<PAGE> 1
[CORVEL LETTERHEAD]
July 1, 1998
Dear CorVel Stockholder:
We are pleased to invite you to our 1998 Annual Meeting which will be
held at the offices of the Company, 2010 Main Street, Suite 1020,
Irvine, California, on Thursday, August 6, 1998, at 9:00 a.m. Pacific
Daylight Time. The Annual Meeting will begin with a report on the
Company's progress, followed by a discussion and stockholder questions.
Voting on election of directors and other matters is also scheduled. The
items to be voted on are addressed in the enclosed Notice of Annual
Meeting of Stockholders and Proxy Statement.
Several significant milestones reached in fiscal 1998 deserve special
mention:
o CorVel reported record revenues of $142 million for the fiscal year ended
March 31, 1998, representing an increase of approximately 17% over the
$121.7 million in revenues in fiscal 1997.
o CorVel continued to add branch offices and to expand the number of
state-licensed "Managed Care Organizations" during the year.
o CorVel has begun marketing licenses of its Client/Server version of
MedCheck(R) Medical bill review software.
Your vote is important. Whether or not you plan to attend the Annual
Meeting, please complete and mail the enclosed proxy card to ensure that
your shares will be represented. A postage pre-paid envelope has been
provided for your convenience.
We look forward to seeing you at our meeting.
Sincerely,
V. Gordon Clemons,
Chairman of the Board, Chief Executive
Officer and President
<PAGE> 2
CorVel Corporation
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 6, 1998
----------------------------------------
To the Stockholders of CorVel Corporation:
Notice is hereby given that the 1998 Annual Meeting of Stockholders of CorVel
Corporation, will be held at the Company's offices, at 2010 Main Street, Suite
1020, Irvine, California, on Thursday, August 6, 1998, at 9:00 a.m. Pacific Time
for the following purposes:
1. To elect five (5) directors to serve until the 1999 Annual Meeting;
2. To approve the appointment of Ernst & Young LLP as independent auditors
of the Company for fiscal 1999; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on June 15, 1998 has been fixed as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof. Only stockholders of record at such time
will be so entitled to vote.
You are cordially invited to attend the Annual Meeting in person. Even if you
plan to attend the Annual Meeting, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD in the enclosed, self-addressed, postage pre-paid
envelope. It will assist us in keeping down the expenses of the Annual Meeting
if all stockholders return their signed proxies promptly, whether they own a few
shares or many shares.
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK MUST BE REPRESENTED AT THE
ANNUAL MEETING IN ORDER TO CONSTITUTE A QUORUM. PLEASE RETURN YOUR PROXY CARD IN
ORDER TO ENSURE THAT A QUORUM IS OBTAINED AND TO AVOID THE ADDITIONAL COST TO
THE COMPANY OF ADJOURNING THE ANNUAL MEETING AND RESOLICITING PROXIES.
YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors,
RICHARD J. SCHWEPPE
Secretary
Irvine, California
July 1, 1998
<PAGE> 3
CORVEL CORPORATION
---------------
PROXY STATEMENT
---------------
This Proxy Statement and the enclosed proxy card are furnished in connection
with the 1998 Annual Meeting of Stockholders (the "Annual Meeting") of CorVel
Corporation (the "Company") which will be held at the Company's offices located
at 2010 Main Street, Suite 1020, Irvine, California, on Thursday, August 6,
1998, at 9:00 a.m. Pacific Time. Stockholders of record at the close of business
on June 16, 1998, are entitled to notice of and to vote at the Annual Meeting
and any adjournment thereof.
On June 15, 1998, there were 4,101,443 shares of Common Stock, $.0001 par value
per share (the "Common Stock") outstanding. Each share of Common Stock is
entitled to one vote on all matters brought before the Annual Meeting.
A majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting will constitute a quorum. The Company's inspector of elections
for the Annual Meeting will count as present abstentions and so-called "broker
non-votes" (i.e., shares held by a broker or other nominee having discretionary
power to vote on some matters but not others) for purposes of determining
whether a quorum exists for the transaction of business at the Annual Meeting.
Abstentions are also counted in tabulating the total number of votes cast on
matters voted on by the stockholders at the Annual Meeting. Broker non-votes are
not counted for purposes of determining either the number of votes cast on any
matter voted on by the stockholders or whether such matter has been approved.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the directors proposed by the Board unless the authority to vote for the
election of such directors is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of the selection of Ernst &
Young LLP as independent auditors of the Company for the fiscal year ending
March 31, 1999.
The enclosed proxy is being solicited by the Company's Board (the "Board") and
is revocable at any time prior to its exercise. A proxy may be revoked by
delivery of a written revocation to the Secretary of the Company, by
presentation of a subsequent proxy, properly signed, or by attendance at the
Annual Meeting and voting in person.
This Proxy Statement, the enclosed proxy card and the Company's Annual Report
for the fiscal year ended March 31, 1998, are scheduled to be mailed commencing
on or about July 1, 1998 to stockholders of record on June 15, 1998.
The principal executive offices of the Company are located at 2010 Main Street,
Suite 1020, Irvine, California 92614. The Company's telephone number is (949)
851-1473.
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<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
A board of five directors is to be elected at the Annual Meeting. The Company's
Certificate of Incorporation provides that each director will serve for a term
ending on the date of the Company's next annual meeting. The foregoing
notwithstanding, directors will serve until their successors have been duly
elected and qualified or until they resign, become disqualified or disabled, or
are otherwise removed.
The enclosed proxy will be voted, unless authority is withheld or the proxy is
revoked, only for the election of each of the nominees for election named below
to hold office until the date of the Company's 1999 Annual Meeting of
Stockholders or until his successor has been duly elected and qualified or until
he resigns, becomes disqualified or disabled, or is otherwise removed. Each such
nominee is currently serving as a director and has indicated his willingness to
continue to serve as a director if elected. In the unanticipated event that any
such nominee becomes unable or declines to serve at the time of the Annual
Meeting, the proxies will be voted for a substitute person nominated by the
Board.
DIRECTORS AND NOMINEES
The names and certain information about the nominees for director are
set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
V. Gordon Clemons 54 Chairman of the Board,
Chief Executive Officer
and President
Peter E. Flynn(1) 38 Director
Steven J. Hamerslag(1)(2) 42 Director
R. Judd Jessup(1)(2) 50 Director
Jeffrey J. Michael(2) 41 Director
</TABLE>
- ----------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Clemons joined the Company as President and Chief Executive Officer in
January 1988 and became Chairman of the Board in April 1991. Mr. Clemons was
President of Caremark, Inc., the then largest home intravenous therapy company
in the United States, from May 1985 to September 1987, at which time the company
was purchased by Baxter International, Inc. From 1981 to 1985, Mr. Clemons was
President of INTRACORP, a subsidiary of CIGNA Corporation. Mr. Clemons has 22
years of experience in the health care and insurance industries. Mr. Clemons has
served on the board of Omnicell Technologies, Inc., a provider of hospital
supply and pharmaceutical systems, since December 1995.
Mr. Flynn has served as a director of the Company since May 1991. Mr. Flynn has
been the Executive Vice President of ENStar, Inc., ("ENStar"), formerly a
wholly-owned subsidiary of North Star Universal, Inc. ("North Star") since
February 1997. In connection with certain transactions (collectively the
"Reorganization") consummated pursuant to a reorganization agreement, North Star
transferred to ENStar certain of its assets including its shares of the Company.
Pursuant to the Reorganization, ENStar ceased to be a subsidiary of North Star
and became a publicly traded company. From December 1990 to February 1997 Mr.
Flynn was Executive Vice President, Chief Financial Officer and Secretary of
North Star. In December 1992, Mr. Flynn also became the President and Chief
Operating Officer of Transition Engineering, Inc. an indirect, wholly-owned
subsidiary of North Star. From April 1989 to December 1990 Mr. Flynn was the
Treasurer of North Star.
Mr. Hamerslag has served as a director of the Company since May 1991. Mr.
Hamerslag has been the Vice-Chairman of MTI Technology Corporation, a
manufacturer of computer peripherals and network management
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<PAGE> 5
software, since April 1996. From 1987 to April 1996 Mr. Hamerslag was the
President and Chief Executive Officer of MTI.
Mr. Jessup has served as a director of the Company since August 1997. Mr. Jessup
was President of the HMO Division of FHP International Corporation ("FHP") a
diversified health care services company, from 1994 to 1996. From 1987 to 1994,
Mr. Jessup was President of TakeCare, Inc., a publicly traded HMO operating in
California, Colorado, Illinois and Ohio, until it was acquired by FHP. Mr.
Jessup has 26 years of experience in the health care and managed care
industries. Mr. Jessup served as President of the California Association of
HMO's for two years and as a director for four years. Mr. Jessup has been a
director of ADESSO Specialty Services, Inc., a specialist network management
company, and Mellenium Health, Inc., a disease management company since May
1998. Mr. Jessup has also been a director of Pacific Dental Benefits, a dental
HMO, since August 1997, and a director of US Laboratories, a pathology delivery
company since June 1998.
Mr. Michael has served as a director of the Company since September 1990. Mr.
Michael has been the President, Chief Executive Officer and a director of ENStar
since March 1996. Mr. Michael was an initial director and officer (serving as
President and Secretary) of ENStar at the time it was organized by North Star in
December 1995. Prior to the Reorganization, Mr. Michael served as President and
Chief Executive Officer of North Star from December 1990 until February 1997 and
a director of North Star since May 1987. From April 1989 to December 1990 Mr.
Michael was the Vice President-Finance of North Star. Mr. Michael has been a
director of Michael Foods, Inc., a food processing and distribution company
formerly affiliated with North Star, since April 1990, and a director of
Michael-Curry Companies, Inc. since 1993. Mr. Michael has also been a director
of Centuple Communications, Inc., a communications company, since August 1997.
BOARD MEETINGS AND COMMITTEES
During fiscal 1998, the Board held four meetings and took three actions by
unanimous written consent in lieu of meetings. Each of the present directors
standing for re-election at the Annual Meeting attended at least 75% of the
meeting s of the Board and the committees of the Board of which they are members
and participated in at least 75% of the actions by written consent of the Board.
The Committees of the Board include the Audit Committee and the Compensation
Committee. The Board does not have a nominating committee.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent accountants and reviewing the Company's
accounting practices and system of internal accounting controls. The Audit
Committee currently consists of Messrs. Flynn, Hamerslag, and Jessup. The Audit
Committee met once during fiscal 1998.
The Compensation Committee is responsible for recommending and reviewing the
compensation, including perquisites, of the Company's employees and for
administering the Company's employee stock option and stock purchase plans. The
Compensation Committee consists of Messrs. Hamerslag, Jessup, and Michael. The
Compensation Committee met four times and took eight actions by unanimous
written consent in lieu of meetings during fiscal 1998.
COMPENSATION OF DIRECTORS
The Company pays each non-employee director an amount equal to $1,250 plus
travel expenses for each Board meeting attended. The directors do not receive
fees for telephonic meetings.
Each individual who first becomes a non-employee member of the Board at any time
on or after August 5, 1993 and who has not previously been in the employ of the
Company, will receive an automatic option grant for 5,000 shares of Common Stock
under the Company's Restated 1988 Executive Stock Option Plan, as amended (the
3
<PAGE> 6
"Option Plan"). In addition, each non-employee director who continues to serve
as a non-employee Board member after one or more annual stockholder meetings
commencing with the 1993 Annual Meeting, will be granted at that meeting,
whether or not such individual has been in the prior employ of the Company, an
option to purchase 1,500 shares of Common Stock, provided such individual has
been a non-employee member of the Board for at least six months. Accordingly, as
a non-employee director who was re-elected at the 1997 Annual Meeting each of
Messrs. Flynn, Hamerslag, and Michael received an option to purchase 1,500
shares of Common Stock on August 7, 1997, (the date of the 1997 Annual Meeting),
with an exercise price of $30.625. In addition, each of Messrs. Flynn,
Hamerslag, Jessup, and Michael, will be granted an automatic option to purchase
an additional 1,500 shares of Common Stock on the date of the 1998 Annual
Meeting at an exercise price equal to the fair market value of the stock on such
date, provided such individual is re-elected as a director at the time of the
Annual Meeting.
STOCKHOLDER APPROVAL
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present or represented at the Annual Meeting is required for
approval of the election of each of the nominees as a director of the Company.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED ABOVE OR HIS
SUBSTITUTE AS DESCRIBED ABOVE.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The accounting firm of Ernst & Young LLP served as the independent auditors for
the Company for the fiscal year ended March 31, 1998. The Board has selected
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending March 31, 1999 and has further directed that the selection of the
auditors be submitted for ratification by the stockholders at the Annual
Meeting. Neither Ernst & Young LLP nor any of its members has any relationship
with the Company or any of its affiliates except in the firm's capacity as the
Company's auditors. The affirmative vote of a majority of the shares of the
Company's voting stock represented and voted at the Annual Meeting is required
for approval of the appointment of Ernst & Young LLP as the Company's
independent auditors.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting. They will have an opportunity to make statements and will be available
to respond to appropriate questions from stockholders.
Stockholder ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the appointment of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the appointment by an affirmative vote of the
holders of a majority of the Common Stock present or represented at the meeting
and entitled to vote thereat, the Audit Committee and the Board will reconsider
whether to retain that firm as the Company's independent auditors. Even if the
appointment is ratified, the Audit Committee and the Board in their discretion
may direct the appointment of a different independent accounting firm at any
time during the year if they determine that such a change would be in the best
interest of the Company and its stockholders.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
4
<PAGE> 7
OTHER MATTERS
Management does not know of any other matters to be brought before the Annual
Meeting. If any other matter is properly presented for consideration at the
Annual Meeting, it is intended that the proxies will be voted by the persons
named therein in accordance with their judgment on such matters.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company as of
May 31, 1998 with respect to beneficial ownership of the Company's Common Stock
by (i) each person (or group of affiliated persons) who is known by the Company
to own beneficially more than 5% of the Company's outstanding Common Stock, (ii)
each director and/or nominee for director, (iii) the Chief Executive Officer and
each other Named Executive Officer of CorVel (as such term is defined below
under the caption "Summary of Cash and Certain Other Compensation"), and (iv)
all current directors and executive officers as a group, together with the
approximate percentages of outstanding Common Stock owned by each of them. The
following table is based upon information supplied by directors, executive
officers and principal stockholders, and Schedule 13Gs filed with the Securities
and Exchange Commission. Except as otherwise noted, the persons named in the
following table have sole voting and investment power with respect to all shares
shown as beneficially owned by them, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF COMMON PERCENTAGE OF COMMON
BENEFICIAL OWNER STOCK BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED (1)
---------------- ------------------------ ----------------------------
<S> <C> <C>
ENSTAR, INC. 1,039,296 (2) 25.34%
Jeffrey J. Michael
6479 City West Parkway
Eden Prairie, MN 55344
V. GORDON CLEMONS 394,742 (3) 9.64%
2010 Main Street, Suite 1020
Irvine, CA 92614
WELLINGTON MANAGEMENT COMPANY, LLP 385,100 (4) 9.40%
75 State Street
Boston, MA 02109
OPPENHEIMER CAPITAL 304,600 (5) 7.43%
Oppenheimer Tower
World Financial Center
New York, NY 10281
WASATCH ADVISORS, INC. 261,425 (6) 6.38%
68 South Main Street, Suite 400
Salt Lake City, UT 84101
GEOCAPITAL CORPORATION 240,500 (7) 5.9%
767 Fifth Avenue
New York, NY 10053-4590
DANIEL H. DAVIS 89,032 (8) 2.16
1210 Northbrook Drive, Suite 410
Trevose, PA 19053
LOUIS E. SILVERMAN 24,896 (9) *
2010 Main Street, Suite 1020
Irvine, CA 92614
R. JUDD JESSUP 19,000 (10) *
30962 Via Serenidad
Cotode Caza, CA 92679
STEVEN J. HAMERSLAG 11,250 (11) *
4905 East LaPalma Avenue
Anaheim, CA 92807
PETER E. FLYNN 10,050 (12) *
6479 City West Parkway
Eden Prairie, MN 55344
All executive officers and directors 1,601,461 (13) 38.47%
as a group (8 individuals)
</TABLE>
- ----------
*Less than 1%
5
<PAGE> 8
(1) Applicable percentage ownership is based on 4,096,946 shares of
Common Stock outstanding as of May 31, 1998, which excludes a total of 770,600
shares repurchased by the Company in accordance with the Stock Repurchase
Program described below under the caption, "Certain Transactions" and held by
the Company in the treasury. Any securities not outstanding but which are
subject to options exercisable within 60 days of May 31, 1998, are deemed
outstanding for the purpose of computing the percentage of outstanding Common
Stock beneficially owned by any person holding such options but are not deemed
outstanding for the purpose of computing the percentage of Common Stock
beneficially owned by any other person.
(2) Includes 1,025,000 shares owned by ENStar, Inc. ("ENStar"), 10,546
shares owned directly by Mr. Michael, a director of ENStar and the Company and
3,750 shares subject to options held by Mr. Michael that are exercisable within
60 days of May 31, 1998. Excludes 1,750 shares subject to options held by Mr.
Michael that are exercisable after July 31, 1998. Also excludes (i) 300 shares
owned indirectly by Mr. Flynn, a director of ENStar and the Company, as
custodian for his children, (ii) 3,750 shares subject to options held by Mr.
Flynn that are exercisable within 60 days of May 31, 1998, and (iii) 1,750
options held by Mr. Flynn that are exercisable after July 31, 1998. Mr. Michael
is the President and Chief Executive Officer and a stockholder of ENStar. In
addition, Mr. Michael is the managing general partner of the 3J2R Limited
Partnership and both a general and limited partner of the 4J2R1C Limited
Partnership, both of which are a stockholder of ENStar. Based on the foregoing,
Mr. Michael may be deemed to share beneficial ownership of the shares of the
Company's Common Stock held by ENStar. Mr. Michael disclaims such beneficial
ownership except to the extent of any indirect pecuniary interest therein.
ENStar's common and voting preferred stock are traded on the over-the-counter
market under the symbol ENSR. ENStar files periodic reports, proxy statements
and other information with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, relating to its business, financial
condition and other matters. Also excludes 3,000 shares issuable upon the
exercise of options to be granted to Messrs. Michael and Flynn at the Annual
Meeting (provided they are re-elected) as non-employee directors of the Company
under the Automatic Option Grant Program.
(3) Includes 393,717 shares owned by Mr. Clemons directly and 1,025
shares owned indirectly by Mr. Clemons as custodian for his child who shares the
same primary residence.
(4) According to the Schedule 13G of Wellington Management Company, LLP
("WMC") dated January 13, 1998, WMC is an Investment Advisor registered under
Section 203 of the Investment Advisors Act of 1940, and shares investment power,
along with its clients, with respect to the shares.
(5) According to the Schedule 13G of Oppenheimer Capital ("Oppenheimer")
dated February 28, 1998, Oppenheimer is an Investment Advisor registered under
Section 203 of the Investment Advisors Act of 1940, and shares investment power,
along with its clients, with respect to the shares.
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<PAGE> 9
(6) According to the Schedule 13G of Wasatch Advisors, Inc. ("Wasatch")
dated February 11, 1998, Wasatch is an Investment Advisor registered under
Section 203 of the Investment Advisors Act of 1940 with sole investment power
with respect to the shares.
(7) According to the Schedule 13G of GeoCapital Corporation
("GeoCapital") dated February 13, 1998, GeoCapital is an Investment Advisor
registered under Section 203 of the Investment Advisors Act of 1940 with sole
investment power with respect to the shares.
(8) Includes 66,000 shares owned directly by Mr. Davis and 23,032 shares
subject to options that are exercisable within 60 days of May 31, 1998. Excludes
26,968 shares issuable upon exercise of options exercisable after July 31, 1998.
(9) Consists of 24,896 shares subject to options held by Mr. Silverman
that are exercisable within 60 days of May 31, 1998. Excludes 27,104 shares
issuable upon exercise of options exercisable after July 31, 1998.
(10) Includes 19,000 shares owned directly by Mr. Jessup. Excludes 5,000
shares issuable upon exercise of options exercisable after July 31, 1998. Also
excludes 1,500 shares issuable upon the exercise of options to be granted to Mr.
Jessup at the Annual Meeting (provided he is re-elected) as a non-employee
director of the Company under the Automatic Option Grant Program.
(11) Includes 7,500 shares owned directly by Mr. Hamerslag and 3,750
shares subject to options that are exercisable within 60 days of May 31, 1998.
Excludes 3,750 shares issuable upon exercise of options exercisable after July
31, 1998. Also excludes 1,500 shares issuable upon the exercise of options to be
granted to Mr. Hamerslag at the Annual Meeting (provided he is re-elected) as a
non-employee director of the Company under the Automatic Option Grant Program.
(12) Includes 6,000 shares owned directly by Mr. Flynn, 300 shares owned
indirectly by Mr. Flynn as custodian for his children, and 3,750 shares subject
to options that are exercisable within 60 days of May 31, 1998. Excludes 1,750
shares issuable upon exercise of options exercisable after July 31, 1998. Also
excludes 1,500 shares issuable upon the exercise of options to be granted to Mr.
Flynn at the Annual Meeting (provided he is re-elected) as a non-employee
director of the Company under the Automatic Option Grant Program.
(13) Includes 1,535,363 shares owned directly or indirectly and 66,098
shares subject to options exercisable within 60 days of May 31, 1998 held by
those officers and directors referenced above in footnotes 3, 8, 9, 10, 11 and
12 and one additional officer not referenced above who is an executive officer
but not a Named Executive Officer. Excludes 74,101 shares issuable upon exercise
of options exercisable after July 31, 1998 held by all executive officers and
directors as a group.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
V. Gordon Clemons 54 Chairman of the Board, Chief Executive Officer and President
Daniel H. Davis 49 Vice President, Marketing & Business Development
Richard J. Schweppe 43 Chief Financial Officer and Secretary
Louis E. Silverman 39 Vice President, Operations
</TABLE>
- ---------
Information regarding Mr. Clemons is included under the heading "Directors and
Nominees."
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<PAGE> 10
Mr. Davis has been the Vice President, Marketing and Business Development since
January 1997. From April 1988 to January 1997 Mr. Davis was the Vice President,
Marketing and New Business Development for the Company. From October 1987 to
April 1988, Mr. Davis was the Senior Vice President, Sales and Employee Benefits
Group for INTRACORP. From May 1983 to October 1987, he was the Senior Vice
President, Marketing, for INTRACORP. Mr. Davis has 27 years of experience in the
health care and insurance industries.
Mr. Schweppe has been the Chief Financial Officer since April 1991 and Secretary
since June 1995. From March 1988 to April 1991, Mr. Schweppe was the Director of
Finance for the Company. From May 1983 to February 1988 Mr. Schweppe was the
Manager, Technical Accounting for Caremark, Inc.
Mr. Silverman became Vice President, Operations in June 1995. Mr. Silverman was
Vice President, Eastern and California Operations from April 1994 to May 1995.
Mr. Silverman joined the Company in March 1993 as Vice President, Eastern
Operations. Prior to joining the Company, Mr. Silverman served as Vice President
of Corporate Development from 1986 to 1990 and Vice President of California
Operations from 1990 to 1993 of Office Specialists, a national temporary
employment company. Mr. Silverman has 14 years of experience in service sector
general management, including direct operating, acquisitions, and strategic
planning responsibilities.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the National Association of Securities Dealers. Officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1998,
all filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION*
The Compensation Committee administers the Company's executive compensation
programs. After consideration of the Compensation Committee's recommendations,
the full Board reviews and approves the salaries of all elected officers,
including those of the executive officers named in the Summary Compensation
Table which follows this report. The Compensation Committee is responsible for
administering all other elements of executive compensation, including annual
incentive awards and stock option grants under the Company's Option Plan for
executive officers and other key employees.
GENERAL COMPENSATION GOALS
The design and implementation of all executive compensation arrangements are
based on certain goals derived from Company values, business strategy and
management requirements. These goals may be summarized as follows:
o Pay competitive salaries to attract, retain and motivate a highly
competent executive team essential to the long-term success of the
Company;
- -----------------------------
*The material in this report is not "soliciting material," is not deemed filed
with the SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1993 Act, as amended ("1993 Act"), or the
1934 Act.
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<PAGE> 11
o Tie an individual's total compensation to individual and profit
center performance and the financial success of the Company;
o Reward executives for long-term corporate success by facilitating
their ability to acquire an ownership interest in the Company; and
o Align executives' financial interests with stockholder value.
FACTORS
Several of the more important factors which were considered in establishing the
components of each executive officer's compensation package for the 1998 fiscal
year are summarized below. Additional factors were also taken into account, and
the Compensation Committee may in its discretion apply entirely different
factors, particularly different measures of financial performance, in setting
executive compensation for future fiscal years. All compensation decisions will
be designed to further the general compensation goals indicated above.
BASE SALARIES. Base salaries are targeted to be moderate yet competitive in
relation to salaries commanded by those in similar positions with other
companies in the same industry. The base salary for each executive officer is
reviewed annually and is set on the basis of personal performance, the relative
importance of the functions the officer performs, the scope of the officer's
ongoing responsibilities, the salary levels in effect for comparable positions
with the Company's principal competitors, and internal equity considerations.
The weight given to each of these factors varies from individual to individual.
ANNUAL INCENTIVE AWARDS. Although the Company has a March 31 fiscal year end, it
has calendar year budgets and annual incentive plans which are based on the
calendar year. Annual bonuses are designed to reward personal contributions to
the success of the Company and are earned under a structured formula that
considers the following factors:
Company Profit Center Financial Performance
Each profit center of the Company submits a proposed annual operating
budget including annual profit goals for review of and approval by the
Chief Executive Officer of the Company in conjunction with ratification
by the Committee. At the end of the calendar year, the Compensation
Committee evaluates actual financial performance against these targets.
The resulting performance evaluation dictates whether an increase or
decrease in an executive's "normal" incentive compensation award is
granted. For executive officers with operations responsibilities, the
annual incentive award can range from zero to 30% of base salary
depending upon performance as compared to budget. For executive officers
with corporate staff responsibilities, such awards are based upon
departmental objectives.
Individual Performance
Each executive's personal performance is measured against individual
goals ("MBO's") established for that person on an annual basis.
Leadership, planning, management and innovation are considered in
addition to goal achievement and the weight assigned to each of these
factors will vary from individual to individual. The maximum amount that
any executive may earn based on the MBO element is 5% of base salary,
with full achievement of MBO's resulting in a 75% payout and increasing
up to 100% payout for achievement exceeding established MBO's. For
executive officers with operations responsibilities, this element
comprises a lesser percentage of the annual incentive award for the
individual and for executive officers with corporate staff
responsibilities, it comprises a greater percentage of the annual
incentive award.
9
<PAGE> 12
Discretionary Awards
The Compensation Committee also has the discretion under extraordinary
circumstances to award bonuses based on a percentage of base salary.
Incentive awards to the Chief Executive Officer and the other Named
Executive Officers are shown in the "Bonus" column of the Summary
Compensation Table, which follows this report.
STOCK OPTIONS. Stock option grants accomplish the third and fourth compensation
objectives: to motivate executive officers to manage the business, to improve
long-term Company performance and to align the interests of executive officers
with stockholder value. Customarily, option grants are made with exercise prices
equal to the fair market value of the shares on the grant date and will be of no
value unless the market price of the Company's outstanding shares appreciates,
thereby aligning a substantial part of the executive officer's compensation
package with the return realized by the stockholders. The option generally vests
over a period of four years, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return to
the executive officer only if the officer remains employed by the Company and
the market price of the underlying shares appreciates over the option term. The
size of the option grant is designed to create a meaningful opportunity for
stock ownership and is based upon the individual's current position with the
Company, internal comparability with option grants made to other Company
executives and the individual's potential for future responsibility and
promotion over the option term. The Committee has established certain general
guidelines in making option grants to the executive officers in an attempt to
target a fixed number of unvested option shares based upon the individual's
position with the Company and the officer's existing holdings of unvested
options. However, the Committee does not adhere strictly to these guidelines and
will occasionally vary the size of the option grant made to each executive
officer as circumstances warrant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The annual base salary for the Company's Chief Executive Officer, Mr. Clemons,
was established on January 26, 1988, when the Company and North Star entered
into an employment agreement with Mr. Clemons. The agreement became effective on
February 15, 1988 and has an indefinite term. The agreement provides Mr. Clemons
with an annual salary of $250,000, payable in semi-monthly installments. Mr.
Clemons may terminate the agreement at any time on four months notice and the
Company may terminate the agreement with or without cause. If Mr. Clemons is
terminated without cause, the Company is required to pay Mr. Clemons his
then-current salary for one year after such termination, less any other
employment compensation received by Mr. Clemons during such one year period.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Code generally disallows a tax deduction to publicly-held
corporations for compensation exceeding $1.0 million paid to certain of the
corporation's executive officers. The limitation applies only to compensation
which is not considered to be performance-based. The non-performance based
compensation to be paid to the Company's executive officers for fiscal 1998 did
not exceed the $1.0 million limit per officer, nor is it expected that the
non-performance based compensation to be paid to the Company's executive
officers for fiscal 1998 will exceed that limit. The Company's Option Plan is
structured so that any compensation deemed paid to an executive officer in
connection with the exercise of option grants made under the Option Plan will
qualify as performance-based compensation which will not be subject to the $1.0
million limitation. Because it is very unlikely that the cash compensation
payable to any of the Company's executive officers in the foreseeable future
will approach the $1 million limit, the Committee has decided at this time not
to take any other action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Committee will
reconsider this decision should the individual compensation of any executive
officer ever approach the $1 million level.
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Michael is a member of the Compensation Committee, is the President and
Chief Executive Officer of ENStar, a beneficial owner of more than 10% of the
Company's outstanding Common Stock. No member of the Compensation Committee is a
former or current officer of the Company.
COMPENSATION COMMITTEE
Steven J. Hamerslag
R. Judd Jessup
Jeffrey J. Michael
STOCK PERFORMANCE GRAPH*
The graph depicted below shows the Company's stock price at March 31,
1993 assuming an initial investment of $100 and at March 31, 1994, 1995, 1996,
1997, and 1998, the Standard and Poor's 500 index ("S&P 500") and the Nasdaq
Health Services Index over the same period. The data depicted on the graph are
as set forth in the chart below the graph. An initial investment of $100 in the
peer group on March 31, 1993 would be $294.44 as of March 31, 1998.
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, March 31, March 31,
--------- --------- --------- --------- --------- ---------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CorVel
Corporation 100.00 170.37 209.26 259.26 185.19 294.44
S & P 500 100.00 98.69 110.86 142.92 167.63 243.95
Nasdaq 100.00 131.26 151.40 182.99 164.44 197.78
Health
Services Index
</TABLE>
- -------------
*The material in this report is not "soliciting material," is not deemed filed
with the SEC and is not to be incorporated by reference in any filing of the
Company under the 1993 Act or the 1934 Act.
11
<PAGE> 14
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's Chief
Executive Officer and each of the other executive officers whose total cash
salary and bonus for fiscal 1998 exceeded $100,000 (the "Named Executive
Officers") for the three fiscal years ended March 31, 1996, 1997 and 1998. No
other executive officer who would otherwise have been included in such table on
the basis of salary and bonus earned for the 1998 fiscal year resigned or
terminated employment during fiscal year 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME OF INDIVIDUAL FISCAL ------------------------ UNDERLYING COMPENSATION(2)
AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
V. GORDON CLEMONS 1998 $250,000 $ - -
Chief Executive 1997 $250,000 $ - - $563
Officer 1996 $239,583 $ - - $466
DANIEL H. DAVIS 1998 $167,666 $33,175
Vice President, New 1997 $163,020 $27,500 33,500 $445
Business Development 1996 $160,000 $30,000 4,000 $442
LOUIS E. SILVERMAN 1998 $176,666 $39,281 9,500
Vice President 1997 $165,833 $15,000 19,500 $590
1996 $156,875 $50,000 3,000 $366
</TABLE>
- ----------
(1) Includes employee contributions to the Company's 401(k) Plan.
(2) "All Other Compensation" represents amounts contributed by the Company to
the Company's 401(k) Plan which match the Named Executive Officer's deferred
contribution to such Plan and annual premiums paid by the Company on behalf
of each Named Executive Officer for the purchase of group term life
insurance in an amount equal to such executive officer's annual salary as
follows:
<TABLE>
<CAPTION>
Fiscal Year 401(k) Company Company-paid
Contributions Life Insurance
Premiums
--------------- --------------------- -------------------
<S> <C> <C> <C>
V. Gordon Clemons 1998 $682.64 $32.50
1997 $530 $33
1996 $74 $392
Daniel H. Davis 1998 $1,297.03 $25.22
1997 $424 $21
1996 $192 $250
Louis E. Silverman 1998 $533.32 $23.40
1997 $579 $11
1996 $115 $251
</TABLE>
12
<PAGE> 15
STOCK OPTIONS
The following table provides information with respect to stock option
grants made during fiscal 1998 to the Named Executive Officers. No options were
granted during such fiscal year to the Chief Executive Officer or V.P. New
Business Development. Except for the limited stock appreciation rights described
in footnote 1 below the table, no stock appreciation rights were granted during
such fiscal year to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL AVERAGE VALUE AT ASSUMED
UNDERLYING OPTIONS EXERCISE OR ANNUAL RATE OF
OPTIONS GRANT GRANTED TO BASE PRICE EXPIRATION STOCK PRICE
NAME GRANTED (1) DATE EMPLOYEES IN ($/SHARE)(3) DATE APPRECIATION FOR OPTION TERM
- ---- ----------- ---- FISCAL ------------ ----- ----------------------------
YEAR(2) 5% (4) 10% (4)
------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Louis E. Silverman 5,000 04/30/97 5.40% $24.875 04/30/02 $34,362.52 $75,932.18
2,000 12/03/97 2.70% $37.750 12/03/02 $26,074.07 $57,616.88
2,500 02/17/98 8.00% $34.875 02/17/03 $72,264.90 $159,686.52
</TABLE>
(1) Each Option will become exercisable for 25% of the option shares one year
from the grant date and thereafter the remaining shares become exercisable
in 36 equal monthly installments. To the extent not already exercisable, the
options generally become exercisable upon a sale of assets, a merger or
consolidation pursuant to which either (i) the Company does not survive or
(ii) ownership of more than 50% of the voting power of the Company's stock
is transferred, unless the option is assumed or replaced with a comparable
option by the successor corporation. The options are also subject to
"limited stock appreciation rights" pursuant to which the options, to the
extent exercisable and outstanding for at least six months at the time of
certain hostile tender offers in which more than 50% of the shares acquired
are acquired from parties other than directors and executive officers of the
Company, will automatically be canceled in return for a cash payment to the
optionee based upon the tender-offer price of the Common Stock subject to
that option. Each option has a maximum term of five years subject to earlier
termination in the event of the optionee's cessation of employment with the
Company.
(2) The Company granted options to purchase a total of 93,250 shares of Common
Stock during fiscal 1998.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and the
Federal and state income tax liability incurred by the optionee in
connection with such exercise. The Plan Administrator has the discretionary
authority to reprice outstanding options under the Option Plan through the
cancellation of those options and the grants of replacement options with an
exercise price equal to the lower fair market value of the option shares on
the regrant date.
(4) These gains are based on annual compounded rates of growth of stock price
mandated by the SEC of 5% and 10% per year from the date the option was
granted over the full option term. These rates do not represent the
Company's estimate or projection of future Common Stock prices. There is no
assurance that the values that may be realized by a Named Executive Officer
on exercise of his options or any other holder of the Company's Common Stock
will be at or near the value estimated in the foregoing table.
13
<PAGE> 16
STOCK OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options during the 1998 fiscal
year and unexercised options held as of the end of such fiscal year. No stock
appreciation rights were exercised during the 1998 fiscal year and except for
the limited stock appreciation rights described in footnote 1 to the table
above, no stock appreciation rights were outstanding at the end of such fiscal
year. Mr. Davis did not exercise any options during the 1998 fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NET VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT
UNDERLYING UNEXERCISED FISCAL YEAR-END (MARKET
SHARES VALUE OPTIONS AT FISCAL YEAR-END PRICE OF SHARES AT FISCAL
NAME ACQUIRED REALIZED 1998 YEAR-END ($39.75) LESS
ON (MARKET PRICE EXERCISE PRICE)
EXERCISE AT EXERCISE ----------------------------------------------------------
(#) LESS EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABE
EXERCISE
PRICE)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
V. GORDON CLEMONS 60,000 $2,264,994 0 0 0 0
DANIEL H. DAVIS - - 23,729 28,771 $439,034 $366,903
LOUIS E. SILVERMAN 18,000 $375,500 21,562 27,938 $332,353 $269,959
</TABLE>
EMPLOYMENT AGREEMENTS
On January 26, 1988, the Company and North Star entered into an employment
agreement with Mr. Clemons. The agreement became effective on February 15, 1988
and has an indefinite term. The agreement provides Mr. Clemons with an annual
salary of $250,000, payable in semi-monthly installments. Mr. Clemons may
terminate the agreement at any time on four months notice and the Company may
terminate the agreement with or without cause. If Mr. Clemons is terminated
without cause, the Company is required to pay Mr. Clemons his then current
salary for one year after such termination, less any other employment
compensation received by Mr. Clemons during such one year period.
NONQUALIFIED STOCK OPTION AGREEMENT
Mr. Clemons, the Company and North Star entered into a Nonqualified Stock Option
Agreement on January 26, 1988 which was amended on August 31, 1988, July 1,
1989, May 14, 1991 and May 16, 1991 (as amended, the "Option Agreement"). The
Option Agreement provided Mr. Clemons with the right to acquire 750,000 shares
of the Company's Common Stock at $.0001 per share. Mr. Clemons exercised this
option pursuant to the Option Agreement for 150,000 shares immediately following
the completion of the Company's initial public offering in July 1991, 25,000
shares in January 1992, 10,000 shares in May 1992, 100,000 shares in December
1992, 5,100
14
<PAGE> 17
shares in December 1993, 10,000 shares in May 1994, 5,000 shares in November
1994, 12,000 shares in December 1994, 10,000 shares in March 1995, 200,000
shares in May 1995, 39,900 shares in November 1995, 123,000 shares in January
1996, and 60,000 shares in January 1998. As of March 31, 1998, no further shares
are covered by the Option Agreement.
CERTAIN TRANSACTIONS
INDEMNIFICATION AGREEMENT
In connection with the Company's initial public offering of its Common Stock,
the Company agreed to indemnify North Star against certain liabilities in
connection with the offering, including liabilities under the 1933 Act.
SHAREHOLDER RIGHTS AGREEMENT
In February 1997, the Company's Board adopted a Shareholder Rights Plan
similar to that adopted by numerous other public companies. Among other things,
the Plan provides for a divided distribution to the Company stockholders of one
preferred stock purchase "Right" for each outstanding share of Company common
stock. The Rights are designed to assure that all stockholders receive fair and
equal treatment in the event of a proposed takeover of the Company and to
encourage a potential acquirer to negotiate with the Board prior to attempting a
takeover. Each Right has an exercise price of $125.00 per Right, subject to
subsequent adjustment. The Rights were distributed to holders of the Company's
common stock of record as of February 28, 1997, as a dividend and will expire
unless earlier redeemed, February 10, 2007.
STOCK REPURCHASE PROGRAM
In August 1996, the Company's Board authorized the Company to begin a
repurchase program to acquire up to 100,000 shares annually of its Common Stock,
which represented approximately 2% of its outstanding shares. The shares are
purchased from time to time at prevailing market prices through open market or
unsolicited negotiated transactions, depending upon market conditions.
In January 1997, the Company repurchased 200,000 shares of its Common
Stock from ENStar subject to a registration statement filed with the Securities
and Exchange Commission by North Star. In March 1997, August 1997 and May 1998,
the Company's Board approved expansions of 200,000 shares, 300,000 shares and
250,000 shares, respectively, increasing the total number of shares approved for
repurchase under the stock repurchase plan to 1,100,000 shares. Of that total,
329,400 shares remain as approved for repurchase. Since the beginning of this
plan, CorVel has repurchased approximately 770,600 Common Shares, equal to 16%
of its outstanding stock.
ANNUAL REPORT AND STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
A copy of the Annual Report of the Company for the fiscal year ended March 31,
1998 has been mailed concurrently with this Proxy Statement. The Annual Report
is not incorporated into this Proxy Statement, is not considered "soliciting
material", is not deemed filed with the SEC and is not incorporated by reference
in any filing of the Company under the 1933 Act or the 1934 Act.
A stockholder who intends to present a proposal at the Company's 1999 Annual
Meeting of Stockholders must submit such proposal to the Company for inclusion
in the Company's 1999 Proxy Statement and proxy card relating to such meeting
not later than March 9, 1999. Stockholder proposals must be mailed to the
Company's principal office at 2010 Main Street, Suite 1020, Irvine, California
92614, Attention: Secretary.
15
<PAGE> 18
COSTS OF SOLICITATION
Proxies will be solicited by mail and by telephone by regular employees of the
Company without additional remuneration. The Company will request banks,
brokerage houses and other institutions to forward the soliciting material to
persons for whom they hold shares and to obtain authorization for the execution
of proxies. The Company will reimburse banks, brokerage houses and other
institutions for their reasonable expenses in forwarding the Company's proxy
materials to beneficial owners of the Common Stock. All costs associated with
the solicitation of proxies will be borne by the Company. Proxies in the
accompanying form which are properly executed, duly returned to the Company's
management and not subsequently revoked will be voted as specified thereon.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY FILES AN ANNUAL REPORT ON FORM 10K WITH THE SECURITIES AND EXCHANGE
COMMISSION. STOCKHOLDERS MAY OBTAIN A COPY OF THIS REPORT, WITHOUT CHARGE, BY
WRITING TO THE COMPANY'S SECRETARY.
By Order of the Board of Directors
Richard J. Schweppe
Secretary
July 1, 1998
Irvine, California
16
<PAGE> 19
FORM OF PROXY
CORVEL CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 6, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of Annual Meeting of Stockholders to be held on August 6, 1998 and the
accompanying Proxy Statement, and appoints V. Gordon Clemons and Jeffrey J.
Michael, or either of them, the proxy of the undersigned, with full power of
substitution, to vote all shares of the Common Stock of CorVel Corporation which
the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the Annual Meeting of Stockholders of CorVel
Corporation to be held at 2010 Main Street, Suite 1020, California, on Thursday,
August 6, 1998 at 9:00 a.m. Pacific Daylight Time, and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this proxy
shall be voted in the following manner:
1. To elect the following directors to serve for a term of one year.
<TABLE>
<S> <C> <C>
V. Gordon Clemons FOR [ WITHHOLDING AUTHORITY [ ]
]
Peter E. Flynn FOR [ WITHHOLDING AUTHORITY [ ]
]
Steven J. Hamerslag FOR [ WITHHOLDING AUTHORITY [ ]
]
R. Judd Jessup FOR [ WITHHOLDING AUTHORITY [ ]
]
Jeffrey J. Michael FOR [ WITHHOLDING AUTHORITY [ ]
]
</TABLE>
2. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for fiscal 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS SET FORTH
ABOVE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ABOVE.
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR PROPOSAL 2 IF NO
SPECIFICATION IS MADE.
<PAGE> 20
(Continued from reverse side)
Dated:
-------------------------
-------------------------
(Print name(s) as it
(they) appear(s)
on certificate)
-------------------------
(Authorized Signature(s))
Please print the name(s)
appearing on each share
certificate(s) over which
you have voting
authority.
PLEASE RETURN YOUR EXECUTED PROXY TO U.S. STOCK TRANSFER CORPORATION IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PRE-PAID ENVELOPE.
