<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 2)
------------------------
VIVRA INCORPORATED
(NAME OF SUBJECT COMPANY)
VIVRA INCORPORATED
(NAME OF PERSON FILING STATEMENT)
--------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
--------------------------
92855M104
(CUSIP NUMBER OF CLASS OF SECURITIES)
--------------------------
KENT J. THIRY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIVRA INCORPORATED
1850 GATEWAY DRIVE, SUITE 500
SAN MATEO, CALIFORNIA 94404
(415) 577-5700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING THIS STATEMENT)
--------------------------
COPIES TO:
JOHN W. LARSON, ESQ.
ALEXANDER D. LYNCH, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(415) 421-0160
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
This Amendment No. 2 to the Solicitation/Recommendation Statement on
Schedule 14D-9 (as amended or supplemented, this "Schedule 14D-9") relates to
an offer by Gambro Healthcare Acquisition Corp., a Delaware corporation and
an indirect wholly owned subsidiary of Incentive AB, a corporation organized
under the laws of Sweden, to purchase all of the issued and outstanding
Shares (as hereinafter defined) of Vivra Incorporated, a Delaware
corporation. Capitalized terms used herein and not otherwise defined herein
shall have the meaning assigned to them in the Offer to Purchase dated May 9,
1997, a copy of which is filed as Exhibit (a)(1) to this Schedule 14D-9, is
incorporated herein by reference in its entirety, and is attached hereto (the
"Offer to Purchase").
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the Company
and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and its executive officers, directors or
affiliates are described in the Company's Information Statement filed on May 9,
1997 pursuant to Section 14(f) (the "Section 14(f) Information Statement") of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), under the
headings "Executive Compensation -- Summary Compensation Table", "-- Option
Grants in Last Fiscal Year", "-- Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values", "-- Employment Arrangements, Termination of
Employment and Change in Control Agreements", and "Certain Transactions."
Relevant portions of the Section 14(f) Information Statement are filed as
Exhibit (c)(2) to this Schedule 14D-9 and are incorporated herein by reference
in their entirety. Furthermore, the Section 14(f) Information Statement is
attached as Schedule I hereto.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement which has been
filed as Exhibit (c)(1) to this Schedule 14D-9 and is incorporated herein by
reference in its entirety. The Merger Agreement may be examined and copies may
be obtained at the places and in the manner set forth in Section 7 of the Offer
to Purchase.
THE OFFER. Section 1.01 of the Merger Agreement provides that Purchaser
will commence the Offer as promptly as practicable, but in no event later
than five business days after the initial public announcement of Purchaser's
intention to commence the Offer, and that, upon the terms of and subject to
prior satisfaction or waiver of the conditions of the Offer, Purchaser will
purchase all Shares validly tendered and not withdrawn pursuant to the Offer.
The Merger Agreement further provides that Purchaser will not decrease the
price per Share payable in the Offer, reduce the maximum number of Shares to
be purchased in the Offer, or impose any condition to the Offer other than
those set forth in Annex A to the Merger Agreement. Notwithstanding the
foregoing, if on the initial scheduled expiration date of the Offer (June 6,
1997), the sole condition remaining unsatisfied is (i) the failure of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1987, as amended (the "HSR Act"), to have expired or been terminated or (ii)
the failure to consummate the Specialty Merger Transaction (as hereinafter
defined) and such transaction has not been consummated solely due to the
failure of the waiting period under the HSR Act to have expired or been
terminated, then, in either case, Purchaser has agreed to extend the Offer
from time to time until five business days after the expiration or
termination of the applicable waiting period under the HSR Act. On May 19,
1997, the Company received notice of early termination of the waiting period
under the HSR Act for the transactions contemplated by the Merger Agreement.
Furthermore, if immediately prior to the latest applicable expiration date of
the Offer, as it may be extended, the number of Shares validly tendered and
not withdrawn pursuant to the Offer equals 80 percent or more, but less than
90 percent, of the outstanding Shares on a fully diluted basis, Purchaser may
extend the Offer for an additional 10 business days beyond such expiration
date.
2
<PAGE>
CONDITIONS. Subject to the satisfaction of the Minimum Condition (as
hereinafter defined) and the terms and conditions of the Offer set forth in
Section 15 of the Offer to Purchase, Purchaser shall, promptly after expiration
of the Offer, pay for all Shares tendered and not withdrawn. Among the
conditions to the consummation of the Offer is the Company's obligation to
complete the transactions contemplated by the Specialty Merger Agreement (the
"Specialty Merger Transaction"). See "-- Specialty Merger Agreement" for greater
detail concerning the Specialty Merger Transactions.
THE MERGER. Subject to the terms and conditions of the Merger Agreement, as
promptly as practicable after the consummation of the Offer and in accordance
with applicable Delaware law, at the effective time of the Merger (the
"Effective Time"), Purchaser will merge with and into the Company. As a result
of the Merger, the separate corporate existence of Purchaser will cease and the
Company will continue as the Surviving Corporation.
The respective obligations of Parent and Purchaser, on the one hand, and the
Company, on the other, to effect the Merger are subject to the satisfaction at
or prior to the Effective Time of the following conditions, any and all of which
may be waived in whole or in part, to the extent permitted by applicable law:
(a) the Merger, the Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by the affirmative vote of the stockholders
to the extent required by Delaware law and the Certificate of Incorporation of
the Company, as amended to the date hereto (the "Certificate of Incorporation");
(b) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; (c) no governmental authority, other agency or commission, or court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise restricting, preventing or
prohibiting consummation of the Offer or the Merger; and (d) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer, unless such failure to purchase is as a result
of a breach of Purchaser's obligations under the Merger Agreement or the terms
of the Offer.
At the Effective Time, each holder of Shares (other than Shares held in the
treasury of the Company, Shares owned by Purchaser, Parent or any direct or
indirect wholly owned other subsidiary of Parent or the Company, or Shares held
by stockholders who have properly exercised their appraisal rights under
applicable Delaware law) will be entitled to receive the Per Share Amount,
without interest.
THE COMPANY'S BOARD OF DIRECTORS. Section 6.03 of the Merger Agreement
provides that promptly upon the purchase by Purchaser of the Shares pursuant to
the Offer, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
to the Company's Board of Directors as shall give Purchaser representation on
the Board of Directors equal to the product of the total number of directors on
the Board of Directors (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any affiliate of Purchaser following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all actions necessary to cause Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board of Directors or securing the resignations of incumbent
directors or both. The Company shall use its reasonable efforts to cause persons
so designated by Purchaser to constitute the same percentage as persons
designated by Purchaser shall constitute of the Board of Directors of: (x) each
committee of the Board of Directors, (y) each board of directors of each
domestic subsidiary of the Company that is engaged in the Company's dialysis,
renal care, nephrology disease management or nephrologist practice business or
the Company's business of contracting with payors on behalf of nephrologists
(collectively, the "Dialysis Subsidiaries") and (iii) each committee of each
such Dialysis Subsidiary's board of directors, in each case only to the extent
permitted by applicable law. Notwithstanding the foregoing, until the earlier of
(x) the time Purchaser acquires a majority of the then outstanding
3
<PAGE>
Shares on a fully diluted basis or (y) the Effective Time, the Company shall use
its reasonable efforts to ensure that all members of the Board of Directors and
each committee of the Board of Directors and such boards of directors and
committees of the domestic Dialysis Subsidiaries as of the date of the execution
of the Merger Agreement who are not employees of the Company shall remain
members of the Board of Directors and of such boards of directors and
committees, except for the members who are not standing for re-election at the
Company's 1997 Annual Meeting of Stockholders to be held on May 9, 1997 (the
"1997 Annual Meeting"). The Company's obligation to appoint Purchaser's
designees to its Board of Directors is subject to compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder.
STOCKHOLDERS' MEETING. Pursuant to Section 6.01 the Merger Agreement, if
required by applicable Delaware law in order to consummate the Merger, the
Company shall duly call, give notice of, convene and hold a special meeting of
its stockholders as soon as practicable following consummation of the Offer for
the purpose of considering the Merger Agreement and the transactions
contemplated thereby (the "Stockholders' Meeting"). If required by applicable
Delaware law, as soon as reasonably practicable following consummation of the
Offer, the Company shall file a proxy statement (the "Proxy Statement") with the
Commission under the Exchange Act, and shall use its reasonable efforts to have
the Proxy Statement cleared by the Commission. Each of the Company, Parent and
Purchaser has agreed to use its reasonable efforts to respond promptly to all
comments of and requests by the Commission and to cause the Proxy Statement and
all required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Stockholders' Meeting at the earliest practicable
time. The Company has agreed to, except in certain instances, include in the
Proxy Statement the unanimous recommendation of the Board of Directors that the
holders of the Shares approve and adopt the Merger Agreement and the
Transactions (as hereinafter defined) and use its reasonable efforts to obtain
such approval and adoption of the holders of Shares. If Purchaser acquires at
least a majority of the outstanding Shares, Purchaser will have sufficient
voting power to approve the Merger, even if no other stockholder votes in favor
of the Merger. Parent and Purchaser have agreed that they will cause all Shares
then owned by them and their subsidiaries to be voted in favor of the approval
and adoption of the Merger Agreement and the transactions contemplated thereby.
Notwithstanding the foregoing, in the event that Purchaser shall acquire at
least 90 percent of the then outstanding Shares, the Company, Purchaser and
Parent agree, at the request of Purchaser and subject to the terms of the Merger
Agreement, to take all necessary and appropriate action to cause the Merger to
become effective, in accordance with applicable Delaware law, as soon as
reasonably practicable after such acquisition, without a meeting of stockholders
of the Company.
OPTIONS. Pursuant to Section 6.06 of the Merger Agreement, immediately
prior to the Effective Time, all stock options (and any related alternative
rights) to purchase Shares (the "Options") granted under the Company's Revised
1989 Stock Incentive Plan or the 1989 Transition Consultants' Stock Option Plan
(collectively, the "Company Stock Option Plans") (including those granted to
current or former employees, consultants and directors of the Company or any of
its subsidiaries), which Options are outstanding immediately prior to the
Effective Time (whether or not then presently exercisable), to be cancelled. In
exchange for the cancellation of such Options, the holder thereof shall be
entitled to receive from the Surviving Corporation an amount in cash equal to
the product of (x) the difference between the Per Share Amount and the per share
exercise price of such Option and (y) the number of shares of the Company's
Common Stock covered by such Option. Prior to the Effective Time, the Company
shall cause each holder of an Option to consent to the foregoing treatment of
such Options. The Company Stock Option Plans shall terminate as of the Effective
Time and thereafter the only rights of participants therein shall be the right
to receive the consideration set forth above and more fully discussed in the
Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has covenanted and agreed that, between the date of the Merger
Agreement and the Effective Time, except as
4
<PAGE>
expressly contemplated or provided by the Merger Agreement or agreed to in
writing by Parent or Purchaser, the Company's dialysis, renal care, nephrology
disease management or nephrologist practice management business or the Company's
business of contracting with payors on behalf of nephrologists (collectively,
the "Dialysis Business") shall be conducted only in, and the Dialysis
Subsidiaries shall not take any action except in the ordinary course of the
Dialysis Business, and the Company and the Dialysis Subsidiaries shall use all
reasonable commercial efforts to preserve substantially intact the business
organization of the Dialysis Business, to keep available the services of the
current officers, employees and consultants of the Dialysis Business and to
preserve the current relationships of the Company and the Dialysis Subsidiaries
with physicians, payors, and other persons with which the Company or any
Dialysis Subsidiary has significant business relations. By way of amplification
and not limitation, neither the Company nor any Dialysis Subsidiary shall,
between the date of the Merger Agreement and the Effective Time, directly or
indirectly without the prior written consent of Parent or Purchaser: (a) amend
or otherwise change its respective certificate of incorporation or by-laws or
equivalent organizational documents; (b) issue, sell, pledge, dispose of, grant,
encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (i) any shares of capital stock of the Company or any Dialysis
Subsidiary, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Dialysis Subsidiary (except for certain permitted issuances) or (ii) any
assets of the Company or any Dialysis Subsidiary, except as contemplated by the
Specialty Merger Transaction or in the ordinary course of the Dialysis Business;
(c) declare, set aside, make or pay any dividend or other distribution, payable
in cash, stock, property or otherwise, with respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem any of its capital stock, or
purchase or otherwise acquire, directly or indirectly, any of its capital stock
or any capital stock of any other subsidiary; (e) acquire (including, without
limitation, by merger, consolidation, or acquisition of stock or assets) any
interest in any corporation, partnership, other business organization or any
division thereof or any material amount of assets or authorize any capital
expenditures, other than acquisitions or capital expenditures in the ordinary
course of the Dialysis Business which, in the aggregate, do not exceed
$10,000,000 in each of May 1997, June 1997 and July 1997; (f) increase the
compensation payable or to become payable or the benefits provided to its
officers or employees, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director or officer or other
key employee of the Company or any subsidiary, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any director, officer or employee; (g) hire or
retain any employee or consultant at an annual rate of compensation in excess of
$125,000; (h) grant options or other interests in the equity securities of any
subsidiary of the Company; (i) take any action, other than in the ordinary
course of the Dialysis Business, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable); (j) make any
tax election or settle or compromise any material federal, state, local or
foreign income tax liability; (k) settle any action other than an action
relating solely to the Company's business of providing specialty physician
network and disease management services to managed care and provider
organizations, other than such businesses included in the Dialysis Business
(collectively, the "Specialty Business"); (l) amend, modify or consent to the
termination of any material contract or amend, modify or consent to the
termination of the Company's or any Dialysis Subsidiary's rights thereunder,
other than in the ordinary course of the Dialysis Business; or (m) enter into
any contract or agreement that would have been a material contract if entered
into prior to the date of execution of the Merger Agreement, other than in the
ordinary course of the Dialysis Business.
CONDUCT OF VSP. The Merger Agreement provides that from the date thereof
until the earlier of the consummation of the Specialty Merger Transaction or the
termination of the Merger Agreement pursuant to its terms, the Company will
operate VSP and the subsidiaries of the Company engaged in the Specialty
Business (the "Specialty Subsidiaries") consistent with Section 1 and Section 2
of the Services Agreement
5
<PAGE>
dated as of May 5, 1997, between the Company and VSP (the "Services Agreement"),
and the Company and the Dialysis Subsidiaries will not make any contribution,
payment or other transfer to VSP or any Specialty Subsidiary of cash, cash
equivalents, marketable securities or any other asset and VSP and the Specialty
Subsidiaries shall not make any contribution, payment or other transfer to the
Company of any Dialysis Subsidiary of cash, cash equivalents, marketable
securities or any other assets. Section 1 and Section 2 of the Services
Agreement have been filed as Exhibit (c)(3) of this Schedule 14D-9 and are
incorporated herein by reference in its entirety.
NO SOLICITATION. Pursuant to Section 6.05 of the Merger Agreement, the
Company shall, and shall direct and use all reasonable efforts to cause its
officers, directors, employees, representatives and agents to immediately cease
any discussions or negotiations with any parties that may be ongoing with
respect to any "acquisition proposal" (as hereinafter defined). Except with
respect to the Specialty Merger Transaction, the Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, accountant, attorney or other
advisor or representative of, the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit or initiate, or knowingly encourage the
submission of, any acquisition proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, an acquisition proposal;
PROVIDED, HOWEVER, that if and to the extent, prior to the acceptance for
payment of Shares pursuant to the Offer, the Board of Directors determines in
good faith that it is necessary to do so in accordance with its fiduciary duties
to the Company's stockholders under applicable law as advised by outside legal
counsel, the Company may, in response to an unsolicited acquisition proposal,
and subject to compliance with the terms and conditions of the Merger Agreement,
(x) furnish information with respect to the Company to any persons pursuant to a
customary confidentiality agreement on terms no less favorable to the Company
than those contained in the confidentiality agreement, dated October 7, 1996,
between Parent and the Company, and (y) participate in negotiations regarding
such acquisition proposal. For purposes of the Merger Agreement, "acquisition
proposal" means any bona fide proposal or offer from any person relating to any
direct or indirect acquisition or purchase of all or a substantial part of the
assets of the Company or any of its Dialysis Subsidiaries or of over 20 percent
of any class of equity securities of the Company or any of its Dialysis
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 20 percent or more of any class of
equity securities of the Company or any of its Dialysis Subsidiaries, any
merger, consolidation, business combination, sale of all or substantially all
the assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Dialysis Subsidiaries, other than the
transactions contemplated by the Merger Agreement and the Specialty Merger
Transaction, or any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay the Offer or
the Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the Offer or the Merger. Except in limited circumstances
set forth in the Merger Agreement, neither the Board of Directors nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by the
Board of Directors or any such committee of the Offer, the Merger Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
acquisition proposal, or (iii) enter into any agreement with respect to any
acquisition proposal. Notwithstanding the foregoing, in the event prior to the
time of acceptance for payment of Shares pursuant to the Offer the Board of
Directors determines in good faith that it is necessary to do so in accordance
with its fiduciary duties to the Company's stockholders under applicable law as
advised by outside legal counsel, the Board of Directors may withdraw or modify
its approval or recommendation of the Offer, the Merger or the Merger Agreement
in order to enter into a definitive agreement with respect to a Superior
Proposal (as hereinafter defined) and may terminate the Merger Agreement subject
to the incurrence of certain termination fees and expenses pursuant to the terms
of the Merger Agreement. For purposes of the Merger Agreement, a "Superior
Proposal" means any bona fide proposal made by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or
6
<PAGE>
securities, more than 50 percent of the combined voting power of the Shares then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Board of Directors determines in its good faith judgment
(based on the advice of a financial advisor of nationally recognized reputation)
to be more favorable to the Company's stockholders other than the Offer and the
Merger and for which financing, to the extent required, is then committed.
Pursuant to the Merger Agreement, the Company is obligated to promptly advise
Parent of any request for information or of any acquisition proposal, the terms
thereof and the identity of the person making such request or acquisition
proposal.
INDEMNIFICATION AND INSURANCE. Pursuant to Section 6.08 of the Merger
Agreement, the certificate of incorporation of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article 8 of the Certificate of Incorporation, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law. To the extent that the obligations under such provisions are
not fully performed by the Surviving Corporation, Parent agrees to perform fully
the obligations thereunder for the remaining period. The Merger Agreement also
provides that Parent or the Surviving Corporation shall use its best efforts to
maintain in effect for a period of not less than six years from the Effective
Time the current directors' and officers' liability insurance policies
maintained by the Company (provided that Parent or the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable to such directors and
officers) with respect to matters occurring prior to the Effective Time. Parent
has also agreed that if the existing policies expire, are terminated or
cancelled during such period, Parent or the Surviving Corporation will use its
best efforts to obtain substantially similar policies, but in no event will it
be required to expend more than an amount per year equal to 150 percent of
current annual premiums paid by the Company for such insurance. If Parent or the
Surviving Corporation is unable to obtain the amount of insurance required for
such aggregate premium, Parent or the Surviving Corporation has agreed to obtain
as much insurance as can be obtained for an annual premium of 150 percent of the
premiums currently being paid by the Company.
SPECIALTY MERGER AGREEMENT. Pursuant to Section 6.07 of the Merger
Agreement, the Company shall use reasonable commercial efforts to perform its
obligations under the Specialty Merger Agreement and to consummate the Specialty
Merger Transaction on the terms and conditions set forth in the Specialty Merger
Agreement. The consummation of the Specialty Merger Agreement and the receipt by
the Company of cash proceeds in connection therefor after providing for all
applicable income taxes (using an assumed tax rate of 41%) of not less than
$76,900,000 is a condition to the consummation of the Offer.
REPRESENTATIONS AND WARRANTIES. Pursuant to Article III of the Merger
Agreement, the Company has made customary representations and warranties to
Parent and Purchaser with respect to, among other things, its organization,
capitalization, financial statements, public filings, conduct of business,
employee benefit plans, intellectual property, employment matters, compliance
with laws, tax matters, litigation, environmental matters, vote required to
approve the Merger Agreement, undisclosed liabilities, its stockholders' rights
plan, intercompany payables, intra-corporate expenses, and the absence of any
Material Adverse Effect (as defined in the Merger Agreement) on the Company
since November 30, 1996.
CONVERTIBLE SUBORDINATED NOTES. Pursuant to Section 2.10 of the Merger
Agreement, prior to the Effective Time, the Company shall, in accordance with
the terms of the indenture dated as of July 8, 1996 (the "Indenture") between
the Company and State Street Bank and Trust Company, as trustee (the "Trustee"),
execute and deliver to the Trustee a supplemental indenture providing that from
and after the Effective Time, by virtue of the Merger and without any further
action on the part of the Company, each $1,000 principal amount of the Company's
5% Convertible Subordinated Notes Due 2001 (the "5% Notes") shall be convertible
into an amount of cash equal to the Per Share Amount multiplied by 26.88. The
Company has agreed to take such actions as may be appropriate or required by the
Indenture, or otherwise, to implement the terms of the Indenture, as
supplemented. Furthermore, the Company has
7
<PAGE>
agreed to offer to repurchase the 5% Notes at the option of the holders thereof
in accordance with the terms of the Indenture.
TERMINATION; FEES. In accordance with Article VIII of the Merger Agreement,
the Merger Agreement may be terminated and the Merger and the transactions
contemplated thereby (the "Transactions") abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the stockholders
of the Company: (a) by mutual written consent of Parent, Purchaser and the
Company; (b) by either Parent, Purchaser or the Company if (i) the Effective
Time shall not have occurred on or before July 31, 1997; PROVIDED, HOWEVER, that
if the waiting period under the HSR Act shall not have expired or been
terminated as of such date or any Governmental Authority (as defined in the
Merger Agreement) has caused to be issued as of such date a temporary
restraining order or a preliminary injunction prohibiting the consummation of
the Offer or the Merger and each of the parties to the Merger Agreement, in
either case, are seeking the termination of such waiting period or contesting
such temporary restraining order or preliminary injunction, as the case may be,
such date shall be extended to the earlier of the date of expiration or
termination of such waiting period or the lifting of such injunction or order or
October 31, 1997; PROVIDED, FURTHER, HOWEVER, that the right to terminate the
Merger Agreement pursuant to this sentence shall not be available (A) to any
party whose failure to fulfill any obligation under the Merger Agreement was the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date or (B) after Purchaser shall have purchased the Shares pursuant
to the Offer, or (ii) any court of competent jurisdiction in the United States
or the Kingdom of Sweden or other governmental authority in the United States or
the Kingdom of Sweden shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) by Parent if due to an occurrence or circumstance, other than a breach by
Parent or Purchaser of their obligations under the Merger Agreement, that would
result in a failure to satisfy any condition set forth in Annex A to the Merger
Agreement (which failure cannot be cured or, if capable of being cured has not
been cured in all material respects within 30 days after notice to the Company
of such occurrence or circumstance), Purchaser shall have terminated the Offer
without having accepted any Shares for payment thereunder; or (d) by the
Company, upon approval of the Board of Directors, if (i) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions set
forth in Annex A to the Merger Agreement, Purchaser shall have terminated the
Offer without having accepted any Shares for payment thereunder, (ii) prior to
the purchase of Shares pursuant to the Offer, in order to enter into a
definitive agreement with respect to a Superior Proposal, upon three days' prior
written notice to Parent setting forth, in reasonable detail, the identity of
the person making the Superior Proposal and the final terms and conditions of
such Superior Proposal, if the Board of Directors determines, after giving
effect to any concessions that may be offered by Parent, in good faith that it
is necessary to do so in accordance with its fiduciary duties to the Company's
stockholders under applicable law as advised by outside legal counsel; PROVIDED,
HOWEVER, that any termination of this Agreement pursuant to such subsection
(d)(ii) shall not be effective until the Company has made full payment of any
termination fees and expenses due pursuant to the Merger Agreement, or (iii) if
Parent or Purchaser shall have failed to commence the Offer within five business
days following the date of the initial public announcement of the Offer other
than as a result of an occurrence or circumstance that would result in a failure
to satisfy any of the conditions set forth in Annex A to the Merger Agreement,
or (iv) if Parent or Purchaser shall have breached in any material respect any
of their respective representations, warranties, covenants or other agreements
contained in the Merger Agreement in a manner that materially adversely affects
Parent's ability to consummate the Offer and the Merger and which cannot be
cured or, if capable of being cured, has not been cured in all material respects
within 30 days after notice to Parent of such occurrence or circumstance.
If the Merger Agreement is (i) terminated pursuant to clause (d)(ii) of the
immediately preceding paragraph, or (ii) an acquisition proposal is commenced,
publicly proposed, publicly disclosed or communicated to the Company or any
representative or agent thereof after the date of the Merger Agreement
8
<PAGE>
and prior to the date of its termination, the Merger Agreement is thereafter
terminated pursuant to clause (b) or (c) or (d)(i) of the immediately preceding
paragraph, and within 12 months following such termination an acquisition
proposal is consummated or the Company enters into an agreement relating
thereto; then, in any such event, the Company shall pay Parent promptly (but in
no event later than one business day after the first of such events shall have
occurred) a fee of $50,000,000, which amount shall be payable in immediately
available funds (the "Termination Fee"), plus certain expenses incurred by
Parent and Purchaser; PROVIDED, HOWEVER, that no Termination Fee shall be
payable under clause (ii) of the immediately foregoing sentence if, at the time
of termination under Section 8.01 of the Merger Agreement, Parent or Purchaser
is in material breach of their respective material covenants and agreements in
the Merger Agreement or their respective representations and warranties
contained therein. If the Merger Agreement is terminated for any reason
whatsoever and neither Parent nor Purchaser is in material breach of their
respective material covenants and agreements contained in the Merger Agreement
or their respective representations and warranties contained in the Merger
Agreement, the Company shall, whether or not the Termination Fee is paid,
reimburse Parent, Purchaser and their respective stockholders and affiliates
(not later than one business day after submission of statements therefor) for
all actual and documented out-of-pocket expenses and fees up to $4,000,000 in
the aggregate (including, without limitation, fees and expenses payable to all
banks, investment banking firms, other financial institutions and other persons
and their respective agents and counsel, for arranging, committing to provide or
providing any financing for the Transactions or structuring the Transactions and
all fees of counsel, accountants, experts and consultants to Parent, Purchaser
and their respective stockholders and affiliates, and all printing and
advertising expenses) actually incurred or accrued by either of them or on their
behalf in connection with the Transactions, including, without limitation, the
financing thereof, and actually incurred or accrued by banks, investment banking
firms, other financial institutions and other persons and assumed by Parent,
Purchaser or their respective stockholders or affiliates in connection with the
negotiation, preparation, execution and performance of the Merger Agreement, the
structuring and financing of the Transactions and any financing commitments or
agreements relating thereto.
Except as set forth in the above paragraph, all costs and expenses incurred
in connection with the Merger Agreement, the Specialty Merger Transaction, and
the transactions contemplated thereby will be paid by the party incurring such
expenses, whether or not such transactions are consummated.
SPECIALTY MERGER AGREEMENT
The following is a summary of certain provisions of the Specialty Merger
Agreement and is qualified in its entirety by reference to the Specialty Merger
Agreement which has been filed as Exhibit (c)(4) to this Schedule 14D-9 and is
incorporated herein by reference in its entirety.
Simultaneously with the execution of the Merger Agreement, the Company
entered into the Specialty Merger Agreement, pursuant to which the Company will
sell its interests in VSP and in Vivra Heart Imaging, Inc., a Nevada corporation
and a majority owned subsidiary of the Company ("VHI"), respectively, to the VSP
Purchasers. Both VSP and VHI are engaged in the Company's Specialty Business.
Under the Specialty Merger Agreement, the gross consideration to be allocated
between VSP and VHI will be $84,312,500 (the "Gross Consideration"). Of this
amount, the Company expects to receive sale proceeds of approximately
$79,400,000 in connection with the Specialty Merger Transaction. Assuming both a
pre-tax gain to the Company of approximately $5,400,000 and an income tax rate
of 41 percent, the Company will incur a tax liability of approximately
$2,200,000 in connection with the Specialty Merger Transaction. The anticipated
net after-tax proceeds of approximately $77,200,000 represents approximately
$1.72 per Share on a fully diluted basis. The receipt by the Company of not less
than $76,900,000 of such net after-tax proceeds is a condition to the purchase
of the Shares in the Offer.
Pursuant to the Specialty Merger Agreement, (i) VSP Merger Sub will be
merged with and into VSP, with VSP as the surviving corporation, and (ii) VSP
Purchaser II will obtain a majority interest in VHI. The VSP Purchasers are
corporations organized by certain private equity investment funds for the
purpose
9
<PAGE>
of acquiring the Company's interests in VSP and VHI. Mr. Thiry, the Company's
President and Chief Executive Officer, and Ms. Zumwalt, the Company's Chief
Financial Officer, will become the President and Chief Executive Officer and
Chief Financial Officer, respectively, of VSP following the completion of the
transactions contemplated by the Merger Agreement. Further, each of Mr. Thiry
and Ms. Zumwalt intends to make an equity investment in the VSP Purchasers.
Prior to consummation of the Specialty Merger Transaction, the Company and
VSP have covenanted and agreed to, among other things: (a) conduct VSP's
business in the ordinary course, including preserving existing relationships
with customers and suppliers and maintaining existing material contracts to
which VSP is a party; (b) cause certain subsidiaries of VSP (namely, Vivra
Asthma Allergy Careamerica, Inc., Vivra Heart Services, Inc., Vivra ENT, Inc.,
Vivra Health Advantage, Inc., Vivra Orthopaedics, Inc. and Vivra OB-GYN
Services, Inc.) to merge with and into VSP; (c) transfer and assign certain
assets and liabilities of the Company to VSP; and (d) enter into an agreement
pursuant to which the Company will assign to VSP all of the Company's rights,
title and interest in and to the "Vivra" trademark, and other trademarks of the
Company incorporating the word "Vivra"; PROVIDED, HOWEVER, that simultaneously
with the closing of the Specialty Merger Transaction (the "VSP Closing"), VSP
will license to the Company use of the name "Vivra Renal Care" for nine months
following the VSP Closing and use of the name "Vivra" for three months following
the VSP Closing (collectively, the "VSP Covenants").
The obligations of the VSP Purchasers to consummate the Specialty Merger
Transaction are subject to the satisfaction or waiver of certain conditions,
including: (a) that the representations and warranties made by VSP and the
Company will be true and correct as of the date of the VSP Closing; (b) the VSP
Covenants will have been performed by the Company and VSP; (c) any waiting
period (or any extension thereof) under the HSR Act will have expired or been
terminated; (d) a noncompetition agreement between VSP and Parent will have been
executed; (e) the Services Agreement between VSP and the Company pursuant to
which each of the parties thereto provide certain administrative services to the
other shall be in full force and effect and there shall have been no breach
thereunder; (f) there will have been no change, circumstance or occurrence since
the date of the Specialty Merger Agreement which would have a material adverse
effect on VSP's business, operations, properties or condition and (g) Purchaser
shall have advised the Company that it will purchase the Shares in the Offer or
the Purchaser or any other person or entity shall have acquired either the (x)
greater than 50 percent of the Shares or (y) all or substantially all of the
assets of the Company.
The Specialty Merger Agreement provides that, for a period of five years
from the VSP Closing, VSP Purchaser and VSP will indemnify the Company from
claims arising from the operation of the business of VSP and the Company will
indemnify VSP Purchaser and VSP from claims arising from the operation of the
business of the Company.
The Specialty Merger Agreement also provides that if the VSP Closing has not
occurred by June 30, 1997 solely as a result of the Offer not being consummated,
the VSP Purchasers may elect to consummate an alternative transaction pursuant
to which the VSP Purchasers would acquire 65 percent of the Company's interest
in VSP and 65 percent of the Company's interest in VHI, in exchange for 65
percent of the Gross Consideration.
ARRANGEMENTS FOR CERTAIN EMPLOYEES
On May 5, 1997, the Company's Board of Directors adopted two retention bonus
and deferred compensation arrangements (collectively, the "Retention
Arrangements"), copies of which have been filed as Exhibit (c)(5) and Exhibit
(c)(6), respectively, to this Schedule 14D-9 and are incorporated herein by
reference in their entirety. Pursuant to the Retention Arrangements, over 400
employees of the Company or its majority owned subsidiaries, including certain
executive officers, will be entitled to receive retention bonuses if they remain
employed by the Company or its subsidiaries or by VSP for a certain period
following the Effective Date. Each retention bonus payable under the Company's
retention arrangement will be payable in three installments as follows: 20
percent one month after the Effective Date, an additional 40 percent on the
first anniversary of the Effective Date and the final 40 percent on the second
10
<PAGE>
anniversary of the Effective Date. Each retention bonus payable under VSP's
retention arrangement will be payable in three installments as follows: 20
percent one month after the Effective Date, an additional 40 percent six months
after the Effective Date and the final 40 percent on the first anniversary of
the Effective Date. In addition, certain employees will be required to execute a
noncompetition agreement pursuant to which such employee shall be subject to a
noncompetition covenant for a period of one year following such employee's
termination of employment with the Company or a majority owned subsidiary or
VSP, but in no event more than a specified time from the Effective Date. See the
Section 14(f) Information Statement filed as Exhibit (c)(2) to this Schedule
14D-9 under the caption "Board of Directors and Executive Officers -- Employment
Agreements, Termination of Employment and Change in Control Arrangements" for
information regarding payments to be made to the Company's executive officers
under the Retention Arrangements. Furthermore, the Schedule 14(f) Information
Statement is attached as Schedule I hereto
11
<PAGE>
INDEMNIFICATION AGREEMENTS
Article 8 of the Certificate of Incorporation limits the personal liability
of directors of the Company and provides for indemnification of the officers and
directors of the Company, in each case to the fullest extent permitted by
applicable Delaware law and other applicable law. A copy of such Article 8 has
been filed as Exhibit (c)(7) to this Schedule 14D-9 and is incorporated herein
by reference in its entirety.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is hereby amended and supplemented by adding thereto the following:
On May 7, 1997, a punitive class action was filed in the Superior Court
of the State of California for the County of San Mateo on behalf of the
stockholders of the Company alleging causes of action arising out of the
Offer and the proposed Merger. GOODMAN EPSTEIN AND FLORENCE EPSTEIN v. VIVRA
INC., ET AL., Case No. 400617. A copy of the complaint filed in connection
with the aforementioned action is filed as Exhibit (c)(10) to this Schedule
14D-9 and is incorporated herein by reference in its entirety. The defendants
in this action include the Company and its directors. The action alleges that
the Board of Directors breached its fiduciary duties by failing to take all
necessary and appropriate steps to obtain the maximum value realizable for the
stockholders of the Company. The action seeks, INTER ALIA, to enjoin the
defendants form consummating the proposed acquisition or alternatively for
money damages and other appropriate relief. The Company believes that the
punitive class action suit is without merit and intends to defend it
vigorously.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated May 9, 1997.*
(a)(2) Letter of Transmittal.*
(a)(3) Press release issued by the Company on May 5, 1997.*
(a)(4) Opinion of Goldman, Sachs & Co., dated May 5, 1997.*
(a)(5) Letter to Stockholders, dated May 9, 1997, from Kent J .Thiry, President and Chief
Executive Officer of the Company.*
(c)(1) Agreement and Plan of Merger, dated as of May 5, 1997, among Parent, Purchaser and
the Company. *
(c)(2) Relevant Portions of the Company's Information Statement filed with the Securities
and Exchange Commission on May 9, 1997 pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended. *
(c)(3) Sections 1 and 2 of the Services Agreement, dated May 5, 1997, by and between the
Company and VSP.
(c)(4) Agreement and Plan of Reorganization, dated as of May 5, 1997, by and between VSP
Holdings, Inc., VSP Holdings II, Inc., VSP Acquisition, Inc., Vivra Specialty
Partners, Inc. and Vivra Incorporated. *
(c)(5) Vivra Incorporated Retention Arrangement.*
(c)(6) Vivra Specialty Partners, Inc. Retention Arrangement.*
(c)(7) Article 8 of the Company's Certificate of Incorporation, as amended to date.
(c)(8) Revised and Restated Employment Contract, dated December 15, 1996, between the
Company and Mr. Thiry.*
(c)(9) Employment Contract dated October 31, 1995, between the Company and Ms. Zumwalt.*
(c)(10) Complaint, GOODMAN EPSTEIN AND FLORENCE EPSTEIN v. VIVRA INC., ET
AL., Case No. 400617, filed in the Superior Court of the State of
California for the County of San Mateo.
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to stockholders.
** To be filed by Amendment.
12
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
VIVRA INCORPORATED
By: /s/ KENT J. THIRY
-----------------------------------------
Kent J. Thiry
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: May 20, 1997
13
<PAGE>
Kevin J. Yourman (147159)
Vahn Alexander (167373)
WEISS & YOURMAN
10940 Wilshire Blvd.
24th Floor
Los Angeles, CA 90024
(310) 208-2800
Joseph H. Weiss
Weiss & Yourman
315 Fifth Avenue
New York, NY 10016
(212) 532-4171
Attorneys for Plaintiffs
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN MATEO
GOODMAN EPSTEIN AND FLORENCE EPSTEIN, ) Case No. 400617
individually and on behalf of all )
other persons similarly situated, ) CLASS ACTION
)
) CLASS ACTION COMPLAINT
) FOR BREACH OF FIDUCIARY DUTIES
Plaintiffs )
)
v. )
) JURY TRIAL DEMAND
)
VIVRA INC., DAVID G. CONNOR, ) CASE MANAGEMENT CONFERENCE
RICHARD B. FONTAINE, ALAN R. HOOPS, ) REFER TO SAN MATEO COUNTY
DAVID L. LOWE, JOHN M. NEHRA, ) SUPERIOR COURT ROOM 20
STEPHEN G. PAGLIUCA, KENT J. THIRY, ) DATE: 09-25-97
LE ANNE M. ZUMWALT AND DOES 1-30, ) TIME: 9 AM
) DEPT: 10
)
Defendants. )
- --------------------------------------------
Plaintiffs, through their undersigned attorneys, for their complaint
against defendants, allege upon knowledge as to themselves and their own acts,
and upon information and belief, as to all other matters as follows.
1
<PAGE>
1. Plaintiffs bring this action, individually and as a class action on
behalf of all persons, other than defendants, who own the common stock of Vivra
Inc. ("Vivra" or the "Company") and who are similarly situated, to enjoin the
consummation of the proposed acquisition of Vivra by Incentive AB ("Incentive")
whereby Incentive will pay $35.62 per share of Vivra common stock.
Alternatively, in the event that the transaction is consummated, plaintiffs seek
to recover damages caused by the breach of fiduciary duties, described herein,
owed by the director defendants. The proposed transaction and the acts of the
direct defendants constitute a breach of the defendants' fiduciary duties to
plaintiffs and the class to take all necessary and appropriate steps to obtain
the maximum value realizable for the shareholders of Vivra.
PARTIES
2. Plaintiffs Goodman Epstein and Florence Epstein are now and have been,
since prior to the announcement of the proposed transaction described herein,
the owners of 70 shares of common stock of Vivra. Plaintiffs purchased these
shares at a price of $33.75 per share.
3. Defendant Vivra Inc. is a corporation organized under the laws of
the State of Delaware, with its principal executive offices and company
headquarters at 1850 Gateway Drive, Suite 500, San Mateo, California, 94404.
Vivra is a specialty care company. The Company provides services through
Vivra Renal Care ("VRC") and Vivra Specialty Partners ("VSP"). VRC is the
second largest provider of dialysis services in the United States. VSP
provides physician network and disease management services to managed care
2
<PAGE>
and provider organizations.
4. Defendant David G. Connor ("Connor") has served as a Director of the
Company since 1989 and currently owns 32,097 shares of the Company.
5. Defendant Richard B. Fontaine ("Fontaine") has served as a Director of
the Company since 1992 and currently owns 32,318 shares of the Company.
6. Defendant Alan R. Hoops ("Hoops") has served as a Director of the
Company since 1995 and currently owns 10,124 shares of the Company.
7. Defendant David L. Lowe ("Lowe") has served as a Director of the
Company since 1995 and currently owns 11,041 shares of the Company.
8. Defendant John M. Nehra ("Nehra") has served as a Director of the
Company since 1989 and currently owns 25,644 shares of the Company.
9. Defendant Stephen G. Pagliuca ("Pagliuca") has served as a Director of
the Company since 1992 and currently owns 26,394 shares of the Company.
10. Defendant Kent J. Thiry ("Thiry") has served as a President and Chief
Executive Officer of the Company since September 1992 and as a Director of the
Company since 1991 and currently owns 452,500 shares of the Company.
11. Defendant Le Anne M. Zumwalt ("Zumwalt") has served as Chief Financial
Officer of the Company since May 1996 and Treasurer and Secretary since march
1995 and as a Director of the Company since 1994 and currently owns 28,351
shares of the Company.
3
<PAGE>
12. The individual defendant directors, by reason of their corporate
directorship and/or executive positions, stand in a fiduciary position relative
to the Company's shareholders, which fiduciary relationship, at all times
relevant herein, required the defendants to exercise their best judgment and to
act in a prudent manner and in the best interests of the Company's shareholders.
A director is not permitted to act in his/her own self-interest to the detriment
of the shareholders.
13. Each defendant herein is sued individually as a conspirator and aider
and abettor, as well as in such defendant's capacity as an officer, director or
controlling stockholder of the Company, and the liability of each arises from
the fact that he, she, or it has engaged in all or part of the unlawful acts,
plan, schemes, or transactions complained of herein.
CLASS ACTION ALLEGATIONS
14. Plaintiffs bring this action individually on their own behalf and as a
class action, on behalf of all stockholders of the Company (except defendants
herein, and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who are
or will be threatened with injury arising from defendants' actions as more fully
described herein (the "Class").
15. This action is properly maintained as a class action.
16 The Class is so numerous that joinder of all members is impracticable.
As of April 7, 1997 there were 41,070,626 shares of Vivra common stock
outstanding. The disposition of their claims in a class action will be of
benefit to the parties and Court. The recordholders of Vivra common stock can
be easily
4
<PAGE>
determined from the stock transfer journals maintained by Vivra or its agents.
17 A class action is superior to other methods for the fair and efficient
adjudication of the claims herein asserted, and no unusual difficulties are
likely to be encountered in the management of this action as a class action.
The likelihood of individual Class members prosecuting separate claims is
remote.
18. There is a well-defined community of interests in the questions of law
and fact involved affecting the members of the Class. Among the questions of
law and fact which are common to the Class, which predominate over questions
affecting any individual Class member are, INTER ALIA, the following:
a. whether defendants have engaged in conduct constituting unfair
dealing and have engaged in a plan and scheme to deceive the public stockholders
of Vivra and to enrich themselves at the expense of the Company's public
stockholders;
b. whether the proposed transaction is grossly unfair to the public
stockholders of Vivra;
c. whether defendant shave failed to disclose all material facts
relating to the proposal including the potential and expected positive future
financial benefits which they expect to derive from Vivra;
d. whether defendants have engaged and are continuing to engage in a
plan and scheme to eliminate the public stockholders of Vivra through
fraudulent, deceptive, and coercive means and devices;
e. whether defendants willfully and wrongfully failed or refused to
obtain or attempt to obtain a purchaser for the
5
<PAGE>
assets of Vivra at a higher price than the Incentive proposal;
f. whether plaintiffs and the other members of the Class would be
irreparably damaged were the transaction complained of herein consummated;
g. whether defendants have breached or aided and abetted the breach
of the fiduciary and other common law duties owed by them to plaintiffs and the
members of the Class; and
h. whether plaintiffs have been damaged and what is the proper
measure of damages.
19. Plaintiffs are members of the Class and are committed to prosecuting
this action and have retained competent counsel experienced in litigation of
this nature. Plaintiffs' claims are typical of the claims of the other
members of the Class and plaintiffs have the same interests as the other
members of the Class. Plaintiffs do not have interests antagonistic to or in
conflict with those they seek to represent. Plaintiffs are adequate
representatives of the Class.
20. The likelihood of individual Class members prosecuting separate
individual actions is remote due to the relatively small loss suffered by each
Class member as compared to the burden and expense of prosecuting litigation of
this nature and magnitude. Absent a class action, the defendants are likely to
avoid liability for their wrongdoing, and Class members are unlikely to obtain
redress for the wrongs alleged herein. There are no difficulties likely to be
encountered in the management of the Class claims. This Court is an appropriate
forum for this dispute.
6
<PAGE>
SUBSTANTIVE ALLEGATIONS
21. On or about January 28, 1997, in a BUSINESS WIRE release entitled
VIVRA INCORPORATED ANNOUNCES YEAR END RESULTS, Vivra announced that it earned
$ 0.34 and $ 1.27 per share for the quarter and year ended November 30, 1996,
respectively and that Vivra's earnings per share growth was 21% and 19% compared
to the prior year's corresponding periods. Vivra Renal Care (VRC) achieved
operating profit growth of 28% and 32% on treatment growth of 20% and 24% for
the quarter and year ended November 30, 1996, respectively. Vivra Specialty
Partners (VSP) revenues were $ 29.8 million for the quarter and $ 95.3 million
for the year ended November 30, 1996. VSP lost $ 142,000 in the quarter.
22. The release further noted that:
VIVRA ENTERS 1997 WITH BOTH OPERATING AND STRATEGIC MOMENTUM IN ITS TWO
BUSINESS UNITS.
-- VRC ended the year with 251 dialysis centers, caring for 14,380
patients. The center total includes 20 de novo units opened during the
year.
-- VRC's 1996 ending days revenue in accounts receivable was 73,
SUBSTANTIALLY BELOW THE INDUSTRY AVERAGE.
-- THERE CONTINUES TO BE STRONG BIPARTISAN SUPPORT IN CONGRESS FOR AN
EXTENSION OF THE PRIVATE SECTOR'S COORDINATION OF BENEFITS PERIOD FROM 18
TO 30 MONTHS.
--VSP added 30 physicians, 5 capitated network contracts and 485,000
specialty lives in the quarter, bringing the current totals to 97
physicians and 44 contracts which cover 4.7 million specialty lives.
Emphasis added.
23. On or about March 31, 1997 in a Business Wire release, entitled VIVRA
INCORPORATED ANNOUNCES FIRST QUARTER RESULTS, Vivra announced that it earned
$0.34 per share for the quarter ended February 28, 1997, compared to $0.29 per
share for the same period
7
<PAGE>
of the prior year, a 17.2% increase. The Company also announced that:
For the first quarter of 1997 compared to 1996, Vivra Renal
Care's (VRC) operating profits grew 25% to $23.2 million. Dialysis
treatments increased by 23% to 556,000. VRC ended the quarter with 260
dialysis centers, caring for 15,500 patients.
Vivra Specialty Partners (VSP) lost $ 149,000, after pooling
transaction costs of $ 240,000, on revenues of $35.0 million in the
quarter. VSP currently manages 51 capitated network contracts which
cover 5.7 million specialty lives.
24. On or about May 2, 1997 a Reuters article, entitled RESEARCH ALERT -
VIVRA (V.N.) RAISED, reported that Merrill Lynch upgraded Vivra to "near-term
accumulate" from "neutral" and recommended keeping Vivra as a long-term buy. On
this news, Vivra gained 3/8 to close at 28 for the day.
25. On or about May 5, 1997 in a Business Wire release, entitled
INCENTIVE'S GAMBRO GROUP TO ACQUIRE VIVRA INC., Vivra and Incentive, a holding
company controlled by the Wallenberg family of Sweden, announced that both
companies had signed a definitive merger agreement under which Incentive would
acquire VRC, including its nephrology disease management and nephrology
physician practice management operation. Specifically, the article noted:
Incentive intends to merger VRC with the Gambro Group, its wholly
owned, worldwide, fully integrated dialysis and medical technology
business.
Pursuant to the merger agreement, a cash tender offer will be
commenced by a wholly owned subsidiary of Incentive no later than May
9, 1997, to acquire all of the outstanding shares of Vivra common
stock for $ 35.62 per share or a total cash consideration of $ 1,592
million, of which $ 33.90 represents Incentive's net consideration for
VRC, or a total cash consideration of $ 1,515 million. As part of the
transaction, Vivra has also signed a definitive agreement to sell
Vivra Specialty Partners ("VSP"), its physician network and disease
management division, to a new company formed by
8
<PAGE>
Texas Pacific Group, Hellman & Freedman Capital Partners III, L.P. AND
BAIN CAPITAL for $ 85 million, representing net after-tax proceeds of
$ 77 million or approximately $ 1.72 per Vivra share.
Emphasis added.
26. The same article also indicated that defendants Thiry and Pagliuca,
who were both prior employees of Bain & Company which is a sister company of
Bain Capital, and the remaining board of directors, had "reviewed" the merger
agreement on behalf of its stockholders and had recommended that such
stockholders tender their shares pursuant to the offer.
27. The article further noted that:
The tender offer is expected to be completed in early June. All
shares not purchased in the tender offer will be converted into the right
to receive $35.62 per share in a second-step merger following the tender
offer.
The combination of VRC with Gambro will create a company with pro
forma 1996 worldwide revenues of $ 2.0 billion and earning before interest,
taxes, depreciation, and amortization ("EBITDA") of $ 410 million. THE
TRANSACTION IS EXPECTED TO GENERATE SIGNIFICANT OPERATING SYNERGIES.
Together the companies will serve approximately 26,000 dialysis patients in
the United States.
Mikael Lilius, president and chief executive officer of Incentive
said, "THIS TRANSACTION REPRESENTS A MAJOR STRATEGIC MOVE FOR INCENTIVE AND
CONTINUES OUR STRONG THRUST INTO THE HIGH GROWTH HEALTH CARE SECTOR. We
have consistently restructured and shifted our resources into this highly
attractive area. The acquisition of Vivra Renal Care is a logical next
step in the development of Incentive Group and demonstrates our strong
commitment to shareholder value creation."
Berthold Lindqvist, president and chief executive officer of Gambro
said, "VIVRA RENAL CARE IS A WELL-MANAGED COMPANY THAT FITS WELL WITH
GAMBRO. VRC WILL STRENGTHEN OUR POSITION AS A GLOBAL LEADER IN RENAL CARE.
We pioneered the forward integration strategy in the United States and have
distinguished ourselves as high-quality care providers. With this merger,
we will strengthen Gambro's position as a leading, fully integrated, renal
care management company with multiregional presence; FURTHERMORE THIS
TRANSACTION
9
<PAGE>
WILL GENERATE SIGNIFICANT OPERATING SYNERGIES, while allowing Gambro
-----------
to continue to provide a service of the highest quality."
* * * * *
... Incentive expects the acquisition to enhance cash earnings growth
(calculated before charges for depreciation and goodwill
amortization), with an accretive impact in its first full year and
significant contributions thereafter.
28. On or about May 6, 1997 The New York Times reported, in an article
entitled SWEDISH HOLDING COMPANY TO BUY U.S. DIALYSIS PROVIDER, that Vivra
shares jumped $6.75, or 24 percent, to $35, only $.62 less than Incentive's
offer of $35.62. The article also noted that:
THE SHARE PRICES OF OTHER COMPANIES THAT OPERATE KIDNEY-DIALYSIS, OR
RENAL CARE, CENTERS JUMPED ON THE NEWS, WHICH WALL STREET ANALYSTS SAID
PRESAGED MORE CONSOLIDATION IN THE DIALYSIS INDUSTRY. Patients with
defective kidneys regularly visit the centers to have their blood purified.
Total Renal Care Holdings was up $2.375 to $36.375, and the Renal Treatment
Centers rose $3.25, to $27.25, both on the Big Board.
Vivra has a roughly 8 percent market share in the United States,
following Fresenius A.G. of Germany, the industry leader with 20
percent, said Margo Vignola, a health care analyst with Merrill Lynch.
Fresenius expanded last year with a $4.4 billion acquisition of
National Medical Care, the dialysis unit of W.R. Grace.
MS. VIGNOLA SAID THE EUROPEAN COMPANIES "WANT THE EXPERTISE OF THE
AMERICAN COMPANIES FOR INTERNATIONAL MARKETS, WHICH ARE LOT LESS
DEVELOPED THAN HERE." FRESENIUS HAS PROJECTED 40 PERCENT GROWTH IN THE
GLOBAL MARKET, TO ONE MILLION PATIENTS, BY 2000. Samuel Isaly, an
analyst with Mehta & Isaly, said of the purchase of Vivra, "this is a
smaller version of the Fresenius-National Medical Care deal."
* * * * *
David Barry, president of VRC, the renal care unit of Vivra, will be
president of Gambro Health Care Patient Services, under which name the
combined company will operate. Gambro Health Care now serves 12,100
10
<PAGE>
patients in a number of countries. Vivra has 15,800 patients at 262
centers in 28 states and the District of Columbia. GAMBRO WOULD HAVE
$ 2 BILLION IN COMBINED SALES AFTER THIS ACQUISITION. Vivra, of San
Mateo, Calif., had revenue of $517 million in the fiscal year that
ended on Nov. 30.
Incentive said it planned to sell Vivra's physician network and
disease management unit for $85 million to a new company formed by the
Teas Pacific Group, Bain Capital and Hellman & Friedman Capital
Partners. KENT J. THIRY, CHIEF EXECUTIVE OF VIVRA, WOULD HEAD THE NEW
COMPANY. Vivra would be required to buy back its 5 percent
convertible subordinated notes for the principal amount plus interest.
MS. VIGNOLA SAID INCENTIVE WAS OFFERING "BASICALLY $33 PER SHARE
FOR THE DIALYSIS BUSINESS -- 10 TIMES EARNINGS BEFORE INTEREST,
DEPRECIATION, TAXES AND AMORTIZATION" --- and about $2 a share for
the physician network, which has been losing money.
LEONARD S. YAFFE, AN ANALYST IN SAN FRANCISCO WITH MONTGOMERY
SECURITIES, SAID CONSOLIDATION WOULD BE SPURRED BY THE FURTHER SPREAD
OF MANAGED CARE INTO DIALYSIS TREATMENT. HE SAID THE FEDERAL MEDICARE
PROGRAM, THE MAIN PAYER FOR SUCH TREATMENT, WAS EXPERIMENTING WITH
CONTRACTS THAT WOULD GIVE THE CENTERS OR A HEALTH MAINTENANCE
ORGANIZATION AN ANNUAL LUMP SUM FOR EACH PATIENT'S CARE, COVERING
DIALYSIS AS WELL AS ANY HOSPITALIZATION.
Emphasis added.
29. On the same day, May 6, 1997, The Los Angeles Times further reported,
in an article entitled SWEDISH FIRM OFFERS $1.6 BILLION FOR VIVRA:
Incentive has agreed to buy Vivra Inc. for $1.6 billion, or $35.62 a
share, in cash, furthering the drive of Sweden's Wallenberg family into
high-growth technology businesses. Incentive, one of the Wallenbergs' main
investment companies, will merge San Mateo-based Vivra into its wholly
owned Gambro, making the combined companies the No. 2 dialysis services
firm in the world. THE TRANSACTION COMES AMID A WAVE OF ACQUISITIONS IN
THE DIALYSIS INDUSTRY, AS COMPANIES TRY TO COMPETE WITH FRESENIUS MEDICAL
CARE, THE WORLD'S LARGEST PROVIDER OF DIALYSIS CARE. As part of the
agreement between Incentive and Vivra' board, Vivra will sell its disease
management unit, reducing the net cost of the acquisition to $ 1.52
billion. The Incentive offer is 26% higher than Vivra's Friday closing
price of
11
<PAGE>
$ 28.25. VIVRA SHARES ROSE $ 6.75 TO CLOSE AT $ 35 ON THE NEW YORK
STOCK EXCHANGE.
Emphasis Added.
30. Also on the same day, May 6, 1997, THE DAILY TELEGRAPH stated, in an
article entitled SWEDES BUY U.S. MEDICAL COMPANY FOR $1.6BN:
The merger with Gambro will boost the combined turnover to $ 2 billion,
while profits last year would have been $ 410m, BUT DIRECTORS BELIEVE
THAT THERE ARE SUBSTANTIAL SYNERGIES TO BE EXPLOITED. The two
companies have 26,000 dialysis patients in the United States. IT IS
ESTIMATED THAT THE NUMBER OF AMERICANS REQUIRING CHRONIC DIALYSIS
SERVICES HAS GROWN FROM ABOUT 66,000 IN 1982 TO 200,000. GAMBRO'S
PRESIDENT, BERTHOLD LINDGVIST, SAID: "VIVRA RENAL CARE IS A WELL
MANAGED COMPANY THAT FITS WELL WITH GAMBRO. WITH THIS MERGER WE WILL
STRENGTHEN GAMBRO'S POSITION AS A LEADING, FULLY INTEGRATED, RENAL
CARE MANAGEMENT COMPANY WITH MULTI-REGIONAL PRESENCE."
Emphasis added.
31. Defendants' intention to pursue the above transaction in breach of
their fiduciary duties owed to Vivra's stockholders to take all necessary steps
to ensure that Vivra stockholders will receive the maximum value realizable for
their shares in any extraordinary transaction involving the Company.
32. Defendants further breached their fiduciary duties by failing to honor
their obligation to observe the highest duties in good faith and fair dealing in
their dealings with the Company and its other shareholders by exercising their
positions of control in order to obtain financial gain for themselves not
available to the other shareholders and/or at the expense of the Company.
33. In addition, no independent committee was appointed to ensure that the
proposed transaction was fair to or in the best interests of the Company and its
stockholders, a further breach in fiduciary duty.
12
<PAGE>
34. The offer being advanced and the consideration offered -- $35.62 per
share of Vivra common stock -- is a grossly unfair price; does not reflect the
significant advantages to be obtained by Incentive as a result of the
transaction; and does not offer any control premium whatsoever. The stock is
currently selling on the open market for essentially the same price -- $34.62
per share -- only one dollar less than the current offer by Incentive. The
intrinsic value of Vivra is materially greater than the consideration proposed,
taking into account, INTER ALIA, Vivra's asset value, liquidation value,
expected growth, full extent of its future earnings potential, expected increase
in profitability, strength of its business, its revenues, cash flow and earnings
power.
35. Defendant's knowledge and economic power and that of the investing
public is unequal because the individual defendants and Vivra control the
business and corporate affairs of Vivra and are in possession of material non-
public information concerning the Company's assets, businesses, and future
prospects. This disparity makes it inherently unfair for them to act to
transfer ownership of Vivra from its public stockholders at this time and at
such an unfair and grossly inadequate price.
36. The proposed transaction is not the result of arm's-length
negotiations but was fixed arbitrarily by Incentive and agreed to by defendants
as part of the unlawful plan and scheme to obtain the entire ownership of Vivra
at the lowest possible price. These facts have not been disclosed by
defendants.
37. Further, the Vivra Board's willingness to entertain the proposed offer
requires them to take all reasonable steps to
13
<PAGE>
assure the maximization of stockholder value, including the implementation of a
bidding mechanism to foster a fair auction of the Company to the highest bidder
or the exploration of strategic alternatives which will return greater or
equivalent short-term value to the plaintiffs and the Class.
38. There in no indication that Vivra's board of directors has taken any
steps to ensure that the interests of Vivra's stockholders in maximizing the
value of their holdings were protected by conducting an auction for Vivra or
otherwise seeking out other potential purchasers or the highest possible bid for
the Company or exploring strategic alternatives which will obtain the highest
possible price for Vivra's stockholders or return greater or equivalent
short-term value to the plaintiffs and the Class. If the transaction is
consummated, Vivra's shareholders will be deprived of the opportunity for
substantial gains which the Company may realize.
39. By the acts, transactions, and courses of conduct alleged herein,
defendants, individually and as part of a common plan and scheme and/or aiding
and abetting one another in total disregard of their fiduciary duties, are
attempting to deceive plaintiffs and the Class and deprive them unfairly of
their investment in Vivra.
40. The individual defendants, knowing all of the above, exercised their
positions of control in order to obtain financial gain for themselves while
failing to take the necessary and appropriate steps to obtain the maximum value
realizable for the public shareholders of Vivra.
41. The proposed transaction is wrongful, unfair, and
14
<PAGE>
harmful to Vivra's public stockholders, and represents an attempt by defendants
to aggrandize their personal and financial positions and interests and to enrich
themselves, at the expense of and to the detriment of the public stockholders of
the Company. The proposed transaction will deny Class members their right to
share proportionately in the true value of Vivra's assets, profitable business,
and future growth in profits and earnings, while usurping the same for the
benefit of Incentive at an unfair and inadequate price.
42. By reason of all of the foregoing, defendants herein have willfully
participated in unfair dealing toward plaintiffs and the other members of the
Class and have engaged in and substantially assisted and aided and abetted each
other in breach of the fiduciary duties owed by them to the Class.
43. Defendants have violated fiduciary and other common law duties owed to
the plaintiffs and the other members of the Class in that they have not and are
not exercising independent business judgment, have acted and are acting to the
detriment of the Class in order to benefit themselves and/or their colleagues.
44. As a result of the actions of the defendants, plaintiffs and the Class
have been and will be damaged in that they have been deceived, are the victims
of unfair dealing, and are not receiving the fair value, of Vivra's assets and
businesses.
45. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiffs and the Class, and will succeed in
their plan to enrich themselves by excluding the Class from its fair
proportionate share of Vivra's assets and businesses, all to the irreparable
harm of the Class.
15
<PAGE>
46. Plaintiffs and the Class have no adequate remedy of law. WHEREFORE,
plaintiffs pray for judgment and relief as follows:
(1) declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiffs as representatives of the Class;
(2) declaring that the defendants and each of them have committed or
aided and abetted a gross abuse of trust and have breached their fiduciary
duties to plaintiffs and the other members of the Class;
(3) declaring the transaction to be a nullity;
(4) preliminarily and permanently enjoining defendants, and all
persons acting under, in concert with, or for them, from proceeding with,
consummating or closing the transaction;
(5) in the event the transaction is consummated, rescinding it and
setting it aside;
(6) ordering defendants, jointly and severally, to account to
plaintiffs and the Class for all profits realized and to be realized by them as
a result of the transaction complained of and, pending such accounting, to hold
such profits in a constructive trust for the benefit of plaintiffs and other
members of the Class;
(7) ordering defendants to permit a stockholders' committee
comprised of Class members and their representatives only to ensure a fair
procedure, adequate procedural safe-guards and independent input by
plaintiffs and the Class in connection with any transaction for the shares of
Vivra;
(8) awarding compensatory damages against defendants,
16
<PAGE>
jointly and severally, in the amount to be determined at trial, together with
prejudgment interest at the maximum rate allowable by law;
(9) awarding plaintiffs and the Class their costs and disbursements
and reasonable allowances for plaintiffs' counsel and experts' fees and
expenses; and
(10) granting such other and further relief as may be just and proper.
JURY DEMAND
Plaintiffs demand a trial by jury of all issues so triable.
Dated: May 7, 1997
KEVIN J. YOURMAN
VAHN ALEXANDER
WEISS & YOURMAN
By: /s/ Vahn Alexander
---------------------
Vahn Alexander
10940 Wilshire Boulevard
24th Floor
Los Angeles, CA 90024
(213) 208-2800
JOSEPH H. WEISS
WEISS & YOURMAN
551 Fifth Avenue
Suite 1600
New York, NY 10176
(212) 682-3025
Attorneys for Plaintiffs
17
