-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ihhm7V8tI4MynCHuplEYE4WNmbHZDR8TgrAWczz/6iILib3AUQWCqXOGHfVzNakM LQGox3BT7Oqk99zaciBc7g== 0000912057-97-017312.txt : 19970514 0000912057-97-017312.hdr.sgml : 19970514 ACCESSION NUMBER: 0000912057-97-017312 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970513 SROS: NYSE GROUP MEMBERS: INCENTIVE AB GROUP MEMBERS: VIVRA INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VIVRA INC CENTRAL INDEX KEY: 0000850882 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 943096645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-40888 FILM NUMBER: 97603016 BUSINESS ADDRESS: STREET 1: 1850 GATEWAY DRIVE STREET 2: SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4155775700 MAIL ADDRESS: STREET 1: 1850 GATEWAY DRIVE STREET 2: SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94404 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: VIVRA INC CENTRAL INDEX KEY: 0000850882 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 943096645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 1850 GATEWAY DRIVE STREET 2: SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4155775700 MAIL ADDRESS: STREET 1: 1850 GATEWAY DRIVE STREET 2: SUITE 500 CITY: SAN MATEO STATE: CA ZIP: 94404 SC 14D9/A 1 SCHEDULE 14D9/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 (RULE 14D-101) SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1) ------------------ VIVRA INCORPORATED (NAME OF SUBJECT COMPANY) VIVRA INCORPORATED (NAME OF PERSON FILING STATEMENT) -------------------------- COMMON STOCK, PAR VALUE $.01 PER SHARE (TITLE OF CLASS OF SECURITIES) -------------------------- 92855M104 (CUSIP NUMBER OF CLASS OF SECURITIES) -------------------------- KENT J. THIRY PRESIDENT AND CHIEF EXECUTIVE OFFICER VIVRA INCORPORATED 1850 GATEWAY DRIVE, SUITE 500 SAN MATEO, CALIFORNIA 94404 (415) 577-5700 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING THIS STATEMENT) -------------------------- COPIES TO: JOHN W. LARSON, ESQ. ALEXANDER D. LYNCH, ESQ. BROBECK, PHLEGER & HARRISON LLP TWO EMBARCADERO PLACE 2200 GENG ROAD PALO ALTO, CALIFORNIA 94303 (415) 421-0160 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 9. MATERIALS TO BE FILED AS EXHIBITS (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.*
- ------------------------ * Previously filed. 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 13, 1997 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 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 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.
DIRECTOR OCCUPATION AND CONTINUOUSLY TERM NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES - ------------------------------------ --- --------------------------------------------- --------------- ----------- 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.
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DIRECTOR OCCUPATION AND CONTINUOUSLY TERM NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES - ------------------------------------ --- --------------------------------------------- --------------- ----------- 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.
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 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 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:
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 - ---------------------------------------- ------------ ----------- ------------- ------------- ------------ ------------- 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
- ------------------------ * 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.
PERIOD OF SERVICE AND NAME AGE TITLE BUSINESS EXPERIENCE - -------------------------------------- --- -------------------- --------------------------------------------- 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.
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PERIOD OF SERVICE AND NAME AGE TITLE BUSINESS EXPERIENCE - -------------------------------------- --- -------------------- --------------------------------------------- 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.
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 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 $100,000 (collectively, the "Named Executive Officers"):
LONG-TERM COMPENSATION AWARDS ------------- ANNUAL COMPENSATION SECURITIES UNDERLYING -------------------- OPTIONS/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#)(1) COMPENSATION($) - ---------------------------------------------- --------- --------- --------- ------------- ---------------- 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 --
- ------------------------ (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 $1.25, which represented a 17.5 percent compound annual growth rate over earnings per share reported for fiscal 1992. (3) Includes share of Company's contribution to the Company's Profit Sharing Plan and/or car allowance. (4) Includes share of Company's contribution to the Company's Profit Sharing Plan, a bonus payment made with respect to Ms. Zumwalt's loan with the Company and moving cost reimbursements related to Ms. Zumwalt's relocation from Aliso Viejo, California. I-8 OPTION GRANTS IN LAST FISCAL YEAR The following table shows, with respect to the Named Executive Officers, certain information concerning the grant of stock options in fiscal 1996. No stock appreciation rights were granted during fiscal 1996.
POTENTIAL REALIZABLE INDIVIDUAL GRANTS VALUE AT ASSUMED ---------------------------------------------------------- ANNUAL RATES OF % OF TOTAL STOCK NUMBER OF OPTIONS/SARS PRICE APPRECIATION SECURITIES GRANTED TO EXERCISE FOR UNDERLYING EMPLOYEES OR BASE OPTION TERM OPTIONS/SARS IN FISCAL PRICE EXPIRATION -------------------- NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($) - -------------------------------------------- ------------- ----------------- ----------- ----------- --------- --------- 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........................ -- -- -- -- -- --
- ------------------------ (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:
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 - ----------------------------------------- ----------- ---------- ----------- ------------- ---------- ------------- 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
- ------------------------ (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 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
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 - ------------------------------------ ----------- ---------- --------- --------- ----------- --------- --------- ---------- 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 STRIKE DIRECTOR NAME PRICE - ------------------------------------ --------- 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
* 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 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 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:
SHARES OWNED PERCENT OF NAME OF BENEFICIAL OWNER BENEFICIALLY CLASS - ------------------------------------------------------------------------------------ ------------- ------------- 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%
- ------------------------ * 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 (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 SCHEDULE A 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.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
A-1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
A-2
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
A-3
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
- ------------------------ 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. A-4
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
A-5
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, FIVE-YEAR EMPLOYMENT HISTORY AND NAME BENEFICIAL OWNERSHIP OF SHARES - -------------------------------------------------------- -------------------------------------------------------- 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.
A-6 EX-99.(C)(2) 2 SECTION 14F1 INTER. STATEMENT 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 $100,000 (collectively, the "Named Executive Officers"):
LONG-TERM COMPENSATION AWARDS ------------- ANNUAL COMPENSATION SECURITIES UNDERLYING -------------------- OPTIONS/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS(#)(1) COMPENSATION($) - ---------------------------------------------- --------- --------- --------- ------------- ---------------- 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 --
- ------------------------ (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 $1.25, which represented a 17.5 percent compound annual growth rate over earnings per share reported for fiscal 1992. (3) Includes share of Company's contribution to the Company's Profit Sharing Plan and/or car allowance. (4) Includes share of Company's contribution to the Company's Profit Sharing Plan, a bonus payment made with respect to Ms. Zumwalt's loan with the Company and moving cost reimbursements related to Ms. Zumwalt's relocation from Aliso Viejo, California. I-8 OPTION GRANTS IN LAST FISCAL YEAR The following table shows, with respect to the Named Executive Officers, certain information concerning the grant of stock options in fiscal 1996. No stock appreciation rights were granted during fiscal 1996.
POTENTIAL REALIZABLE INDIVIDUAL GRANTS VALUE AT ASSUMED ---------------------------------------------------------- ANNUAL RATES OF % OF TOTAL STOCK NUMBER OF OPTIONS/SARS PRICE APPRECIATION SECURITIES GRANTED TO EXERCISE FOR UNDERLYING EMPLOYEES OR BASE OPTION TERM OPTIONS/SARS IN FISCAL PRICE EXPIRATION -------------------- NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($) - -------------------------------------------- ------------- ----------------- ----------- ----------- --------- --------- 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........................ -- -- -- -- -- --
- ------------------------ (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:
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 - ----------------------------------------- ----------- ---------- ----------- ------------- ---------- ------------- 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
- ------------------------ (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 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
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 - ------------------------------------ ----------- ---------- --------- --------- ----------- --------- --------- ---------- 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 STRIKE DIRECTOR NAME PRICE - ------------------------------------ --------- 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
* 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 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 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:
SHARES OWNED PERCENT OF NAME OF BENEFICIAL OWNER BENEFICIALLY CLASS - ------------------------------------------------------------------------------------ ------------- ------------- 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%
- ------------------------ * 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 (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 EX-99.(C)(5) 3 VIVRA INC RETENTION & DEFERRED COMPENSATION ARRANG 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 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 Participants: On each Payment Date, each Tier 1 Participant and each Tier 2 Participant (each a "Participant") will receive a cash lump sum payment equal to the percentage specified below of the 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 Effective Date 20% First Anniversary Effective Date 40% Second Anniversary Effective Date 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 Participants: The Company shall establish on its books and records a deferred compensation account for each Participant (in each case, an "Account"). Each 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 Participant's Account. Amounts credited to the Account will be credited with notional interest at a specified rate from the date of crediting to the time of payment. Amounts held in a Participant's 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: TERMINATION FOR CAUSE. If a Participant's employment is terminated by the Company for Cause (as hereinafter defined), the Participant will immediately forfeit as of the date of such termination the right to receive any future installment payments and the right to any future credits (other than notional interest) to the Account. The balance of the Account, if any, will be paid in the manner described above. For purposes of this Arrangement "Cause" shall mean (i) the Participant's repeated failure to perform the material duties of his or her position after receipt of written notice of such non-performance; (ii) any willful misconduct or gross negligence on the part of the Participant which is demonstrably injurious to the Company; (iii) the Participant's repeated failure to observe one or more material policies of the Company after receipt of written notice of such non-observance; (iv) the Participant's commission of a felony or any other criminal offense involving dishonesty or moral turpitude; (v) the Participant's commission of any act of fraud against, or misappropriation of property belonging to, the Company or (vi) any breach by the Participant of any of the respective covenants described below. Whether the Participant's employment is terminated for "Cause" shall be determined in the discretion of David P. Barry acting in his capacity as an executive officer of the Company. B-2 VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON. If the Participant voluntarily resigns from employment with the Company other than for Good Reason (as hereinafter defined), the Participant will not be eligible for any future installment payments and will not be eligible for any future credits (other than notional interest) to the Account. The balance of the Account, if any, will be paid in the manner described above. TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON. If the Participant's employment is terminated by the Company without Cause or the Participant resigns for Good Reason (as hereinafter defined), the balance of the installment payments will be paid at the time and in the manner contemplated above, any deferred amounts will be credited to the Account in the time and manner described above, and the balance of the Account will be paid in the manner described above. For purposes of this Arrangement, "Good Reason" shall mean (i) a material reduction in the Participant's rate of base salary (other than a reduction in base salary made in connection with a change in the compensation policies of the Company applicable to a number of similarly situated employees) or (ii) a material and detrimental reduction in the Participant's duties and responsibilities from those in effect prior to the Effective Time. DEATH OR DISABILITY. If a Participant's employment is terminated due to death or Disability (as hereafter defined), all remaining installment payments (calculated without regard to any prior deferral election) plus the balance of the Account as of the date of the Participant's death or Disability will be paid in cash lump sum to the Participant or, in the event of death, the Participant's Beneficiary (as hereinafter defined) within ninety days of such date. Such payment shall be in full settlement of any amounts owed to the Participant under this Arrangement. For purposes of this Arrangement, "Beneficiary" shall mean the person designated in writing by the Participant to receive the payments hereunder in the event of the Participant's death, or, if no person is designated or if no such person is alive at the time of the Participant's death, the Participant's estate. No Beneficiary designation shall be effective unless it is in writing and received by the Company prior to the date of death. For purposes of this Arrangement, "Disability" shall mean absence from work for a period of at least six continuous months as a result of a mental or physical illness or disease. Protective Covenants: As a condition to the payments above, Participants will agree as follows: Certain Participants will agree not to compete with the Company (i) while employed and (ii) for Participants who terminate within three years of the Effective Date, for up to the one-year period following termination of employment, but in no event longer than three years from the Effective Date. 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. B-3 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 Vivra Specialty Partners, Inc. 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 EX-99.(C)(6) 4 VIVRA SPECIALTY PARTNERS INC RETENTION ARRANGEMENT VIVRA SPECIALTY PARTNERS, INC. RETENTION AND COMPENSATION ARRANGEMENT Purpose: To provide certain executives and key employees of Vivra Specialty Partners, Inc. or any affiliated company (collectively "VSP"), an incentive to stay in the employ of VSP, following the Merger of VSP. The arrangement provides for the payment of stay bonuses to participants (each a "Participant"). Participants: Designated key employees. Stay Bonuses: With respect to certain Participants (the "x Participants"), on each Payment Date, such x Participant's will receive a cash lump sum payment equal to the percentage specified below the x Participant's Maximum Target Bonus, provided the x Participant is employed by VSP on such date. PAYMENT DATE PERCENTAGE OF MAXIMUM TARGET BONUS ------------ ---------------------------------- One Month after Effective Date 20% Six Months after Effective Date 40% First Anniversary of Effective Date 40% The remaining Participants excluded from the aforementioned calculation will receive a cash lump sum payment equal to the percentage specified below the Participants Maximum Target Bonus, provided the Participant is employed by VSP on such date. PAYMENT DATE PERCENTAGE OF MAXIMUM TARGET BONUS ------------ ---------------------------------- One Month after Effective Date 20% First Anniversary of Effective Date 40% Second Anniversary of Effective Date 40% Maximum Target Bonus: The Maximum Target Bonus each Participant will receive will be an amount previously disclosed in writing to Incentive AB ("Parent") and agreed to by Parent. EFFECT OF TERMINATION OF EMPLOYMENT. TERMINATION FOR CAUSE. If the Participant's employment is terminated by VSP for Cause (as hereinafter defined), the Participant will immediately forfeit as of the date of such termination the right to receive any future installment payments. For purposes of this Arrangement "Cause" shall mean (i) the Participant's repeated failure to perform the material duties of his or her position after receipt of written notice of such non-performance; (ii) any willful misconduct or gross negligence on the part of the Participant which is demonstrably injurious to VSP; (iii) the Participant's repeated failure to observe one or more material policies of VSP after receipt of written notice of such non-observance; (iv) the Participant's commission of a felony or any other criminal offense involving dishonesty or moral turpitude; (v) the Participant's commission of any act of fraud against, or the misappropriation of property belonging to, VSP or (vi) any breach by the Participant of the provisions of any other provision of this Arrangement. Whether the Participant's employment is terminated for "Cause" shall be determined in the discretion of Kent J. Thiry acting in his capacity as Chief Executive Officer of VSP. VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON. If the Participant voluntarily resigns from employment with VSP other than for good reason (as hereinafter defined), the Participant will not be eligible for any future installment payments. TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON. If the Participant's employment is terminated by VSP without Cause or if the Participant resigns for Good Reason (as hereinafter defined), the balance of the installment payments will be paid at the time and in the manner comtemplated above. For purposes of this Arrangement, "Good Reason" shall mean (i) a material reduction in the Participant's rate of base salary (other than a reduction in base salary made in connection with a change in the compensation policies of VSP applicable to a number of similarly situated employees) or (ii) a material and detrimental reduction in the Participant's duties and responsibilities from those in effect prior to the Effective Time. DEATH OR DISABILITY. If a Participant's employment is terminated due to death or Disability (as hereinafter defined), all remaining installment payments as of the date of the Participant's death or Disability will be paid in a cash lump sum to the Participant or, in the event of death, the Participant's Beneficiary (as hereinafter defined) within ninety days of such date. Such payment shall be in full settlement of any amounts owed to the Participant under this Arrangement. For purposes of this Arrangement, "Beneficiary" shall mean the person designated in writing by the Participant to receive the payments hereunder in the event of the Participant's death, or, if no such person is designated or if no such person is alive at the time of the Participant's death, the Participant's estate. No Beneficiary designation shall be effective unless it is in writing, and received by VSP prior to the date of death. For purposes of this Arrangement, "Disability" shall mean absence from work for a period of at least six continuous months as a result of a mental or physical illness or disease. Protective Covenants: As a condition to the payments above, Participants will agree as follows: 2 Certain Participants will agree not to compete with VSP (i) while employed, (ii) for the x Participants who terminate within two years of the Effective Date, for up to the one-year period following termination of employment, but in no event longer than two years from the Effective Date, and (iii) for the remaining Participants who terminate within three years of the Effective Date for up to the one-year period following termination of employment, but in no event longer than three years from the Effective Date. All Participants will agree not to solicit the customers or employees of VSP 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. VSP shall also be entitled to appropriate equitable relief to enjoin any such breach. Agreements: Each Participant shall sign an agreement agreeing to the terms above. Governing Law: California. 3 EX-99.(C)(7) 5 ART. 8 OF THE CO., CERT OF INC., AS AMENDED TO DAT Article Eight: A. A director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability which, by express provision of the Delaware Law, cannot be limited or eliminated. B. (i) The corporation shall, to the fullest extent permitted by the Delaware Law, indemnify any person (the "Indemnitee") who is or was involved in any manner (including, without limitation, as a party or a witness) in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any action, suit or proceeding brought by or in the right of the corporation to procure a judgment in its favor) (a "Proceeding") by reason of the fact that the Indemnitee is or was a director or officer of the corporation, or is or was serving another entity in such capacity at the request of the corporation, B-2 against all expenses and liabilities actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding (including attorneys' fees). (ii) The right to indemnification conferred by this Article Eight shall be presumed to have been relied upon by the Indemnitee and shall be enforceable as a contract right. The corporation may enter into contracts to provide individual Indemnitees with specific rights of indemnification to the fullest extent permitted by the Delaware Law and may create trust funds, grant security interests, obtain letters or credit or use other means to ensure the payment of such amounts as may be necessary to effect the rights provided in this Article Eight or in any such contract. (iii) Upon making a request for indemnification, the Indemnitee shall be presumed to be entitled to indemnification under this Article Eight and the corporation shall have the burden of proof to overcome that presumption in reaching any contrary determination. Such indemnification shall include the right to receive reimbursement in advance of any expenses incurred by the Indemnitee in connection with any Proceeding, consistent with the provisions of the Delaware Law. (iv) The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the corporation the expenses incurred in defending any Proceeding in advance of its final disposition, to any other employee or agent of the corporation to the fullest extent of the provisions of this Article Eight with respect to the indemnification and advancement of expenses of directors and officers of the corporation. (v) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article Eight shall, unless otherwise provided when authorized or ratified, continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such Indemnitee. (vi) The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware Law. C. Any repeal or modification of the foregoing provisions of this Article Eight shall not adversely affect any right or protection of any director or any Indemnitee existing at the time of such repeal or modification. B-3 -----END PRIVACY-ENHANCED MESSAGE-----