exv10w2



 








EXHIBIT 10.2




 





	 	 	 
	Notice of Grant of Stock Options

and Option Agreement

	 	CorVel Corporation

ID: 33-0282651

2010 Main Street Suite 600

Irvine, California 92614






 





Daniel J. Starck

19 Pegasus Drive

Coto de Caza, CA United States 92679

ID:



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.
	 	 	003149	 
	Date of Grant
	 	 	5/26/2006	 
	Stock Option Plan
	 	 	1988	 
	Option Price Per Share
	 	$	23.64	 
	Total Number of Shares Granted
	 	 	50,000.00	 
	Total Price of Shares Granted
	 	$	1,182,000.00	 






 




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 with respect to (i) 25% of the Optioned Shares
one year from the Grant Date, and (ii) the balance of the Optioned Shares in a
series of equal monthly installments for each complete month of service over
the 3 year period thereafter. 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 1988 Executive Stock Option Plan.




 





 




	 	 	 
	/s/ Gordon Clemons

	 	May 26, 2006
	 

	 	 
	CorVel Corporation

	 	Date
	 
	 	 
	 

	 	 
	 

	 	 
	Daniel J. Starck

	 	Date
	 
	 	 
	 

	 	 
	 

	 	 
	Spouse
	 	Date
	 
	 	 





Date: 5/26/2006





 










 







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 independent consultants 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) Except as set forth in Paragraph 3(b), this option shall be neither assignable nor
transferable by Optionee other than by will or the laws of inheritance following Optionee’s death
and may be exercised, during Optionee’s lifetime, only by Optionee. Notwithstanding the foregoing,
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.



               (b) If this option is designated a Non-Statutory Option in the Grant Notice, then this option
may be assigned in whole or in part during Optionee’s lifetime only to one or more members of
Optionee’s immediate family or to a trust established exclusively for one or more such family
members or to Optionee’s former spouse, to the extent such assignment is in connection with
Optionee’s estate plan or pursuant to a domestic relations order. 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.



          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



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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.



               (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 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.



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               (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
Company-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 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.



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



          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



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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.



          15. Governing Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of California 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.



          17. Additional Terms Applicable to an Incentive Option. In the event this option is
designated an Incentive Option in the Grant Notice, the following terms and conditions shall also
apply to the grant:



               (a) This option shall cease to qualify for favorable tax treatment as an Incentive Option if
(and to the extent) this option is exercised for one or more Option Shares: (i) more than three
months after the date Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (ii) more than twelve months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.



               (b) An Incentive Option held by an Optionee who ceases to be a Employee for reasons other than
death or Permanent Disability will lose its status as an Incentive Option on the ninety-first day
after the date Optionee ceases to be an Employee, and thereafter the option, if it is exercisable
at all, will be treated as a Non-Statutory Option. An Optionee who, pursuant to the Company’s
leave of absence policy, is on a leave of absence that exceeds ninety days will be deemed to have
ceased to be an Employee on the ninety-first day of the leave of absence, unless Optionee’s rights
to reemployment are guaranteed by statute or contract. If an Optionee switches from Employee to
independent contractor status, Optionee’s status as a Service Provider is not affected; however,
this change will result in an option losing its status as an Incentive Option on the ninety-first
day after the switch, and thereafter the option, if it is exercisable at all, will be treated as a
Non-Statutory Option.



               (c) No installment under this option shall qualify for favorable tax treatment as an Incentive
Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable hereunder would, when added to
the aggregate value (determined as of the respective date or dates of grant) of the Common Stock
for which this option or any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Company or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed $100,000 in the aggregate. Should such
$100,000 limitation be exceeded in any calendar year, this option shall nevertheless become
exercisable for the excess shares in such calendar year as a Non-Statutory Option.



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               (d) Should the exercisability of this option be accelerated upon a Corporate Transaction, then
this option shall qualify for favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this
option first becomes exercisable in the calendar year in which the Corporate Transaction occurs
does not, when added to the aggregate value (determined as of the respective date or dates of
grant) of the Common Stock or other securities for which this option or one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Company or any Parent or Subsidiary) first become exercisable during the same calendar
year, exceed $100,000 in the aggregate. Should the applicable $100,000 limitation be exceeded in
the calendar year of such Corporate Transaction, the option may nevertheless be exercised for the
excess shares in such calendar year as a Non-Statutory Option.



               (e) Should Optionee hold, in addition to this option, one or more other options to purchase
shares of Common Stock which become exercisable for the first time in the same calendar year as
this option, then the foregoing limitations on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are granted.



               (f) Optionee must notify the Company if Optionee disposes of shares of Common Stock acquired
upon the exercise of an Incentive Option prior to the expiration of the holding periods required to
qualify for long-term capital gains treatment on the sale proceeds.




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EXHIBIT I




Notice of Exercise




     I hereby notify CorVel Corporation (the “Company”) that I elect to purchase
___shares of the Company’s common stock (the “Purchased Shares”) at the option exercise
price of $  per share (the “Exercise Price”) pursuant to that certain option (the “Option”) granted
to me under the CorVel Corporation Restated 1988 Executive Stock Option Plan on , ___.



     Concurrently with the delivery of this Exercise Notice to the Company, I shall hereby pay to
the Company the aggregate Exercise Price for the Purchased Shares in accordance with the provisions
of my agreement with the Company (or other documents) 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 aggregate Exercise Price.



___, ___

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:
	 	 	 	 
	 	 	 







 









 








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, $.0001 par value.



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



     E. Committee shall mean a committee consisting of two or more members of the Board
appointed by the Board to administer the Plan.



     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.



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



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     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 SmallCap 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 SmallCap 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
SmallCap 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. Incentive Option shall mean an option intended to satisfy the requirements of Code
Section 422.



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     P. 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;




     (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).



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



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



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



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



     U. 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.



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



     W. Plan shall mean the CorVel Corporation Restated 1988 Executive Stock Option Plan.



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     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.



     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.




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Addendum

to

Stock Option Agreement

for

Termination of Service Provider Status Following

Corporate Transaction




     The following provisions are hereby incorporated into, and made a part of, that certain
Stock Option Agreement (the “Option Agreement”) by and between the Company and Dan Starck
(“Optionee”) evidencing the stock option (the “Option”) granted to Optionee under the terms of the
CorVel Corporation Restated 1988 Executive Stock Option Plan (the “Plan”), and such provisions are
effective immediately. All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement and the Plan.



     1. To the extent that, in connection with a Corporate Transaction, the Option is to be assumed
by the successor corporation (or parent thereof), the Option shall not, pursuant to the Option
Agreement, become exercisable on an accelerated basis upon the occurrence of that Corporate
Transaction, and the Option shall accordingly continue, over Optionee’s period of service as a
Service Provider after the Corporate Transaction, to become exercisable for the Option Shares in
one or more installments in accordance with the provisions of the Option Agreement. However,
immediately upon termination of Optionee’s status as a Service Provider following such Corporate
Transaction, the assumed Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option.



     2. To the extent that, in connection with a Corporate Transaction, the successor corporation
(or parent thereof) replaces the Option with a cash incentive program, Optionee’s right to receive
cash payments for the Option Shares will be paid out in accordance with the same exercise schedule
for those Option Shares set forth in the Grant Notice. However, if Optionee’s status as a Service
Provider is terminated following such Corporate Transaction, then Optionee’s right to receive the
cash payments shall be accelerated in full and shall no longer be subject to the exercise schedule
set forth in the Grant Notice.



     3. The Option as accelerated pursuant to this Addendum shall remain so exercisable until the
earlier of (i) the Expiration Date or (ii) the expiration of the one-year period measured from the
date of the termination of Optionee’s status as a Service Provider.



     4. The provisions of Paragraphs 1 and 2 of this Addendum shall govern the period for which the
Option is to remain exercisable following the termination of Optionee’s status as a Service
Provider following a Corporate Transaction, and shall supersede any provisions to the contrary in
the Option Agreement.



 









 





     IN WITNESS WHEREOF, CorVel Corporation has caused this Addendum to be executed by its duly
authorized officer as of the Effective Date specified below.



	 	 	 	 	 
	 	CorVel Corporation 

 	 
	 	By:  	/s/ V. Gordon Clemons
 	 
	 	 	Title:  CEO 	 
	 	 	 	 
	 



Effective Date: 05/26/2006






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