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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CORVEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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or the Form or Schedule and the date of its filing.
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[CORVEL LOGO]
July 7, 2000
Dear CorVel Stockholder:
We are pleased to invite you to our 2000 Annual Meeting which will be held at
the offices of the Company, 2010 Main Street, Suite 1020, Irvine, California, on
Thursday, August 3, 2000, at 1:00 p.m. Pacific Daylight Time. The Annual Meeting
will begin with a report on the Company's progress, followed by a discussion and
stockholder questions. Voting on election of directors and other matters is also
scheduled. The items to be voted on are addressed in the enclosed Notice of
Annual Meeting of Stockholders and Proxy Statement.
Several significant milestones reached in fiscal 2000 deserve special mention:
- - CorVel reported record revenues of $187 million for the fiscal year ended
March 31, 2000, representing an increase of approximately 13% over the $166
million in revenues in fiscal 1999.
- - CorVel launched its B2B e-commerce business unit, Care(MC), focused upon
healthcare and claims needs of insurers and employers managing employee
absences and disability insurance losses at http://www.caremc.com.
Your vote is important. Whether or not you plan to attend the Annual Meeting,
please complete and mail the enclosed proxy card to ensure that your shares
will be represented. A postage pre-paid envelope has been provided for your
convenience.
We look forward to seeing you at our meeting.
Sincerely,
/s/ V. GORDON CLEMONS
--------------------------------------
V. Gordon Clemons,
Chairman of the Board, Chief Executive
Officer and President
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CORVEL CORPORATION
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 3, 2000
----------------------------------------------------
To the Stockholders of CorVel Corporation:
Notice is hereby given that the 2000 Annual Meeting of Stockholders of CorVel
Corporation, will be held at the Company's offices, at 2010 Main Street, Suite
1020, Irvine, California, on Thursday, August 3, 2000, at 1:00 p.m. Pacific
Daylight Time for the following purposes:
1. To elect five directors to serve until the 2001 Annual Meeting;
2. To approve the appointment of Ernst & Young LLP as independent
auditors of the Company for fiscal 2001; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The close of business on June 15, 2000 has been fixed as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof. Only stockholders of record at such time
will be so entitled to vote.
You are cordially invited to attend the Annual Meeting in person. Even if you
plan to attend the Annual Meeting, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD in the enclosed, self-addressed, postage pre-paid
envelope. It will assist us in keeping down the expenses of the Annual Meeting
if all stockholders return their signed proxies promptly, whether they own a few
shares or many shares.
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK MUST BE REPRESENTED AT THE
ANNUAL MEETING IN ORDER TO CONSTITUTE A QUORUM. PLEASE RETURN YOUR PROXY CARD IN
ORDER TO ENSURE THAT A QUORUM IS OBTAINED AND TO AVOID THE ADDITIONAL COST TO
THE COMPANY OF ADJOURNING THE ANNUAL MEETING AND RESOLICITING PROXIES.
YOUR VOTE IS IMPORTANT.
By order of the Board of Directors,
RICHARD J. SCHWEPPE
Secretary
Irvine, California
July 7, 2000
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CORVEL CORPORATION
----------------------
PROXY STATEMENT
--------------------------
This Proxy Statement and the enclosed proxy card are furnished in connection
with the 2000 Annual Meeting of Stockholders (the "Annual Meeting") of CorVel
Corporation (the "Company") which will be held at the Company's offices located
at 2010 Main Street, Suite 1020, Irvine, California, on Thursday, August 3,
2000, at 1:00 p.m. Pacific Daylight Time. Stockholders of record at the close of
business on June 15, 2000, are entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.
On June 15, 2000, there were 7,665,636 shares of Common Stock, $.0001 par value
per share (the "Common Stock") outstanding. Each share of Common Stock is
entitled to one vote on all matters brought before the Annual Meeting.
A majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting will constitute a quorum. The Company's inspector of elections
for the Annual Meeting will count as present abstentions and so-called "broker
non-votes" (i.e., shares held by a broker or other nominee having discretionary
power to vote on some matters but not others) for purposes of determining
whether a quorum exists for the transaction of business at the Annual Meeting.
Abstentions are also counted in tabulating the total number of votes cast on
matters voted on by the stockholders at the Annual Meeting. Broker non-votes are
not counted for purposes of determining either the number of votes cast on any
matter voted on by the stockholders or whether such matter has been approved.
If the enclosed proxy card is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy card does not specify how the
shares represented thereby are to be voted, the proxy will be voted FOR the
election of the directors proposed by the Board unless the authority to vote for
the election of such directors is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of the selection of Ernst &
Young LLP as independent auditors of the Company for the fiscal year ending
March 31, 2001. In their discretion, the proxies named on the proxy card will be
authorized to vote upon any other matter that may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The proxy is being solicited by the Company's Board of Directors (the "Board")
and is revocable at any time prior to its exercise. A proxy may be revoked by
delivery of a written revocation to the Secretary of the Company, by
presentation of a subsequent proxy card, properly signed, or by attendance at
the Annual Meeting and voting in person.
This Proxy Statement, the enclosed proxy card and the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 2000, are scheduled to be mailed
commencing on or about July 7, 2000 to stockholders of record on June 15, 2000.
The principal executive offices of the Company are located at 2010 Main Street,
Suite 1020, Irvine, California 92614. The Company's telephone number is (949)
851-1473.
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PROPOSAL 1
ELECTION OF DIRECTORS
A board of five directors is to be elected at the Annual Meeting. The Company's
Certificate of Incorporation provides that each director will serve for a term
ending on the date of the Company's next annual meeting. The foregoing
notwithstanding, directors will serve until their successors have been duly
elected and qualified or until they resign, become disqualified or disabled, or
are otherwise removed.
The enclosed proxy will be voted, unless authority is withheld or the proxy is
revoked, only for the election of each of the nominees for election named below
to hold office until the date of the Company's 2001 Annual Meeting of
Stockholders or until his successor has been duly elected and qualified or until
he resigns, becomes disqualified or disabled, or is otherwise removed. Each such
nominee is currently serving as a director and has indicated his willingness to
continue to serve as a director if elected. In the unanticipated event that any
such nominee becomes unable or declines to serve at the time of the Annual
Meeting, the proxies will be voted for a substitute person nominated by the
Board.
DIRECTORS AND NOMINEES
The names and certain information about the nominees for director are set forth
below:
NAME AGE POSITION
- ---- --- --------
V. Gordon Clemons 56 Chairman of the Board, Chief
Executive Officer and President
Peter E. Flynn (1) 40 Director
Steven J. Hamerslag (1) (2) 44 Director
R. Judd Jessup (1) (2) 52 Director
Jeffrey J. Michael (2) 43 Director
- ----------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Clemons joined the Company as President and Chief Executive Officer in
January 1988 and became Chairman of the Board in April 1991. Mr. Clemons was
President of Caremark, Inc., the then largest home intravenous therapy company
in the United States, from May 1985 to September 1987, at which time the company
was purchased by Baxter International, Inc. From 1981 to 1985, Mr. Clemons was
President of INTRACORP, a subsidiary of CIGNA Corporation. Mr. Clemons has 24
years of experience in the health care and insurance industries. Mr. Clemons has
served on the board of Omnicell Technologies, Inc., a provider of hospital
supply and pharmaceutical systems, since December 1995.
Mr. Flynn has served as a director of the Company since May 1991. Mr. Flynn has
been Executive Vice President and Secretary of Corstar Holdings, Inc.
("Corstar"), a holding company owning businesses engaged in voice and data
connectivity and networking products and services, since December 1999. Mr.
Flynn served as the Executive Vice President and Secretary of ENStar, Inc.
("ENStar"), a holding company owning businesses engaged in voice and data
connectivity and networking products and services, from February 1997 until
December 1999, when ENStar merged with Americable, Inc. ("Americable"), formerly
a wholly-owned subsidiary of ENStar, and completed a name change to Corstar. Mr.
Flynn also served as President of Americable from June 1997 until December 1999.
In connection with certain transactions (collectively the "Reorganization")
consummated in January 1997 pursuant to a reorganization agreement, North Star
Universal, Inc. ("North Star"), transferred to ENStar certain of its assets
including its shares of the Company. Pursuant to the Reorganization, ENStar
ceased to be a subsidiary of North Star and became a publicly traded company.
From December 1990 to February 1997, Mr. Flynn was Executive Vice President,
Chief Financial Officer and Secretary of North Star. From April 1989 to December
1990, Mr. Flynn was the Treasurer of North Star.
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Mr. Hamerslag has served as a director of the Company since May 1991. Mr.
Hamerslag has been the President & Chief Executive Officer of Jfax.com since
January 2000. Mr. Hamerslag served as the Vice-Chairman of MTI Technology
Corporation ("MTI"), a manufacturer of computer peripherals and network
management software, from April 1996 to May 1998. Mr. Hamerslag was also the
President and Chief Executive Officer of MTI from 1987 to April 1996.
Mr. Jessup has served as a director of the Company since August 1997. Mr. Jessup
was President of the HMO Division of FHP International Corporation ("FHP"), a
diversified health care services company, from 1994 to 1996. From 1987 to 1994,
Mr. Jessup was President of TakeCare, Inc., a publicly traded HMO operating in
California, Colorado, Illinois and Ohio, until it was acquired by FHP. Mr.
Jessup has 27 years of experience in the health care and managed care
industries. Mr. Jessup served as President of the California Association of HMOs
for two years and as a director for four years. Mr. Jessup has been a director
of ADESSO Specialty Services, Inc., a specialist network management company,
since April 1998, and eBioCare.com (formerly Mellenium Health, Inc.), a disease
management company, since May 1998. Mr. Jessup is also a director of Pacific
Dental Benefits, a dental HMO, since November 1997, a director of US
Laboratories, a pathology delivery company, since May 1998, and a director of
NovaMed Eyecare Services since August 1998.
Mr. Michael has served as a director of the Company since September 1990. Mr.
Michael has been the President, Chief Executive Officer and a director of
Corstar (formerly ENStar) since March 1996. Mr. Michael was an initial director
and officer (serving as President and Secretary) of ENStar at the time it was
organized by North Star in December 1995. Prior to the Reorganization, Mr.
Michael served as President and Chief Executive Officer of North Star from
December 1990 until February 1997 and a director of North Star from May 1987
until February 1997. From April 1989 to December 1990 Mr. Michael was the Vice
President-Finance of North Star. Mr. Michael has been a director of Michael
Foods, Inc., a food processing and distribution company formerly affiliated with
North Star, since April 1990, and a director of Michael-Curry Companies, Inc.
from January 1993 until December 1998. Mr. Michael has also been a director of
Centuple Communications, Inc., a communications company, since August 1997.
BOARD MEETINGS AND COMMITTEES
During fiscal 2000, the Board held four meetings. Each of the present directors
standing for re-election at the Annual Meeting attended at least 75% of the
meetings of the Board and the committees of the Board of which they are members.
The committees of the Board include the Audit Committee and the Compensation
Committee. The Board does not have a nominating committee. Although there are no
formal procedures for stockholders to nominate persons for election as
directors, the Board will consider nominations from stockholders, which should
be addressed to Richard Schweppe, Secretary of the Company, at the Company's
address set forth above.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent accountants and reviewing the Company's
accounting practices and system of internal accounting controls. The Audit
Committee currently consists of Messrs. Flynn, Hamerslag, and Jessup. The Audit
Committee met once during fiscal 2000.
The Compensation Committee is responsible for recommending and reviewing the
compensation, including perquisites, of the Company's employees and for
administering the Company's employee stock option and stock purchase plans. The
Compensation Committee consists of Messrs. Hamerslag, Jessup, and Michael. The
Compensation Committee met four times during fiscal 2000.
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COMPENSATION OF DIRECTORS
The Company pays each non-employee director an amount equal to $2,000 plus
travel expenses for each Board meeting attended. The directors do not receive
fees for telephonic meetings.
Each individual who first becomes a non-employee member of the Board at any time
on or after August 5, 1993 and who has not previously been in the employ of the
Company, will receive an automatic option grant for 10,000 shares of Common
Stock under the Company's Restated 1988 Executive Stock Option Plan, as amended
(the "Option Plan"). In addition, each non-employee director who continues to
serve as a non-employee Board member after one or more annual stockholder
meetings commencing with the 1993 Annual Meeting, will be granted at that
meeting, whether or not such individual has been in the prior employ of the
Company, an option to purchase 3,000 shares of Common Stock, provided such
individual has been a non-employee member of the Board for at least six months.
Accordingly, as a non-employee director who was re-elected at the 1999 Annual
Meeting each of Messrs. Flynn, Hamerslag, Jessup and Michael received an option
to purchase 3,000 shares of Common Stock on August 5, 1999, (the date of the
1999 Annual Meeting), with an exercise price of $ 22.25. In addition, each of
Messrs. Flynn, Hamerslag, Jessup, and Michael, will be granted an option to
purchase an additional 3,000 shares of Common Stock on the date of the 2000
Annual Meeting at an exercise price equal to the fair market value of the stock
on such date, provided such individual is re-elected as a director at the Annual
Meeting.
STOCKHOLDER APPROVAL
Directors are elected by a plurality of the votes present or represented at the
Annual Meeting. The five nominees receiving the highest number of affirmative
votes cast at the Annual Meeting will be the elected directors of the Company.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED ABOVE OR HIS
SUBSTITUTE AS DESCRIBED ABOVE.
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The accounting firm of Ernst & Young LLP served as the independent auditors for
the Company for the fiscal year ended March 31, 2000. The Board has selected
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending March 31, 2001 and has further directed that the selection of the
auditors be submitted for ratification by the stockholders at the Annual
Meeting. Neither Ernst & Young LLP nor any of its members has any relationship
with the Company or any of its affiliates except in the firm's capacity as the
Company's auditors. The affirmative vote of a majority of the shares of the
Company's common stock represented and voted at the Annual Meeting is required
for approval of the appointment of Ernst & Young LLP as the Company's
independent auditors.
Stockholder ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the appointment of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the appointment by an affirmative vote of the
holders of a majority of the Common Stock present or represented at the meeting
and entitled to vote thereat, the Audit Committee and the Board will reconsider
whether to retain that firm as the Company's independent auditors. Even if the
appointment is ratified, the Audit Committee and the Board in their discretion
may direct the appointment of a different independent accounting firm at any
time during the year if they determine that such a change would be in the best
interest of the Company and its stockholders.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
Management does not know of any other matters to be brought before the Annual
Meeting. If any other matter is properly presented for consideration at the
Annual Meeting, it is intended that the proxies will be voted by the persons
named therein in accordance with their judgment on such matters.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company as of
May 31, 2000 with respect to beneficial ownership of the Company's Common Stock
by (i) each person (or group of affiliated persons) who is known by the Company
to own beneficially more than 5% of the Company's outstanding Common Stock, (ii)
each director and/or nominee for director, (iii) the Chief Executive Officer and
each other Named Executive Officer of CorVel (as such term is defined below
under the caption "Summary of Cash and Certain Other Compensation"), and (iv)
all current directors and executive officers as a group, together with the
approximate percentages of outstanding Common Stock owned by each of them. The
following table is based upon information supplied by directors, executive
officers and principal stockholders, and Schedule 13Gs filed with the Securities
and Exchange Commission. Except as otherwise noted, the persons named in the
following table have sole voting and investment power with respect to all shares
shown as beneficially owned by them, subject to community property laws where
applicable.
NAME AND ADDRESS OF AMOUNT OF COMMON PERCENTAGE OF COMMON
BENEFICIAL OWNER STOCK BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED (1)
- ------------------- ------------------------ ----------------------------
CORSTAR HOLDINGS, INC. 1,984,592 (2) 25.8%
Jeffrey J. Michael
6479 City West Parkway
Eden Prairie, MN 55344
V. GORDON CLEMONS 759,519 (3) 9.9%
2010 Main Street, Suite 1020
Irvine, CA 92614
FMR CORPORATION 752,000 (4) 9.8%
82 Devonshire Street
Boston, MA 02109
OPPENHEIMER CAPITAL 587,156 (5) 7.6%
Oppenheimer Tower
1345 Avenue of the Americas
New York, NY 10105
KESTREL INVESTMENT MANAGEMENT CORP. 528,500 (6) 6.9%
Abbott J. Keller
Daniel J. Steinman
411 Borel Avenue, Suite 403
San Mateo, CA 94402
WASATCH ADVISORS, INC. 456,350 (7) 6.0%
150 Social Hall Avenue
Salt Lake City, UT 84111
DANIEL H. DAVIS 154,770 (8) 2.0%
LOUIS E. SILVERMAN 58,792 (9) *
R. JUDD JESSUP 43,750 (10) *
STEVEN J. HAMERSLAG 28,500 (11) *
PETER E. FLYNN 28,100 (12) *
All executive officers and 1,141,646 (13) 14.6%
directors as a group
(8 individuals)
- -----------------
*Less than 1%
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(1) Applicable percentage ownership is based on 7,665,636 shares of Common Stock
outstanding as of May 31, 2000, which excludes a total of 2,428,840 shares
repurchased by the Company in accordance with the Stock Repurchase Program
described below under the caption "Certain Transactions" and held by the Company
in the treasury. Any securities not outstanding but which are subject to options
exercisable within 60 days of May 31, 2000, are deemed outstanding for the
purpose of computing the percentage of outstanding Common Stock beneficially
owned by any person holding such options but are not deemed outstanding for the
purpose of computing the percentage of Common Stock beneficially owned by any
other person.
(2) Includes 1,950,000 shares owned by Corstar, 21,092 shares owned directly by
Mr. Michael, a director of Corstar and the Company, and 13,500 shares subject to
options held by Mr. Michael that are exercisable within 60 days of May 31, 2000.
Mr. Michael is the President and Chief Executive Officer and a stockholder of
Corstar. In addition, Mr. Michael is the managing general partner of the 3J2R
Limited Partnership and both a general and limited partner of the 4J2R1C Limited
Partnership, both of which are stockholders of Corstar. Based on the foregoing,
Mr. Michael may be deemed to share beneficial ownership of the shares of the
Company's Common Stock held by Corstar. Mr. Michael disclaims such beneficial
ownership except to the extent of any indirect pecuniary interest therein.
(3) Includes 757,469 shares owned by Mr. Clemons directly and 2,050 shares owned
indirectly by Mr. Clemons as custodian for his child who shares the same primary
residence.
(4) According to the Schedule 13G of Fidelity Management & Research Company
("Fidelity") dated February 14, 2000, Fidelity is a wholly-owned subsidiary of
FMR Corp. and is an Investment Advisor registered under Section 203 of the
Investment Advisors Act of 1940. Edward C. Johnson, FMR Corp., through its
control of Fidelity, and the funds each have sole power to dispose the shares,
while power to vote the shares resides in the Fund's Board of Trustees.
(5) According to the Schedule 13G of Oppenheimer Capital ("Oppenheimer") dated
February 10, 2000, Oppenheimer is an Investment Advisor registered under Section
203 of the Investment Advisors Act of 1940, and shares investment power, along
with its clients, with respect to the shares.
(6) According to the Schedule 13G of Kestrel Investment Management Corporation
("Kestrel") dated February 14, 2000, Abbott J. Keller and David J. Steinman are
the sole shareholders of Kestrel, which is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940 with sole investment
power with respect to the shares.
(7) According to the Schedule 13G of Wasatch Advisors, Inc. ("Wasatch") dated
February 11, 2000, Wasatch is an Investment Advisor registered under Section 203
of the Investment Advisors Act of 1940, with sole investment power with respect
to the shares.
(8) Includes 126,228 shares owned directly by Mr. Davis and 28,542 shares
subject to options that are exercisable within 60 days of May 31, 2000.
(9) Consists of 58,792 shares subject to options held by Mr. Silverman that are
exercisable within 60 days of May 31, 2000.
(10) Includes 38,000 shares owned directly by Mr. Jessup and 5,750 shares
subject to options that are exercisable within 60 days of May 31, 2000.
(11) Includes 15,000 shares owned directly by Mr. Hamerslag and 13,500 shares
subject to options that are exercisable within 60 days of May 31, 2000.
(12) Includes 14,000 shares owned directly by Mr. Flynn, 600 shares owned
indirectly by Mr. Flynn as custodian for his children, and 13,500 shares subject
to options that are exercisable within 60 days of May 31, 2000.
(13) Includes 988,814 shares owned directly or indirectly and 152,832 shares
subject to options exercisable within 60 days of May 31, 2000 held by those
officers and directors referenced above in footnotes 3, 8, 9, 10, 11 and 12, and
one additional officer not referenced above who is an executive officer but not
a Named Executive Officer.
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EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION
- ---- --- --------
V. Gordon Clemons 56 Chairman of the Board, Chief Executive Officer and President
Daniel H. Davis 51 Vice President, Marketing & Business Development
Richard J. Schweppe 45 Chief Financial Officer and Secretary
Louis E. Silverman 41 Chief Operations Officer
Information regarding Mr. Clemons is included under the heading "Directors and
Nominees."
Mr. Davis served as Vice President, Marketing and Business Development from
April 1988 until June 15, 2000, at which time he transitioned from marketing
responsibilities to a position dedicated to new business development for the
Company.
Mr. Schweppe has been the Chief Financial Officer since April 1991 and Secretary
since June 1995. From March 1988 to April 1991, Mr. Schweppe was the Director of
Finance for the Company. From May 1983 to February 1988 Mr. Schweppe was the
Manager, Technical Accounting for Caremark, Inc.
Mr. Silverman became Chief Operations Officer in August 1998. From June 1995 to
August 1998, Mr. Silverman was Vice President, Operations. Mr. Silverman was
Vice President, Eastern and California Operations from April 1994 to May 1995.
Mr. Silverman joined the Company in March 1993 as Vice President, Eastern
Operations. Prior to joining the Company, Mr. Silverman served as Vice President
of Corporate Development from 1986 to 1990 and Vice President of California
Operations from 1990 to 1993 of Office Specialists, a national temporary
employment company. Mr. Silverman has 16 years of experience in service sector
general management, including direct operating, acquisitions, and strategic
planning responsibilities.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the National Association of Securities Dealers. Officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 2000,
all filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION*
The Compensation Committee administers the Company's executive compensation
programs. After consideration of the Compensation Committee's recommendations,
the full Board reviews and approves the salaries of all elected officers,
including those of the executive officers named in the Summary Compensation
Table, which follows this report. The Compensation Committee is responsible for
administering all other elements of executive compensation, including annual
incentive awards and stock option grants under the Company's Option Plan for
executive officers and other key employees.
GENERAL COMPENSATION GOALS
The design and implementation of all executive compensation arrangements are
based on certain goals derived from Company values, business strategy and
management requirements. These goals may be summarized as follows:
- - Pay competitive salaries to attract, retain and motivate a highly competent
executive team essential to the long-term success of the Company;
- - Tie an individual's total compensation to individual and profit center
performance and the financial success of the Company;
- - Reward executives for long-term corporate success by facilitating their
ability to acquire an ownership interest in the Company; and
- - Align executives' financial interests with stockholder value.
FACTORS
Several of the more important factors, which were considered in establishing the
components of each executive officer's compensation package for the 2000 fiscal
year are summarized below. Additional factors were also taken into account, and
the Compensation Committee may in its discretion apply entirely different
factors, particularly different measures of financial performance, in setting
executive compensation for future fiscal years. All compensation decisions will
be designed to further the general compensation goals indicated above.
BASE SALARIES
Base salaries are targeted to be moderate yet competitive in relation to
salaries commanded by those in similar positions with other companies in the
same industry. The base salary for each executive officer is reviewed annually
and is set on the basis of personal performance, the relative importance of the
functions the officer performs, the scope of the officer's ongoing
responsibilities, the salary levels in effect for comparable positions with the
Company's principal competitors, and internal equity considerations. The weight
given to each of these factors varies from individual to individual.
ANNUAL INCENTIVE AWARDS
Although the Company has a March 31 fiscal year end, it has calendar year
budgets and annual incentive plans which are based on the calendar year.
Incentive awards to the Chief Executive Officer and the other Named Executive
Officers are shown in the "Bonus" column of the Summary Compensation Table,
which follows this report. Annual bonuses are designed to reward personal
contributions to the success of the Company and are earned under a structured
formula that considers the following factors:
- --------------------
*The material in this report is not "soliciting material", is not deemed filed
with the SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933 Act, as amended ("1993 Act"), or the
1934 Act.
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Company Profit Center Financial Performance
Each profit center of the Company submits a proposed annual operating budget
including annual profit goals for review of and approval by the Chief Executive
Officer of the Company in conjunction with ratification by the Committee. At the
end of the calendar year, the Compensation Committee evaluates actual financial
performance against these targets and actual revenue growth. The resulting
performance evaluation dictates whether an increase or decrease in an
executive's "normal" incentive compensation award is granted. For executive
officers with operations responsibilities, the annual incentive award can range
from zero to 70% of base salary depending upon performance as compared to
budget. For executive officers with corporate staff responsibilities, such
awards are based upon departmental objectives.
Individual Performance
Each executive has some portion of their annual bonus measured against
individual goals ("MBOs") established for that person. The maximum amount that
any executive may earn based on the MBO element is variable, with full
achievement of MBOs resulting in a 75% payout and increasing up to 100% payout
for achievement exceeding established MBOs. For executive officers with
operations responsibilities, this element comprises a lesser percentage of the
annual incentive award for the individual and for executive officers with
corporate staff responsibilities, it comprises a greater percentage of the
annual incentive award.
Discretionary Awards
The Compensation Committee also has the discretion under extraordinary
circumstances to award bonuses based on a percentage of base salary.
STOCK OPTIONS
Stock option grants accomplish the third and fourth compensation objectives: to
motivate executive officers to manage the business, to improve long-term Company
performance and to align the interests of executive officers with stockholder
value. Customarily, option grants are made with exercise prices equal to the
fair market value of the shares on the grant date and will be of no value unless
the market price of the Company's outstanding shares appreciates, thereby
aligning a substantial part of the executive officer's compensation package with
the return realized by the stockholders. The option generally vests over a
period of four years, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return to
the executive officer only if the officer remains employed by the Company and
the market price of the underlying shares appreciates over the option term. The
size of the option grant is designed to create a meaningful opportunity for
stock ownership and is based upon the individual's current position with the
Company, internal comparability with option grants made to other Company
executives and the individual's potential for future responsibility and
promotion over the option term. The Committee has established certain general
guidelines in making option grants to the executive officers in an attempt to
target a fixed number of unvested option shares based upon the individual's
position with the Company and the officer's existing holdings of unvested
options. However, the Committee does not adhere strictly to these guidelines and
will occasionally vary the size of the option grant made to each executive
officer as circumstances warrant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The annual base salary for the Company's Chief Executive Officer, Mr. Clemons,
was established on January 26, 1988, when the Company and North Star entered
into an employment agreement with Mr. Clemons. The agreement became effective on
February 15, 1988 and has an indefinite term. The agreement provides Mr. Clemons
with an annual salary of $250,000, payable in semi-monthly installments. Mr.
Clemons may terminate the agreement at any time on four months notice and the
Company may terminate the agreement with or without cause. If Mr. Clemons is
terminated without cause, the Company is required to pay Mr. Clemons his
then-current salary for one year after such termination, less any other
employment compensation received by Mr.
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Clemons during such one year period.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Code generally disallows a tax deduction to publicly-held
corporations for compensation exceeding $1.0 million paid to certain of the
corporation's executive officers. The limitation applies only to compensation,
which is not considered to be performance-based. The non-performance based
compensation to be paid to the Company's executive officers for fiscal 2000 did
not exceed the $1.0 million limit per officer, nor is it expected that the
non-performance based compensation to be paid to the Company's executive
officers for fiscal 2000 will exceed that limit. The Company's Option Plan is
structured so that any compensation deemed paid to an executive officer in
connection with the exercise of option grants made under the Option Plan will
qualify as performance-based compensation which will not be subject to the $1.0
million limitation. Because it is very unlikely that the cash compensation
payable to any of the Company's executive officers in the foreseeable future
will approach the $1.0 million limit, the Committee has decided at this time not
to take any other action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Committee will
reconsider this decision should the individual compensation of any executive
officer ever approach the $1.0 million level.
COMPENSATION COMMITTEE
Steven J. Hamerslag
R. Judd Jessup
Jeffrey J. Michael
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Michael is a member of the Compensation Committee, is the President and
Chief Executive Officer of Corstar, a beneficial owner of more than 10% of the
Company's outstanding Common Stock. No member of the Compensation Committee is a
former or current officer of the Company.
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STOCK PERFORMANCE GRAPH*
The graph depicted below shows the Company's stock price at March 31, 1995
assuming an initial investment of $100 and at March 31, 1996, 1997, 1998, 1999
and 2000, along with the Company's self-determined peer group index consisting
of composite prices of the companies listed below ("Peer Group") and the Nasdaq
Health Services Index over the same period. The data depicted on the graph are
as set forth in the chart below the graph. An initial investment of $100 in the
peer group on March 31, 1995 would be $133.93 as of March 31, 2000.
STOCK PERFORMANCE GRAPH
[PERFORMANCE GRAPH]
March 31, March 31, March 31, March 31, March 31, March 31,
1995 1996 1997 1998 1999 2000
--------- --------- --------- --------- --------- ----------
CorVel Corporation 100.00 123.89 88.50 140.71 126.55 184.07
Peer Group 100.00 212.21 120.82 202.51 116.42 133.93
Nasdaq 100.00 120.76 107.96 130.16 90.04 83.89
Health Services Index
Companies in the Peer Group are as follows: Core, Inc, First Health Group Corp.,
Healtheon/WebMD Corp., HNC Software Inc., Healthplan Services Corp., Health Risk
Management and Medical Control, Inc.
- ----------------
*The material in this report is not "soliciting material," is not deemed filed
with the SEC and is not to be incorporated by reference in any filing of the
Company under the 1933 Act or the 1934 Act.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned by the Company's Chief
Executive Officer and each of the other executive officers whose total cash
salary and bonus for fiscal year 2000 exceeded $100,000 (the "Named Executive
Officers") for the three fiscal years ended March 31, 1998, 1999, and 2000. No
other executive officer who would otherwise have been included in such table on
the basis of salary and bonus earned for the 2000 fiscal year resigned or
terminated employment during fiscal year 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------------------------
NAME OF INDIVIDUAL FISCAL SECURITIES UNDERLYING ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS GRANTED COMPENSATION(2)
- ---------------------- ------ --------- ------- --------------------- ---------------
V. GORDON CLEMONS ............. 2000 $250,000 $ -- -- $ 991
Chief Executive Officer 1999 $250,000 $ -- -- $ 890
1998 $250,000 $ -- -- $1,079
DANIEL H. DAVIS ..............
Vice President, Marketing 2000 $178,333 $35,416 -- $1,273
& Business Development 1999 $174,500 $40,020 3,000 $1,273
1998 $167,666 $33,175 -- $1,597
LOUIS E. SILVERMAN ...........
Chief Operations Officer 2000 $200,000 $92,787 18,000 $ 940
1999 $183,750 $66,065 21,000 $ 817
1998 $176,666 $39,281 19,000 $ 809
- -------------------
(1) Includes employee contributions to the Company's 401(k) Plan.
(2) "All Other Compensation" represents amounts contributed by the Company to
the Company's 401(k) Plan which match the Named Executive Officer's deferred
contribution to such Plan and annual premiums paid by the Company on behalf of
each Named Executive Officer for the purchase of group term life insurance in an
amount equal to such executive officer's annual salary as follows:
COMPANY-PAID
401(k) COMPANY LIFE INSURANCE
FISCAL YEAR CONTRIBUTIONS PREMIUMS
----------- ---------------- --------------
V. GORDON CLEMONS ................ 2000 $ 601 $390
1999 $ 500 $390
1998 $ 683 $396
DANIEL H. DAVIS .................. 2000 $1,000 $278
1999 $1,000 $273
1998 $1,297 $300
LOUIS E. SILVERMAN ............... 2000 $ 628 $312
1999 $ 528 $289
1998 $ 533 $276
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STOCK OPTIONS
The following table provides information with respect to stock option grants
made during fiscal year 2000 to the Named Executive Officers. No options were
granted during such fiscal year to the Chief Executive Officer or Vice
President, Marketing & Business Development. Except for the limited stock
appreciation rights described in footnote 1 below the table, no stock
appreciation rights were granted during such fiscal year to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL AVERAGE ANNUAL RATE OF STOCK PRICE
UNDERLYING OPTIONS GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS GRANT EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME GRANTED (1) DATE FISCAL YEAR(2) ($/SHARE)(3) DATE 5% (4) 10% (4)
---- ----------- -------- ------------------ ------------ ---------- ---------- -----------
LOUIS E. 5,000 5/6/99 3.10% $18.086 5/6/04 $24,984.14 $55,208.42
SILVERMAN 4,000 8/5/99 2.48% $22.250 8/5/04 $24,589.06 $54,335.39
4,000 11/18/99 2.48% $20.500 11/4/04 $22,473.38 $49,614.28
5,000 3/7/00 3.10% $23.625 3/3/05 $32,555.17 $71,917.89
(1) Each Option will become exercisable for 25% of the option shares one year
from the grant date and thereafter the remaining shares become exercisable in 36
equal monthly installments. To the extent not already exercisable, the options
generally become exercisable upon a sale of assets, a merger or consolidation
pursuant to which either (i) the Company does not survive or (ii) ownership of
more than 50% of the voting power of the Company's stock is transferred, unless
the option is assumed or replaced with a comparable option by the successor
corporation. The options are also subject to "limited stock appreciation rights"
pursuant to which the options, to the extent exercisable and outstanding for at
least six months at the time of certain hostile tender offers in which more than
50% of the shares acquired are acquired from parties other than directors and
executive officers of the Company, will automatically be canceled in return for
a cash payment to the optionee based upon the tender-offer price of the Common
Stock subject to that option. Each option has a maximum term of five years
subject to earlier termination in the event of the optionee's cessation of
employment with the Company.
(2) The Company granted options to purchase a total of 161,200 shares of Common
Stock during fiscal year 2000.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the Federal and
state income tax liability incurred by the optionee in connection with such
exercise. The Plan Administrator has the discretionary authority to reprice
outstanding options under the Option Plan through the cancellation of those
options and the grants of replacement options with an exercise price equal to
the lower fair market value of the option shares on the regrant date.
(4) These gains are based on annual compounded rates of growth of stock price
mandated by the SEC of 5% and 10% per year from the date the option was granted
over the full option term. These rates do not represent the Company's estimate
or projection of future Common Stock prices. There is no assurance that the
values that may be realized by a Named Executive Officer on exercise of his
options or any other holder of the Company's Common Stock will be at or near the
value estimated in the foregoing table.
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STOCK OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named Executive
Officers concerning the exercise of options during the 2000 fiscal year and
unexercised options held as of the end of such fiscal year. No stock
appreciation rights were exercised during the 2000 fiscal year and except for
the limited stock appreciation rights described in footnote 1 to the table
above, no stock appreciation rights were outstanding at the end of such fiscal
year. Mr. Clemons did not exercise any options during the 2000 fiscal year and
did not hold any unexercised options as of the end of such fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES NET VALUE OF UNEXERCISED IN-THE-MONEY
VALUE REALIZED UNDERLYING UNEXERCISED OPTIONS AT FISCAL YEAR-END
(MARKET PRICE OPTIONS AT FISCAL (MARKET PRICE OF SHARES AT FISCAL
NO. OF SHARES AT EXERCISE YEAR-END 2000 YEAR-END ($26.00) LESS EXERCISE PRICE)
ACQUIRED ON LESS EXERCISE --------------------------- --------------------------------------
NAME EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- -------------- ----------- ------------- ----------- -------------
DANIEL H. DAVIS 18,000 $216,875 22,876 44,124 $257,077 $544,798
LOUIS E. SILVERMAN 16,000 $143,438 51,460 50,540 $543,554 $393,641
EMPLOYMENT AGREEMENTS
On January 26, 1988, the Company and North Star entered into an employment
agreement with Mr. Clemons. The agreement became effective on February 15, 1988
and has an indefinite term. The agreement provides Mr. Clemons with an annual
salary of $250,000, payable in semi-monthly installments. Mr. Clemons may
terminate the agreement at any time on four months notice and the Company may
terminate the agreement with or without cause. If Mr. Clemons is terminated
without cause, the Company is required to pay Mr. Clemons his then current
salary for one year after such termination, less any other employment
compensation received by Mr. Clemons during such one year period.
CERTAIN TRANSACTIONS
STOCK REPURCHASE PROGRAM
In August 1996, the Company's Board authorized the Company to begin a repurchase
program to acquire shares of its Common Stock. The shares are purchased from
time to time at prevailing market prices through open market or unsolicited
negotiated transactions, depending upon market conditions. From time to time,
the Board has approved expansions of the program, increasing the total number of
shares approved for repurchase to 3,400,000 shares. Since the beginning of this
plan, CorVel has repurchased approximately 2,428,840 Common Shares, equal to 24%
of its outstanding stock.
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ANNUAL REPORT ON FORM 10-K AND STOCKHOLDER PROPOSALS
FOR THE 2001 ANNUAL MEETING
A copy of the Annual Report on Form 10-K of the Company for the fiscal year
ended March 31, 2000 has been mailed concurrently with this Proxy Statement. The
Annual Report is not incorporated into this Proxy Statement, is not considered
"soliciting material", is not deemed filed with the SEC and is not incorporated
by reference in any filing of the Company under the 1933 Act or the 1934 Act.
A stockholder who intends to present a proposal at the Company's 2001 Annual
Meeting of Stockholders must submit such proposal to the Company for inclusion
in the Company's 2001 Proxy Statement and proxy card relating to such meeting
not later than March 2, 2001. Stockholder proposals must be mailed to the
Company's principal office at 2010 Main Street, Suite 1020, Irvine, California
92614, Attention: Secretary.
COSTS OF SOLICITATION
Proxies will be solicited by mail and by telephone by regular employees of the
Company without additional remuneration. The Company will request banks,
brokerage houses and other institutions to forward the soliciting material to
persons for whom they hold shares and to obtain authorization for the execution
of proxies. The Company will reimburse banks, brokerage houses and other
institutions for their reasonable expenses in forwarding the Company's proxy
materials to beneficial owners of the Common Stock. All costs associated with
the solicitation of proxies will be borne by the Company. Proxies in the
accompanying form which are properly executed, duly returned to the Company's
management and not subsequently revoked will be voted as specified thereon.
By Order of the Board of Directors
Richard J. Schweppe
Secretary
July 7, 2000
Irvine, California
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CORVEL CORPORATION PROXY
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 3, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of Annual Meeting of Stockholders to be held on August 3, 2000 and the
accompanying Proxy Statement, and appoints V. Gordon Clemons and Jeffrey J.
Michael, or either of them, the proxy of the undersigned, with full power of
substitution, to vote all shares of the Common Stock of CorVel Corporation which
the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the Annual Meeting of Stockholders of CorVel
Corporation to be held at 2010 Main Street, Suite 1020, California, on Thursday,
August 3, 2000 at 1:00 p.m. Pacific Daylight Time, and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this proxy
shall be voted in the following manner:
1. To elect the following directors to serve for a term of one year.
V. Gordon Clemons FOR [ ] WITHHOLDING
AUTHORITY [ ]
Peter E. Flynn FOR [ ] WITHHOLDING
AUTHORITY [ ]
Steven J. Hamerslag FOR [ ] WITHHOLDING
AUTHORITY [ ]
R. Judd Jessup FOR [ ] WITHHOLDING
AUTHORITY [ ]
Jeffrey J. Michael FOR [ ] WITHHOLDING
AUTHORITY [ ]
2. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for fiscal 2001.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES AND THE
PROPOSALS SET FORTH ABOVE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
SPECIFIED ABOVE. THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR
PROPOSAL 2 IF NO SPECIFICATION IS MADE.
21
Dated:
(Print name(s) as it
(they) appear(s) on
certificate)
(Authorized Signature(s))
Please print the name(s)
appearing on each share
certificate(s) over which
you have voting authority.
PLEASE RETURN YOUR EXECUTED PROXY TO U.S. STOCK TRANSFER CORPORATION IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PRE-PAID ENVELOPE.