Document:

exv10w3

 

EXHIBIT 10.3

Performance 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
and in accordance with the conditions as specified on Schedule A attached hereto. 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

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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.

               (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.

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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. Misconduct shall mean any of the following:

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     (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).

     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 1988 Executive Stock Option Plan.

     W. 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.

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     X. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.

     Y. 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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Schedule A

Performance Option

Grant: 50,000 shares

Definitions:

"EPS” shall mean fully diluted net income per share (as reported in the Company’s financial
statements filed with the Securities and Exchange Commission).

"Calendar 2008 Achieve Target” shall mean the Company achieves EPS of at least $*.** per share
during calendar year 2008.

"Calendar 2008 Achieve Alternate Target” shall mean the Company achieves EPS of at least $*.** per
share during calendar year 2008.

"Calendar 2009 Achieve Target” shall mean the Company achieves EPS of at least $*.** per share
during calendar year 2009.

"Calendar 2009 Achieve Alternate Target” shall mean the Company achieves EPS of at least $*.** per
share during calendar year 2009.

"Calendar 2010 Achieve Target” shall mean the Company achieves EPS of at least $*.** per share
during calendar year 2010.

"Calendar 2010 Achieve Alternate Target” shall mean the Company achieves EPS of at least $*.** per
share during calendar year 2010.

Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to
them in the Stock Option Agreement.

 

			
	*	 	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.

 

 

Vesting Schedule:

Upon the Company achieving the specified targets set forth in the table below, the Option shall
become exercisable during each stated calendar year for the number of Option Shares set forth
opposite such targets described in the table below.

Performance Vesting

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Number of Option Shares That Will Vest	 
	Calendar 2008	 	Calendar 2009	 	Calendar 2010	 	Calendar 2008	 	 	Calendar 2009	 	 	Calendar 2010	 	 	Total	 
	Achieve Target
	 	Fail to Achieve Any Target	 	Fail to Achieve Any Target	 	 	15,000	 	 	 	0	 	 	 	0	 	 	 	15,000	 
	Achieve Target
	 	Fail to Achieve Any Target	 	Achieve Alternate Target	 	 	15,000	 	 	 	0	 	 	 	12,500	 	 	 	27,500	 
	Achieve Target
	 	Fail to Achieve Any Target	 	Achieve Target	 	 	15,000	 	 	 	0	 	 	 	25,000	 	 	 	40,000	 
	Achieve Target
	 	Achieve Alternate Target	 	Fail to Achieve Any Target	 	 	15,000	 	 	 	7,500	 	 	 	0	 	 	 	22,500	 
	Achieve Target
	 	Achieve Alternate Target	 	Achieve Alternate Target	 	 	15,000	 	 	 	7,500	 	 	 	10,000	 	 	 	32,500	 
	Achieve Target
	 	Achieve Alternate Target	 	Achieve Target	 	 	15,000	 	 	 	7,500	 	 	 	20,000	 	 	 	42,500	 
	Achieve Target
	 	Achieve Target	 	Fail to Achieve Any Target	 	 	15,000	 	 	 	15,000	 	 	 	0	 	 	 	30,000	 
	Achieve Target
	 	Achieve Target	 	Achieve Alternate Target	 	 	15,000	 	 	 	15,000	 	 	 	10,000	 	 	 	40,000	 
	Achieve Target
	 	Achieve Target	 	Achieve Target	 	 	15,000	 	 	 	15,000	 	 	 	20,000	 	 	 	50,000	 
	Achieve Alternate Target
	 	Fail to Achieve Any Target	 	Fail to Achieve Any Target	 	 	7,500	 	 	 	0	 	 	 	0	 	 	 	7,500	 
	Achieve Alternate Target
	 	Fail to Achieve Any Target	 	Achieve Alternate Target	 	 	7,500	 	 	 	0	 	 	 	12,500	 	 	 	20,000	 
	Achieve Alternate Target
	 	Fail to Achieve Any Target	 	Achieve Target	 	 	7,500	 	 	 	0	 	 	 	25,000	 	 	 	32,500	 
	Achieve Alternate Target
	 	Achieve Alternate Target	 	Fail to Achieve Any Target	 	 	7,500	 	 	 	7,500	 	 	 	0	 	 	 	15,000	 
	Achieve Alternate Target
	 	Achieve Alternate Target	 	Achieve Alternate Target	 	 	7,500	 	 	 	7,500	 	 	 	10,000	 	 	 	25,000	 
	Achieve Alternate Target
	 	Achieve Alternate Target	 	Achieve Target	 	 	7,500	 	 	 	7,500	 	 	 	20,000	 	 	 	35,000	 
	Achieve Alternate Target
	 	Achieve Target	 	Fail to Achieve Any Target	 	 	7,500	 	 	 	15,000	 	 	 	0	 	 	 	22,500	 
	Achieve Alternate Target
	 	Achieve Target	 	Achieve Alternate Target	 	 	7,500	 	 	 	15,000	 	 	 	10,000	 	 	 	32,500	 
	Achieve Alternate Target
	 	Achieve Target	 	Achieve Target	 	 	7,500	 	 	 	15,000	 	 	 	20,000	 	 	 	42,500	 
	Fail to Achieve Any Target
	 	Fail to Achieve Any Target	 	Fail to Achieve Any Target	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 
	Fail to Achieve Any Target
	 	Fail to Achieve Any Target	 	Achieve Alternate Target	 	 	0	 	 	 	0	 	 	 	12,500	 	 	 	12,500	 
	Fail to Achieve Any Target
	 	Fail to Achieve Any Target	 	Achieve Target	 	 	0	 	 	 	0	 	 	 	25,000	 	 	 	25,000	 
	Fail to Achieve Any Target
	 	Achieve Alternate Target	 	Fail to Achieve Any Target	 	 	0	 	 	 	10,000	 	 	 	0	 	 	 	10,000	 
	Fail to Achieve Any Target
	 	Achieve Alternate Target	 	Achieve Alternate Target	 	 	0	 	 	 	10,000	 	 	 	10,000	 	 	 	20,000	 
	Fail to Achieve Any Target
	 	Achieve Alternate Target	 	Achieve Target	 	 	0	 	 	 	10,000	 	 	 	20,000	 	 	 	30,000	 
	Fail to Achieve Any Target
	 	Achieve Target	 	Fail to Achieve Any Target	 	 	0	 	 	 	20,000	 	 	 	0	 	 	 	20,000	 
	Fail to Achieve Any Target
	 	Achieve Target	 	Achieve Alternate Target	 	 	0	 	 	 	20,000	 	 	 	10,000	 	 	 	30,000	 
	Fail to Achieve Any Target
	 	Achieve Target	 	Achieve Target	 	 	0	 	 	 	20,000	 	 	 	20,000	 	 	 	40,000	 

Notwithstanding anything to the contrary in this Schedule A or the Stock Option
Agreement to which this Schedule A is attached, the Company shall have the right, in its
sole discretion, with or without the consent of the Optionee, to amend this Schedule A to
adjust any or all of the targets, dates and/or target EPS amounts as it deems equitable to
recognize unusual or non-recurring events, including, but not limited to the Company’s acquisition
of another business entity or assets, a corporate merger or other consolidation, or the sale or
discontinuation of significant business operations or business units of the Company; changes in tax
laws or accounting procedures; and any other extraordinary circumstances.

 

 

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

2<PAGE>
                                                                     EXHIBIT 4.4

                          DELPHI FINANCIAL GROUP, INC.
                          EMPLOYEE STOCK PURCHASE PLAN
                          ----------------------------

     1. PURPOSE. The purpose of the Delphi Financial Group, Inc. Employee Stock
Purchase Plan is to provide employees of the Company and its Subsidiaries with
an opportunity to purchase Common Stock of the Company through accumulated
payroll deductions. It is the intention of the Company that the Plan qualify as
an "Employee Stock Purchase Plan" within the meaning of Section 423 of the Code
and the provisions of the Plan shall be construed in a manner consistent with
the requirements of such Section of the Code.

     2. DEFINITIONS.

        (a) "Board" shall mean the Board of Directors of the Company.

        (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

        (c) "Committee" shall mean the committee established by the Board to
administer the Plan.

        (d) "Common Stock" shall mean the Class A Common Stock, $.01 par value,
of the Company.

        (e)  "Company" shall mean Delphi Financial Group, Inc., a Delaware
corporation.

        (f)  "Compensation" shall mean an Employee's taxable income payable to
an Employee from and after the date the Employee becomes eligible to participate
in the Plan, which would be reported on the Employee's Form W-2, but excluding
any severance pay, tuition, automobile expense or moving expense reimbursements
or allowances and any imputed taxable income resulting from any group life
insurance coverage provided by the Company or a Subsidiary which is included as
taxable income on Form W-2, but including amounts deferred under a salary
reduction agreement pursuant to Section 401(k) or Section 125 of the Code.

        (g) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company (including, but not limited to, a military
or sick

                                      -1-
<PAGE>
leave); provided that such leave is for a period of not more than ninety days or
if reemployment upon the expiration of such leave is guaranteed by contract or
statute.

        (h) "Employee" shall mean any person, including an officer, who is
regularly employed by the Company or a Subsidiary.

        (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

        (j) "Exercise Date" shall mean the last business day of each Offering
Period under the Plan.

        (k) "Fair Market Value" of the Common Stock for any day shall mean the
last reported sales price, regular way, or in the event that no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in either case as reported on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or, if the Common Stock is not quoted on
such National Market System, the average of the closing bid and asked prices on
each such day in the over-the-counter market as reported by NASDAQ or, if bid
and asked prices for Common Stock on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in Common Stock selected for such purpose by the Board or a committee thereof,
or, if the Common Stock is not publicly traded, the fair market value of the
Common Stock as determined in good faith by the Board or by a committee thereof.
If any day as of which Fair Market Value is to be determined is not a business
day, the price or quote from the last business day preceding such date shall be
used.

        (l) "Offering Date" shall mean January 1 and July 1 of each Plan Year.
The first Offering Date shall be January 1, 1994.

        (m) "Offering Period" shall mean each twenty-six week period during the
effectiveness of the Plan, commencing on each Offering Date; provided that,
subject to Section 16 hereof, the Committee shall have the power to change the
duration of Offering Periods.

        (n) "Plan" shall mean this Delphi Financial Group, Inc. Employee Stock
Purchase Plan, as the same may be amended from time to time.

                                      -2-
<PAGE>
        (o) "Plan Year" shall mean a calendar year.

        (p) "Reserve" shall have the meaning set forth in Section 15 hereof.

        (q) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than fifty percent of the voting shares are held, directly or
indirectly, by the Company or a Subsidiary, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or a Subsidiary.

     3. ELIGIBILITY.

        (a) Subject to the requirements of Section 4(b) hereof, any person who
has been an Employee for a period of twelve months or more as of an Offering
Date, but excluding Employees whose customary employment is not for more than
five months in any calendar year or twenty (20) or more hours per week, shall be
eligible to participate in the Plan for the Offering Period commencing on such
Offering Date; provided that he or she continues to be so employed on the last
payroll deduction date in such Offering Period.

        (b) Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary, or (ii) which permits his or her right to purchase stock
under all employee stock purchase plans (as described in Section 423 of the
Code) of the Company and its Subsidiaries to accrue at a rate which exceeds
$25,000 of Fair Market Value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.

     4. GRANT OF OPTION; PARTICIPATION.

        (a) On each Offering Date the Company shall commence an offer by
granting each eligible Employee an option to purchase shares of Common Stock,
subject to the limitations set forth in Sections 3(b) and 10 hereof.

                                      -3-
<PAGE>
        (b) Each eligible Employee may elect to participate in the Plan with
respect to an offer only by filing a subscription agreement with the Company as
set forth in Section 5 hereof.

        (c) The option price per share of the Common Stock subject to an
offering shall be the lesser of (i) eighty-five percent of the Fair Market Value
of a share of Common Stock on the Offering Date, or (ii) eighty-five percent of
the Fair Market Value of a share of Common Stock on the Exercise Date.

        (d) The maximum number of shares that may purchased by a participant
during any Offering Period is 1,000.

     5. PAYROLL DEDUCTIONS.

        (a) During an Offering Period, the Company shall withhold from each
paycheck of each Employee participating in the offer, the whole percentage
amount of Compensation elected by the Employee. The percentage amount of
Compensation which may be elected by an Employee shall be not less than one
percent (1%) nor more than ten percent (10%) of such Employee's Compensation,
provided, however, that in no event may an Employee authorize payroll deductions
of more than $21,250 for any Plan Year. The percentage amount of Compensation
elected by an employee shall be calculated before withholding or other
deductions.

        (b) Upon an Employee's written request to the Company, the percentage
amount of Compensation elected by an Employee to be withheld from each paycheck
may be increased or decreased, subject to the terms of Section 5(a) hereof,
provided, however, that an Employee may only change the amount of his or her
percentage election for an Offering Period prior to the commencement of such
Offering Period.

        (c) All payroll deductions made by a participant shall be credited to
his or her account under the Plan. A participant may not make any additional
payments into such account.

        (d) Upon written request to the Company, a participant may instruct the
Company to cease making further payroll deductions. Such request shall become
effective no earlier than the payroll period immediately following the payroll
period in which the Company receives the written request. An Employee may not
participate in or authorize payroll deductions under the Plan until the first
Offering Date which occurs after twelve months following the payroll period in
which the Company ceased to make payroll deductions pursuant to the Employee's
request.

                                      -4-
<PAGE>
     6. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 8 hereof, a participant's election to purchase shares will
be exercised automatically on the Exercise Date, and the Company will purchase
for such participant, at the applicable option price, the maximum number of
shares which can be purchased with the accumulated payroll deductions in the
participant's account. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the participant on the Exercise Date.
During a participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by such participant.

     7. DELIVERY. After the Exercise Date of each Offering Period the Company
shall arrange the delivery to each participant a certificate representing the
shares purchased upon exercise of his or her option; provided, however, that the
Committee may direct that certificates not be delivered to participants until
two years after the Exercise Date on which the shares represented by such
certificates are purchased. Pending such delivery, certificates may be deposited
with a member firm of the National Association of Securities Dealers, Inc. Any
cash remaining to the credit of a participant's account under the Plan after the
purchase of the shares covered by such participant's option or which is
insufficient to purchase a full share of Common Stock of the Company will be
retained in such participant's account and applied toward the purchase of shares
of Common Stock in a subsequent Offering Period. No shares shall be delivered
until full payment therefore has been made.

     8. WITHDRAWAL; TERMINATION OF EMPLOYMENT.

        (a) A participant may not withdraw the payroll deductions credited to
his or her account under the Plan, except as provided in paragraphs (b), (c) and
(d) below.

        (b) During any Offering Period, a participant may withdraw from the Plan
at any time prior to the Exercise Date for such Offering Period; and the
participant shall be deemed for the purpose of Section 5(d) hereof to have
requested the Company to cease making payroll deductions. Withdrawal of a
participant shall be effected by a written notification ("Notice of Withdrawal")
on a form that shall be provided for this purpose. In the event the participant
shall withdraw from the Plan, any amounts then credited to his account shall be
returned to him as soon as reasonably practicable after his Notice of Withdrawal
has been received.

        (c) If, for any reason during any Offering Period, an Employee does not,
for seven consecutive payroll periods have,

                                      -5-
<PAGE>
after other authorized and required payroll deductions, sufficient Compensation
to permit payroll deductions authorized under the Plan to be made in full, such
Employee will be considered to have suspended his or her election to purchase
Common Stock with respect to such offering. The suspension will last until the
participant again has sufficient compensation to permit such payroll deductions
to be made in full; but if such suspension shall not have been removed by the
Exercise Date, the participant shall be deemed to have withdrawn from the Plan
pursuant to Section 8(b) hereof.

        (d) Upon termination of a participant's Continuous Status as an Employee
prior to the Exercise Date of an Offering Period for any reason, including
voluntary termination, retirement or death, the payroll deductions credited to
such Employee's account will be returned to the Employee or, in the case of such
Employee's death, to the person or persons entitled thereto under Section 12
hereof, and the Employee's option will be automatically terminated.

     9. INTEREST. The Company shall have no obligation to pay interest with
respect to the payroll deductions of a participant in the Plan. Notwithstanding
the foregoing, if the Company elects to invest such payroll deductions such
funds shall be invested in short-term money market obligations (which shall
include money market mutual funds of entities registered under the Investment
Company Act of 1940, as amended), bank certificates of deposit, interest bearing
demand deposits or other similar investments. Any interest payable with respect
to payroll deductions earned on behalf of a Plan participant shall be used to
purchase additional shares of Common Stock under the Plan.

                                      -6-
<PAGE>
     10. STOCK.

        (a) The maximum number of shares of Common Stock which shall be reserved
for sale under the Plan shall be 997,500, subject to adjustment upon changes in
capitalization of the Company as provided in Section 15 hereof. Such shares may,
in whole or in part, be authorized but unissued shares or shares that shall have
been or that may be reacquired by the Company in open market transactions or
otherwise. If the total number of shares which would otherwise be subject to
options granted pursuant to Section 4(a) hereof on an Offering Date exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Committee
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable. In such event, the Committee shall give written notice to each
Employee of such reduction of the number of option shares affected thereby and
shall similarly reduce the rate of payroll deductions, if necessary.

        (b) A participant will not have rights as a shareholder with respect to
shares covered by such participant's option until such have been transferred to
such participant in accordance with the provisions of the Plan.

        (c) Shares of Common Stock purchased by a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse, at the election of the participant.

     11. ADMINISTRATION. The Plan shall be administered by the Committee, the
composition of which shall at all times satisfy the provisions of Rule 16b-3
under the Exchange Act or any successor thereof.

     The Committee shall have full power and authority, subject to the
provisions of the Plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the Plan, to interpret the provisions
and supervise the administration of the Plan, and to take all action in
connection therewith or in relation to the Plan as it deems necessary or
advisable. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.

                                      -7-
<PAGE>
     All decisions of the Committee shall be made by a majority of its members
and shall be final. Any decision reduced to writing and signed by all of the
members of the Committee shall be fully effective as if it had been made at a
meeting duly held. The Company will pay all its expenses incurred in the
administration of the Plan.

     12. DESIGNATION OF BENEFICIARY.

        (a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash remaining in such participant's account under the
Plan in the event of the participant's death. Such designation of beneficiary
may be changed by the participant at any time by written notice to the Company.

        (b) In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

     13. TRANSFERABILITY. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 12 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect.

     14. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees
periodically, but no less frequently than as soon as practicable following each
Exercise Date. The statements will set forth the amounts of payroll deductions,
the per share purchase price, the number of shares purchased and the remaining
cash balance, if any.

     15. EFFECT OF CERTAIN CHANGES. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under the Plan

                                      -8-
<PAGE>
(the "Reserve"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any change in or increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock or similar capital
adjustment or any other increase or decrease in the number of shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an option.

     In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation
unless the Committee determines in the exercise of its sole discretion and in
lieu of such assumption or substitution, that the participant shall have the
right to exercise the option as to all of the optioned shares, including shares
as to which the option would not otherwise be exercisable. If the Committee
makes an option fully exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Committee shall notify the participant
that the option shall be fully exercisable for a period of thirty days from the
date of such notice, and the option will terminate upon the expiration of such
period.

     The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves as well as the price
per share of Common stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other changes in the shares of its outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.

                                      -9-
<PAGE>
     16. AMENDMENT OR TERMINATION. The Board may terminate or amend the Plan at
any time, and from time to time; provided that, except as provided in Section 15
hereof, no such termination can affect options previously granted without the
participant's consent, and no such amendment may (i) make any changes in any
option theretofore granted which adversely affects the rights of any participant
without the participant's consent, (ii) be made without prior approval of the
shareholders of the Company (obtained in the manner described in Section 18
hereof) unless such approval is required in order to comply with Rule 16b-3
under the Exchange Act or to comply with any other law, rule or regulation or
(iii) cause an Offering Period to exceed twenty-seven months or such other
period as may cause the Plan to fail to qualify as an "Employee Stock Purchase
Plan" within the meaning of the Code.

     17. NOTICE. All notices, requests and other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at: Delphi
Financial Group, Inc., c/o Reliance Standard Life Insurance Company, 2001 Market
Street, Suite 1500, Philadelphia, Pennsylvania 19103, Attn: Assistant
Vice-President of Human Resources.

     18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve months before or after the date the
Plan is adopted by the Board. If such shareholder approval is obtained at a duly
held shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company.

     19. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, the requirements of any stock exchange (including the
NASDAQ National Market System) upon which the shares may then be listed or
designated for trading and the securities laws of any state. As a condition to
the exercise of an option, the Company may require the person exercising such
option to represent and warrant at the time of any such exercise that the shares
are being purchased only for investment and without any present intention to
sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned applicable
provisions of law.

                                      -10-
<PAGE>
     20. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly, create
any right for the benefit of any Employee or class of Employees to purchase any
shares under the Plan, or create in any Employee or class of Employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an Employee's employment at any time.

     21. EFFECTIVE DATE. The Plan shall be effective as of January 1, 1994,
subject to the approval of the Plan by the shareholders of the Company as set
forth in Section 18 hereof.

                                      -11-

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