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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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VIVRA INCORPORATED
(NAME OF SUBJECT COMPANY)
VIVRA INCORPORATED
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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92855M104
(CUSIP NUMBER OF CLASS OF SECURITIES)
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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)
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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
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INTRODUCTION
This 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 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Vivra Incorporated, a Delaware
corporation (the "Company"). The address of the principal executive office of
the Company is 1850 Gateway Drive, Suite 500, San Mateo California 94404. The
title of the class of equity securities to which this Schedule 14D-9 relates is
the Company's common stock, par value $.01 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer disclosed in the Schedule
14D-1 dated May 9, 1997 (as amended or supplemented, the "Schedule 14D-1") filed
with the Securities and Exchange Commission (the "Commission") by Incentive AB,
a corporation organized under the laws of Sweden ("Parent"), and its indirect
wholly owned subsidiary, Gambro Healthcare Acquisition Corp., a Delaware
corporation and formerly known as HH Acquisition Corp. ("Purchaser"), relating
to an offer by Purchaser to acquire all of the issued and outstanding Shares for
an amount equal to $35.62 per Share (such amount or any greater amount per Share
paid pursuant to the Offer (as hereinafter defined) being hereinafter referred
to as the "Per Share Amount") net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). The principal executive office of
Purchaser is located at 1185 Oak Street, Lakewood, Colorado 80215. The principal
executive office of Parent is located at Hamngatan 2, Box 7373, S-10391,
Stockholm, Sweden.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of May 5, 1997 (the "Merger Agreement") among Parent, Purchaser and the
Company. A copy of the Merger Agreement is filed as Exhibit (c)(l) to this
Schedule 14D-9 and is incorporated herein by reference in its entirety. Pursuant
to the Merger Agreement, as soon as practicable following the consummation of
the Offer and the satisfaction of the other conditions set forth in the Merger
Agreement, and in accordance with applicable Delaware law, Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and will become an indirect wholly owned subsidiary of Parent. As
a result of the Merger, each Share outstanding at the Effective Time (as
hereinafter defined) (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 Delaware law) will, by virtue of
the Merger and without any action by the holder thereof, be cancelled and
converted automatically into the right to receive the Per Share Amount, without
interest (the "Merger Consideration"), upon the surrender of the certificate
that formerly evidenced such Share (the "Certificate"). The Merger Agreement is
summarized in Item 3 of this Schedule 14D-9.
Simultaneously with the execution of the Merger Agreement, the Company
entered into an Agreement and Plan of Reorganization (the "Specialty Merger
Agreement"), dated as of May 5, 1997, by and between VSP Holdings, Inc., a
Delaware corporation ("VSP Purchaser"), VSP Holdings II, Inc., a Delaware
corporation ("VSP Purchaser II"), VSP Acquisition, Inc., a Delaware corporation
and a wholly owned subsidiary of Purchaser ("VSP Merger Sub" and, together with
VSP Purchaser and VSP Purchaser
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II, the "VSP Purchasers"), Vivra Specialty Partners, Inc., a Nevada corporation
and a majority owned subsidiary of the Company ("VSP"), and the Company. As a
condition to Purchaser's obligation to purchase the Shares tendered and not
withdrawn pursuant to the Offer, the Company is obligated to consummate the
transactions contemplated by the Specialty Merger Agreement and to receive cash
proceeds therefor after providing for all applicable income taxes (using an
assumed income tax rate of 41%) of not less than $76,900,000. Following the
consummation of the Merger, Kent J. Thiry, the Company's President and Chief
Executive Officer, and LeAnne M. Zumwalt, the Company's Chief Financial Officer,
shall become the President and Chief Executive Officer and Chief Financial
Officer, respectively, of VSP. See "Item 3. Identity and Background -- Specialty
Merger Agreement" for greater detail concerning the Specialty Merger Agreement
and the transactions contemplated thereunder.
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.
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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company unanimously has approved the Merger
Agreement, the Offer and the Merger and has determined that each of the Offer
and the Merger is fair to, and in the best interests of, the stockholders of the
Company and unanimously recommends that stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer.
As set forth in the Merger Agreement, Purchaser will accept for payment and
pay for Shares tendered and not withdrawn prior to the expiration of the Offer
if certain conditions to the Offer have been satisfied, including the condition
that at least that number of Shares that when added to the Shares already owned
by Parent and its affiliates shall constitute a majority of the then outstanding
Shares on a fully diluted basis shall have been validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition").
Stockholders considering not tendering their Shares in order to wait for the
Merger should note that if the Minimum Condition is not satisfied or any of the
other conditions to the Offer are not satisfied, Purchaser is not obligated to
purchase any Shares, and can terminate the Offer and not proceed with the
Merger. Under applicable Delaware law, the approval of the Board of Directors
and the affirmative vote of the holders of a majority of the outstanding Shares
are required to approve the Merger. Accordingly, if all of the conditions to the
Offer are satisfied, Purchaser will have sufficient voting power to cause the
approval of the Merger without the affirmative vote of any other stockholder.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
Friday, June 6, 1997, unless Purchaser, in accordance with the terms of the
Merger Agreement, extends the period of time for which the Offer is open. If on
the initial scheduled expiration date of the Offer, the sole condition remaining
unsatisfied is (i) the failure of the waiting period under the HSR Act to have
expired or been terminated or (ii) the failure to consummate the Specialty
Merger Transaction and such transaction has not yet 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. A copy of the press release issued
by the Company on May 5, 1997 announcing the Merger and the Offer is filed as
Exhibit (a)(3) to this Schedule 14D-9 and is incorporated herein by reference in
its entirety.
BACKGROUND OF THE OFFER
In late August and early September 1996, Mr. Thiry and Mats Wahlstrom,
President and Chief Executive Officer of Gambro Healthcare, Inc., a wholly owned
subsidiary of Parent ("Gambro Healthcare"), had discussions concerning a
possible strategic transaction between Parent and the Company. Before and during
September 1996, members of the Company's senior management, including Mr. Thiry,
Ms. Zumwalt and Stephen G. Pagliuca, a director of the Company, interviewed
various investment banking firms with respect to an engagement to provide
financial advice to the Company concerning its long-term strategic direction and
to potentially assist the Company in identifying an acquiror for all or a
portion of the Company's business. In September 1996, the Company engaged
Goldman Sachs to assist the Company in determining the proper structure by which
to achieve its objectives.
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In September 1996, Goldman Sachs, on behalf of the Company, contacted
several companies regarding a potential strategic relationship with the Company,
including Parent and Purchaser. On September 19, 1996, UBS Securities LLC
("UBS"), financial advisor to Gambro AB, a wholly owned subsidiary of Parent and
parent of Gambro Healthcare ("Gambro"), forwarded to the Company certain
materials concerning a possible transaction structure. On September 25, 1996,
Mr. Thiry met with representatives of Parent and Gambro, including Berthold
Lindqvist, President and Chief Executive Officer of Gambro, Mikael Lilius,
President and Chief Executive Officer of Parent, and Mr. Wahlstrom to discuss a
potential acquisition of the Company by Parent.
On October 6, 1996, several representatives of Goldman Sachs met with
members of senior management of the Company to discuss potential transactions
and acquirors. On October 16, 1996, Mr. Thiry sent a letter to Parent and
Purchaser regarding certain structural issues involved in a potential
acquisition of the Company by Parent.
On November 1, 1996, Mr. Thiry met with representatives of Parent and Gambro
to discuss outstanding structural issues and the feasibility of combining the
Company and Gambro Healthcare.
During November 1996, Mr. Thiry had discussions with another company
regarding a potential strategic relationship with the Company. Also during
November 1996, Goldman Sachs, on behalf of the Company, had discussions with
another company regarding a potential strategic relationship with the Company.
On November 18, 1996, the Company formally engaged Goldman Sachs to serve as
its financial advisor in connection with a potential acquisition of the Company
by a third party.
On November 21, 1996, Mr. Wahlstrom, Herbert S. Lawson, Chief Financial
Officer of Gambro Healthcare, Mr. David Barry, President of the Vivra Renal Care
division (the division primarily responsible for the Dialysis Business), and Ms.
Zumwalt met in Colorado, together with representatives of Goldman Sachs and UBS,
to discuss certain financial data concerning Gambro and the Company, including
the operating synergies that might be expected from a transaction.
On November 25, 1996, representatives of UBS and Morgan Stanley & Co.
Limited ("Morgan Stanley"), financial advisor to Parent, met with
representatives of Goldman Sachs and presented an initial proposal for the
acquisition of the Company. The Company responded that the proposed terms were
below the Company's expectations. Mr. Thiry confirmed that response during a
subsequent telephone conversation. During December, the Company advised Gambro
that the Company would shift its focus to consideration of a transaction
involving the sale of all or part of VSP (the "VSP Sale").
During December 1996, the Company had discussions with one company regarding
a potential strategic relationship with the Company. Also during December 1996,
Ms. Zumwalt met with representatives of a potential acquiror in connection with
the VSP Sale.
During February 1997, the Company had discussions with two companies
regarding potential strategic relationships with the Company. On February 5,
1997, Mr. Lindqvist sent a letter to the Company indicating that Gambro would be
prepared to make an offer to acquire all the Shares for cash, or alternatively
to acquire the Company's Dialysis Business. Mr. Lilius sent a letter
contemporaneously to the Company expressing Parent's support for Gambro's
proposal.
On February 7, 1997, the Company's Board of Directors held a telephonic
meeting to review the history of the discussions to date with Parent and Gambro
and to discuss in detail Gambro's letter. The Board of Directors requested
members of senior management and Goldman Sachs to contact Parent and its
financial advisor to better understand and evaluate the terms set forth in the
letter.
On February 21, 1997, Mr. Lindqvist sent Mr. Thiry another letter
reiterating Gambro's interest in the transaction with the Company. On the same
day, the Company's Board of Directors held a telephonic meeting to discuss the
status of the ongoing discussions with Parent and Gambro. During such telephonic
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meeting, the Board of Directors named Mr. Thiry, Ms. Zumwalt and John M. Nehra,
a director of the Company, to a committee to consider the acquisition of the
Company by Gambro and Parent. On February 27, 1997, Mr. Lindqvist sent a letter
to Mr. Thiry and the Company's Board of Directors proposing to acquire only the
Company's renal care business.
On March 7, 1997, the Company's Board of Directors met to discuss Gambro's
offer and the status of ongoing discussions with one additional company
regarding a potential strategic relationship with the Company.
On March 21, 1997, the Company's Board of Directors held a telephonic
meeting to receive a report from Mr. Thiry, Ms. Zumwalt and Mr. Nehra regarding
the February 5, 1997 letter. The Board of Directors also established a Special
Committee consisting of Mr. Nehra and Richard B. Fontaine, a director of the
Company (the "Special Committee"), for the purposes of investigating
alternatives available to the Company regarding VSP, including a possible sale
of VSP.
On April 2, 1997, representatives of the Company, including Mr. Nehra, and
Goldman Sachs met with representatives of Parent, Gambro, UBS and Morgan Stanley
to discuss a possible transaction. The conversation initially centered around
the acquisition by Gambro of all the Shares for cash and later focused on the
purchase by Gambro of the Dialysis Business.
On April 6, 1997, Mr. Nehra, on behalf of the Special Committee, during a
telephone conversation with Messrs. Lilius, Lindqvist and Wahlstrom, indicated
that the Special Committee had met and was interested in moving forward on a
cash tender offer transaction for the Company's Dialysis Business. Mr. Nehra
indicated that it would be appropriate for representatives of Parent to conduct
a due diligence review of the Company's business.
On April 8, 1997, several representatives of Parent and Gambro Healthcare,
together with representatives of Shearman & Sterling, representatives of UBS and
Morgan Stanley met with the Special Committee, together with representatives of
Brobeck, Phleger & Harrison LLP and representatives of Goldman Sachs to organize
legal and operational due diligence and to discuss the process and structure for
the VSP Sale. During April 1997, the Company held ongoing discussions with a
number of companies concerning the VSP Sale.
From April 10, 1997 through April 24 1997, several representatives of Parent
and Gambro conducted a due diligence review of the Company. These
representatives met at length with the Company's executive officers concerning
the Company's historical and projected financial data. Certain of these meetings
also included a representative of Goldman Sachs. The representatives of Parent
and Gambro also reviewed numerous documents concerning the Company's business,
financial results and financial outlook, as well as the Company's standard
operating policies and procedures and related data.
On April 22, 1997, representatives of Brobeck, Phleger & Harrison LLP and
Shearman & Sterling met in Washington, D.C. to negotiate the terms of the merger
aggreement relating to the proposed transaction. On April 24, 1997, Brobeck,
Phleger & Harrison LLP and Shearman & Sterling met again in New York to continue
such negotiations.
On April 25, 1997, representatives of Parent and Gambro conducted an
additional due diligence meeting to obtain an update on due diligence matters,
recent financial results, updated financial projections and the status of the
VSP Sale and the interrelationships between the Company and VSP following such
VSP Sale.
On April 26, 1997, the Company's Board of Directors held a telephonic
meeting to discuss the continuing negotiations and current terms of the proposed
transaction with Parent and Gambro. On April 29, 1997, the parties and their
respective representatives, including Mr. Nehra and Mr. Fontaine on behalf of
the Company, met in Chicago to further negotiate the terms and conditions of the
Offer, the Merger and the Merger Agreement.
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Representatives of Parent, Gambro and Purchaser and Shearman & Sterling met
with representatives of the Company and Brobeck, Phleger & Harrison LLP on May
4, 1997 and May 5, 1997 to finalize negotiations of the terms and conditions of
the Offer, the Merger and the Merger Agreement.
On May 4, 1997 and May 5, 1997, the Board of Directors held a special
meeting to consider the acquisition proposal submitted by Purchaser. All of the
Company's directors participated in the meeting. At the meeting, the Board of
Directors reviewed the Merger Agreement, the Offer and the Merger with the
Company's executive officers, outside legal counsel and representatives of
Goldman Sachs. The Board of Directors heard presentations by its legal counsel
with respect to the terms of the proposed Offer and Merger and by
representatives of Goldman Sachs with respect to the financial terms of the
proposed Offer and the Merger. At the conclusion of their presentation,
representatives of Goldman Sachs delivered their oral opinion to the Board of
Directors (subsequently confirmed in writing) that, as of such date, the
consideration proposed to be received by the holders of the Shares in the Offer
and in the Merger is fair to the holders of the Shares.
Based upon such discussions, presentations and opinion, the Board of
Directors unanimously (i) approved the Offer, the Merger and the execution of
the Merger Agreement substantially in the form presented to it, and (ii)
recommended that the Company's stockholders accept the Offer and tender their
Shares and approve the Merger and the Merger Agreement. On May 5, 1997,
representatives of the Company, Parent and Purchaser signed the Merger Agreement
and issued press releases to such effect.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS IN APPROVING THE OFFER
At the meeting on May 4, 1997, the Board of Directors of the Company
unanimously (i) approved the Merger Agreement, the Offer and the Merger, (ii)
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the Company and its stockholders and (iii) resolved to recommend
that the Company's stockholders accept the Offer and tender their Shares
pursuant to the Offer.
In arriving at its decision to approve the Merger Agreement, the Offer and
the Merger and to recommend that the Company's stockholders accept the Offer,
the Board of Directors considered, among other things: (i) the financial and
other terms and conditions of the Offer, the Merger and the Merger Agreement;
(ii) the results of the effort that the Company's management and its financial
advisors made to identify and select potential strategic partners which
management believed would have a high level of interest in entering into a
strategic combination with the Company; (iii) the fact that the Per Share Amount
represented a premium of approximately 38 percent over the average closing price
of $25.80 per Share as reported on the New York Stock Exchange over the last 20
trading days prior to the date the Board of Directors authorized and approved
the Merger Agreement, the Offer and the Merger; (iv) the structure of the
transaction which is designed, among other things, to result in receipt by the
holders of Shares at the earliest practicable time of the consideration to be
paid in the Offer and the fact that the consideration to be paid in the Offer
and the Merger is the same; (v) the recent historical market prices of the
Shares; (vi) the Board of Directors' knowledge of the financial condition,
results of operations, business, prospects, properties, assets and earnings of
the Company; (vii) the effect of the Offer and the Merger on the Company's
relationships with its employees and physicians and payors; (viii) the
likelihood that the proposed Merger would be consummated, including a
consideration of all of the conditions to the Offer; (ix) the advantages in a
competitive environment of strategically aligning with a large, well-capitalized
company such as Parent; (x) the fact that pursuant to the Merger Agreement, the
Company was not prohibited from responding to any unsolicited Superior Proposal
to acquire more than 50 percent of the combined voting power of the Shares then
outstanding or all or substantially all the assets of the Company, to the extent
that the Board of Directors of the Company determined in good faith, after
receiving advice from outside legal counsel, that it would have been necessary
to do so in accordance with its fiduciary duties to the Company's stockholders
under applicable law, and that, under such circumstances, the Company would have
been entitled to enter into a definitive agreement with respect to such Superior
Proposal upon payment of the Termination Fee and the reimbursement of Parent's,
Purchaser's
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and their respective stockholders' and affiliates' out-of-pocket expenses and
fees up to $4,000,000 in the aggregate; and (xi) the opinion of Goldman Sachs
presented at the meeting of the Board of Directors held on May 4, 1997 and May
5, 1997, to the effect that, as of such date, the $35.62 per Share to be
received by the holders of Shares pursuant to the Merger Agreement is fair to
such stockholders. The opinion of Goldman Sachs contains a description of the
factors considered, the assumptions made and the scope of review undertaken by
Goldman Sachs in rendering its opinion. The full text of the opinion of Goldman
Sachs, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with such opinion, is filed as Exhibit
(a)(4) to this Schedule 14D-9, is incorporated herein by reference in its
entirety, and is also attached hereto. Stockholders are urged to read such
opinion in its entirety.
The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Merger Agreement, the Offer and the
Merger, determined that the historical results of operations and future
prospects of the Company are adequately reflected in the consideration to be
received by holders of the Shares in the Offer and the Merger. In addition, the
Board of Directors considered the possibility that, in the event the Offer but
not the Merger is consummated, the number of stockholders could be reduced,
which could adversely affect the liquidity and market value of the Shares.
In light of all the factors set forth above, the Board of Directors approved
the Merger Agreement, the Offer and the Merger. In view of the variety of
factors considered in connection with its evaluation of the Merger Agreement,
the Offer and the Merger, the Board of Directors did not assign relative weights
to the specific factors considered in reaching its decision. Rather, the Board
of Directors based their determination and recommendation on the totality of the
information presented to and considered by it.
It is expected that if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an on-going business. However, the Company may, under
these circumstances, continue to explore other possible methods of maximizing
stockholder value.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
In connection with the Offer, the Merger and other matters arising in
connection therewith, Goldman Sachs has been retained as the exclusive financial
advisor to the Company. Pursuant to a letter agreement, dated November 18, 1996,
between the Company and Goldman Sachs, the Company has agreed to pay Goldman
Sachs a fee of approximately $9,100,000 for acting as financial advisor in the
event that 50 percent or more of the outstanding Shares are acquired pursuant to
the Offer. The Company has also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses incurred in connection with rendering
financial advisory services, including reasonable fees and disbursements of its
attorneys. The Company has agreed to indemnify Goldman Sachs and its partners,
directors, employees, controlling persons (if any) and affiliates for any and
all losses, claims, damages or liabilities to which any such person may be
subjected arising out of or related to the engagement of Goldman Sachs as
financial advisor.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person or
class of persons to make solicitations or recommendations to the stockholders of
the Company on the Company's behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected by
the Company or, to the best of the Company's knowledge, by any of its executive
officers, directors, affiliates or subsidiaries.
16
<PAGE>
(b) To the best of the Company's knowledge, all directors and executive
officers of the Company presently intend to tender, pursuant to the Offer, all
Shares beneficially owned by them, except for those Shares, if any, held by such
persons which, if tendered, could cause such persons to incur liability under
the provisions of Section 16(b) of the Exchange Act and except for those Shares,
if any, underlying stock options held by such persons. The foregoing does not
include any Shares over which, or with respect to which, any such executive
officer, director, or affiliate acts in a fiduciary or representative capacity
or is subject to the instructions of a third party with respect to such tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, to the knowledge of the
Company, no negotiation is being undertaken or is under way by the Company in
response to the Offer which relates to or would result in: (1) an extraordinary
transaction, such as a merger or reorganization involving the Company or any
subsidiary thereof; (2) a purchase, sale or transfer of a material amount of
assets by the Company or any subsidiary thereof; (3) a tender offer for or other
acquisition of securities by or of the Company; or (4) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as set forth in this Schedule 14D-9, there is no transaction,
board resolution, agreement in principle, or signed contract in response to the
Offer which relates to or would result in one or more of the matters referred to
in Item 7(a)(1), (2), (3) or (4).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The information contained in all of the Exhibits referred to in Item 9 below
is incorporated herein by reference in its entirety.
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.
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to stockholders.
** To be filed by Amendment.
17
<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 9, 1997
18
<PAGE>
SCHEDULE I
VIVRA INCORPORATED
1850 GATEWAY DRIVE, SUITE 500
SAN MATEO, CALIFORNIA 94404
(415) 577-5700
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED,
AND RULE 14F-1 PROMULGATED THEREUNDER
------------------------
This Information Statement is being mailed on or about May 9, 1997 as a part
of the Solicitation/ Recommendation Statement of the Company on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about May 5, 1997. You are receiving this Information Statement
in connection with the possible election of persons designated by the Purchaser
to a majority of the seats on the Company's Board of Directors. The Merger
Agreement requires the Company, at the request of Purchaser, to take all action
necessary to cause Purchaser Designees (as hereinafter defined) to be elected to
the Board of Directors under the circumstances described therein. This
Information Statement is required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. See "Board of Directors and Executive Officers --
Right to Designate Directors; Purchaser Designees" below. You are urged to read
this Information Statement carefully. You are not, however, required to take any
action in this regard.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on May 9,
1997. The Offer is scheduled to expire at 12:00 midnight, New York City time, on
June 6, 1997, unless the Offer is extended in accordance with the terms of the
Merger Agreement.
The information contained in this Information Statement concerning Parent,
Purchaser and the Purchaser Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
Each Share has one vote. As of the close of business on May 5, 1997, there
were 41,991,547 Shares issued and outstanding, which is the only class of voting
securities of the Company outstanding having a right to vote for the election of
directors, each share of which entities its record holder to one vote. The Board
of Directors currently consists of eight members, and there are currently no
vacancies on the Board of Directors. Following the 1997 Annual Meeting, the
Board of Directors will consist of six members, and there are expected to be no
vacancies on the Board of Directors immediately following such meeting. Each
director holds office until such director's successor is elected and qualified
or until such director's earlier resignation, death or removal.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
BOARD REPRESENTATION BY PURCHASER. Pursuant to the Merger Agreement, the
Company agreed that, promptly upon the purchase by Purchaser of Shares pursuant
to the Offer, and from time to time thereafter, Purchaser shall be entitled to
designate up to such number of directors (the "Purchaser Designees"), rounded up
to the next whole number, on the Board of Directors as shall give Purchaser
I-1
<PAGE>
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. In furtherance thereof, the Company agreed that at such time it
shall promptly take all actions necessary to cause the Purchaser Designees to be
elected as directors of the Company, including increasing the size of the Board
of Directors or securing the resignations of its incumbent directors, or both.
The Merger Agreement further provides that at such times, the Company shall,
upon the written request of Purchaser, 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 (i) each
committee of the Board of Directors, (ii) each board of directors of each
domestic Dialysis Subsidiary of the Company 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
(i) the time Purchaser acquires a majority of the then outstanding Shares on a
fully diluted basis and (ii) 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 do not stand for re-election at the 1997 Annual Meeting.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Purchaser of a majority of the Shares outstanding on a
fully diluted basis pursuant to the Offer, which purchase cannot be earlier than
12:00 midnight on June 6, 1997 and that, upon assuming office, the Purchaser
Designees will thereafter constitute at least a majority of the Board of
Directors. To the extent the Company's Board of Directors will consist of
persons who are not Purchaser Designees, the remainder of the Board of Directors
is expected to consist of those persons who are currently directors of the
Company who have not resigned.
As of the date of this Information Statement, Purchaser has not determined
who will be the Purchaser Designees. However, the Purchaser Designees shall be
selected from among the directors and executive officers of Parent or Purchaser.
Certain information regarding the list of candidates as Purchaser Designees is
contained in Schedule A annexed hereto.
None of the persons from among whom the Purchaser Designees will be selected
or their associates is a director of, or holds any position with, the Company.
To the best knowledge of the Company, except as set forth on Schedule A annexed
hereto, none of the Purchaser Designees or their associates beneficially owns
any equity securities, or rights to acquire any equity securities, of the
Company or has been involved in any transactions with the Company or any of its
directors or executive officers that are required to be disclosed pursuant to
the rules and regulations of the Commission.
DIRECTORS OF THE COMPANY
The members of the Board of Directors of the Company are classified into
three classes, one of which is elected at each Annual Meeting of Stockholders to
hold office for a three-year term and until successors of such class have been
elected and qualified. The following table sets forth, as of May 9, 1997, as to
each
I-2
<PAGE>
current director of the Company, his or her age and principal occupation and
business experience and the period during which each has served as a director of
the Company.
<TABLE>
<CAPTION>
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 1997
1992; 1988-1992, Senior Vice President of
CR&R Incorporated, a waste management
company; 1984-1988, Vice President, Business
Development of Caremark, Inc., a health care
company, neither of which corporations is
affiliated with the Company.
Stephen G. Pagliuca................. 41 Managing General Partner of Information 1992 1998
Partners, a venture capital firm since 1989;
1986-1989, Vice President of Bain & Company,
a management consulting company, neither of
which entities is affiliated with the
Company.
Kent J. Thiry....................... 41 President and Chief Executive Officer of the 1991 1998
Company since September 1992; April-August
1992, President and Co-Chief Executive
Officer of the Company; September 1991-March
1992, President and Chief Operating Officer
of the Company; 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 two
percent of the Common Stock.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
OCCUPATION AND CONTINUOUSLY TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
- ------------------------------------ --- --------------------------------------------- --------------- -----------
<S> <C> <C> <C> <C>
LeAnne M. Zumwalt................... 38 Chief Financial Officer of the Company since 1994 1998
May 1996 and Treasurer and Secretary since
March 1995; August 1995 through May 1996,
Executive Vice President of the Company;
November 1993-1995, Vice President, Finance
of the Company; joined the Company in 1991;
prior thereto Audit Senior Manager with Ernst
& Young.
Alan R. Hoops....................... 48 Chief Executive Officer and Director of 1995 1999
PacifiCare Health Systems, a healthcare
company which is not affiliated with the
Company, since 1993; 1991-1993, Chief
Operating Officer of PacifiCare Health
Systems.
David L. Lowe....................... 37 Chairman and Chief Executive Officer of ADAC 1995 1999
Laboratories, Inc., a medical imaging and
healthcare information company, which is not
affiliated with the Company, since 1994;
1992-1994, Chief Executive Officer of ADAC
Laboratories, Inc. and 1988-1994 President of
ADAC Laboratories, Inc.
John M. Nehra....................... 48 General Partner of New Enterprise Associates, 1989 1999
a venture capital partnership since December
1993; Managing General Partner of Catalyst
Ventures L.P., a venture capital partnership
since 1989; 1983-1989, Managing Director of
Alex. Brown & Sons, Inc., an investment
banking firm, responsible for its Capital
Markets Group, including health care
corporate finance, neither of which entities
is affiliated with the Company.
</TABLE>
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended November 30, 1996, the Board of Directors met
seven times. All of the Company's directors attended at least 75 percent of the
scheduled Board of Directors meetings and meetings held by committees of the
Board of Directors of which they were members. In addition to attending Board of
Directors and committee meetings, the directors of the Company meet their
responsibilities through communication with the Chief Executive Officer and
other members of management on matters affecting the Company.
The Audit Committee currently consists of Stephen G. Pagliuca, Chair, John
M. Nehra and David G. Connor, M.D. The Audit Committee met once in fiscal 1996.
The Audit 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
I-4
<PAGE>
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. The Compensation Committee met three
times in fiscal 1996. The Compensation Committee reviews and recommends to the
Board of Directors salary and incentive compensation for the Chief Executive
Officer, including bonus, stock options and restricted stock; 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 Company's 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. The Governance Committee met once in fiscal 1996. Its
purpose is to create policies for and make recommendations to the Board of
Directors regarding the organization and structure of the Board of Directors;
the role and effectiveness of the Board of Directors and each of the Board of
Directors' committees in the Company's corporate governance process; and the
qualifications of and candidates for directorships.
The Clinical Quality Committee currently consists of David L. Lowe, Chair,
and David G. Connor, M.D. In fiscal 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 the improvement of clinical care and review and measure outcomes of
care in comparison to medical guidelines and industry standards.
DIRECTOR REMUNERATION
Those directors who are not employed by the Company receive a fee of $1,500
for each Board of Directors 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 and fiscal 1997, 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 in 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 in restricted stock for the Chair of the Governance
Committee, with cash 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 in restricted stock for the Chair of the Clinical Quality
Committee, with cash 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 receives cash fees of $500 for each meeting attended
telephonically, except that the Chair of the Governance Committee receives cash
fees of $1,500 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 at the 1997 Annual Meeting, 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.
I-5
<PAGE>
During 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 the fair market value of such shares on the date of grant as
follows:
<TABLE>
<CAPTION>
VIVRA ASTHMA &
ALLERGY CAREAMERICA VIVRA HEALTH VIVRA SPECIALTY
------------------------- ADVANTAGE, INC. PARTNERS, INC.
STRIKE ---------------------------- ---------------------------
DIRECTOR NAME # OF OPTIONS PRICE # OF OPTIONS STRIKE PRICE # OF OPTIONS STRIKE PRICE
- ---------------------------------------- ------------ ----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <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
</TABLE>
- ------------------------
* The subsidiary options granted to each of Dr. Conner, Mr. Fontaine, Mr.
Hoops, Mr. Lowe, Mr. Nehra and Mr. Pagliuca will terminate upon the closing
of the Specialty Merger Transaction without any payment being made in
connection with such termination.
(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 at $1.00 per
share.
No other compensation is paid to the nonemployee members of the Board of
Directors with respect to their service on the Board of Directors.
EXECUTIVE OFFICERS OF THE COMPANY
The identity of the current executive officers of the Company (excluding
those executive officers who are directors, as discussed in the section above
entitled "Directors of the Company") and certain biographical information is set
forth below.
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME AGE TITLE BUSINESS EXPERIENCE
- -------------------------------------- --- -------------------- ---------------------------------------------
<S> <C> <C> <C>
David P. Barry........................ 38 President of Vivra Appointed March 1996. May 1992, Vice
Renal Care, Inc. President; August 1995, President, VRC,
("VRC") 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, District Manager for California
Homedco, an infusion therapy company, since
1990.
</TABLE>
I-6
<PAGE>
<TABLE>
<CAPTION>
PERIOD OF SERVICE AND
NAME AGE TITLE BUSINESS EXPERIENCE
- -------------------------------------- --- -------------------- ---------------------------------------------
<S> <C> <C> <C>
Terry Gilpin.......................... 49 Executive Vice Appointed September 1996. 1995, Vice
President of VRC President of VRC; December 1994, Vice
President of Nephrology Services Group, a
subsidiary of the Company; 1993-1994, Chief
Operating Officer 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 November
Finance of VRC 1993. Prior thereto, Director of Finance for
the Company.
Charles McAllister, M.D............... 49 Vice President, Appointed Vice President, Clinical Affairs at
Clinical Affairs of VRC 1992; Medical Director, VRC of Clearwater
VRC and Palm Harbor, Florida, since 1987; Private
Medical Practice, Nephrology--Clearwater,
Florida, with specialty in dialysis, clinical
Nephrology and transplantation from 1988
-Present.
Richard Pozen, M.D.................... 49 Vice President, Appointed 1996. 1996, Vice President, Vivra
Medical Director Heart 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.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act, requires the Company's directors,
executive officers and persons who own more than 10 percent of a registered
class of the Company's equity securities to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than 10
percent beneficial owners are required by Commission regulations to furnish the
Company with copies of all Section 16(a) reports 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 November 30, 1996, 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 1996, except Messrs. Fontaine,
Pagliuca, Nehra, Lowe, Holcomb, Bilt and
I-7
<PAGE>
Barry and Dr. Connor each of whom filed his or her Form 5 for fiscal 1996
approximately two months late with respect to the grant of Stock and/or options
pursuant to the Revised 1989 Stock Incentive Plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid by
the Company during fiscal 1996, 1995 and 1994 to the Company's Chief Executive
Officer and the four other executive officers of the Company whose total
compensation during fiscal 1996 exceeded $100,000 (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
UNDERLYING
-------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#)(1) COMPENSATION($)
- ---------------------------------------------- --------- --------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Kent J. Thiry................................. 1996 275,000 625,000(2) -- 16,733(3)
President and Chief Executive Officer 1995 250,000 275,000 150,000 24,546(3)
1994 225,000 200,000 150,000 17,072(3)
LeAnne M. Zumwalt............................. 1996 160,625 215,000 -- 119,183(4)
Chief Financial Officer, Secretary and 1995 124,200 75,000 84,000 8,956(3)
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 --
</TABLE>
- ------------------------
(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 of Director approval, because the
Company's earnings per share as of that date was in excess of $1.25, which
represented a 17.5 percent compound annual growth rate over earnings per
share reported for fiscal 1992.
(3) Includes share of Company's contribution to the Company's Profit Sharing
Plan and/or car allowance.
(4) Includes share of Company's contribution to the Company's Profit Sharing
Plan, a bonus payment made with respect to Ms. Zumwalt's loan with the
Company and moving cost reimbursements related to Ms. Zumwalt's relocation
from Aliso Viejo, California.
I-8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in fiscal 1996. No
stock appreciation rights were granted during fiscal 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK
NUMBER OF OPTIONS/SARS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS/SARS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED YEAR ($/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........................ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Vests 20 percent on August 29, 1996 and 20 percent each year on August 29,
1997 through 2000 and 100% in the event of a change of control. Consummation
of the Offer will constitute a change of control for purposes of these
option grants.
(2) Vests 20 percent on November 21, 1996 and 20 percent each year on November
21, 1997 through 2000 and 100% in the event of a change of control.
Consummation of the Offer will constitute a change of control for purposes
of these option grants.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the Named
Executive Officers regarding the exercise of options and/or limited SARs during
the last fiscal year and unexercised options and limited SARs held as of
November 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR-END YEAR-END($)(1)
ACQUIRED VALUE -------------------------- -------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kent J. Thiry............................ 227,000 4,886,363 452,500 232,500 7,654,862 2,313,750
LeAnne M. Zumwalt........................ 39,638 627,314 28,350 78,450 289,429 706,575
David P. Barry........................... 81,600 1,363,788 52,650 182,250 307,525 1,025,825
Thomas O. Usilton........................ 10,100 139,479 1,000 21,900 8,833 217,251
Jacob Lazarovic, M.D..................... -- -- 16,500 24,750 152,625 228,937
</TABLE>
- ------------------------
(1) The closing price of the Company's Common Stock on the New York Stock
Exchange on November 30, 1996 was $30.75 per share.
SUBSIDIARY OPTIONS
The Company has granted options to employees and other individuals in
various operating subsidiaries. The purpose of such option grants is to motivate
individuals directly responsible for each such 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 on the date of grant
typically with a term of the earlier of five years or a period after death,
disability or termination of employment. The subsidiary may also compel the
exercise
I-9
<PAGE>
of options under certain circumstances. The options generally vest over a
four-year term in equal annual installments. All of the subsidiary options were
granted at exercise prices in excess of the Per Share Amount. Option holders are
also required to be bound by the terms of a stockholders' agreement (the
"Stockholders' Agreement"). The Stockholders' Agreement contains rights of first
refusal on transfers of Stock issued pursuant to the exercise of such option
grants by stockholders, a right of the subsidiary to repurchase such shares (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 the Company's Common Stock. The Stockholders' Agreement also
contains various other rights and restrictions, including "piggyback"
registration rights to include shares in certain registration statements filed
by the subsidiary under the Securities Act of 1933, as amended. As a condition
to the closing of the Specialty Merger Transaction, the Stockholders' Agreements
relating to subsidiaries of VSP will be terminated.
SUBSIDIARY OPTION GRANTS TO DIRECTORS AND EXECUTIVE OFFICERS AS OF 11/30/96
<TABLE>
<CAPTION>
VIVRA
SPECIALTY
VIVRA ASTHMA & VIVRA HEALTH VIVRA HEART PARTNERS,
FISCAL ALLERGY CAREAMERICA ADVANTAGE, INC. SERVICES, INC. INC.
YEAR --------------------- ---------------------- -------------------- ----------
OF # OF STRIKE # OF STRIKE # OF STRIKE # OF
DIRECTOR NAME GRANT OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS
- ------------------------------------ ----------- ---------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Barry*........................ 1995 -- -- -- -- 10,000 $ .50 60,000
1996 -- -- -- -- -- -- 95,000
David G. Connor, M.D.*.............. 1995 -- -- -- -- 2,500 $ .50 --
1996 57,564 $ .5625 9,853 $ .79 -- -- 28,227
Richard B. Fontaine*................ 1996 287,820 $ .5625 49,625 $ .79 -- -- 141,135
Alan R. Hoops*...................... 1996 115,128 $ .5625 19,706 $ .79 -- -- 56,454
Jacob Lazarovic, M.D................ 1995 -- -- -- -- -- -- 270,000
1996 -- -- -- -- -- -- 78,000
10,000
David L. Lowe*...................... 1996 57,564 $ .5625 9,853 $ .79 -- -- 28,227
John M. Nehra*...................... 1995 -- -- -- -- 60,000 $ .50 --
50,000 $ 1.00
1996 287,820 $ .5625 49,625 $ .79 -- -- 141,135
Stephen G. Pagliuca*................ 1996 201,474 $ .5625 34,486 $ .79 -- -- 98,795
Richard Pozen, M.D.................. 1995 -- -- -- -- 220,000 $ .50 --
1996 60,000 $ 1.00 60,000
Kent J. Thiry....................... 1996 2,302,560 $ .5625 197,060 $ .79 -- -- 1,129,080
Thomas O. Usilton................... 1995 -- -- -- -- 30,000 $ 1.00 180,000
1996 20,000 $ .3750 -- -- -- -- 110,000
223,900
LeAnne Zumwalt...................... 1995 -- -- -- -- 15,000 $ .50 70,000
1996 863,460 $ .5625 73,898 $ .79 -- -- 353,405
111,367
<CAPTION>
STRIKE
DIRECTOR NAME PRICE
- ------------------------------------ ---------
<S> <C>
David Barry*........................ $ 1.65
$ 1.65
David G. Connor, M.D.*.............. --
$ 1.65
Richard B. Fontaine*................ $ 1.65
Alan R. Hoops*...................... $ 1.65
Jacob Lazarovic, M.D................ $ 1.65
$ 1.65
$ 2.94
David L. Lowe*...................... $ 1.65
John M. Nehra*...................... --
$ 1.65
Stephen G. Pagliuca*................ $ 1.65
Richard Pozen, M.D.................. --
$ 1.65
Kent J. Thiry....................... $ 1.65
Thomas O. Usilton................... $ 1.65
$ 1.65
$ 2.94
LeAnne Zumwalt...................... $ 1.65
$ 1.65
$ 2.94
</TABLE>
* The subsidiary options granted to each of Mr. Barry, Dr. Conner, Mr.
Fontaine, Mr. Hoops, Mr. Lowe, Mr. Nehra and Mr. Pagliuca will terminate
upon the closing of the Specialty Merger Transaction without any payment
being made in connection with such termination.
I-10
<PAGE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The following is a summary of the material provisions of the employment
agreement between the Company and Mr. Thiry and of employment agreements between
the Company and the other Named Executive Officers, which are substantially
identical to one another except for salary.
Mr. Thiry's employment agreement (which was entered into in March 1996)
provides for an annual salary of at least $275,000 and expires on January 31,
2000. A copy of Mr. Thiry's employment agreement is filed as Exhibit (c)(8) to
the Schedule 14D-9 and is incorporated herein by reference in its entirety. The
Company may award discretionary bonuses under the agreement. 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 of Directors. Mr. Thiry's agreement contains
certain nondisclosure, noncompetition and nonsolicitation covenants. The Company
may terminate Mr. Thiry's employment upon 30 days' written notice (i) upon Mr.
Thiry's breach of the agreement or neglect of his duties; (ii) for cause; or
(iii) upon his permanent disability. The agreement terminates immediately upon
his death. If Mr. Thiry's employment terminates due to his permanent disability
or death, the Company will be obligated to pay him or his estate an amount equal
to one year's salary computed at a rate of at least $300,000. If Mr. Thiry
terminates the agreement 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 fiscal year prior to such
termination. If his 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) continuation of existing or comparable life and
health insurance coverage for three years; (c) acceleration of the
exercisability of stock options and related stock appreciation rights and
vesting of any other stock-related awards; and (d) 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 employment
agreement) becomes the beneficial owner, directly or indirectly, of at least 30
percent 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 consummation of the Offer will constitute a "change of control" under Mr.
Thiry's employment agreement thereby entitling him, upon a termination of
employment within one year following such change in control, to receive a
severance payment of $1,800,000.
The Company also has employment agreements with each of Messrs. Barry,
Usilton, Lazarovic and Ms. Zumwalt that provide for salaries, which are subject
to annual review by the Board of Directors. A copy of Ms. Zumwalt's employment
agreement is filed as Exhibit (c)(9) to the Schedule 14D-9 and is incorporated
herein by reference in its entirety. 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 agreements). Under the agreements, 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' agreements contain nondisclosure,
nonsolicitation and noninterference covenants. If the employment of Mr. Barry or
Ms. Zumwalt 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 a payment equal to 2.99 times the
sum of base compensation being paid at the time of the change of control and the
cumulative bonuses received by the executive in the preceding 24 months, and
acceleration of the exercisability of stock options and related stock
appreciation rights. For
I-11
<PAGE>
purposes of the contracts, a "change in control" means (1) any person becoming
the beneficial owner, directly or indirectly, of at least 20 percent 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; or (3) a change in control required to
be reported pursuant to Item 6(e) of Schedule 14A under the Exchange Act. The
consummation of the Offer will, upon a termination of employment within two
years following such change of control, constitute a "change of control" under
Ms. Zumwalt's employment agreement thereby entitling her to receive a severance
payment of $870,000. In addition, Mr. Barry and Ms. Zumwalt will receive up to
$2,880,000 (plus a tax gross-up not to exceed approximately $1,344,000) and
$1,920,000 (plus a tax gross-up not to exceed approximately $1,344,000),
respectively, pursuant to the Retention Arrangements. In addition, Mr. Terry
Gilpin, Mr. Gregory Holcomb, Dr. Charles McAllister and Mr. Thomas O. Usilton
will receive $650,000, $250,000, $700,000 and $480,000, respectively, pursuant
to the Retention Arrangements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables show beneficial ownership as of February 28, 1997 of
the Company's Common Stock, $.01 par value, by the directors and executive
officers and the greater than 5% stockholders:
<TABLE>
<CAPTION>
SHARES OWNED PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY CLASS
- ------------------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
David G. Connor, M.D................................................................ 32,097(1) *
Richard B. Fontaine................................................................. 36,818(2) *
Alan R. Hoops....................................................................... 10,124(1) *
David L. Lowe....................................................................... 11,041(3) *
John M. Nehra....................................................................... 25,644(4) *
Stephen G. Pagliuca................................................................. 26,394(5) *
Kent J. Thiry....................................................................... 452,500(1) 1.1%
David P. Barry...................................................................... 52,650(1) *
LeAnne M. Zumwalt................................................................... 28,351(6) *
Thomas O. Usilton................................................................... 1,000(1) *
Putnam Investments, Inc.(7)......................................................... 5,163,405(8) 12.9%
One Post Office Square
Boston, MA 02109
RCM Capital Management(9)........................................................... 3,764,250(10) 9.3%
RCM Limited, L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, CA 94111
Nichols Company, Inc................................................................ 2,385,194(11) 6.0%
700 North Water Street
Milwaukee, WI 53202
All directors and executive officers as a group (14 persons)........................ 690,644(12) 1.7%
</TABLE>
- ------------------------
* Denotes ownership less than 1% of the outstanding shares of Common Stock.
(1) All shares are subject to options which are currently exercisable.
(2) Includes 31,310 shares subject to options which are currently exercisable.
(3) Includes 10,874 shares subject to options which are currently exercisable.
(4) Includes 25,310 shares subject to options which are currently exercisable.
(5) Includes 26,060 shares subject to options which are currently exercisable.
(6) Includes 28,350 shares subject to options which are currently exercisable.
I-12
<PAGE>
(7) 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 percent 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.
(8) Shared voting and investment power, 98,500 and 5,163,405 shares,
respectively.
(9) 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 owned by RCM Capital management, L.L.C.
(10) Sole investment power.
(11) Sole voting and investment power, 2,455,950 and 3,661,250 shares,
respectively; shared investment power, 103,000 shares.
(12) Includes 802,015 shares subject to options which are currently exercisable
or will become exercisable within 60 days.
CERTAIN TRANSACTIONS
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 percent. 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.
During the first quarter of 1997, the Board of Directors established the
Special Committee consisting of John M. Nehra, Chair and Richard B. Fontaine,
Member. The Special Committee, working with Goldman Sachs, designed and managed
the process which led to the Merger Agreement and the Specialty Merger
Agreement. The Committee also contacted various parties which expressed interest
in the Company or VSP and ultimately negotiated the terms of the Merger
Agreement, the Offer and the Specialty Merger Agreement. In consideration of the
substantial efforts of the Special Committee, the Board of Directors authorized
payments to be made to Mr. Nehra and Mr. Fontaine in amounts equal to $466,667
and $233,333, respectively. In addition, Mr. Nehra and Mr. Fontaine are also
entitled to approximately $73,500 and $60,000, respectively, for cash fees to be
received for attending meetings of the Special Committee in person or
telephonically and the reimbursement of out-of-pocket expenses incurred in
attending meetings relating to the objectives of the Special Committee.
I-13
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Vivra Incorporated
at
$35.62 Net Per Share
by
Gambro Healthcare Acquisition Corp.
an indirect wholly owned subsidiary of
Incentive AB
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 6, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) THE EXPIRATION
OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AND (III) THE CONSUMMATION OF THE SPECIALTY
MERGER TRANSACTION (AS DESCRIBED HEREIN) AND THE RECEIPT BY VIVRA INCORPORATED
(THE "COMPANY") OF CASH PROCEEDS THEREFOR, AFTER PROVIDING FOR ALL APPLICABLE
INCOME TAXES (USING AN ASSUMED INCOME TAX RATE OF 41%), OF NOT LESS THAN
$76,900,000. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS WHICH ARE
CONTAINED IN THIS OFFER TO PURCHASE. SEE "SECTION 15. CERTAIN CONDITIONS OF THE
OFFER".
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $.01 per share (the "Shares"), of the Company
should either (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal and
mail or deliver it together with the certificate(s) evidencing tendered Shares,
and any other required documents, to the Depositary or tender such Shares
pursuant to the procedure for book-entry transfer set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" or (2) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such stockholder. Any stockholder whose Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares".
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
UBS Securities
May 9, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
INTRODUCTION..................................................................................................... 1
1. Terms of the Offer; Expiration Date................................................................... 4
2. Acceptance for Payment and Payment for Shares......................................................... 5
3. Procedures for Accepting the Offer and Tendering Shares............................................... 7
4. Withdrawal Rights..................................................................................... 10
5. Certain Federal Income Tax Consequences............................................................... 11
6. Price Range of Shares; Dividends...................................................................... 12
7. Certain Information Concerning the Company............................................................ 13
8. Certain Information Concerning Purchaser and Parent................................................... 15
9. Effect on Convertible Notes........................................................................... 20
10. Financing of the Offer and the Merger................................................................. 21
11. Background of the Offer; Contacts with the Company; the Merger Agreement and the Specialty Merger
Agreement............................................................................................. 22
12. Purpose of the Offer; Plans for the Company After the Offer and the Merger............................ 33
13. Dividends and Distributions........................................................................... 35
14. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration...... 36
15. Certain Conditions of the Offer....................................................................... 38
16. Certain Legal Matters and Regulatory Approvals........................................................ 40
17. Fees and Expenses..................................................................................... 43
18. Miscellaneous......................................................................................... 44
Schedule I. Directors and Executive Officers of Parent and Purchaser............................................. I-1
</TABLE>
<PAGE>
To the Holders of Common Stock of
Vivra Incorporated:
INTRODUCTION
Gambro Healthcare Acquisition Corp., a Delaware corporation ("Purchaser")
and an indirect wholly owned subsidiary of Incentive AB, a corporation organized
under the laws of Sweden ("Parent"), hereby offers to purchase all outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of Vivra
Incorporated, a Delaware corporation (the "Company"), at a price of $35.62 per
Share (such amount or any greater amount per Share paid pursuant to the Offer
(as defined below), being hereinafter referred to as the "Per Share Amount"),
net to the seller in cash, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
UBS Securities LLC ("UBS"), which is acting as Dealer Manager for the Offer (in
such capacity, the "Dealer Manager"), The Bank of New York (the "Depositary")
and Georgeson & Company Inc. (the "Information Agent") incurred in connection
with the Offer. See "Section 17. Fees and Expenses".
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) THE EXPIRATION
OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AND (III) THE CONSUMMATION OF THE SPECIALTY
MERGER TRANSACTION (AS DESCRIBED HEREIN) AND THE RECEIPT BY THE COMPANY OF CASH
PROCEEDS THEREFOR, AFTER PROVIDING FOR ALL APPLICABLE INCOME TAXES (USING AN
ASSUMED INCOME TAX RATE OF 41%), OF NOT LESS THAN $76,900,000. THE OFFER IS ALSO
SUBJECT TO OTHER TERMS AND CONDITIONS WHICH ARE CONTAINED IN THIS OFFER TO
PURCHASE. SEE "SECTION 15. CERTAIN CONDITIONS OF THE OFFER".
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of May 5, 1997 (the "Merger Agreement") among Parent, Purchaser and the Company.
The Merger Agreement provides that, among other things, as soon as practicable
after the purchase of Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware
("Delaware Law"), Purchaser will be merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue as
the surviving corporation (the "Surviving Corporation") and will become an
indirect wholly owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company or
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company, and other than Shares held by stockholders who shall
have demanded and perfected appraisal rights, if any, under Delaware Law) will
be cancelled and converted automatically into the right to receive $35.62 in
cash, or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Consideration"). The Merger Agreement is more fully
described in "Section 11. Background of the Offer; Contacts with the Company;
the Merger Agreement and the Specialty Merger Agreement".
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of 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, on the Board as will give Purchaser representation on the
Board equal to the product of the number of directors on the Board multiplied by
the percentage that the aggregate number of Shares then beneficially owned by
Purchaser and its affiliates following such
<PAGE>
purchase bears to the total number of Shares then outstanding. In the Merger
Agreement, the Company has agreed to take all actions necessary to cause
Purchaser's designees to be elected as directors of the Company, including
increasing the size of the Board or securing the resignations of incumbent
directors or both.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the stockholders of the Company. See "Section 12.
Purpose of the Offer; Plans for the Company After the Offer and the Merger".
Under the Company's Certificate of Incorporation and Delaware Law, the
affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the Merger. Consequently,
if Purchaser acquires (pursuant to the Offer or otherwise) at least a majority
of the outstanding Shares, Purchaser will have sufficient voting power to
approve and adopt the Merger Agreement and the Merger without the vote of any
other stockholder.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the then outstanding Shares, Purchaser will be able
to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, without a vote of the Company's stockholders. In
such event, Parent, Purchaser and the Company have agreed to take, at the
request of Purchaser, all necessary and appropriate action to cause the Merger
to become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's stockholders. If, however, Purchaser does not
acquire at least 90% of the then outstanding Shares pursuant to the Offer or
otherwise and a vote of the Company's stockholders is required under Delaware
Law, a significantly longer period of time will be required to effect the
Merger. See "Section 12. Purpose of the Offer; Plans for the Company After the
Offer and the Merger".
The Company has advised Purchaser that as of May 5, 1997, 41,991,547 Shares
were issued and outstanding, 2,711,133 Shares were reserved for issuance
pursuant to outstanding stock options granted by the Company to employees and
directors and 4,261,963 Shares were reserved for issuance upon conversion of the
Company's 5% Convertible Subordinated Notes Due 2001 (the "Convertible Notes").
As a result, as of such date, the Minimum Condition would be satisfied if
Purchaser acquired 24,482,322 Shares.
Simultaneously with the execution of the Merger Agreement, the Company
entered into an Agreement and Plan of Reorganization (the "Specialty Merger
Agreement"), dated as of May 5, 1997, by and between VSP Holdings, Inc., a
Delaware corporation ("VSP Purchaser"), VSP Holdings II, Inc., a Delaware
corporation ("VSP Purchaser II"), VSP Acquisition, Inc., a Delaware corporation
and a wholly owned subsidiary of VSP Purchaser ("VSP Merger Sub" and, together
with VSP Purchaser and VSP Purchaser II, the "VSP Purchasers"), Vivra Specialty
Partners, Inc., a Nevada Corporation and a majority owned subsidiary of the
Company ("Specialty Partners"), and the Company. Pursuant to the Specialty
Merger Agreement, the Company will sell its interests in Specialty Partners and
in Vivra Heart Imaging, Inc., a Nevada corporation and a majority owned
subsidiary of the Company ("VHI") to the VSP Purchasers (the "Specialty Merger
Transaction").
Of the Per Share Amount, $1.72 represents the expected net after-tax
proceeds per Share to the Company from the Specialty Merger Transaction. Under
the Specialty Merger Agreement, the gross consideration allocated between
Specialty Partners and VHI will be $84,312,500. Of this amount, the Company
expects to receive sale proceeds of approximately $79,400,000. Assuming both a
pre-tax gain to the Company of approximately $5,400,000 and an income tax rate
of 41%, the Company will incur a tax liability of approximately $2,200,000 in
connection with the Specialty Merger Transaction. The 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. See "Section 15. Conditions of the Offer."
2
<PAGE>
THE OFFER IS NOT BEING MADE FOR (NOR WILL TENDERS BE ACCEPTED OF) ANY OF THE
CONVERTIBLE NOTES. Holders of Convertible Notes who wish to participate in the
Offer must first convert their Convertible Notes into Shares 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"),
and tender the Shares issued upon such conversion pursuant to the Offer. Under
the Indenture, any holder of Convertible Notes may, at his option, convert the
principal amount thereof into that number of Shares obtained by dividing the
principal amount thereof by the conversion price of $37.20 (26.88 shares per
$1,000 principal amount of Convertible Notes), subject to adjustment under
certain circumstances. Holders of Convertible Notes who convert such Convertible
Notes into Shares will have no right under the Indenture to revoke an effective
conversion. Accordingly, if the Offer terminates or expires without the purchase
of Shares or if Shares tendered after conversion by a holder of Convertible
Notes are not purchased for any reason, the converting holder will no longer
have any rights under the Indenture. According to the Indenture, after
consummation of the Merger, each holder of a Convertible Note then outstanding
would be entitled to receive, upon conversion, the consideration receivable upon
consummation of the Merger by the holder of the number of Shares that would have
been deliverable upon conversion of such Convertible Notes immediately prior to
the Merger; or $957.47 per $1,000 principal amount of Convertible Notes.
Subject to the terms and conditions of the Indenture, upon the consummation
of the Offer, the holders of Convertible Notes, will have the right to require
the Company to repurchase their Convertible Notes at a purchase price equal to
the principal amount thereof plus accrued interest (up to and including the date
of repurchase). See "Section 9. Effect on Convertible Notes".
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not withdrawn as permitted by "Section 4. Withdrawal
Rights". The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, June 6, 1997, unless and until Purchaser, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any of the conditions specified in "Section
15. Certain Conditions of the Offer", by giving oral or written notice of such
extension to the Depositary. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of a tendering stockholder to withdraw such stockholder's shares. See
"Section 4. Withdrawal Rights".
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time and from time to time, (i) to delay acceptance for
payment of, or, regardless of whether such Shares were theretofore accepted for
payment, payment for, any Shares pending receipt of any regulatory approval
specified in "Section 16. Certain Legal Matters and Regulatory Approvals", (ii)
to terminate the Offer and not accept for payment any Shares upon the occurrence
of any of the conditions specified in "Section 15. Certain Conditions of the
Offer" and (iii) to waive any condition or otherwise amend the Offer in any
respect, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof. The
Merger Agreement provides that, without the consent of the Company, Purchaser
will not
3
<PAGE>
(i) decrease the price per Share payable pursuant to the Offer, (ii) reduce the
maximum number of Shares to be purchased in the Offer or (iii) impose conditions
to the Offer in addition to those set forth in "Section 15. Certain Conditions
of the Offer". Purchaser acknowledges that (i) Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires
Purchaser to pay the consideration offered or to return the Shares tendered
promptly after the termination or withdrawal of the Offer and (ii) Purchaser may
not delay acceptance for payment of, or payment for (except as provided in
clause (i) of the first sentence of this paragraph), any Shares upon the
occurrence of any of the conditions specified in "Section 15. Certain Conditions
of the Offer" without extending the period of time during which the Offer is
open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to stockholders in
a manner reasonably designed to inform them of such changes) and without
limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules l4d-4(c)
and l4d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all stockholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), Purchaser will
accept for payment, and will pay for, all Shares validly tendered prior to the
Expiration Date and not properly withdrawn promptly after the later to occur of
(i) the Expiration Date, (ii) the expiration or termination of any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and (iii) the satisfaction or waiver of the
conditions to the Offer set forth in "Section 15. Certain Conditions of the
Offer". Subject to applicable rules of the Commission, Purchaser expressly
reserves the right to delay acceptance for payment of, or payment for, Shares
pending receipt of any regulatory approvals specified in "Section 16.
4
<PAGE>
Certain Legal Matters and Regulatory Approvals" or in order to comply, in whole
or in part, with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry
Transfer Facilities") pursuant to the procedures set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares", (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees and (iii) any other documents required under
the Letter of Transmittal.
On May 9, 1997, Parent filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Premerger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York
City time, on May 24, 1997. Prior to the expiration or termination of such
waiting period, the FTC or the Antitrust Division may extend such waiting period
by requesting additional information from Parent with respect to the Offer. If
such a request is made with respect to the purchase of Shares in the Offer, the
waiting period will expire at 11:59 p.m., New York City time, on the tenth
calendar day after substantial compliance by Parent with such a request.
Thereafter, the waiting period may only be extended by court order. The waiting
period under the HSR Act may be terminated prior to its expiration by the FTC
and the Antitrust Division. Parent has requested early termination of the
waiting period, although there can be no assurance that this request will be
granted. See "Section 16. Certain Legal Matters and Regulatory Approvals" for
additional information regarding the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "Section 3. Procedures for Accepting the Offer and Tendering
Shares", such Shares will be credited to an account maintained at such Book-
Entry Transfer Facility), as promptly as practicable following the expiration or
termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-entry
5
<PAGE>
transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) the Share Certificates evidencing tendered Shares must
be received by the Depositary at such address or such Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary (including an Agent's
Message if the tendering stockholder has not delivered a Letter of Transmittal),
in each case prior to the Expiration Date, or (ii) the tendering stockholder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility
to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgement from the participant in such Book-Entry Transfer
Facility tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must, in
any case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. Delivery of documents to a Book-Entry Transfer Facility does
not constitute delivery to the Depositary.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or by a
commercial bank or trust company having an office or correspondent in the United
States (each of the foregoing being referred to as an "Eligible Institution"),
except in cases where Shares are tendered (i) by a registered holder of Shares
who has not completed either the box entitled "Special Payment Instructions" or
the box entitled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. If a Share Certificate is
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or a Share Certificate not accepted
for payment or not tendered is to be returned, to a person other than the
registered holder(s), then the Share Certificate must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear on the Share Certificate, with the signature(s) on
such Share Certificate or stock powers guaranteed by an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to
6
<PAGE>
the Expiration Date, or such stockholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may nevertheless
be tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, is received prior to the
Expiration Date by the Depositary as provided below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by the Letter of Transmittal are received by the Depositary within
three New York Stock Exchange, Inc. ("NYSE") trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity, in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of Purchaser, Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Purchaser's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after May 5,
1997). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such Shares
(and such other Shares and securities) will be revoked without further action,
and no subsequent proxies may be given nor any subsequent written consent
executed by such stockholder (and, if given or executed, will not be deemed to
be effective) with respect thereto. The designees of Purchaser will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement
7
<PAGE>
thereof, by written consent in lieu of any such meeting or otherwise. Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon Purchaser's payment for such Shares, Purchaser must
be able to exercise full voting rights with respect to such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 7, 1997. If
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to accept Shares for payment pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this "Section 4. Withdrawal
Rights". Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "Section 3. Procedures for Accepting the
Offer and Tendering Shares", any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares".
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for U.S.
federal income tax purposes under the Internal Revenue Code of 1986, as amended,
and may also be a taxable transaction under applicable state, local or foreign
tax laws. In general, a stockholder will recognize gain or loss for U.S. federal
income tax purposes
8
<PAGE>
equal to the difference between the amount of cash received in exchange for the
Shares sold and such stockholder's adjusted tax basis in such Shares. Assuming
the Shares constitute capital assets in the hands of the stockholder, such gain
or loss will be capital gain or loss and will be long term capital gain or loss
if the stockholder's holding period exceeds one year.
Legislative proposals have been under consideration that would reduce the
rate of federal income taxation of certain capital gains. Such legislation, if
enacted, might apply only to gain realized on sales occurring after a date
specified in the legislation. It cannot be predicted whether any such
legislation ultimately will be enacted and, if enacted, what its effective date
will be.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO
ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded
principally on the NYSE under the symbol "V". The following table sets forth,
for the quarters indicated, the high and low sales prices per Share on the NYSE
as reported by the Dow Jones News Service.
<TABLE>
<CAPTION>
1995: HIGH LOW
- ---------------------------------------------------------------------- ---------- --------
<S> <C> <C> <C> <C>
First Quarter......................................................... $ 23 59/64 $ 18 1/2
Second Quarter........................................................ 22 11/64 18
Third Quarter......................................................... 22 37/64 17 3/4
Fourth Quarter........................................................ 25 5/8 21 5/64
<CAPTION>
1996:
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter......................................................... $ 30 7/8 $ 24 3/4
Second Quarter........................................................ 35 3/8 27 3/8
Third Quarter......................................................... 33 1/4 27 5/8
Fourth Quarter........................................................ 36 1/8 24 5/8
<CAPTION>
1997:
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter......................................................... $ 31 1/8 $ 24 5/8
Second Quarter (through May 8, 1997).................................. 35 1/4 24 1/2
</TABLE>
Although there is no legal or contractual restriction on the payment of
dividends by the Company, historically the Company has never declared or paid
dividends and has stated that it has no future plans to do so. The Company has
advised Purchaser that if the Offer and the Merger were not to be consummated,
it would expect to continue to retain any future earnings for the development of
its business.
On May 2, 1997, the last full trading day prior to the announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence the
Offer, the closing price per Share as reported on the NYSE was $28 1/4. On May
8, 1997, the last full trading day prior to the commencement of the Offer, the
closing price per Share as reported on the NYSE was $34 3/4.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Neither Purchaser nor Parent
assumes any
9
<PAGE>
responsibility for the accuracy or completeness of the information concerning
the Company furnished by the Company or contained in such documents and records
or for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information but which are
unknown to Purchaser or Parent.
GENERAL. The Company is a Delaware corporation with its principal executive
offices located at 1850 Gateway Drive, Suite 500, San Mateo, California 94404.
According to the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (the "Form 10-K"), the Company is a specialty care company
with a business strategy to compete in specialties/disease states where it can
demonstrably deliver differentiated care to high-cost patient populations. The
Form 10-K states that the Company provides services through its Vivra Renal Care
("VRC") and Vivra Specialty Partners ("VSP") divisions, that VRC is the second
largest provider of dialysis services in the United States and that VSP provides
physician network and disease management services to entities responsible for
coordinating health care for a patient population, principally managed care
organizations.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited consolidated financial statements
contained in the Form 10-K and the unaudited consolidated financial statements
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997 (the "Form 10-Q"). More comprehensive financial information is
included in the Form 10-K, the Form 10-Q and other documents filed by the
Company with the Commission. The financial information that follows is qualified
in its entirety by reference to such reports and other documents, including the
consolidated financial statements and related notes contained therein. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission in the manner set forth below.
10
<PAGE>
VIVRA INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30,
------------------------------------- FEBRUARY 29, FEBRUARY 28,
STATEMENT OF EARNINGS DATA: 1994 1995 1996 1996 1997
----------- ----------- ----------- ------------- -------------
Operating revenues.......................... $ 310,117 $ 380,826 $ 506,590 $ 110,075 $ 158,455
Operating costs............................. 207,779 260,838 360,500 79,110 114,138
General and administrative expense.......... 42,495 50,107 57,775 11,424 17,827
Depreciation expense........................ 9,953 11,280 14,170 3,202 4,550
Interest expense............................ 606 483 3,692 56 2,231
Earnings from continuing operations, before
income taxes.............................. 51,165 63,244 81,060 18,150 21,866
Net earnings from continuing operations..... 30,187 38,599 50,295 11,287 13,685
Net earnings................................ 30,884 38,599 50,295 11,287 13,685
Net earnings per share from continuing
operations................................ $ 0.92 $ 1.03 $ 1.27 $ 0.29 $ 0.34
Average number of common shares (fully
diluted).................................. 32,987 37,350 39,708 39,132 44,709
</TABLE>
<TABLE>
<CAPTION>
AT NOVEMBER 30, AT FEBRUARY
-------------------- 28,
BALANCE SHEET DATA: 1995 1996 1997
--------- --------- ------------
<S> <C> <C> <C>
Current assets.......................................... $ 189,481 $ 294,004 $ 277,349
Total assets............................................ 411,423 655,218 674,288
Working capital......................................... 133,704 214,414 192,750
Current liabilities..................................... 55,777 79,590 84,599
Long term debt - exclusive of current maturities........ 2,185 162,534 162,906
Total stockholders' equity.............................. 345,962 403,228 416,380
</TABLE>
In connection with Parent's review of the Company and in the course of the
negotiations between the Company and Parent described in "Section 11. Background
of the Offer; Contacts with the Company; the Merger Agreement and the Specialty
Merger Agreement", the Company provided Parent with certain business and
financial information which Parent and Purchaser believe is not publicly
available, including, among other things, certain financial forecasts for VRC
prepared by the Company for the Company's 1997 and 1998 fiscal years (the "VRC
Forecasts"). The VRC Forecasts indicate that operating revenues are forecasted
to be $559.8 million in 1997 and $788.5 million in 1998, which reflects an
assumed annual revenue growth rate of 36.1% and 40.9% in 1997 and 1998,
respectively, primarily due to assumed additions of new patients at existing
dialysis centers and assumed acquisitions of new dialysis centers and physician
practice groups. Also, the VRC Forecasts indicate that earnings from continuing
operations before interest and taxes ("EBIT") are forecasted to be $109.2
million in 1997 and $140.0 million in 1998, which reflects an assumed EBIT
margin of 19.5% and 17.8% in 1997 and 1998, respectively. The decrease in such
margin is due primarily to an increase in the number of global capitated
agreements as a percentage of VRC's revenues and additional amortization
resulting from acquisitions.
THE VRC FORECASTS ARE BASED UPON NUMEROUS ESTIMATES AND ASSUMPTIONS ABOUT
COMPLEX ECONOMIC AND OPERATING FACTORS WITH RESPECT TO INDUSTRY PERFORMANCE,
GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS THAT CANNOT BE
PREDICTED ACCURATELY AND THAT ARE SUBJECT TO CONTINGENCIES OVER WHICH NEITHER
THE COMPANY, PARENT NOR PURCHASER HAVE CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS ARE INDICATIVE OF FUTURE PERFORMANCE OR
THAT ACTUAL RESULTS WILL NOT BE MATERIALLY HIGHER OR LOWER THAN THOSE FORECAST.
THE VRC FORECASTS SHOULD NOT BE CONSIDERED A RELIABLE PREDICTOR OF FUTURE
RESULTS, AND THE INFORMATION CONTAINED THEREIN SHOULD NOT BE RELIED UPON AS
SUCH. IN ADDITION, THE VRC FORECASTS WERE NOT PREPARED WITH
11
<PAGE>
A VIEW TO PUBLIC DISCLOSURE OR IN COMPLIANCE WITH THE PUBLISHED GUIDELINES OF
THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS REGARDING FORECASTS OR PROJECTIONS. THE VRC
FORECASTS ARE ONLY BEING PROVIDED BECAUSE SUCH INFORMATION WAS PROVIDED TO
PARENT. NONE OF PARENT, PURCHASER, THE COMPANY OR ANY OTHER PARTY ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS.
ERNST & YOUNG LLP, INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY, HAS
NEITHER EXAMINED, REVIEWED NOR COMPILED THE VRC FORECASTS AND, CONSEQUENTLY,
DOES NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT THERETO.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, or may be obtained from the Commission's Internet
site on the World Wide Web at http:// www.sec.gov. Copies of such materials may
also be obtained by mail, upon payment of the Commission's customary fees, by
writing to its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The information should also be available for inspection at the NYSE, 20
Broad Street, New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser, formerly
HH Acquisition Corp., is a newly incorporated Delaware corporation organized in
connection with the Offer and the Merger and has not carried on any activities
other than in connection with the Offer and the Merger. The principal offices of
Purchaser are located at 1185 Oak Street, Lakewood, Colorado 80215. Purchaser is
an indirect wholly owned subsidiary of Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Parent, Incentive AB (publ), is a corporation organized under the laws of
Sweden. Its principal offices are located at Hamngatan 2, Box 7373, S-10391,
Stockholm, Sweden. Parent is an international industrial group. Operations are
principally conducted in the medical technology, environment, materials handling
and development business areas. In addition, Parent has a substantial equity
interest in (i) ABB AB, which jointly with ABB AG, owns equal shares of ABB ASEA
Brown Boveri Ltd, a leading electrotechnical company with operations in a number
of business areas related to the production, distribution and utilization of
electrical power in electrical power generation, transmission and distribution,
industrial and building systems and rail transportation, and (ii) AB Electrolux,
one of the world's leading manufacturers of household appliances.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser and Parent and certain other information are set forth in
Schedule I hereto.
12
<PAGE>
Parent is not subject to the information reporting requirements of the
Exchange Act, and, accordingly, does not file reports or other information with
the Commission relating to its business, financial condition and other matters.
Set forth below are certain selected consolidated financial information
relating to Parent and its subsidiaries for Parent's last three fiscal years.
The selected consolidated financial information has been prepared in Swedish
kronor in accordance with generally accepted accounting principles in Sweden
("Swedish GAAP"). Swedish GAAP differs in certain significant respects from
generally accepted accounting principles in the United States ("US GAAP"). A
summary of the significant differences between US GAAP and Swedish GAAP is set
forth below. Parent, however, believes that the differences are not material to
a decision by a holder of Shares whether to sell, tender or hold any Shares
because any such differences would not affect the ability of Parent to obtain
sufficient funds to pay for Shares to be acquired pursuant to the Offer and to
repay any funds which have been borrowed for such purpose. The amounts in the
table set forth below are in Swedish kronor unless otherwise indicated. The US
dollar amounts in the table set forth below for the year ended December 31, 1996
and the three months ended March 31, 1997 were determined by translating the
corresponding Swedish kronor amounts into US dollars using the noon buying rate
in New York City for cable transfers in Swedish kronor as certified for customs
purposes by the Federal Reserve Bank of New York on May 7, 1997 (the "Noon
Buying Rate"), which was SEK 7.7505 = $1.00. No representation is made that
Swedish kronor have been, could have been or could be, converted into US dollars
at that or any other rate.
INCENTIVE AB
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(SWEDISH KRONOR IN MILLIONS ("SEK"), EXCEPT WHERE OTHERWISE
INDICATED IN UNITED STATES DOLLARS IN MILLIONS ("$"),
AND EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
-------------------------------------------- ---------------------------------
1994 1995 1996 1996(1) 1996 1997 1997(1)
--------- --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(SEK) (SEK) (SEK) ($) (SEK) (SEK) ($)
INCOME STATEMENT
Revenues..................................... 18,389 24,324 20,220 2,609 5,286 4,783 617
Operating earnings after depreciation........ 2,677 3,239 4,050 523 1,010 678 87
Operating earnings after financial items
incl. associated companies................. 3,832 4,653 5,228 675 1,174 828 107
excl. associated companies................. 2,078 2,624 3,442 444 826 473 61
Net income................................... 2,186 2,431 2,884 372 532 357 46
BALANCE SHEET
Total assets................................. 35,703 32,035 34,696 4,477 39,240 34,947 4,509
Net debt (2)................................. 10,366 6,738 10,324 1,332 -- 9,000 1,161
Shareholders' equity......................... 10,976 12,246 14,581 1,881 12,762 14,932 1,927
PER SHARE AMOUNTS
Shareholders' equity per share............... 161 179 213 27 187 218 28
Net asset value per share (3)................ 253 289 349 45 -- -- --
Dividend per share (4)....................... 8.00 9.00 10.00 1.29 -- -- --
</TABLE>
- ------------------------
(1) Translated, solely for the convenience of the reader at an exchange rate of
SEK 7.7505 = $1.00, the Noon Buying Rate on May 7, 1997.
(2) Not available for the three months ended March 31, 1996 and only available
as an approximation for the three months ended March 31, 1997.
(3) Shareholders' equity per share adjusted for surplus value (after deferred
tax) in exchange-listed shares in ABB AB, AB Electrolux and other associated
companies. Not available on a quarterly basis.
(4) Dividends paid annually.
13
<PAGE>
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN US GAAP AND SWEDISH GAAP. The
following is a summary of certain significant differences in generally accepted
accounting practices in Sweden and the United States with respect to
consolidated financial statements. The summary is not to be regarded as a
complete list of all of the differences between Swedish GAAP and US GAAP and
does not include disclosure differences between Swedish GAAP and US GAAP.
ACCOUNTING FOR PENSIONS. According to Swedish GAAP, pension expenses are, in
general, recognized on the basis of funding requirements. In the United States,
FAS 87 (Employers' Accounting for Pensions) states that future salary increases,
inflation and other factors must be taken into account for computation of the
projected benefit obligation.
DEFERRED TAXES. Under Swedish GAAP, deferred taxes are calculated on untaxed
reserves using the liability method. Certain temporary differences and deferred
tax assets are not recorded. Under US GAAP, a reserve for deferred taxes under
the liability method is required for all temporary differences. Deferred tax
assets may be reported only if it is probable that the tax benefit will be
utilized.
CHANGES IN ACCOUNTING PRINCIPLES. According to Swedish GAAP, the accumulated
effect of changes in accounting principles is reported directly against equity.
According to US GAAP, the accumulated effect of changes in accounting principles
is reported in the income statement.
FOREIGN CURRENCY TRANSLATION. FINANCIAL STATEMENTS OF FOREIGN
SUBSIDIARIES. Swedish GAAP requires that all components of equity to be
classified either as restricted equity (share capital and restricted reserves)
or unrestricted equity. Cumulative currency translation adjustments are included
in restricted reserves or as retained earnings. Under US GAAP, cumulative
currency translation adjustments are required to be stated as a separate item
under stockholders' equity. In addition, assets and liabilities in foreign
currencies which are not designated as and effective as hedges are required to
be translated using the exchange rate at the balance sheet date and the
resulting gains or losses recognized in income.
RECEIVABLES AND PAYABLES IN FOREIGN CURRENCIES. With respect to the
valuation of outstanding forward exchanges contracts covering future flows of
foreign currencies, Swedish GAAP normally requires that provisions for
unrealized losses are made to the extent that such losses exceed unrealized
gains. Unrealized gains in excess of unrealized losses are not credited to
income. Under US GAAP, forward exchange contracts are valued at market price and
gains and losses arising therefrom are included in income.
LEASING. According to Swedish GAAP almost all leases are treated as
operating leases. According to US GAAP leases are treated as either operating or
financial leases.
CONSOLIDATED ACCOUNTS. The consolidated accounts are prepared in accordance
with the purchase method. For Gambro's acquisition of the Hospa Group, however,
the pooling method was used. US GAAP would require purchase accounting for this
acquisition.
GOODWILL. Acquired goodwill is amortized over ten years, or, in the event of
long-term strategic acquisitions, over a maximum of twenty years according to
Swedish GAAP. Under US GAAP, acquired goodwill is amortized over a maximum of
forty years.
Except as described in this Offer to Purchase, (i) none of Purchaser, Parent
nor, to the knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to this Offer to Purchase or any associate or majority-owned
subsidiary of Purchaser, Parent or any of the persons so listed beneficially
owns or has any right to acquire, directly or indirectly, any Shares and (ii)
none of Purchaser, Parent nor, to the knowledge of Purchaser and Parent, any of
the persons or entities referred to above nor any director, executive officer or
subsidiary of any of the foregoing has effected any transaction in the Shares
during the past 60 days.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, none of Purchaser, Parent nor, to the knowledge of
Purchaser and Parent, any of the persons listed in Schedule I to this Offer to
Purchase, has any contract, arrangement, understanding or relationship with
14
<PAGE>
any other person with respect to any securities of the Company, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or voting of such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
or the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, since December 1, 1993, neither Purchaser nor Parent nor, to the best
knowledge of Purchaser and Parent, any of the persons listed on Schedule I
hereto, has had any business relationship or transaction with the Company or any
of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer. Except as set forth in this Offer to Purchase, since December 1, 1993,
there have been no contacts, negotiations or transactions between any of
Purchaser, Parent, or any of their respective subsidiaries or, to the best
knowledge of Purchaser and Parent, any of the persons listed in Schedule I to
this Offer to Purchase, on the one hand, and the Company or its affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
9. EFFECT ON CONVERTIBLE NOTES. The Indenture provides that upon a "Change
of Control" of the Company the holders of the Convertible Notes have the right
to require the Company to purchase their Convertible Notes for 100% of the
principal amount thereof, plus accrued and unpaid interest (up to and including
the date of repurchase). The consummation of the Offer on the terms described
herein will constitute a Change of Control under the Indenture. However, the
consummation of the Offer shall not be deemed to be a Change of Control for
purposes of the Indenture if (i) immediately following the date upon which the
Offer is consummated, the aggregate market value of the Shares, excluding the
Shares beneficially owned by Parent and Purchaser is equal to or greater than
$700,000,000 or (ii) the closing price per share of the Shares for any five
trading days within the period of 10 consecutive trading days ending immediately
after the later of the consummation of the Offer or the public announcement
thereof shall equal or exceed 105% of the conversion price of the Convertible
Notes (currently 105% of $37.20 or $39.06) in effect on each such trading day.
According to the Indenture, within 30 days after the occurrence of such a
Change of Control, the Company will mail a written notice (the "Company Notice")
to the Trustee and to each holder of Convertible Notes and will cause a copy of
such notice to be published in a daily newspaper of national circulation. Such
notice will describe the Change of Control, the repurchase date, repurchase
price and the procedure for the holders to exercise their rights to require the
Company to repurchase their Convertible Notes. The date of repurchase of the
Convertible Notes will be designated by the Company so long as such date is not
less than 45 days nor more than 60 days after the date of the Company Notice.
According to the Form 10-K, at November 30, 1996, $158,545,000 aggregate
principal amount of the Convertible Notes was outstanding. The Offer is not
being made for (nor will tenders be accepted of) any of the Convertible Notes.
Holders of Convertible Notes who wish to participate in the Offer must first
convert their Convertible Notes into Shares in accordance with the terms of the
Indenture, and then tender the Shares issued upon such conversion pursuant to
the Offer. Under the Indenture, any holder of Convertible Notes may, at his
option, convert the principal amount thereof into that number of Shares obtained
by dividing the principal amount thereof by the conversion price of $37.20
(currently 26.88 shares per $1,000 principal amount of Notes), subject to
adjustment under certain circumstances. Holders of Convertible Notes who convert
such Convertible Notes into Shares will have no right under the Indenture to
revoke an effective conversion. Accordingly, if the Offer terminates or expires
without the purchase of any Shares or if any Shares tendered after conversion by
any holder of Convertible Notes are not purchased for any reason, the converting
holders will no longer have any rights under the Indenture.
Under the Indenture, after consummation of a merger, each holder of a
Convertible Note then outstanding would be entitled to receive, upon conversion,
the amount of shares of stock and other securities and property (including cash)
receivable upon such merger by the holder of the number of Shares which would
have been deliverable upon conversion of such Convertible Note immediately prior
15
<PAGE>
to such merger. Accordingly, assuming a conversion price of $37.20 for the
Convertible Notes, each $1,000 principal amount of Convertible Notes would be
convertible into $957.47 upon consummation of the Merger.
The Indenture requires that the Company, or the successor corporation,
execute and deliver to the Trustee, as a condition precedent to any such merger,
a supplemental indenture stating that holders of Convertible Notes shall have
the right to convert such Convertible Notes into the kind and amount of
consideration receivable if they had converted their Convertible Notes
immediately prior to the merger. In addition, the Indenture provides that the
Company may not consolidate with or merge into any corporation unless, among
other things, the acquiror is a US corporation and it expressly assumes (by a
supplemental indenture) the payment of principal and interest on the Convertible
Notes, as well as the Company's covenants under the Indenture.
10. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by Purchaser to consummate the Offer and the Merger, to repurchase the
Convertible Notes and to pay related fees and expenses is estimated to be
approximately $1.8 billion. Purchaser will obtain all of such funds from Parent
and its affiliates, including Gambro AB, a wholly owned subsidiary of Parent
("Gambro"). Gambro will provide to Purchaser to finance the Offer and the Merger
approximately $155 million from the Revolving Credit Facility, dated December
15, 1995 (the "Gambro Credit Facility"), between Gambro, BNP Capital Markets
Limited (as Arranger), certain banks named therein and Banque Nationale de Paris
(as Agent). Parent and Incentive Treasury AB, a subsidiary of Parent, will
provide to Purchaser to finance the Offer and the Merger (i) approximately $129
million from the Multicurrency Revolving Credit Facility, dated as of May 7,
1997 (the "1997 Credit Facility"), between Incentive Treasury AB (as Borrower),
Parent (as Guarantor) and Skandinaviska Enskilda Banken AB; (ii) approximately
$820 million from the Multicurrency Revolving Credit Facility, dated as of March
4, 1996 (the "1996 Credit Facility"), between Incentive Treasury AB (as
Borrower), Parent (as Guarantor), Deutsche Bank Luxembourg S.A. and Enskilda,
Skandinaviska Enskilda Banken (as Arrangers), Enskilda, Skandinaviska Enskilda
Banken (as Agent) and certain banks named therein; (iii) approximately $473
million from the Multicurrency Revolving Credit Facility, dated as of May 24,
1995, and amended March 4, 1996 (the "1995 Credit Facility"), between Incentive
Treasury AB (as Borrower), Parent (as Guarantor), Deutsche Bank Luxembourg S.A.
and Enskilda, Skandinaviska Enskilda Banken AB (as Arrangers) and Deutsche Bank
Luxembourg S.A. (as Agent) and certain banks named therein; (iv) approximately
$116 million from the Revolving Credit Facility, dated as of September 1, 1994,
and amended December 2, 1994, April 24, 1995, October 26, 1995 and November 5,
1996 (the "1994 Credit Facility"), between Parent (as First Borrower and
Guarantor), Incentive Treasury AB (as Second Borrower), Deutsche Bank Luxembourg
S.A. (as Lender); and (v) approximately $121 million from the Multicurrency
Credit Facility, dated as of March 6, 1996 (the "Nordbanken Credit Facility"),
between Nordbanken AB (as Lender), Incentive Treasury AB (as Borrower) and
Parent (as Guarantor).
Purchaser, Gambro and Parent anticipate that any indebtedness incurred
through borrowings under the foregoing credit facilities will be repaid from a
variety of sources, which may include, but may not be limited to, funds
generated internally by Gambro, Parent and their affiliates (including,
following the Merger, funds generated by the Surviving Corporation), bank
refinancing, and the public or private sale of debt or equity securities. No
decision has been made concerning the method Gambro and Parent will employ to
repay such indebtedness. Such decision will be made based on a review from time
to time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions and such factors as
Gambro and Parent may deem appropriate.
THE GAMBRO CREDIT FACILITY. Under the Gambro Credit Facility, Gambro and
its designated subsidiaries may borrow up to a total of $300 million from the
banks that are signatories thereto. All loans under this facility must be repaid
in full by December 15, 2002, but may also be voluntarily prepaid. The annual
rate of interest on loans made under this facility is the aggregate of the
following: (i) 0.20% per annum from December 15, 1995 until December 15, 2000,
and 0.225% per annum thereafter, (ii) LIBOR (as
16
<PAGE>
defined in this facility) in the case of loans not denominated in sterling or
EIBOR (as defined in this facility) in the case of loans denominated in
sterling, and (iii) MLA Costs (as defined in this facility) when applicable to
such loan. Loan obligations under this facility rank at least PARI PASSU with
all the obligor's other present and future unsecured and unsubordinated
obligations, except for obligations which are mandatorily preferred by law.
Subject to certain exceptions, an obligor under this facility may not create or
permit to subsist any security interest on any of its assets.
THE 1997 CREDIT FACILITY. Under the 1997 Credit Facility, Incentive
Treasury AB may borrow up to a total of 1 billion Swedish kronor from
Skandinaviska Enskilda Banken AB. Parent has guaranteed the obligations of
Incentive Treasury AB under this facility. Advances under this facility must be
repaid by May 5, 1998, and may be voluntarily prepaid only with the consent of
Skandinaviska Enskilda Banken AB. The annual rate of interest on loans made
under this facility is the aggregate of the following: (i) 0.10% per annum above
STIBOR (as defined in this facility) for loans in Swedish kronor and (ii) 0.10%
per annum above LIBOR (as defined in this facility) for loans in Eurocurrencies.
THE 1996 CREDIT FACILITY. Under the 1996 Credit Facility, Incentive
Treasury AB may borrow up to a total of $1 billion from the banks that are
signatories thereto. Parent has guaranteed the obligations of Incentive Treasury
AB under this facility. All loans under this facility must be repaid in full by
March 4, 2001. The annual rate of interest on loans made under this facility is
0.175% per annum over LIBOR (as defined in this facility). Loan obligations
under this facility rank at least PARI PASSU with the claims of obligor's other
unsecured creditors, except those whose claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general application. Subject to
certain exceptions, obligor may not create or permit to subsist any encumbrance
on any of its assets.
THE 1995 CREDIT FACILITY. Under the 1995 Credit Facility, Incentive
Treasury AB may borrow up to a total of $500 million from the banks that are
signatories thereto. Parent has guaranteed the obligations of Incentive Treasury
AB under the facility. All loans under this facility must be repaid in full by
May 24, 2002. The annual rate of interest on loans made under this facility is
the aggregate of the following: (i) 0.20% per annum from May 24, 1995 to May 24,
1999 and 0.25% per annum thereafter, (ii) the Associated Costs Rate (as defined
in this facility) in the case of loans denominated in sterling, and (iii) LIBOR
(as defined in this facility). Loan obligations under this facility rank at
least PARI PASSU with the claims of obligor's other unsecured creditors, except
those whose claims are preferred by any bankruptcy, insolvency, liquidation or
other similar laws of general application. Subject to certain exceptions,
obligor may not create or permit to subsist any encumbrance on any of its
assets.
THE 1994 CREDIT FACILITY. Under the 1994 Credit Facility, Deutsche Bank
Luxembourg S.A. has made available to Parent and Incentive Treasury AB a
revolving credit facility of 200 million German marks. Parent has guaranteed the
obligations of Incentive Treasury AB under this facility. Advances under this
facility must be repaid by October 28, 1997. The annual rate of interest on
loans made under this facility is 0.10% per annum above DM LIBOR (as defined in
this facility).
THE NORDBANKEN CREDIT FACILITY. Under the Nordbanken Credit Facility,
Incentive Treasury AB may borrow up to a total of 1 billion Swedish kronor from
Nordbanken AB. Parent has guaranteed the obligations of Incentive Treasury AB
under this facility. Advances under this facility must be repaid by December 8,
1997, and may be voluntarily prepaid. The annual rate of interest on loans made
under this facility is (i) 0.10% per annum above STIBOR (as defined in this
facility) for loans in Swedish kronor and (ii) 0.10% per annum above LIBOR (as
defined in this facility) for loans in Eurocurrencies. Loan obligations under
this facility rank at least PARI PASSU with other unsecured obligations, except
for obligations which are mandatorily preferred by law.
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11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT
AND THE SPECIALTY MERGER AGREEMENT.
BACKGROUND OF THE OFFER, CONTACTS WITH THE COMPANY
In late August and early September 1996, Mr. Thiry and Mr. Mats Wahlstrom,
President and Chief Executive Officer of Gambro Healthcare, Inc. ("Gambro
Healthcare"), a wholly owned subsidiary of Parent and Gambro, had discussions
concerning a possible strategic transaction between Parent and the Company.
Before and during September 1996, members of the Company's senior management,
including Mr. Thiry, Ms. Zumwalt and Stephen G. Pagliuca, a director of the
Company, interviewed various investment banking firms with respect to an
engagement to provide financial advice to the Company concerning its long-term
strategic direction and to potentially assist the Company in identifying an
acquiror for all or a portion of the Company's business. In September 1996, the
Company engaged Goldman Sachs to assist the Company in determining the proper
structure by which to achieve its objectives.
In September 1996, Goldman, Sachs & Co., financial advisor to the Company
("Goldman Sachs"), on behalf of the Company, contacted several companies
regarding a potential strategic relationship with the Company, including Parent
and Purchaser. On September 19, 1996, UBS Securities LLC ("UBS"), financial
advisor to Gambro, forwarded to the Company certain materials concerning a
possible transaction structure. On September 25, 1996, Mr. Thiry met with
representatives of Parent and Gambro, including Berthold Lindqvist, President
and Chief Executive Officer of Gambro, Mikael Lilius, President and Chief
Executive Officer of Parent and Mr. Wahlstrom to discuss a potential acquisition
of the Company by Parents.
On October 6, 1996, several representatives of Goldman Sachs met with
members of senior management of the Company to discuss potential transactions
and acquirors. On October 16, 1996, Mr. Thiry sent a letter to Parent and
Purchaser regarding certain structural issues involved in a potential
acquisition of the Company by Parent.
On November 1, 1996, Mr. Thiry met with representatives of Parent and Gambro
to discuss outstanding structural issues and the feasibility of combining the
Company and Gambro Healthcare. During November 1996, Mr. Thiry had discussions
with another company regarding a potential strategic relationship with the
Company. Also during November 1996, Goldman Sachs, on behalf of the Company, had
discussions with another company regarding a potential strategic relationship
with the Company.
On November 18, 1996, the Company formally engaged Goldman Sachs to serve as
its financial advisor in connection with a potential acquisition of the Company
by a third party.
On November 21, 1996, Mr. Wahlstrom, Herbert S. Lawson, Chief Financial
Officer of Gambro Healthcare, Mr. David Barry, President of the Company's Renal
division, and Ms. Zumwalt met in Colorado, together with representatives of
Goldman Sachs and UBS, to discuss certain financial data concerning Gambro and
the Company, including the operating synergies that might be expected from a
transaction.
On November 25, 1996, representatives of UBS and Morgan Stanley & Co.
Limited ("Morgan Stanley"), financial advisor to Parent, met with
representatives of Goldman Sachs and presented an initial proposal for the
acquisition of the Company. The Company responded that the proposed terms were
below the Company's expectations. Mr. Thiry confirmed that response during a
subsequent telephone conversation. During December, the Company advised Gambro
that the Company would shift its focus to considering a transaction involving
the sale of all or part of VSP (the "VSP Sale").
During December 1996, the Company had discussions with one company regarding
a potential strategic relationship with the Company. Also during December 1996,
Ms. Zumwalt met with representatives of a potential acquiror in connection with
the VSP Sale.
During February 1997, the Company had discussions with two companies
regarding a potential strategic relationship with the Company. On February 5,
1997, Mr. Lindqvist sent a letter to the Company
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indicating that Gambro would be prepared to make an offer to acquire all the
Shares for cash, or alternatively to acquire the Company's dialysis services and
renal care business. Mr. Lilius sent a letter contemporaneously to the Company
expressing Parent's support for Gambro's proposal.
On February 7, 1997, the Company's Board of Directors held a telephonic
meeting to review the history of the discussions to date with parent and Gambro
and to discuss in detail Gambro's letter. The Board of Directors requested
members of senior management and Goldman Sachs to contact Parent and its
financial advisor to better understand and evaluate the terms set forth in the
letter.
On February 21, 1997, Mr. Lindqvist sent Mr. Thiry another letter
reiterating Gambro's interest in the transaction with the Company. On the same
day, the Company's Board of Directors held a telephonic meeting to discuss the
status of the ongoing discussions with Parent and Gambro. During such telephonic
meeting, the Board of Directors named Mr. Thiry, Ms. Zumwalt and John M. Nehra,
a director of the Company, to a committee to consider the acquisition of the
Company by Gambro and Parent. On February 27, 1997, Mr. Lindqvist sent a letter
to Mr. Thiry and the Company's Board of Directors proposing to acquire only the
Company's renal care business.
On March 7, 1997, the Company's Board of Directors met to discuss Gambro's
offer and the status of ongoing discussions with one additional company
regarding a potential strategic relationship with the Company.
On March 21, 1997, the Company's Board of Directors held a telephonic
meeting to receive a report from Mr. Thiry, Ms. Zumwalt and Mr. Nehra regarding
the February 5, 1997 letter. The Board of Directors also established a Special
Committee consisting of Mr. Nehra and Richard B. Fontaine, a director of the
Company, for the purposes of investigating alternatives available to the Company
regarding VSP, including a possible sale of VSP (the "Special Committee").
On April 2, 1997, representatives of the Company and Goldman Sachs met with
representatives of Parent, Gambro, UBS and Morgan Stanley to discuss a possible
transaction in which Gambro would acquire the Company's dialysis services and
renal care business.
On April 6, 1997, Mr. Nehra, on behalf of the Special Committee, during a
telephone conversation with Messrs. Lilius, Lindqvist and Wahlstrom, indicated
that the Special Committee had met and was interested in moving forward on a
cash tender offer transaction for the Company's Vivra Renal Care business. Mr.
Nehra indicated that it would be appropriate for representatives of Parent to
conduct a due diligence review of the Company's business.
On April 8, 1997, several representatives of Parent and Gambro Healthcare,
together with representatives of Shearman & Sterling, representatives of UBS and
Morgan Stanley met with the Special Committee, together with representatives of
Brobeck, Phleger & Harrison LLP and representatives of Goldman Sachs to organize
legal and operational due diligence and to discuss the process and structure for
the VSP Sale. During April 1997, the Company held ongoing discussions with a
number of companies concerning the VSP Sale.
From April 10, 1997 through April 24, 1997, several representatives of
Parent and Gambro conducted a due diligence review of the Company. These
representatives met at length with the Company's executive officers concerning
the Company's historical and projected financial data. Certain of these meetings
also included a representative of Goldman Sachs. The representatives of Parent
and Gambro also reviewed numerous documents concerning the Company's business,
financial results and financial outlook, as well as the Company's standard
operating policies and procedures and related data.
On April 25, 1997, representatives of Parent and Gambro conducted an
additional due diligence meeting to obtain an update on due diligence matters,
recent financial results, updated financial projections and the status of the
VSP Sale and the interrelationships between the Company and VSP following such
VSP Sale.
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On April 22, 1997, representatives of Brobeck, Phleger & Harrison LLP and
Shearman & Sterling met in Washington, D.C. to negotiate the terms of the Merger
Agreement relating to the proposed transaction. On April 24, 1997, Brobeck,
Phleger & Harrison LLP and Shearman & Sterling met again in New York to continue
such negotiations.
On April 26, 1997, the Company's Board of Directors held a telephonic
meeting to discuss the continuing negotiations and current terms of the proposed
transaction with Parent and Gambro. On April 29, 1997, the parties and their
respective representatives met in Chicago to further negotiate the terms and
conditions of the Offer, the Merger and the Merger Agreement.
Representatives of Parent, Gambro and Purchaser and Shearman & Sterling met
with representatives of the Company and Brobek, Phleger & Harrison LLP on May 4
and May 5, 1997 to finalize negotiations of the terms and conditions of the
Offer, the Merger and the Merger Agreement.
On May 4, 1997 and May 5, 1997, the Board of Directors held a special
meeting to consider the acquisition proposal submitted by Purchaser. All of the
Company's directors participated in the meeting. At the meeting, the Board of
Directors reviewed the Merger Agreement, the Offer and the Merger with the
Company's executive officers, legal counsel and representatives of Goldman
Sachs. The Board of Directors heard presentations by its legal counsel with
respect to the terms of the proposed Offer and Merger and by representatives of
Goldman Sachs with respect to the financial terms of the proposed Offer and the
Merger. At the conclusion of their presentation, representatives of Goldman
Sachs delivered their oral opinion to the Board of Directors (subsequently
confirmed in writing) that, as of such date, the consideration proposed to be
received by the holders of the Shares in the Offer and in the Merger is fair to
the holders of the Shares from a financial point of view.
Based upon such discussions, presentations and opinion, the Board of
Directors unanimously (i) approved the Offer, the Merger and the execution of
the Merger Agreement substantially in the form presented to it, and (ii)
recommended that the Company's stockholders accept the Offer and tender their
Shares and approve the Merger and the Merger Agreement. On May 5, 1997,
representatives of the Company, Parent and Purchaser signed the Merger Agreement
and issued a joint press release to such effect.
THE MERGER AGREEMENT
A copy of the Merger Agreement is filed as an Exhibit to the Schedule 14D-1
and is incorporated by reference in this Offer to Purchase. Following is a
summary of the Merger Agreement which summary is qualified in its entirety by
reference to the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of 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.
The obligation of Purchaser to accept for payment and pay for the Shares
tendered pursuant to the Offer is subject to the satisfaction of (i) the Minimum
Condition prior to the expiration of the Offer and (ii) certain other conditions
described in "Section 15. Certain Conditions of the Offer". Purchaser may waive
any condition to the Offer, increase the price per Share payable in the Offer
and make any other changes to the Offer. However, no change may (i) decrease the
price per Share payable in the Offer, (ii) reduce the maximum number of Shares
to be purchased or (iii) impose conditions to the Offer other than those
described in "Section 15 Certain Conditions of the Offer". The Purchaser may,
without the consent of the Company, (i) extend the Offer beyond the scheduled
Expiration Date (the initial scheduled Expiration Date being June 6, 1997, if,
at the scheduled Expiration Date, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation or interpretation of the Commission or the staff thereof applicable
to the Offer or (iii) extend the Offer for an aggregate period of not more than
10 business days beyond the latest applicable date that would otherwise be
permitted under clause (i) or (ii) of this sentence, if as of such date, all of
the
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conditions to Purchaser's obligations to accept for payment, and to pay for, the
Shares are satisfied or waived, but the number of Shares validly tendered and
not withdrawn pursuant to the Offer equals 80% or more, but less than 90%, of
the outstanding Shares on a fully diluted basis. However, (A) if, on the initial
scheduled Expiration Date of the Offer, the sole condition remaining unsatisfied
is (1) the failure of the waiting period under the HSR Act to have expired or
been terminated, or (2) the failure to consummate the Specialty Merger
Transaction 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, the Purchaser is required 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 and (B) if the sole condition
remaining unsatisfied on the initial scheduled Expiration Date of the Offer is
the condition described in (f) of "Section 15. Certain Conditions of the Offer",
Purchaser is required, so long as the breach can be cured and the Company is
vigorously attempting to cure such breach, to extend the Offer from time to time
until five business days after such breach is cured provided that Purchaser will
not be required to extend the Offer beyond 35 days after such initial scheduled
Expiration Date.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with Delaware Law, at the Effective
Time, Purchaser will be merged with and into the Company and the Company will
continue as the Surviving Corporation and will become an indirect wholly owned
subsidiary of Parent. Upon consummation of the Merger, each issued and
outstanding Share (other than any Shares held in the treasury of the Company, or
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company and any outstanding Shares which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
Shares in accordance with Delaware Law) will be canceled and converted
automatically into the right to receive an amount equal to the Per Share Amount
(the "Merger Consideration"). Pursuant to the Merger Agreement, each share of
common stock, par value $.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time will be converted into and exchanged for
one validly issued, fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Corporation.
CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS. The Merger Agreement
provides that, at the Effective Time, the Certificate of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation; PROVIDED, HOWEVER,
that Article I of the Certificate of Incorporation of the Surviving Corporation
will be amended to read as follows: "The name of the corporation is Vivra
Incorporated." The Merger Agreement also provides that the By-laws of Purchaser,
as in effect immediately prior to the Effective Time, will be the By-laws of the
Surviving Corporation. Pursuant to the Merger Agreement, the directors of
Purchaser immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation and the officers of the Purchaser immediately prior
to the Effective Time will be the initial officers of the Surviving Corporation.
STOCKHOLDERS MEETING. The Merger Agreement provides that, if required by
applicable law in order to consummate the Merger, the Company will, in
accordance with applicable law and its Certificate of Incorporation and By-Laws,
(i) convene and hold an annual or special meeting of its stockholders (the
"Company Stockholders Meeting") for the purpose of considering and taking action
on the Merger Agreement and the transactions contemplated thereby, and (ii)
except if the Board determines in good faith an alternative action to be
necessary in accordance with its fiduciary duties to the Company's stockholders
under applicable law as advised by outside legal counsel, use its reasonable
efforts to approve and adopt the Merger Agreement and the transactions
contemplated thereby. Parent and Purchaser will cause all Shares 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. If the Minimum
Condition is satisfied, Purchaser will have sufficient voting power to cause the
approval and adoption of the Merger without the affirmative vote of any other
stockholder. Under Delaware Law, if Purchaser
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acquires at least 90% of the outstanding Shares, Purchaser will be able to
approve the Merger without a vote of the Company's stockholders.
FILINGS. The Merger Agreement provides that the Company will, as soon as
reasonably practicable after the consummation of the Offer and if required by
applicable law, prepare and file the Proxy Statement with the Commission, and
will use all reasonable efforts to have the Proxy Statement cleared by the
Commission. The Company has agreed that, except if the Board determines in good
faith an alternative action to be necessary in accordance with its fiduciary
duties to the Company's stockholders under applicable law as advised by outside
legal counsel, the Proxy Statement will contain the unanimous recommendation of
the Board that the stockholders of the Company approve the Merger Agreement and
the transactions contemplated thereby.
CONDUCT OF DIALYSIS BUSINESS. Pursuant to the Merger Agreement, the Company
has covenanted and agreed that, between the date of the Merger Agreement and the
Effective Time, unless Parent or Purchaser will otherwise agree in writing, the
Company's dialysis, renal care or nephrologist practice management business or
the Company's business of contracting with payors on behalf of nephrologists
(the "Dialysis Business") will be conducted only in, and the Company and the
subsidiaries of the Company engaged in the Dialysis Business (the "Dialysis
Subsidiaries") will not take any action with respect to the Dialysis Business
except in the ordinary course of the Dialysis Business; and the Company and the
Dialysis Subsidiaries will 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, the Merger Agreement provides that
neither the Company nor any Dialysis Subsidiary will, between the date of the
Merger Agreement and the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent or
Purchaser:
(i) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(ii) 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 of the Company
or any Dialysis Subsidiary (except for the issuance of certain Shares
pursuant to outstanding options and Shares issuable upon conversion of the
Convertible Notes) 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;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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
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severance agreement with any director or officer or other key employee of
the Company or its subsidiaries, 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;
(vii) hire or retain any employee or consultant at an annual rate of
compensation in excess of $125,000;
(viii) grant options or other interests in the equity securities of any
subsidiary of the Company;
(ix) 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);
(x) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;
(xi) settle any litigation, suit, claim, action, proceeding or
investigation (an "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");
(xii) 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
(xiii) enter into any contract or agreement that would have been a
Material Contract if entered into prior to the date hereof, other than in
the ordinary course of the Dialysis Business.
CONDUCT OF SPECIALTY BUSINESS. The Merger Agreement provides that from the
date thereof until the earlier of the consummation of the Specialty Merger
Transaction and the termination of the Merger Agreement pursuant to its terms,
the Company will operate Specialty Partners and the subsidiaries of the Company
engaged in the Specialty Business (the "Specialty Subsidiaries") consistent with
Section 2 of the Services Agreement dated as of May 5, 1997 between the Company
and Specialty Partners and the Company and the Dialysis Subsidiaries will not
make any contribution, payment or other transfer to Specialty Partners or any
Specialty Subsidiary of cash, cash equivalents, marketable securities or any
other asset and Specialty Partners and the Specialty Subsidiaries shall not make
any contribution, payment or other transfer to the Company or any Dialysis
Subsidiary of cash, cash equivalents, marketable securities or any other asset.
DIRECTORS. 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 will be entitled to designate such number of directors,
rounded up to the next whole number, on the Board as will give Purchaser
representation on the Board equal to the product of the total number of
directors on the Board (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 of its affiliates following such purchase
bears to the number of Shares outstanding, and the Company will, 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 or
securing the resignation of incumbent directors or both. At such times, the
Company will, upon written request to Purchaser, use its reasonable efforts to
cause persons designated by Purchaser to constitute the same percentage as
persons designated by Purchaser will constitute of the Board of (i) each
committee of the Board, (ii) the board of directors of each domestic Dialysis
Subsidiary and (iii) each committee of each such board, to the extent permitted
by applicable law. Until the earlier of (i) the time Purchaser acquires a
majority of the then outstanding Shares on a fully diluted basis and
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(ii) the Effective Time, the Company is required to use its reasonable efforts
to ensure that all the members of the Board and each committee of the Board and
such boards and committees of the domestic Dialysis Subsidiaries of the Company
as of the date of the Merger Agreement who are not employees of the Company will
remain members of the Board and of such boards and committees, except for the
members not standing for re-election at the Company's 1997 annual meeting of
stockholders.
Pursuant to the Merger Agreement, after the election of designees of
Purchaser pursuant to the preceding paragraph and prior to the Effective Time,
any amendment of the Merger Agreement or the Certificate of Incorporation or
By-laws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or Purchaser or waiver of any of the
Company's rights hereunder will require the concurrence of a majority of the
directors of the Company then in office who neither were designated by Purchaser
nor are employees of the Company.
NO SOLICITATION. The Company has agreed that it will, and will 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 defined below). Except with respect to the Specialty Merger Transaction, the
Company will not, nor will it permit any of its subsidiaries to, nor will 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
determines in good faith 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 written
Acquisition Proposal, and subject to compliance with the notice requirements
described below, (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
discussions regarding and negotiate with respect to 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 the Dialysis Subsidiaries or of over 20% of any class of
equity securities of the Company or any of the Dialysis Subsidiaries, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of the Company
or any of the Dialysis Subsidiaries, any merger, consolidation, business
combination, sale of all or substantially all of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
the 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
transactions contemplated by the Offer and the Merger.
The Merger Agreement also provides that neither the Board nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Parent, the approval or recommendation by the Board 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
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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 may (x) withdraw or modify its approval or
recommendation of the Offer, the Merger and the Merger Agreement in order to
enter into a definitive agreement with respect to a Superior Proposal (as
defined below) and may terminate the Merger Agreement pursuant to the
termination provisions described below (and concurrently with or after such
termination may cause the Company to enter into any agreement with respect to
any Superior Proposal). 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 securities,
more than 50% of the combined voting power of the Shares then outstanding or all
or substantially all of the assets of the Company and otherwise on terms which
the Board 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 than the Offer and the Merger and for which
financing, to the extent required, is then committed.
The Merger Agreement provides that the Company will promptly advise Parent
orally and in writing of any request for information or of any Acquisition
Proposal, the material terms and conditions of such request or Acquisition
Proposal and the identity of the person making such request or Acquisition
Proposal.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Merger Agreement requires
that the Certificate of Incorporation of the Surviving Corporation contain
provisions no less favorable with respect to indemnification than are set forth
in Article Eight of the Certificate of Incorporation of the Company, which
provisions will not be amended, repealed or otherwise modified for six years
after the Effective Time in any manner that would affect adversely the rights of
individuals who at the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification is required by
law. To the extent that the obligations under such provisions are not fully
performed by the Surviving Corporation, Parent has agreed to perform fully the
obligations thereunder for the remaining period.
Parent or the Surviving Corporation will use its best efforts to maintain in
effect for a period not less than six years after 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; PROVIDED, HOWEVER, that if the
existing policies expire, are terminated or cancelled during such period, Parent
or Surviving Corporation will use its best efforts to obtain substantially
similar policies. Notwithstanding the foregoing, the Merger Agreement provides
that in no event will Parent or the Surviving Corporation be required to pay
more than an amount per year equal to 150% of current annual premiums paid by
the Company for such insurance. If the Parent or the Surviving Corporation is
not able to obtain the amount of required insurance for such aggregate premium,
the Merger Agreement requires Parent or the Surviving Corporation to obtain as
much insurance as can be obtained for an annual premium of 150% of the Company's
current annual premiums.
OPTIONS PLANS. The Merger Agreement provides that immediately prior to the
Effective Time, the Company will take all such actions as shall be necessary to
cause all stock options (and any related alternative rights) to purchase shares
(the "EMPLOYEE STOCK OPTIONS") granted under the Company's stock option plans
which are outstanding immediately prior to the Effective Time (whether or not
then presently exercisable or vested), to be cancelled. In exchange for the
cancellation of such Employee Stock Option, the holder thereof will be entitled
to receive from the Surviving Corporation an amount in cash equal to the product
of the difference between the Per Share Amount and the per share exercise price
of such Employee Stock Option, and the number of shares of Company Common Stock
covered by such Employee Stock Option. All payments in respect of Employee Stock
Options will be made after the Effective Time and not later than 30 days
following the Effective Time, subject to the Company's collection of all
applicable withholding taxes. The Merger Agreement also provides that all
restricted
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stock under the Company's 1989 Stock Incentive Plan will be vested, and any
restrictions attached to such stock pursuant to such plan will lapse,
immediately prior to the Effective Time.
In addition, the Merger Agreement states that the Company Stock Option Plans
will terminate as of the Effective Time and thereafter the only rights of
participants therein will be the right to receive the consideration set forth in
the previous paragraph. Prior to the Effective Time, the Company will cause each
holder of an outstanding Employee Stock Option to consent to the cancellation of
the Employee Stock Options held by such holder in consideration for the payment
provided herein, and will take such other action as may be necessary to carry
out the terms of the foregoing.
RETENTION ARRANGEMENT. The Merger Agreement provides that, following the
Effective Time, the Company will maintain a retention bonus and deferred
compensation arrangement (the "Retention Arrangement") with substantially the
terms and conditions set forth therein. As set forth in the Merger Agreement,
the Retention Arrangement will provide certain executives and key employees of
the Company with bonuses which will be payable in installments of 20% one month
following the Effective Time and 40% on each of the first two anniversaries of
the Effective Time. The Retention Arrangement will permit participants to defer
all or a specified percentage of each installment of the bonus. Amounts so
deferred will be credited to a deferred compensation account established by the
Company on its books and records for each participant, credited with notional
interest and distributed to the participant commencing on the later to occur of
the participant's termination of employment with the Company or attainment of
age 60. As a condition to the receipt of payments pursuant to the Retention
Arrangement, participants will be required to enter into certain
non-competition, non-solicitation and non-disclosure agreements with the
Company.
The Retention Arrangement is subject to the consummation of the Merger, and
the Company will have no payment obligations under the Retention Arrangement in
the event that the Merger is not consummated.
CONVERTIBLE SUBORDINATED NOTES. Pursuant to the Merger Agreement, prior to
the Effective Time, the Company will, in accordance with the terms of the
Convertible Note Indenture, execute and deliver to the Trustee a supplemental
indenture providing that, after the Effective Time, each $1,000 principal amount
of the Convertible Notes will be convertible into an amount of cash equal to the
price payable per Share in the Offer multiplied by 26.88. The Company also
agreed that it will offer to repurchase the Convertible Notes at the option of
the holders thereof and will consummate such repurchase, in each case in
accordance with the Indenture.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain changes or events
concerning the Company's corporate organization and qualification,
capitalization, authority, filings with the Commission and other governmental
authorities, financial statements, litigation, employee benefit matters,
intellectual property, real property, taxes, insurance, environmental matters,
material contracts, compliance with law, and Board approval of amendments to the
Company's Amended and Restated Rights Agreement dated as of February 13, 1996
between the Company and the First National Bank of Boston.
CONDITIONS TO CONSUMMATION OF THE MERGER. The Merger Agreement provides
that the respective obligations of each party to effect the Merger is subject to
the following conditions: (i) the Merger Agreement, the Merger and the
transactions contemplated thereby will have been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required by
Delaware Law and the Certificate of Incorporation of the Company; (ii) any
waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act will have expired or been terminated;
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(iii) no foreign, United States or state governmental authority or other agency
or commission or foreign, United States or state 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 transactions by the Merger Agreement or the Specialty Merger
Transaction; and (iv) Purchaser or its permitted assignee shall have purchased
all Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED,
HOWEVER, that this condition shall not be applicable to the obligations of
Parent or Purchaser if, in breach of the Merger Agreement or the terms of the
Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time by: (i) mutual written consent of Parent, Purchaser and the
Company duly authorized by their respective Boards of Directors; or (ii) either
Parent, Purchaser or the Company if (a) the Effective Time will 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 shall have 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 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 will not be available (1) to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date or (2) after Purchaser shall have purchased the Shares pursuant to the
Offer, or (b) 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 will 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 will have become final and nonappealable;
or (iii) 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 described in "Section 15. Certain
Conditions of the Offer" (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 will have
terminated the Offer without having accepted any Shares for payment thereunder;
or (iv) the Company, upon approval of the Board, if (a) due to an occurrence or
circumstance that would result in a failure to satisfy any of the conditions in
"Section 15. Certain Conditions of the Offer", Purchaser will have terminated
the Offer without having accepted any Shares for payment thereunder or (b) 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, if the Company's 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; PROVIDED, HOWEVER, that any termination of the Merger Agreement
pursuant to this clause (iv)(b) will not be effective until the Company has made
full payment of all amounts as set forth in "-- Fees and Expenses" below, or (c)
if Parent or Purchaser will 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 described in "Section 15. Certain
Conditions of the Offer", or (d) if Parent or Purchaser shall have breached 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.
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FEES AND EXPENSES. The Merger Agreement provides that in the event that (i)
the Merger Agreement is terminated under clause (iv)(b) of the preceding
paragraph; or (ii) (a) 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 and prior to the date of its
termination, (b) the Merger Agreement is thereafter terminated pursuant to
clause (ii), (iii) or (iv)(a) of the preceding paragraph, and (c) 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 will pay Parent promptly a fee of $50,000,000 (the "Fee"), which amount
will be payable in immediately available funds, plus all Expenses (as defined
below); PROVIDED, HOWEVER, that no Fee shall be payable under clause (ii) of
this paragraph if, at the time of termination, Parent or Purchaser is in
material breach of their respective material covenants and agreements and their
respective representations and warranties, in each case contained in the Merger
Agreement.
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 or their respective representations and warranties, the
Company will, whether or not any payment is made pursuant to the preceding
paragraph, reimburse each of Parent, Purchaser and their respective stockholders
and affiliates 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 or the structuring of the transactions
contemplated by the Merger Agreement and the Specialty Merger Transaction 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 Offer, Merger and Specialty Merger 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 contemplated by the Merger Agreement and any financing commitments
or agreements relating thereto (all of the foregoing being referred to herein
collectively as the "Expenses").
Except as set forth in the above paragraph, all costs and expenses incurred
in connection with the Merger Agreement, the transactions contemplated thereby
and the Specialty Merger Transaction will be paid by the party incurring such
expenses, whether or not such transactions are consummated.
THE 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)(2) to this Schedule 14D-1 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 the Company's interests in Specialty Partners and in VHI to the VSP
Purchasers. Both Specialty Partners and VHI are engaged in the Company's
Specialty Business. Pursuant to the Specialty Merger Agreement, the gross
consideration allocated between Specialty Partners and VHI will be $84,312,500
(the "Gross Consideration"). Of this amount, the Company expects to receive sale
proceeds of approximately $79,387,500. 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 net after-tax proceeds of
approximately $77,200,00 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.
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Pursuant to the Specialty Merger Agreement, (i) VSP Merger Sub will be
merged with and into Specialty Partners, with Specialty Partners 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 of acquiring the Company's interests in
Specialty Partners 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 Specialty Partners 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
Specialty Partners have agreed to, among other things: (a) conduct Specialty
Partners' business in the ordinary course, including preserving existing
relationships with customers and suppliers and maintaining existing material
contracts to which Specialty Partners is a party; (b) cause certain subsidiaries
of Specialty Partners (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
Specialty Partners; (c) transfer and assign certain assets and liabilities of
the Company to Specialty Partners; and (d) enter into an agreement pursuant to
which the Company will assign to Specialty Partners 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"),
Specialty Partners 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 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 Specialty
Partners 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
Specialty Partners; (c) any waiting period (or any extension thereof) under the
HSR Act will have expired or been terminated; (d) a noncompetition agreement
between Specialty Partners and Parent will have been executed; (e) the Services
Agreement between Specialty Partners and the Company pursuant to which each of
the parties thereto provides 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
Specialty Partners' 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% 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 Specialty Partners will indemnify the
Company from claims arising from the operation of the business of Specialty
Partners and the Company will indemnify VSP Purchaser and Specialty Partners
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% of the Company's interest in
Specialty Partners and 65% of the Company's interest in VHI, in exchange for 65%
of the Gross Consideration.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for Parent
to acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for Parent to acquire all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will
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become an indirect wholly owned subsidiary of Parent. The Offer is being made
pursuant to the Merger Agreement.
PLANS FOR MERGER CONSUMMATION. Under Delaware Law, the approval of the
Board and the affirmative vote of the holders of a majority of the outstanding
Shares is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Board of Directors
of the Company has unanimously approved and adopted the Merger Agreement and the
transactions contemplated thereby, and, unless the Merger is consummated
pursuant to the short-form merger provisions under Delaware Law described below,
the only remaining required corporate action of the Company is the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the affirmative vote of the holders of a majority of the Shares. Accordingly, if
the Minimum Condition is satisfied, Purchaser will have sufficient voting power
to cause the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required by Delaware Law.
If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Purchaser will be entitled to designate representatives to serve
on the Board in proportion to Purchaser's ownership of Shares following such
purchase. See "Section 11. Background of the Offer; Contacts with the Company;
the Merger Agreement and the Specialty Merger Agreement". Purchaser expects that
such representation would permit Purchaser to exert substantial influence over
the Company's conduct of its business and operations.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the outstanding Shares, Purchaser will be able to
approve the Merger without a vote of the Company's stockholders. In such event,
Parent, Purchaser and the Company have agreed in the Merger Agreement to take,
at the request of Purchaser, all necessary and appropriate action to cause the
Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting of the Company's stockholders. If, however,
Purchaser does not acquire at least 90% of the outstanding Shares pursuant to
the Offer or otherwise and a vote of the Company's stockholders is required
under Delaware Law, a significantly longer period of time would be required to
effect the Merger.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders will have certain
rights under Delaware Law to dissent and demand appraisal of, and to receive
payment in cash of the fair value of, their Shares. Such rights to dissent, if
the statutory procedures are complied with, could lead to a judicial
determination of the fair value of the Shares, as of the day prior to the date
on which the stockholders' vote was taken approving the Merger or similar
business combination (excluding any element of value arising from the
accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, the
court is required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset values and
earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated,
among other things, that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in an appraisal proceeding. Therefore,
the value so determined in any appraisal proceeding could be the same, more or
less than the purchase price per Share in the Offer or the Merger Consideration.
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In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders which requires that the merger be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of consideration to be received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER
and RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available
to minority stockholders in a cash-out merger is the right to appraisal
described above. However, a damages remedy or injunctive relief may be available
if a merger is found to be the product of procedural unfairness, including
fraud, misrepresentation or other misconduct.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger. Rule
13e-3 requires, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction, be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
PLANS FOR THE COMPANY. It is expected that, initially following the
Merger, the business and operations of the Company will, except as set forth in
this Offer to Purchase, be continued by the Company substantially as they are
currently being conducted. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period. Thereafter, Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
businesses. It is expected that the business and operations of the Company would
be integrated with the dialysis and renal care operations of Gambro Healthcare.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any Subsidiary, a sale or transfer of a material amount
of assets of the Company or any Subsidiary or any material change in the
Company's capitalization or dividend policy or any other material changes in the
Company's corporate structure or business, or the composition of the Board or
the Company's management.
13. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company shall not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of Parent, (a) issue, sell, pledge,
dispose of, grant, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of any shares of capital stock of any class 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 the
issuance of Shares issuable pursuant to employee stock options outstanding on
the date hereof and Shares issuable pursuant to the conversion of the
Convertible Notes) or (b) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock.
See "Section 11. Background of the Offer; Contacts with the Company; the Merger
Agreement and the Specialty Merger Agreement". If, however, the Company should,
during the pendency of the Offer, (i) split, combine or otherwise change the
Shares or its capitalization, (ii) acquire or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell any additional Shares,
shares of any other class or series of capital stock, other voting securities or
any securities convertible into, or options, rights, or warrants, conditional or
otherwise, to
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acquire, any of the foregoing, then, without prejudice to Purchaser's rights
under "Section 15. Certain Conditions of the Offer", Purchaser may (subject to
the provisions of the Merger Agreement) make such adjustments to the purchase
price and other terms of the Offer (including the number and type of securities
to be purchased) as it deems appropriate to reflect such split, combination or
other change.
If, on or after May 5, 1997, the Company should declare or pay any dividend
on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's
rights under "Section 15. Certain Conditions of the Offer", (i) the Per Share
Amount payable by Purchaser pursuant to the Offer will be reduced (subject to
the Merger Agreement) to the extent any such dividend or distribution is payable
in cash and (ii) any non-cash dividend, distribution or right shall be received
and held by the tendering stockholder for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing and
may be delisted from the NYSE. Parent intends to seek the delisting of the
Shares by the NYSE following consummation of the Offer.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. The Company has advised
Purchaser that, as of May 5, 1997, there were 41,991,547 Shares outstanding,
held by approximately 1,800 holders of record. If, as a result of the purchase
of Shares pursuant to the Offer or otherwise, the Shares no longer meet the
requirements of the NYSE for continued listing and the listing of the Shares is
discontinued, the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Merger Consideration.
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<PAGE>
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with stockholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for NASDAQ reporting. Purchaser currently intends to seek to
cause the Company to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration are met.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, Purchaser will not be required to accept for payment or pay for any
Shares tendered pursuant to the Offer, and may terminate or amend the Offer
(subject to the provisions of the Merger Agreement) and may postpone the
acceptance for payment of (subject to any applicable rules and regulations of
the Commission, including Rule 14e-1(c) under the Exchange Act) and payment for
Shares tendered, if (i) the Minimum Condition will not have been satisfied, (ii)
any applicable waiting period under the HSR Act will not have expired or been
terminated prior to the expiration of the Offer, (iii) prior to the expiration
or termination of the Offer, the Company will not have consummated the Specialty
Merger Transaction and received aggregate cash proceeds therefor, after
providing for all applicable income taxes (using an assumed tax rate of 41%), of
not less than $76,900,000, or (iv) at any time on or after the date of the
Merger Agreement, and prior to the acceptance for payment of Shares, any of the
following conditions will exist:
(a) there will have been instituted by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, any
action or proceeding before any court or any governmental, administrative or
regulatory authority or agency, domestic or foreign (including such
authority or agency instituting or initiating such action or proceeding),
(i) challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Parent, Purchaser
or any other affiliate of Parent, the consummation of any other transaction
contemplated by the Merger Agreement or the consummation of the Specialty
Merger Transaction or seeking to obtain material damages in connection with
any such transaction; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their subsidiaries
of all or any material portion of the business or assets of the Company,
Parent or any of their subsidiaries, or to compel the Company, Parent or any
of their subsidiaries to dispose of or to hold separate all or any material
portion of the business or assets of the Company, Parent or any of their
subsidiaries, as a result of the transactions contemplated by the Merger
Agreement; (iii) seeking to impose or confirm limitations on the ability of
Parent, Purchaser or any other affiliate of Parent to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by
33
<PAGE>
Purchaser pursuant to the Offer or otherwise on all matters properly
presented to the Company's stockholders, including, without limitation, the
approval and adoption of the Merger Agreement and the transactions
contemplated thereby; (iv) seeking to require divestiture by Parent,
Purchaser or any other affiliate of Parent of any Shares; or (v) which
otherwise causes or gives rise to any circumstance, change in or effect on
the Company, any Subsidiary or any circumstance, change in or effect on the
Dialysis Business that is, or is reasonably likely to be, materially adverse
to the value of the Dialysis Business or the Company and the Dialysis
Subsidiaries, taken as a whole, other than a change, condition, event or
development that results from (i) the announcement of the transactions
contemplated by the Merger Agreement or the Specialty Merger Transaction,
(ii) general economic conditions, (iii) conditions that are generally
applicable to the dialysis business, the renal care business or the
nephrologist practice management business, or (iv) actions, legislation or
initiatives that are generally applicable to the dialysis, renal care or
nephrologist practice management business, or any proposals thereof, of any
governmental authority or any announcement thereof ("Material Adverse
Effect");
(b) there will have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of
Parent or the Company or (ii) any transaction contemplated by the Merger
Agreement, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign, other
than the routine application of the waiting period provisions of the HSR Act
to the Offer or the Merger, which is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
(c) there will have occurred any change, condition, event or development
that has a Material Adverse Effect;
(d) there will have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or Sweden, (iii) any limitation (whether or not mandatory) by
any government or governmental, administrative or regulatory authority or
agency of the United States or Sweden on the extension of credit by banks or
other lending institutions such that Parent is not reasonably able to obtain
financing for the Offer on reasonable terms or (iv) a commencement of a war
or material armed hostilities or other national or international calamity
involving the United States or Sweden;
(e) (i) it will have been publicly disclosed or Purchaser will have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the then outstanding Shares has been acquired by any
person, other than Parent or any of its affiliates or any other person not
required to file a Schedule 13D under the rules promulgated under the
Exchange Act or (ii) the Company's Board of Directors or any committee
thereof will have (A) withdrawn or modified in a manner adverse to Parent or
Purchaser the approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any acquisition proposal or any
other acquisition of the Shares other than the Offer or the Merger or (B)
resolved to do any of the foregoing;
(f) (i) any representation or warranty which addresses matters as of a
particular date shall not be true and correct as of such date, or (ii) any
other representation or warranty shall not be true, as of the date of the
Merger Agreement and as of the expiration of the Offer, unless the
inaccuracies under all such representations and warranties together in their
entirety, would not, individually or in the aggregate, have a Material
Adverse Effect;
34
<PAGE>
(g) the Company will have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement unless all such failures together in
their entirety, would not, individually or in the aggregate, have a Material
Adverse Effect;
(h) the Merger Agreement will have been terminated in accordance with
its terms; or
(i) Purchaser and the Company will have agreed that Purchaser will
terminate the Offer or postpone the acceptance for payment of or payment for
Shares thereunder.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion,
subject in each case to the terms of the Merger Agreement. The failure by Parent
or Purchaser at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances will not be deemed a waiver with
respect to any other facts and circumstances; and each such right will be deemed
an ongoing right that may be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company,
except to the extent the Merger will require the Company to obtain new Medicare,
Medicaid or third party provider numbers, licenses or similar permits (see
"Section 11. Background of the Offer; Contacts with the Company; the Merger
Agreement and the Specialty Agreement"), neither Purchaser nor Parent is aware
of any license or other regulatory permit that appears to be material to the
business of the Company and the Subsidiaries, taken as a whole, which might be
adversely affected by the acquisition of Shares by Purchaser pursuant to the
Offer or, except as set forth below, of any approval or other action by any
domestic (federal or state) or foreign governmental, administrative or
regulatory authority or agency which would be required prior to the acquisition
of Shares by Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is Purchaser's present intention to seek such approval or
action. Purchaser does not currently intend, however, to delay the purchase of
Shares tendered pursuant to the Offer pending the outcome of any such action or
the receipt of any such approval (subject to Purchaser's right to decline to
purchase Shares if any of the conditions in "Section 15. Certain Conditions of
the Offer" shall have occurred). There can be no assurance that any such
approval or other action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company, Purchaser or Parent or that certain parts of the businesses of the
Company, Purchaser or Parent might not have to be disposed of or held separate
or other substantial conditions complied with in order to obtain such approval
or other action or in the event that such approval was not obtained or such
other action was not taken. Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions, including
conditions relating to the legal matters discussed in this "Section 16. Certain
Legal Matters and Regulatory Approvals". See "Section 15. Certain Conditions of
the Offer".
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of Delaware Law prevents an
"interested stockholder" (generally a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock, or an affiliate
or associate thereof) from engaging in a "business combination" (defined to
include mergers and certain other transactions) with a Delaware corporation for
a period of three years following the date such person became an interested
stockholder unless, among other things, prior to such date the board of
directors of the corporation approved either the business combination or the
transaction in which the interested stockholder became an interested
stockholder. On May 4, 1997, prior to the execution of the
35
<PAGE>
Merger Agreement, the Board of Directors of the Company, by unanimous vote of
all directors present at a meeting held on such date, approved the Merger
Agreement, determined that each of the Offer and the Merger is fair to, and in
the best interest of, the stockholders of the Company. Accordingly, Section 203
is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987, in
CTS CORP. V. DYNAMICS CORP. OF AMERICA,the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, Purchaser will take such action
as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer, and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See "Section 15. Certain
Conditions of the Offer".
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by Purchaser pursuant to the Offer are subject to such requirements.
See "Section 2. Acceptance for Payment and Payment for Shares".
Pursuant to the HSR Act, on May 9, 1997, Parent filed a Premerger
Notification and Report Form in connection with the purchase of Shares pursuant
to the Offer with the Antitrust Division and the FTC. Under the provisions of
the HSR Act applicable to the Offer, the purchase of Shares pursuant to the
Offer may not be consummated until the expiration of a 15-calendar day waiting
period following the filing by Parent. Accordingly, the waiting period under the
HSR Act applicable to the purchase of Shares pursuant to the Offer will expire
at 11:59 p.m., New York City time, on May 23, 1997, unless such waiting period
is earlier terminated by the FTC and the Antitrust Division or extended by a
request from the FTC or the Antitrust Division for additional information or
documentary material prior to the expiration of the waiting period. Pursuant to
the HSR Act, Parent has requested early termination of the waiting period
applicable to the Offer. There can be no assurance, however, that the 15-day HSR
Act waiting period will be terminated early. If either the FTC or the Antitrust
Division were to request additional information or documentary material from
Parent with respect to the Offer, the waiting period with respect to the Offer
would expire at 11:59 p.m., New York City time, on the tenth calendar day after
the date of substantial compliance by Parent with such request. Thereafter, the
waiting period could be extended only by court order. If the acquisition of
Shares is delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer may, but need not, be
36
<PAGE>
extended and, in any event, the purchase of and payment for Shares will be
deferred until 10 days after the request is substantially complied with, unless
the extended period expires on or before the date when the initial 15-day period
would otherwise have expired, or unless the waiting period is sooner terminated
by the FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such extension
of the waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See "Section 4. Withdrawal Rights". It is a
condition to the Offer that the waiting period applicable under the HSR Act to
the Offer expire or be terminated. See "Section 2. Acceptance for Payment and
Payment for Shares" and "Section 15. Certain Conditions of the Offer".
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that the Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the result would be. See "Section 15. Certain Conditions
of the Offer", for certain conditions to the Offer, including conditions with
respect to litigation.
17. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer.
UBS is acting as Dealer Manager in connection with the Offer and has
provided certain financial advisory services in connection with the acquisition
of the Company. Gambro has agreed to pay UBS a retainer fee of $150,000 and a
transaction fee (against which the foregoing retainer fee will be credited) of
$5,000,000, of which $1,500,000 will become payable upon commencement of the
Offer and the remainder of which will become payable at the closing of the
Merger. Gambro has also agreed to reimburse UBS for all reasonable out-of-pocket
expenses incurred by UBS, including the reasonable fees and expenses of legal
counsel, and to indemnify UBS against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the federal
securities laws.
Purchaser and Parent have retained Georgeson & Company Inc., as the
Information Agent, and The Bank of New York, as the Depositary, in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telex, telecopy, telegraph and personal interview and may request
banks, brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Georgeson & Company Inc. will be paid a fee of $12,500 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. Purchaser will pay the Depositary
reasonable and customary compensation for its services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including under federal securities laws. Brokers, dealers, commercial banks and
trust companies will be reimbursed by Purchaser for customary handling and
mailing expenses incurred by them in forwarding material to their customers.
37
<PAGE>
18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by the Dealer Manager or by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in "Section 7. Certain Information
Concerning the Company" (except that they will not be available at the regional
offices of the Commission).
GAMBRO HEALTHCARE ACQUISITION CORP.
May 9, 1997
38
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Parent. Unless otherwise indicated, the
current business address of each person is Incentive AB, Hamngatan 2, Box 7373,
S-10391 Stockholm, Sweden. Unless otherwise indicated, each such person is a
citizen of Sweden and has held his or her present position as set forth below
for the past five years and each such person does not beneficially own Shares.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Parent.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Anders Scharp Chairman since 1992; Chairman of the Boards of:
Electrolux, S-105 45, Stockholm, Sweden since 1991;
Saab-Scania AB, S-581-88 Linkoping, Sweden from 1990 to
1995; Saab AB, S-581-88 Linkoping, Sweden since 1995;
Scania AB, S-151 87 Sodertalje, Sweden since 1995; SKF,
S-415 50 Gothenburg, Sweden since 1992; and Atlas Copco,
S-105 23 Stockholm, Sweden since 1996. Vice Chairman of
the Boards of Investor, S-103 32 Stockholm, Sweden since
1992 and Atlas Copco, S-105 23 Stockholm, Sweden from
1992 to 1996; Director of Email Ltd. (Australia),
Waterloo, NSW 2017, Australia since 1986; Chairman of
Swedish Employers' Confederation, S. blasieholmshamnen
4A, S-103 30 Stockholm, Sweden since 1996 and a director
from 1987 to 1996. Director of Federation of Swedish
Industries, Storgatan 19, S-114 85 Stockholm, Sweden
since 1992.
Casimir Ehrnrooth Director since 1991. Chairman of the Board of Nokia
(Finnish) Group, P.O. Box 226, FIN-00101 Heksinki, Finland since
1992; Director of UPM-Kymmene Corporation, P.O. Box 203,
FIN-00171 Helsinki, Finland since 1996; Director of
Merita Bank Ltd, Alek-Santerinkatu 30, FIN-00100
Helsinki, Finland since 1992; Director of Continental
AG, Postfach 169, D-3001 Hannover, Germany since 1995.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Mikael Lilius Director since 1991; President and Chief Executive
(Finnish) Officer since 1991; Chairman of Gambro, S-220 10 Lund,
Sweden since 1995; Chairman of Garphyttan Industrier,
P.O. Box 7200, S-103 88 from 1992 to 1996; Chairman of
Orrefors Kosta Boda, S-380 40 Orrefors, Sweden from 1991
to 1995. Director of the Boards of Huhtamaki Oy,
Elelaranta 8, SF-00130 Helsinki, Finland since prior to
1992; Perlos Oy, P.O. Box 9, FIN-01901 Nurmijjarvi,
Stockholm, Sweden since 1997; Westinghouse Air Brake
Company, Wilmerding, PA 15148, USA from 1995 to 1997.
Hakan Mogren Director since 1996. President and CEO of Astra, S-151
85 Sodertalje, Sweden since prior to 1992. Director of
the Boards of Astra, S-151 85 Sodertalje, Sweden since
prior to 1992; Investor, S-103 32 Stockholm, Sweden
since prior to 1992; STORA, S-791 80 Falun, Sweden since
prior to 1992 and the Federation of Swedish Industries
since prior to 1992.
Karl-Erik Sahlberg Director since 1995; Chairman of the Boards of Cardo,
P.O. Box 486, S-201 24 Malmo, Sweden since 1992; S-E
Bank Group, S-106 40 Stockholm, Sweden since 1996,
Vattenfall, S-162 87 Vallingby, Sweden since 1992 and
Lund Institute of Technology since prior to 1992. Vice
Chairman of Skoogs AB, S-205 70 Malmo, Sweden since
prior to 1990. Director of the Board of Tetra Laval
Group, S-221 86 Lund, Sweden since prior to 1992.
Bjorn Svedberg Director since 1997. Chairman of the Board of Ericsson,
S-126 25 Stockholm, Sweden since prior to 1992 and ABB
AB, S-103 91 Stockholm, Sweden since 1996. President and
CEO of Skandinaviska Enskilda Banken, S-104 60
Stockholm, Sweden from 1992 to 1997. Director of the
Boards of STORA, S-791 80 Falun, Sweden since prior to
1992 and Volvo, S-405 08 Goteborg, Sweden since prior to
1992.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Sven Soderberg Director since 1991. Chairman of Skandia, S-103 50
Stockholm, Sweden since prior to 1992; Chairman of
Ratos, P.O. Box 1661, S-111 96 Stockholm, Sweden since
1994; Director of ABB AB, S-103 91 Stockholm, Sweden
since 1992. Director of the Board of STORA, S-791 80
Falun, Sweden since prior to 1992; Counsel General of
Norway since prior to 1992.
Marcus Wallenberg Director since 1994; Executive Vice President of
Investor, S-103 32 Stockholm, Sweden since 1993; Vice
Chairman of Astra, S-151 85 Sodertalje, Sweden since
1993; Vice Chairman of Saab AB, S-581 88 Linkoping,
Sweden since 1993; Director of Investor, S-103 32
Stockholm, Sweden since 1990; Director of SKF, S-415 00,
Gothenburg, Sweden from 1993 to 1996. Director of Saab
Automobile, S-461 80 Trollhattan, Sweden from 1992 to
1996. Director of Scania AB, S-151 87 Sodertalje, Sweden
since 1994; Director of S-E Banken, S-106 40 Stockholm,
Sweden since 1995. Director of Ericsson, S-126 25
Stockholm, Sweden since 1996 and Director of the Knut
and Alice Wallenberg Foundation, S-104 60 Stockholm,
Sweden since prior to 1992.
Bengt-Ola Nygren Employee Representative on Board since 1991 (the Swedish
Confederation of Trade Unions); Employee of Munters
Component AB, P.O. Box 29, S-740 61 Tobo, since prior to
1992.
Nicolaus Malmgren Employee Representative on Board since 1996 (the Swedish
Confederation of Trade Unions); Employee of Gambro, P.O.
Box 10101, S-220 10 Lund, Sweden since prior to 1992.
Ann-Christine Adamsson Employee Representative on Board since 1996 (the Swedish
Confederation of Trade Unions); Employee of TA Control
AB, Fabriksvagen 1, S-137 37 V asterhaninge, Sweden
since prior to 1992.
Dan Nilsson Employee Representative on Board since 1991 (the Swedish
Federation of Salaried Employees in Industry and
Service), Employee of Hagglunds Vehicle AB, S-891 81
Ornskoldsvik, Sweden since prior to 1992.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Stig Fristad Employee Representative on Board since 1996 (the Swedish
Federation of Salaried Employees in Industry and
Service); Employee of Munters Dry Air AB, S-191 24
Sollentuna, Sweden since prior to 1992.
Lars-Ake Johansson(*) Employee Representative on Board since 1995 (Swedish
Federation of Salaried Employees in Industry and
Services); Employee of Gambro AB, Box 10101 S-22010
Lund.
Lars Fahlen Senior Vice President Human Resources since 1992.
Anders Jagraeus Executive Vice President since 1995; President of AB
Carl Munters, P.O. Box 430, S-191 24 Sollentuna, Sweden
from 1991 to 1995; Director of Garphyttan Industries AB,
P.O. Box 7200, S-103 88 Stockholm, Sweden from 1995 to
1996.
Sverker Lundkvist Senior Vice President, Finance, since 1993; Executive
Vice President, Skandia International, S-103 50
Stockholm, Sweden from prior to 1992 to 1993.
Soren Mellstig Executive Vice President since 1997; Senior Vice
President, Corporate Control from 1994 to 1997; Director
and Controller of Akzo Nobel B.V. (Chemicals), Postbus
9300, NL-6800 SB Arnhem, the Netherlands since 1994;
Senior Vice President Nobel Industries (Chemicals), P.O.
Box 11500, S-100 61 Stockholm, Sweden from 1993 to 1994;
Senior Vice President EKA Nobel (chemicals), S-445 80
Bohus, Sweden prior to 1993. Director of Gambro, P.O.
Box 10101, S-220 10 Lund, Sweden since 1995.
Bengt Modeer Senior Vice President, Corporate Communications since
1991.
</TABLE>
- ------------------------
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, material occupations, positions, offices or
employments and business addresses thereof for the past five years, and
beneficial ownership interest, if any, in the Shares of each director and
executive officer of Purchaser. Unless otherwise indicated, the current business
address of each person is 1185 Oak Street, Lakewood, Colorado 80215. Unless
otherwise indicated, each such person is a citizen of the United States of
America, each occupation set forth opposite an individual's name refers to
employment with Purchaser, and each such person does not beneficially own
Shares.
I-4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Mats L. Wahlstrom Mr. Wahlstrom has served on the Board of Directors and
as President of Purchaser since its incorporation in May
1997. He is the Chief Executive Officer and President of
Gambro Healthcare, Inc. and on its Board of Directors.
Mr. Wahlstrom has served in these capacities from
December 1990 to the present. Mr. Wahlstrom has served
as Director of Gambro Healthcare Patient Services, Inc.,
formerly known as REN-Corporation-USA, from May 1991 to
the present. He served as Chief Financial Officer of
Gambro, AB from 1985 until becoming its Executive Vice
President in March 1993. In June 1990, he was elected a
director of COBE and was appointed its Executive Vice
President; in May 1991 he became its President. Mr.
Wahlstrom beneficially owns 1,800 Shares, which
represents less than 1% of the issued and outstanding
Shares, based upon 41,991,547 Shares issued and
outstanding as of May 5, 1997, as advised by the
Company.
Herbert S. Lawson Mr. Lawson has been Vice President and Treasurer, as
well as a director of Purchaser since May 1997. Mr.
Lawson has served as Chief Financial Officer and
director of Gambro Healthcare, Inc. since 1996 and as a
director of Gambro Healthcare Patient Services, Inc.
since 1992. In 1996, he became an executive officer of
Gambro Healthcare Patient Services, Inc. From 1981 to
June 1992, he served as Director of Taxes of COBE and
from 1992 to the present Mr. Lawson has served as an
executive officer of COBE.
Lawrence J. Centella Mr. Centella was appointed the Vice President and a
director of Purchaser in May 1997. Mr. Centella has
served as an executive officer and director of Gambro
Healthcare, Inc. and as President and a director of
Gambro Healthcare Patient Services, Inc., formerly known
as REN-Corporation-USA, since July 1993. From July 1990
to July 1993, Mr. Centella was President of COBE Renal
Care, Inc., a subsidiary of COBE Laboratories, Inc. From
April 1989 to June 1990, Mr. Centella was President of
Gambro-Hospal, Inc., a manufacturer and distributor of
renal care products. For the ten years prior to April
1989, he was President of LADA International, Inc., a
distributor of specialty hospital equipment products.
</TABLE>
I-5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
FIVE-YEAR EMPLOYMENT HISTORY AND
NAME BENEFICIAL OWNERSHIP OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Ralph Z. Levy, Jr. Mr. Levy has served as Vice President and Secretary of
Purchaser, as well as director since May 1997 and has
been Vice President & General Counsel to Gambro
Healthcare, Inc. since 1996. He has also been an
executive officer and director of COBE Laboratories,
Inc., Gambro Healthcare, Inc. and Gambro Healthcare
Patient Services, Inc. since 1996. Previously, Mr. Levy
served as REN-Corporation-USA's Executive Vice President
and General Counsel from 1992 to 1995. Prior to joining
REN-Corporation-USA, Mr. Levy was, from July 1978 to
October 1992, a partner with Wyatt, Tarrant & Combs, a
Nashville, Tennessee and Louisville, Kentucky based law
firm.
</TABLE>
I-6
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department Department
P.O. Box 11248 Confirm by Telephone: 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 1-800-507-9357 New York, New York 10286
10286-1248
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Toll Free: 1-800-223-2064
UNITED STATES:
Wall Street Plaza
New York, New York 10005
Bankers and Brokers call collect:
(212) 440-9800
EUROPE:
Georgeson & Company
17th Floor, Moor House
119 London Wall
London EC2Y 5ET
Telephone: 171-454-7100
or Call Collect (212) 440-9800
THE DEALER MANAGER FOR THE OFFER IS:
UBS SECURITIES
299 Park Avenue, 35th Floor
New York, New York 10171-0026
1-888-821-5176 (Toll Free)
<PAGE>
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Vivra Incorporated
Pursuant to the Offer to Purchase
Dated May 9, 1997
of
Gambro Healthcare Acquisition Corp.
an indirect wholly owned subsidiary of
Incentive AB
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 6, 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
<S> <C> <C>
Tender & Exchange (212) 815-6213 Tender & Exchange Department
Department Confirm by Telephone: 101 Barclay Street
P.O. Box 11248 1-800-507-9357 Receive and Delivery Window
Church Street Station New York, New York 10286
New York, New York
10286-1248
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via facsimile transmission or telex other
than as set forth above will not constitute a valid delivery.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
<PAGE>
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC"), the Midwest
Securities Trust Company ("MSTC") or the Philadelphia Depository Trust Company
("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the
"Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure
described in "Section 3. Procedures for Accepting the Offer and Tendering
Shares" of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in "Section 1. Terms of the Offer; Expiration Date" of the Offer to
Purchase) or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis and who wish to tender their Shares must do so
pursuant to the guaranteed delivery procedure described in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase. See Instruction 2.
<TABLE>
<S> <C>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT
ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) / / DTC / / MSTC / / PDTC
Account Number
Transaction Code Number
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Window Ticket No. (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY
AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER OF
SHARE SHARES EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
Total Shares..............................
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate
delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH
IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Gambro Healthcare Acquisition Corp., a
Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of
Incentive AB, a corporation organized under the laws of Sweden, the
above-described shares of Common Stock, par value $.01 per share, of Vivra
Incorporated, a Delaware corporation (the "Company") (all shares of such Common
Stock from time to time outstanding being, collectively, the "Shares"), pursuant
to Purchaser's offer to purchase all Shares, at $35.62 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated May 9, 1997 (the "Offer to Purchase"), receipt of which
is hereby acknowledged, and in this Letter of Transmittal (which, together with
the Offer to Purchase, constitute the "Offer"). The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after May 5, 1997 (collectively, "Distributions")
and irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all
Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Mats L. Wahlstrom and Ralph Z.
Levy, Jr., and each of them, as the attorneys and proxies of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or his substitute shall, in his sole discretion, deem proper
and otherwise act (by written consent or otherwise) with respect to all the
Shares tendered hereby which have been accepted for payment by Purchaser prior
to the time of such vote or other action and all Shares and other securities
issued in Distributions in respect of such Shares, which the undersigned is
entitled to vote at any meeting of stockholders of the Company (whether annual
or special and whether or not an adjourned or postponed meeting) or consent in
lieu of any such meeting or otherwise. This proxy and power of attorney is
coupled with an interest in the Shares tendered hereby, is irrevocable and is
granted in consideration of, and is effective upon, the acceptance for payment
of such Shares by Purchaser in
<PAGE>
accordance with other terms of the Offer. Such acceptance for payment shall
revoke all other proxies and powers of attorney granted by the undersigned at
any time with respect to such Shares (and all Shares and other securities issued
in Distributions in respect of such Shares), and no subsequent proxy or power of
attorney shall be given or written consent executed (and if given or executed,
shall not be effective) by the undersigned with respect thereto. The undersigned
understands that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's acceptance of such Shares for payment, Purchaser must be able
to exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's stockholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to
<PAGE>
transfer any Shares from the name of the registered holder(s) thereof if
Purchaser does not purchase any of the Shares tendered hereby.
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the To be completed ONLY if the check for the
purchase price of Shares purchased or Share purchase price of Shares purchased or Share
Certificates evidencing Shares not tendered or Certificates evidencing Shares not tendered or
not purchased are to be issued in the name of not purchased are to be mailed to someone other
someone other than the undersigned, or if Shares than the undersigned, or the undersigned at an
tendered hereby and delivered by book-entry address other than that shown under "Description
transfer which are not purchased are to be of Shares Tendered".
returned by credit to an account at one of the
Book-Entry Transfer Facilities other than that
designated above.
Issue / / check / / Share Certificate(s) to: Mail / / check / / Share Certificate(s) to:
Name Name
PLEASE PRINT PLEASE PRINT
Address Address
(ZIP CODE) (ZIP CODE)
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) NUMBER) (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
/ / Credit Shares delivered by book-entry
transfer and not purchased to the account set
forth below:
Check appropriate box:
/ / DTC / / MSTC / / PDTC
Account Number:
</TABLE>
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: ______________ , 199__
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s): _____________________________________________________________________
PLEASE PRINT
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
INCLUDE ZIP CODE
Area Code and Telephone No: __________________________________________________
Taxpayer Identification or Social Security No.: ______________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE
SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion Signature
Guarantee Program, or by any other "eligible guarantor institution", as such
term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Expiration Date (as
defined in "Section 1. Terms of the Offer; Expiration Date" of the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis may
tender their Shares pursuant to the guaranteed delivery procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in "Section 3. Procedures for Accepting the Offer
and Tendering Shares" of the Offer to Purchase)), and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of such Notice of Guaranteed Delivery, all as described in "Section 3.
Procedures for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided
<PAGE>
in the box entitled "Special Delivery Instructions" on the reverse hereof, as
soon as practicable after the expiration or termination of the Offer. All Shares
evidenced by Share Certificates delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Stockholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at a
Book-Entry Transfer Facility as such stockholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Information Agent or the Dealer
Manager at their respective addresses or telephone numbers set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed
<PAGE>
Delivery may be obtained from the Information Agent or from brokers, dealers,
commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN "SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE" OF THE OFFER TO
PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a stockholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for such statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A stockholder should consult his or her tax advisor as
to such stockholder's qualification for exemption from backup withholding and
the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
SUBSTITUTE FORM W-9 PART I--Taxpayer Identification --------------------------------
Number--For all accounts, enter Social Security Number
your taxpayer identification
number in the box at right. (For OR
most individuals, this is your Taxpayer Identification
social security number. If you Number
do not have a number, see
Obtaining a Number in the (If awaiting TIN write
enclosed GUIDELINES.) Certify by "Applied For")
signing and dating below. Note:
If the account is in more than
one name, see the chart in the
enclosed GUIDELINES to determine
which number to give the payer.
PAYER'S REQUEST FOR TAXPAYER PART II--For Payees Exempt From Backup Withholding, see the
IDENTIFICATION NUMBER (TIN) enclosed GUIDELINES and complete as instructed therein.
</TABLE>
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
GUIDELINES.)
SIGNATURE ____________________________________________ DATE _____________, 199_
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Facsimiles of the Letter of Transmittal, properly completed and duly signed,
will be accepted. The Letter of Transmittal certificates evidencing Shares and
any other required documents should be sent or delivered by each stockholder to
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department Department
P.O. Box 11248 Confirm by Telephone: 101 Barclay Street
Church Street Station 1-800-507-9357 Receive and Delivery Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A stockholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Toll Free: 1-800-223-2064
<TABLE>
<S> <C>
UNITED STATES: EUROPE:
Wall Street Plaza Georgeson & Company
New York, New York 10005 17th Floor, Moor House
Banks and Brokers call collect: 119 London Wall
(212) 440-9800 London EC2Y 5ET
Telephone: 171-454-7100
</TABLE>
or Call Collect: (212) 440-9800
THE DEALER MANAGER FOR THE OFFER IS:
UBS SECURITIES
299 Park Avenue, 35th Floor
New York, New York 10171-0026
1-888-821-5176 (Toll Free)
<PAGE>
Exhibit 99.(a)(3)
[Letterhead]
VIVRA SELLS VIVRA RENAL CARE AND VIVRA SPECIALTY PARTNERS IN A
COMBINED TRANSACTION VALUED AT $1.68
San Mateo, CA, May 5, 1997 -- Vivra Incorporated ("Vivra") announced today
that it has entered into a definitive merger agreement under which Incentive
AB ("Incentive") will acquire Vivra simultaneous with a sale of Vivra
Specialty Partners ("VSP"), Vivra's physician network and disease management
division, to a new company formed by Texas Pacific Group, Bain Capital, and
Hellman & Friedman Capital Partners. Incentive intends to merge Vivra Renal
Care ("VRC") with The Gambro Group, its wholly owned dialysis and medical
technology business.
Pursuant to the merger agreement, incentive or a wholly owned subsidiary of
Incentive will commence a cash tender offer to acquire all of the outstanding
shares of Vivra common stock for $35.62 per share, representing a total cash
consideration of $1,592 million. The investor group will purchase VSP for
$85 million less minority interests. The VSP sale agreement is subject to
the expiration or termination of the waiting periods under the
Hart-Scott-Rodino Act and other conditions and will close immediately prior
to the consummation of the Incentive tender offer.
The tender offer is conditioned upon the valid tender of a majority of Vivra
shares, the expiration or termination of the waiting periods under applicable
antitrust and competition laws, and receipt of proceeds from the sale of VSP
and other conditions. 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 received $35.62 per share in a second-step merger following the
tender offer.
As a result of the change in control resulting from Incentive's purchase of
Vivra shares pursuant to the tender offer, Vivra will thereafter be required
to offer to purchase the 5% Convertible Subordinated Notes Due 2001 from each
of the holders for the principal amount thereof plus accrued and unpaid
interest.
The Board of Directors of Vivra Incorporated has unanimously approved the
proposal and recommends the tender offer to its shareholders.
Kent Thiry, President and CEO of Vivra said, "Combining the Vivra and Gambro
dialysis teams creates a duly formidable enterprise. David Barry, the
current President of VRC, will be joining the Gambro executive group as the
President of Gambro Health Care Patient Services, Inc. He will therefore be
able to continue to provide his infectious brand of energy and leadership."
Mr. Thiry will be assuming the position of CEO of Vivra Specialty Partners.
The Gambro Group is a world leader in renal care, manufacturing high quality
dialysis products and providing dialysis services to 12,100 patients
worldwide. Gambro also manufactures products used in cardiopulmonary care
and equipment in the field of blood component technology. Gambro is a wholly
owned subsidiary of Incentive.
Incentive is a leading international industrial group with core operations in
medical technology, materials handling, development and environment. In
addition, Incentive has a significant shareholding in Asea Brown Boveri
(ABB). The acquisition of VRC represents a major step in the continued
restructuring of Incentive and its focus on the healthcare sector.
Vivra is the second largest provider of dialysis services in the United
States with approximately 15,800 patients at 262 centers in 28 states and the
District of Columbia. In fiscal 1996, Vivra had total revenues of $517
million and EBITDA of approximately $105 million. VSP provides physician
network and disease management services to managed care and provider
organizations in the United States with approximately 1,500 affiliated
network physicians.
Contact: LeAnne Zumwalt (415) 577-5525
<PAGE>
- --------------------------------------------------------------------------------
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000 | Fax: 212-357-4449
Goldman
Sachs
PERSONAL AND CONFIDENTIAL
- --------------------------------------------------------------------------------
May 5, 1997
Board of Directors
Vivra Incorporated
1850 Gateway Drive, Suite 500
San Mateo, CA 94404
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of
Vivra Incorporated (the "Company") of the $35.62 per Share to be received by the
holders of Shares pursuant to the Agreement and Plan of Merger dated as of May
5, 1997 among Incentive AB ("Parent"), Gambro Healthcare Acquisition Corp., an
indirect wholly owned subsidiary of Parent ("Purchaser"), and the Company (the
"Parent Agreement"). The Company has also entered into an Agreement and Plan of
Reorganization (the "VSP Agreement") dated as of May 5,1997 by and between VSP
Holdings, Inc. ("Acquiror"), VSP Acquisition Inc., a wholly owned subsidiary of
Acquiror ("Merger Sub"), VSP Holdings II, Inc. ("Acquiror II"), Vivra Specialty
Partners, Inc., a subsidiary of the Company ("VSP"), and the Company pursuant to
which the Company has agreed that Merger Sub will be merged into VSP and all of
the shares of Vivra Heart Imaging, Inc. owned by the Company will be sold to
Acquiror II (the Parent Agreement and the VSP Agreement are referred to herein
as the "Agreements").
The Parent Agreement provides for a tender offer by Purchaser for all of the
Shares (the "Tender Offer") pursuant to which Purchaser will pay $35.62 per
Share in cash for each Share accepted, following completion of which the
Purchaser will be merged into the Company (the "Parent Merger") and each
outstanding Share (other than Shares already owned by Parent or Purchaser) will
be converted into the right to receive $35.62 in cash. The closing of the merger
contemplated by the VSP Agreement is a condition to the closing of the Tender
Offer.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with the Parent
Agreement. We also have provided certain investment banking services to Parent
from time to time including having acted as the financial advisor to Parent in
its tender offer for outstanding shares of Gambro AB in March 1996 and may
provide investment banking services to Parent in the future. In addition, we
have provided certain investment banking services from time to time to Investor
AB ("Investor") a significant shareholder of Parent including having acted as
co-manager in the underwriting of $200 million of 6.125% bonds of Investor in
January 1994 and as co-manager in the underwriting of ECU
<PAGE>
Vivra, Incorporated
May 5,1997
Page Two
100 million of 7.25% convertible securities of Investor in June 1992 and may
provide investment banking services to Investor in the future. Goldman, Sachs &
Co. is a full service securities firm and in the course of our normal trading
activities we have accumulated a net short position, as of the date hereof, of
18,600 B-shares, par value SEK 5 per share, of Parent.
In connection with this opinion, we have reviewed, among other things, the
Agreements; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five fiscal years ended November 30,1996; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects, including the risks and uncertainties in achieving the
forecasts provided by the Company. We have, with your consent, taken such risks
and uncertainties into account for purposes of rendering our opinion. In
addition, we have reviewed the reported price and trading activity for the
Shares, compared certain financial and stock market information for the Company
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the healthcare industry specifically and in other industries
generally and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. Our opinion is expressed only with
respect to the $35.62 per share to be received by holders of Shares in respect
of the sale of the Company, as a whole. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Parent Agreement and such opinion does not constitute a recommendation as to
whether or not any holder of Shares should tender into the Tender Offer or vote
in favor of the Parent Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the $35.62 per
Share to be received by the holders of Shares pursuant to the Parent Agreement
is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- -------------------------------
(GOLDMAN, SACHS & CO.)
<PAGE>
[LOGO]
May 9, 1997
To Our Stockholders:
I am pleased to inform you that on May 5, 1997, Vivra Incorporated (the
"Company") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Incentive AB ("Incentive") and Gambro Healthcare Acquisition Corp.
("Purchaser"), an indirect wholly owned subsidiary of Incentive, pursuant to
which Purchaser has commenced a cash tender offer (the "Offer") to acquire all
of the issued and outstanding shares of the Company's Common Stock, par value
$.01 per share (the "Shares"), for $35.62 per Share, net to the seller in cash.
Under the terms of the Merger Agreement, as soon as practicable after
consummation of the Offer and in accordance with applicable Delaware law,
Purchaser will merge with and into the Company (the "Merger") and each remaining
Share which is then issued and outstanding will be converted into the right to
receive $35.62 per Share, net to the seller in cash (or any higher price that
may be paid in the Offer), without interest.
YOUR BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER, HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Goldman, Sachs & Co., the
Company's financial advisor, that the $35.62 per Share to be received by the
holders of Shares pursuant to the Merger Agreement is fair to such stockholders.
The full text of the written opinion of Goldman, Sachs & Co., which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with such opinion, is attached as an exhibit to the Schedule 14D-9
and stockholders are urged to read such opinion in its entirety.
In addition to the attached Schedule 14D-9 relating to the Offer, enclosed
is the Offer to Purchase, dated May 9, 1997, of Purchaser, together with related
materials, including a Letter of Transmittal to be used for tendering your
Shares. These documents set forth the terms and conditions of the Offer and the
Merger and provide instructions as to how to tender your Shares. I urge you to
read the enclosed material carefully.
Sincerely,
/s/ Kent J. Thiry
Kent J. Thiry
President and Chief Executive Officer
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
INCENTIVE AB
HH ACQUISITION CORP.
and
VIVRA INCORPORATED
Dated as of May 5, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE OFFER
SECTION 1.01. The Offer................................................. 2
SECTION 1.02. Company Action............................................ 3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger................................................. 4
SECTION 2.02. Effective Time............................................ 5
SECTION 2.03. Effect of the Merger...................................... 5
SECTION 2.04. Certificate of Incorporation; By-laws..................... 5
SECTION 2.05. Directors and Officers.................................... 5
SECTION 2.06. Conversion of Securities.................................. 5
SECTION 2.07. Employee Stock Options.................................... 6
SECTION 2.08. Dissenting Shares......................................... 6
SECTION 2.09. Surrender of Shares; Stock Transfer Books................. 7
SECTION 2.10. Convertible Subordinated Notes............................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries............. 8
SECTION 3.02. Certificate of Incorporation and By-laws................. 10
SECTION 3.03. Capitalization........................................... 10
SECTION 3.04. Authority Relative to this Agreement and the Specialty
Merger Agreement......................................... 11
SECTION 3.05. No Conflict; Required Filings and Consents............... 11
SECTION 3.06. Permits; Compliance...................................... 12
SECTION 3.07. SEC Filings; Financial Statements........................ 12
SECTION 3.08. Absence of Certain Changes or Events..................... 13
SECTION 3.09. Absence of Litigation.................................... 14
SECTION 3.10. Employee Benefit Plans; Labor Matters.................... 14
SECTION 3.11. Offer Documents; Schedule 14D-9; Proxy Statement......... 16
SECTION 3.12. Property................................................. 17
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<PAGE>
SECTION 3.13. Trademarks, Patents and Copyrights....................... 17
SECTION 3.14. Taxes.................................................... 17
SECTION 3.15. Environmental Matters.................................... 18
SECTION 3.16. Material Contracts....................................... 19
SECTION 3.17. Benefits and Payments.................................... 20
SECTION 3.18. Amendment to Rights Agreement............................ 21
SECTION 3.19. Brokers.................................................. 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization................................... 21
SECTION 4.02. Authority Relative to this Agreement..................... 22
SECTION 4.03. No Conflict; Required Filings and Consents............... 22
SECTION 4.04. Offer Documents; Proxy Statement......................... 23
SECTION 4.05. Financing................................................ 23
SECTION 4.06. Interim Operations of Purchaser.......................... 23
SECTION 4.07. Ownership of Company Capital Stock....................... 23
SECTION 4.08. Brokers.................................................. 23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business Pending the Merger................... 24
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting.................................... 26
SECTION 6.02. Proxy Statement.......................................... 26
SECTION 6.03. Company Board Representation; Section 14(f).............. 27
SECTION 6.04. Access to Information; Confidentiality................... 28
SECTION 6.05. No Solicitation.......................................... 28
SECTION 6.06. Employee Stock Options and Other Employee Benefits....... 30
SECTION 6.07. Specialty Merger Agreement............................... 31
SECTION 6.08. Directors' and Officers' Indemnification and Insurance... 31
SECTION 6.09. Rights Plan.............................................. 32
SECTION 6.10. Conduct of Specialty Business............................ 32
SECTION 6.11. Notification of Certain Matters.......................... 32
-ii-
<PAGE>
SECTION 6.12. Further Action; Reasonable Efforts....................... 32
SECTION 6.13. Public Announcements..................................... 33
SECTION 6.14. Confidentiality Agreement................................ 33
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger................................. 33
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.............................................. 34
SECTION 8.02. Effect of Termination.................................... 35
SECTION 8.03. Fees and Expenses........................................ 36
SECTION 8.04. Amendment................................................ 37
SECTION 8.05. Waiver................................................... 37
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements............................................... 37
SECTION 9.02. Notices.................................................. 38
SECTION 9.03. Certain Definitions...................................... 39
SECTION 9.04. Severability............................................. 40
SECTION 9.05. Entire Agreement; Assignment............................. 40
SECTION 9.06. Parties in Interest...................................... 41
SECTION 9.07. Specific Performance..................................... 41
SECTION 9.08. Governing Law............................................ 41
SECTION 9.09. Headings................................................. 41
SECTION 9.10. Counterparts............................................. 41
ANNEX A Conditions to the Offer
ANNEX B Retention and Deferred Compensation Arrangement
-iii-
<PAGE>
Glossary of Defined Terms
Defined Term Location of Definition
Action Section 3.09
acquisition proposal Section 6.05(a)
affiliate Section 9.03(a)
Agreement Preamble
beneficial owner Section 9.03(b)
Blue Sky Laws Section 3.05(b)
Board Recitals
business day Section 9.03(c)
Certificate of Merger Section 2.02
Certificates Section 2.09(b)
Code Section 3.10(a)
Company Preamble
Company Common Stock Recitals
Company Disclosure Schedule Article III
Company Options Section 3.03
Company Preferred Stock Section 3.03
Company Rights Section 3.03
Company Stock Option Plans Section 3.03
Competing Proposal Section 8.03(a)(ii)
Confidentiality Agreement Section 6.04(b)
control Section 9.03(d)
Current Premiums Section 6.08(b)
Delaware Law Recitals
Dialysis Business Section 3.01
Dialysis Subsidiaries Section 3.01
Dissenting Shares Section 2.08(a)
Effective Time Section 2.02
Employee Stock Options Section 6.06(a)
Employment Contracts Section 6.06(b)
Environmental Laws Section 3.15(a)
ERISA Section 3.10(a)
Exchange Act Section 1.02(b)
Expenses Section 8.03(b)
Fee Section 8.03(a)
5% Notes Section 2.10
-iv-
<PAGE>
Defined Term Location of Definition
GAAP Section 3.07(b)
Goldman Sachs Section 1.02(a)
Governmental Authority Section 3.05(b)
Hazardous Substances Section 3.15(a)
HSR Act Section 1.01(a)
Indenture Section 2.10
IRS Section 3.10(a)
knowledge of the Company Section 9.03(e)
Law Section 3.05(a)
Material Adverse Effect Section 3.01
Material Contracts Section 3.16(a)
Merger Recitals
Merger Consideration Section 2.06(a)
Minimum Condition Section 1.01(a)
Multiemployer Plan Section 3.10(b)
Multiple Employer Plan Section 3.10(b)
NYSE Section 3.05(b)
Offer Recitals
Offer Documents Section 1.01(b)
Offer to Purchase Section 1.01(b)
Order Section 6.12(b)
Parent Preamble
Paying Agent Section 2.09(a)
Per Share Amount Recitals
Permits Section 3.06
person Section 9.03(f)
Plans Section 3.10(a)
Proxy Statement Section 3.11
Purchaser Preamble
Rights Agreement Section 3.03
Schedule 14D-9 Section 1.02(b)
Schedule 14D-1 Section 1.01(b)
SEC Section 1.01(a)
SEC Reports Section 3.07(a)
Securities Act Section 3.07(a)
Shares Recitals
Specialty Business Section 3.01
Specialty Merger Agreement Recitals
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Defined Term Location of Definition
Specialty Partners Recitals
Specialty Subsidiaries Section 3.01
Stockholders' Meeting Section 6.01(a)
Subsidiary Section 3.01
subsidiary Section 9.03(g)
Superior Proposal Section 6.05(b)
Surviving Corporation Section 2.01
Tax/Taxes Section 3.14(b)
Tax Return Section 3.14(c)
Transactions Section 3.04
Trustee Section 2.10
WARN Section 3.10(f)
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AGREEMENT AND PLAN OF MERGER, dated as of May 5,1997 (this
"AGREEMENT"), among INCENTIVE AB, a corporation organized under the laws of
Sweden ("PARENT"), HH ACQUISITION CORP., a Delaware corporation and an indirect
wholly owned subsidiary of Parent ("PURCHASER"), and VIVRA INCORPORATED, a
Delaware corporation (the "COMPANY").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company
have each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that
Purchaser shall make a cash tender offer (the "OFFER") to acquire all of the
issued and outstanding shares of Common Stock, par value $0.01 per share, of the
Company ("COMPANY COMMON STOCK") (such shares of Company Common Stock being
hereinafter collectively referred to herein as "SHARES") for $35.62 per Share
(such amount, or any greater amount per Share paid pursuant to the Offer, being
hereinafter referred to as the "PER SHARE AMOUNT") net to the seller in cash,
upon the terms and subject to the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "BOARD") has
unanimously consented to the making of the Offer by Purchaser and resolved and
agreed to recommend that holders of Shares tender their Shares pursuant to the
Offer;
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of Parent, Purchaser and the Company have each approved the merger
(the "MERGER") of Purchaser with and into the Company in accordance with the
General Corporation Law of the State of Delaware ("DELAWARE LAW") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, as an inducement to Parent to enter this Agreement, the
Company has entered into an Agreement and Plan of Reorganization in the form
attached hereto as Exhibit I (the "SPECIALTY MERGER AGREEMENT") pursuant to
which the Company has agreed that VSP Acquisition, Inc., a Delaware corporation
and a wholly owned subsidiary of VSP Holdings, Inc., a Delaware corporation,
shall merge with and into Vivra Specialty Partners, Inc., a Nevada corporation
and a majority-owned subsidiary of the Company ("SPECIALTY PARTNERS") (the
"SPECIALTY MERGER TRANSACTION").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Purchaser and the Company hereby agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing, Purchaser shall
commence the Offer as promptly as reasonably practicable after the date hereof,
but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject to the condition (the "MINIMUM CONDITION") that at least
the number of Shares that when added to the Shares already owned by Parent and
its affiliates shall constitute a majority of the then outstanding Shares on a
fully diluted basis (including, without limitation, all Shares issuable upon the
conversion of any outstanding convertible securities or upon the exercise of any
outstanding options, warrants or rights (other than the Company Rights (as
defined in Section 3.03))) shall have been validly tendered and not withdrawn
prior to the expiration of the Offer and also shall be subject to the
satisfaction of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition, to increase the price
per Share payable in the Offer, and to make any other changes in the terms and
conditions of the Offer; PROVIDED, HOWEVER, that no change may be made which
decreases the price per Share payable in the Offer or which reduces the maximum
number of Shares to be purchased in the Offer or which imposes conditions to the
Offer other than those set forth in Annex A hereto. Notwithstanding the
foregoing, Purchaser may, without the consent of the Company, (i) extend the
Offer beyond the scheduled expiration date (the initial scheduled expiration
date being 20 business days following the commencement of the Offer) if, at the
scheduled expiration date of the Offer, any of the conditions to Purchaser's
obligation to accept for payment, and to pay for, the Shares, shall not be
satisfied or waived, (ii) extend the Offer for any period required by any rule,
regulation or interpretation of the Securities and Exchange Commission (the
"SEC") or the staff thereof applicable to the Offer, or (iii) extend the Offer
for an aggregate period of not more than 10 business days beyond the latest
applicable date that would otherwise be permitted under clause (i) or (ii) of
this sentence, if as of such date, all of the conditions to Purchaser's
obligations to accept for payment, and to pay for, the Shares are satisfied or
waived, but 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; PROVIDED, HOWEVER, that (A) if, on
the initial scheduled expiration date of the Offer, the sole condition remaining
unsatisfied is (1) the failure of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), to have expired
or been terminated or (2) the failure to consummate the Specialty Merger
Transaction 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 shall extend the Offer from time to
time until five business days after the
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expiration or termination of the applicable waiting period under the HSR Act and
(B) if the sole condition remaining unsatisfied on the initial scheduled
expiration date of the Offer is the condition set forth in (f) of Annex A, the
Purchaser shall, so long as the breach can be cured and the Company is
vigorously attempting to cure such breach, extend the Offer from time to time
until five business days after such breach is cured (provided that Purchaser
shall not be required to extend the Offer beyond 35 days after such initial
scheduled expiration date). The Per Share Amount shall, subject to applicable
withholding of taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and conditions of the
Offer, Purchaser shall, promptly after expiration of the Offer, pay for all
Shares validly tendered and not withdrawn.
(b) As soon as practicable on the date of commencement of the Offer,
Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the "SCHEDULE 14D-1")
with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "OFFER TO PURCHASE") and
forms of the related letter of transmittal and any related summary advertisement
(the Schedule 14D-1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to herein
collectively as the "OFFER DOCUMENTS"). Parent, Purchaser and the Company agree
to correct promptly any information provided by any of them for use in the Offer
Documents which shall have become false or misleading, and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
SECTION 1.02. COMPANY ACTION. (a) The Company hereby consents to
the Offer and represents that (i) the Board, at a meeting duly called and held
on May 4, 1997, has unanimously (A) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
are in the best interests of the holders of Shares, (B) approved and adopted
this Agreement and the transactions contemplated hereby and (C) resolved to
recommend that the stockholders of the Company accept the Offer and approve and
adopt this Agreement and the transactions contemplated hereby, and (ii) Goldman,
Sachs & Co. ("GOLDMAN SACHS") has delivered to the Board its opinion that the
consideration to be received by the holders of Shares pursuant to each of the
Offer and the Merger is fair to the holders of Shares. The Company hereby
consents to the inclusion in the Offer Documents of the recommendation of the
Board described in the immediately preceding sentence. The Company has been
advised by each of its directors and executive officers that they intend to
tender all Shares beneficially owned by them to Purchaser pursuant to the Offer.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on
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Schedule 14D-9 (together with all amendments and supplements thereto, the
"SCHEDULE 14D-9") containing the recommendation of the Board described in
Section 1.02(a), except if the Board determines in good faith that an
alternative recommendation to be necessary in accordance with its fiduciary
duties to the Company's stockholders under applicable law as advised by outside
legal counsel, and shall disseminate the Schedule 14D-9 to the extent required
by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and any other applicable federal securities laws. The
Company, Parent and Purchaser each agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall hold in confidence the information contained in such labels, listings and
files, shall use such information solely in connection with the Offer and the
Merger, and, if this Agreement shall be terminated in accordance with
Section 8.01 or if the Offer is otherwise terminated, shall promptly deliver to
the Company all copies of such information and any information derived therefrom
then in their possession or the possession of their agents and representatives.
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in Article VII, and in accordance with Delaware Law, at the
Effective Time (as hereinafter defined) Purchaser shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "SURVIVING CORPORATION").
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<PAGE>
SECTION 2.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or a certificate of merger or certificate of ownership and
merger (in any of such cases, the "CERTIFICATE OF MERGER") with the Secretary of
State of the State of Delaware, in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time of
such filing being the "EFFECTIVE TIME").
SECTION 2.03. EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law.
SECTION 2.04. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At the
Effective Time the Certificate of Incorporation of Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; PROVIDED, HOWEVER, that, at the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation
is Vivra Incorporated."
(b) The By-laws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-laws.
SECTION 2.05. DIRECTORS AND OFFICERS. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation and Delaware Law, and the
officers of the Purchaser immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified in accordance
with the Certificate of Incorporation and By-laws of the Surviving Corporation
and Delaware Law.
SECTION 2.06. CONVERSION OF SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to
Section 2.06(b) and any Dissenting Shares (as hereinafter defined)) shall
be cancelled and shall be converted automatically into the right to receive
an amount equal to the Per Share Amount in cash (the "MERGER
CONSIDERATION") payable, without interest, to the holder
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<PAGE>
of such Share, upon surrender, in the manner provided in Section 2.09, of
the certificate that formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each
Share owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Each share of Common Stock, par value $0.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 2.07. EMPLOYEE STOCK OPTIONS. All outstanding Employee Stock
Options (as defined in Section 6.06(a)) will be cancelled immediately prior to
the Effective Time and, in consideration of such cancellation, the Surviving
Corporation will pay each holder of an Employee Stock Option the cash amount
determined in accordance with Section 6.06(a). All restricted stock under the
Company's 1989 Stock Incentive Plan will be vested, and any restrictions
attached thereto pursuant to such plan will lapse, immediately prior to the
Effective Time.
SECTION 2.08. DISSENTING SHARES. (a) Notwithstanding any provision
of this Agreement to the contrary, Shares that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Section 262 of Delaware Law (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 2.09, of the
certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to Delaware Law and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Delaware Law. The Company shall not, except with
the prior written consent of Parent, make any
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<PAGE>
payment with respect to any demands for appraisal or offer to settle or settle
any such demands.
SECTION 2.09. SURRENDER OF SHARES; STOCK TRANSFER BOOKS. (a) Prior
to the Effective Time, Purchaser shall designate a bank or trust company to act
as agent (the "PAYING AGENT") for the holders of Shares in connection with the
Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent
as directed by the Surviving Corporation.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a)(i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and (ii) instructions for use
in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as reasonably may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each Share
formerly evidenced by such Certificate, and such Certificate shall then be
cancelled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If payment of the Merger Consideration is to be made to a
person other than the person in whose name the surrendered Certificate is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a
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<PAGE>
Share for any Merger Consideration delivered in respect of such Share to a
public official pursuant to any abandoned property, escheat or other similar
law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the
Company. From and after the Effective Time, the holders of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided herein or by applicable law.
SECTION 2.10. CONVERTIBLE SUBORDINATED NOTES. (a) 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 (which shall conform to the Trust Indenture Act
of 1939, as amended, as in force at the date of execution of such 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 shall promptly cause notice of
the execution and delivery of such supplemental indenture to be mailed to each
holder of the 5% Notes in accordance with the Indenture and shall take such
other actions as may be appropriate or required by the Indenture, or otherwise,
to implement the terms of the Indenture, as supplemented as provided herein.
(b) The Company agrees that it shall offer to repurchase the Notes at
the option of the holders thereof and shall consummate such repurchase, in each
case in accordance with the terms and conditions of Section 3.8 through Section
3.13, inclusive, of the Indenture.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent concurrently with the execution of this Agreement (the
"COMPANY DISCLOSURE SCHEDULE"), which shall identify exceptions by specific
Section references, the Company hereby represents and warrants to Parent and
Purchaser that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
the Company and each subsidiary of the Company (a "SUBSIDIARY") is a corporation
duly
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incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not prevent or materially delay
consummation of the Merger or the other Transactions, or otherwise prevent the
Company from performing its material obligations under this Agreement, and would
not, individually or in the aggregate, have a Material Adverse Effect (as
defined below). The Company and each Subsidiary is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not prevent or materially delay consummation of the Merger
or the other Transactions, or otherwise prevent the Company from performing its
material obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect. When used in connection with the
Company or any Subsidiary, the term "MATERIAL ADVERSE EFFECT" means any
circumstance, change in or effect on the Company, any Subsidiary or any
circumstance, change in or effect on 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") that is, or is reasonably likely to be,
materially adverse to the value of the Dialysis Business or the Company and the
Dialysis Subsidiaries (not including the Specialty Business (as defined below)),
taken as a whole, other than a change, condition, event or development that
results from (i) the announcement of the Transactions, (ii) general economic
conditions, (iii) conditions that are generally applicable to the dialysis
business, the renal care business or the nephrologist practice management
business, or (iv) actions, legislation or initiatives that are generally
applicable to the dialysis business, the renal care business or the nephrologist
practice management business, or any proposals thereof, of any Governmental
Authority or any announcement thereof. Section 3.01 of the Company Disclosure
Schedule sets forth, as of the date of this Agreement, a true and complete list
of all of the Subsidiaries (which list indicates those Subsidiaries (the
"DIALYSIS SUBSIDIARIES") that are engaged in the Dialysis Business and those
Subsidiaries (the "SPECIALTY SUBSIDIARIES") that are engaged, in whole or in
part, in the 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")), together with the jurisdiction of incorporation of each Subsidiary
and the percentage of each Subsidiary's outstanding capital stock or other
equity interests owned by the Company and Subsidiaries, as the case may be.
There are no partnerships or joint venture arrangements or other business
entities in which the Company or any Subsidiary owns an equity interest. The
Dialysis Business is conducted through the Company and the Dialysis
Subsidiaries, and all the assets and services predominantly used in the Dialysis
Business as presently conducted are owned or leased by the Company and the
Dialysis
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Subsidiaries. Neither Specialty Partners nor any Specialty Subsidiary is
engaged, in any material respect, in the Dialysis Business.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company
has heretofore made available to Parent a complete and correct copy of the
Certificate of Incorporation and the By-laws (or equivalent organizational
documents), each as amended to date, of the Company and each Subsidiary. Such
Certificates of Incorporation, By-laws or equivalent organizational documents
are in full force and effect. The Company and each Subsidiary are not in
violation of any of the provisions of their respective Certificates of
Incorporation or By-laws (or equivalent organizational documents).
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the
Company consists of 80,000,000 Shares and 10,000,000 shares of Preferred Stock,
par value $.01 per share ("COMPANY PREFERRED STOCK"). As of the date hereof,
(i) 41,991,547 Shares are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no Shares are held in the treasury of
the Company, (iii) no Shares are held by the Subsidiaries, (iv) 2,711,133 Shares
are reserved for future issuance pursuant to employee stock options (the
"COMPANY OPTIONS") granted under the Company's Revised 1989 Stock Incentive
Plan, 1989 Transition Consultants' Stock Option Plan or any other plan or
arrangement of the Company (collectively, the "COMPANY STOCK OPTION PLANS"), and
(v) 4,261,963 Shares are reserved for issuance pursuant to the conversion of the
5% Notes. As of the date hereof, no shares of Company Preferred Stock are
issued and outstanding. Except for (i) Company Options granted pursuant to the
Company Stock Option Plans or options or restricted stock to be granted pursuant
to automatic grants under Company Stock Option Plans, (ii) options granted
pursuant to Subsidiary stock option plans described in Section 3.03 of the
Disclosure Schedule, (iii) the 5% Notes and (iv) the rights (the "COMPANY
RIGHTS") issued pursuant to the Amended and Restated Rights Agreement, dated as
of February 13, 1996 (the "RIGHTS AGREEMENT"), between the Company and The First
National Bank of Boston, as Rights Agent, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any Dialysis
Subsidiary or obligating the Company or any Dialysis Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in, the Company or any
Dialysis Subsidiary. All Shares subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding contractual obligations of the Company
or any Dialysis Subsidiary to repurchase, redeem or otherwise acquire any Shares
or any capital stock of any Subsidiary. Each outstanding share of capital stock
of each Dialysis Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company or another Dialysis
Subsidiary is free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
such other Dialysis Subsidiary's voting rights, charges and other encumbrances
of any nature whatsoever. There are no material
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outstanding contractual obligations of the Company or any Dialysis Subsidiary to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, Specialty Partners, any other Subsidiary or any
other person.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT AND THE SPECIALTY
MERGER AGREEMENT. The Company has all necessary power and authority to execute
and deliver this Agreement and the Specialty Merger Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby (the "TRANSACTIONS"). The execution and
delivery of this Agreement and the Specialty Merger Agreement by the Company and
the consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or the
Specialty Merger Agreement or to consummate the Transactions (other than, with
respect to the Specialty Merger Transaction, the reorganization of Specialty
Partners as contemplated in the Specialty Merger Agreement, and other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the then outstanding Shares if and to the extent
required by applicable law, and the filing and recordation of appropriate merger
documents as required by Delaware Law). As an amplification and not in
limitation of the immediately preceding sentence, the Board has taken all
actions required to render inapplicable to the Transactions the restrictions on
business combinations contained in Section 203 of the Delaware Law and Article 9
and Article 10 of the Certificate of Incorporation of the Company. This
Agreement and the Specialty Merger Agreement each have been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Purchaser, constitute a legal, valid and
binding obligation of the Company.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement and the Specialty Merger Agreement by
the Company do not, and the performance of this Agreement and the Specialty
Merger Agreement by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws or equivalent organizational documents
of the Company or any Subsidiary, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.05(b) have been made,
conflict with or violate any foreign or domestic law, statute, ordinance, rule,
regulation, order, judgment or decree ("LAW") applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary is
bound, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and
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(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) The execution and delivery of this Agreement and the Specialty
Merger Agreement by the Company do not, and the performance of this Agreement
and the Specialty Merger Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign ("GOVERNMENTAL
AUTHORITY"), except (i) for applicable requirements, if any, of the Exchange
Act, state securities or "blue sky" laws ("BLUE SKY LAWS"), the New York Stock
Exchange (the "NYSE"), state takeover laws, the pre-merger notification
requirements of the HSR Act and filing and recordation of appropriate merger
documents as required by Delaware Law, (ii) except to the extent that the Merger
will require the Company to obtain new Medicare, Medicaid or third party
provider numbers, licenses or similar permits, and (iii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Offer,
the Merger or the Specialty Merger Transaction, or otherwise prevent the Company
from performing its obligations under this Agreement or the Specialty Merger
Agreement, and would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. The Company and each of the
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Authority necessary for the Company or
each Dialysis Subsidiary to own, lease and operate its properties or to carry on
the Dialysis Business as it is now being conducted (the "PERMITS"), except where
the failure to have, or the suspension or cancellation of, any of the Permits
would not, individually or in the aggregate, have a Material Adverse Effect,
and, as of the date hereof, no suspension or cancellation of any of the Permits
is pending or, to the knowledge of the Company, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Permits would
not, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any Dialysis Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to the Company or any Dialysis Subsidiary
or by which any property or asset of the Company or any Dialysis Subsidiary is
bound or affected, (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Dialysis Subsidiary is a party or by which the
Company or any Dialysis Subsidiary or any property or asset of the Company or
any Dialysis Subsidiary is bound or affected or (iii) any Permits, except for
any such conflicts, defaults or violations that would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company
has filed all forms, reports and documents required to be filed by it with the
SEC since
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November 30, 1993 through the date of this Agreement (collectively, the "SEC
REPORTS"). The SEC Reports (i) complied as to form in all material respects
with the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the applicable rules and
regulations thereunder and (ii) did not, at the time they were filed, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Dialysis Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented the consolidated financial
position, results of operations and cash flows of the Company and the
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein except as otherwise noted therein (subject,
in the case of unaudited statements, to normal and recurring year-end
adjustments which did not and are not expected to, individually or in the
aggregate, have a Material Adverse Effect).
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November
30, 1996, except as contemplated by or as disclosed in this Agreement or as
disclosed in any SEC Report filed since November 30, 1996, the Company and the
Dialysis Subsidiaries have conducted the Dialysis Business only in the ordinary
course of the Dialysis Business and, since such date, there has not been (a) any
Material Adverse Effect, (b) any material change by the Company in its
accounting methods, principles or practices, including without limitation, those
used in the calculation of contractual adjustments or bad debts, (c) any
revaluation by the Company of any material assets (including, without
limitation, any writing down of the value of inventory, writing off of notes or
accounts receivable), other than in the ordinary course of the Dialysis
Business, (d) any entry by the Company or any Dialysis Subsidiary into any
commitment or transaction material to the Dialysis Business, (e) except as
specifically contemplated hereby, any declaration, setting aside or payment of
any dividend or distribution in respect of the Shares or any redemption,
purchase or other acquisition of any of its securities or (f) any increase in,
or establishment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any other increase in the compensation payable or to
become payable to any officers or key employees of the Company or any
Subsidiary, except increases in the salaries of employees, payment of profit
sharing and bonuses, and granting of stock options in the ordinary course of
business consistent with past practice.
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SECTION 3.09. ABSENCE OF LITIGATION. There is no litigation, suit,
claim, action, proceeding or investigation (an "ACTION") pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary, or
any property or asset of the Company or any Subsidiary, before any court,
arbitrator or Governmental Authority, which (i) individually or in the
aggregate, reasonably would be expected to have a Material Adverse Effect or
(ii) seeks to delay or prevent the consummation of any Transaction. Neither the
Company nor any Subsidiary nor any property or asset of the Company or any
Subsidiary is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority or arbitrator having, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a)
Section 3.10 of the Disclosure Schedule contains a true and complete list of all
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company or
any Subsidiary is a party, with respect to which the Company or any Subsidiary
has any obligation or which are maintained, contributed to or sponsored by the
Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary (collectively, the
"PLANS"). Each Plan is in writing and the Company has previously furnished or
made available to Parent a true and complete copy of each Plan and a true and
complete copy of each material document prepared in connection with each such
Plan, including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor any
Subsidiary has any express or implied commitment (i) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Internal Revenue Code of 1986, as amended
(the "CODE").
(b) None of the Plans is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN"), or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "MULTIPLE
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EMPLOYER PLAN"). None of the Plans is "defined benefit plan" within the meaning
of Section 3(35) of ERISA. None of the Plans (i) provides for the payment of
separation, severance, termination or similar-type benefits to any person,
(ii) obligates the Company or any Subsidiary to pay separation, severance,
termination or other benefits as a result of any Transaction or (iii) obligates
the Company or any Subsidiary to make any payment or provide any benefit that
could be subject to a tax under Section 4999 of the Code. None of the Plans
provides for or promises retiree medical, disability or life insurance benefits
to any current or former employee, officer or director of the Company or any
Subsidiary, except for continued healthcare coverage under COBRA.
(c) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the IRS that such
Plan is so qualified, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that such trust is
so exempt. No fact or event has occurred since the date of any such
determination letter from the IRS that could adversely affect the qualified
status of any such Plan or the exempt status of any such trust. Each trust
maintained or contributed to by the Company or any Subsidiary which is intended
to be qualified as a voluntary employees' beneficiary association exempt from
federal income taxation under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and no fact or event has occurred since the date of such
determination by the IRS that could adversely affect such qualified or exempt
status.
(d) There has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any Subsidiary is currently liable or has previously
incurred any liability for any tax or penalty arising under Section 4971, 4972,
4979, 4980 or 4980B of the Code or Section 502(c) of ERISA, and no fact or event
exists which could give rise to any such liability. Neither the Company nor any
subsidiary has incurred any liability under, or by operation of, Title IV of
ERISA and no fact or event exists which could give rise to any such liability.
(e) Each Plan is now and has been operated in all respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and each Subsidiary have
performed all obligations required to be performed by them under, are not in any
respect in default under or in violation of any Plan. The audited consolidated
balance sheet of the Company for the fiscal year ended November 30, 1996
reflects an accrual of all amounts of employer contributions and premiums
accrued but unpaid with respect to the Plans.
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(f) The Company and the Subsidiaries have not incurred any liability
under, and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the Effective Time.
(g) Except as set forth in Section 3.10(g) of the Disclosure
Schedule, (i) there are no claims or actions pending or, to the knowledge of the
Company, threatened between the Company or any Subsidiary and any of their
respective employees, which controversies have a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or contract
and there are no grievances outstanding against the Company or any Subsidiary
under any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; and (v) there is no strike,
slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat
thereof, by or with respect to any employees of the Company or any Subsidiary.
SECTION 3.11. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the respective times the
Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are
filed with the SEC or are first published, sent or given to stockholders of the
Company, as the case may be, shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. Neither the proxy
statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting (as hereinafter defined) nor the information statement to
be sent to such stockholders, as appropriate (such proxy statement or
information statement, as amended or supplemented, being referred to herein as
the "PROXY STATEMENT"), shall, at the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, at the
time of the Stockholders' Meeting and at the Effective Time, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to statements therein based on
information supplied by
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Parent or Purchaser or any of their representatives which is contained in the
Schedule 14D-9, the Offer Documents, the Proxy Statement or any amendment or
supplement thereto. The Schedule 14D-9 and the Proxy Statement shall comply in
all material respects as to form with the requirements of the Exchange Act and
the applicable rules and regulations thereunder.
SECTION 3.12. PROPERTY. The Company and the Dialysis Subsidiaries
have sufficient title to, or right to use, all their properties and assets
necessary to conduct their respective businesses as currently conducted or as
contemplated to be conducted, with only such exceptions as, individually or in
the aggregate, would not have a Material Adverse Effect.
SECTION 3.13. TRADEMARKS, PATENTS AND COPYRIGHTS. To the knowledge
of the Company, the Company and the Dialysis Subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
servicemarks, trade secrets, applications for trademarks and for servicemarks,
know-how and other proprietary rights and information used or held for use in
connection with the Dialysis Business as currently conducted or as contemplated
to be conducted, and the Company is unaware of any assertion or claim
challenging the validity of any of the foregoing which, individually or in the
aggregate, would have a Material Adverse Effect. To the knowledge of the
Company, the conduct of the Dialysis Business as currently conducted does not
and will not infringe upon any patent, patent right, license, trademark,
trademark right, trade name, trade name right, servicemark or copyright of any
third party that, individually or in the aggregate, would have a Material
Adverse Effect. To the knowledge of the Company, there are no infringements of
any propriety rights owned by or licensed by or to the Company or any Dialysis
Subsidiary which, individually or in the aggregate, would have a Material
Adverse Effect.
SECTION 3.14. TAXES. (a) The Company and the Subsidiaries have
timely filed all Tax Returns and reports required to be filed by them, or
extensions of time for such filings have been filed, and such returns and
reports are in all material respects true, complete and correct. The Company
and the Subsidiaries have paid and discharged within the time and in the manner
prescribed by the law all Taxes that are due and payable, other than such
payments as are being contested in good faith by appropriate proceedings. The
accruals and reserves for Taxes reflected in the Company's audited consolidated
balance sheet for the fiscal year ended November 30, 1996 are adequate to cover
all Taxes accruable through such date (including interest and penalties, if any,
thereon) in accordance with GAAP. Neither the IRS nor any other taxing
authority or agency, domestic or foreign, is now asserting or, to the knowledge
of the Company, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. Neither the Company nor any Subsidiary has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the
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assessment of, any income Tax. The statute of limitations for the assessment of
any federal income Taxes has expired for all income Tax Returns of the Company
and each of the Subsidiaries or such income Tax Returns of the Company and each
of the Subsidiaries have been examined by the IRS for all periods. There are no
Tax liens upon the assets of the Company or any Subsidiaries except for
statutory liens for current Taxes not yet due. No audits or other
administrative proceeding or court proceedings are presently pending with regard
to any Taxes or Tax Returns of the Company or any of the Subsidiaries. Neither
the Company nor any Subsidiary is a party to any agreement relating to
allocating or sharing of Taxes which has not been disclosed on its Tax Returns.
No consent under Section 341(f) of the Code has been filed with respect to the
Company or any Subsidiary. Neither the Company nor any of the Subsidiaries has
received a written ruling relating from, or entered into a written and legally
binding agreement with, a taxing authority relating to Taxes.
(b) "TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added or gains taxes;
license, registration and documentation fees; and customs' duties, tariffs, and
similar charges.
(c) "TAX RETURN" means any report, return, information statement,
payee statement or other information required to be provided to any federal,
state, local or foreign government or taxing authority, or otherwise retained,
with respect to Taxes.
SECTION 3.15. ENVIRONMENTAL MATTERS. (a) For purposes of this
Agreement, the following terms shall have the following meanings:
(i) "HAZARDOUS SUBSTANCES" means (A) those substances defined in or regulated
under the following federal statutes and their state counterparts, as each may
be amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof;
(C) natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any
other contaminant; and (F) any substance with respect to which a federal, state
or local agency requires environmental investigation, monitoring, reporting or
remediation; and (ii) "ENVIRONMENTAL LAWS" means any federal, state or local law
relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous
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Substances or materials containing Hazardous Substances; or (C) otherwise
relating to pollution of the environment or the protection of human health.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, to the knowledge of the Company: (i) the Company and
the Subsidiaries have not violated and are not in violation of any Environmental
Law; (ii) none of the properties owned or leased by the Company or the
Subsidiaries (including, without limitation, soils and surface and ground
waters) are contaminated with any Hazardous Substance at levels which exceed
standards established by applicable Governmental Authorities; (iii) the Company
and each of the Subsidiaries are not actually or reasonably likely to be liable
for any off-site contamination; and (iv) the Company and each of the
Subsidiaries are not actually or reasonably likely to be liable under any
Environmental Law.
SECTION 3.16. MATERIAL CONTRACTS. (a) Subsections (i) through (vi)
of Section 3.16 of the Company Disclosure Schedule contain a list of the
following types of contracts and agreements to which the Company or any Dialysis
Subsidiary is a party (such contracts, agreements and arrangements as are
required to be set forth in Section 3.16(a) of the Company Disclosure Schedule
being referred to herein collectively as the "MATERIAL CONTRACTS"):
(i) all contracts with medical directors or agreements regarding the
provision of acute dialysis services;
(ii) the ten largest contracts between or among the Company or any
Dialysis Subsidiary and any health maintenance organization, physician
provider organization or any other discounted fee for service payor for
dialysis services, which contracts cover in the aggregate more than 50% of
the total patients covered by the Dialysis Business with private insurance;
(iii) all contracts and agreements (excluding routine checking
account overdraft agreements involving petty cash amounts) under which the
Company or any Dialysis Subsidiary has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness (as
defined under GAAP) or under which the Company or any Dialysis Subsidiary
has imposed (or may impose) a security interest or lien on any of its
assets, whether tangible or intangible, to secure indebtedness, other than
contracts or agreements relating to indebtedness (as defined under GAAP),
or security interests securing such indebtedness, not exceeding $5,000,000
in the aggregate;
(iv) all contracts and agreements that limit the ability of the
Company or any Dialysis Subsidiary or, after the purchase of the Shares
pursuant to the Offer, Parent or any of its affiliates, to compete in any
line of business or with any person
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or in any geographic area or during any period of time, or to solicit any
customer or client;
(v) all contracts and agreements between or among the Company or any
Dialysis Subsidiary, on the one hand, and any affiliate of the Company
(other than a wholly owned subsidiary), on the other hand;
(vi) all contracts and agreements between the Company or any Dialysis
Subsidiary, on the one hand, and Specialty Partners or any Specialty
Subsidiary, on the other hand;
(vii) all agreements regarding laboratory services or the
provision or receipt of laboratory services, whether by the Company or any
Dialysis Subsidiary involving amounts in excess of $100,000 over the term
of the agreement;
(viii) all agreements for the purchase or sale of supplies used in
the Dialysis Business that require the payment or receipt of consideration
in excess of $500,000; and
(ix) all contracts and agreements not otherwise listed above (A) which
are material to the Dialysis Business in its entirety or (B) the
termination of which would have a Material Adverse Effect.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, each contract referred to in paragraphs (i) through
(ix) above is a legal, valid and binding agreement, and none of the Material
Contracts is in default by its terms or has been cancelled by the other party;
and the Company and the Dialysis Subsidiaries are not in receipt of any claim of
default under any such agreement. The Company has furnished or made available
to Parent true and complete copies of all Material Contracts.
SECTION 3.17. BENEFITS AND PAYMENTS. The Company and the
Subsidiaries have not engaged in any activities which are prohibited under 42
U.S.C. Section 1320a-7b, or the regulations promulgated thereunder, or under any
related state or local statutes or regulations, or which are prohibited by any
rules of professional conduct, including, without limitation: (i) knowingly and
willfully making or causing to be made a false statement or representation of a
material fact in any application for any benefit or payment; (ii) knowingly and
willfully making or causing to be made any false statement or representation of
a material fact for use in determining rights to any benefit or payment; (iii)
failure to disclose knowledge as a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment on its own
behalf or on behalf of another, with intent to secure fraudulently such benefit
or payment; and (iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
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overtly or covertly, in cash or in kind or offering to pay or receive such
remuneration (a) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare or Medicaid, or (b) in
return for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid.
SECTION 3.18. AMENDMENT TO RIGHTS AGREEMENT. The Board has taken all
necessary action to approve the amendment of the Rights Agreement so that (a)
none of the execution or delivery of this Agreement, the making of the Offer,
the acceptance for payment or payment for Shares by Purchaser pursuant to the
Offer or the consummation of the Merger or any other Transaction will result in
(i) the occurrence of the "flip-in event" described under Section 11 of the
Rights Agreement, (ii) the occurrence of the "flip-over event" described in
Section 13 of the Rights Agreement, or (iii) the Company Rights becoming
evidenced by, and transferable pursuant to, certificates separate from the
certificates representing Company Common Stock and (b) the Company Rights will
expire pursuant to the terms of the Rights Agreement at the Effective Time.
SECTION 3.19. BROKERS. No broker, finder or investment banker (other
than Goldman Sachs) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore made available to
Parent a complete and correct copy of all agreements between the Company and
Goldman Sachs pursuant to which such firm would be entitled to any payment
relating to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby jointly and severally represent and
warrant to Company that:
SECTION 4.01. CORPORATE ORGANIZATION. Each of Parent and Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not prevent or materially
delay consummation of the Merger or the other Transactions, or otherwise prevent
Parent or Purchaser from performing its material obligations under this
Agreement.
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SECTION 4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent
and Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and
validly executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws (or equivalent
organizational documents) of either Parent or Purchaser, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
4.03(b) have been obtained and all filings and obligations described in
subsection (b) have been made, conflict with or violate any Law applicable to
Parent or Purchaser or by which any property or asset of either of them is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or Purchaser pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults, or other occurrences which
would not prevent or materially delay consummation of the Merger or the other
Transactions, or otherwise prevent Parent or Purchaser from performing its
material obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws, the NYSE, state
takeover laws, the pre-merger notification requirements of the HSR Act and
filing and recordation of appropriate merger documents as required by Delaware
Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Offer or the Merger, or otherwise prevent
Parent or Purchaser from performing their respective obligations under this
Agreement.
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SECTION 4.04. OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which shall have become false or misleading.
Notwithstanding the foregoing, Parent and Purchaser make no representation or
warranty with respect to any information supplied by the Company or any of its
representatives which is contained in any of the Offer Documents, the Proxy
Statement or any amendment or supplement thereto. The Offer Documents shall
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
SECTION 4.05. FINANCING. Parent and Purchaser will have available
all of the funds necessary for the acquisition of all the outstanding Shares
pursuant to the Offer and the Merger, as the case may be, and to perform their
respective obligations under this Agreement.
SECTION 4.06. INTERIM OPERATIONS OF PURCHASER. Purchaser was formed
solely for the purpose of engaging in the Transactions and has not engaged in
any business activities or conducted any operations other than in connection
with the Transactions.
SECTION 4.07. OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of
this Agreement, neither Parent, Purchaser nor any of their affiliates is the
beneficial owner of any shares of capital stock of the Company.
SECTION 4.08. BROKERS. No broker, finder or investment banker (other
than UBS Securities LLC and Morgan Stanley & Co. Incorporated) is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or
Purchaser.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS PENDING THE MERGER. The Company
covenants and agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.01 of the Company Disclosure Schedule or
as contemplated by any other provision of this Agreement, unless Parent or
Purchaser shall otherwise agree in writing, the Dialysis Business shall be
conducted only in, and the Company and the Dialysis Subsidiaries shall not take
any action with respect to the Dialysis Business 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, except as contemplated by this Agreement,
neither the Company nor any Dialysis Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Parent or Purchaser:
(a) amend or otherwise change its 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 the issuance of a Shares issuable
pursuant to Company Options outstanding on the date hereof and the Shares
issuable upon the conversion of the 5% Notes) 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;
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(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;
(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
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 hereof, other than in
the ordinary course of the Dialysis Business.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDERS' MEETING. (a) If required by applicable
law in order to consummate the Merger, the Company, acting through the Board,
shall, in accordance with applicable law and the Company's Certificate of
Incorporation and By-laws, (i) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
this Agreement and the transactions contemplated hereby (the "STOCKHOLDERS'
MEETING") and (ii) except if the Board determines in good faith an alternative
action to be necessary in accordance with its fiduciary duties to the Company's
stockholders under applicable law as advised by outside legal counsel,
(A) include in the Proxy Statement the unanimous recommendation of the Board
that the holders of the Shares approve and adopt this Agreement and the
Transactions and (B) use its reasonable efforts to obtain such approval and
adoption of the holders of Shares. At the Stockholders' Meeting, Parent and
Purchaser shall cause all Shares then owned by them and their subsidiaries to be
voted in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VII, to take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as soon as reasonably practicable
after such acquisition, without a meeting of the stockholders of the Company.
SECTION 6.02. PROXY STATEMENT. If required by applicable law, as
soon as reasonably practicable following consummation of the Offer, the Company
shall file the Proxy Statement with the SEC under the Exchange Act, and shall
use its reasonable efforts to have the Proxy Statement cleared by the SEC.
Parent, Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the reasonable opportunity
to review the Proxy Statement prior to its being filed with the SEC and shall
give Parent and its counsel the opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC. Each of the Company, Parent and Purchaser agrees to use its reasonable
efforts, after consultation with the other parties hereto, to respond promptly
to all such comments of and
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requests by the SEC 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.
SECTION 6.03. COMPANY BOARD REPRESENTATION; SECTION 14(F). (a)
Promptly upon the purchase by Purchaser of 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, on the Board as
shall give Purchaser representation on the Board equal to the product of the
total number of directors on the Board (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 or securing the resignations of incumbent
directors or both. At such times, the Company shall, upon the written request
of Purchaser, use its reasonable efforts to cause persons designated by
Purchaser to constitute the same percentage as persons designated by Purchaser
shall constitute of the Board of (i) each committee of the Board, (ii) each
board of directors of each domestic Dialysis Subsidiary and (iii) each committee
of each such board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, until the earlier of (i) the time Purchaser
acquires a majority of the then outstanding Shares on a fully diluted basis and
(ii) the Effective Time, the Company shall use its reasonable efforts to ensure
that all the members of the Board and each committee of the Board and such
boards and committees of the domestic Dialysis Subsidiaries as of the date
hereof who are not employees of the Company shall remain members of the Board
and of such boards and committees, except for the members not standing for
re-election at the Company's 1997 annual meeting of stockholders.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or By-laws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
waiver of any of the Company's rights
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hereunder shall require the concurrence of a majority of the directors of the
Company then in office who neither were designated by Purchaser nor are
employees of the Company.
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the
date hereof to the Effective Time, upon reasonable notice, the Company shall,
and shall cause the Dialysis Subsidiaries and the officers, directors,
employees, auditors and agents of the Company and the Dialysis Subsidiaries to,
afford the officers, employees and agents of Parent and Purchaser complete
access during normal business hours to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Dialysis Subsidiary, and shall furnish Parent and Purchaser
with all financial, operating and other data and information as Parent or
Purchaser, through its officers, employees or agents, may reasonably request.
Parent and Purchaser shall make all reasonable efforts to minimize any
disruption to the Dialysis Business which may result from the requests for data
and information hereunder.
(b) All information obtained by Parent or Purchaser pursuant to this
Section 6.04 shall be kept confidential in accordance with the confidentiality
agreement, dated October 7, 1996 (the "CONFIDENTIALITY AGREEMENT"), between
Parent and the Company.
(c) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05. NO SOLICITATION. (a) 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 defined below in this Section 6.05(a)). 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 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 Section 6.05(c), (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 and (y)
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participate in negotiations regarding such acquisition proposal. For purposes
of this 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 the Dialysis
Subsidiaries or of over 20% of any class of equity securities of the Company or
any of the Dialysis Subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any of the Dialysis Subsidiaries,
any merger, consolidation, business combination, sale of all or substantially
all of the assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of the Dialysis Subsidiaries, other
than the Transactions, 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 Merger.
(b) Except as set forth in this Section 6.05, neither the Board 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 or any such committee of the Offer, this 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 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 may withdraw or modify its approval or recommendation of the
Offer, the Merger or this Agreement in order to enter into a definitive
agreement with respect to a Superior Proposal (as defined below) and may
terminate this Agreement pursuant to Section 8.01(d)(ii) (and concurrently with
or after such termination may cause the Company to enter into any agreement with
respect to any Superior Proposal). For purposes of this 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 securities,
more than 50% 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 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 than the Offer and the Merger and for which financing, to
the extent required, is then committed.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.05, the Company shall promptly advise
Parent orally and in writing of any request for information or of any
acquisition proposal, the material terms and conditions of such request or
acquisition proposal and the identity of the person making such request or
acquisition proposal.
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(d) Nothing contained in this Section 6.05 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to the Company's stockholders if the Board 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, PROVIDED,
HOWEVER, neither the Company nor the Board nor any committee thereof shall,
except as permitted by Section 6.05(b), withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to the Offer, this Agreement or
the Merger or to approve or recommend, or propose publicly to approve or
recommend, an acquisition proposal.
(e) The Company agrees not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which the
Company is a party.
SECTION 6.06. EMPLOYEE STOCK OPTIONS AND OTHER EMPLOYEE BENEFITS.
(a) Immediately prior to the Effective Time, the Company shall take all such
actions as shall be necessary to cause all stock options (and any related
alternative rights) to purchase shares of Company Common Stock (the "EMPLOYEE
STOCK OPTIONS") granted under 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 Employee Stock Options are outstanding
immediately prior to the Effective Time (whether or not then presently
exercisable or vested), to be cancelled. In exchange for the cancellation of
such Employee Stock Option, the holder thereof shall be entitled to receive from
the Surviving Corporation an amount in cash equal to the product of the
difference between the Per Share Amount and the per share exercise price of such
Employee Stock Option, and the number of shares of Company Common Stock covered
by such Employee Stock Option. All payments in respect of Employee Stock
Options shall be made after the Effective Time and not later than thirty days
following the Effective Time, subject to the Company's collection of all
applicable withholding taxes. 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 in the previous
sentence. Prior to the Effective Time, the Company shall cause each holder of
an outstanding Employee Stock Option to consent to the cancellation of the
Employee Stock Options held by such holder in consideration for the payment
provided herein, and shall take such other action as may be necessary to carry
out the terms of this Section 6.06(a).
(b) Section 6.06(b) of the Disclosure Schedule contains a list of
each employee of the Company or any Dialysis Subsidiary who has a written
employment agreement that provides for the payment of severance or similar-type
payments or benefits to such employee following such employee's termination of
employment with the Company and its Dialysis Subsidiaries (the "EMPLOYMENT
CONTRACTS").
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(c) Following the Effective Time the Company will maintain for
eligible participants other than employees who will be employed by Specialty
Partners after the date of the Specialty Merger Transaction a retention bonus
and deferred compensation arrangement substantially in the form of Annex B to
this Agreement.
SECTION 6.07. SPECIALTY 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 Company will
not amend or modify any material provision of, or waive any of its rights under
the Specialty Merger Agreement.
SECTION 6.08. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article Eight of the Certificate of Incorporation of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from 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.
(b) 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;
PROVIDED, HOWEVER, that if the existing policies expire, are terminated or
cancelled during such period, Parent or Surviving Corporation will use its best
efforts to obtain substantially similar policies. Notwithstanding the
foregoing, in no event shall Parent or the Surviving Corporation be required to
expend pursuant to this Section 6.08(b) more than an amount per year equal to
150% of current annual premiums (the "CURRENT PREMIUMS") paid by the Company for
such insurance (which premiums the Company represents and warrants to be
$180,000 in the aggregate); and, PROVIDED, FURTHER, that if the Parent or the
Surviving Corporation is not able to obtain the amount of insurance required by
this Section 6.08(b) for such aggregate premium, Parent or the Surviving
Corporation shall obtain as much insurance as can be obtained for an annual
premium of 150% of the Current Premiums.
(c) In the event the Company, the Surviving Corporation or the Parent
or any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such
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consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company, the
Surviving Corporation or the Parent, as the case may be, shall assume the
obligations set forth in this Section 6.08.
SECTION 6.09. RIGHTS PLAN. The Company shall not redeem the Company
Rights prior to the Effective Time unless required to do so by order of a court
of competent jurisdiction. The Board shall take, or cause to be taken, such
action as is necessary to effect the amendments to the Rights Plan as approved
by the Board and described in Section 3.18.
SECTION 6.10. CONDUCT OF SPECIALTY BUSINESS. From the date hereof
until the earlier of the consummation of the Specialty Merger Transaction and
the termination of this Agreement pursuant to Section 8.01, the Company shall
operate Specialty Partners, the Specialty Subsidiaries, and the Specialty
Business consistent with Section 2 of the Services Agreement dated as of the
date hereof between the Company and Specialty Partners and the Company and the
Dialysis Subsidiaries shall not make any contribution, payment or other transfer
to Specialty Partners or any Specialty Subsidiary of cash, cash equivalents,
marketable securities or any other asset, and Specialty Partners and the
Specialty Subsidiaries shall not make any contribution, payment or other
transfer to the Company or any Dialysis Subsidiary of cash, cash equivalents,
marketable securities or any other asset.
SECTION 6.11. NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would cause any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect when made
and (ii) any material failure of the Company, Parent or Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 6.11 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 6.12. FURTHER ACTION; REASONABLE EFFORTS. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions and (ii) use its
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, using its reasonable efforts to
obtain all licenses, permits (including, without limitation, Environmental
Permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and the
Subsidiaries as are necessary for the consummation of the Transactions and to
fulfill the conditions to the Offer and the Merger. In case at any time
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after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use their reasonable efforts to take all such
action.
(b) Each of the parties hereto agree to cooperate and use their
reasonable efforts vigorously to contest and resist any action, including
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an "ORDER") that is in effect and that restricts,
prevents or prohibits the consummation of the Offer, the Merger or any other
Transactions, including, without limitation, by vigorously pursuing all
available avenues of administrative and judicial appeal.
SECTION 6.13. PUBLIC ANNOUNCEMENTS. Unless otherwise required by
applicable law or stock exchange requirements applicable to any party hereto,
Parent and the Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any Transaction and shall not issue any such press release or make any such
public statement prior to such consultation.
SECTION 6.14. CONFIDENTIALITY AGREEMENT. The Company hereby waives
the provisions of the Confidentiality Agreement as and to the extent necessary
to permit the consummation of each Transaction. Upon the acceptance for payment
of Shares pursuant to the Offer, the Confidentiality Agreement shall be deemed
to have terminated without further action by the parties thereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE MERGER. The respective obligations
of each party to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement, the Merger and the
transactions contemplated hereby shall have been approved and adopted by
the affirmative vote of the stockholders of the Company to the extent
required by Delaware Law and the Certificate of Incorporation of the
Company;
(b) HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
33
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(c) NO ORDER. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state
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 Merger; and
(d) OFFER. Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to
the obligations of Parent or Purchaser if, in breach of this Agreement or
the terms of the Offer, Purchaser fails to purchase any Shares validly
tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company:
(a) By mutual written consent of Parent, Purchaser and the
Company duly authorized by the Boards of Directors of Parent, Purchaser and
the Company; or
(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 shall have 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 hereto, 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 this Agreement under this Section 8.01(b) shall not be available
(A) to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to
34
<PAGE>
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; or
(c) By Parent if due to an occurrence or circumstance, other
than a breach by Parent or Purchaser of their obligations hereunder, that
would result in a failure to satisfy any condition set forth in Annex A
hereto (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, 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 hereto, Purchaser shall have terminated
the Offer without having accepted any Shares for payment thereunder or
(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
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 this Section 8.01(d)(ii) shall not be
effective until the Company has made full payment of all amounts provided
under Section 8.03, 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 hereto, or (iv) if Parent or Purchaser
shall have breached any of their respective representations, warranties,
covenants or other agreements contained herein 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.
SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in
35
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Sections 8.03 and 9.01 and (ii) nothing herein shall relieve any party from
liability for any breach hereof.
SECTION 8.03. FEES AND EXPENSES. (a) In the event that
(i) this Agreement is terminated pursuant to
Section 8.01(d)(ii); or
(ii) (x) an acquisition proposal is commenced, publicly
proposed, publicly disclosed or communicated to the Company or any
representative or agent thereof after the date of this Agreement and prior
to the date of termination of this Agreement, (y) this Agreement is
thereafter terminated pursuant to Section 8.01(b), 8.01(c) or 8.01(d)(i),
and (z) 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 (the "FEE"), which amount shall be payable in immediately
available funds, plus all Expenses (as hereinafter defined); PROVIDED, HOWEVER,
that no Fee shall be payable under Section 8.03(ii) if, at the time of
termination under Section 8.01, Parent or Purchaser is in material breach of
their respective material covenants and agreements contained in this Agreement
or their respective representations and warranties contained herein.
(b) If this 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 this Agreement or their respective
representations and warranties contained in this Agreement, the Company shall,
whether or not any payment is made pursuant to Section 8.03(a), reimburse each
of 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 this Agreement, the
structuring and financing of the Transactions and any
36
<PAGE>
financing commitments or agreements relating thereto (all of the foregoing being
referred to herein collectively as the "EXPENSES").
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(d) In the event that the Company shall fail to pay the Fee or any
Expenses when due, the term "Expenses" shall be deemed to include the costs and
expenses actually incurred or accrued by Parent, Purchaser and their respective
stockholders and affiliates (including, without limitation, fees and expenses of
counsel) in connection with the collection under and enforcement of this
Section 8.03, together with interest on such unpaid Fee and Expenses, commencing
on the date that the Fee or such Expenses became due, at a rate equal to the
rate of interest publicly announced by Citibank, N.A., from time to time, in The
City of New York, as such bank's Prime Rate plus 2.00%.
SECTION 8.04. AMENDMENT. Subject to Section 6.03 and applicable law,
this Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; PROVIDED, HOWEVER, that, after the approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company, no amendment may be made which would reduce the amount or change the
type of consideration into which each Share shall be converted upon consummation
of the Merger. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Articles II and IX
37
<PAGE>
and Sections 6.06 and 6.08 shall survive the Effective Time indefinitely and
those set forth in Sections 6.04 and 8.03 shall survive termination
indefinitely.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) or nationally recognized courier services such as
Federal Express, to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent or Purchaser:
Incentive AB
Hamngatan 2
P.O. Box 7373
SE-103 91
Stockholm, Sweden
Telecopier: 011-46-86-11-8161
Attention: Mikael Lilius
and
HH Acquisition Corp.
1185 Oak Street
Lakewood, Colorado 80215
Telecopier: (303) 231-4914
Attention: Mats L. Wahlstr m
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier: (212) 848-7179
Attention: Peter D. Lyons, Esq.
38
<PAGE>
if to the Company:
Vivra Incorporated
1850 Gateway Drive
Suite 500
San Mateo, California 94404
Telecopier: (415) 345-0486
Attention: Kent J. Thiry
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Telecopier: (415) 496-2777
Attention: John W. Larson, Esq.
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
(a) "AFFILIATE" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any Shares means a person
who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates (as such term is defined
in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
39
<PAGE>
(c) "BUSINESS DAY" means any day on which the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks are
not required or authorized to close in The City of New York;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "KNOWLEDGE OF THE COMPANY" means the actual knowledge of the
executive officers of the Company, without having made any independent
investigation in connection with the execution of this Agreement;
(f) "PERSON" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government; and
(g) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Sections 6.04 and 6.14, all
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned by operation of law or otherwise, except that Parent and
Purchaser may assign all or any of their rights and obligations hereunder to any
affiliate of Parent provided that no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
40
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obligations. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
SECTION 9.06. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. GOVERNING LAW. Except to the extent that the laws of
Delaware are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any Delaware state or federal court.
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
41
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INCENTIVE AB
By /s/ Mikael Lilius
-----------------------------------
Name: Mikael Lilius
Title: President and
Chief Executive Officer
By /s/ Soren Mellstig
-----------------------------------
Name: Soren Mellstig
Title: Executive Vice President,
Corporate Control
HH ACQUISITION CORP.
By /s/ Mats L. Wahlstrom
-----------------------------------
Name: Mats L. Wahlstrom
Title: President
VIVRA INCORPORATED
By /s/ Kent J. Thiry
-----------------------------------
Name: Kent J. Thiry
Title: President and
Chief Executive Officer
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer (subject to the provisions of the
Merger Agreement) and may postpone the acceptance for payment of (subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act) and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the HSR
Act shall not have expired or been terminated prior to the expiration of the
Offer, (iii) prior to the expiration or termination of the Offer, the Company
shall not have consummated the Specialty Merger Transaction and received
aggregate cash proceeds therefor after providing for all applicable income taxes
(using an assumed income tax rate of 41%) of not less than $76,900,000, or
(iv) at any time on or after the date of this Agreement, and prior to the
acceptance for payment of Shares, any of the following conditions shall exist:
(a) there shall have been instituted by any government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, any action or proceeding before any court or any governmental,
administrative or regulatory authority or agency, domestic or foreign
(including such authority or agency instituting or initiating such action
or proceeding), (i) challenging or seeking to make illegal, materially
delay or otherwise directly or indirectly restrain or prohibit the making
of the Offer, the acceptance for payment of, or payment for, any Shares by
Parent, Purchaser or any other affiliate of Parent, or the consummation of
any other Transaction, or seeking to obtain material damages in connection
with any Transaction; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their subsidiaries
of all or any material portion of the business or assets of the Company,
Parent or any of their subsidiaries, or to compel the Company, Parent or
any of their subsidiaries to dispose of or to hold separate all or any
material portion of the business or assets of the Company, Parent or any of
their subsidiaries, as a result of the Transactions; (iii) seeking to
impose or confirm limitations on the ability of Parent, Purchaser or any
other affiliate of Parent to exercise effectively full rights of ownership
of any Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer or otherwise on all matters
properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of this Agreement and the
transactions contemplated hereby; (iv) seeking to require divestiture by
Parent, Purchaser or any
<PAGE>
other affiliate of Parent of any Shares; or (v) which otherwise has a
Material Adverse Effect;
(b) there shall have been any action taken, or any statute,
rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to (i) Parent, the Company or any subsidiary or affiliate
of Parent or the Company or (ii) any Transaction, by any legislative body,
court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, other than the routine application of the
waiting period provisions of the HSR Act to the Offer or the Merger, which
is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or Sweden, (iii) any limitation (whether or not mandatory) by
any government or governmental, administrative or regulatory authority or
agency of the United States or Sweden on the extension of credit by banks
or other lending institutions such that Parent is not reasonably able to
obtain financing for the Offer on reasonable terms or (iv) a commencement
of a war or material armed hostilities or other national or international
calamity involving the United States or Sweden;
(e) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the then outstanding Shares has been
acquired by any person, other than Parent or any of its affiliates or any
other person not required to file a Schedule 13D under the rules
promulgated under the Exchange Act or (ii) (A) the Board or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or
Purchaser the approval or recommendation of the Offer, the Merger or the
Agreement, or approved or recommended any acquisition proposal or any other
acquisition of Shares other than the Offer or the Merger or (B) the Board
or any committee thereof shall have resolved to do any of the foregoing;
(f) (i) any representation or warranty of the Company which
addresses matters as of a particular date shall not be true and correct as
of such date,
A-2
<PAGE>
or (ii) any other representation or warranty shall not be true, as of the
date of this Agreement and as of the expiration of the Offer, unless the
inaccuracies under all such representations and warranties together in
their entirety, would not, individually or in the aggregate, have a
Material Adverse Effect;
(g) the Company shall have failed to perform any obligation or
to comply with any agreement or covenant of the Company to be performed or
complied with by it under the Agreement unless all such failures together
in their entirety, would not, individually or in the aggregate, have a
Material Adverse Effect;
(h) the Agreement shall have been terminated in accordance with
its terms; or
(i) Purchaser and the Company shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder.
The foregoing conditions are for the sole benefit of Purchaser and
Parent and may be asserted by Purchaser or Parent regardless of the
circumstances giving rise to any such condition or may be waived by Purchaser or
Parent in whole or in part at any time and from time to time in their sole
discretion, subject in each case to the terms of the Agreement. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and other circumstances shall not be deemed a waiver
with respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
A-3
<PAGE>
ANNEX B
RETENTION AND DEFERRED COMPENSATION ARRANGEMENT
Purpose: To provide certain executives and key employees of the
Company an incentive to stay in the employ of the Company
following the Merger. The arrangement provides for the
payment of stay bonuses and deferred compensation to Tier 1
Participants and stay bonuses to Tier 2 Participants.
Participants: TIER 1 PARTICIPANTS: The president, regional vice
presidents and other designated key employees.
TIER 2 PARTICIPANTS: All participants other than Tier 1
Participants.
Stay Bonuses
to Tier 1
Participants: On each Payment Date, each Tier 1 Participant will receive a
cash lump sum payment equal to the percentage specified
below of the Tier 1 Participant's Maximum Target Bonus,
provided the participant is employed by the Company on such
date.
PAYMENT DATE PERCENTAGE OF MAXIMUM TARGET BONUS
One Month after
Closing 20%
First Anniversary
of Closing 40%
Second Anniversary
of Closing 40%
Stay Bonuses
to Tier 2
Participants: On each Payment Date, each Tier 2 Participant will receive a
cash lump sum payment equal to the percentage specified
below of the Tier 2 Participant's Maximum Target Bonus,
provided the participant is employed by the Company on such
date.
<PAGE>
PAYMENT DATE PERCENTAGE OF MAXIMUM TARGET BONUS
One Month after
Closing 20%
First Anniversary
of Closing 40%
Second Anniversary
of Closing 40%
Maximum Target
Bonus: The Maximum Target Bonus for each Tier 1 Participant and
Tier 2 Participant will be an amount previously disclosed in
writing to Parent and agreed to by Parent. In addition, any
amount payable under the Plan which is not allocated as of
the closing date of the Merger may thereafter be allocated
as agreed by David Barry and a designated officer of Parent.
Such amount shall not exceed $300,000.
Deferred
Compensation
for Tier 1
Participants: The Company shall establish on its books and records a
deferred compensation account for each Tier 1 Participant.
Each Tier 1 Participant shall have a one-time election to
defer some or all of the stay bonus payable to such
participant. Amounts deferred will be credited to the Tier I
Participant's deferred compensation account. Amounts
credited to the account will be credited with notional
interest at a to-be-determined rate from the date of
crediting to the time of payment.
Subject to the forfeiture provisions set forth below,
amounts held in a Tier 1 Participant's deferred compensation
account will be paid to the participant in three equal
annual installments beginning on the LATER to occur of (i)
the first day of the month following the participant's
termination of employment with the Company and (ii) the
first day of the month following the month the participant
attains age 60.
Effect of
Termination
of Employment: CAUSE. If a Tier 1 Participant or a Tier 2 Participant (a
"Participant") is terminated for cause (to be defined), the
Participant will not be eligible for any future cash
payments of
B-2
<PAGE>
stay bonus and all amounts in the deferred compensation
account, if any, will be immediately forfeited.
VOLUNTARY RESIGNATION. If a Participant voluntarily
resigns, the Participant will not be eligible for any future
cash payments of stay bonus and will not be eligible for any
future credits to the deferred compensation account. The
balance of the deferred compensation account will be paid in
the manner set forth above.
TERMINATION WITHOUT CAUSE. If a Participant's employment is
terminated by the Company without Cause, the balance of
payments of the stay bonus and the balance of credits to the
deferred compensation account will be made in the manner
contemplated above. The balance of the deferred
compensation account will be paid in the manner set forth
above.
DEATH OR DISABILITY. If a Participant's employment is
terminated due to death or disability, all payments of the
stay bonus and credits to the deferred compensation account
will be accelerated and the balance of the deferred
compensation account will be paid to the Participant or the
Participant's estate, as applicable, within 90 days.
Protective
Covenants: As a condition to the payments above, Participants will
agree as follows:
Each Participant whose Maximum Target Bonus equals or
exceeds $200,000 will agree not to compete with the Company
while employed and for the one-year period following
termination of employment, but in no event longer than
three years from the Effective Time.
All Participants will agree not to solicit the customers or
employees of the Company while employed and for the one-year
period following termination of employment.
All Participants will agree not to disclose any confidential
or proprietary information at any time.
Breach by a Participant of any of these protective covenants
will result in immediate forfeiture of any right to future
payment of stay bonus and immediate forfeiture of amounts
credited to the
B-3
<PAGE>
deferred compensation account. The Company shall also be
entitled to appropriate equitable relief to enjoin any such
breach.
Excluded
Employees: No individual who is or becomes an employee of Specialty
Partners shall be eligible to participate in the
arrangement.
Agreements: Each Participant shall sign an agreement agreeing to the
terms above.
Governing Law: New York.
B-4
<PAGE>
EXHIBIT (C)2
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid by
the Company during fiscal 1996, 1995 and 1994 to the Company's Chief Executive
Officer and the four other executive officers of the Company whose total
compensation during fiscal 1996 exceeded $100,000 (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
UNDERLYING
-------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#)(1) COMPENSATION($)
- ---------------------------------------------- --------- --------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Kent J. Thiry................................. 1996 275,000 625,000(2) -- 16,733(3)
President and Chief Executive Officer 1995 250,000 275,000 150,000 24,546(3)
1994 225,000 200,000 150,000 17,072(3)
LeAnne M. Zumwalt............................. 1996 160,625 215,000 -- 119,183(4)
Chief Financial Officer, Secretary and 1995 124,200 75,000 84,000 8,956(3)
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 --
</TABLE>
- ------------------------
(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 of Director approval, because the
Company's earnings per share as of that date was in excess of $1.25, which
represented a 17.5% compound annual growth rate over earnings per share
reported for fiscal 1992.
(3) Includes share of Company's contribution to the Company's Profit Sharing
Plan and/or car allowance.
(4) Includes share of Company's contribution to the Company's Profit Sharing
Plan, a bonus payment made with respect to Ms. Zumwalt's loan with the
Company and moving cost reimbursements related to Ms. Zumwalt's relocation
from Aliso Viejo, California.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in fiscal 1996. No
stock appreciation rights were granted during fiscal 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK
NUMBER OF OPTIONS/SARS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS/SARS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED YEAR ($/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........................ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Vests 20 percent on August 29, 1996 and 20% each year on August 29, 1997
through 2000 and 100% in the event of a change of control. Consummation of
the Offer will constitute a change of control for purposes of these option
grants.
(2) Vests 20 percent on November 21, 1996 and 20% each year on November 21, 1997
through 2000 and 100% in the event of a change of control. Consummation of
the Offer will constitute a change of control for purposes of these option
grants.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the Named
Executive Officers regarding the exercise of options and/or limited SARs during
the last fiscal year and unexercised options and limited SARs held as of
November 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS AT FISCAL
SHARES YEAR-END YEAR-END($)(1)
ACQUIRED VALUE -------------------------- -------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ---------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kent J. Thiry............................ 227,000 4,886,363 452,500 232,500 7,654,862 2,313,750
LeAnne M. Zumwalt........................ 39,638 627,314 28,350 78,450 289,429 706,575
David P. Barry........................... 81,600 1,363,788 52,650 182,250 307,525 1,025,825
Thomas O. Usilton........................ 10,100 139,479 1,000 21,900 8,833 217,251
Jacob Lazarovic, M.D..................... -- -- 16,500 24,750 152,625 228,937
</TABLE>
- ------------------------
(1) The closing price of the Company's Common Stock on the New York Stock
Exchange on November 30, 1996 was $30.75 per share.
SUBSIDIARY OPTIONS
The Company has granted options to employees and other individuals in
various operating subsidiaries. The purpose of such option grants is to motivate
individuals directly responsible for each such 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 on the date of grant
typically with a term of the earlier of five 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. All of the subsidiary options
were granted at exercise prices in excess of the Per Share Amount. Option
holders are also required to be bound by the terms of a stockholders' agreement
(the
<PAGE>
"Stockholders' Agreement"). The Stockholders' Agreement contains rights of first
refusal on transfers of Stock issued pursuant to the exercise of such option
grants by stockholders, a right of the subsidiary to repurchase such shares (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 the Company's Common Stock. The Stockholders' Agreement also
contains various other rights and restrictions, including "piggyback"
registration rights to include shares in certain registration statements filed
by the subsidiary under the Securities Act of 1933, as amended. As a condition
to the closing of the Specialty Merger Transaction, the Stockholders' Agreements
relating to subsidiaries of VSP will be terminated.
SUBSIDIARY OPTION GRANTS TO DIRECTORS AND EXECUTIVE OFFICERS AS OF 11/30/96
<TABLE>
<CAPTION>
VIVRA
SPECIALTY
VIVRA ASTHMA & VIVRA HEALTH VIVRA HEART PARTNERS,
FISCAL ALLERGY CAREAMERICA ADVANTAGE, INC. SERVICES, INC. INC.
YEAR --------------------- ---------------------- -------------------- ----------
OF # OF STRIKE # OF STRIKE # OF STRIKE # OF
DIRECTOR NAME GRANT OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS
- ------------------------------------ ----------- ---------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Barry*........................ 1995 -- -- -- -- 10,000 $ .50 60,000
1996 -- -- -- -- -- -- 95,000
David G. Connor, M.D.*.............. 1995 -- -- -- -- 2,500 $ .50 --
1996 57,564 $ .5625 9,853 $ .79 -- -- 28,227
Richard B. Fontaine*................ 1996 287,820 $ .5625 49,625 $ .79 -- -- 141,135
Alan R. Hoops....................... 1996 115,128 $ .5625 19,706 $ .79 -- -- 56,454
Jacob Lazarovic, M.D................ 1995 -- -- -- -- -- -- 270,000
1996 -- -- -- -- -- -- 78,000
10,000
David L. Lowe*...................... 1996 57,564 $ .5625 9,853 $ .79 -- -- 28,227
John M. Nehra*...................... 1995 -- -- -- -- 60,000 $ .50 --
50,000 $ 1.00
1996 287,820 $ .5625 49,625 $ .79 -- -- 141,135
Stephen G. Pagliuca*................ 1996 201,474 $ .5625 34,486 $ .79 -- -- 98,795
Richard Pozen, M.D.................. 1995 -- -- -- -- 220,000 $ .50 --
1996 60,000 $ 1.00 60,000
Kent J. Thiry....................... 1996 2,302,560 $ .5625 197,060 $ .79 -- -- 1,129,080
Thomas O. Usilton................... 1995 -- -- -- -- 30,000 $ 1.00 180,000
1996 20,000 $ .3750 -- -- -- -- 110,000
223,900
LeAnne Zumwalt...................... 1995 -- -- -- -- 15,000 $ .50 70,000
1996 863,460 $ .5625 73,898 $ .79 -- -- 353,405
111,367
<CAPTION>
STRIKE
DIRECTOR NAME PRICE
- ------------------------------------ ---------
<S> <C>
David Barry*........................ $ 1.65
$ 1.65
David G. Connor, M.D.*.............. --
$ 1.65
Richard B. Fontaine*................ $ 1.65
Alan R. Hoops....................... $ 1.65
Jacob Lazarovic, M.D................ $ 1.65
$ 1.65
$ 2.94
David L. Lowe*...................... $ 1.65
John M. Nehra*...................... --
$ 1.65
Stephen G. Pagliuca*................ $ 1.65
Richard Pozen, M.D.................. --
$ 1.65
Kent J. Thiry....................... $ 1.65
Thomas O. Usilton................... $ 1.65
$ 1.65
$ 2.94
LeAnne Zumwalt...................... $ 1.65
$ 1.65
$ 2.94
</TABLE>
* The subsidiary options granted to each of Mr. Barry, Dr. Conner, Mr.
Fontaine, Mr. Hoops, Mr. Lowe, Mr. Nehra and Mr. Pagliuca will terminate
upon the closing of the Specialty Merger Transaction without any payment
being made in connection with such termination.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The following is a summary of the material provisions of the employment
agreement between the Company and Mr. Thiry and of employment agreements between
the Company and the other Named Executive Officers, which are substantially
identical to one another except for salary.
<PAGE>
Mr. Thiry's employment agreement (which was entered into in March 1996)
provides for an annual salary of at least $275,000 and expires on January 31,
2000. A copy of Mr. Thiry's employment agreement is filed as Exhibit (c)(9) to
the Schedule 14D-9 and is incorporated herein by reference in its entirety. The
Company may award discretionary bonuses under the agreement. 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 of Directors. Mr. Thiry's agreement contains
certain nondisclosure, noncompetition and nonsolicitation covenants. The Company
may terminate Mr. Thiry's employment upon 30 days' written notice (i) upon Mr.
Thiry's breach of the agreement or neglect of his duties; (ii) for cause; or
(iii) upon his permanent disability. The agreement terminates immediately upon
his death. If Mr. Thiry's employment terminates due to his permanent disability
or death, the Company will be obligated to pay him or his estate an amount equal
to one year's salary computed at a rate of at least $300,000. If Mr. Thiry
terminates the agreement 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 fiscal year prior to such
termination. If his 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) continuation of existing or comparable life and
health insurance coverage for three years; (c) acceleration of the
exercisability of stock options and related stock appreciation rights and
vesting of any other stock-related awards; and (d) 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 employment
agreement) becomes the beneficial owner, directly or indirectly, of at least 30
percent 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 consummation of the Offer will constitute a "change of control" under Mr.
Thiry's employment agreement thereby entitling him, upon a termination of
employment within one year following such change in control, to receive a
severance payment of $1,600,000.
The Company also has employment agreements with each of Messrs. Barry,
Usilton, Lazarovic and Ms. Zumwalt that provide for salaries, which are subject
to annual review by the Board of Directors. A copy of Ms. Zumwalt's employment
agreement is filed as Exhibit (c)(10) to the Schedule 14D-9 and is incorporated
herein by reference in its entirety. 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 agreements). Under the agreements, 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' agreements contain nondisclosure,
nonsolicitation and noninterference covenants. If the employment of Mr. Barry or
Ms. Zumwalt 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 a payment equal to 2.99 times the
sum of base compensation being paid at the time of the change of control and the
cumulative bonuses received by the executive in the preceding 24 months, 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 percent 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; or (3)
a change in control required to be reported pursuant to Item 6(e) of Schedule
14A under the Exchange Act. The consummation of the Offer will, upon a
termination of employment within two years following such change of control,
constitute a "change of control" under Ms. Zumwalt's employment
<PAGE>
agreement thereby entitling her to receive a severance payment of $870,000 (plus
a tax gross-up [not to exceed approximately $424,000]). In addition, Mr. Barry
and Ms. Zumwalt will receive up to $3,000,000 (plus a tax gross-up [not to
exceed approximately $1,400,000) and $2,000,000 (plus a tax gross-up [not to
exceed approximately $976,000]), respectively, pursuant to the Retention
Arrangements. In addition, Mr. Terry Gilpin, Mr. Gregory Holcomb, Dr. Charles
McAllister and Mr. Thomas O. Usilton will receive $650,000, $250,000, $700,000
and $500,000, respectively, pursuant to the Retention Arrangements.
<PAGE>
SERVICES AGREEMENT
1. Services.
(a) Pursuant to the terms of this Agreement, the Company shall provide, or
shall cause any of its affiliates to provide, for the benefit of VSP, and VSP
shall provide, or shall cause any of its affiliates to provide, for the benefit
of the Company, the services described in Schedule A hereto (the "Services"),
which schedule may be amended from time to time as provided in Section 14. The
Company shall perform the Services in good faith in a commercially reasonable
manner and in accordance with applicable law and the express terms of this
Agreement. Specifically, the Company shall provide the Services with that degree
of skill, attention and care that the Company exercises with respect to
furnishing comparable services to itself. The Services shall be provided to VSP
at those locations most convenient to the Company, other than such services the
nature of which requires they be performed at VSP's locations. All employees of
the Company performing Services hereunder for VSP shall be under the exclusive
direction and control of the Company. The Company shall be an independent
contractor as to VSP in performing Services hereunder and shall have exclusive
authority to control and direct the performance of any and all Services
performed by the Company for VSP.
(b) VSP shall provide all data and information required by the Company in
connection with the performance of the Services in the time and in the manner
which the Company reasonably requests.
2. Capital Contribution; Cash Management and Accounting
In connection with the execution of the Merger Agreement and the Vivra
Agreement, on the date hereof the Company will make a capital contribution to
VSP in cash or VSP shall distribute cash to the Company to the extent required
in order that VSP and the VSP Entities shall hold cash and cash equivalents that
would represent $25,000,000 in "Cash" as of the date hereof on a consolidated
balance sheet of VSP and the VSP Entities prepared in accordance with GAAP. The
Company and VSP estimate that, in order to satisfy the foregoing requirement,
the Company will be required to contribute $2,350,000 in cash to VSP as of the
date hereof, and the parties hereto agree that, after the date hereof, the
Company shall reimburse VSP or VSP shall reimburse the Company to the extent
necessary to ensure that the requirement provided for in the preceding sentence
is achieved. From and after the date hereof, the Company shall cease to pay the
costs and expenses incurred by VSP in the operation of its business and VSP
shall be solely responsible for all costs and expenses arising out of the
business of VSP and VSP Entities; provided that (a) the Company shall continue
to pay and be responsible for checks and drafts issued in respect of VSP
business prior to the date hereof that are presented for payment on or after the
date hereof, (b) the Company shall retain all obligations and liabilities under
all medical, dental and disability plans and any worker's compensation insurance
arrangements covering employees of VSP and VSP Entities for claims or premiums
to the extent accrued on or prior to the date hereof, (c) the Company shall
retain all obligations and liabilities to Kent Thirty and LeAnne Zumwalt under
any employment agreement or severance or change of control agreement to which
they are parties on the date and all liabilities of the Company to employees of
the Company, VSP and/or the VSP Entities under the Retention Plan adopted by the
Board of Directors of the Company on May 5, 1997, and (d) the Company shall,
from the date hereof until the Closing, retain all obligations and liabilities
for salary and benefits payable to Company corporate employees who provide
services to both the Company and VSP.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
by and between
VSP HOLDINGS, INC.,
VSP HOLDINGS II, INC.,
VSP ACQUISITION, INC.,
VIVRA SPECIALTY PARTNERS, INC.
and
VIVRA INCORPORATED
Dated as of May 5, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
-----
ARTICLE I. THE MERGER 2
1.01 The Merger 2
1.02 VHI Acquisition 2
1.03 Closing 2
1.04 Effective Time 2
1.05 Effect of the Merger 2
1.06 Certificate of Incorporation; Bylaws 2
1.07 Directors and Officers 2
1.08 Conversion of Shares 3
1.09 Stock Options 3
1.10 Dissenting Shares 3
1.11 Surrender of Common Stock and Stock Options 4
1.12 Alternative Transaction 5
1.13 Consideration 5
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
COMPANY 6
2.01 Corporate Existence 6
2.02 Corporate Power and Authority 6
2.03 Reorganization 6
2.04 Conflicts 7
2.05 Capitalization 7
2.06 Financial Statements 8
2.07 Properties 8
2.08 Subsidiaries and Partnerships 8
2.09 Contracts 9
2.10 Proprietary Rights 9
2.11 Rights to Use Assets and Property 9
2.12 Compliance With Laws 9
2.13 Litigation 9
2.14 Labor Matters 9
2.15 Absence of Certain Changes 10
2.16 Brokers' Fees 10
2.17 Books and Records 10
ARTICLE III. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
PARENT 11
3.01 Corporate Existence 11
3.02 Corporate Power and Authority 11
3.03 Conflicts 11
i
<PAGE>
PAGE
-----
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR,
ACQUIROR II AND MERGER SUB 12
4.01 Corporate Existence 12
4.02 Corporate Power and Authority 12
4.03 Conflicts 12
4.04 Capitalization 13
4.05 Litigation 13
4.06 Brokers Fees 13
4.07 Financing 13
ARTICLE V. COVENANTS OF THE COMPANY 13
5.01 Conduct of Business in Ordinary Course 13
5.02 Preservation of Business and Relationships 13
5.03 New Transactions 14
5.04 Dividends, Distributions, Acquisitions of Stock,
Issuance of Stock 14
5.05 Payment of Liabilities and Waiver of Claims 14
5.06 Material Contracts. 14
5.07 The Acquiror's and Merger Sub's Access to Premises
and Information 14
5.08 Reorganization 14
5.09 Certain Exchange Transactions 15
5.10 Conversion of Company Preferred Stock 15
5.11 Employee Benefits Matters 15
5.12 Trademark Assignment and License 15
5.13 Intercompany Transactions 16
ARTICLE VI. TAX COVENANTS 16
6.01 Definitions. 16
6.02 Tax Allocation. 17
6.03 Tax Indemnity. 17
6.04 Filing of Tax Returns. 18
6.05 Control of Audits. 18
6.06 Cooperation 19
6.07 Tax Refund 19
6.08 Effect of Payment 19
6.09 Tax Elections 19
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR
AND MERGER SUB 20
7.01 Representations True 20
7.02 Covenants Performed 20
7.03 No Prohibition 20
7.04 Authorizations, Consents and Approvals 20
7.05 Services Agreement 21
7.06 Non-Competition Agreement 21
7.07 Legal Opinion 21
7.08 Reorganization 21
ii
<PAGE>
PAGE
-----
7.09 Assignment of Trademark 21
7.10 Conversion of Preferred Stock 21
7.11 Material Adverse Change 21
ARTICLE VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY 21
8.01 Representations True 22
8.02 Covenants Performed 22
8.03 No Prohibition 22
8.04 Authorizations, Consents, and Approvals 22
8.05 Legal Opinion 22
8.06 License Agreement 22
8.07 Services Agreement 22
8.08 The Offer 22
ARTICLE IX. INDEMNIFICATION 22
9.01 Indemnification by Acquiror 22
9.02 Indemnification by Parent 23
9.03 Notice and Right to Defend Third Party Claims 23
9.04 Survival of Indemnification 24
ARTICLE X. GENERAL PROVISIONS 24
10.01 Each Party to Bear Own Costs 24
10.02 Entire Agreement; Amendment; Waivers 24
10.03 Public Announcements 24
10.04 Assignment 24
10.05 Survival 25
10.06 Termination 25
10.07 Confidentiality; Record Retention 25
10.08 Cooperation and Assignments; Further Assurances 25
10.09 Notices 25
10.10 Governing Law 26
10.11 Duplicate Originals 26
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into as of this 5th day of May, 1997, by and among VSP Holdings, Inc., a
Delaware corporation (the "Acquiror"), VSP Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of Acquiror (the "Merger Sub"), VSP
Holdings II, Inc., a Delaware corporation ("Acquiror II"), Vivra Specialty
Partners, Inc., a Nevada corporation (the "Company"), and Vivra Incorporated,
a Delaware corporation (the "Parent").
RECITALS
A. Acquiror, Merger Sub, the Company and the Parent have each determined
to engage in the transactions contemplated hereby, pursuant to which (i)
Merger Sub will merge with and into the Company (the "Merger") and (ii)
except in certain specified circumstances, (a) each share of the Company's
Class A common stock, $0.01 par value per share (the "Class A Common Stock"),
and each share of the Company's Class B common stock, $0.01 par value per
share (the "Class B Common Stock," and, together with the Class A Common
Stock, the "Common Stock") shall be converted into rights to receive cash
consideration in the manner herein described, and (b) each outstanding option
granted by the Company to purchase shares of Common Stock shall be converted
into the right to receive options to purchase shares of Acquiror's Class B
common stock, $0.01 par value per share (the "Acquiror Class B Common Stock").
B. The respective Boards of Directors of the Company and Parent have each
approved the Merger and this Agreement. The holders of a majority of the
issued and outstanding shares of Common Stock have approved the Merger and
this Agreement.
C. The respective Boards of Directors of Acquiror and Merger Sub have
each approved the Merger and this Agreement. Acquiror, as the sole
stockholder of Merger Sub, has approved the Merger and this Agreement.
D. The parties may make an election under Section 338(h)(10) of the
Internal Revenue Code of 1986, as amended (the "Code") with respect to such
transactions.
E. Reference is made to that certain Agreement and Plan of Merger (the
"Vivra Agreement"), dated as of May 5, 1997, among Incentive AB, a
corporation organized under the laws of Sweden ("Incentive"), HH Acquisition
Corp., a Delaware corporation (the "Purchaser"), and Parent, pursuant to
which Purchaser shall make a cash tender offer (the "Offer") to acquire all
of the issued and outstanding shares of common stock of Parent (the "Parent
Shares") and shall merge with and into the Parent, subject to certain terms
and conditions.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
<PAGE>
ARTICLE I.
THE MERGER
Section 1.01 The Merger. Subject to the terms and conditions of this
Agreement, Merger Sub shall be merged with and into the Company in accordance
with the General Corporation Law of the State of Nevada ("Nevada Law") and the
General Corporation Law of the State of Delaware ("Delaware Law"), whereupon the
separate existence of Merger Sub shall cease, and the Company shall be the
surviving corporation (the "Surviving Corporation").
Section 1.02 VHI Acquisition. Subject to any adjustment to such terms
pursuant to Section 1.12, simultaneously with the consummation of the Merger,
Parent will sell and transfer to Acquiror II all of the outstanding capital
stock of Vivra Heart Imaging, Inc., a Nevada corporation ("VHI"), owned by
Parent in exchange for a payment in cash by Acquiror II to Parent of the VHI
Consideration (as defined in Section 1.13) (such transaction being hereinafter
referred to as the "VHI Acquisition" and, together with the Merger, the
"Transactions").
Section 1.03 Closing. The closing of the Transactions or the Alternative
Transaction (as hereinafter defined in Section 1.12), as the case may be (the
"Closing"), shall take place as soon as practicable on the first business day
after satisfaction or waiver of the conditions set forth herein, at the offices
of Brobeck, Phleger & Harrison LLP, Spear Street Tower, One Market, San
Francisco, California 94105, or at such other time and place as the parties
shall designate in writing (the "Closing Date").
Section 1.04 Effective Time. Concurrent with the Closing, the Company
and Merger Sub shall file this Agreement or a certificate of merger or a
certificate of ownership and merger (the "Certificate of Merger") with the
Offices of the Secretary of State of the states of Nevada and Delaware in
accordance with Nevada Law and Delaware Law, respectively. The Merger shall
become effective at such time as the Certificate of Merger is duly filed (the
date of such filing being hereinafter referred to as the "Effective Date" and
the time of such filing being hereinafter referred to as the "Effective Time").
It is the intention of the parties that this Agreement shall constitute an
agreement of merger under Section 92A.120 of Nevada Law and under Section 252 of
Delaware Law.
Section 1.05 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Nevada Law and
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Company and Merger Sub shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
Section 1.06 Certificate of Incorporation; Bylaws. At the Effective
Time, the Certificate of Incorporation and Bylaws of Merger Sub, each as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter amended
as provided by Nevada Law, the Certificate of Incorporation and the Bylaws.
Section 1.07 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
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Section 1.08 Conversion of Shares. Subject to any adjustment to such
terms pursuant to Section 1.12, at the Effective Time, (a) each share of Common
Stock outstanding immediately prior to the Effective Time (other than any
Dissenting Shares (as hereinafter defined) and any shares of Common Stock held
by Acquiror) shall automatically and without any action on the part of the
holder thereof, upon surrender of the certificate that formally evidenced such
Common Stock in the manner provided herein, be cancelled and shall be converted
automatically into the right to receive an amount payable in cash, without
interest, determined by dividing the Adjusted VSP Consideration (as defined
below) by the number of shares of Common Stock outstanding immediately prior to
the Effective Time other than those held by Acquiror (such amount payable per
share in the Merger being referred to herein as the "Merger Consideration"), (b)
each share of Common Stock outstanding immediately prior to the Effective Time
held by Acquiror shall be cancelled for no consideration, and (c) each share of
common stock, $0.01 par value per share, of Acquiror shall be converted into one
share of common stock of the Surviving Corporation. For the purposes of the
preceding sentence, "Adjusted VSP Consideration" shall mean the product obtained
by multiplying the VSP Consideration (as defined in Section 1.13) times the
percentage obtained by subtracting (i) the percentage of the Company's
outstanding Common Stock exchanged for Acquiror Class B Common Stock pursuant to
Section 5.09(a) (assuming, for the purpose of determining such percentage, that
all of Parent's Preferred Stock has been converted into Common Stock at the time
of such exchange) from (ii) 100 percent.
Section 1.09 Stock Options.
(a) Each stock option (and any related rights) to purchase capital
stock of any of the VSP Entities (as hereinafter defined) granted under stock
option plans of the VSP Entities outstanding prior to the consummation of the
Reorganization (as hereinafter defined) (each, a "VSP Entity Option") shall be
converted into a stock option to purchase shares of Class A Common Stock under
the Company's Stock Option Plans (the "Company Stock Option Plan") prior to the
Closing Date on the terms and conditions described in Schedule 2.05(b) pursuant
to the Reorganization (as hereinafter defined).
(b) Each stock option (and any related alternative rights) to
purchase one share of Common Stock (the "Stock Options") granted under the
Company's Stock Option Plan (including those granted to current or former
employees, consultants and directors of the Company or the VSP Entities and
including those stock options granted pursuant to Section 1.09(a) above), which
Stock Options are outstanding at the Effective Time (whether or not then
presently exercisable), other than those that will expire by their terms in
connection with or as a result of the Merger, will be converted at the Effective
Time into an option to purchase a number of shares of Acquiror Class B Common
Stock as would provide such optionholder the right to acquire substantially the
same percentage ownership of the capital stock of Acquiror immediately following
the Effective Time as such optionholders would have been entitled to acquire in
the Company immediately prior to the Effective Time at a price per share equal
to (i) the aggregate exercise price for the shares of Common Stock subject to
such Stock Option divided by (ii) the number of full shares of Acquiror Class B
Common Stock deemed purchasable pursuant to each such Stock Option issued
pursuant to this Section 1.08 (the "Option Consideration"). The Company Stock
Option Plan 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 in this Section 1.09. Prior to the Effective Time, the Company shall
use its reasonable efforts to cause each holder of outstanding Stock Options to
consent to the conversion of the Stock Options held by such holder in
consideration for the Option Consideration, and shall take such other action as
may be necessary to carry out the terms of this Section 1.09.
Section 1.10 Dissenting Shares. Notwithstanding any provision in this
Agreement to the contrary, to the extent that appraisal rights are available
under Nevada Law, Common Stock outstanding
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immediately prior to the Effective Time and held by a holder who has not
consented thereto in writing and who has demanded appraisal for such Common
Stock in accordance with such law shall not be converted into or represent
the right to receive the Merger Consideration, but shall be entitled to
receive such consideration as shall be determined pursuant to Section
92A.300, et. seq. of the Nevada Law, provided, however, that, if such holder
shall have failed to perfect or shall have effectively withdrawn or lost his
or her right to appraisal and payment under the Nevada Law, such holder's
shares of Common Stock shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon, in accordance
with Section 1.08, and such shares shall no longer be Dissenting Shares (the
"Dissenting Shares"). The Company shall give Acquiror prompt notice of any
demands received by the Company for appraisal of Common Stock, and Acquiror
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior
written consent of Acquiror, make any payment with respect to, or settle or
offer to settle, any such demands.
Section 1.11 Surrender of Common Stock and Stock Options.
(a) At the Closing, each Company stockholder of record shall
deliver to Merger Sub a stock certificate ("Certificate") which, immediately
prior to the Effective Time, represents all of such holders's shares of
Common Stock, for conversion and exchange into the Merger Consideration
pursuant to this Section 1.11. At the Closing, Merger Sub shall deliver to
each such stockholder who delivered his Certificate in exchange therefor an
amount equal to the product of the Merger Consideration multiplied by the
number of shares of Common Stock so surrendered by the holder thereof. Each
share of Common Stock so converted shall, by virtue of the Merger and without
any action on the part of the holders thereof, cease to be outstanding, be
cancelled and retired and cease to exist. In the event of a transfer of
ownership of Common Stock which is not registered in the transfer records of
the Company, the Merger Consideration may be delivered to a transferee if the
Certificate representing such Common Stock is presented to the Acquiror and
accompanied by all documents required to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 1.11, each holder of a
Certificate shall thereafter cease to possess any rights with respect to such
Common Stock, except the right to receive upon such surrender the Merger
Consideration as provided herein and by the provisions of Nevada Law.
(b) At the Closing, each holder of Stock Options shall deliver to
Merger Sub a stock option agreement or other agreement evidencing the grant of
Stock Option to the holder thereof (each an "Option Agreement") which, at the
Effective Time, represented all of such holder's Stock Options, for conversion
and exchange into the Option Consideration pursuant to this Section 1.11. At
the Closing, Acquiror shall deliver, and Acquiror and each holder of a Stock
Option shall enter into, a stock option agreement, in form acceptable to
Acquiror, providing for the Option Consideration to be received by each such
optionholder (a "Replacement Option Agreement"). Following the Effective Time
and until the holder shall have executed and delivered a Replacement Option
Agreement and surrendered his or her Stock Options as contemplated by this
Section 1.11, each holder of a Stock Option shall cease to possess any rights
with respect to such Stock Option, except the right to receive upon such
surrender and execution the Option Consideration as provided herein and the
provisions of Nevada Law.
(c) All consideration delivered upon the surrender of the Common
Stock and Stock Options in accordance with the terms hereof to the former
stockholders and optionholders of the Company shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such Common Stock and
Stock Options, respectively. After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Company of
the shares of Common Stock that were outstanding immediately prior to the
Effective Time, and the Company shall not issue any shares of
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Common Stock upon the exercise of any Stock Options. If, after the Effective
Time, Certificates or Stock Options are presented for any reason, they shall
be cancelled and exchanged as provided in this Section 1.11.
(d) In the event the Alternative Transaction is consummated, all
references in this Section 1.11 to Common Stock shall be interpreted to mean
references to Common Stock and Preferred Stock, and all references to Merger
Consideration shall be interpreted to mean the consideration to be received per
share of Common Stock and Preferred Stock in the Merger pursuant to
Section 1.12.
Section 1.12 Alternative Transaction.
(a) In the event that the Closing shall not have occurred as of
June 30, 1997 solely as a result of the failure of the condition to Closing
contained in Section 8.08 to be satisfied, Acquiror, Acquiror II and Merger
Sub may, at their sole option, elect to consummate the Merger and the VHI
Acquisition notwithstanding the non-satisfaction of such condition subject to
the following adjustments to the terms of the Merger and the VHI Acquisition
(as so adjusted, the "Alternative Transaction"): (a) in the Merger, (i) all
of the shares of Preferred Stock outstanding immediately prior to the
Effective Time shall be converted in the aggregate into an amount, payable in
cash without interest, equal to 65% of the VSP Consideration and (ii) all of
the shares of Common Stock outstanding immediately prior to the Effective
Time (other than any Dissenting Shares) shall be converted in the aggregate
into a number of shares of Class B Common Stock of Acquiror as would
represent substantially the same percentage ownership of the capital stock of
Acquiror immediately following the Effective Time as the percentage such
shares of Common Stock represented in the Company immediately prior to the
Effective Time and (b) in the VHI Acquisition, Acquiror II shall acquire 65%
of the outstanding capital stock of VHI owned by Parent in exchange for a
payment in cash by Acquiror II of an amount equal to 65% of the VHI
Consideration.
(b) If the Closing shall be effectuated as an Alternative
Transaction pursuant to Section 1.12, Parent shall have the right to
purchase, upon the issuance by the Acquiror of any of its equity securities
("New Stock"), a pro rata portion of such New Stock such that Parent may
maintain its percentage ownership in the capital stock of the Acquiror.
Notwithstanding the foregoing, Parent shall have no preemptive rights with
respect to the issuance of New Stock (i) pursuant to Acquiror's stock option
plan, (ii) in the Merger and in the exchange transaction and as contemplated
by Section 5.09, (iii) issuable upon the conversion or exercise of any
securities outstanding on the date hereof, or (iv) issuable in connection
with acquisitions that may be consummated by Acquiror or any of its
subsidiaries. The preemptive rights granted under this Section 1.12 shall
expire upon the earlier to occur of (i) the date upon which Parent shall own
capital stock of Acquiror representing less than 20% of the aggregate voting
power with respect to matters generally requiring shareholder approval, and
(ii) the date upon which upon an initial public offering of Acquiror's
capital stock is consummated. The terms of the preemptive rights granted
hereunder shall be more specifically set forth in the securityholders
agreement of Acquiror.
Section 1.13 Consideration. The total of the consideration for the
Transaction (the consideration allocated to the Merger is hereinafter referred
to as the "VSP Consideration", and the consideration allocated to the VHI
Acquisition is hereinafter referred to as the "VHI Consideration") shall be
equal to $84,312,500.00 (the "Gross Consideration"). Between the date hereof
and the Closing, Acquiror and Acquiror II shall determine the allocation of the
Gross Consideration among the VSP Consideration and the VHI Consideration
(provided that Acquiror and Acquiror II shall not be entitled to allocate in
excess of $1,500,000 to the VHI consideration), and Acquiror and Acquiror II
shall notify the Company and Parent in writing of such determination not later
than five (5) days prior to the Closing.
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If, and to the extent that, all of the VSP Consideration is not paid to the
stockholders of the Company pursuant to the provisions of Section 1.08, such
unpaid portion shall be retained by Acquiror.
ARTICLE II.
REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF THE COMPANY
The Company hereby represents, warrants and agrees with the Acquiror and
Merger Sub that, except as set forth on the Schedules attached hereto:
Section 2.01 Corporate Existence. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Nevada. Each
of the entities listed on Schedule 2.01 is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation (each, a "VSP Entity" and collectively, the "VSP Entities"). Each
of the Company and the VSP Entities has full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations,
properties or condition (financial or otherwise) of the Company and the VSP
Entities taken as a whole (a "Company Material Adverse Effect"). As used in
this Agreement, "to the Company's knowledge" means the actual knowledge of the
executive officers of the Company, without having made any independent
investigation in connection with the execution of this Agreement.
Section 2.02 Corporate Power and Authority. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each other agreement, document, or instrument or certificate contemplated by
this Agreement to be executed by the Company in connection with the consummation
of the transactions contemplated hereby (together with this Agreement, the
"Company Documents"), and to consummate the transactions contemplated hereby and
thereby. All corporate action necessary to authorize the execution, delivery
and performance of each of the Company Documents has been duly taken by the
Company. This Agreement has been, and each of the Company Documents will be at
or prior to the Closing, duly and validly executed and delivered by the Company
and (assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the Company
Documents when so executed and delivered will constitute, legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 2.03 Reorganization. Each of the Company and the VSP Entities
has all requisite corporate power and authority to consummate the Reorganization
(as hereinafter defined) and to execute and deliver each of the agreements,
documents, instruments or certificates contemplated by the Reorganization or be
executed by the Company or any of the VSP Entities in connection with the
Reorganization (the "Reorganization Documents"), and to consummate the
transactions contemplated thereby. All corporate action necessary to authorize
the execution, delivery and performance of each of the Reorganization Documents
has been duly taken by each of the Company and the VSP Entities. The
Reorganization Documents have been duly and validly executed and delivered by
each of the Company and VSP Entities (assuming the due authorization, execution
and delivery by the other parties thereto) and constitute legal, valid and
binding obligations of each of the Company and the VSP Entities,
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enforceable against each of the Company and the VSP Entities in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at
law or in equity).
Section 2.04 Conflicts. None of the execution and delivery by the
Company of this Agreement and the other Company Documents, the consummation of
the transactions contemplated hereby or thereby, including, without limitation,
the Reorganization (as hereinafter defined), or compliance by the Company and
the VSP Entities with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or by-laws of the Company or
the VSP Entities; (ii) conflict with, violate, result in the breach or
termination of, or constitute a default under any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which the
Company or any VSP Entity is a party or by which its properties or assets are
bound; (iii) violate any statute, rule, regulation, order or decree of any
governmental body or authority by which the Company or any VSP Entity is bound;
or (iv) result in the creation of any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, encumbrance or any other restriction or
limitation whatsoever upon the properties or assets of the Company or any VSP
Entity except, in case of clauses (ii), (iii) and (iv), for such conflicts,
violations, breaches or defaults as would not have a Company Material Adverse
Effect.
Section 2.05 Capitalization. (a) The authorized capital stock of the
Company consists of 80,000,000 shares of Preferred Stock, $0.01 per share (the
"Preferred Stock"), 100,000,000 shares of Class B Common Stock and
20,000,000 shares of Class A Common Stock. The issued and outstanding shares of
Preferred Stock, Class A Common Stock and Class B Common Stock (such issued
shares are collectively referred to herein as the "Capital Stock"), as of the
date hereof and as adjusted to give effect to the Reorganization (as hereinafter
defined), are as set forth on Schedule 2.05(a). All of the shares of Capital
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Schedule 2.05(b) hereto or as
contemplated herein, there are no subscriptions, options, warrants, conversion
rights, rights of exchange, or other rights, plans, agreements or commitments of
any nature whatsoever (including, without limitation, conversion or preemptive
rights) providing for the purchase, issuance, transaction, registration or sale
of any shares of the Company's Capital Stock or any securities convertible into
or exchangeable for any shares of the Company's Capital Stock (collectively, the
"Company Derivative Securities"). None of the Company Derivative Securities are
entitled to be accelerated as a result of the Merger. All of the Company
Derivative Securities have been issued, and all of the Company Derivative
Securities to be issued in the Reorganization will be issued, pursuant to valid
exemptions from registration under all Federal and state securities laws, except
where the failure to have such exemptions would not have a Company Material
Adverse Affect, and there are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any of the Company Derivative
Securities.
(b) The authorized and outstanding capital stock of each VSP
Entity, as of the date hereof and as adjusted to give effect to the
Reorganization (as hereinafter defined), is as set forth on Schedule 2.05(c)
hereto (such issued shares are collectively referred to as the "VSP Entities'
Capital Stock"). All such shares of VSP Entities' Capital Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedules 2.05(b) or 2.05(d) hereto or as contemplated
herein, there are no subscriptions, options, warrants, concession rights,
rights of exchange, or other rights, plans, agreements or commitments of any
nature whatsoever (including, without limitation, conversion or preemptive
rights) providing for the purchase, issuance, transaction, registration or
sale of any shares of VSP Entities' Capital Stock or any securities
convertible into, or exchangeable for, any shares of VSP Entities' Capital
Stock (the "VSP Entity Derivative Securities"). None of the VSP
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Entity Derivative Securities are entitled to be accelerated as a result of
the Merger. All of the VSP Derivative Securities have been issued, and all
of the VSP Derivative Securities, if any, to be issued in the Reorganization
will be issued, pursuant to valid exemptions from registration under all
Federal and State securities laws, except where the failure to have such
exemption would not have a Company Material Adverse Effect, and there are no
outstanding obligations of any of the VSP Entities or the Company to
repurchase, redeem or otherwise acquire any of the VSP Derivative Securities.
Section 2.06 Financial Statements. The Company has furnished the
Acquiror with an audited (based upon agreed upon procedures) balance sheet and
related statement of income for the Company at and for the fiscal year ended
November 30, 1996 (collectively, the "November Financial Statements"). The
Company has also furnished the Acquiror with the unaudited balance sheet as of
February 28, 1997, pro forma to give effect to the separation of (i) the Parent,
on the one hand, and (ii) the Company and VSP Entities, on the other hand, and
the Reorganization (the "February 28 Balance Sheet" and, collectively with the
November Financial Statements, the "Financial Statements"). Except as set forth
on Schedule 2.06, the Financial Statements (i) have been prepared from the books
and records of the Company in accordance with accounting practices consistently
applied with prior periods, (ii) are complete and correct in all material
respects and fairly present the financial condition and results of operations,
as applicable, of the Company as of the dates and for the periods indicated
thereon, and (iii) to the Company's knowledge, contain and reflect adequate
reserves for all liabilities or obligations of any nature, whether absolute,
contingent or otherwise, as may be required under generally accepted accounting
principles. To the Company's knowledge, neither the Company nor any of the VSP
Entities has any liability that is not reflected in the February 28 Balance
Sheet, other than liabilities incurred in the ordinary course of business since
the date of the February 28 Balance Sheet.
Section 2.07 Properties. The following Schedules set forth the
information indicated as of the dates noted on such Schedules:
(a) Schedule 2.07(a) sets forth a list of all of the interests in
real property and all material improvements thereto held by each of the Company
and the VSP Entities (collectively, the "Real Property"); and
(b) Schedule 2.07(b) sets forth a list of all of the machinery,
equipment, leasehold improvements, tooling, furniture, fixtures, supplies,
repair and maintenance parts, fuel and other personal property held by each of
the Company and the VSP Entities (collectively, the "Personal Property") having
an original purchase price or current book value of at least One Hundred
Thousand Dollars ($100,000.00).
Each of the Company and the VSP Entities has good and marketable title to
all Real Property and Personal Property listed on Schedules 2.07(a) and
2.07(b) or has valid leasehold interests in all leased Real Property and
Personal Property listed on such Schedules as leased by each of the Company
and the VSP Entities, except such as shall have been disposed of in the
ordinary course of business since the date of such Schedules. To the
Company's knowledge, such properties and assets are subject to no liens,
mortgages, pledges, encumbrances or charges of any kind except liens for real
property taxes not delinquent or being contested in good faith and for which
adequate provision has been made, statutory mechanics and materialman's
liens, liens and encumbrances disclosed on the public record, or which would
not have a Company Material Adverse Effect.
Section 2.08 Subsidiaries and Partnerships. Except as set forth on
Schedules 2.01 or 2.08, each of the Company and the VSP Entities has no
subsidiaries or investments in other corporations, partnerships or joint
ventures.
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Section 2.09 Contracts. There is set forth on Schedule 2.09 a list of
all outstanding contracts to which each of the Company and the VSP Entities is a
party, except: (i) the leases and other agreements listed in Schedules 2.07(a)
and (b); (ii) any contract which does not involve the possible payment or
incurrence of liabilities or rendering of services after the date of this
Agreement in an amount of more than One Hundred Thousand Dollars ($100,000.00)
and does not have a term extending beyond twelve months from the date of this
Agreement; and (iii) any contract pursuant to which a physician provides
services to the Company or the VSP Entities (a "Physician Contract")
(collectively, the "Material Contracts"). Schedule 2.09 also identifies all
contracts of the Company in which its officers or directors (or any person, firm
or corporation affiliated with such persons, excluding any contracts with
Parent) have a material interest. Except as would not individually or in the
aggregate, have a Company Material Adverse Effect, each Material Contract and
each Physician Contract is a legal, valid and binding agreement, and none of the
Material Contracts is in default by its terms or has been cancelled by the other
party, and neither the Company nor the VSP Entities is in receipt of any claim
of default under any such Material Contract.
Section 2.10 Proprietary Rights. Schedule 2.10 sets forth a list of all
patents, trademarks, service marks, copyrights, and pending applications
therefor, the loss of which would reasonably be likely to have a Company
Material Adverse Effect (the "Proprietary Rights"). Except as disclosed on
Schedule 2.10, the Company is not bound by or a party to any options, licenses
or agreements of any kind with respect to the Proprietary Rights except those
that would not have a Company Material Adverse Effect. Except as disclosed on
Schedule 2.10, the Company has not been informed of any claims or suits pending
or threatened against the Company or any of the VSP Entities claiming an
infringement by the Company or any of the VSP Entities of any patents,
copyrights, licenses, trademarks, service marks or trade names of others.
Section 2.11 Rights to Use Assets and Property. The Company and the VSP
Entities, together, own (and as of the Closing will own), or have rights to use
(and as of the Closing will have rights to use), all of the assets and property,
both tangible and intangible, necessary for the operation of the businesses of
the Company and the VSP Entities as currently conducted, except where the
failure to own or have such rights would not have a Company Material Adverse
Effect.
Section 2.12 Compliance With Laws. To the knowledge of the Company, each
of the Company and the VSP Entities is in compliance with all applicable laws,
regulations, orders, judgments, ordinances or decrees of any Federal, state or
local court or any governmental authority, the non-compliance with which would
have a Company Material Adverse Effect.
Section 2.13 Litigation. There is no litigation, proceeding or
controversy pending or, to the Company's knowledge, threatened, by or against
the Company or the VSP Entities before any court, government agency or any other
administrative body that would reasonably be expected to have a Company Material
Adverse Effect or prohibit or restrain the ability of the Company to enter into
this Agreement or to consummate the transactions contemplated hereby.
Section 2.14 Labor Matters. Schedule 2.14 lists the collective
bargaining agreements or other labor union contracts and employee benefit plans
applicable to employees which are employed by the Company or any of the VSP
Entities, and, to the Company's knowledge, the Company and the VSP Entities are
as of the date of this Agreement in full compliance with the terms and
conditions of such agreements and contracts, except where the failure to be in
compliance would not have a Company Material Adverse Effect. Except as set
forth on Schedule 2.14, and to the Company's knowledge, (i) there are no charges
or allegations of unfair labor practices pending or threatened under Federal or
state labor laws; (ii) there are no pending arbitration matters or grievance
procedures under any of the
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agreements listed in Schedule 2.09; (iii) there are no facts or conditions
existing which upon the giving of notice, or lapse of time, will result in a
breach under any collective bargaining agreement or under any of the other
foregoing agreements, which would have a Company Material Adverse Effect; and
(iv) there is no pending or threatened labor dispute, strike or work stoppage
which would have a Company Material Adverse Effect.
Section 2.15 Absence of Certain Changes. Except for the Reorganization
and except as disclosed on Schedule 2.15 hereto, since November 30, 1996, each
of the Company and the VSP Entities has operated its business only in the
ordinary course and there has not occurred:
(a) Any event that has had a Company Material Adverse Effect;
(b) Any declaration or payment of any dividends or distributions by
the Company or the VSP Entities, any acquisition or redemption by the Company or
the VSP Entities of any of its or their equity securities or any loan by the
Company or the VSP Entities to any of its or their security holders; or
(c) Any agreement to, or any authorization by the Company, its
officers or its directors, to any of the things described in the preceding
subsections of this Section 2.15.
Section 2.16 Brokers' Fees. Neither the Company nor any of the VSP
Entities has incurred any liability for brokerage fees, finders' fees, agents'
commissions or other similar forms of compensation in connection with this
Agreement and the transactions contemplated hereby for which the Acquiror or
Merger Sub would be responsible.
Section 2.17 Books and Records. To the Company's knowledge, the books
and records of the Company to which the Acquiror and Merger Sub have been given
access and to which they will be given access on or prior to the Closing Date
are the true books and records of the Company and truly and accurately reflect
the underlying facts and transactions in all material respects.
Section 2.18 Required Filings and Consents. The execution and delivery
of this Agreement by the Company and Parent does not, and the performance of
this Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except (i) for applicable
requirements, if any, of the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act") and filing and recordation of
appropriate merger documents as required by Nevada Law and Delaware Law and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent or delay
consummation of the Merger or otherwise prevent the Company from performing its
obligations under this Agreement, and would not, individually or in the
aggregate, have a Company Material Adverse Effect. The execution and delivery
of the transactions and documents contemplated by the Reorganization (as
hereinafter defined) do not require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or authority except (i) as where such consents, approvals,
authorizations or permits have been obtained, or such filings or notifications
have been made or (ii) where the failure to obtain such consents, approvals,
authorizations or permits or to make such filings or notifications, would not,
individually or in the aggregate, have a Company Material Adverse Change.
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ARTICLE III.
REPRESENTATIONS, WARRANTIES AND
AGREEMENTS OF THE PARENT
The Parent hereby represents, warrants and agrees with the Acquiror and
Merger Sub that:
Section 3.01 Corporate Existence. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
The Parent has full corporate power to carry on its business as now being
conducted and to own and operate the property and assets now owned and operated
by it, and is duly qualified to transact business and is in good standing in
each jurisdiction where the ownership of its properties or the conduct of its
business requires such qualification and the failure to be so qualified would
have a material adverse effect on the business, operations, properties or
condition (financial or otherwise) of the Parent and its subsidiaries, taken as
a whole (a "Parent Material Adverse Effect") of the Parent.
Section 3.02 Corporate Power and Authority. The Parent has all requisite
corporate power and authority to execute and deliver this Agreement and each
other agreement, document, or instrument or certificate contemplated by this
Agreement to be executed by the Parent in connection with the consummation of
the transactions contemplated hereby, including, without limitation, the
Reorganization (as hereinafter defined) to the extent the Parent is a party to
any component of the Reorganization (together with this Agreement, the "Parent
Documents"), and to consummate the transactions contemplated hereby and thereby.
All corporate action necessary to authorize the execution, delivery and
performance of each of the Parent Documents has been duly taken by the Parent.
This Agreement has been, and each of the Parent Documents will be at or prior to
the Closing, duly and validly executed and delivered by the Parent and (assuming
the due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and each of the Parent Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Parent, enforceable against the Parent in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 3.03 Conflicts. None of the execution and delivery by the Parent
of this Agreement and the other Parent Documents, the consummation of the
transactions contemplated hereby or thereby, including, without limitation, the
Reorganization (as hereinafter defined), to the extent the Parent is a party to
any component of the Reorganization, or compliance by the Parent with any of the
provisions hereof or thereof will (i) violate any provision of the certificate
of incorporation or by-laws of the Parent; (ii) conflict with, violate, result
in the breach or termination of, or constitute a default under any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which the Parent is a party or by which its properties or assets are bound;
(iii) violate any statute, rule, regulation, order or decree of any governmental
body or authority by which the Parent is bound; or (iv) result in the creation
of any lien, pledge, mortgage, deed of trust, security interest, claim, lease,
charge, encumbrance or any other restriction or limitation whatsoever upon
the properties or assets of the Parent except, in case of clauses (ii), (iii)
and (iv), for such conflicts, violations, breaches or defaults as would not have
a Parent Material Adverse Effect.
Section 3.04 Ownership of Capital Stock. Except as set forth on
Schedule 2.05(a), all of the shares of Capital Stock of the Company outstanding
as of the Effective Time will be owned by the Parent.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR, ACQUIROR II AND MERGER SUB
The Acquiror, Acquiror II and Merger Sub hereby jointly and severally
represent, warrant and agree with the Company that, except as set forth on the
Schedules attached hereto:
Section 4.01 Corporate Existence. Each of the Acquiror, Acquiror II and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with full
corporate power to carry on its business as now being conducted and to own and
operate the property and assets now owned and operated by it, and is duly
qualified to transact business and is in good standing in each jurisdiction
where the ownership of its properties or the conduct of its business requires
such qualification and the failure to be so qualified would have a material
adverse effect on the business, operations or condition (financial or otherwise)
of the Acquiror, Acquiror II and Merger Sub taken as a whole (an "Acquiror
Material Adverse Effect").
Section 4.02 Corporate Power and Authority. Each of the Acquiror,
Acquiror II and Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement and each other agreement, document, or
instrument or certificate contemplated by this Agreement or to be executed by
the Acquiror, Acquiror II or Merger Sub in connection with the consummation of
the transactions contemplated hereby (together with this Agreement, the
"Acquiror Documents"), and to consummate the transactions contemplated hereby
and thereby. All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and each of the other Acquiror
Documents has been duly taken by the Acquiror, Acquiror II and Merger Sub. This
Agreement has been, and each of the Acquiror Documents will be at or prior to
the Closing, duly and validly executed and delivered by the Acquiror,
Acquiror II and Merger Sub and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each of the Acquiror Documents when so executed and delivered will
constitute, legal, valid and binding obligations of the Acquiror, Acquiror II
and Merger Sub, enforceable against each of the Acquiror, Acquiror II and Merger
Sub in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.03 Conflicts. None of the execution and delivery by the
Acquiror, Acquiror II or Merger Sub of this Agreement and the Acquiror
Documents, the consummation of the transactions contemplated hereby or thereby,
or compliance by the Acquiror, Acquiror II or Merger Sub with any of the
provisions hereof or thereof will (i) violate any provision of the certificate
of incorporation or bylaws of the Acquiror, Acquiror II or Merger Sub;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Acquiror, Acquiror II
or Merger Sub is a party or by which their respective properties or assets are
bound; (iii) violate any statute, rule, regulation, order or decree of any
governmental body or authority by which the Acquiror, Acquiror II or Merger Sub
is bound; or (iv) result in the creation of any lien, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, encumbrance or any other
restriction or limitation whatsoever upon the properties or assets of the
Acquiror, Acquiror II or Merger Sub except, in case of clauses (ii), (iii) and
(iv), for such conflicts, violations, breaches or defaults as would not have an
Acquiror Material Adverse Effect.
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Section 4.04 Capitalization. The authorized Capital Stock of the
Acquiror consists of 1,000,000 shares of Class A common stock, $0.01 par value
per share (the "Acquiror Class A Common Stock"), of which no shares are
presently issued and outstanding, 200,000,000 shares of Acquiror Class B Common
Stock, of which 1,000 shares are outstanding, and 1,000,000 shares of preferred
stock, $0.01 par value per share, of which no shares are presently issued and
outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, $0.01 par value per share, of which 1,000 shares
have been issued to Acquiror and are presently outstanding (the "Merger Sub
Common Stock"), and 100 shares of preferred stock, $0.01 par value per share, of
which no shares are issued and outstanding. The authorized capital stock of
Acquiror II consists of 1,000 shares of common stock, $0.01 par value per share,
of which 100 shares are presently issued and outstanding (the "Acquiror II
Common Stock"), and 100 shares of preferred stock, $0.01 par value per share, of
which no shares are presently issued and outstanding. All of the outstanding
shares of Acquiror Class A Common Stock, Acquiror II Common Stock and Merger Sub
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable.
Section 4.05 Litigation. There is no litigation, proceeding or
controversy pending or, to the Acquiror's, Acquiror II's and Merger Sub's
knowledge, threatened, by or against the Acquiror, Acquiror II or Merger Sub
before any court, government agency or any other administrative body that would
be reasonably likely to prohibit or restrain the ability of the Acquiror,
Acquiror II or Merger Sub to enter into this Agreement or to consummate the
transactions contemplated hereby.
Section 4.06 Brokers Fees. Neither Acquiror, Acquiror II nor Merger Sub
has incurred any liability for brokerage fees, finders' fees, agents'
commissions or other similar forms of compensation in connection with this
Agreement and the transactions contemplated hereby for which the Company would
be responsible.
Section 4.07 Financing. The Acquiror, Acquiror II and Merger Sub have
available all of the funds necessary to perform its obligations hereunder and
under the Acquiror Documents.
ARTICLE V.
COVENANTS OF THE COMPANY
The Company covenants that from the date of this Agreement until the
Closing:
Section 5.01 Conduct of Business in Ordinary Course. The Company will,
and will cause each of the VSP Entities to, carry on its or their business in
the ordinary course, and it or they shall not, nor permit any of the VSP
Entities to, make or institute any unusual or novel methods of purchase, sale,
lease, management, accounting or operation that will vary materially from those
methods used by it prior to the date of this Agreement. The Company will not,
and will cause the VSP Entities not to, sell, lease or dispose of, or agree to
sell, lease or dispose of, any of the assets or properties of the Company or the
VSP Entities other than in the ordinary course of business, or pursuant to any
existing plan, agreement or practice.
Section 5.02 Preservation of Business and Relationships. The Company
will, and will cause the VSP Entities to, use its or their reasonable efforts to
preserve its or their business intact and to maintain its or their present
material relationships with customers, suppliers, employees and others having
business relationships with it or them. The Company will not, and will cause
the VSP Entities not to, amend its or their certificate of incorporation,
by-laws or similar governing document.
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Section 5.03 New Transactions. Except as otherwise provided in this
Agreement, the Company will not, and will cause the VSP Entities not to, enter
into any material contract, commitment or transaction not in the ordinary course
of its or their business.
Section 5.04 Dividends, Distributions, Acquisitions of Stock, Issuance of
Stock. Except in connection with the transactions contemplated by this
Agreement and the Reorganization (as hereinafter defined), the Company will not,
and will cause each of the VSP Entities not to: (i) declare, set aside or pay
any dividend or make any distribution in respect of its capital stock;
(ii) directly or indirectly purchase, redeem or otherwise acquire any shares of
its capital stock; or (iii) issue any shares of common stock or stock options or
any other capital stock or right or option to acquire capital stock of the
Company (other than issuances of capital stock under stock options currently
outstanding); or (iv) enter into any agreement obligating it to do any of the
foregoing prohibited acts.
Section 5.05 Payment of Liabilities and Waiver of Claims. The Company
will not do, or agree to do, and will cause each of the VSP Entities not to, or
agree to, any of the following acts: (i) pay any material obligation or
material liability, fixed or contingent, other than current liabilities and
other obligations incurred in the ordinary course of business; (ii) waive or
compromise any material right or claim; or (iii) except for the delinquency
charge imposed, from time to time, by the Company or a VSP Entity, as the case
may be, on overdue accounts receivable, cancel, without full payment, any note,
loan or other obligation owing to it.
Section 5.06 Material Contracts. Except as otherwise provided in this
Agreement, the Company will not, and will cause the VSP Entities not to, modify
or amend in any material manner or cancel or terminate any existing Material
Contract or Physician Contract other than in the ordinary course of its or their
business.
Section 5.07 The Acquiror's and Merger Sub's Access to Premises and
Information. The Acquiror and Merger Sub and its counsel, accountants and other
representatives shall have reasonable access during normal business hours to all
properties, books, accounts, records, contracts and documents of or relating to
the Company or the VSP Entities.
Section 5.08 Reorganization. Prior to the Closing, Parent and the
Company will consummate, or cause to be consummated, the following
transactions (collectively, the "Reorganization"):
(a) Each of 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. will be merged with and into
the Company, and, in connection therewith, each VSP Entity Option shall be
converted into an option to purchase shares of Common Stock under the Company
Stock Option Plan as reflected on Schedule 2.05(b). In connection therewith,
the Company will use reasonable efforts (without the requirement of paying any
money or making any financial concession) to cause each holder of VSP Entity
Options to execute and deliver an option exchange agreement, in form and
substance satisfactory to the Company and Acquiror, pursuant to which each
holder of VSP Entity Options will agree, among other things, (i) to convert his
or her VSP Entity Options into options to acquire Common Stock and, upon the
Merger, into options to acquire Acquiror Class B Common Stock, (ii) to enter
into a stockholders' agreement, in form and substance satisfactory to the
Company and Acquiror, upon the exercise of any options to acquire Acquiror
Class B Common Stock following the Closing, and (iii) to terminate the existing
stockholders agreement relating to the shares of capital stock of the VSP Entity
issuable upon the exercise of such holder's VSP Entity Options.
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(b) Immediately prior to the Closing, Parent will convey, transfer
and assign to the Company all of the assets of Parent listed on Schedule 5.08(b)
and the Company will assume and agree to perform all of the liabilities and
obligations of Parent listed on Schedule 5.08(b) hereto; provided, however, that
if the Closing shall be effectuated as the Alternative Transaction pursuant to
Section 1.12 hereof, Parent shall have no obligation to assign to the Company,
and the Company shall have no obligation to assume, any of Parent's rights,
duties or obligations under the Gateway Lease (as defined in Schedule 2.07(a)
hereto).
Section 5.09 Certain Exchange Transactions.
(a) Prior to the Closing, Parent and the Company will use reasonable
efforts (without the requirement of paying any money or making any financial
concession) to cause each holder of capital stock of the Company other than
Parent to enter into an agreement with Acquiror, (i) to exchange such shares of
capital stock immediately prior for shares of Acquiror Class B Common Stock
(providing such holder with approximately the same percentage ownership of
Acquiror as of the time of such exchange as such holder held with respect to the
Company immediately prior to the exchange), (ii) to terminate the stockholders
agreements, dated as of May 1, 1996, by and between the Company and certain of
its stockholders and optionholders, and (iii) to enter into a new stockholders'
agreement, in form and substance satisfactory to Acquiror and the Company,
relating to such holder's shares of Acquiror Class B Common Stock.
(b) Prior to the Closing, Parent and the Company will use reasonable
efforts (without the requirement of paying any money or making any financial
concession) to cause each holder of capital stock of VHI other than Parent to
enter into an agreement with Acquiror II (i) to exchange such shares of capital
stock for shares of capital stock of Acquiror II (providing such holder with
approximately the same percentage ownership of Acquiror II as of the time of
such exchange as such holder held with respect to VHI immediately prior to the
exchange), (ii) to cancel and terminate any stockholder agreement to which such
holder is a party relating to such shares of VHI capital stock, and (iii) to
enter into a new stockholders' agreement, in form and substance satisfactory to
Acquiror II and the Company, relating to such holder's shares of capital stock
of Acquiror II.
Section 5.10 Conversion of Company Preferred Stock. Immediately prior to
the Effective Time, Parent shall cause all of its shares of Preferred Stock of
the Company to be converted into Class B Common Stock on the terms and
conditions provided for in the Company's certificate of incorporation; provided,
however, that if the Closing shall be effectuated as the Alternative Transaction
pursuant to Section 1.12 hereof, Parent shall be obligated under this Section
5.10, immediately prior to the Effective Time, to convert into Class B Common
Stock that number of shares of Preferred Stock (and no more and no less) as will
result in Parent's remaining shares of Preferred Stock representing 65% of the
aggregate voting power of all outstanding shares of capital stock of the Company
with respect to the election of directors of the Company immediately prior to
the Effective Time.
Section 5.11 Employee Benefits Matters. Parent and the Company shall
cause interests of employees of the Company in Parent's 401(k) plan to become
distributable pursuant to Internal Revenue Code Section 401(k)(10)(A)(iii) and
any amounts distributed to such employees may be rolled over pursuant to
Internal Revenue Code Section 402 to a comparable plan maintained by Acquiror.
Section 5.12 Trademark Assignment and License. Prior to the Closing,
Parent will assign to the Company all of its rights, title and interest in and
to the "Vivra" trademark, and any other trademarks of Parent incorporating or
including the word "Vivra". In connection with such assignment, Parent shall
execute, deliver and cause to be filed such trademark assignments, notices of
transfer or other
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filings as are necessary in order to secure for the Company all right, title
and interest in such marks. Simultaneously with the Closing, the Company and
Parent will enter into a license agreement, containing customary terms and
conditions, providing for (i) the royalty free license by the Company to
Parent of the right to use the name "Vivra Renal Care" in connection with the
operation of Parent's business for a period of nine (9) months following the
Closing; (ii) the royalty free license by the Company to Parent of the right
to use the name "Vivra" in connection with the operation of Parent's business
for a period of three (3) months following the Closing; provided however that
Parent shall use all reasonable efforts to cause its executives to
immediately cease the promotion of the names "Vivra Renal Care" and "Vivra"
and that Parent shall use reasonable efforts to effectuate the transition
from its use of "Vivra" and "Vivra Renal Care" to the use of its new name.
Notwithstanding the foregoing provision of this Section 5.12, if the Closing
shall be effectuated as an Alternative Transaction pursuant to Section 1.12,
Parent's obligations under this Section 5.12 shall be limited to the
obligation to grant to the Company a perpetual worldwide royalty free license
to use the name "Vivra" and the Company shall not be required to grant any
license to Parent.
Section 5.13 Intercompany Transactions. Between the date hereof and the
Closing Date, Parent, on the one hand, and the Company and the VSP Entities on
the other hand, shall not engage in any transactions or make any payments or
advances to one another or enter into any commitments to provide services or to
transfer assets or liabilities to or from one another, except as contemplated by
the Reorganization and except as provided for in the Services Agreement, dated
as of the date hereof, between the Company and Parent (the "Services
Agreement"), a copy of which is attached hereto as Exhibit 5.13.
ARTICLE VI.
TAX COVENANTS
The parties covenant that:
Section 6.01 Definitions.
(a) "Pre-Closing Partial Period" shall mean, with respect to any
Tax period beginning before the Closing Date and ending after the Closing
Date, the portion of such period up to and including the Closing Date.
(b) "Post-Closing Partial Period" shall mean, with respect to
any Tax period beginning before the Closing Date and ending after the Closing
Date, the portion of such period after the Closing Date.
(c) "Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net work; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
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Section 6.02 Tax Allocation.
(a) Parent shall pay, and be liable for, any and all Taxes for
which the Company or any of the VSP Entities may become liable with respect
to (i) all periods ending on or prior to the Closing Date and (ii) any
Pre-Closing Partial Period (hereinafter, any and all such Taxes referred to
as "Parent's Potential Tax Liability"); provided, however, that Parent's
Potential Tax Liability shall not include (i) any such Taxes to the extent
there is a reserve established therefor as of the Closing Date, and (ii) any
Taxes relating to any activities or transactions occurring on the Closing
Date, but after the Closing, imposed on the Company or any of the VSP
Entities that are not in the ordinary course of business. Parent's Potential
Tax Liability shall include but not be limited to any Tax liability arising
pursuant to the federal consolidated return rules, including the deferred
income rules under Treas. Reg Section 1.1502-13 and Section 1.1502-14, the
excess loss account rules under Treas. Reg Section 1.1502-19 and any Tax
asserted under Treas. Reg. Section 1.1502-6. Notwithstanding anything to the
contrary above, Parent's Potential Tax Liability shall not include any
liability for Taxes owing as a result of any deemed sale of assets pursuant
to Section 338 (or any corresponding rules under state, local, or other Tax
laws) with respect to the Company or any of the VSP Entities to the extent
such Taxes exceed the Tax liability that Parent would have incurred upon the
Transactions or the Alternate Transaction in the absence of such deemed sale
of assets pursuant to Section 338.
(b) Acquiror shall pay, and be liable for, any and all Taxes
imposed on or allocable to the Company or any of the VSP Entities with
respect to the operations, business, activities or assets of the Company and
the VSP Entities for which Parent is not liable pursuant to the provisions of
Section 6.02(a) (hereinafter, any and all such Taxes referred to as
"Acquiror's Potential Tax Liability").
(c) Any Taxes for any period that begins before and ends after the
Closing Date and that are imposed on a periodic basis with respect to the assets
of the Company or any VSP Entity, or otherwise measured by the level of any
item, shall be apportioned between the Post-Closing Period and the Pre-Closing
Period by taking the amount of such Taxes for the entire period (or, in the case
of such Taxes determined on an arrears basis the amount of such Taxes for the
immediately preceding period), multiplied by a fraction the numerator of which
is the number of calendar days in the period ending on the Closing Date and the
denominator of which is the number of calendar days in the entire period. No
election under Treas. Reg Section 1.1502-76(b)(2)(ii)(D) (dealing with a
pro-rata allocation) shall be made in connection with the Transactions.
(d) Parent shall not change its current policies and practices with
respect to the sharing of Taxes within its affiliated group until the Closing
Date. All Tax sharing agreements or similar agreements with respect to or
involving the Company or any of the VSP Entities shall be terminated as of the
Closing Date and, after the Closing Date, the Company and the VSP Entities shall
not be bound thereby or have any liability thereunder.
Section 6.03 Tax Indemnity.
(a) Parent shall indemnify, save and hold harmless Acquiror, Merger
Sub and the Company, all of the VSP Entities and each of their respective
subsidiaries, affiliates, directors, stockholders, officers, employees, agents,
consultants, successors, transferees and assignees and their respective
representatives from and against any and all losses incurred in connection with,
arising out of, resulting from or relating to any Parent's Potential Tax
Liability.
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(b) Acquiror shall indemnify, save and hold harmless Parent and
each of its respective subsidiaries, affiliates, directors, stockholders,
officers, employees, agents, consultants, successors, transferees and
assignees and their respective representatives from and against any and all
losses incurred in connection with, arising out of, resulting from or
relating to any Acquiror's Potential Tax Liability.
(c) Parent shall promptly pay to Acquiror (or other indemnitee)
after receipt of notice from Acquiror or other indemnitee (together with
appropriate calculations), and after a final determination of the amount of
any Taxes paid or to be paid by Acquiror (or other indemnitee) for which
Parent is liable under Section 6.03(a), an amount equal to such Taxes.
(d) Acquiror shall promptly pay to Parent (or other indemnitee)
after receipt of notice from Parent or other indemnitee (together with
appropriate calculations), and after a final determination of the amount of
any Taxes paid or to be paid by Parent (or other indemnitee) for which
Acquiror is liable under Section 6.03(b), an amount equal to such Taxes.
Section 6.04 Filing of Tax Returns.
(a) Parent shall file, on behalf of the group for which Parent
is the common parent, all federal consolidated Tax returns and any state or
local consolidated or combined Tax returns which have not been filed by the
Closing Date and which Tax returns properly include the Company or any VSP
Entity in Parent's consolidated or combined group. Parent will include the
income of the Company and such includable VSP Entities on such Tax returns
for all periods through the Closing Date and pay any Taxes attributable to
such income. Acquiror shall provide Parent with funds to make such payments
to the extent required by Sections 6.03(b) and 6.09. If there is any
material change in the manner in which such Tax returns are prepared and if
such material change has any adverse impact on the Company for periods (or
portions thereof) after the Closing Date, such material change shall be
subject to Acquiror's review and consent. Parent shall also file all other
Tax returns that have not been filed as of the Closing Date that are for any
Taxable periods ending on or before the Closing Date.
(b) Except as provided by Section 6.04(a), Acquiror shall cause the
Company to prepare and file Tax returns with respect to Taxes which are required
to be filed by the Company that are for periods after the Closing Date
(excluding any federal consolidated returns and any state or local consolidated
or combined Tax returns to be filed by Parent on behalf of the group for which
Parent is the common parent and which return properly includes the Company or
any of the VSP Entities.) All Tax returns for any Taxable periods that include
the Closing Date shall be prepared in a manner consistent with the Company's
prior practice (including elections), unless otherwise required by law,
provided, however, that Parent shall control the contents of the Tax returns to
the extent they relate to periods prior to the Closing Date or Pre-Closing
Partial Periods. Acquiror shall provide Parent with copies of such Tax returns
at least 20 days prior to the due date thereof for Parent's review.
Section 6.05 Control of Audits.
(a) Upon receipt by Acquiror or the Company of any notice or other
communication that there are any pending or threatened Tax audits or assessments
against the Company or any of the VSP Entities involving a Parent's Potential
Tax Liability, Acquiror shall promptly give written notice thereof to Parent.
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(b) Subject to paragraph (d) of this Section 6.05, Parent shall
have the sole right, exercisable at any time, to elect to represent the
Company's interest or the interest of any of the VSP Entities in any Tax
audit or administrative or court proceeding relating to Parent's Potential
Tax Liability, to employ counsel of its choice at its expense, and to control
the conduct of such audit or proceeding, including settlement or other
disposition thereof. If Parent elects to so represent the Company's interest
or the interest of any of the VSP Entities, it shall notify Acquiror of its
intent to do so, and shall reasonably and in good faith consult with Acquiror
with respect to the defense against or compromise of any such Parent's
Potential Tax Liability.
(c) If Parent elects not to represent the Company's interests or
the interest of any of the VSP Entities pursuant to paragraph (b) of this
Section 6.05, Acquiror shall, at the request of Parent, cause the Company to
defend against such Parent's Potential Tax Liabilities and shall keep Parent
fully advised of the process of such defense, it being understood that Parent
shall not be excused from its obligations to pay Parent's Potential Tax
Liabilities by reason of such election. If Parent notifies Acquiror of
Parent's desire to further contest the Parent's Potential Tax Liability,
Parent shall be entitled to do so at Parent's expense by way of petition in
the United States Tax Court, claim for refund, suit for refund, appeals, writ
of certiorari or other procedures permitted under federal, state, local or
foreign law.
(d) Notwithstanding paragraphs (b) and (c) of this Section 6.05,
Parent may not settle, compromise, or otherwise dispose of any such Parent's
Potential Tax Liability without the consent of Acquiror (which consent shall not
be unreasonably withheld), if such settlement, compromise, or other disposition
could have a material adverse effect on the Tax liabilities of the Company, the
VSP Entities or Acquiror for any period (or a portion thereof) after the
Closing.
Section 6.06 Cooperation. Parent and Acquiror agree to furnish or cause
to be furnished to each other, at no cost and upon request, as promptly as
practicable, such information and assistance (including access to books and
records) relating to the Company and the VSP Entities as are reasonably
necessary for preparation of any return, claim for refund or audit, and the
prosecution or defense of any claim, suit or proceeding relating to any Parent's
Potential Tax Liability. Acquiror shall execute or cause to be executed and
deliver or cause to be delivered any powers of attorney and other documents
reasonably necessary to enable Parent (or its advisors) to take all actions in
connection with audits which Parent has right to control pursuant to Article 6
hereof.
Section 6.07 Tax Refund. Parent shall be entitled to retain, and
Acquiror or the Company shall pay to Parent within 10 days after the receipt,
any refund of Taxes or credit relating to the Company or any VSP Entity with
respect to a period ending on or prior to the Closing Date or a Pre-Closing
Partial Period.
Section 6.08 Effect of Payment. An indemnity payment by Parent pursuant
to this Article shall be treated as a reduction in the Merger Consideration.
Section 6.09 Tax Elections.
(a) At Acquiror's election, Acquiror and Parent agree to make the
election provided for by Section 338(h)(10) of the Code (and any corresponding
election or deemed election under state, local or foreign Tax law)
(collectively, the "Election") with respect to the Company or the other VSP
Entities and to provide one another with all necessary information to permit the
Election to be made. Parent and Acquiror shall, as promptly as practicable
following the Closing Date, take all actions necessary and appropriate
(including filing such form, returns, elections, schedules and other documents
as may be required) to effect and preserve a timely Election.
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(b) In connection with any Election, prior to the due date for such
Election, Parent and Acquiror shall act together in good faith to (i) determine
and agree upon the amount of the "adjusted grossed-up basis" of assets of the
Company or any of the VSP Entities subject to the Election (within the meaning
of Treas. Reg. Section 1.338(h)(10)-1(e)(5)) and (ii) agree upon the proper
allocations (the "Allocations") of such "adjusted grossed-up basis" among the
assets of the Company in accordance with Section 338(b)(5) of the Code and the
Treasury regulations promulgated thereunder. Parent and Acquiror shall not, and
Acquiror shall cause the Company, and the other VSP Entities, not to, take any
position inconsistent with the Allocations in any Tax return or otherwise.
(c) The parties agree that any and all Taxes payable by Parent
arising from the deemed sale of assets pursuant to Section 338 or otherwise of
the Code with respect to the Company or any of the VSP Entities (or any
corresponding election or deemed election under state, local, or foreign Tax
law), to the extent such Taxes exceed the Tax liability that Parent would have
incurred upon the Transactions in the absence of such Election, shall be borne
by Acquiror. Acquiror shall pay to Parent, within ten (10) days after receipt
of notice from Parent (together with appropriate calculations), an amount equal
to the amount of any Taxes paid or to be paid by Parent for which Acquiror is
liable under the preceding sentence of this Section 6.09(c), together with any
Taxes paid or to be paid by Parent on amounts payable under this
Section 6.09(c).
ARTICLE VII.
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE ACQUIROR AND MERGER SUB
The obligations of the Acquiror and Merger Sub to consummate the Merger and
the obligation of Acquiror II to consummate the VHI Acquisition contemplated by
this Agreement are subject to the satisfaction or waiver, at or before the
Closing Date, of each of the following conditions:
Section 7.01 Representations True. All representations and warranties by
the Company and the Parent in this Agreement in Article II and Article III shall
be true in all material respects on and as of the Closing Date, as if made on
and as of the Closing Date, and there shall be delivered to the Acquiror and
Merger Sub a certificate of the Company, signed by its President or Chief
Financial Officer, to such effect.
Section 7.02 Covenants Performed. The Company shall have complied in all
material respects with all covenants, agreements, and conditions required by
this Agreement to be complied with by it on or before the Closing Date, except
any failures to comply which do not have any Company Material Adverse Effect.
Section 7.03 No Prohibition. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the
Company or the Acquiror and Merger Sub from consummating the transactions
contemplated hereby.
Section 7.04 Authorizations, Consents and Approvals. All governmental
authorizations, consents and approvals necessary for the consummation of the
transactions contemplated hereby shall have been obtained prior to the Closing,
including, without limitation, the filing of any required notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any
waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
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Section 7.05 Services Agreement. Parent shall have executed and
delivered to the Company the Services Agreement and the Services Agreement shall
be in full force and effect and there shall have been no material breach
thereof.
Section 7.06 Non-Competition Agreement. The Company and the Parent shall
have executed a non-competition agreement containing the provisions set forth in
Exhibit 7.06 hereto.
Section 7.07 Legal Opinion. Brobeck, Phleger & Harrison LLP, special
counsel to the Company, shall deliver a legal opinion with respect to matters as
set forth in Sections 2.01, 2.02, 2.03, 2.04, 3.01, 3.02 and 3.03, provided that
with respect to matters governed by Nevada Law, such counsel may rely solely on
certificates and filings with state officials and a review of corporate
documents and provided further that the opinions with respect to the matters
covered in Section 2.04(ii) and (iv) and Section 3.03(ii) and (iv) need only
address the impact of the Transaction and the Reorganization upon Material
Contracts.
Section 7.08 Reorganization. The Reorganization described in
Section 5.08 shall have been consummated, and the Company shall have delivered
to Acquiror documentation evidencing the same; provided however, that if the
Closing shall be effectuated as the Alternative Transaction pursuant to Section
1.12 hereof, the assignment by Parent to the Company of, and the assumption by
the Company of, the Gateway Lease (as defined in Schedule 2.07(a) hereto) shall
not be a condition to the Closing.
Section 7.09 Assignment of Trademark. The assignment of trademarks
contemplated by Section 5.12 shall have been consummated, and the Company shall
have delivered to Acquiror documentation evidencing the same; provided, however,
that, if the Closing shall be effectuated as an Alternative Transaction pursuant
to Section 1.12, it shall only be a condition to Closing under this Section 7.09
that Parent shall have granted to the Company a perpetual worldwide royalty free
license to use the name "Vivra."
Section 7.10 Conversion of Preferred Stock. All of the Company's
outstanding Preferred Stock shall have been converted into Class B Common Stock
as contemplated in Section 5.10, and the Company shall have delivered to
Acquiror documentation evidencing the same; provided however, that if the
Closing shall be effectuated as the Alternative Transaction pursuant to Section
1.12 hereof, it shall be a condition to Closing that Parent shall have converted
into Class B Common Stock that number of shares of Preferred Stock (and no more
and no less) as will result in Parent's remaining shares of Preferred Stock
representing 65% of the aggregate voting power of all outstanding shares of
capital stock of the Company with respect to the election of directors of the
Company immediately prior to the Effective Time.
Section 7.11 Material Adverse Change. There shall have been no change,
circumstance or occurrence since the date of this Agreement except for a change,
circumstance or occurrence that has not had or would not have a Company Material
Adverse Effect.
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions contemplated
by this Agreement are subject to the satisfaction or waiver, at or before the
Closing Date, of each of the following conditions:
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Section 8.01 Representations True. All representations and warranties by
the Acquiror and Merger Sub contained in this Agreement shall be true in all
material respects on and as of the Closing Date, as if made on and as of the
Closing Date, and there shall be delivered to the Company a certificate of the
Acquiror, signed by its President or Chief Financial Officer, to such effect.
Section 8.02 Covenants Performed. The Acquiror and Merger Sub shall have
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be complied with by it on or before Closing Date
and there shall be delivered to the Company a certificate of the Acquiror,
signed by its President or Chief Financial Officer, to such effect.
Section 8.03 No Prohibition. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which prohibits the
Company or the Acquiror and Merger Sub from consummating the transactions
contemplated hereby.
Section 8.04 Authorizations, Consents, and Approvals. All
authorizations, consents and approvals necessary for the consummation of the
transactions contemplated hereby shall have been obtained prior to the Closing,
including, without limitation, the filing of any required notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the lapse
of all applicable time periods without there being any continuing objection
thereto.
Section 8.05 Legal Opinion. Gibson, Dunn & Crutcher LLP shall deliver a
legal opinion with respect to the matters set forth in Sections 4.01, 4.02 and
4.03.
Section 8.06 License Agreement. The Company and Parent shall have
entered into the license agreement contemplated by Section 5.12; provided,
however, that, if the Closing shall be effectuated as an Alternative Transaction
pursuant to Section 1.12, this condition shall not apply.
Section 8.07 Services Agreement. Acquiror shall have executed and
delivered to Parent the Services Agreement, and the Services Agreement shall be
in full force and effect.
Section 8.08 The Offer. Purchaser shall have advised Parent that it will
purchase the Parent Shares in the Offer hereto or the Purchaser or any other
person or entity shall have acquired either (i) greater than fifty percent (50%)
of the outstanding capital stock of Parent or (ii) all or substantially all of
the assets of Parent, in either case by way of merger, purchase of stock,
purchase of assets or otherwise.
ARTICLE IX.
INDEMNIFICATION
Section 9.01 Indemnification by Acquiror. The Acquiror and Merger Sub,
shall, and, from and after the Effective Time, the Surviving Corporation shall,
indemnify, defend and hold harmless the Parent and its successors, affiliates,
stockholders, officers and employees from and against any and all claims,
demands, actions, losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and expenses) which arise out of or in connection
with the operation of the business of the Company and the VSP Entities,
including, without limitation, any liabilities of Parent and its affiliates
(other than the Company and the VSP Entities) arising out of the provision of
specialty physician network and disease management services to managed care and
provider organizations (other than such businesses included within the Dialysis
Business (as hereinafter defined)), including, without limitation all
liabilities
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arising under the agreements set forth on Schedule 9.01, other than those
liabilities and obligations that Parent has agreed to pay pursuant to the
Services Agreement (collectively, the "VSP Liabilities").
Section 9.02 Indemnification by Parent. The Parent and its successors
shall indemnify, defend and hold harmless the Acquiror and Merger Sub, and from
and after the Effective Time, the Surviving Corporation, and their successors,
affiliates, stockholders, officers and employees from and against any and all
claims, demands, actions, losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which arise out of or in
connection with the operation of the of Parent (other than the VSP Liabilities)
and Vivra Renal Care, Inc. ("VRC") and the Dialysis Subsidiaries (as defined in
the Vivra Agreement), including without limitation, any liabilities of the
Company and the VSP Entities arising out of the provision of dialysis, renal
care, nephrology, disease management or, nephrologist practice management
businesses or the business of contracting with payors on behalf of nephrologists
(the "Dialysis Business").
Section 9.03 Notice and Right to Defend Third Party Claims. Upon receipt
of written notice of any claim, demand or assessment, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought on
account Section 9.01 or 9.02 of this Agreement, the party seeking
indemnification (the "Indemnitee") shall promptly, but in no event later than
twenty (20) days prior to the date a response or answer thereto is due (unless a
response or answer is due within fewer than twenty (20) days from the date the
Indemnitee's receipt of notice thereof), inform the party against whom
indemnification is sought (the "Indemnitor") in writing thereof. The failure,
refusal or neglect of such Indemnitee to notify the Indemnitor within the time
period specified above of any such claim or action shall relieve such Indemnitor
from any liability which it may have to such Indemnitee in connection therewith,
if the effect of such failure, refusal or neglect is to prejudice materially the
rights of the Indemnitor in defending against the claim or action. In case any
claim, demand or assessment shall be asserted or any suit, action or proceeding
is commenced against an Indemnitee, and such Indemnitee shall have timely and
property notified the Indemnitor of the commencement thereof, the Indemnitor
will be entitled to participate therein, and, to the extent that it may wish, to
assume the defense, conduct or settlement thereof, with counsel selected by the
Indemnitor. After notice from the Indemnitor to the Indemnitee of its election
to assume the defense, conduct or settlement thereof, the Indemnitor will not be
liable to the Indemnitee for expenses incurred in connection with the defense,
conduct or settlement thereof, except for such expenses as may be reasonably
required to enable the Indemnitor to take over such defense, conduct or
settlement. The Indemnitee will at its own expense cooperate with the
Indemnitor in connection with any such claim, make personnel, witnesses, books
and records relevant to the claim available to the Indemnitor at no cost, and
grant such authorizations or powers of attorney to the agents, representatives
and counsel of the Indemnitor as the Indemnitor may reasonably request in
connection with the defense or settlement of any such claim; provided that,
before settling any claim hereunder, the Indemnitor shall give ten (10) days
notice to the Indemnitee to provide the Indemnitee with the opportunity to
reject the settlement, and in the case of any rejection of any settlement that
would have released Indemnitee of any liability, Indemnitee shall thereafter
defend the claim at its own expense. In the event that the Indemnitor does not
wish to assume the defense, conduct or settlement of any claim, demand or
assessment, the Indemnitee shall have the exclusive right to prosecute, defend,
compromise, settle or pay the claim in its sole discretion and pursue its rights
under this Agreement; provided that, before settling any claim hereunder, the
Indemnitee shall give ten (10) days' notice to the Indemnitor to provide the
Indemnitor with the opportunity to reject the settlement, and in the case of any
rejection of any settlement that would have released Indemnitor of any
liability, Indemnitor shall thereafter, at Indemnitee's election, defend the
claim at Indemnitor's own expense. Notwithstanding the foregoing, the
Indemnitee shall have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof, but the fees and
expense of such counsel shall be paid by the Indemnitee unless (a) the
Indemnitor has agreed in writing to pay such fees and expenses, (b) the
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Indemnitor has failed to assume the defense of such action, claim or proceeding
or (c) the named parties to any such action, claim or proceeding (including any
impleaded parties) include both the Indemnitor and the Indemnitee and the
Indemnitee reasonably determines that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnitor (in which case, if Indemnitee informs the Indemnitor in writing that
it elects to employ separate counsel at the expense of the Indemnitor, the
Indemnitor shall not have the right to assume the defense of such action, claim
or proceeding on behalf of the Indemnitee, it being understood, however, that
the Indemnitor shall not, in connection with any one such action, claim or
proceeding or separate but substantially similar or related actions, claims or
proceeding in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnitee, which firm shall
be designated in writing by the Indemnitee).
Section 9.04 Survival of Indemnification. The right to make a claim for
indemnification pursuant to Sections 9.01 and 9.02 of this Agreement shall
survive the Closing Date until the fifth anniversary of the Closing Date.
Further, the provisions of this Article VIII are intended to be for the benefit
of, and shall be enforceable by and binding on, each indemnified party and their
respective successors and assigns.
ARTICLE X.
GENERAL PROVISIONS
Section 10.01 Each Party to Bear Own Costs. Except as provided below,
each of the parties shall pay all costs and expenses incurred or to be incurred
by it in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated by this Agreement. The fees and expenses of
the Acquiror's and Merger Sub's investment bankers shall be borne solely by the
Acquiror and Merger Sub. The fees and expenses of the Company incurred or to be
incurred by it in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement shall be borne
solely by the Parent.
Section 10.02 Entire Agreement; Amendment; Waivers. This Agreement and
the Schedules hereto constitute the entire agreement and understanding between
the parties pertaining to the subject matter hereof and supersede all prior or
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by all the parties. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
Section 10.03 Public Announcements. No party hereto shall issue any press
release or public announcement or otherwise disclose the existence of this
Agreement or the transactions contemplated hereby without the prior approval of
the other parties hereto, except as and to the extent that the parties hereto in
writing jointly agree or that such party shall be obligated by law, rule or
regulation of any governmental or regulatory body, in which case the parties
shall in good faith agree on the content of any such press release, public
announcement or disclosure.
Section 10.04 Assignment. This Agreement is not assignable by any party,
but shall be binding upon and inure to the benefit of each party and its
successors (by operation of law or otherwise).
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Section 10.05 Survival. The representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant hereto or
in connection herewith and the covenants and agreements contained herein to be
performed or complied with at or prior to the Closing Date shall not survive
beyond the Closing Date.
Section 10.06 Termination. This Agreement may be terminated by the
Acquiror, Merger Sub or by the Company without liability to any party (i) if the
Closing has not occurred by October 31, 1997, or (ii) by any party hereto if any
court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or 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.
Section 10.07 Confidentiality; Record Retention. Each of the Acquiror and
Merger Sub acknowledges that its designated representatives have been given
access to confidential files, documents, agreements, books and records of
accounts (the "Books and Records") of the Company, and that in the event of
termination of this Agreement, any of such Books and Records in the possession
of the Acquiror and Merger Sub, and all copies thereof, will be returned to the
Company and that the contents thereof or any confidential information gained
therefrom, or from other sources of the Company will not be disclosed to third
parties or used for the Acquiror's and Merger Sub's benefit.
In the event this Agreement is consummated, such Books and Records will be
retained by the Acquiror and Merger Sub in accordance with the Company's
ordinary practice for retention of records after the Closing Date and for such
further time as may reasonably be requested, and that during such time such
Books and Records shall be open to inspection and examination by the Company at
all reasonable times.
After the Closing Date, the Acquiror, Merger Sub and the Company shall make
available to each other, as reasonably requested, and to any taxing authority,
all information, records or documents relating to tax liabilities or potential
tax liabilities of the Company for all periods prior to or including the Closing
Date and shall preserve all such information, records and documents until the
expiration of any applicable statute of limitations or extensions thereof.
Section 10.08 Cooperation and Assignments; Further Assurances. The
parties hereto will use their reasonable efforts, and will cooperate with one
another to secure all necessary consents, approvals, authorizations, exemptions
and waivers from third parties as shall be required in order to consummate the
transactions contemplated hereby, and will otherwise use its reasonable efforts
to cause such transactions to be consummated in accordance with the terms and
conditions hereof; provided, however, that the failure to obtain any consents
required under any agreement, contract, lease, license or other instrument
assigned and assumed hereunder shall not constitute a breach or nonfulfillment
of the foregoing covenant or a condition of Closing. At any time or from time
to time after the Closing Date, each party agrees that it shall, at the request
of any other party hereto and at the expense of such requesting party, execute
and deliver any further instruments or documents and take all such further
action as such requesting party may reasonably request in order to consummate
the transactions contemplated by this Agreement.
Section 10.09 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
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To Acquiror, Acquiror II and Merger Sub at:
VSP Holdings, Inc.
1850 Gateway Drive, Suite 500
San Mateo, CA
Telecopier: 415-345-0486
Attention: President
With a copy to:
Andrew E. Bogen, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier: 213-234-7520
Mats Wahlstrom
Gambro Healthcare
1185 Oak Street
Lakewood, CO 80215-4498
Telecopier: 303-231-4950
To the Parent or Company at:
Vivra Incorporated
1850 Gateway Drive, Suite 500
San Mateo, CA
Telecopier: 415-345-0486
Attention: General Counsel
With copies to:
John W. Larson, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94304
Telecopier: 415-496-2777
Any party may change its address for purposes of this paragraph by giving
notice of the new address to each of the other parties in the manner set
forth above.
Section 10.10 Governing Law. The terms of this Agreement shall be
governed by the laws of the State of California, without regard to principles of
conflicts or choice of law.
Section 10.11 Duplicate Originals. This Agreement may be executed in as
many duplicate originals as may be deemed necessary and convenient, each of
which, when so executed, shall be deemed an original but all such duplicate
originals shall constitute but one and the same instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
VSP HOLDINGS, INC.
By: /s/ Justin Chang
------------------------------------------
Name: Justin Chang
------------------------------------------
Title:
------------------------------------------
VSP HOLDINGS II, INC.
By: /s/ Justin Chang
------------------------------------------
Name: Justin Chang
------------------------------------------
Title:
------------------------------------------
VSP ACQUISITION, INC.
By: /s/ Justin Chang
------------------------------------------
Name: Justin Chang
------------------------------------------
Title:
------------------------------------------
VIVRA SPECIALTY PARTNERS, INC.
By: /s/ John Nehra
------------------------------------------
Name: John Nehra
------------------------------------------
Title:
------------------------------------------
VIVRA INCORPORATED
By: /s/ Kent J. Thirg
------------------------------------------
Name: Kent J. Thirg
------------------------------------------
Title:
------------------------------------------
27
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REVISED AND RESTATED EMPLOYMENT CONTRACT
----------------------------------------
THIS REVISED AND RESTATED EMPLOYMENT CONTRACT (the "Contract") is made as
of November 1, 1996, between VIVRA INCORPORATED, a Delaware corporation
("VIVRA") and KENT J. THIRY, an individual ("Thiry").
RECITALS:
A. VIVRA has employed Thiry in an executive capacity pursuant to a
Contract dated as of December 1, 1992.
B. VIVRA desires to revise the terms of Thiry's employment and restate his
contract, and Thiry desires to continue in VIVRA's employment.
NOW, THEREFORE, Thiry and VIVRA agree:
1. Definitions. As used in this Contract, the following terms have the
following meanings:
1.1 Beneficiary. "Beneficiary" means any Person or Persons designated from
time to time by Thiry as beneficiary pursuant to paragraph 6.5.1.
1.2 Board. "Board" means the Board of Directors of VIVRA.
1.3 Change of Control. "Change of Control" means a change of control that
would be required to be reported pursuant to Item 6(e) of Schedule 14A of Rule
14 under the Exchange Act. Without limitation of the foregoing sentence, such a
change of control shall be deemed to have occurred if (i) any Person is or
becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of VIVRA representing 30% or more of the
combined voting power of VIVRA's then outstanding securities, or (ii) during any
period of two (2) consecutive years during the term of this Contract,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof, unless the election of
each director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of such period,
(iii) substantially all (80% or more) of Vivra's assets are sold or (iv) if
Vivra merges or consolidates with or into another entity where the stockholders
of Vivra immediately before such event own less than 50% of the surviving entity
immediately
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<PAGE>
after such event. For purposes of this Agreement, a Change of Control does not
include a distribution to VIVRA's shareholders of stock of any subsidiary or a
purchase of securities or assets by a management-led purchasing group, which
includes Thiry.
1.4 Code. "Code" means the Internal Revenue Code of 1986, as amended.
1.5 Commission. "Commission" means the Securities and Exchange Commission.
1.6 Compete. "Compete" means either directly or indirectly to own,
initiate, manage, operate, join, control, advise, or participate in the
ownership, operation, management or control (other than as a shareholder owning
less than five percent (5%) of the capital stock of any entity, the shares of
which are traded on a national exchange) of any business in the U.S. similar to
the Existing or Other Businesses or to lease or sell real or personal property
to any such business.
1.7 Confidential Information. "Confidential Information" means all company
information which would constitute proprietary information or protectable trade
secrets under the laws of the State of California, including without limitation,
(i) market surveys, studies and analyses (ii) medical and personnel records,
(iii) statistical, financial, cost and accounting data, (iv) existing and
prospective patient and customer lists; and (v) other written materials
proprietary to VIVRA.
1.8 Contingent Bonus. A bonus described in paragraph 3.1.3.
1.9 Discretionary Bonus. A bonus described in paragraph 3.1.2.
1.10 Employment Term. "Employment Term" means the period commencing
November 1, 1996 and continuing for the shorter of (i) a period of four (4)
years ending October 31, 2000, or (ii) a period ending on the date of any
termination pursuant to paragraph 5 or any wrongful termination by either VIVRA
or Thiry.
1.11 Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.12 Existing or Other Businesses. "Existing or Other Businesses" means
dialysis services, diabetes management, and any other business (a) in which
VIVRA is actively engaged during or at the end of the Employment Term and (b)
which, during the preceding twelve (12) months, represented at least ten percent
(10%) of Vivra's consolidated revenue.
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1.13 Fiscal Year. "Fiscal Year" means VIVRA's annual accounting period for
financial accounting and reporting purposes, which currently is the period from
each December 1 to and including the next following November 30.
1.14 GAAP. "GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
1.15 Permanent Disability. "Permanent Disability" means any mental or
physical illness, disease or condition which results in Thiry's inability to
perform his duties during normal working hours for a period of not less than six
(6) consecutive months.
1.16 Person. "Person" means any individual, corporation, partnership,
business trust, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency, or political subdivision
hereof.
1.17 Prior Contract. "Prior Contract" means the Employment Agreement
between Thiry and VIVRA dated as of December 1, 1992.
1.18 Salary. "Salary" means Thiry's annual base compensation of a minimum
of $275,000 per Fiscal Year, except when "Salary" is used in paragraphs 5.2.2,
5.2.3. and 5.2.4, in which contexts "Salary" means annual base compensation to
Thiry of a minimum of $300,000 per Fiscal Year.
2. Employment and Duties.
2.1 Position. During the Employment Term, VIVRA shall employ Thiry and
Thiry shall serve VIVRA as its President and Chief Executive Officer.
2.1.1 Directorship. Thiry is a Director of VIVRA for a term ending at the
annual meeting of VIVRA's shareholders in 1998. VIVRA shall use its best efforts
to cause Thiry to be re-elected to the Board for further terms as long as he
serves as VIVRA's Chief Executive Officer. If he ceases to be employed by VIVRA
at any time Thiry agrees to offer to resign from the Board as of the date of his
termination of employment.
2.2 Time and Effort. During the Employment Term, Thiry shall devote his
full productive business time, efforts, energies and abilities to VIVRA and
shall not render services to any other person or entity without the written
consent of the Board. Thiry, however, shall not be precluded from engaging in
civic, charitable or religious activities.
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2.3 Place of Business. During the Employment Term, Thiry's principal place
of business shall be in San Mateo County, California, and VIVRA shall not
require him to maintain his principal place of business elsewhere.
3. Compensation, Reimbursement and Benefits.
3.1 Compensation.
3.1.1 Salary. During the Employment Term, VIVRA shall pay the Salary to
Thiry, in equal monthly or more frequent installments, in accordance with
VIVRA's general practice and subject to legally required withholdings.
3.1.2 Discretionary Bonuses. VIVRA may award Discretion-ary Bonuses to
Thiry in the future as determined by the Board in its sole discretion, but VIVRA
shall be under no obligation, express or implied, to grant any future
Discretionary Bonuses.
3.1.3 Contingent Bonus. If VIVRA's earnings per share are $1.25 or more
for the fiscal year ended November 30, 1996 and if he is employed as its Chief
Executive Officer throughout the period ending November 30, 1996, VIVRA shall
then pay Thiry a bonus of $300,000 which was granted and accrued in previous
years.
3.2 Expense Reimbursement and Benefits.
3.2.1 Expense Reimbursement. During the Employment Term, VIVRA shall
promptly reimburse Thiry, upon submission to VIVRA by Thiry of adequate
documentation, for all reasonable out-of-pocket expenses respecting
entertainment, travel, meals, hotel accommodations and other like-kind expenses,
in each case incurred by Thiry in the interest of VIVRA's business.
3.2.2 Insurance. During the Employment Term, VIVRA shall provide life,
medical, dental and hospital insurance to Thiry in the amount and on the terms
such insurance is provided from time to time to other executive officers of
VIVRA.
3.2.3 Automobile Allowance. VIVRA shall provide Thiry with an automobile
allowance of Five Hundred Dollars ($500) per month, and shall reimburse him for
all reasonable parking and cellular phone expenses incurred in connection with
his duties hereunder.
3.2.4 Vacation and Sick Leave. Thiry shall be entitled to paid vacation
and sick leave each year of the same duration and under the same conditions as
other executive officers of VIVRA.
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3.2.5 YPO. During the Employment Term, VIVRA shall pay for, or promptly
reimburse Thiry for, all reasonable out of pocket expenses related to monthly
meetings and Chapter and Forum events of the Young Presidents Organization.
3.3 Other Benefits. During the Employment Term, Thiry may participate in
employment benefit plans and fringe benefit programs made available to other
executive officers of VIVRA subject to the generally applicable terms and
conditions of each such plan or program.
3.4 Vesting on Change of Control. Whether or not Thiry terminates this
Contract pursuant to paragraph 5.1.2(b), all stock options and related stock
appreciation rights held by Thiry shall vest and become exercisable immediately
upon a Change of Control, and any plan or company restrictions on shares of
stock of VIVRA or on stock units that were awarded to Thiry under any plan or
arrangement maintained by VIVRA for the benefit of Thiry shall lapse upon the
occurrence of such an event.
4. Protection of Business Information; Noncompetition; Nonsolicitation.
4.1 Nondisclosure.
4.1.1 Confidential Information. In the operation, planning development and
expansion of the Existing or Other Businesses, VIVRA has generated and will
generate Confidential Information which is and will be proprietary and
confidential and the disclosure of which would be extremely detrimental to VIVRA
and of great assistance to its competitors.
4.1.2 Information Held as a Fiduciary. All of the Confidential Information
which is acquired by, communicated to or in any way comes into the possession or
control of Thiry shall be held by Thiry in a fiduciary capacity for the
exclusive benefit of VIVRA.
4.1.3 Nondisclosure Covenant. During the employment term and for a period
of two (2) years thereafter, Thiry shall not disclose any Confidential
Information to any person, without the consent of VIVRA.
4.1.4 Exemptions. The restrictions set forth in this paragraph 4.1 shall
not apply to any part of the Confidential Information which: (i) is or becomes
generally available to the public or publicly known other than as a result of
disclosure in breach of any obligation of confidentiality; (ii) becomes
available to Thiry on a nonconfidential basis from a source other than VIVRA or
its agents or affiliates; (iii) is disclosed
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pursuant to the requirement of a governmental agency or court of competent
jurisdiction or as otherwise required under applicable law; or (iv) was
otherwise known or available to Thiry without any obligation of confidentiality.
4.1.5 Following Employment. Upon termination of this Agreement, Thiry
shall promptly relinquish and return to VIVRA all Confidential Information and
all files, correspondence, memoranda, diaries and other records, minutes, notes,
manuals, papers and other documents and data, however prepared or memorialized,
and all copies thereof, belonging to or relating to the business of VIVRA, that
are in Thiry's custody or control and that contain Confidential Information.
4.2 Noncompetition Covenant. Except as provided in paragraphs 5.2.3 and
5.2.4, during the Employment Term and for a period of two (2) years thereafter,
Thiry shall not Compete or plan or prepare to Compete with VIVRA.
4.3 Nonsolicitation Covenant. Except as provided in paragraphs 5.2.3 and
5.2.4, for a period of two (2) years after the Employment Term, Thiry shall not
solicit employees of VIVRA for employment.
4.4 Scope and Duration; Severability. VIVRA and Thiry understand and agree
that the scope and duration of the covenants contained in this paragraph 4 are
reasonable both in time and area and are fairly necessary to protect the
business of VIVRA. Nevertheless, it is further agreed that such covenants shall
be regarded as divisible and shall be operative as to time and area to the
extent that they may be made so operative and, if any part of them is declared
invalid or unenforceable, the validity and enforceability of the remainder shall
not be affected.
4.5 Injunction. Thiry understands and agrees that, due to the highly
competitive nature of the health care industry, the breach of any of the
covenants set out in paragraphs 4.1.3, 4.1.5, 4.2 and 4.3 will cause irreparable
injury to VIVRA for which it will have no adequate monetary or other remedy at
law. Therefore, VIVRA shall be entitled, in addition to such other remedies as
it may have hereunder, to a temporary restraining order and to preliminary and
permanent injunctive relief for any breach or threatened breach of the covenants
without proof of actual damages that have been or may be caused hereby. In
addition, VIVRA shall have available all remedies provided under state and
federal statutes, rules and regulations as well as any and all other remedies as
may otherwise be contractually or equitably available.
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4.6 Assignment. Except as provided in paragraphs 5.2.3 and 5.2.4, Thiry
agrees that the covenants contained in paragraph 4 shall inure to the benefit of
any successor or assign of VIVRA with the same force and effect as if such
covenants had been made by Thiry directly to such successor or assign.
5. Termination. This Contrast may be terminated for any of the reasons set
forth in paragraph 5.1, in each case with the consequences set out in paragraph
5.2.
5.1 Grounds for Termination.
5.1.1 By VIVRA. This Contract may be terminated by VIVRA at any time, upon
thirty (30) days written notice to Thiry, for any of the following reasons;
provided, however, that VIVRA shall have the burden of proving the causes
described in subparagraphs (a) and (b) by clear and convincing evidence:
(a) Breach or Neglect. Breach of any material provision of this Contract
by Thiry, which is not remedied within 30 days after written notice specifying
such breaches in reasonable detail, or breach or habitual neglect by Thiry of
his duties as director, officer or employee of VIVRA; or
(b) Cause. For cause which shall consist of defalcation, fraud, breach of
trust, gross negligence, willful misconduct, chronic substance abuse which
interferes with essential functions of his duties, or conviction of a felony
involving moral turpitude, in each case in connection with performance of his
duties as director, officer or employee of VIVRA or which materially and
adversely affects VIVRA.
5.1.2 By Thiry. This Contract may be terminated by Thiry at any time, upon
thirty (30) days written notice to VIVRA, for any of the following reasons:
(a) Breach. Breach of any material provision of this Contract by VIVRA
which is not remedied within thirty (30) days after written notice specifying
such breach in reasonable detail; or
(b) Change of Control. A Change of Control; provided, however, that
termination pursuant to this paragraph 5.1.2(b) shall be effective if and only
if Thiry gives VIVRA written notice of such termination within one (1) year
after a Change of Control.
5.1.3 Permanent Disability. Either VIVRA or Thiry may terminate this
Contract upon thirty (30) days written notice upon Thiry's Permanent Disability.
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5.1.4 Death. This Contract shall terminate immediately upon the death of
Thiry.
5.2 Effect of Termination. If this Contract is terminated pursuant to
paragraph 5.1, the parties shall have the following rights and obligations:
5.2.1 By VIVRA for Breach. If this Contract is terminated by VIVRA
pursuant to paragraph 5.1.1 or wrongfully terminated by Thiry, Thiry shall not
have the right or obligation to perform the services described in paragraph 2,
he shall resign as a Director of VIVRA and he shall not have any right to
receive the Salary or any other compensation, bonuses or benefits described in
paragraph 3 after the date of termination, but Thiry shall be obligated to VIVRA
as provided in paragraph 4, and VIVRA shall have all remedies available at law
or in equity.
5.2.2 By VIVRA or Thiry upon Permanent Disability; Death. If this Contract
is terminated by VIVRA or Thiry pursuant to paragraph 5.1.3 or if it terminates
pursuant to paragraph 5.1.4:
(a) Permanent Disability. After his Permanent Disability, Thiry shall have
the obligations described in paragraph 4; and
(b) Payments. Upon termination of this Contract pursuant to paragraph
5.1.3 or 5.1.4, VIVRA shall pay to Thiry or his Beneficiary, within seven (7)
days after the date of termination, (i) in an amount equal to one (1) year's
Salary plus (ii) the Contingent Bonus whether or not, in this instance, the
contingency shall have occurred by the date of such termination.
5.2.3 By Thiry for Breach. If this Contract is terminated by Thiry
pursuant to paragraph 5.1.2(a) or wrongfully terminated by VIVRA, he shall not
have any further obligation to VIVRA under paragraph 2 and under paragraph 4
(except as to the Confidential Information provisions of paragraphs 4.1.2,
4.1.3, and 4.l.5) and VIVRA shall pay him within thirty (30) days after
termination, an amount equal to (i) one and one-half (l(OMEGA)) times the sum of
his yearly Salary plus the Discretionary Bonus actually paid to Thiry for the
prior Fiscal Year and (ii) the Contingent Bonus whether or not, in this
instance, the contingencies shall have occurred by the date of such
termination. This paragraph does not apply in the event of a Change of Control.
5.2.4 Change of Control. If this Contract is terminated by Thiry pursuant
to paragraph 5.1.2(b) or is terminated by VIVRA or any successor entity within
one (1) year after a Change of Control and paragraph 5.1.1 does not apply, Thiry
shall not have any duty to mitigate his damage or any further obligation to
VIVRA under paragraphs 2 and under paragraph 4 (except as to
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the Confidential Information provisions of paragraphs 4.1.2, 4.1.3 and 4.1.5)
and he shall be entitled to receive the follow-ing payments and benefits from
VIVRA or the successor entity:
(a) Termination Payments. A cash payment to be made within thirty (30)
days after termination equal to the sum of: (i) 2.99 times the Salary plus any
Discretionary Bonus actually paid to Thiry for the Fiscal Year ended
immediately prior to the Change of Control termination and (ii) the Contingent
Bonus whether or not, in this instance, the contingencies shall have occurred by
the date of such termination.
(b) Insurance Coverage. During the period commencing on the date of a
Change of Control termination and ending on the third anniversary thereof, Thiry
(and, where applicable, his dependents) shall be entitled to participate in any
insurance or similar plans maintained by VIVRA. Where applicable, Thiry's Salary
for purposes of such plans shall be deemed to be equal to the Salary he was
receiving at the time of the Change of Control termination. To the extent that
VIVRA finds it impractical to cover Thiry under its group insurance policies
during such three (3) year period, VIVRA shall provide him with the same level
of coverage under individual policies. The entire cost of insurance coverage
under this paragraph 5.2.4(b) shall be borne by VIVRA.
(c) Outplacement Services. VIVRA shall provide Thiry with the use of a
furnished office, secretary and telephone and access to facsimile and
photocopying machines for a one (1) year period following the Change of Control
termination. The cost of these services and facilities shall be borne entirely
by VIVRA.
5.2.5 Payment and Computation of Salary upon Termination. Upon any
termination of this Contract pursuant to paragraph 5.1:
(a) Salary to Date of Termination. VIVRA shall pay Thiry the Salary to the
date of termination, and
(b) Computation. As to terminations pursuant to subparagraphs 5.1.1, the
Salary shall be that in effect on the day before the date of termination. As to
all other terminations, the Salary shall be that in effect on the day before the
rate of termination calculated with a minimum annual base compensation of
$300,000.
5.3 Withholding. Anything in this Contract to the contrary
notwithstanding, all payments required to be made to Thiry or the Beneficiary
under this Contract shall be subject to the withholding of such amounts, if any,
for income and other payroll taxes and deductions as VIVRA may reasonably
determine
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should be withheld pursuant to any applicable law or regulation.
5.4 Examples. The following are examples of the payments to be made to
Thiry pursuant to paragraph 5.2 based on the assumptions that (i) Thiry's
employment terminates on April 30, 1997 and (ii) the Salary is $275,000 for
Fiscal Year 1997 and (iii) Thiry has received a Discretionary Bonus of $200,000
for Fiscal Year 1996. Under the foregoing assumptions, if:
5.4.1 Paragraph 5.1.1. VIVRA terminates this Contract pursuant to
paragraph 5.1.1, Thiry shall be paid only through April 30, 1997 at the Salary
rate of $275,000 per year (plus an amount equal to the Contingent Bonus but only
if the Contingent Bonus has been earned but not yet paid).
5.4.2 Permanent Disability; Death. Thiry dies or if this Contract is
terminated pursuant to paragraph 5.1.3, VIVRA shall pay Thiry or his beneficiary
one (1) year's Salary at the rate of $300,000 plus an amount equal to the
Contingent Bonus ($300,000) (if the Contingent Bonus has been earned but not yet
paid), a total of either $300,000 or $600,000.
5.4.3 Paragraph 5.1.2(a). Thiry terminates this Contract pursuant to
paragraph 5.1.2(a), VIVRA shall pay Thiry (i) one and one-half (l(OMEGA)) times
the sum of the Salary plus the Discretionary Bonus given to him for Fiscal Year
1996 (1.5 x ($300,000 + $200,000)) which totals $750,000, and (ii) the
Contingent Bonus ($300,000) (if the Contingent Bonus has been earned but not yet
paid), all of which would total $1,050,000.
5.4.4 Paragraph 5.1.2(b). Thiry terminates this Contract pursuant to
paragraph 5.1.2(b), VIVRA or the successor entity shall pay Thiry (i) 2.99 times
the sum of the Salary plus the Discretionary Bonus given to him for Fiscal Year
1996 (2.99 x ($300,000 + $200,000)) which totals $1,495,000, and (ii) the
Contingent Bonus ($300,000) (if the Contingent Bonus has been earned but not yet
paid), all of which would total $1,795,000.
6. Miscellaneous.
6.1 Prior Contracts Null and Void. VIVRA and Thiry agree that upon
execution and delivery of this Contract by each of them, the Prior Contract
shall terminate and be deemed null and void, and shall have no further force or
effect.
6.2 Assignment by VIVRA. This Contract shall be binding upon and shall
inure to the benefit of any successors or assigns of VIVRA. As used in this
contract, the term "successor" includes any Person or combination of Persons
acting in concert which at any time in any form or manner acquires all or
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substantially all of the assets or business or more than thirty percent (30%) of
the voting stock of VIVRA.
6.3 Nonassignability by Thiry. Neither Thiry nor any Beneficiary shall
assign, transfer, pledge or hypothecate any rights, interests or benefits
created hereunder or hereby. Any attempt to do so contrary to the provisions of
this Contract, and any levy of any attachment, execution or similar process
created thereby, shall be null and void and without effect.
6.4 Spendthrift Provision. Prior to actual receipt by Thiry or the
beneficiary, as the case may be, no right or benefit under this Contract and,
without limitation, no interest in any payment hereunder shall be:
6.4.1 Anticipation. Anticipated, assigned or encumbered or subject to any
creditor's claim or subject to execution, attachment or similar legal process,
or
6.4.2 Liability for Debts: Claims. Applied on behalf of or subject to the
debts, contracts, liabilities or torts of the Person entitled or who might
become entitled to such benefits, or subject to the claims of any creditor of
any such Person.
6.5 Beneficiary; Recipients of Payments; Designation of Beneficiary. The
salary and other compensation and benefits payable by VIVRA pursuant to this
Contract shall be made only to Thiry during his lifetime or in the event of his
death, to the Thiry-O'Leary Living Trust ("Beneficiary").
6.5.1 Designation of Beneficiary. Thiry may from time to time change the
Beneficiary by filing a new designation in writing with VIVRA's Corporate
Secretary. If no designation is in effect, any sums payable under this Contract
hall be paid to Thiry's estate.
6.5.2 Elections. Whenever this Contract provides for any option or
election by Thiry or the Beneficiary, the option shall be exercised or the
election made solely by the person or persons receiving payments pursuant to
this Contract at that time, and shall be made in that Person's sole discretion
and without regard to the effect of the decision on subsequent recipients of
payments. Such decision by such Person shall be final and binding on all
subsequent recipients of payments.
6.6 Limitation on Payments. In the event that it is determined by counsel
(or any other tax advisor) approved by Thiry and VIVRA that any compensation
payable hereunder, alone or when aggregated with other compensation payable to
Thiry, would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as
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amended, and the net, after-tax amount that Thiry would realize from the
compensation hereunder and from all other sources, considering Thiry's federal
and state income tax brackets and the effect of any nondeductible excise tax,
would be greater if the compensation payable hereunder were reduced, then the
compensation payable hereunder shall be reduced until Thiry's after-tax
compensation (taking into account state and federal income taxes, excise taxes
and all other applicable taxes) is maximized.
6.7 Arbitration. If any controversy, question or dispute arises out of or
relating to the construction, application or enforcement of this Contract, it
shall be settled by arbitration as follows:
6.7.1 Appointment of Arbitrators. Within fifteen (15) days after the
delivery of written notice of any such dispute from one to the other, VIVRA and
Thiry shall each appoint one person to hear and determine the dispute, and, if
the two (2) persons so selected are unable to agree on its resolution within ten
(10) days after their appointment, they shall select a third impartial
arbitrator, and the three arbitrators so selected shall hear and determine the
dispute within sixty (60) days thereafter.
6.7.2 Finality. The determination of a majority of the arbitrators shall
be final and conclusive on Thiry and VIVRA.
6.7.3 Rules. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association, and judgment on any award
rendered by the arbitrators may be entered in any court having jurisdiction.
6.7.4 Discovery. The parties shall be entitled to avail themselves of all
discovery procedures available in civil actions in the State of California,
and, without limitation, Thiry and VIVRA hereby incorporate section 1283.05 of
the California Code of Civil Procedure into this Contract pursuant to section
1283.1 of that Code.
6.8 Notices. Any notice provided for by this Contract and any other
notice, demand or communication which either party may wish to send to the other
(the "Notices") shall be in writing and shall be deemed to have been properly
given if served by (a) personal delivery, or (b) registered or certified mail,
return receipt requested, in a sealed envelope, postage prepaid, addressed to
the party for which such notice is intended as follows:
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If to VIVRA: VIVRA Incorporated
Board of Directors
400 Primrose, Suite 200
Burlingame, CA 94010
If to Thiry: Kent J. Thiry
124 Warren Avenue
San Mateo, CA 94401
6.8.1 Change of Address. Any address or name specified in this paragraph
6.8 may be changed by a Notice given by one party to the other party in
accordance with paragraph 6.8.
6.8.2 Effective Date of Notice. All notices shall be given and effective
as of the date of Personal delivery thereof or the date of receipt set forth on
the return receipt. The inability to deliver because of a changed address of
which no Notice was given, or rejection or other refusal to accept any Notice
shall be deemed to be the receipt of the Notice as of the date of Such inability
to deliver or rejection or refusal to accept.
6.9 Governing Law: Jurisdiction. This Contract shall be construed in
accordance with and governed by the laws of the State of California. VIVRA
hereby consents and submits to the jurisdiction of the state and federal courts
in California in any suit for the enforcement or construction of or otherwise
rising out of this Contract.
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6.10 Counterparts. This Contract may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Contract has been executed and delivered by the
parties on the date set forth opposite their names.
Dated: December 15, 1996
/s/ Kent J. Thiry
------------------------------------
Kent J. Thiry
Dated: December 11, 1996
VIVRA INCORPORATED
By /s/ LeAnne M. Zumwalt
---------------------------------
LeAnne M. Zumwalt
Its Chief Financial Officer
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<PAGE>
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT (the "Contract") is made on October 31, 1995,
between VIVRA INCORPORATED, a Delaware Corporation ("VIVRA") and LEANNE ZUMWALT,
an individual ("Employee").
RECITALS:
Employee and VIVRA agree:
1. DEFINITIONS. As used in this Contract, the following terms have the
following meanings:
1.1 BOARD. "Board" means the Board of Directors of VIVRA.
1.2 CAUSE. "Cause" means:
1.2.1 BREACH OR NEGLECT. Breach of nay material provision of this
Contract by Employee or breach or habitual neglect by Employee of her duties as
an officer or employee of VIVRA, other than by reason of permanent Disability:
1.2.2 DISHONESTY. Any dishonesty, defalcation or fraud of Employee
in connection with the performance of her duties as an officer or employee of
VIVRA;
1.2.3 MISCONDUCT OR NEGLIGENCE. Any gross or willful misconduct or
gross negligence by Employee in the performance of her duties as an officer or
employee of VIVRA; or
1.2.4 OTHER CONDUCT. Egregious conduct by Employee which has brought
VIVRA into public disgrace or disrepute.
1.3 CHANGE OF CONTROL "Change of Control" means a "Change in Control" as
defined in VIVRA's 1989 Stock Incentive Plan, a may be amended from time to
time, except that for purposes of this Agreement, a Change of Control does not
include a purchase of securities or assets by a management-led purchasing group
in which Employee is given a reasonable opportunity to participate.
1.4 COMPETE. "Compete" means either directly or indirectly to own,
initiate, manage, operate, join, control, advise, assist, consult with or
participate in the ownership, operation, management or control (other than a an
owner of less than five percent(5%) of the equity of any entity) of any Person
in the U.S. engaged in the VIVRA Businesses or to lease or sell real or personal
property to any such business.
1.5 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information and any idea in whatever form, tangible or intangible pertaining in
any manner to the business of VIVRA or any affiliated company, except
information which: (i) is or becomes generally available to the public or
publicly known other than as a result of disclosure in breach of any
<PAGE>
obligation of confidentiality; (ii) was or becomes available to Employee on a
nonconfidential basis from a source other than VIVRA or its agents or
affiliates; (iii) is disclosed pursuant to the requirement of a governmental
agency or court of competent jurisdiction or as otherwise required under
applicable law; or (iv) was otherwise known or available to Employee without any
obligation of confidentiality.
1.6 FISCAL YEAR. "Fiscal Year" means VIVRA's annual accounting period
for financial accounting and reporting purposes, which currently is the period
from each December 1 to and including the next following November 30.
1.7 PERMANENT DISABILITY. 'Permanent Disability" means any mental or
physical illness, disease or condition which results in Employees' inability to
perform any substantial portion of her duties during normal working hours for a
period expected to exceed six consecutive months.
1.8 PERSON. "Person" means any individual, corporation, partnership,
business trust, joint venture, association, joint stock company, trust,
unincorporated organization, government agency or political subdivision thereof.
1.9 SALARY. "Salary" means $124,500 annual base compensation; provided,
however, that VIVRA may increase or decrease the Employee's Salary.
Notwithstanding the foregoing, if Kent Thiry is no longer the Chief Executive
officer of VIVRA, no decrease shall be made or taken into account for purposes
of this Agreement unless the salary of substantially all of VIVRA's other senior
executives is reduced in amounts proportionate to the decrease in Employee's
salary.
1.10 VIVRA BUSINESSES. "VIVRA Businesses" means any business in which
VIVRA is engaged at the date of termination of Employee's employment pursuant to
the Contract and for which VIVRA has a business plan in place.
2. EMPLOYMENT AND DUTIES.
2.1 POSITION. Pursuant to this Contract, VIVRA shall employ and
Employee shall serve VIVRA as Executive vice president of VIVRA.
2.2 TIME AND EFFORT. While Employee is employed by VIVRA pursuant to
the Contract, Employee shall devote her full productive business time, efforts,
energies and abilities to VIVRA and its subsidiaries and shall not render
services to any other person without the written consent of VIVRA's Chief
Executive Officer. Employee, however, shall not be precluded from engaging in
civic, charitable or religious activities.
2.3 PLACE OF BUSINESS. During employment, Employee's principal place of
business shall be in Laguna Hills, California, unless VIVRA and Employee
mutually agree to relocation.
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3. COMPENSATION, REIMBURSEMENT AND BENEFITS.
3.1 COMPENSATION. While Employee is employed by VIVRA pursuant to this
Contract:
3.1.1 SALARY. VIVRA shall pay the Salary to Employee in equal
semi-monthly installments, in accordance with VIVRA's general practice and
subject to legally required withholdings.
3.2 EXPENSE REIMBURSEMENT AND BENEFITS. While Employee is employed by
VIVRA pursuant to this Contract:
3.2.1 EXPENSE REIMBURSEMENT. VIVRA shall promptly reimburse Employee,
upon submission to VIVRA of out-of-pocket expenses respecting entertainment,
travel, meals, hotel accommodations and other like-kind expenses, in each case
incurred by Employee in the interest of VIVRA's business.
3.2.2 LIFE, MEDICAL, DENTAL AND HOSPITAL BENEFITS. VIVRA shall provide
life, medical, dental and hospital coverage to Employee in the amount and on the
terms such coverage is provided from time to time to most other VIVRA officers
(other than the chief executive officer).
3.2.3 VACATION AND SICK LEAVE. Employee shall be entitled to paid
vacation and sick leave each year of the same duration and under the same
conditions a most other VIVRA officers (other than the chief executive officer).
3.2.4 OTHER BENEFITS. Employee may participate in employee benefit
plans and fringe benefit programs made available to other corporate employees
(other than the chief executive officer), subject to the generally applicable
terms and conditions of each such plan or program.
3.3 VESTING, ETC. ON CHANGE OF CONTROL. Whether or not Employee's
employment terminates under this Contract pursuant to a Change of Control, all
stock options and related stock appreciation rights held by Employee shall vest
and become exercisable immediately upon such a Change of Control, and any
restrictions on shares of stock of VIVRA or on stock units that were awarded to
Employee under any plan or arrangement maintained by VIVRA for the benefit of
Employee shall lapse upon the occurrence of such an event.
4. PROTECTION BUSINESS INFORMATION; NONCOMPETITION; NONSOLICITATION.
4.1 NONDISCLOSURE.
4.1.1 CONFIDENTIAL INFORMATION. In the operation, planning,
development and expansion of the VIVRA businesses, VIVRA has generated and will
generate Confidential
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Information which is and will be proprietary and confidential and the disclosure
of which would be extremely detrimental to VIVRA and of great assistance to its
competitors.
4.1.2 INFORMATION HELD AS A FIDUCIARY. All of the Confidential
information which is acquired by, communicated to or in any way comes into the
possession or control of Employee shall be held by Employee in a fiduciary
capacity for the exclusive benefit of VIVRA.
4.1.3 NONDISCLOSURE COVENANT. As a mateial part of the consideration
for this Contract, Employee shall not disclose any Confidential Information to
any Person, without the consent of VIVRA.
4.1.4 FOLLOWING EMPLOYMENT. Upon termination of this contract,
Employee shall promptly relinquish and return to VIVRA all Confidential
Information and all files, correspondence, memoranda, diaries and other records,
minutes, notes, manuals, papers and other documents and data, however prepared
or memorialized, and all copies thereof, belonging to or relating to the
business of VIVRA, that are in Employee's custody or control whether or not they
contain Confidential Information, and shall promptly provide VIVRA with a
written statement attesting to compliance with this paragraph.
4.2 NONCOMPETITION COVENANT. As a material part of the consideration for
this Contract, while Employee is employed by VIVRA pursuant to this Contract
and, pursuant to Sections 5.2.2 and 5.2.3 for a period of one (1) year
thereafter, Employee shall not Compete or plan or prepare to Compete with VIVRA;
provided, however, that during the one (1) year following employment, Employee
may seek employment to commence after expiration of such one-year period, so
long as such activity would not effectively constitute Competing.
4.3 NONSOLICITATION COVENANT. As a material part of the
consideration for this Contract, while Employee is employed by VIVRA pursuant to
this Contract and for a period of two (2) years thereafter, Employee shall not
solicit employees or independent contractors of VIVRA for employment other than
for the VIVRA Businesses.
4.4 SCOPE AND DURATION; SEVERABILITY. VIVRA and Employee understand
and agree that the scope and duration of the covenants in this Section 4 are
reasonable both in time and area and are fairly necessary to protect the
business of VIVRA. Nevertheless, it is further agreed that such covenants shall
be regarded as divisible and shall be operative as to time and area to the
extent that they may be made so operative and, if any part of them is declared
invalid or unenforceable, the validity and enforceability of the remainder shall
not be affected.
4.5 INJUNCTION. Employee understands and agrees that, due to the highly
competitive nature of the health care industry, the breach of any of the
covenants set out in Sections 4.1, 4.2 and 4.3 will cause irreparable injury to
VIVRA for which it will have no adequate monetary or other remedy at law.
Therefore, VIVRA shall be entitled , in addition to such other remedies as it
may have hereunder, to a temporary restraining order and to preliminary and
permanent injunctive relief for any breach or threatened beach of the covenants
without proof of actual damages that have been or may be caused hereby. In
addition, VIVRA
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shall have available all remedies provided under state and federal statures,
rules and regulations as well as any and all other remedies as may otherwise be
contractually or equitable available.
4.6 ASSIGNMENT. Employee agrees that subject to paragraph 5.2.2, the
covenants contained in paragraph 4 shall inure to the benefit of any successor
or assign of VIVRA with the same force and effect as if such covenants had been
made by Employee on behalf of such successor or assign.
5. TERMINATION. Employee's employment under this Contract may be
terminated as provided in Section 5.1 with the consequences set out in Section
5.2.
5.1 TERMINATION. Employee's employment may be terminated by VIVRA or
Employee at any time and for any reason upon thirty (30) days' written notice or
by VIVRA immediately for Cause.
5.2 EFFECT OF TERMINATION. Upon Employee's termination of employment,
the parties shall have the following rights and obligations:
5.2.1 GENERAL RULE. Except as provided in Sections 5.2.2 through
5.2.4, if Employee's employment is terminated by VIVRA or Employee for any
reason, she shall be pad forty-five (45) days' additional Salary as severance
pay but she shall not have any other right to receive the Salary or any other
bonuses or benefits described in Section 3 after the date of termination.
notwithstanding any termination of this Contract, Employee shall have the
continuing obligations, as provided in Section 4.1 and Sections 4.3 through 4.6.
Employee will also be given thirty (30) days from the date of termination to
exercise her VIVRA stock options that were vested on the date of termination.
5.2.2 CHANGE OF CONTROL. If Employee's employment is terminated by VIVRA
or any successor entity within two (2) years after a Change of Control for any
reason except for Cause, or Employee is forced to relocate more than thirty-five
(35) miles from the office in which she is then working, the Employee suffers a
reduction in Salary from the prior VIVRA fiscal year of suffers a reduction or
change in authority, duties or responsibilities associated with her positions,
she shall be entitled to cash lump sum payment to be made by VIVRA or the
successor entity within thirty (30) days after the date of such termination
equal to two (2.99) year's Salary and five (5) times the cumulative bonuses
received by the Employee in the preceding twenty-four (24) months, and she shall
be obligated to VIVRA as provided in Section 4. If Employee's compensation was
reduced upon a Change of Control, then any payments under this Section 5.2.2
shall be based upon the Salary received by Employee prior to such Change in
Control.
5.2.3 BY VIVRA OTHER THAN FOR CAUSE, PERMANENT DISABILITY OR DEATH. If
Employee's employment is terminated by VIVRA other than for Cause, Permanent
Disability or death, and VIVRA directs that the Employee shall remain obligated
to VIVRA as provided in Section 4 in its entirety, she shall have the right to
receive a cash lump sum payment to be made by VIVRA within thirty (30) days
after such termination equal to one (1) year's Salary. Except as provided
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in the preceding sentence, if Employee's employment is terminated by VIVRA other
than for Cause, Permanent Disability or death, she shall be obligated to VIVRA
as provided in Section 4.1 and Sections 4.3 through 4.6, but she shall have the
right to only receive the payments provided in Section 5.2.1.
5.2.4 DUE TO PERMANENT DISABILITY OR DEATH. If Employee's employment
terminates due to her Permanent Disability or death, she (or her Beneficiary)
shall be entitled to be paid an amount equal to six (6) months' Salary and
Employee shall be obligated to VIVRA as provided in Section 4, but only for the
six (6) months following her termination of employment due to Permanent
Disability.
5.3 WITHHOLDING. Anything in this Contract to the contrary
notwithstanding, all payments required to be made to Employee under this
Contract shall be subject to the withholding of such amounts, if any, for income
and other payroll taxes and deductions as VIVRA may reasonably determine should
be withheld pursuant to any applicable law or regulation.
6. MISCELLANEOUS.
6.1 ASSIGNMENT BY VIVRA. This Contract may be assigned to any successors
or assigns of VIVRA.
6.2 NONASSIGNABILITY BY EMPLOYEE. Employee shall not assign, transfer,
pledge or hypothecate any rights, interests or benefits created hereunder or
hereby. Any attempt to do so contrary to the provisions of this Contract, and
any levy of any attachment, execution or similar process created thereby, shall
be null and void and without effect.
6.3 SPENDTHRIFT PROVISION. Prior to actual receipt by Employee, no right
or benefit under this Contract and, without limitation, no interest in any
payment hereunder shall be: (i) anticipated, assigned or encumbered or subject
to any creditor's claim or subject to execution, attachment or similar legal
process, or (ii) applied on behalf of or subject to the debts, contracts,
liabilities or torts of the Person entitled or who might become entitled to such
benefits, or subject to the claims of any creditor of any such person.
6.4 DISPUTE RESOLUTION PROCEDURE. The parties agree that, except for
Section 4, any disputes arising out of the employment relationship between them
or out of this Contract, including claims for discrimination or arising out of
the termination of that relationship, shall be resolved under the following
procedures.
6.4.1 The party claiming to be aggrieved shall furnish to the other party
a written statement of the grievance identifying any witnesses or documents that
support the grievance and the relief requested or proposed.
6.4.2 If the other party does not agree to furnish the relief requested or
proposed, or otherwise does not satisfy the demand of the party claiming to be
aggrieved, the parties shall
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submit the dispute to nonbinding mediation before a mediator to be jointly
selected by the parties. VIVRA will pay one-half of the cost of the mediation.
6.4.3 If the mediation does not produce a resolution of a dispute, the
parties agree that the dispute shall be resolved by final and binding
arbitration in accordance with the rules, but not under the auspices of the
American Arbitration Association, with the arbitration proceedings to be held at
a location selected as follows:
(a) If the party seeking arbitration is the Employee, the arbitration
shall be held a VIVRA's choice of locations; and
(B) If VIVRA seeks the arbitration, the arbitration shall be held in the
city where Employee is then currently residing.
6.4.4 The party seeking arbitration (the "First Party") shall give to the
other party (the "Second Party") notice in writing indication the First Party's
desire to have the dispute submitted to arbitration and naming one arbitrator to
represent the First Party. For purposes of this Contract, VIVRA or its
successors or assigns shall be deemed but one party entitled collectively to
appoint but one arbitrator. Within thirty (30) days of the receipt of the
arbitration notice by the Second Party, the Second Party shall select one
arbitrator to represent such party, and within thirty (30) days of selection of
the second arbitrator, the two arbitrators shall select a third arbitrator,
provided, however, that should the two arbitrators selected by the parties fail
to agree on the third arbitrator as specified above, both parties shall jointly
resort to the Chief Judge of the Circuit Court of the County in which the
arbitration is held, and have such judge select a third arbitrator, and such
selection shall be binding on the parties.
6.4.5 The decisions of the arbitration board shall be adopted by numerical
majority and shall in all cases be final and binding on the parties hereto. The
parties hereby submit to such arbitration and to the enforcement of any award
resulting therefrom by any court of competent jurisdiction. The hearing shall
be transcribed. VIVRA shall bear the costs of the arbitration if the employee
prevails. If VIVRA prevails, the employee will pay half the cost of the
arbitration or $2,000, whichever is more. Each party shall be responsible for
paying its own attorney fees.
6.4.6 Arbitration shall be the exclusive final remedy for any dispute
between theta parties. The parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for in Section 6.4.1 and 6.4.2.
6.5 NOTICES. Any notice provided for by this Contract and any other
notice, demand or communication which either party may with to send to the other
(the "Notices") shall be in writing and shall be deemed to have been properly
given if served by (i) personal delivery, or (ii) registered or certified mail,
return receipt requested, in a sealed envelope, postage prepaid, addressed to
the party for which such notice is intended as follow:
If to VIVRA:
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VIVRA Incorporated
Board of Directors
400 Primrose, Suite 200
Burlingame, CA 92620
If to Employee:
LeAnne Zumwalt
1102 Tropic Lane
Santa Ana, CA 92656
6.5.1 CHANGE OF ADDRESS. Any address or name specified in this paragraph
6.5.1 may be changed by a Notice given by the addressee to the other party in
accordance with paragraph 6.5.
6.5.2 EFFECTIVE DATE OF NOTICE. All notices shall be given and effective
as of the date of personal delivery thereof or the date of receipt set forth of
the receipt. The inability to deliver because of a changed address of which no
Notice was given, or rejection or other refusal to accept any Notice shall be
deemed to be the receipt of the Notice as of the date of such inability to
deliver or rejection or refusal to accept.
6.6 LIMITATION ON PAYMENTS. In the event that it is determined by counsel
(or any other tax advisor) approved by both Employee and VIVRA that any
compensation payable hereunder, alone or when aggregated with other compensation
payable to Employee, would constitute an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and
the net, after-tax amount that Employee would realize from the compensation
hereunder and from all other sources, considering Employee's federal and state
income tax brackets and the effect of any nondeductible excise tax, would be
greater if the compensation payable hereunder were reduced, then the
compensation payable hereunder shall be reduced until Employee's after-tax
compensation (taking into account state and federal income taxes, excise taxes
and all other applicable taxes) is maximized.
6.7 COUNTERPARTS. This Contract may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.8 ENTIRE AGREEMENT. This Contract constitutes the entire agreement
between the parties with respect to the subject hereof and supersedes all prior
agreements, understandings, negotiations and discussions of the parties, whether
oral or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof,
except as specifically set forth in this Contract. No amendment, alteration or
modification of this Contract shall be valid unless in each instance such
amendment, alteration or modification is expressed in a written instrument duly
executed by the
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6.9 GOVERNING LAWS JURISDICTION This Contract shall be construed in
accordance with and governed by the laws of the State of California as that
State is presently constituted. VIVRA hereby consents and submits to the
jurisdiction of the state and federal courts in California in any suit for the
enforcement or construction of or otherwise arising out of this Contract.
IN WITNESS WHEREOF, this Contract has been executed and delivered by the
parties, and this Contract shall be a binding obligation of each of the parties,
on as of the date set forth opposite their names.
Dated: October 31, 1995 /s/ Leanne Zumwalt
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VIVRA INCORPORATED
Dated: , 1995 By: /s/ Kent J. Trinity
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Its President & CEO
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