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EXHIBIT 99.5
CORVEL CORPORATION
NON-EMPLOYEE DIRECTOR AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Restated 1988 Executive Stock Option Plan (the "Plan")
pursuant to which the non-employee members of the Corporation's Board of
Directors (the "Board") will automatically receive stock option grants at
periodic intervals while they continue to serve as Board members.
B. Optionee is a non-employee member of the Board and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant to such individual of a stock
option to purchase shares of the Corporation's common stock ("Common Stock")
under the Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue Code
and is designed to provide Optionee with a meaningful incentive to continue to
serve as a member of the Board.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, there is hereby granted to Optionee, as of the date
of grant (the "Grant Date") specified in the accompanying Notice of Grant of
Non-Employee Director Automatic Stock Option (the "Grant Notice"), a stock
option to purchase up to that number of shares of Common Stock (the "Option
Shares") as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the price per share (the
"Option Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the Expiration Date specified in the Grant Notice, unless sooner terminated in
accordance with Paragraph 5, 7 or 8 of this Agreement.
3. LIMITED TRANSFERABILITY. This option may, in connection with
the Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should
the Optionee die while holding this
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option, then this option shall be transferred in accordance with Optionee's will
or the laws of descent and distribution.
4. DATES OF EXERCISE. This option shall become exercisable in a
series of successive annual installments as specified in the Grant Notice. As
the option becomes exercisable for one or more installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the expiration or sooner termination of the option term. In
no event shall this option become exercisable for any additional Option Shares
following Optionee's cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
A. Should Optionee cease to serve as a Board member for any
reason (other than death or permanent disability) while holding this
option, then the period for exercising this option shall be reduced to a
six (6)-month period commencing with the date of such cessation of Board
service, but in no event shall this option be exercisable at any time
after the Expiration Date. During such limited period of exercisability,
this option may not be exercised for more than the number of Option
Shares (if any) for which it is exercisable on the date Optionee ceases
service as a Board member. Upon the expiration of such six (6)-month
period, the option shall terminate and cease to be exercisable.
B. Should Optionee die during the six (6)-month period following
his or her cessation of Board service, then the personal representative
of Optionee's estate or the person or persons to whom the option is
transferred pursuant to Optionee's will or in accordance with the laws
of descent and distribution shall have the right to exercise this option
for any or all of the Option Shares for which the option is exercisable
at the time of Optionee's cessation of Board service (less any Option
Shares subsequently purchased by Optionee prior to death). Such right of
exercise shall terminate, and this option shall accordingly cease to be
outstanding, upon the earlier of (A) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (B) the
specified Expiration Date of the option term.
C. Should Optionee die or become permanently disabled while
serving as a Board member, then this option shall accelerate in full and
Optionee, or the personal representative of Optionee's estate or the
person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution, shall have the right to exercise this option for any or
all of the Option Shares subject to this option at the time of
Optionee's cessation of Board service. Such right of exercise shall
terminate, and this option shall
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accordingly cease to be outstanding, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date on
which Optionee dies or becomes permanently disabled or (B) the specified
Expiration Date of the option term.
D. Upon Optionee's cessation of Board service for any reason
other than death or permanent disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all Option
Shares for which this option is not otherwise at that time exercisable
in accordance with the normal exercise provisions of Paragraph 4 or the
special acceleration provisions of Paragraph 7 or 8.
E. Optionee shall be deemed to be PERMANENTLY DISABLED and to
have incurred PERMANENT DISABILITY if Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months.
6. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock issuable under the Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares or other change affecting
such Common Stock as a class without the Corporation's receipt of consideration,
then the number and class of securities purchasable under this option and the
Option Price payable per share shall be appropriately adjusted to prevent the
dilution or enlargement of Optionee's rights hereunder; provided, however, the
aggregate Option Price shall remain the same.
7. CORPORATE TRANSACTION. In the event of any of the following
stockholder-approved transactions to which the Corporation is a party (a
"Corporate Transaction"):
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State in which the
Corporation is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation to any entity other
than a parent or subsidiary of the Corporation (as determined in
accordance with the provisions of the Plan), or
(iii) any reverse merger in which the Corporation is
the surviving entity but in which securities possessing fifty percent
(50%) or more of the total combined voting power of the Corporation's
outstanding securities are transferred to person or persons different
from those who held such securities immediately prior to such merger,
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this option, to the extent outstanding at such time but
not otherwise fully exercisable, shall automatically accelerate so that such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the Option Shares at
the time subject to this option and may be exercised for all or any portion of
such shares as fully-vested shares of Common Stock. Upon the consummation of the
Corporate Transaction, this option shall terminate and cease to be outstanding.
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
(a) This option, to the extent outstanding at the time of a
Change in Control (as defined below) but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of such Change in Control, become fully exercisable for all of
the Option Shares at the time subject to this option and may be exercised for
all or any portion of such shares as fully-vested shares of Common Stock. This
option as so accelerated shall remain fully exercisable until the earliest to
occur of (i) the specified Expiration Date of the option term, (ii) the sooner
termination of this option in accordance with Paragraph 5 or 7 or (iii) the
cancellation of this option under Paragraph 8(b).
(b) Upon the occurrence of a Hostile Take-Over (as defined
below), this option shall automatically be cancelled, to the extent such option
is at the time exercisable for fully-vested shares of Common Stock, immediately
following the consummation of such Hostile Take-Over. The Optionee shall in turn
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of (I) the Take-Over Price of the vested shares of Common Stock at
the time subject to the cancelled option over (II) the aggregate Option Price
payable for such shares.
(c) The cash distribution payable upon such cancellation shall be
paid to Optionee within five (5) days following the consummation of the Hostile
Take-Over, and neither the approval of the Plan Administrator nor the consent of
the Board shall be required in connection with such option cancellation and cash
distribution. Upon receipt of such cash distribution, Optionee shall cease to
have any further right to acquire the Option Shares subject to the cancelled
option, and this Agreement shall become null and void with respect to those
Option Shares. However, should this option be cancelled as to only a portion of
the Option Shares, then the Company shall issue a new stock option agreement (in
substantially the form of this Agreement) for the balance of the Option Shares
remaining subject to the uncancelled portion of this option.
(d) This limited right shall in all events terminate upon the
expiration or sooner termination of the option term and may not be assigned or
transferred by Optionee.
(e) Definitions: For purposes of this Agreement, the following
definitional provisions shall be in effect:
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A CHANGE IN CONTROL shall be deemed to occur in the event:
(i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934 (the "1934 Act")) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept; or
(ii) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a majority of
the Board members (rounded up to the next whole number) ceases, by reason of one
or more proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least two-thirds of the Board members
described in clause (A) who were still in office at the time such election or
nomination was approved by the Board.
A HOSTILE TAKE-OVER shall be deemed to occur in the event any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the ▇▇▇▇ ▇▇▇) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer which the Board
does not recommend the Corporation's shareholders to accept.
The TAKE-OVER PRICE per share shall be deemed to be equal to the
greater of (a) the Fair Market Value per share of Common Stock on the option
cancellation date, as determined in accordance with the valuation provisions of
Paragraph 9(b), or (b) the highest reported price per share of Common Stock paid
by the acquiring entity in effecting the Hostile Take-Over.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option for all or any part of the
Option Shares for which the option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following actions:
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(i) Provide the Secretary of the Corporation with written
notice of the option exercise (the "Exercise Notice"), in substantially the form
of Exhibit I attached hereto, in which there is specified the number of Option
Shares which are to be purchased under the exercised option.
(ii) Pay the aggregate Option Price for the purchased shares
in one of the following alternative forms:
1. full payment in cash or check made payable to the
Corporation's order; or
2. full payment in shares of Common Stock held by
Optionee for the requisite period necessary to avoid a charge to the
Corporation's reported earnings (which in any event shall not be less than six
(6) months) and valued at Fair Market Value on the Exercise Date; or
3. full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes (which in any event
shall not be less than six (6) months) and valued at Fair Market Value on the
Exercise Date and cash or check made payable to the Corporation's order; or
4. full payment effected through a broker-dealer sale
and remittance procedure pursuant to which Optionee shall provide irrevocable
written instructions (A) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate Option Price payable for the purchased shares and (B) to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(b) For purposes of subparagraph 9(a) above and for all other
valuation purposes under this Agreement, the Fair Market Value per share of
Common Stock on any relevant date shall be the determined in accordance with the
following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any national stock exchange but is traded on the
NASDAQ National Market System, the Fair Market Value shall be the
closing selling price per share on the date in question, as such price
is reported by the National Association of Securities Dealers through
the NASDAQ National Market System or any successor
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system. If there is no reported closing selling price for the Common
Stock on the date in question, then the closing selling price on the
last preceding date for which such quotation exists shall be
determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market Value shall
be the closing selling price per share on the date in question on the
exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(c) The Exercise Date shall be the date on which the Exercise
Notice is delivered to the Secretary of the Corporation. Except to the extent
the sale and remittance procedure specified above is utilized in connection with
the option exercise, payment of the Option Price for the purchased shares must
accompany such notice.
(d) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or other person or persons exercising
this option) a certificate or certificates representing the purchased Option
Shares.
(e) In no event may this option be exercised for any fractional
share.
10. STOCKHOLDER RIGHTS. The holder of this option shall not have
any of the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised this option and paid the Option Price for the
purchased shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any stock
exchange on which shares of the Common Stock may be listed at the time of such
exercise and issuance.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding
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upon, the successors, administrators, heirs, legal representatives and assigns
of Optionee and the successors and assigns of the Corporation.
14. DISCHARGE OF LIABILITY. The inability of the Corporation to
obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Common Stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at the Corporate Offices
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Any notice required
to be given or delivered to Optionee shall be in writing and addressed to
Optionee at the address indicated below Optionee's signature line on the Grant
Notice. All notices shall be deemed to have been given or delivered upon
personal delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the automatic option grant provisions of Article Three of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws rules.
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EXHIBIT I
NOTICE OF EXERCISE OF
NONSTATUTORY STOCK OPTION
I hereby notify CorVel Corporation (the "Corporation") that I elect to
purchase __________ shares of Common Stock of the Corporation (the "Purchased
Shares") pursuant to that certain option (the "Option") granted to me on
___________, 199_ to purchase up to __________ shares of the Corporation's
Common Stock at an option price of $ per share (the "Exercise Price").
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise
Price for the Purchased Shares in accordance with the provisions of my agreement
with the Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
the Purchased Shares.
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Date Optionee
Address:
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Print name in exact manner
it is to appear on the
stock certificate:
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Address to which certificate
is to be sent, if different
from address above:
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Social Security Number:
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