VIVRA INC, DEF 14A, 1997-03-31

VIVRA INC
DEF 14A, 1997-03-31
MISC HEALTH & ALLIED SERVICES, NEC

Previous: INTERAMERICAS COMMUNICATIONS CORP, NT 10-K, 1997-03-31

Next: DYCAM INC, 10KSB40, 1997-03-31

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 |_|

<TABLE>
Check the appropriate box:
<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 ss.240.14a-11(c) or ss.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| No Fee Required.

|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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.

<PAGE>

(1) Amount Previously Paid:

- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------
(3) Filing Party:

- --------------------------------------------------------------------------------
(4) Date Filed:

- --------------------------------------------------------------------------------

2
<PAGE>

VIVRA INCORPORATED

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

March 31, 1997

TO THE STOCKHOLDERS:

The annual meeting of the stockholders of VIVRA Incorporated, a Delaware
corporation, will be held on Thursday, May 9, 1997, at 11:00 a.m. Pacific
Daylight Time, at the Company's headquarters located at 1850 Gateway Drive,
Fifth floor, San Mateo, California, for the following purposes:

1. To elect one director for a three-year term;

2. To approve the amendment to the Company's Revised 1989 Stock Incentive
Plan, including the reservation of an additional 1,400,000 shares for
issuance thereunder; and

3. To transact such other business as may properly come before the meeting
or any adjournment thereof.

Stockholders of record at the close of business on Friday, March 14, 1997
will be entitled to vote at the meeting.

If you plan to attend the meeting, the Company's headquarters is located at
1850 Gateway Drive, Fifth floor, San Mateo, California.

Directions to the Company from San Francisco International Airport: Highway
101 South. East on Highway 92 (toward Hayward). Take Mariners Island
Boulevard/Edgewater Boulevard Exit. Left on Edgewater Boulevard. First left on
Metro Center Boulevard. First left on Gateway Drive. Our facility is the
7-story, white building on the left side and our office is on the Fifth floor.

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

3
<PAGE>

VIVRA INCORPORATED

1850 Gateway Drive, Fifth floor
San Mateo, CA 94404

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 Friday, May 9, 1997, 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 31, 1997.

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 nominee 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 14, 1997 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
41,004,134 shares were outstanding at the close of business on March 14, 1997.
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

Richard B. Fontaine, who is presently a member of the Board of Directors,
will be the nominee for election to hold office until the annual meeting in
2000, and until his successor is 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 Mr. Fontaine. If Mr.
Fontaine 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 Mr. Fontaine will refuse or be
unable to serve. David G. Connor is not standing for reelection. Additionally,
LeAnne M. Zumwalt will be resigning from the Board effective May 9, 1997. The
size Board will be reduced accordingly effective as of May 9, 1997.

4
<PAGE>

<TABLE>

Information Concerning Nominees and Directors

The following information is furnished with respect to each nominee and the
directors:

- ------------------------------------------------------------------------------------------------------------
Director
Occupation and Continuously Term
Name Age Business Experience Since Expires
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David G. Connor, M.D. 56 Physician in private practice in Daly City, 1989 1997
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 53 Independent health care consultant since 1992; 1992 1997
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 41 Managing General Partner of Information Partners, 1992 1998
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.
- ------------------------------------------------------------------------------------------------------------
Kent J. Thiry 41 President and Chief Executive Officer of the 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 38 Chief Financial Officer of the Company since May 1994 1998
1996 and Treasurer and Secretary since March
1995, August 1995 through May 1996, Executive
Vice President; November 1993-1995, Vice
President, Finance; joined the Company in 1991;
prior thereto Audit Senior Manager with Ernst &
Young.
- ------------------------------------------------------------------------------------------------------------
Alan R. Hoops 48 Chief Executive Officer and Director of PcifiCare 1995 1999
Health Systems, which is not affiliated with the
Company, since 1993; 1991-1993, Chief Operating
Officer of PacifiCare Health Systems.
- -----------------------------------------------------------------------------------------------------------

5
<PAGE>

BOARD COMMITTEES

During fiscal 1996, the Board of Directors met seven 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 1996. 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 three times in fiscal 1996. 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 1996. 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 Governance Committee will accept
recommendations from Company's shareholders regarding qualified candidates to
serve as directors of the Company. Any such request should be furnished in
writing to the Company's Secretary, LeAnne Zumwalt, at 1850 Gateway Drive, Fifth
floor, San Mateo, CA 94404.

The Clinical Quality Committee currently consists of David L. Lowe, Chair
and David G. Connor, M.D. In fiscal 1996 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

6
<PAGE>

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 fiscal 1996,
nonemployee directors also received fees payable in grants of stock, options or
cash ranging from (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.
Officers of the Company who serve as directors receive no fee, but are
reimbursed for expenses incurred in attending meetings. If the amendment and
restatement of the Company's 1989 Stock Incentive Plan is approved, the annual
retainer for the chair of the Compensation Committee will increase to $55,000
with $27,500 in Restricted Stock and $27,500 in cash.

<TABLE>
In fiscal 1996, each of the outside directors received, in addition to the
amounts set forth above, options to purchase shares in certain subsidiaries of
the Company at fair market value on the date of grant as follows:
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Vivra Health Vivra Specialty
Vivra Asthma & Allergy Advantage, Inc. Partners, Inc.
CareAmerica # of Options / # of Options /
Director Name # of Options / Strike Price Strike Price Strike Price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David G. Connor, M.D. (1) 57,564 @ $0.5625 9,853 @ $0.79 28,227 @ $1.65

- ------------------------------------------------------------------------------------------------------------
Richard B. Fontaine 287,820 @ $0.5625 49,265 @ $0.79 141,135 @ $1.65

- ------------------------------------------------------------------------------------------------------------
Alan R. Hoops 115,128 @ $0.5625 19,706 @ $0.79 56,454 @ $1.65

- ------------------------------------------------------------------------------------------------------------
David L. Lowe 57,564 @ $0.5625 9,853 @ $0.79 28,227 @ $1.65

- ------------------------------------------------------------------------------------------------------------
John M. Nehra (2) 287,820 @ $0.5625 49,625 @ $0.79 141,135 @ $1.65

- ------------------------------------------------------------------------------------------------------------
Stephen G. Pagliuca 201,474 @ $0.5625 34,486 @ $0.79 98,795 @ $1.65

- ------------------------------------------------------------------------------------------------------------
<FN>
- -------------

(1) In fiscal 1995, David G. Connor, M.D. was granted options to purchase 2,500 shares of Vivra Heart
Services, Inc., a subsidiary of the Company ("VHS"), at $.50 per share.

(2) In connection with consulting services provided to the Company in fiscal 1995, John M. Nehra
was granted options to purchase 60,000 shares of VHS at $.50 per share and options to purchase 50,000
shares of VHS of $1.00 per share.
</FN>
</TABLE>

7
<PAGE>
<TABLE>

BENEFICIAL OWNERSHIP

The following tables show beneficial ownership as of February 28, 1997 and
as of December 31, 1996, respectively of the Company's Common Stock, $.01 par
value, by the directors and executive officers and the greater than 5%
stockholders:

Beneficial Ownership of Management
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Shares Owned Percent
Name of Beneficial Owner Beneficially of Class(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David G. Connor, M.D.............................................................. 32,097 (2)
Richard B. Fontaine............................................................. 32,318 (3)
Alan R. Hoops................................................................... 10,124 (2)
David L. Lowe................................................................... 11,041 (4)
John M. Nehra................................................................... 25,644(5)
Stephen G. Pagliuca............................................................. 26,394(6)
Kent J. Thiry................................................................... 452,500(2) 1.1%
David P. Barry.................................................................. 52,650(2)
LeAnne M. Zumwalt............................................................... 28,351(7)
Thomas O. Usilton............................................................... 1,000 (2)
All directors and executive officers as a group (14 persons).................... 690,644(8) 1.7%
- -----------------------------------------------------------------------------------------------------------------
<FN>
- ----------
(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 31,310 shares subject to options which are currently exercisable.

(4) Includes 10,874 shares subject to options which are currently exercisable.

(5) Includes 25,310 shares subject to options which are currently exercisable.

(6) Includes 26,060 shares subject to options which are currently exercisable.

(7) Includes 28,350 shares subject to options which are currently exercisable.

(8) Includes 802,015 shares subject to options which are currently exercisable or will become exercisable
within 60 days.
</FN>
</TABLE>

<TABLE>
Other Beneficial Ownership
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Owned Percent of
Name and Address of Beneficial Owner(1) Beneficially Class
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Putnam Investments, Inc.(2)............. 5,163,405(3) 12.9 %
One Post Office Square
Boston, MS 02109

RCM Capital Management (4).............. 3,764,250(6) 9.3%
RCM Limited, L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, CA 94111

Nicholas Company, Inc................... 2,385,194(5) 5.98%
700 North Water Street
Milwaukee, WI 53202

- -----------------------------------------------------------------------------------------------------------------------
<FN>

- ----------

(1) Information based on a Schedule 13D or Schedule 13G filed with the Securities and Exchange Commission by each
named owner.

8
<PAGE>

(2) Certain Putnam investment managers (together with their parent corporation, Putnam Investments, Inc.), are
considered "beneficial owners" in the aggregate of 5,163,405 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.

(3) Shared voting and investment power, 98,500 and 5,163,405 shares, respectively.

(4) The parent company of RCM Capital Management, L.L.C., Dresdner Bank AG ("Dresdner"), has beneficial ownership
of 3,764,250 shares only to the extent Dresdner may be deemed to have beneficial ownership of securities
deemed to be beneficially owed by RCM Capital Management, L.L.C.

(5) Sole voting and investment power, 2,455,950 and 3,661,250 respectively; shared investment power, 103,000.

(6) Sole investment power.
</FN>
</TABLE>

<TABLE>
Information Concerning Executive Officers

The following table lists and provides biographical data about the executive officers of the Company.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Period of Service and
Name Age Title Business Experience
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kent J. Thiry........
President and Chief Appointed September 1992. April-August 1992,
Executive Officer President and Co-Chief Executive Officer;
September 1991-March 1992, President and
Chief Operating Officer; 1983-1991,
Consultant, then Vice President, Director
of U.S. Health Care Consulting, Bain &
Company, Inc., San Francisco, California.

- --------------------------------------------------------------------------------------------------------------
David P. Barry....... 38 President Appointed March 1996. May 1992, Vice
of VRC President; August 1995, 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.

- --------------------------------------------------------------------------------------------------------------
Terry Gilpin......... 49 Executive Vice Appointed September 1996. 1995, Vice President of
President of VRC VRC; December 1994, Vice President of Nephrology
Services Group, a subsidiary of the Company;
1993 - 1994, COO of Medical Resources, Inc., a
diagnostic imaging company; 1992 - 1993, Vice
President, Sales of Home Nutritional Services,
Inc.; 1982 - 1992, Vice President of Glasrock
Home Healthcare, Inc.

- --------------------------------------------------------------------------------------------------------------
Gregory M. Holcomb... 46 Vice President, Appointed Vice President, Finance
Finance of VRC November 1993. Prior thereto, Director
of Finance for the Company.

- --------------------------------------------------------------------------------------------------------------
Charles McAllister, M.D. 49 Vice President, Appointed Vice President, Clinical Affairs at Vivra
Clinical Affairs of Renal Care, Inc. 1992; Medical
VRC Director, Vivra Renal Care of Clearwater and
Palm Harbor, Florida since 1987; Private Medical
Practice, Nephrology - Clearwater, Florida with
specialty in dialysis, clinical Nephrology and
transplantation from 1928 - Present

- --------------------------------------------------------------------------------------------------------------

9
<PAGE>

- --------------------------------------------------------------------------------------------------------------
Period of Service and
Name Age Title Business Experience
- --------------------------------------------------------------------------------------------------------------
Richard Pozen, M.D. 49 Vice President, Appointed 1996. 1996, Vice President, Vivra Heart
Medical Director Services, a subsidiary of the Company; 1992 - 1995,
owner and founder of Cardiology Networks, Inc.;
1983 - 1995, co-owner and co-founder of
Sokolowica & Pozen, M.D.s, P.A.

- --------------------------------------------------------------------------------------------------------------
Thomas O. Usilton.... 45 Executive Vice Appointed September 1995 and also appointed
President, Vivra Executive Vice President of Vivra Specialty
Specialty Partners Partners, Inc.; 1990-1994 founder and Chief
Executive Officer of Premier Allergy, Inc.
- --------------------------------------------------------------------------------------------------------------
LeAnne M. Zumwalt.... 38 Chief Financial Appointed Chief Financial Officer,
Officer, May 1996 and Treasurer and Secretary
Treasurer and March 1995, Executive Vice President August 1995
Secretary - May 1996, Vice President, Finance, November
1993-August 1995; joined the Company in 1991.
Prior thereto, Audit Senior Manager with Ernst &
Young.

- --------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>

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 1996, 1995
and 1994, 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, 1996, 1995 and 1994:

Summary Compensation Table

<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Long Term
Compensation
Awards
Annual Compensation Securities
Name Underlying All Other
Principal Position Year Salary($) Bonus($) Options/SARs(#)(1) Compensation($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kent J. Thiry................. 1996 275,000 625,000 (2) -- 16,733 (3)
President and Chief 1995 250,000 275,000 150,000 24,546(3)
Executive Officer 1994 225,000 200,000 150,000 17,072(3)

- ---------------------------------------------------------------------------------------------------------
LeAnne M. Zumwalt............. 1996 160,625 215,000 -- 119,183 (4)
Chief Financial Officer 1995 124,200 75,000 84,000 8,956(3)
Secretary and Treasurer 1994 107,725 60,000 18,000 5,770(3)

- ---------------------------------------------------------------------------------------------------------
David P. Barry................ 1996 165,000 300,000 90,000 15,576 (3)
Executive Vice President 1995 127,000 225,000 141,000 8,519(3)
1994 115,000 120,725 10,500 7,893(3)

- ---------------------------------------------------------------------------------------------------------
Thomas O. Usilton............. 1996 137,150 210,000 -- --
Vice President 1995 102,000 29,300 -- --

- ---------------------------------------------------------------------------------------------------------
Jacob Lazarovic, M.D.......... 1996 197,250 -- -- --
Vice President 1995 196,500 32,000 41,250 --

- ---------------------------------------------------------------------------------------------------------
<FN>
- ----------
(1) Excludes the value of subsidiary options granted.

(2) Includes a contingent bonus of $300,000 for fiscal 1993, which was paid
after November 30, 1996, upon Board approval, because the Company's earnings
per share as of that date was in excess of $1.25, which represented a 17.5%
compound annual growth rate over earnings per share reported for fiscal
1992.

(3) Includes share of Company's contribution to Profit Sharing Plan and/or car
allowance.

(4) Includes share of Company's contribution to Profit Sharing Plan, a bonus
payment made with respect to Ms. Zumwalt's loan with the Company and moving
cost reimbursements related to Ms. Zumwalt's relocation from Aliso Viejo,
California.
</FN>
</TABLE>
11
<PAGE>

<TABLE>

Fiscal 1996 Vivra Option/SAR Grants

<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....... -- -- -- -- -- --

- -----------------------------------------------------------------------------------------------------------------
LeAnne M. Zumwalt... -- -- -- -- -- --

- -----------------------------------------------------------------------------------------------------------------
David P. Barry...... 45,000 (1) 8.0 29.75 08/29/01 369,872 817,320
45,000 (2) 8.0 29.38 11/21/01 365,210 807,018

- -----------------------------------------------------------------------------------------------------------------
Thomas O. Usilton -- -- -- -- -- --

- -----------------------------------------------------------------------------------------------------------------
Jacob Lazarovic, M.D. -- -- -- -- -- --

- -----------------------------------------------------------------------------------------------------------------
<FN>
- ----------

(1) Vests 20% on August 29, 1996, and 20% each year on August 29, 1997 through 2000 and 100% in the event
of a change of control.

(2) Vests 20% on November 21, 1996, and 20% each year on November 21, 1997 through 2000 and 100% in the
event of a change of control.

</FN>
</TABLE>
12
<PAGE>

<TABLE>
Fiscal 1996 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, 1996:

<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End
Shares (#) ($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kent J. Thiry....... 227,000 4,886,363 452,500 7,654,862
232,500 2,313,750

- ------------------------- -------------- ------------------ ----------------------- --------------------------------
LeAnne M. Zumwalt... 39,638 627,314 28,350 289,425
78,450 706,575

- ------------------------- -------------- ------------------ ----------------------- --------------------------------
David P. Barry...... 81,600 1,363,788 52,650 307,575
182,250 1,025,825

- ------------------------- -------------- ------------------ ----------------------- --------------------------------
Thomas O. Usilton .. 10,100 139,479 1,000 8,833
21,900 217,251

- ------------------------- -------------- ------------------ ----------------------- --------------------------------
Jacob Lazarovic, M.D.... -- -- 16,500 152,625
24,750 228,937
- ------------------------- -------------- ------------------ ----------------------- --------------------------------
<FN>
(1) The closing price of the Company's Common Stock on the New York Stock Exchange at fiscal year end,
November 30, 1996, was $30.75 per share.
</FN>
</TABLE>

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.

13
<PAGE>
<TABLE>

Subsidiary Option Grants to Directors and Executive Officers as of 11/30/96
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------

Vivra Asthma & Vivra Health Vivra Heart Vivra Specialty
Allergy CareAmerica Advantage, Inc. Services, Inc. Partners, Inc.
Fiscal Year # of Options / Strike # of Options / # of Options / # of Options /
Name of Grant Price Strike Price Strike Price Strike Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David Barry 1995 -- -- 10,000 @ $.50 60,000 @ $1.65
1996 -- -- 95,000 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
David G. Connor, M.D. 1995 -- -- 2,500 @ $.50 --
1996 57,564 @ $.5625 9,853 @ $.79 -- 28,227 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Richard B. Fontaine 1996 287,820 @ $.5625 49,625 @ $.79 -- 141,135 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Alan R. Hoops 1996 115,128 @ $.5625 19,706 @ $.79 -- 56,454 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Jacob Lazarovic, M.D. 1995 -- -- -- 270,000 @ $1.65
1996 -- -- -- 78,000 @ $1.65
10,000 @ $2.94

- -------------------------------------------------------------------------------------------------------------------------
David L. Lowe 1996 57,564 @ $.5625 9,853 @ $.79 -- 28,227 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
John M. Nehra 1995 -- -- 60,000 @ $.50 --
50,000 @ $1.00
1996 287,820 @ $.5625 49,625 @ $.79 -- 141,135 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Stephen G. Pagliuca 1996 201,474 @ $.5625 34,486 @ $.79 -- 98,795 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Richard Pozen, M.D. 1995 -- -- 220,000 @ $.50 --
60,000 @ $1.00 60,000 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Kent J. Thiry 1996 2,302,560 @ $.5625 197,060 @ $.79 -- 1,129,080 @ $1.65

- -------------------------------------------------------------------------------------------------------------------------
Thomas O. Usilton 1995 -- -- 30,000 @ $1.00 180,000 @ $1.65
1996 20,000 @ $.3750 -- -- 110,000 @ $1.65
223,900 @ $2.94

- -------------------------------------------------------------------------------------------------------------------------
LeAnne M. Zumwalt 1995 -- -- 15,000 @ $.50 70,000 @ $1.65
1996 863,460 @ $.5625 73,898 @ $.79 -- 353,405 @ $1.65
111,.367 @ $2.94
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Employee Loan

In connection with Ms. Zumwalt's relocation from Aliso Viejo, California to
San Mateo, California in July 1996, the Company loaned Ms. Zumwalt $400,000 to
acquire a new residence. The loan bears interest at an annual interest rate of
6.74%. Interest payments are due each year on the last day of the year and all
unpaid interest and principal are due on July 24, 2002. The loan is secured by a
second deed of trust on Ms. Zumwalt's residence. The Company has agreed to pay
Ms. Zumwalt bonuses at least equal to the amount of interest due on the loan
each year.

<PAGE>

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 1996, compensation for executive officers, as listed in the
Information Concerning Executive Officers table starting on page 9 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
$300,000 and averaged $182,000, 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 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 $625,000, $300,000
of which was a contingent bonus, options on shares of Common Stock of Vivra
Specialty Partners 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 1996,
including a 17.6%

15
<PAGE>

increase in net earnings per share (expanding), a dramatic improvement in
Clinical Quality Initiatives, and the expanding of Vivra Specialty Partners,
Inc., the Committee determined it was appropriate to award to Mr. Thiry bonuses
for fiscal 1996, as discussed above.

For fiscal 1992 and 1993, Mr. Thiry was awarded contingent bonuses of
$100,000 and $200,000, respectively, which were paid in January 1997, since the
Company's earnings per share for the fiscal year ending November 30, 1996
exceeded $1.25. The $1.25 was a 17.5% compound annual growth rate over earnings
per share for fiscal 1992.

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.

16
<PAGE>

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 1996, the
Company made profit sharing contributions on behalf of many of its employees,
including Messrs. Thiry and Barry and Ms. Zumwalt.

THE COMPENSATION COMMITTEE

DAVID L. LOWE
STEPHEN G. PAGLIUCA

<TABLE>
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

[The following descriptive data is supplied in accordance with rule 304(d) of
regulation S-T]

Fiscal Year Ending November 30
- -------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vivra Incorporated 100 109.30 111.63 159.77 190.47 257.44
Dow Jones Equity Market Index 100 119.42 131.22 132.28 182.21 233.13
Dow Jones Health Care Provider Index 100 126.18 176.64 221.59 272.76 310.03
- -------------------------------------------------------------------------------------------------------------------------
</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.

17
<PAGE>

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 received a previously
granted contingent bonus of $300,000 because the Company's earnings per share
reached $1.25 for the fiscal year ending November 30, 1996, and such bonus was
approved by the Board. 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. 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 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, Usilton,
Lazarovic 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 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.

<PAGE>

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, 1850
Gateway Drive, Fifth floor, San Mateo, California 94404, telephone 415-577-5700.
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 25, 1997 was $28.25.

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 of payment 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. A SAR permits the participant to
elect to receive any appreciation in the value of the underlying stock from the
Company in cash. The amount payable on exercise of a SAR is measured by the
difference between the market value of the underlying stock at exercise and the
exercise price. SARs may only be granted in conjunction with options, and may
only be exercised to the extent that the option to which the SAR is attached is
exercisable. A SAR can only be granted in conjunction with an ISO at the time of
ISO grant, but can be granted in conjunction with a NSO at any time that is at
least six months before the expiration of the NSO.

A SAR may be exercised by written notice to the Company, and will be deemed
exercised if it has value, i.e., the exercise price exceeds fair market value,
on the date when the attached option expires without exercise. Upon exercise of
a SAR, the corresponding portion of the related option must be surrendered and
cannot thereafter be exercised. Conversely, upon exercise of an option to which
a 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 15, 1997 there were 254
persons participating in the 1989 Plan.

Federal Income Tax Consequences. The following tax discussion is only a
brief summary of current federal income tax law. It is intended solely as
general information and does not make specific representations to any optionee.
A taxpayer's particular situation may be such that some variation of the basic
rules is applicable to him or her. In addition, the federal income tax laws and
regulations frequently have been revised and may be changed again at any time in
the future. Each optionee is urged to consult a tax advisor concerning the tax
consequences to such optionee under the 1989 Plan.

19
<PAGE>

Neither the optionee nor the Company will incur any federal tax
consequences as a result of the grant of an option. The optionee will have no
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply), and the Company will receive no deduction when an ISO is exercised.
Upon exercising an NSO, the optionee generally must recognize ordinary income
equal to the "spread" between the exercise price and fair market value of the
Common Stock on the date of exercise; the Company ordinarily will be entitled to
a deduction for the same amount. In the case of an employee, the option spread
at the time an NSO is exercised is subject to income tax withholding, but the
optionee generally may elect to satisfy the withholding tax obligation by having
shares of Common Stock withheld from those purchased under the NSO. The tax
treatment of a disposition of option shares acquired under the 1989 Plan depends
on how long the shares have been held and on whether such shares were acquired
by exercising an ISO or by exercising an NSO. The Company will not be entitled
to a deduction in connection with a disposition of option shares, except in the
case of a disposition of shares acquired under an ISO before the applicable ISO
holding periods have been satisfied.

Proposed Amendments. The Company proposes to amend the 1989 Plan to increase
the shares of Common Stock available for award by 1,400,000. As of March 21,
1997, a total of 6,280,346 shares had been authorized under the 1989 Plan for
award and only 44,883 remain available for grant. Including the 1,400,000 shares
added by the proposed amendment, 7,680,346 would be authorized and 1,444,883
available for grant. If any options or stock units granted under the 1989 Plan
are forfeited, or if any options or stock units granted under the 1989 Plan
terminate for any other reason prior to exercise, then the underlying shares of
Common Stock again become available for awards. In addition, Common Stock
underlying options surrendered upon the exercise of related SARs shall again
become available for awards. The Company also proposes to amend the 1989 Plan
effective at and after the 1997 Annual Meeting to provide that automatic grant
of restricted stock to the chair of the Compensation Committee be increased from
$20,000 of restricted stock to $27,500 of restricted stock.

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

Section 16(a) Beneficial Ownership Reporting Compliance. 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.

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 Messrs, Fontaine,
Pagliuca, Nehra, Lowe, Holcomb, Bilt and Barry and Dr. Connor each filed their
Form 5 for the fiscal
20
<PAGE>

year 1996 approximately two months late with respect to the grant of stock
and/or options pursuant to the Revised 1989 Stock Incentive Plan.

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.

21
<PAGE>

TIME FOR SUBMISSION OF SHAREHOLDER PROPOSALS

Shareholder proposals to be presented at the next annual meeting which will
take place on or about May 9, 1998, must be received by the Company for
inclusion in its proxy statement not later than December 4, 1997.

By Order of the Board of Directors

LEANNE M. ZUMWALT
Secretary

22
<PAGE>

APPENDIX A
VIVRA INCORPORATED

REVISED 1989 STOCK INCENTIVE PLAN
(Amended and Restated
Effective May 9, 1997)

23
<PAGE>

<TABLE>

TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. INTRODUCTION.............................................................. 1

ARTICLE 2. ADMINISTRATION............................................................ 1
2.1 The Committee.......................................................................... 1
2.2 Committee Responsibilities............................................................. 1

ARTICLE 3. LIMITATION ON AWARDS..................................................... 1

ARTICLE 4. ELIGIBILITY............................................................... 1
4.1 General Rule .......................................................................... 2
4.2 Non-Employee Directors................................................................. 2
4.3 Ten-Percent Stockholders............................................................... 2
4.4 Attribution Rules...................................................................... 2
4.5 Outstanding Stock...................................................................... 2

ARTICLE 5. OPTIONS................................................................... 3
5.1 Stock Option Agreement................................................................. 3
5.2 Options Nontransferable................................................................ 3
5.3 Number of Shares....................................................................... 3
5.4 Exercise Price......................................................................... 3
5.5 Exercisability and Term................................................................ 3
5.6 Effect of Change in Control............................................................ 3
5.7 Modification, Extension and Renewal of Options......................................... 3
5.8 Restrictions on Transfer of Common Shares.............................................. 4

ARTICLE 6. PAYMENT FOR OPTION SHARES................................................. 4
6.1 General Rule .......................................................................... 4
6.2 Surrender of Stock..................................................................... 4
6.3 Exercise/Sale.......................................................................... 4
6.4 Exercise/Pledge........................................................................ 4
6.5 Other Forms of Payment................................................................. 4

ARTICLE 7. STOCK APPRECIATION RIGHTS................................................. 4
7.1 Grant of SARs.......................................................................... 5
7.2 Manner of Exercise of SARs............................................................. 5
7.3 Special Holding Period................................................................. 5
7.4 Special Exercise Window................................................................ 5
7.5 Limited SARs .......................................................................... 5

ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS......................................... 5
8.1 Time, Amount and Form of Awards........................................................ 5
8.2 Payment for Awards..................................................................... 5
8.3 Vesting Conditions..................................................................... 5
8.4 Form of Settlement of Stock Units...................................................... 5
8.5 Time of Settlement of Stock Units...................................................... 6
8.6 Death of Recipient..................................................................... 6

ARTICLE 9. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS....................... 6
9.1 Restricted Shares...................................................................... 6
9.2 Stock Units .......................................................................... 6

ARTICLE 10. PROTECTION AGAINST DILUTION.............................................. 6
10.1 General .......................................................................... 6

<PAGE>

10.2 Reorganizations........................................................................ 6
10.3 Reservation of Rights.................................................................. 6

ARTICLE 11. LIMITATION OF RIGHTS...................................................... 7
11.1 Employment Rights...................................................................... 7
11.2 Stockholders' Rights................................................................... 7
11.3 Creditors' Rights...................................................................... 7
11.4 Government Regulations................................................................. 7

ARTICLE 12. LIMITATION ON PAYMENTS.................................................... 7
12.1 Basic Rule .......................................................................... 7
12.2 Reduction of Payments.................................................................. 7
12.3 Overpayments and Underpayments......................................................... 8
12.4 Related Corporations................................................................... 8

ARTICLE 13. WITHHOLDING TAXES......................................................... 8
13.1 General .......................................................................... 8
13.2 Nonstatutory Options, Restricted Shares or Stock Units................................. 8

ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD........................................... 8

ARTICLE 15. FUTURE OF THE PLAN........................................................ 9
15.1 Term of the Plan....................................................................... 9
15.2 Amendment or Termination`.............................................................. 9
15.3 Effect of Amendment or Termination..................................................... 9

ARTICLE 16. DEFINITIONS............................................................... 9
16.1 Award .......................................................................... 9
16.2 Award Year .......................................................................... 9
16.3 Board .......................................................................... 9
16.4 Change in Control...................................................................... 9
16.5 Code .......................................................................... 9
16.6 Committee .......................................................................... 9
16.7 Common Share .......................................................................... 9
16.8 Company .......................................................................... 9
16.9 Exchange Act .......................................................................... 10
16.10 Exercise Price......................................................................... 10
16.11 Fair Market Value...................................................................... 10
16.12 ISO .......................................................................... 10
16.13 Key Employee .......................................................................... 10
16.14 Non-Employee Director.................................................................. 10
16.15 NSO .......................................................................... 10
16.16 Option .......................................................................... 10
16.17 Optionee .......................................................................... 10
16.18 Participant .......................................................................... 10
16.19 Plan .......................................................................... 10
16.20 Restricted Share....................................................................... 10
16.21 SAR .......................................................................... 10
16.22 Stock Award Agreement.................................................................. 10
16.23 Stock Option Agreement................................................................. 10
16.24 Stock Unit .......................................................................... 11
16.25 Subsidiary .......................................................................... 11

ARTICLE 17. EXECUTION................................................................. 11
</TABLE>

<PAGE>

VIVRA INCORPORATED

REVISED 1989 STOCK INCENTIVE PLAN

(Amended and Restated Effective
May 9, 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.

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 7,680,346. 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.

<PAGE>

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 5,062 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:

-------------------------------------------------------------------
Chair of the Compensation Committee................... $27,500
Chair of the Audit Committee.......................... $20,000
Chair of the Governance Committee..................... $20,000
Chair of Clinical Quality............................. $10,000
-------------------------------------------------------------------

(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.

2
<PAGE>

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 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

3
<PAGE>

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:

(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 a 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 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 a SAR in an ISO may be
exercised only at the time of the grant of such ISO. The discretion of the
Committee to include a 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 a

<PAGE>

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. A 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, a 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, a 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 a 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 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.

5
<PAGE>

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 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 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

6
<PAGE>

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.

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 notice. If no such election is made by the

<PAGE>

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
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.

<PAGE>

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 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. 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.

9
<PAGE>

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.

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.

10
<PAGE>

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.

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
-------------------------------------
Its
-------------------------------------

<PAGE>

APPENDIX B

DETACH HERE

PROXY

VIVRA INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS, MAY 9, 1997

PROXY

The undersigned hereby appoints Kent J. Thiry, LeAnne M. Zumwalt, and
Charles W. Ott, and each of them, the attorneys and proxies of the undersigned
with full right of substitution to vote as designated below all the shares of
VIVRA INCORPORATED Common Stock held of record by the undersigned on March 14,
1997, at the annual meeting of stockholders of the Corporation to be held on May
9, 1997 at 11:00 a.m. and at all adjournments thereof with the same force and
effect as the undersigned might or could do, if personally present at the
meeting.

Management knows of no other matters which may properly be, or which are
likely to be, brought before the meeting. However, if any of the matters are
properly brought before the meeting, the persons named in this proxy or their
substitutes will vote in accordance with their best judgment on such matters.

This proxy when properly executed will be voted in the manner directed by
the undersigned stockholder.

The proxies appointed may act by a majority of them present at the meeting or if
only one is present by that one.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEE REVERSE SIDE

<PAGE>

DETACH HERE

|_| Please mark
votes as in
this example.

IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
THE DIRECTOR NOMINATED AND IN FAVOR OF THE AMENDMENT OF THE REVISED 1989
STOCK INCENTIVE PLAN, AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.

1. Election of Director
Nominee: Richard B. Fontaine

|_| FOR |_| WITHHELD
THE FROM THE
NOMINEE NOMINEE

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_____