<PAGE> 1
As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 333-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CORVEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0282651
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2010 MAIN STREET, SUITE 1020
IRVINE, CALIFORNIA 92614
(Address of principal executive offices) (Zip Code)
CORVEL CORPORATION
RESTATED 1988 EXECUTIVE STOCK OPTION PLAN
1991 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plans)
V. GORDON CLEMONS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CORVEL CORPORATION
2010 MAIN STREET, SUITE 1020, IRVINE, CA 92614
(Name and address of agent for service)
(949) 851-1473
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Restated 1988 Executive Stock Option Plan:
Common Stock, $0.0001 par value 200,000 shares $39.00 $7,800,000 $2,301.00
1991 Employee Stock Purchase Plan:
Common Stock, $0.0001 par value 100,000 shares $39.00 $3,900,000 $1,150.50
Aggregate Registration Fee $3,451.50
</TABLE>
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the CorVel Corporation Restated
1988 Executive Stock Option Plan or 1991 Employee Stock Purchase Plan,
by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration which
results in an increase in the number of the outstanding shares of Common
Stock of CorVel Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of Common Stock of CorVel
Corporation on June 30, 1998 as reported on the Nasdaq National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The Registrant hereby incorporates by reference into this
Registration Statement the following documents previously filed with the
Securities and Exchange Commission ("SEC"):
a. The Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998, filed with the SEC on June 29,
1998;
b. The Registrant's Registration Statement No. 00-19291 on
Form 8-A filed with the SEC on May 16, 1991 pursuant to
Section 12 of the Securities Exchange Act of 1934 (the
"1934 Act"), as amended by Amendment No. 1 thereto filed
with the SEC on June 28, 1991, in which there is described
the terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law ("Delaware
Law"), the Registrant has broad powers to indemnify its directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "1933 Act"). The Registrant's
Bylaws provide that the Registrant will indemnify its directors and officers to
the fullest extent permitted by law and require the Registrant to advance
litigation expenses upon receipt by the Registrant of an undertaking by the
director or officer to repay such advances if it is ultimately determined that
the director or officer is not entitled to indemnification. The Bylaws further
provide that rights conferred under such Bylaws shall not be deemed to be
exclusive of any other right such persons may have or acquire under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
The Registrant's Certificate of Incorporation provides that, pursuant to
Delaware Law, its directors shall not be liable for monetary damages for breach
of the director's fiduciary duty of care to the Registrant and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware Law.
In addition, each director will continue to be subject to liability for breach
of the
II-1
<PAGE> 3
director's duty of loyalty to the Registrant or its stockholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware Law. The provision also does not
effect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
In addition, the Registrant has entered into agreements to indemnify its
directors and certain of its officers in addition to the indemnification
provided for in the Certificate of Incorporation and Bylaws. These agreements
will, among other things, indemnify the Registrant's directors and certain of
its officers for certain expenses (including attorneys' fees), judgments, fines
and settlement amounts incurred by such person in any action or proceeding,
including any action by or in the right of the Registrant, on account of
services as a director or officer of the Registrant or as a director or officer
of any other company or enterprise that the person provides services to at the
request of the Registrant.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 00-19291 on Form 8-A, as
amended, which is incorporated herein by reference pursuant to Item
3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration
Statement
99.1 Restated 1988 Executive Stock Option Plan. (As Restated & Amended
through August 7, 1997).
99.2* Form of Notice of Grant.
99.3 Form of Stock Option Agreement.
99.4* Form of Notice of Grant of Non-Employee Director Automatic Stock Option.
99.5 Form of Non-Employee Director Automatic Stock Option Agreement.
99.6 Restated 1991 Employee Stock Purchase Plan. (As Restated & Amended
through August 7, 1997).
99.7* Form of 1991 Employee Stock Purchase Plan Enrollment/Change Form and
Stock Purchase Agreement.
</TABLE>
* Exhibits 99.2, 99.4, and 99.7 are incorporated by reference to Exhibits 99.2,
99.7, and 99.10 respectively, to Registrant's Registration Statement on Form
S-8, File Number 33-94440, filed with the SEC on July 10, 1995.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall
II-2
<PAGE> 4
be deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof and (3) to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Registrant's Restated 1988 Executive
Stock Option Plan and/or 1991 Employee Stock Purchase Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the 1933 Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irvine, State of California, on this
2nd day of July, 1998.
CORVEL CORPORATION
By: /s/ V. Gordon Clemons
-------------------------------
V. Gordon Clemons
Chairman of the Board, Chief
Executive Officer, and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of CorVel
Corporation, a Delaware corporation, do hereby constitute and appoint V. Gordon
Clemons and Richard J. Schweppe and each of them, the lawful attorneys-in-fact
and agents with full power and authority to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, and any one
of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ V. GORDON CLEMONS Chairman of the Board, July 2, 1998
- ---------------------------- Chief Executive Officer, and
V. Gordon Clemons President
(Principal Executive Officer)
/s/ RICHARD J. SCHWEPPE Chief Financial Officer July 2, 1998
- ---------------------------- and Secretary
Richard J. Schweppe (Principal Financial and
Accounting Officer)
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ PETER E. FLYNN Director July 2, 1998
- ----------------------------
Peter E. Flynn
Director
- ----------------------------
Steven J. Hamerslag
/s/ R. JUDD JESSUP Director July 2, 1998
- ----------------------------
R. Judd Jessup
/s/ JEFFREY J. MICHAEL Director July 2, 1998
- ----------------------------
Jeffrey J. Michael
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 00-19291 on Form 8-A, as
amended, which is incorporated herein by reference pursuant to Item
3(b).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration
Statement
99.1 Restated 1988 Executive Stock Option Plan. (As Restated & Amended
through August 7, 1997).
99.2* Form of Notice of Grant.
99.3 Form of Stock Option Agreement.
99.4* Form of Notice of Grant of Non-Employee Director Automatic Stock Option.
99.5 Form of Non-Employee Director Automatic Stock Option Agreement.
99.6 Restated 1991 Employee Stock Purchase Plan. (As Restated & Amended
through August 7, 1997).
99.7* Form of 1991 Employee Stock Purchase Plan Enrollment/Change Form and
Stock Purchase Agreement.
</TABLE>
* Exhibits 99.2, 99.4, and 99.7 are incorporated by reference to Exhibits 99.2,
99.7, and 99.10 respectively, to Registrant's Registration Statement on Form
S-8, File Number 33-94440, filed with the SEC on July 10, 1995.
<PAGE> 1
EXHIBIT 5
Opinion and consent of Brobeck, Phleger & Harrison LLP
July 2, 1998
CorVel Corporation
2100 Main Street
Suite 1020
Irvine, CA 92614
Re: CorVel Corporation Registration Statement on Form S-8 for
300,000 Shares of Common Stock and Related Stock Options
Ladies and Gentlemen:
We have acted as counsel to CorVel Corporation, a Delaware corporation (the
"Company"), in connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of an additional (i)
200,000 shares of common stock and related stock options for issuance under the
Company's Restated 1988 Executive Stock Option Plan (the "Option Plan") and (ii)
100,000 shares of common stock and related stock purchase rights for issuance
under the Restated 1991 Employee Stock Purchase Plan (the "Purchase Plan").
This opinion is being furnished in accordance with the requirements of Item
8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Option Plan and the Purchase Plan. Based on such review, we
are of the opinion that if, as and when the shares of common stock are issued
and sold (and the consideration therefor received) pursuant to (a) the
provisions of option agreements duly authorized under the Plan and in accordance
with the Registration Statement or (b) the provisions of the Purchase Plan and
the purchase rights thereunder and in accordance with the Registration
Statement, such shares will be duly authorized, legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Option Plan or Purchase Plan or the shares of common stock issuable under such
plans.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Restated 1988 Executive Stock Option and 1991 Employee
Stock Purchase Plans of CorVel Corporation of our report dated May 11, 1998,
with respect to the consolidated financial statements and schedule of CorVel
Corporation included in the Annual Report (Form 10-K) for the year ended
March 31, 1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Orange County, California
July 2, 1998
<PAGE> 1
EXHIBIT 99.1
CORVEL CORPORATION
RESTATED 1988 EXECUTIVE STOCK OPTION PLAN
AS RESTATED AND AMENDED THROUGH AUGUST 7, 1997
<PAGE> 2
ARTICLE ONE
GENERAL
I. PURPOSES OF THE PLAN
A. This Restated 1988 Executive Stock Option Plan (the "Plan"),
as restated through August 7, 1997, is intended to promote the interests of
CorVel Corporation, a Delaware corporation (the "Company")(1), by providing a
method whereby (i) key employees (including officers and directors) of the
Company (or its parent or subsidiary corporations) responsible for the
management, growth and financial success of the Company (or its parent or
subsidiary corporations), (ii) the non-employee members of the Company's Board
of Directors (the "Board"), and (iii) consultants and independent contractors
who provide valuable services to the Company (or its parent or subsidiary
corporations) are to be offered equity incentives and rewards intended to
encourage such individuals to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Company and to continue to render
services to the Company or its parent or subsidiary corporations.
B. For purposes of the Plan, the following definitions shall be
in effect:
COMMON STOCK: The Common Stock issuable under the Plan
shall be shares of the Company's common stock, $.0001 par value.
EMPLOYEE: An individual shall be considered to be an
Employee for so long as such individual remains in the employ of the
Company or one or more of its parent or subsidiary corporations, subject
to the control and direction of the employer entity as to both the work
to be performed and the method and manner of performance.
FAIR MARKET VALUE: The Fair Market Value per share of
Common Stock on any relevant date under the Plan shall be the closing
selling price per share of Common Stock on such date, as quoted by the
National Association of Securities Dealers through the Nasdaq National
Market (or any successor system). Should the Common Stock become traded
on a national securities exchange, then the Fair Market Value per share
shall be the closing selling price on such exchange on the date in
question, as such price is quoted on the composite tape of transactions
on such exchange. If there is no closing selling price of Common Stock
on the Nasdaq National Market (or national securities
- --------
(1) The Company was previously known as FORTIS Corporation and assumed all of
the rights and responsibilities of FORTIS Corporation, a Minnesota corporation
("FORTIS Minnesota"), with respect to the Plan pursuant to the Agreement and
Plan of Merger by and between the Company and FORTIS Minnesota, effective May
16, 1991, under which FORTIS Minnesota changed its state of incorporation from
Minnesota to Delaware by merging with and into the Company which was a wholly
owned subsidiary of FORTIS Minnesota.
2.
<PAGE> 3
exchange) on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
OPTIONEE: Any person to whom an option is granted under
the Discretionary Option Grant Program of Article Two or the Automatic
Option Grant Program of Article Three of this Plan.
PARENT: A corporation shall be deemed to be a parent of
the Company if it is a corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
such corporation in the unbroken chain (other than the Company) owns, at
the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
SECTION 16(b) INSIDER: An individual shall be considered
to be a Section 16(b) Insider on any relevant date under the Plan if
such individual is at the time subject to the short-swing profit
restrictions of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") by reason of his or her affiliation with
the Company.
SERVICE PROVIDER: An individual shall be deemed to be a
Service Provider for the Company for so long as such individual renders
service on a periodic basis to the Company or one or more of its parent
or subsidiary corporations as an Employee.
SUBSIDIARY: A corporation shall be deemed to be a
subsidiary of the Company if it is one of the corporations (other than
the Company) in an unbroken chain of corporations beginning with the
Company, provided each such corporation (other than the last corporation
in the unbroken chain) owns, at the time of determination, stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain. For purposes of all non-statutory option grants under the Plan
and all Corporate Transaction provisions of the Plan, the term
"subsidiary" shall also include any partnership, joint venture or other
business entity of which the Company owns, directly or indirectly
through another subsidiary corporation, more than a fifty percent (50%)
interest in voting power, capital or profits.
C. Stock option grants made to any individual under the
Discretionary Option Grant Program of Article Two shall not in any way affect,
limit or restrict such individual's eligibility to participate in any other
stock plan or other compensation or benefit plan, arrangement or practice now or
hereafter maintained by the Company or any parent or subsidiary corporation.
II. STRUCTURE OF THE PLAN
3.
<PAGE> 4
A. Stock Programs. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Committee, be granted options to purchase shares of Common Stock in
accordance with the provisions of Article Two. Under the Automatic Option Grant
Program, non-employee members of the Board will receive at periodic intervals
special option grants to purchase shares of Common Stock in accordance with the
provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four shall apply to both the
Discretionary Option Grant Program and the Automatic Option Grant Program and
shall accordingly govern the interests of all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Company's Compensation
Committee (the "Committee") consisting of two (2) or more members of the Board
appointed by the Board. Members of the Committee shall serve for such period of
time as the Board may determine and shall be subject to removal by the Board at
any time.
B. Subject to the express provisions of the Plan, the Committee
shall have the sole and exclusive authority with respect to the Discretionary
Option Grant Program:
(i) to make option grants to any and all eligible
individuals;
(ii) to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations
deemed necessary or advisable in administering the Discretionary Option Grant
Program; and
(iii) to change the terms and conditions of any outstanding
option grant under this Article Two, provided such action does not, without the
consent of the holder, adversely affect the rights and obligations such
individual may have under the outstanding grant.
C. Determinations of the Committee on all matters relating to the
Plan and any option grants or stock issuances made hereunder shall be final,
binding and conclusive on all persons having any interest in the Plan or any
options granted or shares issued under the Plan.
D. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Three, and the Committee shall exercise no discretionary functions with respect
to option grants made pursuant to that program.
IV. ELIGIBILITY
4.
<PAGE> 5
A. The persons eligible to receive option grants under the
Discretionary Option Grant Program are as follows:
(i) key employees of the Company (or its parent or
subsidiary corporations) who are members of the management team and who render
services which contribute directly to the success and growth of the Company (or
its parent or subsidiary corporations) or which may reasonably be anticipated to
directly contribute to the future success and growth of the Company (or its
parent or subsidiary corporations);
(ii) non-employee members of the Board or of the board of
directors of any Parent or Subsidiary, and
(iii) those consultants or independent advisors who provide
valuable services to the Company (or its parent or subsidiary corporations).
V. STOCK SUBJECT TO THE PLAN
A. The Common Stock issuable under the Plan shall be made
available either from authorized but unissued shares of Common Stock or from
shares of Common Stock reacquired by the Company on the open market. The
aggregate number of shares of Common Stock issuable over the term of this Plan
shall not exceed 1,635,000 shares, including an increase of 100,000 shares of
Common Stock which was authorized by the Board in June 1997, subject to
stockholder approval at the 1997 Annual Meeting. Such share reserve is subject
to adjustment from time to time in accordance with paragraph V.C. below.
B. Should an option granted under this Plan expire or terminate
for any reason prior to exercise or surrender in full (including options
cancelled in accordance with the cancellation-regrant provisions of Section V of
Article Two), the shares subject to the portion of the option not so exercised
or surrendered shall be available for subsequent option grants under this Plan.
In addition, unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original option exercise price paid per
share, pursuant to the Corporation's repurchase rights under the Plan shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, shares subject to stock
appreciation rights exercised in accordance with the provisions of Section II of
Article Two and Section III of Article Three shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent option
grants under this Plan. Should the exercise price of an outstanding option under
the Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the withholding taxes incurred in connection with the exercise of an outstanding
option under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised, and not by the net number of shares of Common Stock
actually issued to the option holder.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock dividend, stock split, combination of
shares, exchange of shares or
5.
<PAGE> 6
other change affecting the outstanding Common Stock as a class without the
Company's receipt of consideration, then appropriate adjustments shall be made
by the Committee to (i) the aggregate number and/or class of securities issuable
under the Plan, to reflect the effect of such change upon the Company's capital
structure, (ii) the maximum number and/or class of securities for which any one
individual participating in the Plan may be granted stock options and separately
exercisable stock appreciation rights over the term of the Plan, (iii) the
number and/or class of securities for which automatic option grants are to be
subsequently made to non-employee Board members under the Automatic Option Grant
Program, (iv) the number and/or class of securities and the exercise price per
share of the stock subject to each option outstanding under the Plan in order to
preclude the dilution or enlargement of benefits thereunder and (v) the number
and/or class of securities and the exercise price per share in effect under each
outstanding stock appreciation right in order to preclude the dilution or
enlargement of benefits thereunder. All adjustments made by the Committee
pursuant to this paragraph V.C. shall be final, binding and conclusive.
D. In the event that (i) the Company is the surviving entity in
any Corporate Transaction which does not result in the termination of
outstanding options pursuant to the Corporate Transaction provisions of the Plan
or (ii) the outstanding options under the Plan are to be assumed in connection
with such Corporate Transaction, then each such continuing or assumed option
shall, immediately after such Corporate Transaction, be appropriately adjusted
to apply and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the exercise price payable per share, provided the aggregate
option price shall remain the same. In addition, the number and class of
securities which remain issuable under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
E. From and after January 1, 1994, in no event may any one
individual participating in the Plan be granted stock options and separately
exercisable stock appreciation rights exceeding 800,000 shares in the aggregate
over the term of the Plan, subject to adjustment from time to time in accordance
with the provisions of Section V.C.
6.
<PAGE> 7
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
A. The Committee shall have sole and exclusive authority (subject
to the express provisions of the Plan) to determine which eligible individuals
are to be granted options under the Discretionary Option Grant Program, the
number of shares to be covered by each such option, the status of the granted
option as either an incentive stock option which meets the requirements of
Section 422 of the Internal Revenue Code ("Incentive Option") or a non-statutory
option not intended to meet such requirements ("Non-Statutory Option"), the time
or times at which such option is to become exercisable and the maximum term for
which the option is to remain outstanding.
B. The granted options shall be evidenced by instruments in such
form as the Committee shall from time to time approve; provided, however, that
each such instrument shall comply with the terms and conditions specified below.
1. Option Price.
a. The option price per share shall be fixed by the
Committee, but in no event shall the option price per share be less than
eighty-five percent (85%) of the Fair Market Value per share of Common Stock on
the date of the option grant.
b. The option price shall become immediately due upon
exercise of the option and shall, subject to the loan provisions of Section I of
Article Four, be payable in one of the alternative forms specified below:
1. full payment in cash or check payable to the
Company's order; or
2. full payment in shares of Common Stock held by
the Optionee for the requisite period necessary to avoid a charge to the
Company'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 (as such term is
defined below); or
3. full payment in a combination of shares of
Common Stock held by the Optionee for the requisite period necessary to avoid a
charge to the Company'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 and
cash or check payable to the Company's order, equal in the aggregate to the
option price; or
4. full payment through a special sale and
remittance procedure pursuant to which the Optionee is to provide irrevocable
written instructions (i) to a designated
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brokerage firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date, an
amount sufficient to cover the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment taxes
required to be withheld by the Company by reason of such purchase and (ii) to
the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.
c. The Exercise Date shall be the date on which written
notice of the option exercise is delivered to the Company. Except to the extent
the sale and remittance procedure specified in clause 4 of subparagraph b. is
utilized in connection with the option exercise, payment of the option price for
the purchased shares must accompany such notice.
2. Term and Exercise of Options.
(i) Each option granted under the Discretionary
Option Grant Program shall be exercisable in one or more installments as shall
be determined by the Committee and set forth in the instrument evidencing such
option; provided, however, no such option shall have a maximum term in excess of
ten (10) years.
(ii) During the lifetime of the Optionee, Incentive
Options shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
3. Termination of Service.
(i) Should an Optionee cease to be a Service Provider
for any reason including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code (other than termination set forth in
subparagraph (iii) below) while the holder of one or more outstanding options
under this Article Two, then such options shall not be exercisable at any time
after the earlier of (i) the specified expiration date of the option term or
(ii) the expiration of the limited period of time (not to exceed twelve (12)
months after the Optionee ceases to be a Service Provider) specified by the
Committee in the option agreement. Each such option shall, during such twelve
(12)-month or shorter period following cessation of Service Provider status, be
exercisable only to the extent of the number of shares (if any) in which the
Optionee is vested on the date of such cessation of Service Provider status.
(ii) Any option granted to an Optionee under this
Article Two and outstanding in whole or in part on the date of the Optionee's
death may be subsequently
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exercised, but only to the extent of the number of shares (if any) in which the
Optionee is vested on the date the Optionee ceases to be a Service Provider
(less any of those shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution. Any such exercise must
occur prior to the earlier of (i) the expiration date of the option term or (ii)
the first anniversary of the date of the Optionee's death.
(iii) If the Optionee's Service Provider status is
terminated for any of the following reasons, then all outstanding options
granted the Optionee under this Article Two shall immediately terminate and
cease to be exercisable immediately upon such termination:
(1) Optionee's intentional misconduct or continuing
gross neglect of duties which materially and adversely affects the business and
operations of the Company or any parent or subsidiary corporation employing
Optionee;
(2) Optionee's unauthorized use or disclosure (or
attempt thereat) of confidential information or trade secrets of the Company or
its parent or subsidiary corporations; or
(3) Optionee's commission of an act involving
embezzlement, theft, fraud, falsification of records, destruction of property or
commission of a crime or other offense involving money or other property of the
Company or any parent or subsidiary corporation employing Optionee.
The reasons for termination of Optionee as a Service
Provider set forth in this subparagraph (iii) are not intended to be, and are
not inclusive, of all acts or omissions which the Company may deem to constitute
misconduct or other grounds for terminating the Optionee (or any other
individual).
(iv) The Committee shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited period of
exercisability following cessation of Service Provider status, not only with
respect to the number of shares in which the Optionee is vested at the time of
such cessation of Service Provider status but also with respect to one or more
subsequent installments of purchasable shares in which the Optionee would
otherwise have vested had the Optionee continued as a Service Provider.
(v) If the option is granted to an individual who is
not an Employee of the Company, then the option agreement evidencing the granted
option shall include provisions comparable to those set forth in subparagraphs
(i), (ii) and (iii) above, and may include
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provisions comparable to subparagraph (iv) above, with respect to the Optionee's
termination of service with the Company or its parent or subsidiary
corporations.
4. Stockholder Rights.
An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and satisfied
all other conditions precedent to the issuance of certificates for the purchased
shares.
5. Repurchase Rights. The shares of Common Stock acquired upon
the exercise of any Article Two option grant may be subject to one or more
repurchase rights of the Company in accordance with the following provisions:
(i) The Committee shall have the discretion to authorize the
issuance of unvested shares of Common Stock under this Article Two. Should the
Optionee cease Service Provider status while holding such unvested shares, the
Company shall have the right to repurchase any or all of those unvested shares
at the option price paid per share. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Committee and set forth in the instrument evidencing such
repurchase right.
(ii) All of the Company's outstanding repurchase rights shall
automatically terminate, and all shares subject to such terminated rights shall
immediately vest in full, upon the occurrence of any Corporate Transaction under
Section III of Article Two of this Plan, except to the extent: (i) any such
repurchase right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such termination
is precluded by other limitations imposed by the Committee at the time the
repurchase right is issued.
(iii) The Committee shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of Service Provider
status, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under this Article
Two and thereby accelerate the vesting of such shares in whole or in part at any
time.
II. STOCK APPRECIATION RIGHTS
A. The Committee shall have full power and authority, exercisable
in its sole discretion, to grant selected Optionees tandem stock appreciation
rights ("Tandem Rights") and/or limited stock appreciation rights ("Limited
Rights") pertaining to all or part of the shares of Common Stock subject to one
or more of their option grants under this Article Two.
B. Tandem Rights may be granted at the same time the underlying
option is granted or any time thereafter while the option remains outstanding.
The Optionee may exercise
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such Tandem Right by surrendering the underlying option in whole or in part to
the Company, to the extent such option is at the time exercisable for vested
shares of Common Stock. In exchange for the surrendered option, the Optionee
shall receive a distribution from the Company in an amount equal to the excess
of (i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option
(or surrendered portion) over (ii) the aggregate option price payable for such
vested shares. However, the exercise of the Tandem Right shall be effective only
if approved by the Committee. If so approved, the distribution to which the
Optionee shall accordingly become entitled with respect to the surrendered
option may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash, as the
Committee shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Committee,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion) on the option surrender date and may
exercise such rights at any time prior to the later of (i) five (5) business
days after the receipt of the rejection notice or (ii) the last day on which the
option is otherwise exercisable in accordance with the terms of the instrument
evidencing such option, but in no event may such rights be exercised more than
ten (10) years after the date of the option grant.
D. One or more Section 16(b) Insiders may, in the Committee's
sole discretion, be granted Limited Rights(2) in conjunction with their
outstanding options under this Article Two. Upon the occurrence of a Hostile
Take-Over, each outstanding option with such a Limited Right shall automatically
be cancelled, to the extent such option is at the time exercisable for
fully-vested shares of Common Stock. The Optionee shall in return be entitled to
a cash distribution from the Company 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 (or cancelled portion of such option) over (ii) the aggregate
exercise price payable for such shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of
the Hostile Take-Over. The Committee shall pre-approve, at the time the limited
right is granted, the subsequent exercise of that right in accordance with its
terms. No additional approval of the Committee or the Board shall be required at
the time of the actual option cancellation and cash distribution. The balance of
the option (if any) shall continue to remain outstanding and exercisable in
accordance with the terms and conditions of the instrument evidencing such
option.
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(2) Options granted to Section 16(b) Insiders prior to the effective date of the
June 15, 1992 Restatement contain a different form of Limited Right. Such right
will provide each Section 16(b) Insider with a thirty (30)-day election period,
following the successful completion of a hostile tender offer for fifty percent
(50%) or more of the Company's outstanding voting securities, to surrender the
underlying option for a cash distribution from the Company in an amount per
share of Common Stock in which the Section 16(b) Insider is at the time vested
under the surrendered option equal to the excess of the highest price per share
paid in effecting such tender offer over the exercise price payable per share
under the surrendered option.
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E. For purposes of subparagraph D. above, the following
definitions shall be in effect:
A HOSTILE TAKE-OVER shall be the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders 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 on the option
cancellation date or (b) the highest reported price per share paid by
the acquiring entity in effecting such Hostile Take-Over. However, if
the cancelled option is an Incentive Option, the Take-Over Price shall
not exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option surrendered
or cancelled for an appreciation distribution pursuant to this Section II shall
NOT be available for subsequent option grant under the Plan.
III. CORPORATE TRANSACTION
A. Upon the occurrence of any of the following transactions (a
"Corporate Transaction") for which the approval of the Company's stockholders is
obtained:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company to any entity other than a parent
or subsidiary of the Company, or
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(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held such fifty
percent (50%) or greater interest immediately prior to such merger,
then the exercisability of each option outstanding under
this Article Two shall be automatically accelerated so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares. However, an outstanding option under this Article
Two shall not be so accelerated if and to the extent: (i) such option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, or (ii) such option is to be replaced with a cash incentive program of
the successor corporation designed to preserve the option spread existing at the
time of the Corporate Transaction and incorporating the same vesting schedule
applicable to such option, or (iii) the acceleration of such option is subject
to other applicable limitations imposed by the Committee at the time of grant.
The determination of comparability under clause (i) above shall be made by the
Committee, and its determination shall be final, binding and conclusive.
B. The Committee shall have the discretion, exercisable either in
advance of any actually-anticipated Corporate Transaction or at the time of an
actual Corporate Transaction, to provide (upon such terms and conditions as it
may deem appropriate) for either the automatic acceleration of one or more
assumed or replaced options which do not accelerate in connection with the
Corporate Transaction or for the automatic vesting of any cash incentive
programs implemented in replacement of such options, in the event the Optionee's
employment should subsequently terminate within a designated period following
the effective date of such Corporate Transaction.
C. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this Section III in connection
with a Corporate Transaction shall remain subject to the applicable dollar
limitation of Section IV.A.(iii) of this Article Two below.
D. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall, to the extent not previously
exercised or assumed by the successor corporation or its parent company,
terminate and cease to be outstanding.
E. The grant of options under this Article Two shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. INCENTIVE OPTIONS
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A. The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Options which are
specifically designated as "non-statutory" options when issued under this
Article Two shall not be subject to such terms and conditions.
(i) Option Price. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the grant
date.
(ii) 10% Stockholder. If any individual to whom an Incentive
Option is to be granted pursuant to the provisions of this Article Two is on the
grant date the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting power
of all classes of stock of the Company or any one of its parent or subsidiary
corporations (such person to be herein referred to as a 10% Stockholder), then
(i) the option price per share shall not be less than one hundred and ten
percent (110%) of the Fair Market Value per share of Common Stock on the grant
date and (ii) the maximum term of the option shall not exceed five (5) years
from the grant date.
(iii) Dollar Limitation. The aggregate fair market value
(determined on the basis of the Fair Market Value in effect on the respective
date or dates of grant) of the Common Stock for which one or more options
granted to any Employee under this Plan (or any other option plan of the Company
or its parent or subsidiary corporations) may for the first time become
exercisable as incentive stock options under the Federal tax laws during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as incentive stock options under the
Federal tax laws shall be applied on the basis of the order in which such
options are granted.
B. Except as modified by the preceding provisions of this
Incentive Options section, all the provisions of the Plan shall be applicable to
the Incentive Options granted hereunder.
V. CANCELLATION AND RE-GRANT OF OPTIONS
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution therefor new options under this Article Two covering the
same or different numbers of shares of Common Stock but having an option price
per share not less than (i) eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the new grant date, (ii) one hundred percent (100%)
of such Fair Market Value for an Incentive Option, or (iii) one hundred and ten
percent (110%) of such Fair Market Value in the case of a 10% Stockholder.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Directors. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three program
shall be limited to (i) those individuals who are serving as non-employee Board
members on August 5, 1993, the effective date of this Automatic Option Grant
Program (the "Effective Date"), and (ii) those individuals who are first elected
or appointed as non-employee Board members on or after the Effective Date,
whether through appointment by the Board or election by the Company's
stockholders. Any non-employee Board member eligible to participate in the
Automatic Option Grant Program pursuant to the foregoing criteria shall be
designated an Eligible Director for purposes of this Plan.
B. Limitation. Except for the option grants to be made pursuant
to the provisions of this Automatic Option Grant Program, an Eligible Director
serving on the Committee shall not be eligible during such period of service to
receive any additional option grants or stock issuances under this Plan or any
other stock plan of the Company (or its parent or subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article
Three on the dates specified below:
(i) Each Eligible Director who first becomes a
non-employee Board member on or after the Effective Date of this
Automatic Option Grant Program, whether through election by the
Company's stockholders or appointment by the Board and who has not at
any time been in the prior employ of the Company (or any parent or
subsidiary corporation), shall automatically be granted, at the time of
such initial election or appointment, a non-statutory stock option to
purchase 5,000 shares of Common Stock upon the terms and conditions of
this Article Three.
(ii) On the date of each Annual Stockholders Meeting,
commencing with the 1993 Annual Stockholders Meeting, each individual
who is at the time serving as an Eligible Director shall automatically
be granted at that meeting, whether or not such individual is standing
for re-election as a Board member at that particular meeting and whether
or not such individual has at any time been in the prior employ of the
Company (or any parent or subsidiary
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corporation), a non-statutory stock option to purchase 1,500 shares of
Common Stock upon the terms and conditions of this Article Three,
provided he or she has served as a non-employee Board member for at
least six (6) months prior to the date of such meeting. There shall be
no limit on the number of 1,500-share option grants any one Eligible
Director may receive over his or her period of Board service.
The number of shares for which the automatic grants are to be
made to each newly-elected or continuing Eligible Director shall be subject to
periodic adjustment pursuant to the applicable provisions of Section V.C of
Article One.
Stockholder approval of the restatement of the Plan at the 1997
Annual Meeting shall constitute pre-approval of each option subsequently granted
pursuant to the express terms of this Automatic Option Grant Program and the
subsequent exercise of that option in accordance with its terms.
B. Exercise Price. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article Three shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check payable to the
Company's order; or
(ii) full payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Company'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 (as such
term is defined below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Company'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 and
cash or check payable to the Company's order, equal in aggregate to the
option price; or
(iv) full payment through a sale and remittance
procedure pursuant to which the non-employee Board member is to provide
irrevocable written instructions (I) to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date, an
amount sufficient to cover the aggregate option
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price payable for the purchased shares and (II) to the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
The Exercise Date shall be the date on which written notice of
the option exercise is delivered to the Company. Except to the extent the sale
and remittance procedure specified in clause (iv) is utilized in connection with
the option exercise, payment of the option price for the purchased shares must
accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a maximum term of ten (10) years measured from the automatic grant
date.
E. Exercisability. Each automatic grant shall become exercisable
in a series of four (4) equal and successive annual installments over the
Optionee's period of service on the Board, with the first such installment to
become exercisable twelve (12) months after the automatic grant date. The
exercisability of each automatic grant shall be subject to acceleration in
accordance with the provisions of Section II.G and Section III of this Article
Three.
F. Limited Transferability. During the lifetime of the Optionee,
each automatic option grant may, in connection with the Optionee's estate plan,
be assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
G. Termination of Board Service.
1. Should the Optionee's service as a Board member cease
for any reason (other than death or permanent disability) while holding one or
more automatic option grants under this Article Three, then such individual
shall have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the shares of
Common Stock for which the option is exercisable at the time of such cessation
of Board service. However, each such option shall immediately terminate and
cease to be outstanding, at the time of such cessation of Board service, with
respect to any shares for which the option is not otherwise at that time
exercisable.
2. Should the Optionee die within six (6) months after
cessation of Board service, then each outstanding automatic option grant held by
the Optionee at the time of death may subsequently be exercised, for any or all
of the shares of Common Stock for which such option is exercisable at the time
of the Optionee's cessation of Board service (less any option shares
subsequently purchased by the Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and
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distribution. Any such exercise must occur within twelve (12) months after the
date of the Optionee's death.
3. Should the Optionee die or become permanently disabled
while serving as a Board member, then each automatic option grant held by such
Optionee under this Article Three shall accelerate in full, and the Optionee (or
the representative of the Optionee's estate or the person or persons to whom the
option is transferred upon the Optionee's death) shall have a twelve (12)-month
period following the date of the Optionee's cessation of Board service in which
to exercise each such option for any or all of the shares of Common Stock
subject to that option at the time of such cessation of Board service.
4. In no event shall any automatic grant under this
Article Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable post-service
exercise period under subparagraph 1, 2 or 3 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be outstanding for any unexercised shares for which the option was
otherwise exercisable at the time of the Optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-Statutory
Stock Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each automatic
option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Upon the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to be outstanding.
B. In connection with any Change in Control of the Company, each
automatic option grant at the time outstanding under this Article Three shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of such shares. For
purposes of this Article Three, a Change in Control shall be deemed to occur in
the event:
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(i) any person or related group of persons (other
than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer which the
Board does not recommend the Company's 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)
cease, by reason of one or more proxy contests for the election of Board
members, to be comprised of individuals who either (I) have been Board
members continuously since the beginning of such period or (II) 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
(I) who were still in office at the time such election or nomination was
approved by the Board.
C. A Limited Right shall be granted with respect to each
automatic option granted under this Article Three. Upon the occurrence of a
Hostile Take-Over, each such option shall automatically be cancelled, to the
extent such option is at the time exercisable for fully-vested shares of Common
Stock. The Optionee shall in return be entitled to a cash distribution from the
Company 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 (or
cancelled portion of such option) over (ii) the aggregate exercise price payable
for such shares. The cash distribution payable upon such cancellation shall be
paid within five (5) days following the consummation of the Hostile Take-Over.
The Committee shall pre-approve, at the time the limited right is granted, the
subsequent exercise of that right in accordance with its terms. No additional
approval of the Committee or the Board shall be required at the time of the
actual option cancellation and cash distribution. The balance of the option (if
any) shall continue to remain outstanding and exercisable in accordance with the
terms and conditions of the instrument evidencing such option.
D. The shares of Common Stock subject to each option surrendered
in connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
E. The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
19.
<PAGE> 20
ARTICLE FOUR
MISCELLANEOUS
I. LOANS OR GUARANTEE OF LOANS
The Committee may assist any Optionee (including any officer or
director) in the exercise of one or more outstanding options under the
Discretionary Option Grant Program by (a) authorizing the extension of a loan to
such Optionee from the Company, (b) permitting the Optionee to pay the option
price for the purchased Common Stock in installments over a period of years or
(c) authorizing a guarantee by the Company of a third-party loan to the
Optionee. The terms of any loan, installment method of payment or guarantee
(including the interest rate and terms of repayment) shall be established by the
Committee in its sole discretion. Loans, installment payments and guarantees may
be granted without security or collateral, but the maximum credit available to
the Optionee shall not exceed the sum of (i) the aggregate option price of the
purchased shares (less the par value) plus (ii) any Federal and State income and
employment tax liability incurred by the Optionee in connection with the
exercise of the option.
II. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise or surrender of stock options or stock appreciation rights granted
under the Plan shall be subject to the satisfaction by the Optionee of all
applicable Federal, State and local income and employment tax withholding
requirements.
B. The Committee may, in its discretion and upon such terms and
conditions as it may deem appropriate (including the applicable safe-harbor
provisions of Securities and Exchange Commission ("SEC") Rule 16b-3 or any
successor rule or regulation) provide any or all holders of outstanding option
grants under the Plan (other than automatic option grants made pursuant to the
provisions of Article Three) with the election to have the Company withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
options, a portion of such shares with an aggregate Fair Market Value equal to
the designated percentage (any multiple of five percent (5%) specified by the
Optionee) of the Federal and state income taxes ("Taxes") incurred in connection
with the acquisition of such shares. In lieu of such direct withholding, one or
more Optionees may also be granted the right to deliver pre-existing shares of
Common Stock to the Company in satisfaction of such Taxes. The withheld or
delivered shares shall be valued at the Fair Market Value on the applicable
determination date for such Taxes or such other date required by the applicable
safe-harbor provisions of SEC Rule 16b-3.
III. EXTENSION OF EXERCISE PERIOD
The Committee shall have full power and authority to extend the
period of time for which any option granted under the Discretionary Option Grant
Program is to remain exercisable following the Optionee's termination of service
from the twelve (12)-month or shorter period set forth in the option agreement
to such greater period of time as the Committee shall
20.
<PAGE> 21
deem appropriate; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term.
IV. AMENDMENT OF THE PLAN
The Board shall have the complete and exclusive authority to
amend or modify the Plan in any or all respects whatsoever. However, (i) no such
amendment or modification shall, without the consent of the holders, adversely
affect rights and obligations with respect to any stock options or stock
appreciation rights at the time outstanding under the Plan and (ii) any
amendment made to the Automatic Option Grant Program (or to any options
outstanding thereunder) shall be in compliance with the limitation of Section IV
of Article Three. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
V. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan was initially adopted by the Board and approved by
the Company's sole stockholder on August 1, 1988. The Board and sole stockholder
amended and restated the Plan effective May 15, 1991 to (i) increase the number
of shares issuable pursuant to the Plan, (ii) conform the provisions of the Plan
to the SEC rules under Section 16 of the Exchange Act applicable to certain
transactions effected under the Plan by Section 16(b) Insiders and (iii) provide
for the grant of Incentive Options. The Plan was further restated on June 15,
1992 (the "1992 Restatement") to (i) increase the number of shares of Common
Stock authorized for issuance under the Plan by an additional 200,000 shares,
(ii) bring the Plan into compliance with revisions to SEC Rule 16b-3 which
became effective on September 1, 1993 and exempts certain officer and director
transactions under the Plan from the short-swing liability provisions of the
federal securities laws and (iii) effect certain technical revisions to the
provisions of the Plan to facilitate plan administration and interpretation. The
1992 Restatement was approved by the Company's stockholders at the 1992 Annual
Meeting. The Plan was further restated and amended by the Board in June, 1993
(the "1993 Restatement") to add the Automatic Option Grant Program. The 1993
Restatement was approved by the Company's stockholders at the 1993 Annual
Meeting. On May 4, 1994, the Board approved an amendment to the Plan to (i)
increase the aggregate number of shares issuable over the term thereof by
200,000 shares to a total of 1,335,000 shares and (ii) impose a limitation of
800,000 shares on the maximum number of shares of Common Stock for which any one
participant may be granted stock options and separately exercisable stock
appreciation rights over the remaining term of the Plan. The amendment was
approved by the Company's stockholders at the 1994 Annual Meeting.
On June 21, 1996, the Board approved an amendment to the Plan to
(i) increase the aggregate number of shares issuable over the term thereof by
200,000 shares to 1,535,000 shares, and (ii) extend the expiration date of the
Plan to June 30, 2006. These amendments were approved by the Company's
stockholders at the 1996 Annual Meeting. In June 1997, the Board further amended
and restated the Plan (the "1997 Restatement") to effect the following
revisions: (i) increase the number of shares of Common Stock reserved for
issuance over the term of the Plan by an additional 100,000 shares to 1,635,000
shares, (ii) render the non-employee Board
21.
<PAGE> 22
members eligible to receive option grants under the Discretionary Option Grant
Program, (iii) allow unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the option exercise price paid per share to be
reissued under the Plan, (iv) remove certain restrictions on the eligibility of
non-employee Board members to serve as Plan Administrator and (v) effect a
series of additional changes to the provisions of the Plan in order to take
advantage of the recent amendments to SEC Rule 16b-3.
The 1997 Restatement is subject to stockholder approval at the
1997 Annual Meeting, and no option grants made on the basis of the 100,000-share
increase under the 1997 Restatement shall become exercisable in whole or in part
unless and until the 1997 Restatement is approved by the stockholders. Should
such stockholder approval not be obtained, then each option grant made pursuant
to the 100,000-share increase shall terminate and cease to remain outstanding
without ever becoming exercisable for those shares, and no additional option
grants shall be made on the basis of that share increase. Subject to the
foregoing limitations, the Plan Administrator may make option grants under the
Plan at any time before the date fixed herein for the termination of the Plan.
B. The provisions of the Restatements apply only to stock options
and stock appreciation rights granted under the Plan from and after the
respective effective dates of such Restatements. All stock options and stock
appreciation rights issued and outstanding under the Plan immediately prior to
such effective dates of the Restatements shall continue to be governed by the
terms and conditions of the Plan (and the instrument evidencing each such option
or stock appreciation right) as in effect on the date each such option or stock
appreciation was previously granted, and nothing in the Restatements shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or stock appreciation rights with respect to the acquisition of
shares of Common Stock thereunder or the exercise of their outstanding stock
appreciation rights.
C. The sale and remittance procedure authorized for the exercise
of outstanding options shall be available for all options granted under the Plan
from and after November 6, 1991 and for all Non-Statutory Options outstanding on
such date. The Committee may also allow such procedure to be utilized in
connection with one or more disqualifying dispositions of incentive stock option
shares effected on or after November 6, 1991, whether or not the option was
granted on or before such date.
D. The Plan shall in all events terminate upon the earlier of (i)
June 30, 2006 or (ii) the date on which all shares available for issuance under
the Plan shall have been issued or cancelled pursuant to the exercise or
surrender of stock options and/or stock appreciation rights under the Plan. If
the date of termination is determined under clause (i) above, then any stock
options and stock appreciation rights at the time outstanding under the Plan
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such grants.
E. Options may be granted under the Discretionary Option Grant
Program to purchase shares of Common Stock in excess of the number of shares
then available for issuance under the Plan, provided (i) an amendment to
increase the maximum number of shares issuable
22.
<PAGE> 23
under the Plan is adopted by the Board prior to the initial grant of any such
option and within one year thereafter such amendment is approved by the
Company's stockholders and (ii) each option granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
stockholder approval.
VI. MISCELLANEOUS
A. Any cash proceeds received by the Company from the issuance of
shares hereunder shall be used for general corporate purposes.
B. The implementation of the Plan, the granting of any stock
option, and the issuance of Common Stock hereunder, shall be subject to the
Company's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, and the stock options granted
under it and the Common Stock issued pursuant to it.
C. Neither the action of the Company in establishing the Plan,
nor any action taken by the Board or the Committee hereunder, nor any provision
of the Plan itself shall be construed so as to grant any individual the right to
remain in the employ or service of the Company or any of its parent or
subsidiary corporations for any period of specific duration, and the Company (or
any parent or subsidiary retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
D. Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
(without limitation) the right of the Company (a) to grant options for proper
corporate purposes otherwise than under this Plan to any Employee or other
person, firm or company or association or (b) to grant options to, or assume the
option of, any person in connection with the acquisition (by purchase, lease,
merger, consolidation or otherwise) of the business and assets (in whole or in
part) of any person, firm, company or association.
23.
<PAGE> 1
EXHIBIT 99.3
CORVEL CORPORATION
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. The Board of Directors (the "Board") of CorVel Corporation
(the "Corporation") has adopted, and the stockholders of the Corporation have
approved, the Corporation's Restated 1988 Executive Stock Option Plan (the
"Plan") for the purpose of attracting and retaining the services of key
employees (including officers and directors), consultants and other independent
contractors of the Corporation and its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services
to the Corporation or its parent or subsidiary corporations, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the Corporation's grant of a stock option to Optionee.
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, the Corporation hereby grants to Optionee, as of
the grant date (the "Grant Date") specified in the accompanying Notice of Grant
of Stock Option (the "Grant Notice"), a stock option to purchase up to that
number of shares of the Corporation's Common Stock (the "Optioned Shares") as is
specified in the Grant Notice. Such Optioned Shares shall be purchasable from
time to time during the option term at the option price (the "Option Price")
specified in the Grant Notice.
2. OPTION TERM. This option shall expire at the close of business
on the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5 or Paragraph 7 of this
Agreement.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Qualified Option in the Grant Notice, then this option may, in connection
with Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of 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
<PAGE> 2
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 Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for
the Optioned Shares in one or more installments in accordance with the exercise
schedule specified in the Grant Notice. As the option becomes exercisable in one
or more installments, those installments shall accumulate and the option shall
remain exercisable for the accumulated installments until the Expiration Date or
sooner termination of the option term under Paragraph 5 or Paragraph 7 of this
Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date to the extent one or more of the
following provisions become applicable:
(i) Upon the Optionee's cessation of Service Provider
status, this option shall immediately terminate and cease to be
outstanding with respect to any Optioned Shares for which this
option is not otherwise at that time exercisable or in which
Optionee is not otherwise vested.
(ii) Except as otherwise provided in subparagraphs (iii)
through (v) below, should Optionee cease to be a Service
Provider at any time during the option term, then the Optionee
shall have up to a three (3) month period commencing with the
date of such cessation of Service Provider status in which to
exercise this option for any or all vested Optioned Shares for
which this option is exercisable at the time of such cessation
of Service Provider status, but in no event shall this option be
exercisable at any time after the Expiration Date. Upon the
expiration of such three (3) month period or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
outstanding.
(iii) Should Optionee die while this option is
outstanding, the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of decent
and distribution shall have the right to exercise this option,
but only with respect to any vested Optioned Shares for which
the option is exercisable on the date of such cessation of
Service Provider status, less any vested Optioned Shares
subsequently purchased by Optionee prior to death. Such right
shall lapse and this option shall cease to be exercisable upon
the earlier of (a) the expiration of the one (1) year period
measured from the date of the Optionee's death or (b) the
Expiration Date. Upon the occurrence of the earlier event, the
option shall terminate and cease to be exercisable.
(iv) Should Optionee become permanently disabled and
cease by reason thereof to be a Service Provider at any time
during the option term, then the Optionee shall have a period of
twelve (12) months (commencing
2.
<PAGE> 3
with the date of such cessation of Service Provider status)
during which to exercise this option; provided, however, that 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 that number of
vested Optioned Shares (if any) for which it is exercisable at
the date of the Optionee's cessation of Service Provider status.
Upon the expiration of such limited period of exercisability or
(if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding.
(v) Should the Optionee's status as a Service Provider
be involuntarily terminated by the Corporation for (A)
intentional misconduct or continuing gross neglect of duties
which materially and adversely affects the business and
operations of the Corporation or any parent or subsidiary
corporation retaining Optionee, (B) unauthorized use or
disclosure of confidential information or trade secrets of the
Corporation or its parent or subsidiary corporations, (C)
commission of an act involving embezzlement, theft, fraud,
falsification of records, destruction of property or commission
of a crime or other offense involving money or other property of
the Corporation or any parent or subsidiary corporation or (D)
any other acts or omissions which the Corporation may deem to
constitute misconduct or other grounds for involuntary
termination of Optionee's status as a Service Provider, then in
any such event this option shall terminate and cease to be
exercisable immediately upon such termination of Service
Provider status. The grounds for involuntary termination set
forth in this subparagraph (v) are not intended to be, and are
not inclusive, of all acts or omissions which the Corporation
may deem to constitute misconduct or other cause for involuntary
termination of Service Provider status.
(vi) For purposes of this Agreement, the following
definitional provisions shall be in effect:
Optionee shall be deemed to be a SERVICE
PROVIDER for so long as the Optionee renders periodic services
to the Corporation or any parent or subsidiary corporation as an
Employee or independent consultant or advisor.
Optionee shall be deemed to be an EMPLOYEE for
so long as the Optionee remains in the employ of the Corporation
or one or more of its parent or subsidiary corporations, subject
to the control and direction of the employer entity as to both
the work to be performed and the method and manner of
performance.
Optionee shall be deemed to be PERMANENTLY
DISABLED if Optionee is, by reason of any medically-determinable
physical or
3.
<PAGE> 4
mental impairment expected to result in death or to be of
continuous duration of not less than twelve (12) months, unable
to engage in any substantial gainful activity.
A corporation shall be considered to be a
SUBSIDIARY corporation of the Corporation if it is a member of
an unbroken chain of corporations beginning with the
Corporation, provided each such corporation in the chain (other
than the last corporation) owns, at the time of determination,
stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such
chain. In the event this option is designated a non-statutory
option in the Grant Notice, the term "subsidiary" shall also
include any partnership, joint venture or other business entity
of which the Corporation owns, directly or indirectly through
another subsidiary corporation, more than a fifty percent (50%)
interest in voting power, capital or profits.
A corporation shall be considered to be a PARENT
corporation of the Corporation if it is a member of an unbroken
chain ending with the Corporation, provided each such
corporation in the chain (other than the Corporation) owns, at
the time of determination, stock possessing 50% or more of the
total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. ADJUSTMENT IN OPTION SHARES.
(a) In the event any change is 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 the outstanding Common
Stock as a class without the Corporation's receipt of consideration, the Plan
Administrator shall make appropriate adjustments to (i) the total number of
Optioned Shares subject to this option and the (ii) Option Price payable per
share in order to prevent any dilution or enlargement of benefits hereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
(b) If the Corporation is the surviving entity in any Corporate
Transaction which does not result in the termination of this option pursuant to
the provisions of Paragraph 7 or if this option is otherwise to be assumed in
connection with such Corporate Transaction, then this option shall, immediately
after the Corporate Transaction, be appropriately adjusted to apply and pertain
to the number and class of securities which would have been issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to this option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the Option Price payable per share, provided the aggregate Option Price payable
hereunder shall remain the same.
4.
<PAGE> 5
7. ACCELERATION AND TERMINATION OF OPTION.
(a) In the event of one or more of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the Corporation is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(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, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which fifty percent (50%) or more of the
Corporation's outstanding voting stock is transferred to holders
different from those who held such stock immediately prior to
such merger,
then, to the extent this option is not otherwise at the
time fully exercisable (as provided in the Grant Notice), the exercisability of
this option shall automatically be accelerated so that such option shall
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable with respect to the total number of Optioned Shares and
may be exercised for all or any portion of such shares as fully-vested shares.
No such acceleration of this option, however, shall occur if and to the extent:
(i) this option is in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof or (ii) this option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
at the time of the Corporate Transaction and provides for payout upon the same
vesting schedule applicable to this option. The determination of comparability
under clause (i) shall be made by the Plan Administrator and its determination
shall be final, binding and conclusive.
(b) This option, to the extent not previously exercised, shall
terminate upon the consummation of such Corporate Transaction and cease to be
exercisable, except to the extent expressly assumed by the successor corporation
or parent thereof.
(c) This option shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any stockholder rights with respect to the Optioned Shares until such
individual shall have exercised the option in accordance with the provisions of
Paragraph 9 and satisfied all other
5.
<PAGE> 6
conditions precedent to the issuance of the stock certificate for the purchased
shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Optioned Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:
(i) Deliver to the Chief Financial Officer of the
Corporation (A) an executed notice of exercise in substantially the form of
Appendix A hereto (the "Exercise Notice") in which there is specified the number
of Optioned Shares to be purchased under the exercised option and (B) any
additional documents which the Plan Administrator may, in its discretion, deem
advisable.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternatives:
(A) full payment in cash or check payable to the
Corporation's order;
(B) 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 6 months) and valued at Fair Market Value on the Exercise Date (as
such terms are defined below);
(C) full payment through a combination of 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 6 months) and valued at Fair Market Value
on the Exercise Date and cash or check payable to the Corporation's
order;
(D) full payment through a special sale and
remittance procedure pursuant to which the Optionee (i) shall provide
irrevocable written directives to a 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 plus all applicable Federal and State income and employment taxes
required to be withheld by the Corporation in connection with such
purchase and (II) shall concurrently instruct the Corporation to deliver
the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction; or
6.
<PAGE> 7
(E) payment in any other form which the Plan
Administrator may, in its discretion, approve at the time of exercise in
accordance with the provisions of Paragraph 10 of this Agreement.(1)
(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) The Exercise Date shall be the date on which written notice
of the option exercise is delivered to the Corporation. Except to the extent the
sale and remittance procedure is utilized for the exercise of the option,
payment of the Option Price for the purchased shares must accompany such notice.
For purposes of this Agreement, the Fair Market Value of a share of Common Stock
on any relevant date shall be determined as follows:
(i) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the
NASDAQ National Market System, the fair market value shall be
the closing selling price of one share of Common Stock 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 system. If there is no 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
of Common Stock on the date in question, as such price is 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) As soon as practical after the Exercise Date, the Corporation
shall mail or deliver to or on behalf of Optionee (or the other person or
persons exercising this option) a certificate or certificates representing the
purchased Optioned Shares, with the appropriate legends affixed thereto.
(d) In no event may this option be exercised for any fractional
shares.
10. SPECIAL FINANCING. The Plan Administrator may, in its
absolute discretion and without any obligation to do so, assist Optionee in the
exercise of this option by (i)
- --------
(1) Authorization of a loan or installment payment under this provision may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
7.
<PAGE> 8
authorizing the extension of a loan to Optionee from the Corporation or (ii)
permitting Optionee to pay the option price for the purchased Common Stock in
installments over a period of years. The terms of any loan or installment method
of payment (including the interest rate, the collateral requirements and terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
11. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of Optioned Shares upon such exercise shall be subject
to compliance by the Corporation and the Optionee with all applicable
requirements of law relating thereto and with all applicable regulations of any
stock exchange on which shares of the Corporation's Common Stock may be listed
at the time of such exercise and issuance.
12. INVESTMENT REPRESENTATIONS. In connection with the exercise
of this option, Optionee shall execute and deliver to the Corporation such
representations in writing as may be requested by the Corporation in order for
it to comply with the applicable requirements of Federal and State securities
laws.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or Paragraph 7, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the successors, administrators,
heirs and legal representatives of Optionee and the successors and assigns of
the Corporation.
14. LIABILITY OF CORPORATION.
(a) If the Optioned Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares which may without stockholder approval
be issued under the Plan, then this option shall be void with respect to such
excess shares unless stockholder approval of an amendment sufficiently
increasing the number of shares issuable under the Plan is obtained in
accordance with the provisions of Section XIII of the Plan.
(b) The inability of 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.
15. NO EMPLOYMENT/SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service Provider
status with the Corporation (or any parent or subsidiary employing or retaining
Optionee) for any period of specific duration or otherwise interfere with or
restrict in any way the rights of the Corporation (or such parent or subsidiary)
or Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service Provider status at any time for any reason whatsoever, with
or without cause.
8.
<PAGE> 9
16. 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 its Chief Financial Officer at its corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated 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.
17. CONSTRUCTION. 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. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
18. GOVERNING LAW. 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-law rules.
19. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. The option shall cease to qualify for favorable tax treatment
as an incentive stock option under the Federal tax laws if (and to the extent)
this option is exercised for one or more Optioned Shares: (i) more than three
(3) months after the date the Optionee ceases to be an Employee for any reason
other than death or permanent disability (as defined in Paragraph 5) or (ii)
more than one (1) year after the date the Optionee ceases to be an Employee by
reason of permanent disability.
B. In the event this option is exercisable in installments as
specified in the Grant Notice, no installment under this option (whether annual
or monthly) shall qualify for favorable tax treatment as an incentive stock
option under the Federal tax laws if (and to the extent) the aggregate fair
market value (determined at the Grant Date) of the Corporation's Common Stock
for which such installment first becomes exercisable hereunder will, when added
to the aggregate fair market value (determined as of the respective date or
dates of grant) of the Corporation's Common Stock for which one or more other
post-1986 incentive stock options granted to the Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
parent or subsidiary corporation) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
C. Should the exercisability of this option be accelerated upon a
Corporate Transaction in accordance with Paragraph 7, then this option shall
qualify for favorable tax treatment as an incentive stock option under the
Federal tax laws only to the extent the aggregate fair market value (determined
at the Grant Date) of the Corporation's Common Stock for which
9.
<PAGE> 10
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate fair market
value (determined as of the respective date or dates of grant) of the
Corporation's Common Stock for which this option or one or more other post-1986
incentive stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Corporation or any parent or
subsidiary corporations) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
D. To the extent this option should fail to qualify as an
incentive stock option under the Federal tax laws, the Optionee will recognize
compensation income in connection with the acquisition of one or more Optioned
Shares hereunder, and the Optionee must make appropriate arrangements for the
satisfaction of all Federal, State and local income and employment tax
withholding requirements applicable to such compensation income.
20. ADDITIONAL TERMS APPLICABLE TO NON-QUALIFIED STOCK OPTION. In
the event this option is designated as a non-qualified stock option in the Grant
Notice, Optionee shall make appropriate arrangements with the Corporation or any
parent or subsidiary corporation employing or retaining Optionee for the
satisfaction of all Federal, State and local income and employment tax
withholding requirements applicable to the exercise of this option.
10.
<PAGE> 11
APPENDIX A
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify CorVel Corporation (the "Corporation") that I elect to
purchase ______________ shares of Common Stock of the Corporation (the
"Purchased Shares") at an option price of $_____________ per share (the "Option
Price") pursuant to the option (the "Option") granted to me on ________________,
19 ____ .
Concurrently with the delivery of this Exercise Notice to the Chief
Financial Officer of the Corporation, I shall hereby pay to the Corporation the
Option 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.
- ----------------------- -------------------------------
Date Optionee
Address:
-------------------------------
-------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-------------------------------
-------------------------------
Address to which certificate
is to be sent, if different
from address above:
-------------------------------
-------------------------------
Social Security Number:
-------------------------------
Employee Number:
-------------------------------
<PAGE> 1
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
<PAGE> 2
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
2.
<PAGE> 3
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,
3.
<PAGE> 4
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:
4.
<PAGE> 5
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 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 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:
5.
<PAGE> 6
(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
6.
<PAGE> 7
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
7.
<PAGE> 8
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 1920 Main Street, Suite 1090, Irvine, California 92714. 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.
8.
<PAGE> 9
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.
- --------------------------- -------------------------------
Date Optionee
Address:
-------------------------------
-------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-------------------------------
Address to which certificate
is to be sent, if different
from address above:
-------------------------------
-------------------------------
Social Security Number:
-------------------------------
<PAGE> 1
EXHIBIT 99.6
CORVEL CORPORATION
1991 EMPLOYEE STOCK PURCHASE PLAN
AS RESTATED AND AMENDED THROUGH AUGUST 7, 1997
<PAGE> 2
CORVEL CORPORATION
1991 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE
The CorVel Corporation 1991 Employee Stock Purchase Plan (the
"Plan"), as restated and amended through August 7, 1997, is intended to provide
eligible employees of the Company and one or more of its Corporate Affiliates
with the opportunity to acquire a proprietary interest in the Company through
participation in a plan designed to qualify as an employee stock purchase plan
under Section 423 of the Internal Revenue Code (the "Code").
II. DEFINITIONS
For purposes of administration of the Plan, the following terms
shall have the meanings indicated:
BASE SALARY means the regular base earnings paid to an Eligible
Employee by one or more Participating Companies during such individual's period
of participation in the Plan, plus (i) one hundred percent (100%) of the
commissions paid to the such individual during each purchase period in which he
or she participates in the Plan and (iii) any salary deferral contributions made
by such individual to the Company's Code Section 401(k) Plan during such period.
There shall be excluded from the calculation of Base Salary (i) all overtime
payments, bonuses, profit-sharing distributions and other incentive-type
payments and (ii) all contributions (other than Code Section 401(k)
contributions) made by the Company or its Corporate Affiliates for such
individual's benefit under any employee benefit or welfare plan now or hereafter
established.
BOARD means the Board of Directors of the Company.
COMPANY means CorVel Corporation, a Delaware corporation(1), and
any corporate successor to all or substantially all of the assets or voting
stock of the Company which shall by appropriate action adopt the Plan.
CORPORATE AFFILIATE means any company which is either the parent
corporation or a subsidiary corporation of the Company (as determined in
accordance with Section 424 of
- --------
(1) The Company was previously known as FORTIS Corporation and assumed
all of the rights and responsibilities of FORTIS Corporation, a Minnesota
corporation ("FORTIS Minnesota"), with respect to the Plan pursuant to the
Agreement and Plan of Merger by and between the Company and FORTIS Minnesota,
effective May 16, 1991, under which FORTIS Minnesota changed its state of
incorporation from Minnesota to Delaware by merging with and into the Company
which was a wholly owned subsidiary of FORTIS Minnesota.
2.
<PAGE> 3
the Code), including any parent or subsidiary corporation which becomes such
after the Effective Date.
EFFECTIVE DATE means October 1, 1991; provided, however, that any
Corporate Affiliate which becomes a Participating Company in the Plan after
October 1, 1991 shall designate a subsequent Effective Date with respect to its
employee-Participants; provided further, that this Plan shall not be effective
until such time as the Company becomes subject to the reporting requirements of
Section 12 of the Securities Exchange Act of 1934.
ELIGIBLE EMPLOYEE means any person who is regularly engaged, for
a period of more than twenty (20) hours per week and more than five (5) months
per calendar year, in the rendition of personal services to the Company or any
other Participating Company for earnings considered wages under Section 3121(a)
of the Code. However, employees of the Company who, at the start of any purchase
period under the Plan, (i) are deemed to be Highly Compensated Employees within
the meaning of Section 414(q) of the Code and (ii) hold unvested options to
purchase more than 15,000 shares of the Company's common stock under the
Company's Restated 1988 Executive Stock Option Plan shall not be treated as
Eligible Employees for that purchase period and shall accordingly be ineligible
to participate in the Plan for such period.
PARTICIPANT means any Eligible Employee of a Participating
Company who is actively participating in the Plan.
PARTICIPATING COMPANY means the Company and such Corporate
Affiliate or Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Companies in the Plan as of the purchase period to begin October 1, 1992 are
listed in attached Schedule A.
STOCK means shares of the common stock of the Company, par value
$.0001 per share.
III. ADMINISTRATION
A. The Plan shall be administered by a committee (the
"Committee") consisting of two (2) or more Board members appointed by the Board.
Members of the Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Committee is hereby designated as the Plan Administrator
and shall have full authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and to adopt such rules and
regulations for administering the Plan as it may deem necessary in order to
comply with the requirements of Section 423 of the Code. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan.
IV. PURCHASE PERIODS
3.
<PAGE> 4
(a) Stock shall be offered for purchase under the Plan through a
series of successive purchase periods until such time as (i) the maximum number
of shares of Stock available for issuance under the Plan shall have been issued
pursuant to purchase rights granted under the Plan or (ii) the Plan shall have
been sooner terminated in accordance with Article IX.
(b) Each purchase period shall have a duration of six (6) months.
The initial purchase period will begin October 1, 1991, and subsequent purchase
periods will commence at successive six (6)-month intervals from and after that
date.
(c) The Participant shall be granted a separate purchase right
for each purchase period in which he or she participates. The purchase right
shall be granted on the first day of the purchase period and shall be
automatically exercised on the last business day of the purchase period.
(d) Under no circumstances shall any purchase rights granted
under the Plan be exercised, nor shall any shares of Stock be issued hereunder,
until such time as (i) the Plan shall have been approved by the Company's
stockholders and (ii) the Company shall have complied with all applicable
requirements of the Securities Act of 1933, as amended, all applicable listing
requirements of any securities exchange on which the Stock is listed and all
other applicable requirements established by law or regulation.
(e) The acquisition of Stock through participation in the Plan
for any purchase period shall neither limit nor require the acquisition of Stock
by the Participant in any subsequent purchase period.
V. ELIGIBILITY AND PARTICIPATION
(a) Each Eligible Employee of a Participating Company may begin
participation in the Plan on the first day of any purchase period following the
commencement of his or her employment with the Company or any other
Participating Company.
(b) In order to participate in the Plan for a particular purchase
period, an Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designee) during the specified enrollment period for that purchase period.
(c) The payroll deduction authorized by a Participant for
purposes of acquiring Stock under the Plan may be any multiple of $10.00, up to
a dollar maximum not in excess of 20% of the Base Salary paid to the Participant
during the purchase period. The deduction rate so authorized shall continue in
effect for the entire purchase period, unless the Participant shall, prior to
the end of the purchase period for which the purchase right is in effect, reduce
the rate by filing the appropriate form with the Plan Administrator (or its
designee). The reduced rate shall become effective as soon as practicable
following the filing of such form. Payroll
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deductions, however, will automatically cease upon the termination of the
Participant's purchase right in accordance with Section VII(d) or (e) below.
VI. STOCK SUBJECT TO PLAN
(a) The Stock purchasable by Participants under the Plan shall,
solely in the Board's discretion, be made available from either authorized but
unissued Stock or from reacquired Stock, including shares of Stock purchased on
the open market. The total number of shares which may be issued under the Plan
shall not exceed 200,000 shares, (subject to adjustment under subparagraph (b)
below), including the 50,000-share increase subject to stockholder approval at
the 1997 Annual Stockholders Meeting.
(b) In the event any change is made to the Stock purchasable
under the Plan by reason of any stock dividend, stock split, combination of
shares, recapitalization or other change affecting the outstanding Stock as a
class without the Company's receipt of consideration, appropriate adjustments
shall be made by the Plan Administrator to (i) the class and maximum number of
shares issuable over the term of the Plan, (ii) the class and maximum number of
shares purchasable per Participant under any one purchase right, and (iii) the
class and number of shares and the price per share in effect under each purchase
right at the time outstanding under the Plan.
VII. PURCHASE RIGHTS
Each Eligible Employee who participates in the Plan for a
particular purchase period shall have the right to purchase Stock upon the terms
and conditions set forth below and shall execute a purchase agreement embodying
such terms and conditions and such other provisions (not inconsistent with the
Plan) as the Plan Administrator may deem advisable.
(a) Purchase Price. The purchase price per share shall be the
lesser of (i) 85% of the fair market value of a share of Stock on the date on
which the purchase right is granted or (ii) 85% of the fair market value of a
share of Stock on the date the purchase right is exercised. For purposes of
determining such fair market value (and for all other valuation purposes under
the Plan), the fair market value of a share of Stock on any date shall be the
closing selling price of such share on such date, as officially quoted on the
principal exchange on which the Stock is at the time traded or, if not traded on
any exchange, the closing selling price per share of the Stock on such date, as
reported on the Nasdaq National Market. If there are no sales of Stock on such
day, then the closing selling price for the Stock on the next preceding day for
which such closing selling price is quoted shall be determinative of fair market
value.
(b) Number of Purchasable Shares. The number of shares
purchasable by a Participant upon the exercise of an outstanding purchase right
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the purchase period for
which such purchase right is outstanding, by the purchase price per share in
effect for that purchase period. However, the maximum number of shares
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purchasable by any Participant during any one purchase period shall not exceed
500 shares (subject to adjustment under Section VI(b)).
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)), or hold outstanding
options or other rights to purchase, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any
Corporate Affiliate.
(c) Payment. Payment for the Stock purchased under the Plan shall
be effected through the Participant's authorized payroll deductions. Such
deductions shall begin on the first pay day coincident with or immediately
following the commencement date of the purchase period and shall terminate with
the pay day ending with or immediately prior to the last day of such purchase
period. The amounts so collected shall be credited to the Participant's
individual account under the Plan, but no interest shall be paid on the balance
from time to time outstanding in the account. The collected amounts may be
commingled with the Company's general assets and used for general corporate
purposes.
(d) Termination of Purchase Rights.
(i) A Participant may, on or before the last day of any
purchase period, terminate his or her outstanding purchase right under the Plan
by filing the prescribed notification form with the Plan Administrator (or its
designee). No further payroll deductions shall be collected from the Participant
with respect to the terminated purchase right, and the Participant shall have
the following election with respect to any payroll deductions made by such
individual with respect to the terminated purchase right: (A) have the Company
refund those payroll deductions or (B) have such payroll deductions held for the
purchase of shares at the end of the purchase period. If no such election is
made, then such payroll deductions shall automatically be refunded at the end of
such purchase period.
(ii) The termination shall be irrevocable with respect to the
particular purchase right to which it pertains, and the Participant may not
subsequently rejoin the purchase period covered by such terminated right.
(e) Termination of Service. If a Participant ceases to remain in
Service while his or her purchase right remains outstanding, then such purchase
right shall immediately terminate, and all sums previously collected from the
Participant during the purchase period in which such termination occurs shall be
refunded promptly to the Participant. However, should the Participant die or
become permanently disabled while in Service or should the Participant cease
active employment by reason of a leave of absence, then the Participant (or the
person or persons to whom the rights of the deceased Participant under the Plan
are transferred by will or by the laws of descent and distribution) shall have
the election, exercisable up until the end of the purchase period in which the
Participant dies or becomes permanently disabled or in which the leave of
absence commences, to (i) withdraw all the funds credited to the Participant's
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account at the time of his or her cessation of Service or at the commencement of
such leave or (ii) have such funds held for the purchase of shares at the end of
such purchase period. If no such election is made, then such funds shall
automatically be held for the purchase of shares at the end of such purchase
period. In no event, however, shall any further payroll deductions be added to
the Participant's account following his or her cessation of Service or the
commencement of such leave. Should the Participant return to active Service
following a leave of absence, then his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave began,
provided such return to Service occurs prior to the expiration date of the
purchase period in which such leave began.
For purposes of the Plan: (a) the Participant shall be considered
to remain in Service for so long as such Participant remains in the active
employ of the Company or one or more other Participating Companies, and (b) the
Participant shall be deemed to be permanently disabled if he or she is unable to
engage in any substantial gainful employment, by reason of any
medically-determinable physical or mental impairment expected to result in death
or to be of continuous duration of at least twelve (12) months.
(f) Stock Purchase. The Stock subject to the purchase right of
each Participant (other than Participants whose payroll deductions have been
refunded in accordance with Section VII(d) or (e) above) shall be automatically
purchased on the Participant's behalf on the last business day of the purchase
period. The purchase shall be effected by applying the amount credited to each
Participant's account on the last date of the purchase period to the purchase of
whole shares of Stock (subject to the limitations on the maximum number of
purchasable shares set forth in Section VII(b)) at the purchase price in effect
for such purchase period. Any amount remaining in the Participant's account
after such application shall be refunded promptly.
(g) Proration of Purchase Rights. Should the total number of
shares of Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata allocation
of the available shares on a uniform and nondiscriminatory basis, and any
amounts credited to the accounts of Participants shall, to the extent not
applied to the purchase of Stock, be refunded to the Participants.
(h) Rights as Stockholder. A Participant shall have no rights as
a stockholder of the Company with respect to shares covered by his or her
outstanding purchase right under the Plan until the shares are actually
purchased on the Participant's behalf in accordance with Section VII(f). No
adjustments shall be made for dividends, distributions or other rights for which
the record date is prior to the date of such purchase.
A Participant shall be issued, as soon as practicable after the
date of each purchase, a stock certificate for the number of shares purchased on
the Participant's behalf. Such certificate may, upon the Participant's request,
be issued in the names of the Participant and his or her spouse as community
property or as joint tenants with right of survivorship.
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(i) Assignability. No purchase right granted under the Plan shall
be assignable or transferable by the Participant other than by will or by the
laws of descent and distribution following the Participant's death and during
the Participant's lifetime the purchase right shall be exercisable only by the
Participant.
(j) Merger or Liquidation of Company. In the event the Company or
its stockholders enter into an agreement to dispose of all or substantially all
of the assets or outstanding capital stock of the Company by means of a sale,
merger or reorganization (other than a reorganization effected primarily to
change the State in which the Company is incorporated) or in the event the
Company is liquidated, all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the effective date of such sale,
merger, reorganization or liquidation by applying all sums previously collected
from Participants during the purchase period of such transaction to the purchase
of whole shares of Stock, subject, however, to the applicable limitations of
Section VII(b). Any amount not applied to the purchase of Stock by reason of the
Section VII(b) limitation on the maximum number of purchasable shares shall be
refunded promptly.
VIII. ACCRUAL LIMITATIONS
(a) No Participant shall be entitled to accrue rights to acquire
Stock pursuant to any purchase right outstanding under the Plan if and to the
extent such accrual, when aggregated with (i) rights to acquire Stock accrued
under other purchase rights granted to the Participant under this Plan and (ii)
similar rights accrued by the Participant under other employee stock purchase
plans (within the meaning of Code Section 423) of the Company or its Corporate
Affiliates, would otherwise permit such Participant to purchase more than
$25,000 worth of Stock of the Company or any Corporate Affiliate (determined on
the basis of the fair market value of such stock on the date or dates such
rights are granted to the Participant) for each calendar year such rights are at
any time outstanding.
(b) For purposes of applying the accrual limitations of Section
VIII(a), the right to acquire Stock pursuant to each purchase right granted
under the Plan shall accrue as follows:
(i) The right to acquire Stock under each such purchase
right shall accrue when the purchase right first becomes exercisable on the last
business day of the purchase period for which such right is granted.
(ii) No right to acquire Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in the same
calendar year the right to acquire $25,000 worth of Stock (determined on the
basis of the fair market value on the date or dates of grant) pursuant to one or
more other purchase rights granted to the Participant during such calendar year.
(iii) To the extent the Participant's purchase right does not,
by reason of the Section VIII(a) limitations, accrue on the last business day of
the particular purchase period for which such right is granted, then the payroll
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deductions which the Participant made during that purchase period with respect
to such purchase right shall be refunded promptly.
(c) In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. AMENDMENT AND TERMINATION
The Board may from time to time alter, amend, suspend or
discontinue the Plan; provided, however, that no such action shall adversely
affect purchase rights at the time outstanding under the Plan; and provided,
further, that no such action of the Board may, without the approval of the
Company's stockholders, materially increase the number of shares issuable under
the Plan or the maximum number of shares which any one Participant may purchase
under the Plan during a single purchase period (provided, however, the Plan
Administrator shall have the authority to effect adjustments pursuant to Section
VI(b) without stockholder approval), alter the purchase price formula so as to
reduce the purchase price specified in the Plan, otherwise materially increase
the benefits accruing to Participants under the Plan, or materially modify the
requirements for eligibility to participate in the Plan.
X. GENERAL PROVISIONS
(a) The Plan became effective on the Effective Date. On June 15,
1992 the Board approved a restatement of the Plan, to be effective as of October
1, 1992. The restatement was approved by the Company's stockholders at the 1992
Annual Meeting. On May 4, 1994, the Board approved an amendment to the Plan to
increase the aggregate number of shares issuable over the term thereof from
100,000 to 150,000 shares. The amendment was approved by the Company's
stockholders at the 1994 Annual Meeting. In June 1997, the Board approved
another amendment to the Plan to increase the aggregate number of shares
issuable over the term thereof from 150,000 to 200,000 shares, subject to
stockholder approval at the 1997 Annual Meeting.
(b) The Plan shall terminate upon the earlier of (i) September
30, 2001, or (ii) the date on which all shares available for issuance under the
Plan shall have been sold pursuant to purchase rights exercised under the Plan.
(c) All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
(d) Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any of its Corporate
Affiliates for any period of specific duration, and such person's employment may
be terminated at any time, with or without cause.
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(e) The provisions of the Plan shall be governed by the laws of
the State of California.
10.
