SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
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clickNsettle.com, Inc.
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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number, or the Form or Schedule and the date of its filing.
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4) Date Filed:
CLICKNSETTLE.COM, INC.
1010 Northern Boulevard, Suite 336
Great Neck, New York 11021
(516) 829-4343
October 27, 2003
Dear Stockholders:
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
Stockholders to be held on Friday, December 12, 2003, 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 Stockholders 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 stockholders 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 STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 2003
--------------
TO THE STOCKHOLDERS OF
CLICKNSETTLE.COM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (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 12, 2003, 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, 2004;
3. To consider and take action on a proposal to approve an amendment to
the Company's Certificate of Incorporation authorizing the Board of Directors,
in its discretion, to increase the authorized common stock, par value $0.001 per
share, of the Company from 15,000,000 shares up to 25,000,000 shares and to
effect a 6-for-1 stock split of the outstanding shares of the Company's common
stock;
4. To consider and act upon a proposal to increase the number of shares of
common stock authorized for issuance under the Company's Amended and Restated
1996 Incentive and Nonqualified Stock Option Plan (the "1996 Stock Option
Plan"); and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on October 27, 2003
as the record date for the determination of stockholders 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 Annual Meeting. The list of stockholders entitled to vote at
the Annual Meeting will be available for examination by any stockholder at our
offices at 1010 Northern Boulevard, Suite 336, Great Neck, New York 11021 for
ten (10) days prior to December 12, 2003.
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 of the Board
Great Neck, New York
October 27, 2003
--------------------------------------------------------------------------------
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 ANNUAL 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 CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY AND
TO EFFECT A 6-FOR-1 STOCK SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK ................................. 12
AMEND THE COMPANY'S AMENDED AND RESTATED 1996 INCENTIVE AND NON QUALIFIED STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER ....................................... 14
OTHER MATTERS ARISING AT THE ANNUAL MEETING ............................................................... 14
PRINCIPAL STOCKHOLDERS .................................................................................... 15
INTERESTED PARTY TRANSACTIONS ............................................................................. 17
STOCKHOLDER PROPOSALS ..................................................................................... 17
COST OF SOLICITATION OF PROXIES ........................................................................... 17
SECTION 16(a) REPORTING DELINQUENCIES ..................................................................... 17
ANNUAL REPORT ON FORM 10-KSB .............................................................................. 17
3
CLICKNSETTLE.COM, INC.
1010 Northern Boulevard, Suite 336
Great Neck, New York 11021
--------------
PROXY STATEMENT
--------------
For Annual Meeting of Stockholders
to be Held on December 12, 2003
--------------
Approximate Mailing Date of Proxy Statement and Form of Proxy: October 29, 2003.
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 stockholders to be held on Friday, December 12, 2003 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 stockholders of record at the close of business on October 27,
2003 are entitled to notice of and to vote at the Annual Meeting. As of the
close of business on October 1, 2003, 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 stockholder 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 stockholder'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,
FOR the amendment to the Company's Certificate of Incorporation authorizing the
Board of Directors to increase the authorized common stock and to effect a
6-for-1 stock split of the outstanding shares of the Company's common stock and
FOR the amendment to the Company's 1996 Stock Option Plan with respect to an
increase in the number of common shares authorized for issuance thereunder. In
their discretion, the proxies are authorized to consider and vote upon such
matters incident to the conduct of the Annual Meeting and upon such other
business matters or proposals as may properly come before the Annual 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
4
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.
Assuming a quorum has been reached, a determination must be made as
to the results of the vote on each matter submitted for stockholder approval.
Director nominees must receive a plurality of the votes cast at the Annual
Meeting, which means that a vote withheld from a particular nominee or nominees
will not affect the outcome of the Annual Meeting. In order to approve proposals
2 and 4, a majority of the votes cast must be voted affirmatively for such
proposal. In order to approve proposal 3, a majority of the outstanding shares
entitled to vote must be cast affirmatively.
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 stockholder 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 "FOR" 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
Kenneth G. Geraghty Director, Audit Committee member December 2002
Randy Gerstenblatt Director December 2001
Corey J. Gottlieb Director, Audit Committee member December 2001
Anthony J. Mercorella Director, Compensation Committee member February 1997
Robert M. Silverson, Jr. Director, Audit Committee and Compensation December 2001
Committee member
Willem F. Specht Director of Information Technology and December 2001
Director
5
ROY ISRAEL, age 43, 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.
KENNETH G. GERAGHTY, age 52, 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.
RANDY GERSTENBLATT, age 44, 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.
COREY J. GOTTLIEB, age 40, 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.
ANTHONY J. MERCORELLA, Esq., age 76, 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.
ROBERT M. SILVERSON, JR., Esq., age 61, 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 43, has been our Director of Information
Technology since May 1998 and previously held the position of Systems Analyst
with us since April 1995.
Committees of the Board of Directors and Meeting Attendees
The Board of Directors held five (5) meetings during fiscal year
2003.
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 2003.
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 Kenneth Geraghty. The Audit Committee held five
(5) meetings during fiscal year 2003.
6
Executive Officers
In addition to Mr. Israel, we have two other executive officers:
ALAN LITTMAN, age 39, has been our Executive Vice President of Sales
since September 2003. Immediately prior thereto, Mr. Littman was the Manager of
Sports Marketing for Westwood One/CBS Radio Sports since June 1999. From May
1996 through May 1999, Mr. Littman was a Senior Account Executive at Dow Jones
Financial Services. Mr. Littman is currently a member of the Board of Directors
of the Boomer Esiason Foundation.
PATRICIA GIULIANI-RHEAUME, age 45, 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 2003 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 2003 $302,288 $90,330 $22,196(2) 200,000(3) $14,110(4)
Executive Officer
and Chairman of the 2002 $284,065 -- $24,066(2) 150,000 $14,110(4)
Board
2001 $268,108 -- $17,490(2) 28,334 $14,110(4)
Patricia Giuliani-
Rheaume, Vice 2003 $147,615 -- -- 75,000(3) $ 2,400(4)
President, Chief
Financial Officer 2002 $142,019 -- -- 35,000 $ 2,400(4)
and Treasurer
2001 $137,019 -- -- 10,000 $ 2,400(4)
Willem F. Specht,
Director of 2003 $106,250 -- -- 75,000(3) --
Information
Technology and 2002 $100,192 -- -- 35,000 --
Director
2001 $ 95,515 -- -- -- --
(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.
7
Options Granted in Last Fiscal Year
-----------------------------------
Percent of Total
Number of Securities Options Granted to Exercise Market Price
Name and Underlying 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 200,000 55.2% (1) $0.25 (2)
Patricia Giuliani-
Rheaume, Vice
President, Chief
Financial Officer
and Treasurer 75,000 20.7% $0.25 $0.25 3/14/13
Willem F. Specht,
Director of Information
Technology and Director 75,000 20.7% $0.25 $0.25 3/14/13
(1) 100,000 options are exercisable at a price of $0.275 per share and 100,000
options at a price of $0.25 per share.
(2) The expiration date for the 100,000 options priced at $0.275 is 3/14/08
and the expiration date for the 100,000 options priced at $0.25 is
3/14/13.
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 2,500 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 Over the Counter Bulletin Board 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 and if the Board of Directors
decides to effect the 6-for-1 stock split, the options granted annually to each
non-employee director will be proportionately increased from options to purchase
2,500 shares to options to purchase 15,000 shares of common stock.
Employment Contracts and Termination of Employment
and Change In Control Arrangements
Roy Israel. 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 $319,166, 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 specified criteria with respect to revenues, cash flow and/or
pretax income (loss). For the fiscal year ended June 30, 2003, Mr. Israel's
bonus, as calculated in accordance with his contract, was $90,330. 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
8
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.
Alan Littman. In August 2003, we entered into an employment
agreement with Mr.Littman effective as of September 8, 2003. The agreement
provides for an annual base salary of $175,000, an annual bonus based on the
achievement of specified criteria with respect to the Company's revenues and a
one-time grant of options to purchase 40,000 shares of common stock with an
exercise price equal to the closing bid price on the first day of employment.
The options vest over two years. In addition, the agreement provides, among
other things, that Mr Littman shall be entitled to participate in the Company's
benefits programs and shall be entitled to a $1,000 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 this
agreement is terminated other than for cause on or before September 7, 2004, Mr.
Littman will be entitled to the greater of (i) his base salary through September
7, 2004 or (ii) four weeks of his base salary. If this agreement is terminated
other than for cause after September 7, 2004, Mr. Littman will be entitled to
four weeks of his base salary.
Patricia Giuliani-Rheaume. Ms. Giuliani-Rheaume's employment
agreement with us currently expires December 31, 2003. 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 $150,000, is eligible for an annual bonus at
the discretion of the Company's Chief Executive Officer, subject to the approval
of the Compensation Committee of the Board of Directors, 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,
subject to the approval of the Compensation Committee of the Board of Directors.
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.
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 five times during fiscal
year 2003. During fiscal year 2004, the Committee will continue to meet
quarterly with the outside auditors to review the quarterly results. 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.
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, 2003 for filing with the Securities and Exchange Commission.
The Audit Committee
-------------------
Corey J. Gottlieb, Chairman
Kenneth G. Geraghty
Honorable Robert M. Silverson, Jr.
September 2003
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 stockholder 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 2003
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PROPOSAL 2: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
It is proposed that the stockholders ratify the appointment of Grant
Thornton LLP ("Grant Thornton") as our independent accountants for fiscal year
2004. Grant Thornton has served as our independent accountants since March 4,
1997.
Representatives of Grant Thornton, who audited our fiscal year 2003
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 stockholders of
the appointment of independent accountants is not required, but the Board deems
it desirable to submit the matter to the stockholders for ratification. If the
majority of stockholders voting at the Annual 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, 2003:
Audit fees and quarterly reviews $59,200
Financial information systems design and implementation fees --
All other fees:
Tax return preparation $19,000
Audit related services 800
Non-audit related services -- 19,800
------- -------
Total Fees $79,000
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 "FOR"
RATIFICATION OF THE INDEPENDENT ACCOUNTANTS.
PROPOSAL 3: APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK FROM 15,000,000 SHARES TO
25,000,000 SHARES AND TO EFFECT A 6-FOR-1 STOCK SPLIT OF OUTSTANDING
SHARES OF COMMON STOCK
The Board of Directors is seeking stockholder approval of an amendment to
the Company's Certificate of Incorporation to increase the authorized common
stock, par value $0.001 per share, of the Company from 15,000,000 shares up to
25,000,000 shares and to effect a 6-for-1 forward stock split of its common
stock (the "Certificate of Amendment"). The full text of the Certificate of
Amendment is set forth in Exhibit A to this Proxy Statement. If this proposal is
approved by the stockholders, the Board of Directors will have the authority, in
its sole discretion and without further action on the part of the stockholders,
to increase the authorized shares of common stock and to effect the approved
stock split at any time prior to the next Annual Meeting of Stockholders. The
Board of Directors also reserves the right, notwithstanding stockholder approval
and without further action or approval by the stockholders, to decide not to
proceed with the increase in the shares of authorized common stock and the stock
split if it determines, in its sole discretion, that such actions are not in the
best interests of the Company and its stockholders.
We are making this proposal as we would like to increase the number of
shares of our common stock that are in the public float. As such, we believe we
can increase liquidity in our common stock by expanding our potential investor
base and by making our common stock potentially more attractive to a diverse
group of investors. Other than what is contemplated by the proposals in this
Proxy Statement, the Company has no immediate definitive plans, undertakings,
agreements or commitments to issue additional shares of its common stock for any
purpose. We believe that the availability of additional authorized, but unissued
shares, of our common stock could be used for various corporate
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activities. For example, the shares could be utilized in connection with
financing and acquisition transactions, business ventures, management incentives
and employee benefits plans and other corporate purposes.
Effectiveness of the Stock Split
If this proposal is approved by stockholders, the increase in the
authorized shares of common stock and the stock split would become effective at
such time as we file the amendment to our Certificate of Incorporation with the
Secretary of State of Delaware. Even if this proposal is approved by
stockholders, our Board of Directors has discretion not to carry out the
increase in the authorized shares of common stock and the stock split if it
determines that these actions will not be beneficial.
Certificates
After the effective date, if a stock split is effected by the
Company, we will send all stockholders of record an additional stock certificate
representing the additional shares to be issued as a result of the stock split.
Effects of the Stock Split
The principal effect of the stock split will be to increase the
number of shares of common stock outstanding from approximately 1,408,176 shares
to approximately 8,449,056 shares. In addition, the Board will take appropriate
action to adjust proportionately the number of shares of common stock issuable
upon exercise of outstanding options and warrants, and to adjust the related
exercise prices, to reflect the stock split. As a result, the number of shares
of common stock issuable upon the exercise of outstanding stock options and
warrants as of October 1, 2003 will be increased from approximately 1,004,940
shares to approximately 6,029,640 shares.
The increase in the number of outstanding shares is expected to
decrease the bid price of our common stock, although there can be no assurance
that the price will decrease in proportion to the stock split ratio. The trading
price of our common stock depends on many factors, including many of which that
are beyond our control.
The shares of new common stock will be fully paid and
non-assessable. The amendment will not change the terms of our common stock. The
shares of new common stock will have the same voting rights and rights to
dividends and distributions and will be identical in all other respects to the
common stock now authorized. Each stockholder's percentage ownership of the new
common stock will not be altered.
Because our authorized common stock will be increased, the overall
effect will be an increase in the authorized, issued and unissued shares of
common stock as a result of the stock split. The unissued shares may be issued
by our Board of Directors in its discretion. Any future issuance will have the
effect of diluting the percentage of stock ownership and voting rights of the
present holders of common stock.
While the Board of Directors believes it advisable to authorize and
approve the stock split for the reasons set forth above, the Board is aware that
the increase in the number of authorized but unissued shares of common stock may
have a potential anti-takeover effect. Our ability to issue additional shares
could be used to thwart persons, or otherwise dilute the stock ownership of
stockholders seeking to control us. The stock split is not being recommended by
the Board as part of an anti-takeover strategy.
Certain Federal Income Tax Consequences
The following description of certain federal income tax consequences
is based on the Internal Revenue Code of 1986, as amended, applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. This discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (for example,
nonresident aliens, broker-dealers or insurance companies) or any aspects of
state, local or foreign tax laws. Stockholders are urged to consult their own
tax advisors to determine the particular tax consequences to them of the stock
split.
We have been advised that because the stock split is not part of a
plan to increase periodically a stockholder's proportionate interest in the
assets or earning and profits of the Company, the stock split should not result
in the recognition by stockholders of any gain or loss for federal income tax
purposes. The holding period for each share of new common stock received by a
stockholder will include the stockholder's holding period for its shares of old
common
13
stock with respect to which the shares of new common stock are issued, provided
that the shares of old common stock were held as capital assets. The adjusted
tax basis of each share of new common stock received by a stockholder will be
the same as the adjusted tax basis of the shares of old common stock with
respect to which the share of new common stock is issued.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO INCREASE THE AUTHORIZED COMMON STOCK AND TO EFFECT THE
STOCK SPLIT.
PROPOSAL 4: TO AMEND THE COMPANY'S AMENDED AND RESTATED 1996 INCENTIVE AND
NONQUALIFIED STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR GRANT
Our Board of Directors, on September 23, 2003, approved, subject to
stockholder approval, an amendment to our 1996 Stock Option Plan to increase the
number of shares of common stock authorized for issuance thereunder from
1,000,000 to 1,250,000. Under Proposal No. 3 described above, if approved and if
the Board of Directors decides to effect the 6-for-1 stock split, the options in
the 1996 Stock Option Plan would proportionately increase from 1,000,000 to
6,000,000. Further, if this Proposal No. 4 were to be approved, the options in
the 1996 Stock Option Plan would increase from 6,000,000 to 7,500,000. The
proposed amendment is set forth in Exhibit B to this Proxy Statement.
The purpose of the 1996 Stock Option Plan is to encourage and enable
key employees, including our officers and directors, consultants and advisors to
us, and other persons or entities providing services to us to acquire a
proprietary interest in us through the ownership of our common stock. We believe
that providing the potential for equity ownership to our employees is positive
for employee morale and will thereby benefit our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"AMENDING THE 1996 STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE.
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.
14
PRINCIPAL STOCKHOLDERS
Security Ownership of Management
The following table sets forth, as of October 1, 2003, 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) 623,546 38.3%
President, Chief Executive Officer and
Chairman of the Board
Anthony J. Mercorella(5) 6,333 *
Director
Robert M. Silverson, Jr.(6) 4,333 *
Director
Willem F. Specht(7) 38,500 2.7%
Director of Information Technology and
Director
Corey J. Gottlieb(8) 6,666 *
Director
Randy Gerstenblatt(9) 3,399 *
Director
Kenneth G. Geraghty(10)(13) 282,911 19.2%
Director
Patricia A. Giuliani-Rheaume(11) 55,300 3.8%
Vice President, Chief Financial Officer and
Treasurer
ISO Investment Holdings, Inc.(12) 280,411 19.1%
M. D. Sabbah(13) 97,500 6.9%
All Officers, Directors and Director 1,020,988 56.6%
Nominees as a Group
(9 persons)(4)(5)(6)(7)(8)(9)(10)(11)(14)
----------
*Less than one percent (1%).
15
(1) Applicable percentage of ownership is based on 1,408,176 shares of our
common stock, which were outstanding on October 1, 2003, 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 beneficial owner 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 203,333 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 options to purchase 6,000 shares of our common stock, which are
vested and exercisable.
(6) Includes options to purchase 4,333 shares of our common stock, which are
vested and exercisable.
(7) Includes options to purchase 38,500 shares of our common stock, which are
vested and exercisable or will vest and become exercisable within 60 days
from the date hereof.
(8) Includes options to purchase 3,333 shares of our common stock, which are
vested and exercisable.
(9) Includes options to purchase 3,333 shares of our common stock, which are
vested and exercisable.
(10) Includes warrants to purchase 60,000 shares of our common stock and
options to purchase 2,500 shares of our common stock, both of 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 55,300 shares of our common stock, which are
vested and 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. We are not aware of any subsequent filings with
the SEC after this date.
(14) All officers and directors comprise 9 persons including Alan Littman, an
executive officer of the Company, who does not own common stock or vested
stock options.
16
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. Carla Israel, our Sales Supervisor and Secretary of
the Company, is the wife of Roy Israel, our president and chief executive
officer.
On March 14, 2003, 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, 2004, provided, however, that the Purchase
Plan may be discontinued at any time by us. As of October 1, 2003, we have
purchased 42,083 shares under the Purchase Plan for an aggregate cost of
$83,918.
STOCKHOLDER PROPOSALS
A stockholder who wishes to present a proposal for action at our
2004 Annual Meeting of Stockholders must submit such proposal to us, and such
proposal must be received by us, no earlier than July 20, 2004 and no later than
September 20, 2004.
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") 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 2003, 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 27, 2003, 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 of the Board
Great Neck, New York
October 27, 2003
17