr. Connor options to purchase 240,000, 10,000, 110,000, 2,500, 15,000 and 2,500
shares, respectively, at exercise prices of $0.50; except in the case of Mr.
Vraciu's options and 50,000 of Mr. Nehra's options, which were granted at an
exercise price of $1.00.
In fiscal 1995, Vivra Health Advantage, Inc., a subsidiary of the Company,
granted Mr. Vraciu an option to acquire 350,000 shares of its Common Stock at
$0.79 per share.
10
<PAGE> 13
In fiscal 1995, Vivra Specialty Partners, Inc., a subsidiary of the
Company, granted to Messrs. Lazarovic and Barry and Ms. Zumwalt options to
acquire 270,000, 60,000 and 70,000 shares, respectively, at an exercise price of
$1.65.
In fiscal 1996, Vivra Asthma & Allergy CareAmerica, Inc., ("VAACA") a
subsidiary of the Company, granted Mr. Prosek options to purchase 600,000 shares
of its common stock at an exercise price of $0.375 per share. Mr. Prosek will
receive an additional 300,000 shares of options to purchase VAACA common stock
at an exercise price equal to the fair market value per share on the date of
grant upon his relocation to Burlingame, California.
EMPLOYEE LOAN
In connection with Mr. Blackwelder's relocation from Boulder, Colorado to
Burlingame, California in July 1995, the Company loaned Mr. Blackwelder $250,000
to acquire a new residence. The loan bears interest at an annual interest rate
of 6.28%. Interest payments are due each year on the last day of the year and
all unpaid interest and principal are due on July 18, 2001. The loan is secured
by a second deed of trust on Mr. Blackwelder's residence. The Company has agreed
to pay Mr. Blackwelder bonuses at least equal to the amount of interest due on
the loan each year.
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 earnings per share 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 and 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, selection
and implementation of financial and clinical information systems, development of
managed care products and advancement of new business initiatives.
For fiscal 1995, compensation for executive officers, as listed in the
Information Concerning Executive Officers table starting on page 8 included cash
bonuses, Vivra stock options and subsidiary stock options in Vivra Specialty
Partners and the individual companies in that segment. Compensation was weighted
heavily toward these variable components, with the long term objective of
shifting to more variable pay for performance. Bonuses ranged from $0 to
$225,000 and averaged $63,000, excluding that for the Chief Executive Officer.
CEO Compensation
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
11
<PAGE> 14
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.
The Company recently entered into a new employment contract with Mr. Thiry
which provides for an annual salary of $275,000 and expires on January 31, 2000.
The Company may award discretionary bonuses under the contract. In fiscal 1995,
Mr. Thiry was employed under a prior contract which provided for a base salary
of $225,000 and similar discretionary and contingent bonuses. For fiscal 1995,
the Committee awarded Mr. Thiry a cash performance bonus of $275,000, options on
150,000 shares of Common Stock and an increase in annual base salary of $25,000
to $275,000, effective December 1, 1995. In determining Mr. Thiry's base and
performance bonus compensation, the Committee considered the compensation of
CEOs of comparable healthcare companies, as well as Mr. Thiry's performance
against specific performance objectives. The objectives were growth in
shareholder value, quality of care improvements, improved strength of the
balance sheet, progress on strategic initiatives to position the Company for
success in future years in the managed healthcare environment and development of
organizational management depth. Based on the performance of the Company in
fiscal 1995, including a 12.5% increase in net earnings per share (increase of
16.7% in earnings per share from continuing operations before special charges),
a dramatic improvement in Clinical Quality Initiatives, and the launching of
Vivra Specialty Partners, Inc., the Committee determined it was appropriate to
award to Mr. Thiry bonuses for fiscal 1995, as discussed above.
For fiscal 1992 and 1993, Mr. Thiry was awarded contingent bonuses of
$100,000 and $200,000, respectively, payable after November 30, 1996, if the
Company's earnings per share for the fiscal year ending November 30, 1996, are
$1.25 or more and subject to Board approval. The $1.25 represents a 17.5%
compound annual growth rate over earnings per share for fiscal 1992. If this
goal is not met or the Board does not approve the bonus, the contingent bonus
will be forfeited.
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 Revised 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 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 1995, the
Company made profit sharing contributions on behalf of many of its employees,
including Messrs. Thiry, Barry and Castaldi and Ms. Zumwalt.
THE COMPENSATION COMMITTEE
RICHARD B. FONTAINE
DAVID L. LOWE
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,
1990 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 HEALTH CARE
MEASUREMENT PERIOD VIVRA INCOR- EQUITY MAR- PROVI DER IN-
(FISCAL YEAR COVERED) PORATED KET INDEX DEX
<S> <C> <C> <C>
1990 100 100 100
1991 166 122 95
1992 182 146 120
1993 186 160 168
1994 266 162 210
1995 317 223 259
</TABLE>
Employment Contracts
The following is a summary of the material provisions of the employment
contract 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 (which was entered into in March 1996) provides for an
annual salary of at least $275,000 and expires January 31, 2000. The Company may
award discretionary bonuses under the contract. Mr. Thiry will receive a
previously granted contingent bonus of $300,000 if the Company's earnings per
share reach $1.25 for the fiscal year ending November 30, 1996, subject to Board
approval, and if he is employed as its Chief Executive Officer throughout the
1996 fiscal year. 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 computed at a rate of at least $300,000, plus
the contingent bonus amount without regard as to whether the contingencies have
occurred. If Mr. Thiry terminates due to the Company's breach of the contract,
he will be entitled to receive an amount equal to one and one half of his annual
salary computed at a rate of at least $300,000 per annum, plus one and one half
of the discretionary bonuses actually awarded during the prior fiscal year. 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 2.99 times the sum
of his annual salary computed at a rate of at least $300,000
13
<PAGE> 16
per annum and any discretionary bonus paid for the fiscal year immediately
preceding the change of control; (b) a payment equal to the contingent bonus as
to which the contingencies 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) 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
under the Securities Exchange Act of 1934, as amended. 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.
The Company also has employment contracts with Messrs. Barry and
Blackwelder and Ms. Zumwalt 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 30 days' written notice and immediately for
cause (as defined in the contracts). 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
two 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, for Mr. Barry and Ms. Zumwalt, a payment equal to 2.99 times the base
compensation being paid at the time of the change of control, and for Mr.
Blackwelder, two times the base compensation being paid at the time of the
change of control, and acceleration of the exercisability of stock options and
related stock appreciation rights. For purposes of the contracts, a "change in
control" means (1) any person becoming the beneficial owner, directly or
indirectly, of at least 20% of the combined voting power of the Company's voting
securities; (2) a change in the composition of the Board of Directors as a
result of which fewer than two-thirds of incumbent directors had been directors
24 months prior to such change or were elected or nominated with the affirmative
votes of directors who had been directors 24 months prior to such change; and
(3) a change in control required to be reported pursuant to Item 6(e) of
Schedule 14A under the Securities Exchange Act of 1934, as amended.
The Company also has an employment contract with Mr. Prosek which provides
for a salary which is subject to annual review by the Board of Directors. During
the first two years of the employment contract, Mr. Prosek may be terminated
only for cause. Thereafter, the Company may terminate employment at any time by
giving not less than 90 days' written notice and upon 75 days written notice for
cause or for disability. Under the contract, Mr. Prosek is 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
employment contract provides that the Company may not require Mr. Prosek to
relocate for two years. His contract contains nondisclosure, nonsolicitation and
noninterference covenants. Mr. Prosek may terminate the contract upon a change
in control of the Company and will be entitled to receive certain payments and
benefits which include a payment equal to one times the base compensation being
paid at the time of the change of control and acceleration of the exercisability
of stock options and related stock appreciation rights. For purposes of the
contract, a "change in control" means (1) any person becoming the beneficial
owner, directly or indirectly, of at least 20% of the combined voting power of
the Company's voting securities; (2) a change in the composition of the Board of
Directors as a result of which fewer than two-thirds of incumbent directors had
been directors 24 months prior to such change or were elected or nominated with
the affirmative votes of directors who had been directors 24 months prior to
such change; (3) a change in control required to be reported pursuant to Item
6(e) of Schedule 14A under the Securities Exchange Act of 1934, as amended; and
(4) the Company discontinues or sells its asthma and allergy business.
14
<PAGE> 17
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S REVISED 1989
STOCK INCENTIVE PLAN
In November 1995, the Board of Directors amended the Company's Revised 1989
Stock Incentive Plan (the "1989 Plan"), subject to approval by the stockholders,
to eliminate the automatic grant of nonstatutory stock options ("NSOs") or
restricted stock for attendance at committee meetings subsequent to the 1996
Annual Meeting and to provide for the automatic grant of restricted stock as a
portion or all of the annual retainer for serving as a chairperson of a
committee.
An explanation of the 1989 Plan and a summary of the changes are set forth
below. A copy of the full plan may be obtained by stockholders by contacting
Charles W. Ott by phone or in writing 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, which is incorporated herein by reference.
Summary of the Plan. Options may include NSOs as well as Incentive Stock
Options ("ISOs"). 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 NSOs 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 20, 1996 was $29.00.
The exercise price of any NSO 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,
or by giving "exercise/sale" or "exercise/pledge" directions.
SARs may also be granted under the Plan. An 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. An 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.
An 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 ISOs may be granted only to employees
and the participation of nonemployee directors is limited to automatic annual
grants of NSOs and automatic grants of NSOs and restricted stock for attendance
at committee meetings as described below. As of March 21, 1996 there were 213
persons participating in the 1989 Plan.
Proposed Amendment. Currently the 1989 Plan authorizes automatic grants of
NSOs and restricted stock for the attendance by nonemployee directors at
committee meetings. The Company proposes to amend the 1989 Plan to delete this
provision effective at and after the 1996 Annual Meeting, such that fees for
attending committee meetings thereafter will be payable solely in cash. The
Company also proposes to amend the 1989 Plan effective at and after the 1996
Annual Meeting to provide for the automatic grant of restricted
15
<PAGE> 18
stock to nonemployee directors in the amount set forth below in satisfaction of
all or the specified portion of the annual retainer for the chairs of the
committees listed below.
<TABLE>
<CAPTION>
VALUE OF
RESTRICTED COMMON STOCK
GRANTED FOR ANNUAL
RETAINERS(1)
-----------------------
<S> <C>
Chair of the Compensation Committee......................... $20,000(2)
Chair of the Audit Committee................................ $20,000
Chair of the Governance Committee........................... $20,000
Chair of the Clinical Quality............................... $10,000
</TABLE>
- ---------------
(1) The Restricted Common Stock vests after six months and the number of shares
granted will be based on the fair market value of the Company's Common Stock
on the date of grant, which will be the date of the Company's Annual
Meeting. No fractional shares will be issued, with amounts rounded down to
the next number of whole shares.
(2) This amount represents fifty percent of the annual retainer, with the
remainder payable in cash.
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
5,062 shares of the Company's Common Stock and a tandem LSAR 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 option 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.
New Stock Plan Benefits. The number of NSOs, SARs or restricted stock to
be received by each nonemployee director is fixed under the 1989 Plan 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 Revised 1989 Stock Incentive Plan. Unless marked to the contrary,
proxies received will be voted FOR approval of the amendment of the Company's
Revised 1989 Stock Incentive Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE COMPANY'S REVISED 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.
OTHER MATTERS
Compliance With Section 16(a) of the Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Company's executive
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership on Forms
3, 4 and 5 with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than 10 percent stockholders are required by SEC
regulations to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
16
<PAGE> 19
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
are not required to file Form 5 for the fiscal year ended December 31, 1995, the
Company believes that all of its officers, directors and greater than 10 percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal year 1995, except John Morse filed his
Form 3 in fiscal 1994 approximately two months late, Messrs. Barry, Holcomb,
Thiry, Castaldi, Malkmus, Morse and Ms. Zumwalt filed their Form 5s for fiscal
1994 approximately three days late; and Mr. Prosek filed his Form 3
approximately 23 days late.
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 May 2, 1997, must be received by the Company for
inclusion in its proxy statement not later than November 27, 1996, 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.
By Order of the Board of Directors
LEANNE M. ZUMWALT
Secretary
17
<PAGE> 20
DETACH HERE VIV 2
PROXY
VIVRA INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, MAY 2, 1996
The undersigned hereby appoints Kent J. Thiry, LeAnne M. Zumwalt, and
P Charles W. Ott, and each of them, the attorneys and proxies of the
R undersigned with full right of substitution to vote as designated below all
O the shares of VIVRA INCORPORATED common stock held of record by the
X undersigned on March 21, 1996, at the annual meeting of stockholders of the
Y Corporation to be held on May 2, 1996 at 4:00 p.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> 21
DETACH HERE VIV 3
/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 OF THE REVISED
1989 STOCK INCENTIVE PLAN, AS DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
1. Election of Directors
Nominees: Alan R. Hoops, David L. Lowe
and John M. Nehra
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ / _____________________________________________
Vote withheld for above named nominee or nominees
2. Stock Incentive Plan amendment:
FOR AGAINST ABSTAIN
Amendment of the Revised / / / / / /
1989 Stock Incentive Plan
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 corporate name by authorized
officer. Joint owners should each sign personally.
Signature:__________________ Date_____ Signature:__________________ Date_____
<PAGE> 22
VIVRA INCORPORATED
REVISED 1989 STOCK INCENTIVE PLAN
(Amended and Restated
Effective May 2, 1996)
<PAGE> 23
TABLE OF CONTENTS
Page
----
ARTICLE 1. INTRODUCTION........................................ 1
ARTICLE 2. ADMINISTRATION....................................... 1
2.1 The Committee...................................................... 1
2.2 Committee Responsibilities......................................... 1
ARTICLE 3. LIMITATION ON AWARDS................................. 2
ARTICLE 4. ELIGIBILITY......................................... 2
4.1 General Rule....................................................... 2
4.2 Non-Employee Directors............................................. 2
4.3 Ten-Percent Stockholders........................................... 3
4.4 Attribution Rules.................................................. 3
4.5 Outstanding Stock.................................................. 3
ARTICLE 5. OPTIONS.............................................. 4
5.1 Stock Option Agreement............................................. 4
5.2 Options Nontransferable............................................ 4
5.3 Number of Shares................................................... 4
5.4 Exercise Price..................................................... 4
5.5 Exercisability and Term............................................ 4
5.6 Effect of Change in Control........................................ 5
5.7 Modification, Extension and Renewal of
Options........................................................... 5
5.8 Restrictions on Transfer of Common Shares......................... 5
ARTICLE 6. PAYMENT FOR OPTION SHARES........................... 5
6.1 General Rule...................................................... 5
6.2 Surrender of Stock................................................ 6
6.3 Exercise/Sale..................................................... 6
6.4 Exercise/Pledge................................................... 6
6.5 Other Forms of Payment............................................ 6
ARTICLE 7. STOCK APPRECIATION RIGHTS........................... 6
7.1 Grant of SARs..................................................... 6
7.2 Manner of Exercise of SARs........................................ 7
7.3 Special Holding Period............................................ 7
7.4 Special Exercise Window........................................... 7
7.5 Limited SARs...................................................... 7
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS................... 7
8.1 Time, Amount and Form of Awards................................... 7
8.2 Payment for Awards................................................ 8
8.3 Vesting Conditions................................................ 8
8.4 Form of Settlement of Stock Units................................. 8
8.5 Time of Settlement of Stock Units................................. 8
8.6 Death of Recipient................................................ 9
-i-
<PAGE> 24
Page
----
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND
EQUIVALENTS........................................ 9
9.1 Restricted Shares................................................ 9
9.2 Stock Units...................................................... 9
ARTICLE 10. PROTECTION AGAINST DILUTION........................ 9
10.1 General.......................................................... 9
10.2 Reorganizations.................................................. 10
10.3 Reservation of Rights............................................ 10
ARTICLE 11. LIMITATION OF RIGHTS............................... 10
11.1 Employment Rights................................................ 10
11.2 Stockholders' Rights............................................. 10
11.3 Creditors' Rights................................................ 10
11.4 Government Regulations........................................... 11
ARTICLE 12. LIMITATION ON PAYMENTS............................. 11
12.1 Basic Rule....................................................... 11
12.2 Reduction of Payments............................................ 11
12.3 Overpayments and Underpayments................................... 12
12.4 Related Corporations............................................. 12
ARTICLE 13. WITHHOLDING TAXES.................................. 12
13.1 General.......................................................... 12
13.2 Nonstatutory Options, Restricted Shares or
Stock Units....................................................... 13
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD..................... 13
ARTICLE 15. FUTURE OF THE PLAN.................................. 13
15.1 Term of the Plan.................................................. 13
15.2 Amendment or Termination.......................................... 13
15.3 Effect of Amendment or Termination................................ 13
ARTICLE 16. DEFINITIONS......................................... 14
16.1 Award............................................................. 14
16.2 Award Year........................................................ 14
16.3 Board............................................................. 14
16.4 Change in Control................................................. 14
16.5 Code.............................................................. 14
16.6 Committee......................................................... 15
16.7 Common Share...................................................... 15
16.8 Company........................................................... 15
16.9 Exchange Act...................................................... 15
16.10 Exercise Price...................................... 15
16.11 Fair Market Value................................... 15
16.12 ISO................................................. 15
16.13 Key Employee........................................ 15
16.14 Non-Employee Director............................... 16
16.15 NSO................................................. 16
16.16 Option.............................................. 16
16.17 Optionee............................................ 16
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Page
----
16.18 Participant.......................................... 16
16.19 Plan................................................. 16
16.20 Restricted Share..................................... 16
16.21 SAR.................................................. 16
16.22 Stock Award Agreement................................ 16
16.23 Stock Option Agreement............................... 16
16.24 Stock Unit........................................... 16
16.25 Subsidiary........................................... 16
ARTICLE 17. EXECUTION............................................ 17
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<PAGE> 26
VIVRA INCORPORATED
REVISED 1989 STOCK INCENTIVE PLAN
(Amended and Restated Effective
May 2, 1996)
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board and approved by the Company's sole
stockholder, Community Psychiatric Centers, on June 22, 1989. The purpose of the
Plan is to promote the long-term success of the Company and the creation of
incremental stockholder value by (a) encouraging Non-Employee Directors and Key
Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Non-Employee Directors and Key Employees with
exceptional qualifications and (c) linking Non-Employee Directors and Key
Employees directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for Awards in the form of
Restricted Shares, Stock Units, stock appreciation rights or Options, which may
constitute incentive stock options or nonstatutory stock options. The Plan shall
be governed by, and construed in accordance with, the laws of the State of
Delaware.
This amended and restated Plan changes the provisions for the grant of
NSOs and Restricted Shares to Non-Employee Directors.
ARTICLE 2. ADMINISTRATION.
2.1 The Committee. The Plan shall be administered by the Committee
appointed by the Board. The Committee shall have membership composition which
enables the Plan to qualify under Rule 16b-3 with regard to the grant of Awards
to persons who are subject to section 16 of the Exchange Act. A member of the
Committee shall not be eligible to receive any Award under the Plan, other than
Options and Restricted Shares granted under Section 4.2.
2.2 Committee Responsibilities. The Committee shall select the Key
Employees who are to receive Awards under the Plan, determine in its sole
discretion the amount, price, vesting requirements, terms and other conditions
of such Awards, interpret the Plan, and make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
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ARTICLE 3. LIMITATION ON AWARDS.
The aggregate number of Common Shares subject to Restricted Shares, Stock
Units and Options awarded under the Plan shall not exceed 4,253,591. If any
Restricted Shares are forfeited before dividends have been paid, if any Options
or Stock Units are forfeited or if any Options or Stock Units terminate for any
other reason before being exercised, then such Restricted Shares, Stock Units or
Options shall again become available for Awards under the Plan. Also, if Options
are surrendered upon the exercise of related SARs, then such Options shall be
restored to the pool available for Awards. Any dividend equivalents distributed
in the form of shares of Common Stock under the Plan shall be applied against
the number of shares of Common Stock available for Awards. The limitation of
this Article 3 shall be subject to adjustment pursuant to Article 10. Any Common
Shares issued pursuant to the Plan may be authorized but unissued shares or
treasury shares.
ARTICLE 4. ELIGIBILITY.
4.1 General Rule. Except as provided in Section 4.2, only Key Employees
shall be eligible for designation as Participants by the Committee.
4.2 Non-Employee Directors. Non-Employee Directors shall be entitled to
receive the NSOs, SARs and Restricted Shares described in this Section 4.2.
(a) Each Non-Employee Director shall receive an NSO covering 3,375 Common
Shares for each Award Year with respect to which he or she serves as a Non-
Employee Director on the grant date described in subsection (c) below;
(b) The Non-Employee Directors set forth below shall receive a grant of
Restricted Shares at each regular annual meeting in satisfaction of all or
a portion of their annual retainer, otherwise paid in cash. The Restricted
Shares will have a Fair Market Value on the date of the annual meeting in
the amounts set forth below. The number of Restricted Shares shall be
rounded down to the next number of whole shares:
<TABLE>
<S> <C>
Chair of the Compensation Committee..........................$20,000
Chair of the Audit Committee.................................$20,000
Chair of the Governance Committee............................$20,000
Chair of Clinical Quality....................................$10,000
</TABLE>
(c) The NSO for a particular Award Year shall be granted to each
Non-Employee Director as of December 1 each year;
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(d) Each NSO shall be exercisable in full at all times during its term;
Restricted Shares shall not vest until 6 months after the date of grant;
(e) The term of each NSO shall be 10 years; provided, however, that any
unexercised NSO shall expire thirty days after the date that the Optionee
ceases to be a Non-Employee Director or a Key Employee for any reason other
than death or disability. If an Optionee ceases to be a Non-Employee
Director or a Key Employee on account of death or disability, any
unexercised NSO shall expire on the earlier of the date 10 years after the
date of grant or one year after the date of death or disability of such
Director.
(f) The Exercise Price under each NSO shall be equal to the Fair Market
Value on the date of grant and shall be payable in accordance with Section
6; and
(g) Each NSO other than those specified in subsection (b) shall include
a related limited SAR, which shall be exercisable only in the event of a
Change in Control. The SAR shall be exercisable in accordance with the
provisions of Section 7.
4.3 Ten-Percent Stockholders. A Key Employee who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless (a) the Exercise Price under such ISO is at least 110 percent of the Fair
Market Value of a Common Share on the date of grant and (b) such ISO by its
terms is not exercisable after the expiration of five years from the date of
grant.
4.4 Attribution Rules. For purposes of Section 4.3, in determining stock
ownership, a Key Employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by or
for its stockholders, partners or beneficiaries. Stock with respect to which the
Key Employee holds an option shall not be counted.
4.5 Outstanding Stock. For purposes of Section 4.3, "outstanding stock"
shall include all stock actually issued and outstanding immediately after the
grant of the ISO to the Key Employee. "Outstanding stock" shall not include
treasury shares or shares authorized for issuance under outstanding options held
by the Key Employee or by any other person.
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ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not inconsistent with
the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical. The Committee may designate all or
any part of an Option as an ISO, except for Options granted to Non- Employee
Directors under Section 4.2.
5.2 Options Nontransferable. Unless the Stock Option Agreement provides
otherwise, no Option granted under the Plan shall be transferable by the
Optionee other than by will or by the laws of descent and distribution. Unless
the Stock Option Agreement provides otherwise, an Option may be exercised during
the lifetime of the Optionee only by him or her. Unless the Stock Option
Agreement provides otherwise, no Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his or her lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
5.3 Number of Shares. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. The Stock Option
Agreement shall also specify whether the Option is an ISO or an NSO. No Key
Employee who is an Optionee shall be granted Options covering more than 250,000
Common Shares during any Award Year.
5.4 Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price under an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Common Share on the date of grant,
except as otherwise provided in Section 4.3. The Exercise Price under an NSO
shall not be less than fifty percent (50%) of the Fair Market Value on the date
of grant of the Common Shares subject to such NSO, except as otherwise provided
in Section 4.2. Subject to the preceding two sentences, the Exercise Price under
any Option shall be determined by the Committee. The Exercise Price shall be
payable in accordance with Article 6.
5.5 Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option. The term of an
ISO shall in no event exceed 10 years from the date of grant, and Section 4.3
may require a shorter term. Subject to Sections 7.3 and 7.4 and the preceding
sentence, the Committee shall determine when all or any part of an Option (and
any SARs included therein) is to
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become exercisable and when such Option is to expire. A Stock Option Agreement
may provide for accelerated exercisability in the event of the Optionee's death,
disability or retirement and may provide for expiration prior to the end of its
term in the event of the termination of the Optionee's employment or service.
Except as provided in Section 4.2, NSOs may also be awarded in combination with
Restricted Shares or Stock Units, and such an Award may provide that the NSOs
will not be exercisable unless the related Restricted Shares or Stock Units
are forfeited.
5.6 Effect of Change in Control. The Committee (at its sole discretion) may
determine, at the time of granting an Option or thereafter, that such Option
(and any SARs included therein) shall become fully exercisable as to all Common
Shares subject to such Option in the event that a Change in Control occurs with
respect to the Company. If the Committee finds that there is a reasonable
possibility that, within the succeeding six months, a Change in Control will
occur with respect to the Company, then the Committee may determine that all
outstanding Options (and any SARs included therein) shall become fully
exercisable as to all Common Shares subject to such Options. The Committee (at
its sole discretion) may determine, at the time of granting an Option, that any
SARs included therein shall become exercisable as to the Common Shares subject
to the related Option only in the event that a Change in Control occurs with
respect to the Company.
5.7 Modification, Extension and Renewal of Options. Within the limitations
of the Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of outstanding Options (to the extent not previously
exercised) in return for the grant of new Options at the same or a different
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair his or her rights or obligations
under such Option.
5.8 Restrictions on Transfer of Common Shares. Any Common Shares issued
upon exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Stock Option Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Common Shares.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased, except as follows:
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(a) In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. However, the Committee may specify in the Stock Option Agreement
that payment may be made pursuant to Section 6.2, 6.3, 6.4 or 6.5.
(b) In the case of an NSO, other than an NSO granted pursuant to Section
4.2, the Committee may at any time accept payment pursuant to Section 6.2,
6.3, 6.4 or 6.5.
6.2 Surrender of Stock. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which have been owned by the Optionee for more than six months (or such lesser
time period as may be adopted by the Committee) and which are surrendered to the
Company. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. In the event that
the Common Shares being surrendered are Restricted Shares that have not yet
become vested, the same restrictions shall be imposed upon the new Common Shares
being purchased.
6.3 Exercise/Sale. To the extent this Section 6.3 is applicable, payment
may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company as security for a loan and to deliver all or part of the
loan proceeds to the Company in payment of all or part of the Exercise Price and
any withholding taxes.
6.5 Other Forms of Payment. To the extent that this Section 6.5 is
applicable, payment may be made in any other form approved by the Committee,
consistent with applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 Grant of SARs. Each Option granted under the Plan may, at the
discretion of the Committee, include an SAR. No Key Employee shall be granted
SARs covering more than 250,000 Common Shares during any Award Year. Such SAR
shall entitle the Optionee (or any person having the right to exercise the
Option after his or her death) to surrender to the Company, unexercised, all or
any part of that portion of the Option which
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<PAGE> 32
then is exercisable and to receive from the Company a cash payment which is
equal to the amount by which the Fair Market Value (on the date of surrender) of
the Common Shares subject to the surrendered portion of the Option exceeds the
Exercise Price. In no event shall any SAR be exercised if such Fair Market Value
does not exceed the Exercise Price. The discretion of the Committee to include
an SAR in an ISO may be exercised only at the time of the grant of such ISO. The
discretion of the Committee to include an SAR in an NSO may be exercised at the
time of the grant of such NSO or at any subsequent time, but not later than six
months before the expiration of such NSO. If an SAR is exercised, the number of
Common Shares remaining subject to the related Option shall be reduced
accordingly, and vice versa.
7.2 Manner of Exercise of SARs. An SAR may be exercised by written notice
to the Company. Subject to Sections 7.3 and 7.4, it may be exercised to the
extent, and only to the extent, that the Option in which it is included is
exercisable. If, on the date when an Option expires, the Exercise Price under
such Option is less than the Fair Market Value on such date but any portion of
such Option has not been exercised or surrendered, then any SAR included in such
Option shall automatically be deemed to be exercised as of such date with
respect to such portion.
7.3 Special Holding Period. To the extent required by section 16 of the
Exchange Act or any rule thereunder, an SAR shall not be exercised unless both
it and the related Option have been outstanding for more than six months. If the
Stock Option Agreement so provides, this Section 7.3 shall not apply in the
event of the Optionee's death or disability.
7.4 Special Exercise Window. To the extent required by section 16 of the
Exchange Act or any rule thereunder, an SAR may only be exercised during a
period which (a) begins on the third business day following a date when the
Company's quarterly summary statement of sales and earnings is released to the
public and (b) ends on the 12th business day following such date. This Section
7.4 shall not apply if the exercise occurs automatically on the date when the
related Option expires, and the Committee may determine that it shall not apply
to limited SARs granted under Section 7.5.
7.5 Limited SARs. An Option granted under the Plan may, at the discretion
of the Committee, provide that it will be exercisable as an SAR only in the
event of a Change in Control.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 Time, Amount and Form of Awards. The Committee may grant Restricted
Shares or Stock Units with respect to an Award Year during such Award Year or at
any time thereafter. The amount of each Award of Restricted Shares or Stock
Units shall
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<PAGE> 33
be determined by the Committee. Awards under the Plan may be granted in the form
of Restricted Shares, in the form of Stock Units, or in any combination of both,
as the Committee shall determine at its sole discretion at the time of the
grant. Restricted Shares or Stock Units may also be awarded in combination with
NSOs, and such an Award may provide that the Restricted Shares or Stock Units
will be forfeited in the event that the related NSOs are exercised.
8.2 Payment for Awards. To the extent that an Award is granted in the form
of Restricted Shares (other than treasury shares), the Award recipient, as a
condition to the grant of such Award, shall be required to pay the Company in
cash an amount equal to the par value of such Restricted Shares. To the extent
that an Award is granted in the form of Stock Units, no cash consideration shall
be required of Award recipients.
8.3 Vesting Conditions. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. The Committee shall select
the vesting conditions, which may be based upon the Participant's service, the
Participant's performance, the Company's performance or such other criteria as
the Committee may adopt. A Stock Award Agreement may also provide for
accelerated vesting in the event of the Participant's death, disability or
retirement. The Committee (at its sole discretion) may determine, at the time of
making an Award or thereafter, that such Award shall become fully vested in the
event that a Change in Control occurs with respect to the Company.
8.4 Form of Settlement of Stock Units. Settlement of vested Stock Units may
be made in the form of cash, in the form of Common Shares, or in any combination
of both, as the Committee shall determine at or before the time when
distribution commences. The Committee may designate a method of converting Stock
Units into cash, including (without limitation) a method based on the average
Fair Market Value of Common Shares over a series of trading days. Until an Award
of Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Article 10.
8.5 Time of Settlement of Stock Units. Vested Stock Units may be settled in
a lump sum or in installments. The distribution may occur or commence when all
vesting conditions applicable to the Stock Units have been satisfied or have
lapsed, or it may be deferred to any later date. The Committee shall determine
when all or any part of an Award of Stock Units is to be distributed, and it may
modify its original determination with respect to the time of distribution at
any time before settlement of the Stock Units is completed. The Committee may
also permit Participants to request a deferral of any distribution under this
Section 8.5. In the case of any deferred distribution, the Committee may
increase the amount of
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<PAGE> 34
such distribution by an interest factor or by dividend equivalents, as it deems
appropriate.
8.6 Death of Recipient. Any Stock Units Award which becomes payable after
the recipient's death shall be delivered or distributed to the recipient's
beneficiary or beneficiaries. Each recipient of a Stock Units Award under the
Plan shall designate one or more beneficiaries for this purpose by filing the
prescribed form with the Company. A beneficiary designation may be changed by
filing the prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award which
becomes payable after the recipient's death shall be delivered or distributed to
the recipient's estate. The Committee, at its sole discretion, shall determine
the form and time of any distribution(s) to a recipient's beneficiary or estate.
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS.
9.1 Restricted Shares. The holders of Restricted Shares awarded under the
Plan shall have the same voting, dividend and other rights as the Company's
other stockholders.
9.2 Stock Units. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan
shall carry with it a right to dividend equivalents. Such right entitles the
holder to be credited with an amount equal to all cash dividends paid on one
Common Share while the Stock Unit is outstanding. Dividend equivalents may be
converted into additional Stock Units. The Committee shall determine at what
time(s) any dividend equivalents are to be distributed. Settlement of dividend
equivalents may be made in the form of cash, in the form of Common Shares, or in
a combination of both. Prior to distribution, any dividend equivalents which are
not paid on or about the date when dividends on Common Shares are paid shall be
subject to the same conditions and restrictions (including, without limitation,
any forfeiture conditions) as the Stock Units to which they attach. The
Committee, at its sole discretion, shall make all determinations relating to
dividend equivalents.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 General. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make appropriate adjustments in one or more of (a) the
number of Options, Restricted Shares and Stock Units available for future
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<PAGE> 35
Awards under Articles 3 and 4, (b) the number of Stock Units included in any
prior Award which has not yet been settled, (c) the number of Common Shares
covered by each outstanding Option or (d) the Exercise Price under each
outstanding Option.
10.2 Reorganizations. In the event that the Company is a party to a merger
or other reorganization, outstanding Options, Restricted Shares and Stock Units
shall be subject to the agreement of merger or reorganization. Such agreement
may provide, without limitation, for the assumption of outstanding Awards by the
surviving corporation or its parent, for their continuation by the Company (if
the Company is a surviving corporation), for accelerated vesting or for
settlement in cash.
10.3 Reservation of Rights. Except as provided in this Article 10, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class. Any issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Common
Shares subject to an Option. The grant of an Award pursuant to the Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
ARTICLE 11. LIMITATION OF RIGHTS.
11.1 Employment Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain employed by the
Company or a Subsidiary. The Company and its Subsidiaries reserve the right to
terminate the employment of any employee at any time, and for any reason,
subject only to a written employment agreement (if any).
11.2 Stockholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Articles 8, 9 and 10.
11.3 Creditors' Rights. A holder of Stock Units shall have no rights other
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
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<PAGE> 36
11.4 Government Regulations. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common Shares to
be issued pursuant to the Plan shall be subject to all applicable laws, rules
and regulations and such approvals by any governmental agencies as may be
required. The Company reserves the right to restrict, in whole or in part, the
delivery of Common Shares pursuant to any Award until such time as:
(a) Any legal requirements or regulations have been met relating to the
issuance of such Common Shares or to their registration, qualification or
exemption from registration or qualification under the Securities Act of
1933, as amended, or any applicable state securities laws; and
(b) Satisfactory assurances have been received that such Common Shares,
when issued, will be duly listed on the New York Stock Exchange or any
other securities exchange on which Common Shares are then listed.
ARTICLE 12. LIMITATION ON PAYMENTS.
12.1 Basic Rule. Any provision of the Plan to the contrary notwithstanding,
in the event that the independent auditors most recently selected by the Board
(the "Auditors") determine that any payment or transfer by the Company to or for
the benefit of a Participant, whether paid or payable (or transferred or
transferable) pursuant to the terms of this Plan or otherwise (a "Payment"),
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided, however, that the Committee, at the
time of making an Award under this Plan or at any time thereafter, may specify
in writing that such Award shall not be so reduced and shall not be subject to
this Article 12. For purposes of this Article 12, the "Reduced Amount" shall be
the amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of section 280G of the Code.
12.2 Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of
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notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 12, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 12 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
12.3 Overpayments and Underpayments. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
12.4 Related Corporations. For purposes of this Article 12, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 13. WITHHOLDING TAXES.
13.1 General. To the extent required by applicable federal, state, local or
foreign law, the recipient of any payment or distribution under the Plan shall
make arrangements satisfactory to the Company for the satisfaction of any
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withholding tax obligations that arise by reason of such payment or
distribution. The Company shall not be required to make such payment or
distribution until such obligations are satisfied.
13.2 Nonstatutory Options, Restricted Shares or Stock Units. The Committee
may permit an Optionee who exercises NSOs, or who receives Awards of Restricted
Shares or Stock Units, to satisfy all or part of his or her withholding tax
obligations by delivering Common Shares or by having the Company withhold a
portion of the Common Shares that otherwise would be issued to him or her under
such Awards. Such Common Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. The payment of
withholding taxes by delivering or surrendering Common Shares to the Company, if
permitted by the Committee, shall be subject to such restrictions as the
Committee may impose, including any restrictions required by rules of the
Securities and Exchange Commission.
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.
Except to the extent the Award agreement provides otherwise, any Award
granted under the Plan shall not be anticipated, assigned, attached, garnished,
optioned, transferred or made subject to any creditor's process, whether
voluntarily, involuntarily or by operation of law. Any act in violation of this
Article 14 shall be void. However, this Article 14 shall not preclude (i) a
Participant from designating a beneficiary who will receive any undistributed
Awards in the event of the Participant's death, or (ii) a transfer by will or by
the laws of descent and distribution.
ARTICLE 15. FUTURE OF THE PLAN.
15.1 Term of the Plan. This amended and restated Plan shall become
effective on May 2, 1996 subject to shareholder approval of the Plan at the
annual meeting of stockholders held on that date. If approved, the Plan shall
remain in effect until it is terminated under Section 15.2, except that no ISOs
shall be granted after June 21, 1999.
15.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. However, any amendment of the Plan shall be
subject to the approval of the Company's stockholders to the extent required by
applicable laws, regulations or rules. The provisions of Section 4.2 relating to
Non-Employee Directors may not be amended more than once every six months,
except to comply with changes to the Code or ERISA.
15.3 Effect of Amendment or Termination. No Awards shall
be made under the Plan after the termination thereof. The
termination of the Plan, or any amendment thereof, shall not
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affect any Option, Restricted Share or Stock Unit previously granted under the
Plan.
ARTICLE 16. DEFINITIONS.
16.1 "Award" means any award of an Option (with or without a related SAR),
a Restricted Share or a Stock Unit under the Plan.
16.2 "Award Year" means a fiscal year beginning December 1 and ending
November 30 with respect to which an Award may be granted.
16.3 "Board" means the Company's Board of Directors, as constituted from
time to time.
16.4 "Change in Control" means the occurrence of any of the following
events:
(a) A change in control required to be reported pursuant to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act;
(b) A change in the composition of the Board, as a result of which fewer
than two-thirds of the incumbent directors are directors who either (i) had
been directors of the Company 24 months prior to such change or (ii) were
elected, or nominated for election, to the Board with the affirmative votes
of at least a majority of the directors who had been directors of the
Company 24 months prior to such change and who were still in office at the
time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 20 percent or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special circumstances)
having the right to vote at elections of directors (the "Base Capital
Stock"); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company.
16.5 "Code" means the Internal Revenue Code of 1986, as amended.
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16.6 "Committee" means the Committee of the Board that is authorized to
administer the Plan, as constituted from time to time.
16.7 "Common Share" means one share of the common stock of the Company.
16.8 "Company" means Vivra Incorporated, a Delaware corporation.
16.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
16.10 "Exercise Price" means the amount for which one Common Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
16.11 "Fair Market Value" means the market price of a Common Share,
determined by the Committee as follows:
(a) If the Common Share was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite-transactions report for such date;
(b) If the Common Share was traded over-the-counter on the date in
question and was classified as a national market issue, then the Fair
Market Value shall be equal to the last-transaction price quoted by the
Nasdaq National Market system for such date;
(c) If the Common Share was traded over-the-counter on the date in
question but was not classified as a national market issue, then the Fair
Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the Nasdaq National Market
system for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
16.12 "ISO" means an incentive stock option described in section 422(b) of
the Code.
16.13 "Key Employee" means a key common-law employee of or consultant to
the Company or any Subsidiary, as determined by the Committee. A consultant may
also include a Non-Employee Director who is not serving on the Committee.
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16.14 "Non-Employee Director" means a member of the Board who is not a
common-law employee.
16.15 "NSO" means an employee stock option not described in sections 422
through 424 of the Code.
16.16 "Option" means an ISO or NSO granted under the Plan and entitling the
holder to purchase one Common Share. The term "Option" includes a Substitute
Option.
16.17 "Optionee" means an individual or his or her estate that holds an
Option.
16.18 "Participant" means a Non-Employee Director or Key Employee who has
received an Award.
16.19 "Plan" means this Vivra Incorporated Revised 1989 Stock Incentive
Plan, as it may be amended from time to time.
16.20 "Restricted Share" means a Common Share awarded to a Participant
under the Plan.
16.21 "SAR" means a stock appreciation right granted under the Plan as part
of an Option or as a subsequent addition to an Option.
16.22 "Stock Award Agreement" means the agreement between the Company and
the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions and restrictions pertaining to such Restricted Share or Stock Unit.
16.23 "Stock Option Agreement" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her Option.
16.24 "Stock Unit" means a bookkeeping entry representing the equivalent of
one Common Share and awarded to a Participant under the Plan.
16.25 "Subsidiary" means any corporation, if the Company and/or one or more
other Subsidiaries own not less than 50 percent of the total combined voting
power of all classes of outstanding stock of such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
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<PAGE> 42
ARTICLE 17. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to execute the Plan in its name and on its behalf as of
March , 1996.
VIVRA INCORPORATED
By
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Its
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