<PAGE>
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
File 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
American Claims Evaluation, Inc.
------------------------------------------------
(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):
[x] 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:
-------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------
<PAGE>
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------
5) Total fee paid:
-------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------
3) Filing Party:
-------------------------------------
4) Date Filed:
-------------------------------------
<PAGE>
AMERICAN CLAIMS EVALUATION, INC.
One Jericho Plaza
Jericho, New York 11753
Notice of Annual Meeting of Shareholders
To be Held on September 16, 1997
To the Shareholders of American Claims Evaluation, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
American Claims Evaluation, Inc., a New York corporation (the "Company"), will
be held at 10:00 a.m. (New York time) on Tuesday, September 16, 1997 at the
offices of Hartman & Craven LLP, 460 Park Avenue, Suite 1100, New York, New York
10022, to consider and act upon the following matters:
(1) To elect three directors to serve for the ensuing year;
(2) To consider and vote upon (i) approval of the 1997 Stock
Incentive Plan; and (ii) ratification of grants previously
made under such Plan; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record of the Company at the close of business on
August 7, 1997 will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS URGES YOU TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE
ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Gary J. Knauer
Gary J. Knauer, Secretary
Jericho, New York
Dated: August 14, 1997
<PAGE>
AMERICAN CLAIMS EVALUATION, INC.
One Jericho Plaza
Jericho, New York 11753
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
September 16, 1997
General
This Proxy Statement and the accompanying Proxy Card are being
furnished in connection with the solicitation by the Board of Directors of
American Claims Evaluation, Inc. (the "Company") of proxies to be voted on at
the Annual Meeting of Shareholders to be held at 10:00 a.m. (New York time) on
Tuesday, September 16, 1997 at the offices of Hartman & Craven LLP, 460 Park
Avenue, Suite 1100, New York, New York 10022 and at any adjournments thereof,
with respect to the matters referred to in the accompanying notice. This Proxy
Statement and accompanying materials will first be mailed to shareholders on or
about August 14, 1997.
The Company's common shares, par value $.01 per share ("Shares"), is
the only outstanding class of voting securities. Holders of record at the close
of business on August 7, 1997 are entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof. At the close of business on August
7, 1997, there were issued and outstanding 4,273,500 Shares, each entitled to
cast one vote per Share. The holders of a majority of the issued and outstanding
Shares entitled to vote shall constitute a quorum at the meeting for the
transaction of business. The election of directors, as described in the
accompanying notice, requires the vote of a plurality of votes cast at the
meeting; and the (i) approval of the 1997 Stock Incentive Plan; and (ii)
ratification of grants previously made under such Plan, each as described in the
accompanying notice, requires the vote of a majority of all outstanding shares
entitled to vote. For purposes of determining whether proposals have received a
majority vote, abstentions will not be included in the vote totals and, in
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned a proxy ("broker non-votes"), those
votes will not be included in the vote totals. Therefore, abstentions and broker
non-votes will be counted in the determination of a quorum and (i) will have no
effect on the vote for the election of Directors; (ii) will have the effect of a
vote against approval with respect to the 1997 Stock Incentive Plan; and (iii)
will have the effect of a vote against the ratification of grants previously
made under such Plan. Because of the percentage of beneficial ownership of
Shares held by directors and management, (i) election of the directors nominated
and referred to in the accompanying notice; (ii) approval of the 1997 Stock
Incentive Plan; and (iii) ratification of grants previously made under such Plan
is assured.
<PAGE>
Revocability of Proxies
The attendance of a shareholder at the Annual Meeting will not
automatically revoke such shareholder's proxy. However, a shareholder may revoke
a proxy at any time prior to its exercise by (1) delivering to the Secretary of
the Company a written notice of revocation prior to the Annual Meeting, (2)
delivering to the Secretary of the Company prior to the Annual Meeting a duly
executed proxy bearing a later date, or (3) attending the Annual Meeting, filing
a written notice of revocation with the secretary of the meeting, and voting in
person.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees
of the Company may solicit proxies for the Annual Meeting from the shareholders
of the Company personally or by telephone or telegram without additional
remuneration therefor, but at the Company's cost for all out-of-pocket expenses.
The Company will also provide persons, firms, banks and corporations holding
Shares in their names or in the names of nominees, which in either case are
beneficially owned by others, proxy material for transmittal to such beneficial
owners.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto sets forth information regarding
the beneficial ownership of the Company's Shares as of August 1, 1997, by (i)
each person known by the Company to be the beneficial owner of more than 5% of
such Shares, (ii) each director, nominee for director of the Company, and each
named executive officer of the Company, and (iii) all directors and executive
officers of the Company as a group. The percentages have been calculated by
taking into account all Shares owned on the record date as well as all such
Shares with respect to which such person has the right to acquire beneficial
ownership at such date or within 60 days thereafter. Unless otherwise indicated,
all persons listed below have sole voting and sole investment power with respect
to all Shares shown as beneficially owned by them.
Amount and Nature
Name and Address of Beneficial Percent of Voting
of Beneficial Owner Ownership Securities (1)
- ------------------- ---------------- -----------------
Gary Gelman(2) 2,696,400(3)(4) 56.4%
Peter Gutmann(2) 80,000(3)(4) 1.7%
Edward M. Elkin, M.D.(2) 60,200(4) 1.3%
D.H. Blair Investment Banking Corp. 561,224(5) 13.1%
44 Wall Street
New York, NY
All directors and executive
officers as a group
(five persons) 2,868,850(4) 60.0%
(footnotes next page)
2
<PAGE>
(footnotes from prior page)
- -----------------------
(1) Based on a total of 4,273,500 Shares issued and outstanding as of
August 1, 1997. In addition, 505,250 Shares which directors and
executive officers described in the table have the right to
acquire within 60 days of such date pursuant to the exercise of
options granted under the Company's stock option plans are
included since these are deemed outstanding for the purpose of
computing the percentage of Shares owned by such person in
accordance with the provisions of Rule 13d-3(d)(1)(i) promulgated
under the Securities Exchange Act of 1934, as amended. The 505,250
Shares includes the 325,000 Shares issuable pursuant to the 1997
Stock Incentive Plan. See "APPROVAL OF THE 1997 STOCK INCENTIVE
PLAN".
(2) Address is c/o the Company, One Jericho Plaza, Jericho, N.Y.
11753.
(3) Includes 10,000 Shares and 4,000 Shares owned, respectively, by
the wives of Messrs. Gelman and Gutmann, as to which beneficial
ownership is disclaimed by the respective reporting person.
(4) Includes the presently exercisable portions of outstanding stock
options (aggregating 505,250 Shares) which, in the case of Messrs.
Gelman, Gutmann and Elkin are 400,000, (300,000 of which are
issuable pursuant to the 1997 Stock Incentive Plan) 19,000 and
25,000, respectively, and in the case of two executive officers
are 31,250 Shares (25,000 of which are issuable pursuant to the
1997 Stock Incentive Plan). See "APPROVAL OF THE 1997 STOCK
INCENTIVE PLAN."
(5) These Shares are owned of record by D.H. Blair Investment Banking
Corp. ("Blair Investment") (532,224 Shares), by Mr. J. Morton
Davis' wife (7,200 Shares) and by Rivkalex Corporation, a private
corporation controlled by Mr. Davis' wife (21,800 Shares). Mr. J.
Morton Davis, the sole shareholder of Blair Investment, has
reported Blair Investment's Shares as being beneficially owned by
himself but has disclaimed ownership of the 21,800 Shares and
7,200 Shares described in this table owned by Rivkalex
Corporation and by Mr. Davis' wife, respectively.
PROPOSAL ONE
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting to hold office
until the next Annual Meeting of Shareholders and until their respective
successors have been elected and qualified or until their prior death,
resignation or removal. The by-laws provide that the Board of Directors shall
consist of no less than three and no more than seven members, with the actual
number to be established by resolution of the Board of Directors. The current
Board of Directors has by resolution established the number of directors at
three.
3
<PAGE>
Should any nominee be unable to accept election, shareholders will vote
for the election of such other person to the office of director as management
may recommend in place of such nominee; however, management knows of no reason
to anticipate that this will occur. Unless a proxy specifies that it is not to
be voted in favor of a nominee for director, it is intended that Shares
represented by the proxy will be voted in favor of the nominees listed below. In
the event that any nominee shall be unable to serve, it is intended that the
proxies will be voted for the nominees designated by the Board of Directors. The
Company believes that all nominees will be able to serve.
The following table sets forth certain information with respect to each
nominee for election as a director. There are no arrangements or understandings
between the Company and any director or nominee pursuant to which such person
was elected or nominated to be a director of the Company. For information with
respect to security ownership of directors, see "Share Ownership."
Nominee Age Position(s) with Company
------- --- ------------------------
Gary Gelman 50 Chairman of the Board,
President and Chief
Executive Officer
Edward M. Elkin, M.D. 58 Director
Peter Gutmann 68 Director
Nominees for Election as Directors
Gary Gelman, the founder of the Company, has been Chairman of the Board
since July 1, 1985, and President, Chief Executive Officer and a director since
inception. Mr. Gelman served as Treasurer from inception to October 31, 1991.
Since 1973, Mr. Gelman has also been Chief Executive Officer of American Para
Professional Systems, Inc., a privately held entity which provides nurses who
perform physical examinations of applicants for life and/or health insurance for
insurance companies. He received a B.A. Degree from Queens College. In March
1996, Mr. Gelman became Chairman of the Board of Directors of MISONIX, INC., a
publicly traded company engaged in the design, development and manufacturing of
ultrasonic medical devices.
Edward M. Elkin, M.D. has been a director of the Company since July 1,
1985. For more than the past five years, Dr. Elkin has been performing services
relating to utilization review and quality assurance in hospitals as a Public
Health Physician for the New York State Department of Health. He is certified by
the American Board of Pediatrics and the American Board of Quality Assurance and
Utilization Review Physicians. He received his B.A. Degree from Harvard College
and his M.D. Degree from New York University School of Medicine.
4
<PAGE>
Peter Gutmann has been a director of the Company since July 1, 1985.
For more than the past twenty years, he has been a Professor of Economics and
Finance at Baruch College, City University of New York and was Chairman of the
Economics and Finance Department from 1971 to 1977. He received a B.A. Degree
from Williams College, a B.S. Degree from Massachusetts Institute of Technology,
an M.A. Degree from Columbia University and a Ph.D. Degree from Harvard
University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF ALL THREE
NOMINEES FOR ELECTION AS DIRECTORS NOTED ABOVE.
Meetings and Committees of the Board
The Board of Directors held three meetings and acted once by unanimous
written consent during the fiscal year commencing April 1, 1996 and ending March
31, 1997 ("Recent Fiscal Year"). All of the nominees were members of the Board
during the Recent Fiscal Year and attended those meetings.
The Audit Committee of the Board of Directors, consisting of Messrs.
Gutmann and Elkin, held one meeting during the Recent Fiscal Year, which meeting
was attended by both members. The Audit Committee has responsibility to
ascertain that the Company's financial statements reflect fairly the financial
condition and operating results of the Company and to appraise the soundness,
adequacy and application of accounting and operating controls. The Audit
Committee recommends independent auditors to the Board, reviews the scope of the
audit functions of the independent auditors and reviews audit reports rendered
by the independent auditors.
The Company has no Compensation Committee or Nominating Committee.
Section 16(a) Reporting
Under Federal securities laws, the Company's directors, its executive
officers and any person holding more than 10% of the Company's Shares are
required to report their ownership of the Company's Shares and any changes in
that ownership to the Securities and Exchange Commission ("SEC") on the SEC's
Forms 3, 4 and 5. Based on its review of the copies of such forms it has
received, the Company believes that all of its officers, directors and greater
than 10% beneficial owners complied with all filing requirements applicable to
them with respect to transactions during the Recent Fiscal Year.
5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
Name Age Position(s) with Company
---- --- ------------------------
Gary Gelman 50 Chairman of the Board,
President and Chief
Executive Officer
Gary J. Knauer 38 Chief Financial Officer,
Treasurer and Secretary
For a description of Mr. Gelman's business experience, see "Election
of Directors-Nominees for Election as Directors."
Gary J. Knauer joined the Company as its Controller in July 1991 and
has served as Chief Financial Officer and Treasurer since October 1991 and as
Secretary since March 1993. Prior to joining the Company, Mr. Knauer was
employed from October 1984 to June 1991 by the accounting firm of KPMG Peat
Marwick LLP. He is a Certified Public Accountant and holds a Bachelor of Science
Degree from the State University of New York at Binghamton. Since February 1994,
Mr. Knauer has also served as Chief Financial Officer of American Para
Professional Systems, Inc.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth all plan and non-plan compensation
awarded to, earned or paid to Gary Gelman, the Company's Chief Executive Officer
for each of the Company's last three fiscal years. No other executive officer
had total annual salary and bonus which exceeded $100,000 during the Company's
fiscal year ended March 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Securities
Name and Other Annual Underlying All Other
Principal Fiscal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) (1) (#) ($) (2)
---------- ------ ---------- ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gary Gelman 1997 $397,772 - - - -
Chairman. 1996 397,772 - - - $227
President 1995 406,745 - - - 811
and CEO
</TABLE>
(footnotes next page)
6
<PAGE>
(footnotes from prior page)
- ----------------------
(1) The aggregate amount of all perquisites and other personal benefits
paid to the Chief Executive Officer is not greater than either
$50,000 or 10% of the total annual salary and bonus reported.
(2) Consists of $227 and $811 of matching contributions made by the
Company under the 401(k) profit sharing plan for each of the fiscal
years 1996 and 1995, respectively.
Compensation Plans
The following describes plans adopted by the Company pursuant to which
cash or non-cash compensation was paid or distributed during the years ended
March 31, 1997, 1996 or 1995, or pursuant to which such compensation may be
distributed in the future, to the Chief Executive Officer.
401(k) Profit Sharing Plan
The Company sponsors a profit sharing plan covering all employees with
one or more years of service. The plan is qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"). Such plan requires the
Company to match participants' contributions to the extent of 10% of such
eligible contributions. Under the terms of the Plan, there is a vesting
requirement with respect to Company contributions, but employees will be fully
vested in their own salary deferral contributions. Officers are eligible to
participate in the plan in the same manner as are all other employees.
Stock Option Plans
The following description of stock options issued takes account of 100%
share dividends declared October 1, 1991 and June 12, 1990, and to changes in
the option price and number of Shares contained, occasioned by anti-dilution
provisions called into effect, as a result of such share dividends.
In July 1985, the Company's Board of Directors adopted the 1985 Stock
Option Plan (the "1985 Plan"). As at March 31, 1997, the 1985 Plan has expired,
except as to options outstanding, and no additional options may be granted
thereunder. The 1985 Plan provided for the issuance of up to 400,000 Shares to
all full-time employees and directors of the Company. Pursuant to the Plan,
options granted could have been either incentive stock options, as defined under
the Code, or nonqualified stock options. Options were to be granted at the fair
market value (as defined in the 1985 Plan) of the Company's Shares at the date
of grant. The option terms were determined by the Board of Directors, but no
options were granted with a term of more than ten years. The options are not
transferable, not exercisable while any previously granted incentive stock
options under the 1985 Plan are outstanding, and are exercisable only while the
optionee is associated with the Company and for three months thereafter, with
certain exceptions.
7
<PAGE>
During the fiscal year ended March 31, 1997, 35,000 options were
granted under the 1985 Plan. Additionally, the Board of Directors approved a
change in the exercise price of 5,000 outstanding employee options to $2.25, a
price in excess of the then current fair market value.
On March 12, 1991, the Board of Directors adopted the Company's 1991
Stock Option Plan (the "1991 Plan") and on October 1, 1991, the shareholders of
the Company ratified, approved and adopted the 1991 Plan. Under the 1991 Plan, a
total of 400,000 Shares are reserved for issuance to employees, including
directors and officers who may not be salaried employees ("Eligible
Participants"). The 1991 Plan provides that the number of Shares subject thereto
and the outstanding options and their exercise prices, are to be appropriately
adjusted for mergers, consolidations, recapitalizations, stock dividends, stock
splits or combinations of shares. Shares allocated to options and stock
appreciation rights which have terminated for reasons other than the exercise
thereof may be reallocated to other options and/or stock appreciation rights.
Both incentive and non-statutory stock options may be granted under the
1991 Plan to Eligible Participants, at a price to be determined by the option
committee, provided, however, that incentive stock options must be granted at an
exercise price not less than the fair market value of the Shares on the date of
the grant. Such exercise price may be payable in cash or, with the approval of
the committee which administers the 1991 Plan, by a combination of cash or
Shares. Shares received upon exercise of options granted under the 1991 Plan
will be subject to certain restrictions on sale or transfer. The term of any
option may not exceed ten years from the date of grant. Conditions of the
exercise of options, which must be consistent with the terms of the 1991 Plan,
are fixed by a committee appointed by the Board of Directors, consisting of not
less than two nor more than five persons. The current committee consists of
Messrs. Gelman, Gutmann and Elkin.
Optionees under the 1991 Plan with incentive options may exercise up to
25 percent of such option granted for each year of service to the Company after
the date of grant of the option, but the committee may accelerate the schedule
of the time or times when an option may be exercised, provided that the fair
market value of the securities subject to an incentive option may not exceed
$100,000 at the first time such options become exercisable. The exercise times
of non-statutory stock options granted under the 1991 Plan are as fixed by the
committee.
The 1991 Plan also provides for stock appreciation rights, pursuant to
which the optionee may surrender to the Company all or any part of an
unexercised option and receive from the Company in exchange therefor Shares
having an aggregate market value equal to the dollar amount obtained by
multiplying the number of Shares subject to the surrendered options by the
amount by which the market value per share at the time of such surrender exceeds
the exercise price per share of the related option. The Company's obligation
arising from an exercise of stock appreciation rights may also be settled by the
payment of cash, or a combination of cash and Shares. The Board of Directors may
at any time terminate or from time to time amend or alter the 1991 Plan.
During the fiscal year ended March 31, 1997, options to purchase 15,000
Shares were granted to each of the Company's outside directors under the 1991
Plan at an option price of $2.25 per Share
8
<PAGE>
exercisable immediately. Additionally, the Board of Directors approved a change
in the exercise price of 14,000 outstanding employee options to $2.25, a price
in excess of the then current fair market value.
Aggregated Option/SAR Exercises in 1997
and FY-End Option/SAR Values
The following table summarizes the number and dollar value of
unexercised stock options at March 31, 1997 for the Named Executive Officer.
<TABLE>
<CAPTION>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)(1)
Value
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- ---- --------------- ----------- ------------- -------------
<S> <C> <C> <C>
Gary Gelman - - 100,000/0 $0/$0
Chairman,
President
and CEO
</TABLE>
(1) The closing price of the Company's Shares on March 31, 1997 as
reported by the NASDAQ National Market System was $1.4375 per
Share.
Employment Agreements
Mr. Gelman's employment agreement with the Company provides for him to
be employed as Chairman of the Board of Directors and Chief Executive Officer at
an annual salary of $388,800. Effective June 4, 1997, Mr. Gelman's annual salary
has been reduced to $238,800 at his initiative. In addition, Mr. Gelman is
entitled to participate in all employee benefit programs and other policies and
programs of the Company. Mr. Gelman is not required to devote any specific
number of hours to the business of the Company. He is subject to a
non-competition and non-disclosure covenant for a period of three years
following termination of employment with the Company.
Director Compensation
The Company's policy is to pay its non-employee directors a uniform fee
of $400 for each Board of Directors' meeting and/or Audit Committee meeting
attended in person.
9
<PAGE>
PROPOSAL TWO
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN
1997 Stock Incentive Plan
On May 7, 1997, the Board of Directors adopted, subject to approval of the
shareholders, the 1997 Stock Incentive Plan (the "1997 Plan"). The following
description of the Plan is qualified in its entirety by reference to the text of
the Plan, a copy of which is annexed hereto as Exhibit A.
Purpose
The purpose of the 1997 Plan is to provide an incentive to key employees
(including directors and officers who are key employees), non-employee
directors, independent contractors and consultants of the Company and to offer
an additional inducement in obtaining the services of such individuals.
Administration of the 1997 Plan
The 1997 Plan is administered by a committee appointed by the Board of Directors
(the "Committee"). The current Committee consists of Messrs. Gelman, Gutmann and
Elkin. The Committee is authorized, subject to the provisions of the 1997 Plan,
to determine the employees, non-employee directors, independent contractors and
consultants who will receive options under the 1997 Plan, the number of Shares
subject to each option and the terms of those options, and to interpret the 1997
Plan and to make such rules and regulations relating to the 1997 Plan as the
Committee may deem proper.
Shares of Stock Subject to the
1997 Plan and Exercise Price
Options granted under the 1997 Plan to key employees will either be Incentive
Stock Options ("ISOs") under the provisions and subject to the limitations of
Section 422 of the Code or non-statutory options under the Code, as determined
by the Committee; options granted to non-employee directors, independent
contractors and consultants are non-statutory options under the Code. The 1997
Plan permits the granting of an aggregate of 750,000 Shares at a price equal to
not less than one hundred percent (100%) of the fair market value of the Common
Stock on the date that the option is granted. Further no ISO may be granted to
an employee owning Shares having more than 10% of the voting power of the
Company unless the option price for such employee's ISO is at least 110% of the
fair market value of the Shares subject to the ISO at the time the ISO is
granted and the ISO is not exercisable after five years from the date of
granting. No option may be granted under the 1997 Plan after the tenth
anniversary of the adoption of the 1997 Plan. Options may be granted through May
6, 2007.
Upon the granting of any option, the optionee must enter into a written
agreement with the Company setting forth the terms upon which the option may be
exercised. Such an agreement
10
<PAGE>
sets forth the length of the term of the option and the timing of its exercise
as determined by the Committee. In no event shall the length of an option extend
beyond ten years from the date of its grant. An optionee may exercise an option
by delivering payment to the Company in cash, previously acquired Shares or a
combination thereof.
Under the 1997 Plan, if the employment of any person to whom an option has been
granted is terminated for any reason other than the death or disability of the
optionee, the optionee may exercise within ninety days of such termination such
options as the optionee could have exercised if his or her employment had
continued for such ninety day period. If the optionee dies while employed by the
Company or its subsidiaries, or during a period after termination of employment
in which the optionee could exercise an option, the optionee's beneficiary may
exercise the option within one year of the date of the optionee's death but in
no event may the option be exercised later than the date on which the option
would have expired if the optionee had lived. If the termination is by reason of
disability, the optionee may exercise the option, in whole or in part, at any
time within one year following such termination of employment, but in no event
may the option be exercised later than the date on which the option would have
expired if the optionee had not been terminated for disability. Notwithstanding
the above, an optionee terminated either (a) for cause or (b) without the
consent of the Company may not exercise his or her outstanding options.
Option
The Committee, subject to shareholder approval, granted the following options
under the Plan:
Number of
Grantee Shares Covered
------- --------------
Gary Gelman 300,000
Gary J. Knauer 25,000
Various Employees 10,000
Mr. Gelman's grant is immediately exercisable, upon shareholder approval of the
1997 Plan and ratification of such grant, at a price of $1.25 per Share and is
exercisable through May 7, 2007. Mr. Knauer's grant and the grants to three
other employees are in replacement of grants inadvertently made under the 1985
Plan when its provisions had expired and, accordingly, such grants under the
1985 Plan were invalidated by the Committee simultaneously with the issuance of
the grants under the 1997 Plan at the same price. Mr. Knauer's and such other
employees' grants are on the same terms as the invalidated grants, are vested
retroactively to the date the invalidated grant was first made, and are
exercisable through May 7, 2002 at the rate of 25% of the Shares on a cumulative
basis at a price of $2.25 per Share.
The fair market value of the Common Shares on May 7, 1997 was $1.25.
The Committee may, from time to time during the term of the 1997 Plan, grant
further options pursuant to such Plan.
11
<PAGE>
Federal Income Tax Consequences
With respect to the tax effects of ISOs, the optionee does not recognize any
taxable income when the option is granted or exercised. If no disposition of
shares issued to an optionee pursuant to the exercise of an ISO is made by the
optionee within two years from the date of grant or within one year after the
transfer of such shares to the optionee then (a) upon sale of such shares, any
amount realized in excess of the option price (the amount paid for the shares)
will be taxed to the optionee as long-term capital gain and any loss sustained
will be a long-term capital loss and (b) no deduction will be allowed to the
Company for Federal income tax purposes. The exercise of an ISO will give rise
to an item of tax preference that may result in alternative minimum tax
liability for the optionee.
If Shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of the two year and one year holding periods described above (a
"Disqualifying Disposition") generally (a) the optionee will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized upon the sale of such shares) over the option price thereof, and (b)
the Company will be entitled to deduct such amount, subject to applicable
withholding requirements. Any further gain realized will be taxed as short-term
or long-term capital gain and will not result in any deduction by the Company. A
Disqualifying Disposition will eliminate the item of tax preference associated
with the exercise of the ISO.
If an optionee is permitted to, and does, make the required payment of the
option price by delivering Shares, the optionee generally will not recognize any
gain as a result of such delivery, but the amount of gain, if any, which is not
so recognized will be excluded from his basis in the new Shares received.
However, the use by an optionee of Shares previously acquired pursuant to the
exercise of an ISO to exercise an ISO will be treated as a taxable disposition
if the transferred Shares are not held by the optionee for the requisite holding
period described above.
A recipient of a non-statutory option incurs no income tax liability as a result
of having been granted those options. The exercise by an individual of a
non-statutory option normally results in the immediate realization of income by
the individual of the difference between the market value of the stock which is
being purchased on the date of exercise and the price being paid for such stock.
The amount of such income also is deductible by the Company. If the exercise
price is paid in whole or in part in Shares, no income, gain or loss is
recognized by an optionee on the receipt of Shares equal in number to the Shares
delivered in payment of the exercise price, and the fair market value of the
remainder of the Shares received upon exercise of the option, determined as of
the date of exercise, less the amount of cash, if any, paid upon exercise, is
treated as compensation income received by the optionee.
Under current law an individual who sells stock which was acquired upon the
exercise of non-statutory options will receive long-term capital gains or loss
treatment, if the individual has held such stock for longer than one year
following the date of such exercise, on gain or loss equal to the difference
between the price for which such stock was sold and the market value of the
stock on the date of the exercise. If the individual has held the stock for one
year or less the gain or loss will be treated as short-term capital gain or
loss.
12
<PAGE>
Amendment to the 1997 Plan
The 1997 Plan may be terminated, suspended, or modified at any time by the
Committee, but no amendment increasing the maximum number of Shares for which
options may be granted (except to reflect a stock split, stock dividend or other
distribution), materially increasing the benefits accruing to an optionee or
changing the class of persons eligible to be optionees shall be made without
first obtaining approval by a majority of the outstanding shares of the Company
entitled to vote. No termination, suspension or modification of the 1997 Plan
shall adversely affect any right previously acquired by the optionee or other
beneficiary under the 1997 Plan without such optionee's or beneficiary's
consent.
ISOs granted under the 1997 Plan may not be transferred other than by will or by
the laws of descent and distribution or a qualified domestic relations order
and, during the optionee's lifetime, may be exercised only by the optionee.
Non-statutory stock options may be transferred as determined by the Committee
and as set forth in the written agreement between the optionee and the Company.
Plan Benefits
The benefits or amounts that will be received by or allocated to any
participants are not now determinable, except that the following grants have
been made under the 1997 Plan:
<TABLE>
<CAPTION>
Name and Dollar Number
Principal Position Value($) of Units
------------------ -------- --------
<S> <C> <C>
Gary Gelman, President and CEO 375,000(1) 300,000
Executive Group 56,250(2) 25,000(3)
Gary J. Knauer 56,250(2) 25,000
Non-Executive Officer Employee Group 22,500(2) 10,000
Non-Executive Director Group 0 0
</TABLE>
- --------------------
(1) Based on an exercise price of $1.25 per Share.
(2) Based on an exercise price of $2.25 per Share.
(3) Consists of options granted to Mr. Knauer.
Vote Required
The 1997 Plan requires the affirmative vote of a majority of the outstanding
shares of the Company entitled to vote. Because of the percentage of beneficial
ownership of Shares held by directors and management, approval of the 1997 Plan
and ratification of grants previously made under the 1997 Plan is assured.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN.
13
<PAGE>
ACCOUNTANTS
The Board of Directors has continued to retain the firm of KPMG Peat
Marwick LLP to act as the Company's independent certified public accountants. A
representative of such firm is expected to be available at the Annual Meeting to
respond to appropriate questions from shareholders and will be given the
opportunity to make a statement if he desires to do so.
OTHER MATTERS
The Board of Directors is not aware of any other matters which are
likely to be brought before the Annual Meeting. However, in the event that any
other matters properly come before the Annual Meeting, it is intended that the
persons named in the accompanying proxy will vote the Shares represented by all
properly executed proxies on such matters in such manner as shall be determined
by a majority of the Board of Directors.
An Annual Report to Shareholders will accompany this Proxy Statement
but is not to be considered a part hereof. The Company will provide, free of
charge, to all shareholders a copy of its Annual Report on Form 10-K (without
exhibits) and/or a copy of its quarterly reports on Form 10-Q (without
exhibits), upon written request of such shareholder to Gary J. Knauer,
Secretary, American Claims Evaluation, Inc., One Jericho Plaza, Jericho, New
York 11753.
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next Annual
Meeting of Shareholders to be held in 1998 must be received by the Secretary of
the Company on or before April 16, 1998 in order to be included in the proxy
statement for that meeting. Proposals should be directed to Gary J. Knauer,
Secretary, American Claims Evaluation, Inc., c/o its principal executive office.
By Order of the Board of Directors,
Gary J. Knauer,
Secretary
Dated: August 14, 1997
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
PLEASE SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE
ENVELOPE PROVIDED.
14
<PAGE>
EXHIBIT A
1997 STOCK INCENTIVE PLAN
of
AMERICAN CLAIMS EVALUATION, INC.
1. PURPOSES OF THE PLAN.
This stock incentive plan (the "Plan") is designed to provide an
incentive to key employees (including directors and officers who are
key employees), non-employee directors, independent contractors and
consultants of American Claims Evaluation, Inc., a New York corporation
(the "Company"), and its present and future subsidiary corporations, as
defined in Paragraph 19 ("Subsidiaries"), and to offer an additional
inducement in obtaining the services of such individuals. The Plan
provides for the grant of (i) "incentive stock options" ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") to key employees of the Company (including
directors and officers who are key employees) and (ii) "non statutory
options" ("Nonqualified Options") to key employees of the Company
(including directors and officers who are key employees), non-employee
directors, independent contractors and consultants of the Company. The
Company makes no warranty as to the qualification of any option as an
"incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Paragraph 12, the aggregate number of
shares of Common Stock, $.01 par value per share, of the Company
("Common Stock") for which options may be granted under the Plan shall
not exceed 750,000. Such shares of Common Stock may, in the discretion
of the Board of Directors of the Company (the "Board of Directors"),
consist either in whole or in part of authorized but unissued shares of
Common Stock or shares of Common Stock held in the treasury of the
Company. The Company shall at all times during the term of the Plan
reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of the Plan. Subject to
the provisions of Paragraph 13, any shares of Common Stock subject to
an option which for any reason expires, is canceled or is terminated
unexercised or which ceases for any reason to be exercisable shall
again become available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee appointed by the Board of
Directors (the "Committee"). A majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts
of the Committee.
Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, to determine the key employees,
non-employee directors, independent contractors and consultants who
shall receive options; the times when they shall receive options;
whether an option shall be an ISO or a Nonqualified Option (provided,
however, that non-employee directors,
A-1
<PAGE>
independent contractors and consultants may only receive Nonqualified
Options); the number of shares of Common Stock to be subject to each
option; the term of each option; the date each option shall become
exercisable; whether an option shall be exercisable in whole, in part
or in installments, and, if in installments, the number of shares of
Common Stock to be subject to each installment; whether the
installments shall be cumulative; the date each installment shall
become exercisable and the term of each installment; whether to
accelerate the date of exercise of any installment; whether shares of
Common Stock may be issued on exercise of an option as partly paid,
and, if so, the dates when future installments of the exercise price
shall become due and the amounts of such installments; the exercise
price of each option; the form of payment of the exercise price; the
amount, if any, necessary to satisfy the Company's obligation to
withhold taxes; whether a Nonqualified Option is transferable and, if
so, the terms of such transfer; whether to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of
an option and to waive any such restriction; whether to subject the
exercise of all or any portion of an option to the fulfillment of
contingencies as specified in the contract referred to in Paragraph 11
(the "Contract"), including, without limitation, contingencies relating
to entering into a covenant not to compete with the Company and its
Parent and Subsidiaries, to financial objectives for the Company, a
Subsidiary, a division, a product line or other category, and/or the
period of continued employment of the optionee with the Company, its
Parent or its Subsidiaries, and to determine whether such contingencies
have been met; to construe the respective Contracts and the Plan; with
the consent of the optionee, to cancel or modify an option, provided
such option as modified would be permitted to be granted on such date
under the terms of the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; and to make all other determinations
necessary or advisable for administering the Plan. The determinations
of the Committee on the matters referred to in this Paragraph 3 shall
be conclusive.
4. ELIGIBILITY.
The Committee may, consistent with the purposes of the Plan, grant
options from time to time, to key employees, non-employee directors,
independent contractors and consultants (including directors and
officers who are key employees) of the Company or any of its
Subsidiaries. Options granted shall cover such number of shares of
Common Stock as the Committee may determine; provided, however, that
the aggregate market value (determined at the time the option is
granted) of the shares of Common Stock for which any eligible person
may be granted ISOs under the Plan or any other plan of the Company, or
of a Parent or a Subsidiary of the Company, which are exercisable for
the first time by such optionee during any calendar year shall not
exceed $100,000. The $100,000 ISO limitation shall be applied by taking
ISOs into account in the order in which they were granted. Any option
(or the portion thereof) granted in excess of such amount shall be
treated as a Nonqualified Option.
5. EXERCISE PRICE.
The exercise price of the shares of Common Stock under each option
shall be determined by the Committee; provided, however, that the
exercise price shall not be less than 100% of the fair market value of
the Common Stock subject to such option on the date of grant; and
further provided, that if, at the time an ISO is granted, the optionee
owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all
A-2
<PAGE>
classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the exercise price of such ISO shall not be less than 110% of
the fair market value of the Common Stock subject to such ISO on the
date of grant.
The fair market value of the Common Stock on any day shall be (a) if
the principal market for the Common Stock is a national securities
exchange, including the National Market System of NASDAQ, the last
trade on such day as reported by such exchange or on a consolidated
tape reflecting transactions on such exchange, (b) if the principal
market for the Common Stock is not a national securities exchange and
the Common Stock is quoted on the Small Capitalization market of
NASDAQ, and (i) if actual sales price information is available with
respect to the Common Stock, the average between the high and low sales
prices of the Common Stock on such day on NASDAQ, or (ii) if such
information is not available, the average between the highest bid and
the lowest asked prices for the Common Stock on such day on NASDAQ, or
(c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on NASDAQ, the
average between the highest bid and lowest asked prices for the Common
Stock on such day as reported on the NASDAQ OTC Bulletin Board Service
or by National Quotation Bureau, Incorporated or a comparable service;
provided that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available
for such day, the fair market value of the Common Stock shall be
determined by the Committee by any method consistent with applicable
regulations adopted by the Treasury Department relating to stock
options. The determination of the Committee shall be conclusive in
determining the fair market value of the Common Stock.
6. TERM.
The term of each option granted pursuant to the Plan shall be such term
as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the
term of each ISO granted pursuant to the Plan shall be for a period not
exceeding 10 years from the date of grant thereof, and further,
provided, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the
term of the ISO shall be for a period not exceeding five years from the
date of grant. Options shall be subject to earlier termination as
hereinafter provided.
7. EXERCISE.
An option (or any part or installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company
at its principal office (at present One Jericho Plaza, Jericho, New
York 11753, Attn.: Secretary), stating which ISO or Nonqualified Option
is being exercised, specifying the number of shares of Common Stock as
to which such option is being exercised and accompanied by payment in
full of the aggregate exercise price therefor (or the amount due on
exercise if the Contract permits installment payments) (a) in cash or
by certified check or (b) if the Contract (at the time of grant) so
permits, with previously acquired shares of Common Stock having an
aggregate fair market value, on the date of exercise, equal to the
aggregate exercise price of all options being exercised, or with any
combination of cash, certified check or shares of Common Stock.
A-3
<PAGE>
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a shareholder with respect to such
shares of Common Stock until the date of issuance of a stock
certificate to him for such shares; provided, however, that until such
stock certificate is issued, any option holder using previously
acquired shares of Common Stock in payment of an option exercise price
shall continue to have the rights of a shareholder with respect to such
previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF EMPLOYMENT.
Any holder of an option whose employment with the Company (and its
Parent and Subsidiaries) has terminated for any reason other than his
death or Disability (as defined in Paragraph 19) may exercise such
option, to the extent exercisable on the date of such termination, at
any time within 90 days after the date of termination, but not
thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if his employment shall be
terminated either (a) for cause, or (b) without the consent of the
Company, said option shall terminate immediately. Options granted under
the Plan shall not be affected by any change in the status of the
holder so long as he continues to be a full-time employee of the
Company, its Parent or any of its Subsidiaries (regardless of having
been transferred from one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time
of the determination, the individual was an employee of such
corporation for purposes of Section 422(a) of the Code. As a result, an
individual on military, sick leave or other bona fide leave of absence
shall continue to be considered an employee for purposes of the Plan
during such leave if the period of the leave does not exceed 90 days,
or, if longer, so long as the individual's right to reemployment with
the Company (or a related corporation) is guaranteed either by statute
or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by
contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the
Company, its Parent or any of its Subsidiaries, or interfere in any way
with the right of the Company, its Parent or any of its Subsidiaries to
terminate the employee's employment at any time for any reason
whatsoever without liability to the Company, its Parent or any of its
Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE.
If an optionee dies (a) while he is employed by the Company, its Parent
or any of its Subsidiaries, (b) within 90 days after the termination of
his employment (unless such termination was for cause or without the
consent of the Company) or (c) within one year following the
termination of his employment by reason of Disability, the option may
be exercised, to the extent exercisable on the date of his death, by
his executor, administrator or other person at the time entitled by law
to his rights under such option, at any time within one year after
death, but not thereafter and in no event after the date the option
would otherwise have expired.
A-4
<PAGE>
Any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective
date of such termination, at any time within one year after such date,
but not thereafter and in no event after the date the option would
otherwise have expired.
10. COMPLIANCE WITH SECURITIES LAWS.
The Committee may require, in its discretion, as a condition to the
exercise of any option that either (a) a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock to be issued upon such exercise
shall be effective and current at the time of exercise, or (b) there is
an exemption from registration under the Securities Act for the
issuance of shares of Common Stock upon such exercise. Nothing herein
shall be construed as requiring the Company to register shares subject
to any option under the Securities Act.
The Committee may require the optionee to execute and deliver to the
Company his representation and warranty, in form and substance
satisfactory to the Committee, that the shares of Common Stock to be
issued upon the exercise of the option are being acquired by the
optionee for his own account, for investment only and not with a view
to the resale or distribution thereof. In addition, the Committee may
require the optionee to represent and warrant in writing that any
subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to
the shares of Common Stock being sold, or (ii) a specific exemption
from the registration requirements of the Securities Act, but in
claiming such exemption, the optionee shall, prior to any offer of sale
or sale of such shares of Common Stock, provide the Company with a
favorable written opinion of counsel, in form and substance
satisfactory to the Company, as to the applicability of such exemption
to the proposed sale or distribution.
In addition, if at any time the Committee shall determine in its
discretion that the listing or qualification of the shares of Common
Stock subject to such option on any securities exchange or under any
applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of an option or the issue of shares of
Common Stock thereunder, such option may not be exercised in whole or
in part unless such listing, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Committee.
11. STOCK OPTION CONTRACTS.
Each option shall be evidenced by an appropriate Contract which shall
be duly executed by the Company and the optionee, and shall contain
such terms and conditions not inconsistent herewith as may be
determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
Notwithstanding any other provisions of the Plan, in the event of any
change in the outstanding Common Stock by reason of a stock dividend,
recapitalization, merger or consolidation in which
A-5
<PAGE>
the Company is the surviving corporation, split-up, combination or
exchange of shares or the like, the aggregate number and kind of shares
subject to the Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
In the event of (a) the liquidation or dissolution of the Company, (b)
a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization in which more than
50% of the shares of Common Stock of the Company entitled to vote are
exchanged, any outstanding options shall vest in their entirety and
become exercisable within the period of thirty (30) days commencing
upon the date of the action of the shareholders (or the Committee if
shareholders' action is not required) is taken to approve the
transaction and upon the expiration of that period all options and all
rights thereto shall automatically terminate, unless other provision is
made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN.
The Plan was adopted by the Committee on February 10, 1997. No option
may be granted under the Plan after February 9, 2007. The Committee,
without further approval of the Company's shareholders, may at any time
suspend or terminate the Plan, in whole or in part, or amend it from
time to time in such respects as it may deem advisable, including,
without limitation, in order that ISOs granted hereunder meet the
requirements for "incentive stock options" under the Code, to comply
with applicable requirements of the Securities Act and the Exchange
Act, and to conform to any change in applicable law or to regulations
or rulings of administrative agencies; provided, however, that no
amendment shall be effective without the requisite prior or subsequent
shareholder approval which would (a) except as contemplated in
Paragraph 12, increase the maximum number of shares of Common Stock for
which options may be granted under the Plan, (b) materially increase
the benefits to participants under the Plan or (c) change the
eligibility requirements for individuals entitled to receive options
hereunder. No termination, suspension or amendment of the Plan shall,
without the consent of the holder of an existing option affected
thereby, adversely affect his rights under such option. The power of
the Committee to construe and administer any options granted under the
Plan prior to the termination or suspension of the Plan nevertheless
shall continue after such termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS.
No ISO granted under the Plan shall be transferable otherwise than by
will or the laws of descent and distribution or a qualified domestic
relations order ("QDRO") as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder, and options may be exercised, during the lifetime of
the holder thereof, only by him or his legal representatives or
pursuant to a QDRO. A Nonqualified Option shall be transferable to the
extent determined by the Committee and set forth in the Contract.
Except to the extent provided above, options may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
A-6
<PAGE>
15. WITHHOLDING TAXES.
The Company may withhold cash and/or shares of Common Stock to be
issued with respect thereto having an aggregate fair market value equal
to the amount which it determines is necessary to satisfy its
obligation to withhold Federal, state and local income taxes or other
taxes incurred by reason of the grant or exercise of an option, its
disposition, or the disposition of the underlying shares of Common
Stock. Alternatively, the Company may require the holder to pay to the
Company such amount, in cash, promptly upon demand. The Company shall
not be required to issue any shares of Common Stock pursuant to any
such option until all required payments have been made. Fair market
value of the shares of Common Stock shall be determined in accordance
with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES.
The Company may endorse such legend or legends upon the certificates
for shares of Common Stock issued upon exercise of an option under the
Plan and may issue such "stop transfer" instructions to its transfer
agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the
Securities Act, (b) implement the provisions of the Plan or any
agreement between the Company and the optionee with respect to such
shares of Common Stock, or (c) permit the Company to determine the
occurrence of a "disqualifying disposition," as described in Section
421(b) of the Code, of the shares of Common Stock transferred upon the
exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in
connection with such issuance.
17. USE OF PROCEEDS.
The cash proceeds from the sale of shares of Common Stock pursuant to
the exercise of options under the Plan shall be added to the general
funds of the Company and used for such corporate purposes as the
Committee may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS.
Anything in this Plan to the contrary notwithstanding, the Committee
may, without further approval by the shareholders, substitute new
options for prior options of a Constituent Corporation (as defined in
Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS.
a. Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of
the Code.
A-7
<PAGE>
b. Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
c. Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section
424(a) of the Code applies (or would apply if the option
assumed or substituted were an ISO), or any Parent or any
Subsidiary of such corporation.
d. Disability. The term "Disability" shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of
the Code.
20. GOVERNING LAW.
The Plan, such options as may be granted hereunder and all related
matters shall be governed by, and construed in accordance with, the
laws of the State of New York.
21. PARTIAL INVALIDITY.
The invalidity or illegality of any provision herein shall not affect
the validity of any other provision.
22. SHAREHOLDER APPROVAL.
The Plan shall be subject to approval by the holders of a majority of
the Company's stock outstanding and entitled to vote thereon at the
next meeting of its shareholders. No options granted hereunder may be
exercised prior to such approval, provided that the date of grant of
any options granted hereunder shall be determined as if the Plan had
not been subject to such approval. Notwithstanding the foregoing, if
the Plan is not approved by a vote of the shareholders of the Company
on or before May 6, 1998, the Plan and any options granted hereunder
shall terminate.
A-8
<PAGE>
PROXY
AMERICAN CLAIMS EVALUATION, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary Gelman, Peter Gutmann and Edward M. Elkin
as Proxies, each with the power to appoint a substitute, and hereby authorizes
them to represent and to vote, as designated below, all the Common Shares of
American Claims Evaluation, Inc. held of record by the undersigned on August 7,
1997 at the Annual Meeting of Shareholders to be held on September 16, 1997 or
any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED
1. Election of Directors: Gary Gelman,
Peter Gutmann and Edward M. Elkin
FOR all WITHHOLD (Instruction: To withhold
Nominees listed AUTHORITY authority to vote for any
(except as to vote for all individual nominee or
marked to the Nominees nominees, write such
contrary) listed nominee's name in the
line(s) provided below)
____________________
|_| |_| ____________________
2. Approval of (i) the 1997 Stock Incentive Plan; and (ii)
ratification of the grants previously made under such Plan.
|_| |_| |_|
FOR AGAINST ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. This Proxy, when properly executed,
will be voted in the manner directed herein by the undersigned shareholder. If
no direction is made, the Proxy will be voted FOR Proposals 1 and 2.
Please sign exactly as name appears hereon.
__________________________________
(Signature)
__________________________________
(Signature if held jointly)
Dated:________________________________
When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person. Please note any change in your address alongside the
address as it appears in the proxy.
PLEASE MARK IN BLUE OR BLACK INK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
