SCHEDULE 14A INFORMATION
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clickNsettle.com, Inc.
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
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4) Date Filed:
CLICKNSETTLE.COM, INC.
1010 Northern Boulevard, Suite 336
Great Neck, New York 11021
(516) 829-4343
October 25, 2002
Dear Shareholders:
On behalf of the Board of Directors and management of clickNsettle.com,
Inc. (the "Company"), I cordially invite you to attend the Annual Meeting of
Shareholders to be held on Friday, December 13, 2002, at 11:30 a.m., at the
Company's principal offices, located at 1010 Northern Boulevard, Suite 336,
Great Neck, New York 11021.
The matters to be acted upon at the meeting are fully described in the
attached Notice of Annual Meeting of Shareholders and Proxy Statement. In
addition, certain of our directors and executive officers will be present to
respond to any questions that you may have. Accompanying the attached Proxy
Statement is a Proxy Card and our Annual Report. This report describes our
financial and operational activities.
Whether or not you plan to attend the annual meeting, please complete,
sign, and date the enclosed proxy card and return it in the accompanying
envelope as promptly as possible. If you attend the Annual Meeting, and I hope
you will, you may vote your shares in person even if you have previously mailed
in a proxy card.
We look forward to greeting our shareholders at the meeting.
Sincerely,
Roy Israel
Chief Executive Officer, President,
and Chairman of the Board
CLICKNSETTLE.COM, INC.
1010 Northern Boulevard, Suite 336
Great Neck, New York 11021
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 13, 2002
--------------
TO THE SHAREHOLDERS OF
CLICKNSETTLE.COM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of clickNsettle.com, Inc., a Delaware corporation (the
"Company"), will be held in the main conference room at our principal offices,
located at 1010 Northern Boulevard, Suite 336, Great Neck, New York 11021, on
Friday, December 13, 2002, at 11:30 a.m., for the following purposes:
1. To elect directors of the Company to hold office until the next Annual
Meeting or until their respective successors are duly elected and qualified;
2. To ratify the appointment of Grant Thornton LLP as our independent
accountants for the fiscal year ending June 30, 2003;
3. To consider and act upon a proposal to increase the number of options
annually granted to non-employee directors of the Company pursuant to the
Company's Amended and Restated 1996 Incentive and Nonqualified Stock Option Plan
(the "1996 Stock Option Plan"); and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on October 25, 2002
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournments thereof. Representation
of at least a majority of all outstanding shares of our common stock is required
to constitute a quorum. Accordingly, it is important that your stock be
represented at the meeting. The list of shareholders entitled to vote at the
Annual Meeting will be available for examination by any shareholder at our
offices at 1010 Northern Boulevard, Suite 336, Great Neck, New York 11021 for
ten (10) days prior to December 13, 2002.
Whether or not you plan to attend the Annual Meeting, please complete,
date, and sign the enclosed proxy card and mail it promptly in the
self-addressed envelope enclosed for your convenience. You may revoke your proxy
at any time before it is voted.
By Order of the Board of Directors,
Roy Israel,
Chairman
Great Neck, New York
October 25, 2002
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT; ACCORDINGLY, WE URGE YOU TO DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING.
--------------------------------------------------------------------------------
2
CLICKNSETTLE.COM, INC.
TABLE OF CONTENTS
Page
----
PROXY STATEMENT...............................................................4
INFORMATION CONCERNING VOTE...................................................4
General...............................................................4
Voting Rights and Outstanding Shares..................................4
Revocability of Proxies...............................................4
Voting Procedures.....................................................4
ELECTION OF THE BOARD OF DIRECTORS............................................5
Director Nominees.....................................................5
Committees of the Board of Directors and Meeting Attendees............6
Executive Officers....................................................7
EXECUTIVE COMPENSATION AND OTHER INFORMATION..................................7
Summary Compensation Table............................................7
Directors' Compensation...............................................8
Employment Contracts and Termination of Employment and Change
In Control Arrangements...............................................8
REPORT OF THE AUDIT COMMITTEE ...............................................10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION......................11
APPOINTMENT OF INDEPENDENT ACCOUNTANTS.......................................12
AMEND THE COMPANY'S AMENDED AND RESTATED 1996 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN TO INCREASE THE NUMBER OF OPTIONS GRANTED ANNUALLY TO
NON-EMPLOYEE DIRECTORS OF THE COMPANY .......................................12
OTHER MATTERS ARISING AT THE ANNUAL MEETING..................................13
PRINCIPAL SHAREHOLDERS.......................................................14
INTERESTED PARTY TRANSACTIONS................................................16
SHAREHOLDER PROPOSALS........................................................16
COST OF SOLICITATION OF PROXIES..............................................16
SECTION 16(a) REPORTING DELINQUENCIES........................................16
ANNUAL REPORT ON FORM 10-KSB.................................................16
3
CLICKNSETTLE.COM, INC.
1010 Northern Boulevard, Suite 336
Great Neck, New York 11021
--------------
PROXY STATEMENT
--------------
For Annual Meeting of Shareholders
to be Held on December 13, 2002
--------------
Approximate Mailing Date of Proxy Statement and Form of Proxy: October 28, 2002.
INFORMATION CONCERNING VOTE
General
This Proxy Statement and the enclosed form of proxy is furnished in
connection with the solicitation of proxies by the Board of Directors of
clickNsettle.com, Inc., a Delaware corporation (the "Company"), for use at the
annual meeting of shareholders to be held on Friday, December 13, 2002 at 11:30
a.m., and at any and all adjournments thereof (the "Annual Meeting"), with
respect to the matters referred to in the accompanying notice. The Annual
Meeting will be held at our principal offices, located at 1010 Northern
Boulevard, Suite 336, Great Neck, New York 11021.
Voting Rights and Outstanding Shares
Only shareholders of record at the close of business on October 25,
2002 are entitled to notice of and to vote at the Annual Meeting. As of the
close of business on October 8, 2002, 1,450,259 shares of our common stock, par
value $.001 per share, were issued, of which 1,408,176 shares were outstanding.
Each share of common stock entitles the record holder thereof to one (1) vote on
all matters properly brought before the Annual Meeting.
Revocability of Proxies
A shareholder who executes and mails a proxy in the enclosed return
envelope may revoke such proxy at any time prior to its use by notice in writing
to the Secretary of our company, at the above address, or by revocation in
person at the Annual Meeting. Unless so revoked, the shares represented by duly
executed proxies received by us prior to the Annual Meeting will be presented at
the Annual Meeting and voted in accordance with the shareholder's instructions
marked thereon. If no instructions are marked thereon, proxies will be voted FOR
the election as directors of the nominees named below under the caption
"ELECTION OF DIRECTORS," FOR the ratification of the independent accountants and
FOR the amendment to the Company's Amended and Restated 1996 Incentive and
Nonqualified Stock Option Plan. In their discretion, the proxies are authorized
to consider and vote upon such matters incident to the conduct of the meeting
and upon such other business matters or proposals as may properly come before
the meeting, that our Board of Directors does not know of in a reasonable time
prior to this solicitation.
Voting Procedures
All votes shall be tabulated by the inspector of elections appointed
for the Annual Meeting, who shall separately tabulate affirmative and negative
votes, abstentions, and broker non-votes. The presence of a quorum for the
Annual Meeting, defined here as a majority of the votes entitled to be cast at
the Annual Meeting, is required. Votes withheld from director nominees and
abstentions will be counted in determining whether a quorum has been reached.
Broker-dealer non-votes are not counted for quorum purposes.
4
Assuming a quorum has been reached, a determination must be made as
to the results of the vote on each matter submitted for shareholder approval.
Director nominees must receive a plurality of the votes cast at the meeting,
which means that a vote withheld from a particular nominee or nominees will not
affect the outcome of the meeting. In order to approve proposals 2 and 3, a
majority of the votes cast must be voted affirmatively for such proposal.
PROPOSAL 1: ELECTION OF THE BOARD OF DIRECTORS
The Board of Directors has nominated seven (7) persons to be elected
as Directors at the Annual Meeting and to hold office until the next annual
meeting or until their successors have been duly elected and qualified. It is
intended that each proxy received by us will be voted FOR the election, as
directors of the Company, of the nominees listed below, unless authority is
withheld by the shareholder executing such proxy. Shares may not be voted
cumulatively. Each of such nominees has consented to being nominated and to
serve as a director of the Company if elected. If any nominee should become
unavailable for election or unable to serve, it is intended that the proxies
will be voted for a substitute nominee designated by the Board of Directors. At
the present time, the Board of Directors knows of no reason why any nominee
might be unavailable for election or unable to serve. The proxies cannot be
voted for a greater number of persons than the number of nominees named herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ALL THE
DIRECTOR NOMINEES.
Director Nominees
The following table sets forth certain information with respect to
the nominees for directors:
Company Positions Director of the
Name and Offices Held Company Since
------------------------- -------------------------------------------- --------------------
Roy Israel Chief Executive Officer, President and February 1994
Chairman of the Board of Directors
Anthony J. Mercorella Director, Compensation Committee member February 1997
Kenneth G. Geraghty Director Nominee, Audit Committee nominee (1)
Robert M. Silverson, Jr. Director, Compensation Committee and Audit December 2001
Committee member
Willem F. Specht Director of Information Technology and December 2001
Director
Corey J. Gottlieb Director, Audit Committee member December 2001
Randy Gerstenblatt Director December 2001
(1) standing for election for the first time
ROY ISRAEL, age 42, has been our Chairman of the Board of Directors,
Chief Executive Officer, and President since February 1994. Immediately prior to
holding such positions, Mr. Israel was President, Director, and founder of
National Arbitration & Mediation, Inc. ("NA&M"), a wholly-owned subsidiary of
the Company until merged with the Company in June 1999.
5
ANTHONY J. MERCORELLA, Esq., age 75, is a senior partner of the law
firm of Wilson, Elser, Moskowitz, Edelman & Dicker and has been a partner with
such firm since 1984, which he joined upon his retirement as a Justice of the
Supreme Court of the State of New York. Judge Mercorella currently serves as an
independent hearing officer for us.
KENNETH G. GERAGHTY, age 51, has been the Executive Vice President
and Chief Financial Officer of Insurance Services Office, Inc. since February
2000. From March 1999 through January 2000, Mr. Geraghty was the Executive Vice
President and Chief Administrative Officer of Dycom Industries, Inc., a company
which provides engineering, construction and maintenance services to
telecommunications providers. Prior to holding this position, Mr. Geraghty was
the Senior Vice President, Strategic Finance of Massachusetts Mutual Life
Insurance Company from December 1997 through March 1999. From October 1995
through May 1997, Mr. Geraghty was the Vice President, Change Management for
American Express Company. Mr. Geraghty holds BS and MS degrees in Chemical
Engineering and a MBA degree in Finance.
ROBERT M. SILVERSON, JR., Esq., age 59, is a principal in the law
firm of Silverson, Pareres & Lombardi LLP and has been a principal with such
firm since founding it in 1992. Judge Silverson previously served as a Judge of
the Civil Court of the City of New York. Judge Silverson currently serves as an
independent hearing officer for us.
WILLEM F. SPECHT, age 42, has been our Director of Information
Technology since May 1998 and previously held the position of Systems Analyst
with us since April 1995.
COREY J. GOTTLIEB, age 39, is the President/CEO of Targeted Media
Partners LTD, a sales, marketing and consulting company for established and
start-up ventures in the commercial advertising sector. From January 1998
through August 2001, Mr. Gottlieb was the Senior Vice President & National Sales
Manager for Transportation Displays Incorporated (TDI). Prior to holding this
position, Mr. Gottlieb was Senior Vice President & National Sales Manager for
Paramount Pictures Domestic Television Group for seven years and the first
Senior Vice President of Sales for the UPN television network. Mr. Gottlieb
holds a BS degree in Finance and a minor in Computer Science.
RANDY GERSTENBLATT, age 43, is currently the Vice President/Director
of ESPN/ABC Sports Customer Marketing and Sales. Prior to holding this position,
Mr. Gerstenblatt was Vice President of ESPN Customer Marketing and Sales from
January 2000 through October 2000. From November 1997 through January 2000, Mr.
Gerstenblatt was the Director of Integrated Sales and Marketing at ESPN. From
1991 through November 1997, he was the Director of Group Station Sales at ABC
National Television Sales.
Committees of the Board of Directors and Meeting Attendees
The Board of Directors held seven (7) meetings during fiscal year
2002.
The Compensation Committee is authorized to review and make
recommendations to our Board of Directors on all matters regarding the
remuneration of our executive officers, including the administration of our
compensation plans, other than our Stock Option Plan. The current members of
this committee are Judge Mercorella and Judge Silverson. The Compensation
Committee held one (1) meeting during fiscal year 2002.
The Audit Committee is responsible for making recommendations to our
Board of Directors as to the selection of our independent auditor, maintaining
communication between our Board and the independent auditor, reviewing the
annual audit report submitted by the independent auditor, and determining the
nature and extent of issues, if any, presented by such audit warranting
consideration by our Board. The current members of this committee are Corey
Gottlieb, Judge Silverson and Frank Coyne. As ISO Investment Holdings, Inc. has
the right to designate an individual to be included as a director nominee,
Kenneth Geraghty will be nominated in place of Mr. Coyne, also of Insurance
Services Office, Inc., as a director and as a member of this committee if
elected to the Board. The Audit Committee held one (1) meeting during fiscal
year 2002.
6
Executive Officers
In addition to Mr. Israel, we have one additional executive officer:
PATRICIA GIULIANI-RHEAUME, age 44, has been our Vice President,
Chief Financial Officer, and Treasurer since February 1997. Immediately prior to
holding such positions, Ms. Giuliani-Rheaume was the Vice President and
Corporate Controller of The Robert Plan Corporation, an insurance services
company, since April 1991. Prior thereto, Ms. Giuliani-Rheaume was an audit
senior manager with KPMG Peat Marwick LLP. Ms. Giuliani-Rheaume is a certified
public accountant and a member of the AICPA and the New York State Society of
CPAs.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following summarizes the aggregate compensation paid during
fiscal year 2002 to our Chief Executive Officer and any officer who earned more
than $100,000 in salary and bonus (the "Named Persons"):
Annual Long Term
Compensation Compensation
------------ ------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options(1) Compensation
------------------ ---- ------ ----- ------------ ---------- ------------
Roy Israel,
President, Chief 2002 $284,065 -- $24,066 (2) 150,000 (3) $ 14,110 (4)
Executive Officer
and Chairman of the 2001 $268,108 -- $17,490 (2) 28,334 $ 14,110 (4)
Board
2000 $254,755 $100,000 $17,618 (2) 30,000 $ 14,110 (4)
Patricia Giuliani-
Rheaume, Vice 2002 $142,019 -- -- 35,000 (3) $ 2,400 (4)
President, Chief
Financial Officer 2001 $137,019 -- -- 10,000 $ 2,400 (4)
and Treasurer
2000 $111,067 -- -- 6,667 $ 2,400 (4)
Kathleen O'Donnell,
Vice President of 2002 $112,039 -- -- 35,000 (3) --
Operations (5)
2001 $104,115 -- -- 6,667 --
2000 $ 93,708 -- -- 10,000 --
Willem F. Specht,
Director of 2002 $100,192 -- -- 35,000 (3) --
Information
Technology and 2001 $ 95,515 -- -- -- --
Director
2000 $ 80,927 -- -- 10,000 --
7
(1) Such option amounts have been restated to reflect the 1-for-3 reverse
stock split of our common stock effectuated on August 20, 2001.
(2) Such amount represents tax gross ups for Mr. Israel for medical, life and
disability payments.
(3) Such figure is also reflected in the table for Options Granted in Last
Fiscal Year.
(4) Such amount represents premium payments on life insurance policies for the
named executive officer.
(5) Became an Executive Officer in February 2000; position terminated as of
August 16, 2002.
Options Granted in Last Fiscal Year
-----------------------------------
Number of Securities Percent of Total Options Exercise Market Price
Name and Underlying Granted to Employees in or Base on Date of
Principal Position Options Granted Fiscal Year Price Grant Expiration Date
------------------ --------------- ----------- ----- ----- ---------------
Roy Israel,
President, Chief
Executive Officer and
Chairman of the Board 150,000 57.9% (1) $1.39 (2)
Patricia Giuliani-
Rheaume, Vice
President, Chief
Financial Officer
and Treasurer 35,000 13.5% $ 1.39 $1.39 3/15/12
Kathleen O'Donnell,
Vice President of
Operations 35,000 13.5% $ 1.39 $1.39 3/15/12
Willem F. Specht,
Director of Information
Technology and Director 35,000 13.5% $ 1.39 $1.39 3/15/12
(1) 130,000 options are exercisable at a price of $1.529 per share and 20,000
options at a price of $1.39 per share.
(2) The expiration date for the 130,000 options priced at $1.529 is 3/15/07
and the expiration date for the 20,000 options priced at $1.39 is 3/15/12.
Directors' Compensation
Non-employee directors receive a fee of $250 for each meeting of the
Board attended, a fee of $150 for each meeting of any committee of the Board
attended and reimbursement of their actual expenses. In addition, pursuant to
our Amended and Restated Incentive and Nonqualified 1996 Stock Option Plan, each
non-employee director will be granted options to purchase 833 shares of our
common stock per annum at an exercise price equal to the closing bid price of
our common stock as reported by the Nasdaq SmallCap Market on the date of grant,
which shall be the last trading date in June of each year. Under Proposal No. 3
described below, if approved, the options granted annually to each non-employee
director will be increased from options to purchase 833 shares to options to
purchase 2,500 shares of common stock.
Employment Contracts and Termination of Employment
and Change In Control Arrangements
Roy Israel. Mr. Israel's prior employment agreement expired on June
30, 2002. In March 2002, we entered into a new employment agreement with Mr.
Israel effective as of July 1, 2002. Pursuant to this new agreement, he
currently receives an annual base salary of $301,100, an annual base salary
increase equal to the greater of 6% or an amount which reflects the increase in
the Urban Consumer Price Index, and an annual bonus based on the achievement of
8
specified criteria with respect to revenues, cash flow and/or pretax income
(loss). In addition, the agreement provides, among other things, that we shall
pay up to an aggregate of $15,000 per policy year for a key man life insurance
policy in favor of us for $1,000,000 and life insurance in favor of the estate
of Mr. Israel, a disability policy for coverage of 60% of his base salary, and
an allowance for leasing an automobile (up to a monthly lease payment of
$1,000.) If this agreement is terminated other than for cause or as a result of
a change in duties, Mr. Israel will be entitled to the greater of (i) his then
current base salary and severance bonus for the remainder of the employment term
or (ii) three times his then current base salary and severance bonus, to be paid
over a one-year period. The severance bonus is 115% of the bonus paid for the
full fiscal year immediately prior to termination. In addition, all unvested
options shall immediately vest. If this agreement is terminated due to a change
in control, Mr. Israel will be entitled to the same severance package as
previously described but to be paid in one lump sum. Mr. Israel's employment
agreement with us expires June 30, 2007 and automatically renews for one-year
terms unless terminated at least 90 days prior to the end of an employment term
by either party. If we give notice of non-renewal of the agreement or we do not
enter into a new employment agreement with Mr. Israel, he is entitled to receive
one year of his base salary plus the severance bonus amount which shall be paid
to Mr. Israel during the one-year period following the end of the employment
term. The agreement also contains a one-year non-competition clause if the
agreement is terminated or upon expiration. In the event of a breach of the
agreement by us, the non-competition clause is null and void.
Patricia Giuliani-Rheaume. Ms. Giuliani-Rheaume's employment
agreement with us currently expires December 31, 2002. It automatically renews
for one-year terms unless terminated at least 45 days prior to the end of an
employment term by either party. Pursuant to this agreement, she currently
receives an annual base salary of $145,000, is eligible for an annual bonus at
the discretion of the Company's Chief Executive Officer, and received a one-time
grant of options to purchase 13,333 shares of our common stock (as restated to
reflect the 1-for-3 reverse stock split of our common shares effectuated on
August 20, 2001) in 1997. In addition, the agreement provides, among other
things, that we shall pay for a life insurance policy of $250,000, full family
health insurance, and a $400 a month allowance for leasing an automobile. The
agreement also contains a one-year non-competition clause if the agreement is
terminated for any reason or upon expiration. If the agreement is terminated
without cause, Ms. Giuliani-Rheaume shall receive a payment of severance of an
amount equal to six months of the base salary in effect at such time.
Willem Specht. Mr. Specht's agreement contains a one-year
non-competition clause if his employment is terminated for any reason. His
salary and bonus are set at the discretion of the Chief Executive Officer. Mr.
Specht's employment is terminable at will.
9
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent we specifically incorporate this Report by
reference therein.
In May 2000, a written charter of the Audit Committee of the Board of
Directors was approved by the full Board. In September 2002, the Board approved
certain amendments to the charter. The complete text of the revised charter,
which reflects standards set forth in SEC regulations and Nasdaq rules, is
reproduced in Appendix A to this proxy statement.
As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:
a. the Committee is charged with monitoring the preparation of
quarterly and annual financial reports by our management, including
discussions with our management and the outside auditors about draft
annual financial statements and key accounting and reporting
matters;
b. the Committee is responsible for matters concerning the relationship
between us and the outside auditors, including their appointment or
removal; reviewing the scope of their audit services and related
fees, as well as any other services being provided to us; and
determining whether the outside auditors are independent (based in
part on the annual letter provided to us pursuant to Independence
Standards Board Standard No. 1); and
c. the Committee oversees management's implementation of effective
systems of internal controls, including review of policies relating
to legal and regulatory compliance, ethics and conflicts of
interests.
The Committee has implemented procedures to ensure that during the course
of each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's charter.
To carry out its responsibilities, the Committee met one time during fiscal year
2002. During fiscal year 2003, the Committee will meet quarterly with the
outside auditors to review the quarterly results. In addition, the Committee
will meet with the outside auditors to review and approve the planning of the
annual audit and will also meet at the conclusion of the annual audit to review
the results thereof. Each member of the audit committee is independent pursuant
to Rule 4200 (a)(14) of the Nasdaq Listing Standards.
In overseeing the preparation of our financial statements, the Committee
met with both management and the outside auditors to review and discuss all
financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee discussed the statements with both management and
the outside auditors. The Committee's review included discussion with the
outside auditors of matters required to be discussed pursuant to Statement on
Auditing Standards No. 61 (Communication With Audit Committees).
With respect to the outside auditors, the Committee, among other things,
discussed with Grant Thornton LLP matters relating to its independence,
including the disclosures made to the Committee as required by the Independence
Standards Board Standard No. 1(Independence Discussions with Audit Committees).
On the basis of these reviews and discussions, the Committee recommended
to the Board of Directors that the Board approve the inclusion of our audited
financial statements in our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2002 for filing with the Securities and Exchange Commission.
The Audit Committee
-------------------
Corey J. Gottlieb, Chairman
Frank J. Coyne
Honorable Robert M. Silverson, Jr.
September 2002
10
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Compensation Committee to develop, administer and
review our compensation plans, programs, and policies; to monitor the
performance and compensation of executive officers; and to make appropriate
recommendations and reports to the Board of Directors relating to executive
compensation.
Our compensation program is intended to motivate, retain and attract
management, thus linking incentives to financial performance and creating
enhanced shareholder value. The program's fundamental philosophy is to tie the
amount of compensation "at risk" for an executive to his or her contribution to
our success in achieving superior performance objectives.
It is currently anticipated that the compensation program will consist of
two components: (1) a base salary as set forth in each executive's employment
agreement, and (2) the potential for an annual cash and/or stock option bonus
equal to a percentage of the executive's base salary, depending upon the
satisfaction of certain general performance criteria established by the
Compensation Committee for each position and evaluated at the end of each fiscal
year. The criteria may relate to overall Company performance, the individual
executive's performance, or a combination of the two, depending upon the
particular position at issue. The second component constitutes the "at risk"
portion of the compensation program.
The Compensation Committee
--------------------------
Honorable Anthony J. Mercorella, Chairman
Honorable Robert M. Silverson, Jr.
September 2002
11
PROPOSAL 2: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
It is proposed that the shareholders ratify the appointment of Grant
Thornton LLP ("Grant Thornton") as our independent accountants for fiscal year
2003. Grant Thornton has served as our independent accountants since March 4,
1997.
Representatives of Grant Thornton, who audited our fiscal year 2002
financial statements, are expected to be present at the Annual Meeting with the
opportunity to make a statement, if they so desire, and they are expected to be
available to respond to appropriate questions. Approval by the shareholders of
the appointment of independent accountants is not required, but the Board deems
it desirable to submit the matter to the shareholders for ratification. If the
majority of shareholders voting at the meeting should not approve the selection
of Grant Thornton, the selection of independent accountants will be reconsidered
by the Board of Directors.
The following table sets forth the fees billed by our independent
auditors, Grant Thornton, for the fiscal year ended June 30, 2002:
Audit fees and quarterly reviews $53,600
Financial information systems design and implementation fees --
All other fees:
Tax return preparation $18,500
Audit related services 5,185
Non-audit related services 3,500 27,185
------- -------
Total Fees $80,785
The Audit Committee considered and determined that the services performed
for "financial information systems design and implementation fees" and "all
other fees" are compatible with maintaining the independence of the independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
RATIFICATION OF THE INDEPENDENT ACCOUNTANTS.
PROPOSAL 3: TO AMEND THE COMPANY'S AMENDED AND RESTATED 1996 INCENTIVE AND
NONQUALIFIED STOCK OPTION PLAN TO INCREASE THE NUMBER OF OPTIONS GRANTED
ANNUALLY TO NON-EMPLOYEE DIRECTORS OF THE COMPANY
The Board of Directors, on September 24, 2002, approved, subject to
shareholder approval, an amendment to our Amended and Restated 1996 Incentive
and Nonqualified Stock Option Plan (the "1996 Stock Option Plan") to increase
the number of options granted annually to each non-employee director from
options to purchase 833 shares to options to purchase 2,500 shares. The proposed
amendment is attached hereto as Appendix B.
The purpose of this amendment is to continue to provide non-employee
directors the ability to acquire a proprietary interest in the Company through
the ownership of our common stock, to increase our ability to retain and
maintain qualified non-employee directors to serve on the Board, and to limit
the cash portion of compensation to the non-employee directors to the repayment
of attendance expenses.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF AMENDING THE 1996
STOCK OPTION PLAN TO INCREASE THE NUMBER OF OPTIONS GRANTED ANNUALLY TO
NON-EMPLOYEE DIRECTORS.
12
OTHER MATTERS ARISING AT THE ANNUAL MEETING
The matters referred to in the Notice of Annual Meeting and
described in this Proxy Statement are, to the knowledge of the Board of
Directors, the only matters that will be presented for consideration at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, the persons appointed by the accompanying proxy will vote on such
matters in accordance with their best judgment pursuant to the discretionary
authority granted to them in the proxy.
13
PRINCIPAL SHAREHOLDERS
Security Ownership of Management
The following table sets forth, as of October 8, 2002, certain
information with respect to the beneficial ownership of each class of our voting
equity securities by each director and director nominee, beneficial owners of 5%
or more of our common stock, the Named Persons and all our directors and
executive officers as a group:(1)
Amount and Nature of
Name of Beneficial Owner(2) Beneficial Ownership(3) Percent of Total
------------------------------------------------- ----------------------- ----------------
Roy Israel(4) 548,546 35.3%
President, Chief Executive Officer and
Chairman of the Board
Frank J. Coyne(5)(14) 282,077 19.2%
Director
Anthony J. Mercorella(6) 3,833 *
Director
Robert M. Silverson, Jr.(7) 1,833 *
Director
Willem F. Specht(8) 11,000 *
Director of Information Technology and Director
Corey J. Gottlieb(9) 4,166 *
Director
Randy Gerstenblatt(9) 5,547 *
Director
Kenneth G. Geraghty(10)(14) 280,411 19.1%
Director Nominee
Patricia A. Giuliani-Rheaume(11) 51,134 3.5%
Vice President, Chief Financial Officer and
Treasurer
ISO Investment Holdings, Inc.(12)(14) 280,411 19.1%
M. D. Sabbah(13) 97,500 6.9%
All Officers, Directors and Director 908,136 53.9%
Nominees as a Group
(8 persons)(4)(5)(6)(7)(8)(9)(10)(11)
----------
* Less than one percent (1%).
14
(1) Applicable percentage of ownership is based on 1,408,176 shares of our
common stock, which were outstanding on October 8, 2002, plus, for each
person or group, any securities that person or group has the right to
acquire within sixty (60) days pursuant to options and warrants.
(2) The address for each individual is c/o clickNsettle.com, Inc., 1010
Northern Boulevard, Suite 336, Great Neck, New York 11021.
(3) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended, and unless
otherwise indicated, represents shares for which the beneficial owner has
sole voting and investment power. The percentage of class is calculated in
accordance with Rule 13d-3.
(4) Includes options to purchase 128,333 shares of our common stock that are
vested and are exercisable or will vest and become exercisable within 60
days from the date hereof. Also includes 20,634 shares owned by Mr.
Israel's wife, Carla Israel, the Secretary of our company, and options to
purchase 18,500 shares of our common stock that are vested and are
exercisable. Mr. Israel disclaims beneficial ownership as to such
securities.
(5) Includes warrants to purchase 60,000 shares of our common stock and
options to purchase 1,666 shares of our common stock, all of which are
vested and are exercisable. The common shares and warrants are owned by
ISO Investment Holdings, Inc. Mr. Coyne disclaims beneficial ownership of
these securities.
(6) Includes options to purchase 3,500 shares of our common stock, which are
vested and exercisable.
(7) Includes options to purchase 1,833 shares of our common stock, which are
vested and exercisable.
(8) Includes options to purchase 11,000 shares of our common stock, which are
vested and exercisable.
(9) Includes options to purchase 833 shares of our common stock, which are
vested and exercisable.
(10) Includes warrants to purchase 60,000 shares of our common stock, which are
vested and exercisable. The common shares and warrants are owned by ISO
Investment Holdings, Inc. Mr. Geraghty disclaims beneficial ownership of
these securities.
(11) Includes options to purchase 51,134 shares of our common stock, which are
vested and are exercisable or will vest and become exercisable within 60
days from the date hereof.
(12) Includes warrants to purchase 60,000 shares of our common stock, which are
vested and exercisable.
(13) This information was taken from an Amendment to Form 13D filed by M. D.
Sabbah on June 2, 2000.
(14) The common shares and warrants are owned by ISO Investment Holdings, Inc.
Pursuant to its stock purchase agreement for these shares, ISO Investment
Holdings, Inc. is entitled to designate one individual as a board nominee.
Mr. Coyne, President and Chief Executive Officer of Insurance Services
Office, Inc., has been its designee to date. Mr. Geraghty, Executive Vice
President and Chief Financial Officer of Insurance Services Office, Inc.,
has been designated to replace Mr. Coyne as its designee with respect to
the next election of board members.
15
INTERESTED PARTY TRANSACTIONS
Since our inception, there have not been any material transactions
between us and any of our officers and directors, except as set forth herein and
no additional transactions are currently contemplated. Judge Mercorella and
Judge Silverson currently serve as independent hearing officers for us through
their respective law firms.
On March 14, 2002, we extended our March 1998 purchase plan (the
"Purchase Plan"), pursuant to which the number of shares of our common stock
eligible for purchase under the Purchase Plan remained at an aggregate of
266,667 shares. The Purchase Plan shall expire on the earlier of all of the
shares being purchased or March 14, 2003, provided, however, that the Purchase
Plan may be discontinued at any time by us. As of October 8, 2002, we have
purchased 42,083 shares under the Purchase Plan for an aggregate cost of
$83,918.
SHAREHOLDER PROPOSALS
A shareholder who wishes to present a proposal for action at our
2003 Annual Meeting of Shareholders must submit such proposal to us, and such
proposal must be received by us, no earlier than July 20, 2003 and no later than
September 20, 2003.
COST OF SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is made
by and on behalf of our Board of Directors. The cost of such solicitation will
be paid by us. Such cost includes the preparation, printing, and mailing of the
Notice of Annual Meeting, Proxy Statement, Annual Report, and form of proxy. The
solicitation will be conducted principally by mail, although our directors,
officers, and employees (at no additional compensation) may solicit proxies
personally or by telephone or telegram. Arrangements will be made with brokerage
houses and other custodians, nominees, and fiduciaries for the forwarding of
proxy material to the beneficial owners of shares held of record by such
fiduciaries, and we may reimburse such persons for their reasonable expenses in
so doing.
SECTION 16(a) REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who beneficially own more than ten
percent (10%) of a registered class of our equity securities, to file with the
U.S. Securities and Exchange Commission (the "SEC") and the Nasdaq SmallCap
Market reports of ownership and changes in ownership of our common stock and
other equity securities. Executive officers, directors, and greater than ten
percent (10%) beneficial owners are required by SEC regulation to furnish us
with copies of all Section 16(a) reports that they file. Based solely upon a
review of the copies of such reports furnished to us or written representations
that no other reports were required, we believe that, during fiscal year 2002,
all filing requirements applicable to our executive officers, directors, and
greater than ten percent (10%) beneficial owners were met.
ANNUAL REPORT ON FORM 10-KSB
We are providing the Form 10-KSB as part of our Annual Report to
each person whose proxy is solicited. We do not undertake to furnish without
charge copies of all exhibits to our Form 10-KSB, but will furnish any exhibit
upon the payment of Twenty Cents ($0.20) per page or a minimum charge of Five
Dollars ($5.00). Such written requests should be directed to Patricia
Giuliani-Rheaume, Chief Financial Officer, clickNsettle.com, Inc., 1010 Northern
Boulevard, Suite 336, Great Neck, New York 11021. Each such request must set
forth a good faith representation that, as of October 25, 2002, the person
making the request was a beneficial owner of securities entitled to vote at the
Annual Meeting. We incorporate herein the Annual Report by reference.
By Order of the Board of Directors,
Roy Israel
Chairman
Great Neck, New York
October 25, 2002
16
Appendix A
clickNsettle.com, Inc.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") of clickNsettle.com, Inc. (the "Corporation")
in fulfilling its oversight responsibilities by:
1. Reviewing the financial reports and other financial related
information released by the Corporation to shareholders, the public,
or in certain circumstances, to governmental bodies.
2. Reviewing the Corporation's system of internal controls regarding
finance, accounting, business conduct, ethics and legal compliance
that management and the Board have established.
3. Reviewing the Corporation's accounting and financial reporting
processes.
4. Reviewing and appraising the performance of the Corporation's
independent auditors.
5. Providing an open avenue of communication between the independent
auditors and the Board.
II. COMPOSITION
The Committee shall be comprised of at least two directors, each of whom shall
be independent directors and free from any relationship that would interfere
with the exercise of his or her independent judgment as a member of the
Committee.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices.
The members of the Committee shall be elected or reappointed by the Board
annually for a one-year term. A Chairperson shall be appointed by the Board.
III. MEETINGS
The Committee will meet at least two times annually and be available to meet
more frequently as circumstances dictate. Scheduled meetings of the Committee
are (a) to review and approve the planning, staffing and scope of the annual
audit to be performed by the Corporation's independent auditors and (b) to
review and discuss the results of the audit and the Company's 10-K report, prior
to its filing. Incidental to any of these regularly scheduled meetings, the
Committee should meet, if necessary, with management and the independent
auditors in separate executive sessions to discuss any matters that the
Committee and each of these groups believe should be discussed privately.
IV. DUTIES
The Committee's primary duties are to:
o -Ensure that an open avenue of communication exists between
financial and senior management, independent accountants and the
Board.
o -Monitor the company's financial reporting, system of internal
controls and risk management process.
o -Review and evaluate the audit efforts of the company's independent
accountants.
In carrying out these duties, the Committee shall have the authority to retain
special legal, accounting or other consultants to advise the Committee. In
addition, the Committee may request any officer or employee of the company or
the company's outside counsel or independent accountants to attend a meeting of
the Committee or to meet with any members of, or consultants to, the Committee.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent accountants. Nor is it the duty
of the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent accountants or to ensure compliance with
laws and regulations.
V. RESPONSIBILITIES
To fulfill its responsibilities and duties, the Committee shall:
1. Review and reassess the adequacy of this Charter on an annual basis
or as conditions dictate.
2. Review and approve the Corporation's Business Conduct policies.
3. Review the Corporation's annual financial statements and other
reports and financial and related information released to
shareholders, the public, or in certain circumstances, to
governmental bodies, including any certification, report, opinion or
review rendered by the independent auditors.
4. Review the quarterly financial information with management as
necessary. The Chairperson of the Committee may represent the entire
Committee for purposes of this review.
5. Review with independent auditors the recommendations included in
their management letter, if any, and their informal observations
regarding the adequacy of overall financial and accounting
procedures of the Corporation. On the basis of this review, make
recommendations to senior management for any changes that seem
appropriate.
6. Prepare the minutes of each meeting, distribute to all members of
the Committee and provide periodic summary reports to the Board. The
permanent file of the minutes will be maintained by the Secretary of
the Corporation.
7. Directly responsible for the appointment, compensation and oversight
of the independent accountants. Review with management and recommend
to the Board the selection, retention or termination of the
independent auditors. On an annual basis, the Committee will review
and discuss with the auditors all significant relationships they
have with the Corporation, including non-audit services proposed or
performed, to determine and ensure the auditors' independence. The
independent auditors are ultimately accountable to the Board and the
Committee.
8. Review the fees, expenses and performance of the independent
auditors.
9. Annually consult with the independent auditors out of the presence
of management about internal controls and the completeness and
accuracy of the Corporation's financial statements.
10. Review with management and the independent accountants the effect of
transactions involving off balance sheet financing or special
purpose entities, if any.
11. Review with management and the independent accountants any
correspondence with regulators or governmental agencies and any
employee complaints or published reports, which raise material
issues regarding the company's financial statements or accounting
policies.
12. Review other matters related to the audit that are to be
communicated to the Committee under generally accepted auditing
standards.
13. Review the experience and qualifications of the senior members of
the independent accountant team and the quality control procedures
of the independent accountants.
14. Approve the retention of the independent accountants for any
non-audit service, when the fees for all such non-audit services, in
the aggregate, exceed 5% of the annual audit and tax fees paid to
such independent accountants.
15. Review and approve the company's hiring of employees of the
independent accountants who participated in the audit of the
company's financial statements in the past five (5) years.
16. Confirm with the independent accountants that they are ultimately
accountable to the Board and Committee, and take appropriate action
to ensure their independence.
17. On an annaual basis, obtain from the independent accountants a
written statement delineating all significant relationships they
have with the company, and discuss with them any relationships or
services that might impact their objectivity or independence.
18. Review significant risks or exposures for the company and assess any
steps management has taken to mitigate them.
19. Prepare a letter for inclusion in the annual proxy statement that
describes the Committee's composition and responsibilities,
including any required disclosure of the Committee's activities.
20. In consultation with the independent auditors, review the integrity
of the Corporation's financial reporting process, both internal and
external.
21. Review and consider the independent auditors' judgments about the
quality and appropriateness of the Corporation's accounting
principles and their application and underlying estimates as applied
in its financial reports.
22. Review and consider major changes to the Corporation's accounting
principles and practices as proposed by management or the
independent auditors.
23. Establish regular reporting to the Committee by management and the
independent auditors regarding any principal/critical risks,
emerging or developing issues and significant judgments made or to
be made in management's preparation of the financial statements.
24. Following completion of the annual audit, review separately with
management and the independent auditors any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
25. Review any significant disagreement among management and the
independent auditors in connection with the preparation of the
financial statements.
26. Review with the independent auditors and management the extent to
which changes or improvements in financial or accounting practices,
as approved by the Committee, have been implemented.
27. Review and approve all related party transactions.
28. Review the Corporation's operations and determine whether management
has established and maintains effective programs and processes to
ensure compliance with its Business Conduct policies.
29. Review management's programs and processes for risk management and
protection of the Corporation's assets and business.
30. Review management's monitoring of the Corporation's compliance with
the above programs to ensure that management has the proper review
system in place to ensure that the Corporation's financial
statements, reports and other financial information disseminated to
governmental organizations and the public satisfy legal
requirements.
31. With the Corporation's counsel, review legal compliance matters,
including corporate securities trading policies.
32. With the Corporation's counsel, review any legal matter that could
have a significant impact on the Corporation's financial statements.
33. Perform any other activities consistent with this Charter, the
Corporation's By-laws and government law, as the Committee or the
Board deems necessary or appropriate.
34. Report Committee actions to the Board with such recommendations as
the Committee may deem appropriate.
Appendix B
clickNsettle.com, Inc.
PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED 1996 INCENTIVE
AND NONQUALIFIED STOCK OPTION PLAN
Section 3 (b) of the Company's Amended and Restated 1996 Incentive and
Nonqualified Stock Option Plan is hereby amended as follows:
Delete the number [833] and replace it with the number [2,500].