Exhibit 10.46

 

   CorVel Corporation

Notice of Grant of Stock Options

and Option Agreement

   ID: 33-0282651    2010 Main Street Suite 600    Irvine, California 92614

Diane J. Blaha

You have been granted an option to acquire CorVel Corporation (the
“Corporation”) common stock (the “Common Stock”) as follows:

 

Non-Qualified Stock Option Grant No.

     004510   

Date of Grant

     11/3/2011   

Stock Option Plan

     1988   

Option Price Per Share

   $ 52.76   

Total Number of Shares Granted

     4,000.00   

Total Price of Shares Granted

   $ 211,040.00   

Expiration Date

     11/3/2016   

Provided you continue to be a Service Provider (as defined in the Stock Option
Agreement attached hereto as Exhibit A) throughout the specified period, the
Option will become exercisable in accordance with Schedule A.

Optionee (and Optionee’s spouse) hereby agree(s) that the option is granted
pursuant to and in accordance with the express terms and conditions of the Stock
Option Agreement and the Corporation’s Restated Omnibus Incentive Plan.

 

/s/ Daniel J. Starck     November 7, 2011 CorVel Corporation     Date /s/ Diane
Blaha     November 7, 2011 Diane J. Blaha     Date           Spouse     Date

--------------------------------------------------------------------------------

Schedule A: Performance Option

CORVEL CORPORATION

Percentage of shares earned by tranche

CY 2012, 2013, 2014

 

     CY 2012     CY 2013     CY 2014  

EPS Target for each calendar year

   $ 2.97      $ *. **    $ *. ** 

Percentage of option grant for tranche (totals 100%)

     30 %      30 %      40 % 

To earn 100% of tranche (105% of EPS target)

   $ 3.12      $ *. **    $ *. ** 

To earn 80% of tranche (100% of EPS target)

   $ 2.97      $ *. **    $ *. ** 

To earn 30% of tranche (95% of EPS target)

   $ 2.82      $ *. **    $ *. ** 

EPS at Zero (90% of EPS target)

   $ 2.67      $ *. **    $ *. ** 

 

* Confidential treatment requested pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. In accordance with rule 24b-2, these confidential portions
have been omitted from this exhibit and filed separately with the Securities and
Exchange Commission.

--------------------------------------------------------------------------------

CORVEL CORPORATION

Percentage of shares earned by traunche (Showing percentage of EPS target)

CY 2012, 2013, 2014

 

Option grant:    4000 Shares option grant CY 2012 Tranche    1200 30% of total
grant CY 2013 Tranche    1200 30% of total grant CY 2014 Tranche    1600 40% of
total grant

 

       CY 2012                 CY 2013                 CY 2014         
Percentage     Shares                 Percentage     Shares                
Percentage     Shares   $ 2.60         0.0 %      0          $ *. **      0.0 % 
    0          $ *. **      0.0 %      0    $ 2.61         0.0 %      0         
$ *. **      0.0 %      0          $ *. **      0.0 %      0    $ 2.62        
0.0 %      0          $ *. **      0.0 %      0          $ *. **      0.0 %     
0    $ 2.63         0.0 %      0          $ *. **      0.0 %      0          $
*. **      0.0 %      0    $ 2.64         0.0 %      0          $ *. **      0.0
%      0          $ *. **      1.7 %      27    $ 2.65         0.0 %      0   
      $ *. **      1.9 %      23          $ *. **      3.3 %      53    $ 2.66
        0.0 %      0          $ *. **      3.8 %      45          $ *. **     
5.0 %      80    $ 2.67         0.0 %      0          $ *. **      5.6 %      68
         $ *. **      6.7 %      107    $ 2.68         2.0 %      24          $
*. **      7.5 %      90          $ *. **      8.3 %      133    $ 2.69        
4.0 %      48          $ *. **      9.4 %      113          $ *. **      10.0 % 
    160    $ 2.70         6.0 %      72          $ *. **      11.3 %      135   
      $ *. **      11.7 %      187    $ 2.71         8.0 %      96          $ *.
**      13.1 %      158          $ *. **      13.3 %      213    $ 2.72        
10.0 %      120          $ *. **      15.0 %      180          $ *. **      15.0
%      240    $ 2.73         12.0 %      144          $ *. **      16.9 %     
203          $ *. **      16.7 %      267    $ 2.74         14.0 %      168   
      $ *. **      18.8 %      225          $ *. **      18.3 %      293    $
2.75         16.0 %      192          $ *. **      20.6 %      248          $ *.
**      20.0 %      320    $ 2.76         18.0 %      216          $ *. **     
22.5 %      270          $ *. **      21.7 %      347    $ 2.77         20.0 % 
    240          $ *. **      24.4 %      293          $ *. **      23.3 %     
373    $ 2.78         22.0 %      264          $ *. **      26.3 %      315   
      $ *. **      25.0 %      400    $ 2.79         24.0 %      288          $
*. **      28.1 %      338          $ *. **      26.7 %      427    $ 2.80      
  26.0 %      312          $ *. **      30.0 %      360          $ *. **     
28.3 %      453    $ 2.81         28.0 %      336          $ *. **      32.9 % 
    395          $ *. **      30.0 %      480    $ 2.82         30.0 %      360
         $ *. **      35.9 %      431          $ *. **      32.8 %      524    $
2.83         33.3 %      400          $ *. **      38.8 %      466          $ *.
**      35.6 %      569    $ 2.84         36.7 %      440          $ *. **     
41.8 %      501          $ *. **      38.3 %      613    $ 2.85         40.0 % 
    480          $ *. **      44.7 %      536          $ *. **      41.1 %     
658    $ 2.86         43.3 %      520          $ *. **      47.6 %      572   
      $ *. **      43.9 %      702    $ 2.87         46.7 %      560          $
*. **      50.6 %      607          $ *. **      46.7 %      747    $ 2.88      
  50.0 %      600          $ *. **      53.5 %      642          $ *. **     
49.4 %      791    $ 2.89         53.3 %      640          $ *. **      56.5 % 
    678          $ *. **      52.2 %      836    $ 2.90         56.7 %      680
         $ *. **      59.4 %      713          $ *. **      55.0 %      880    $
2.91         60.0 %      720          $ *. **      62.4 %      748          $ *.
**      57.8 %      924    $ 2.92         63.3 %      760          $ *. **     
65.3 %      784          $ *. **      60.6 %      969    $ 2.93         66.7 % 
    800          $ *. **      68.2 %      819          $ *. **      63.3 %     
1,013    $ 2.94         70.0 %      840          $ *. **      71.2 %      854   
      $ *. **      66.1 %      1,058    $ 2.95         73.3 %      880         
$ *. **      74.1 %      889          $ *. **      68.9 %      1,102    $ 2.96
        76.7 %      920          $ *. **      77.1 %      925          $ *. ** 
    71.7 %      1,147    $ 2.97         80.0 %      960          $ *. **     
80.0 %      960          $ *. **      74.4 %      1,191    $ 2.98         81.3
%      976          $ *. **      81.3 %      975          $ *. **      77.2 %   
  1,236    $ 2.99         82.7 %      992          $ *. **      82.5 %      990
         $ *. **      80.0 %      1,280    $ 3.00         84.0 %      1,008   
      $ *. **      83.8 %      1,005          $ *. **      81.1 %      1,298   
$ 3.01         85.3 %      1,024          $ *. **      85.0 %      1,020      
   $ *. **      82.2 %      1,316    $ 3.02         86.7 %      1,040          $
*. **      86.3 %      1,035          $ *. **      83.3 %      1,333    $ 3.03
        88.0 %      1,056          $ *. **      87.5 %      1,050          $ *.
**      84.4 %      1,351    $ 3.04         89.3 %      1,072          $ *. ** 
    88.8 %      1,065          $ *. **      85.6 %      1,369    $ 3.05        
90.7 %      1,088          $ *. **      90.0 %      1,080          $ *. **     
86.7 %      1,387    $ 3.06         92.0 %      1,104          $ *. **      91.3
%      1,095          $ *. **      87.8 %      1,404    $ 3.07         93.3 %   
  1,120          $ *. **      92.5 %      1,110          $ *. **      88.9 %   
  1,422    $ 3.08         94.7 %      1,136          $ *. **      93.8 %     
1,125          $ *. **      90.0 %      1,440    $ 3.09         96.0 %     
1,152          $ *. **      95.0 %      1,140          $ *. **      91.1 %     
1,458    $ 3.10         97.3 %      1,168          $ *. **      96.2 %     
1,155          $ *. **      92.2 %      1,476    $ 3.11         98.7 %     
1,184          $ *. **      97.5 %      1,170          $ *. **      93.3 %     
1,493    $ 3.12         100.0 %      1,200          $ *. **      98.7 %     
1,185          $ *. **      94.4 %      1,511    $ 3.13         100.0 %     
1,200          $ *. **      100.0 %      1,200          $ *. **      95.6 %     
1,529    $ 3.14         100.0 %      1,200          $ *. **      100.0 %     
1,200          $ *. **      96.7 %      1,547    $ 3.15         100.0 %     
1,200          $ *. **      100.0 %      1,200          $ *. **      97.8 %     
1,564    $ 3.16         100.0 %      1,200          $ *. **      100.0 %     
1,200          $ *. **      98.9 %      1,582    $ 3.17         100.0 %     
1,200          $ *. **      100.0 %      1,200          $ *. **      100.0 %   
  1,600    $ 3.18         100.0 %      1,200          $ *. **      100.0 %     
1,200          $ *. **      100.0 %      1,600    $ 3.19         100.0 %     
1,200          $ *. **      100.0 %      1,200          $ *. **      100.0 %   
  1,600    $ 3.20         100.0 %      1,200          $ *. **      100.0 %     
1,200          $ *. **      100.0 %      1,600   

 

* Confidential treatment requested pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934. In accordance with Rule 24b-2, these confidential portions
have been omitted from this exhibit and filed separately with the Securities and
Exchange Commission.

--------------------------------------------------------------------------------

Section 16 Insiders Discretionary Option Grant Program

CorVel Corporation

Stock Option Agreement

A. The Board has adopted the Plan for the purpose of retaining the services of
selected Employees, non-employee members of the Board (or the board of directors
of any Parent or Subsidiary) and consultants and advisors who provide services
to the Company (or any Parent or Subsidiary).

B. Optionee is to render valuable services to the Company (or a Parent or
Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Company’s grant of an
option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning assigned to
them in the attached Appendix.

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, Optionee is hereby granted, as of the Grant Date, an option to
purchase the Option Shares. The Option Shares shall be purchasable from time to
time during the option term at the Exercise Price.

2. Option Term. This option shall expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with this Agreement.

3. Limited Transferability.

(a) During Optionee’s lifetime, this option shall be exercisable only by
Optionee and shall not be assignable or transferable other than by will, by the
laws of descent and distribution following the Optionee’s death, or to any
“Family Member” (as such term is defined in the General Instructions to Form S-8
(or any successor to such Instructions or such Form) under the Securities Act),
provided that Optionee may not receive any consideration for such transfer, the
Family Member may not make any subsequent transfers other than by will or by the
laws of descent and distribution and the Company receives written notice of such
transfer. This 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 this option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Company may deem appropriate.

(b) Should Optionee die while holding this option, then this option shall be
transferred in accordance with Optionee’s will or the laws of inheritance.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such

--------------------------------------------------------------------------------

beneficiary or beneficiaries upon Optionee’s death while holding this option.
Such beneficiary or beneficiaries shall take the transferred option subject to
all the terms and conditions of this Agreement, including (without limitation)
the limited time period during which this option may, pursuant to Paragraph 5,
be exercised following Optionee’s death.

4. Exercisability. This option shall become exercisable in one or more
installments as specified in the Grant Notice. As the option becomes exercisable
for such 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.

5. Effect of Cessation of Service.

(a) Should Optionee cease to be a Service Provider for any reason (other than
death, Permanent Disability or Misconduct) while this option is outstanding,
then this option shall remain exercisable until the earlier of (i) the
expiration of the three month period commencing with the date of such cessation
of Service Provider status or (ii) the Expiration Date.

(b) Should Optionee cease to be a Service Provider by reason of Permanent
Disability or death while this option is outstanding, then the option shall
remain exercisable until the earlier of (i) the expiration of the twelve month
period commencing with the date of such cessation of Service Provider status or
(ii) the Expiration Date.

(c) Should Optionee cease to be a Service Provider due to termination for
Misconduct, then this option shall terminate immediately.

(d) During the limited period of post-service exercisability, this option may
not be exercised in the aggregate for more than the number of Option Shares for
which the option is exercisable at the time Optionee ceased to be a Service
Provider. This option shall, immediately when Optionee ceases to be a Service
Provider for any reason, terminate with respect to any Option Shares for which
this option is not otherwise at that time exercisable. Upon the expiration of
the limited post-service exercise period or (if earlier) upon the Expiration
Date, this option shall terminate entirely.

6. Effect of Corporate Transaction.

(a) This option, to the extent outstanding at the time of a Corporate
Transaction but not otherwise fully exercisable, shall automatically accelerate
so that this option shall, immediately prior to the effective date of such
Corporate Transaction, become exercisable for all of the Option Shares at the
time subject to this option. However, this option shall not become exercisable
on such an accelerated basis, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, 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) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing at the time of the
Corporate Transaction on any Option Shares for which this option is not
otherwise at that time exercisable (the excess of the Fair Market Value of those
Option Shares over the aggregate Exercise Price payable for such shares) and
provides for subsequent payout in accordance with the same exercise schedule for
those Option Shares set forth in the Grant Notice.

 

2

--------------------------------------------------------------------------------

(b) Upon the consummation of the Corporate Transaction, this option shall
terminate, except to the extent assumed by the successor corporation (or parent
thereof) in connection with the Corporate Transaction.

(c) If this option is assumed in connection with a Corporate Transaction, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to Optionee as a result of the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.

(d) This Agreement shall not in any 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.

7. Adjustment in Option Shares. Should any change be made to the Common Stock by
reason of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, reorganization,
merger, consolidation, split-up, spin-off, or other change affecting the
outstanding Common Stock as a class without the Company’s receipt of
consideration, appropriate adjustments shall be made to (a) the total number
and/or class of securities subject to this option and (b) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

8. Stockholder Rights. The holder of this option shall not have any stockholder
rights with respect to the Option Shares until such person shall have exercised
the option in accordance with the provisions of Paragraph 9, paid the Exercise
Price and become a holder of record of the purchased shares.

9. Manner of Exercising Option.

(a) In order to exercise this option with respect to all or any part of the
Option Shares for which this option is at the time exercisable, Optionee (or any
other person or persons exercising the option) must take the following actions:

(i) Execute and deliver to the Company (A) a Notice of Exercise, in
substantially the form attached hereto as Exhibit I, that specifies the number
of Option Shares for which the option is being exercised and (B) any additional
documents which the Committee may, in its discretion, deem advisable.

 

3

--------------------------------------------------------------------------------

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of
the following forms:

(A) cash or check payable to the Company’s order;

(B) shares of Common Stock held by Optionee for the requisite period necessary
to avoid a charge to the Company’s reported earnings and valued at Fair Market
Value on the Exercise Date; or

(C) through a special sale and remittance procedure pursuant to which Optionee
is to provide irrevocable written instructions (1) to a 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 Exercise 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 (2) to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.

(iii) Furnish to the Company appropriate documentation that the person or
persons exercising the option (if other than Optionee) have the right to
exercise this option.

(iv) Make appropriate arrangements with the Company (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, state and
local income and employment tax withholding requirements applicable to the
option exercise.

(b) If payment of the exercise price is made by means of the surrender of shares
of Common Stock which are subject to certain restrictions, the number of shares
of Common Stock issued upon the exercise of the option equal to the number of
shares of restricted stock surrendered shall be subject to the same restrictions
as the restricted stock that was surrendered.

(c) Except to the extent the sale and remittance procedure specified in
Paragraph 9(a)(ii)(C) is utilized in connection with the option exercise,
payment of the option price for the purchased shares must accompany the Notice
of Exercise.

(d) Assuming Optionee does not sell the purchased shares of Common Stock on the
Exercise Date, as soon as practical after the Exercise Date, the Company shall
either (i) issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto, or (ii) instruct the Company’s transfer
agent to make a book-entry reflecting the purchase on its stockholder ledger.

(e) In no event may this option be exercised for any fractional shares.

 

4

--------------------------------------------------------------------------------

10. Tax Withholding. 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 Rule 16b-3 or any successor
rule or regulation) provide Optionee (if Optionee is an Employee) with the
election to surrender previously acquired shares of Common Stock or have shares
withheld in satisfaction of the tax withholding obligations. To the extent
necessary to avoid adverse accounting treatment, the number of shares that may
be withheld for this purpose shall not exceed the minimum number needed to
satisfy the applicable income and employment tax withholding rules. If Common
Stock is used to satisfy the Company’s tax withholding obligations, the shares
of Common Stock shall have been held by Optionee for the requisite period
necessary to avoid a charge to the Company’s reported earnings and shall be
valued at their Fair Market Value when the tax withholding is required to be
made.

11. Compliance with Laws and Regulations.

(a) The exercise of this option and the issuance of the Option Shares upon such
exercise shall be subject to compliance by the Company and Optionee with all
applicable requirements of law relating thereto and with all applicable
regulations of any Stock Exchange (or the Nasdaq Stock Market, if applicable) on
which the Common Stock may be listed for trading at the time of such exercise
and issuance.

(b) The inability of the Company to obtain approval from any regulatory body
having authority deemed by the Company to be necessary to the lawful issuance
and sale of any Common Stock pursuant to this option shall relieve the Company
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. The Company, however, shall
use reasonable efforts to obtain all such approvals.

12. Successors and Assigns. Except to the extent otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the Company and its successors and assigns and Optionee,
Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’s
estate and any beneficiaries of this option designated by Optionee.

13. Notices. Any notice required to be given or delivered to the Company under
the terms of this Agreement shall be in writing and addressed to the Company at
its principal corporate offices. 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
effective upon personal delivery or three days after deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.

14. 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 terms of the Plan. In the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Agreement, the terms
and conditions of this Agreement shall prevail. All decisions of the Committee
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.

 

5

--------------------------------------------------------------------------------

15. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without resort
to its conflict-of-laws rules.

16. No Employment/Service Contract. Nothing in this Agreement or in the Plan
shall confer upon Optionee any right to continue to be a Service Provider of the
Company (or any Parent or Subsidiary) for any period of specific duration or
otherwise interfere with or restrict in any way the rights of the Company (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
and for any reason whatsoever, with or without cause.

 

6

--------------------------------------------------------------------------------

EXHIBIT I

NOTICE OF EXERCISE OF STOCK OPTION

I hereby notify CorVel Corporation (the “Company”) 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                     .

My option was granted as a non-qualified stock option. I will need to report
taxable income at the time I exercise this Option and pay the corresponding
withholding tax (the “Withholding Tax”) to the Corporation. The Withholding Tax
is computed on the difference between the Option Price and the Fair Market Value
of the stock on the date I exercise the Option.

Concurrently with the delivery of the Exercise Notice to the Chief Financial
Officer of the Corporation, I shall hereby pay to the Corporation the Option
Price and Withholding Tax 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’s Signature If applicable, print name in exact
manner it is to appear on the stock certificate:         Optionee’s Mailing
Address:                 Address to which certificate is to be sent, if
different from address above:                

Brokerage Account Information

(Broker Name, Contact Info., Account #)

                       

 

A-1

--------------------------------------------------------------------------------

APPENDIX

The following definitions shall be in effect under this Agreement:

A. Agreement shall mean this Stock Option Agreement.

B. Board shall mean the Board of Directors of the Company.

C. Common Stock shall mean shares of the Company’s common stock, $0.0001 par
value.

D. Code shall mean the Internal Revenue Code of 1986, as amended.

E. Committee shall mean a committee designated by the Board to administer the
Plan, which initially shall be the compensation committee of the Board. The
Committee shall be comprised of at least two directors but not less than such
number of directors as shall be required to permit awards granted under the Plan
to qualify under Rule 16b-3 under the Securities Act and Section 162(m) of the
Code, and each member of the Committee shall be a “Non-Employee Director” within
the meaning of Rule 16b-3 under the Securities Act and an “Outside Director”
within the meaning of Section 162(m) of the Code.

F. Company shall mean CorVel Corporation, a Delaware corporation, or any
corporate successor which shall assume the Plan.

G. Corporate Transaction shall mean any of the following transactions 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

(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.

H. Employee shall mean an individual for whom the Company or one or more of its
Parent or Subsidiaries reports his or her earnings on a Form W-2.

I. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9.

 

A-2

--------------------------------------------------------------------------------

J. Exercise Price shall mean the exercise price per Option Share as specified in
the Grant Notice.

K. Expiration Date shall mean the date on which the option expires as specified
in the Grant Notice.

L. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

(i) If the Common Stock is at the time listed on the Nasdaq National Market or
the Nasdaq Capital Market, 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 reported by the National Association of Securities Dealers on the Nasdaq
National Market or the Nasdaq Capital Market and published in The Wall Street
Journal.

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Committee to be
the primary market for the Common Stock, as such price is officially quoted in
the composite tape of transactions on such exchange and published in The Wall
Street Journal.

(iii) If the Common Stock is not listed on the Nasdaq National Market, Nasdaq
Capital Market or a national securities exchange, the Fair Market Value shall be
the average of the closing bid and ask prices of the Common Stock on that day as
reported by the Nasdaq bulletin board or any comparable system on that day.

(iv) If the Common Stock is not traded included in the Nasdaq bulletin board or
any comparable system, the Fair Market Value shall be the average of the closing
bid and ask prices on that day as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by the
Company for that purpose.

(v) If the date in question is not a trading day, then the Fair Market Value
shall be determined based on prices for the trading day prior to the date in
question.

M. Grant Date shall mean the date of grant of the option as specified in the
Grant Notice.

N. Grant Notice shall mean the Notice of Grant of Stock Option accompanying this
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

O. Misconduct shall mean any of the following:

(i) 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 employing Optionee;

 

A-3

--------------------------------------------------------------------------------

(ii) Optionee’s unauthorized use or disclosure of (or attempt to use or
disclose) confidential information or trade secrets of the Company or any Parent
or Subsidiary; or

(iii) 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 employing Optionee.

The reasons for termination of Optionee as a Service Provider set forth in this
subparagraph are not intended to be an exclusive list of all acts or omissions
which the Company (or any Parent or Subsidiary) may deem to constitute
misconduct or other grounds for terminating Optionee (or any other individual).

P. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

Q. Notice of Exercise shall mean the notice of exercise in the form attached
hereto as Exhibit I.

R. Option Shares shall mean the number of shares of Common Stock subject to the
option as specified in the Grant Notice.

S. Optionee shall mean the person to whom the option is granted as specified in
the Grant Notice.

T. Parent shall mean any 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.

U. Permanent Disability shall have the meaning assigned to “permanent and total
disability” as set forth in Code Section 22(e)(3).

V. Plan shall mean the CorVel Corporation Restated Omnibus Incentive Plan
(Formerly The Restated 1988 Executive Stock Option Plan).

W. Securities Act shall mean the Securities Act of 1933, as amended.

X. Service Provider shall mean an individual who renders service on a periodic
basis to the Company, its Parent and/or any of its Subsidiaries as an Employee,
a non-Employee member of the board of directors or a consultant or independent
advisor.

Y. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange, or any other national stock exchange.

 

A-4

--------------------------------------------------------------------------------

Z. Subsidiary shall mean any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company, provided 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 entity, more than
a fifty percent (50%) interest in voting power, capital or profits.

 

A-5