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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[x] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material pursuant to
[ ] Rule 14a-11(c) or Rule 14a-12
GLOWPOINT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
________________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
GLOWPOINT, INC.
225 LONG AVENUE
HILLSIDE, NEW JERSEY 07205
April 27, 2004
Dear Stockholder:
We are pleased to invite you to the 2004 annual meeting of stockholders of
Glowpoint, Inc., which will be held at 9:00 a.m. local time, on May 27, 2004, at
the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081.
At the meeting, you will be asked to elect two Class II Directors to our
board of directors to serve a three-year term each and to ratify the appointment
of BDO Seidman, LLP as our independent auditors for fiscal year 2004.
The enclosed notice and proxy statement contain complete information about
the matters to be considered at the annual meeting. We are also enclosing our
annual report on Form 10-K for 2003.
We hope you will be able to attend the meeting in person. Whether or not
you expect to attend, we urge you to complete, date, sign and return the proxy
card in the enclosed envelope or submit your proxy by telephone or over the
Internet, so that your shares will be represented and voted at the meeting.
Sincerely,
/s/ David C. Trachtenberg
David C. Trachtenberg
Chief Executive Officer and President
GLOWPOINT, INC.
225 LONG AVENUE
HILLSIDE, NEW JERSEY 07205
NOTICE OF THE 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 2004
The annual meeting of stockholders of Glowpoint, Inc. will be held at 9:00
a.m. local time on May 27, 2004, at the Holiday Inn, 304 Route 22 West,
Springfield, New Jersey 07081, for the following purposes:
1. To elect two Class II Directors to the board of directors to serve a
three-year term each;
2. To ratify the appointment of BDO Seidman, LLP as our independent
auditors for fiscal 2004; and
3. To transact other business as may properly come before the meeting.
Stockholders of record of our common stock as of the close of business on
April 16, 2004 are entitled to attend and vote at the annual meeting or any
adjournment or postponement thereof.
Glowpoint, Inc.
/s/ David C. Trachtenberg
David C. Trachtenberg
Chief Executive Officer and President
April 27, 2004
WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY
CARD OR TO VOTE BY TELEPHONE OR OVER THE INTERNET.
TABLE OF CONTENTS
Page
PROXY STATEMENT 1
Record Date; Quorum 1
Voting Procedures 1
Solicitation and Revocation 1
Stockholder Proposals 2
QUESTIONS AND ANSWERS ABOUT THE 2004 ANNUAL MEETING 2
FORWARD LOOKING STATEMENTS
PROPOSAL NO. 1 - ELECTION OF DIRECTORS 4
Biographies 4
Required Vote and Board Recommendation 5
Board of Directors, Board Committees and Meetings 6
Contacting the Board of Directors 8
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS 9
EXECUTIVE COMPENSATION AND OTHER MATTERS 11
Executive Compensation 11
Option Grants in 2003 12
Aggregated Option Exercises In Fiscal 2003 And Fiscal Year-End Option Values 12
Director Compensation 12
Employment Agreements 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION 13
Scope of the Committee's Work 13
Executive Compensation Philosophy and Policies 13
Executive Compensation 14
Internal Revenue Code Section 162(m) Limitation 15
Compensation Committee Interlocks and Insider Participation 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 15
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 16
Section 16(a) Beneficial Ownership Reporting Compliance 17
EQUITY COMPENSATION PLAN INFORMATION 18
PROPOSAL NO. 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS 19
General 19
Audit Fees 19
Audit-Related Fees 19
Tax Fees 19
All Other Fees 19
Required Vote and Board Recommendation 19
STOCK PERFORMANCE GRAPH 20
GLOWPOINT, INC.
225 LONG AVENUE
HILLSIDE, NEW JERSEY 07205
PROXY STATEMENT
FOR THE 2004 ANNUAL MEETING OF STOCKHOLDERS
The board of directors of Glowpoint, Inc. (referred to throughout this
proxy statement as "Glowpoint" or "we" or "our") is soliciting proxies for our
2004 annual meeting of stockholders or any adjournment or postponement thereof.
The annual meeting will be held at 9:00 a.m. local time on May 27, 2004, at the
Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081. This proxy
statement, the accompanying proxy card and our Annual Report on Form 10-K for
2003 are first being mailed to stockholders on or about April 27, 2004.
At the annual meeting, stockholders will be asked to consider and vote on
(1) the election of two directors each to serve a three-year term as a Class II
Director; and (2) the ratification of the appointment of BDO Seidman, LLP as our
independent auditors for the fiscal year ending December 31, 2004. At the annual
meeting, stockholders may also be asked to consider and take action with respect
to other matters that properly come before the meeting. We have not received
notice of other matters that may properly be presented for voting at the annual
meeting.
RECORD DATE; QUORUM
Only holders of record of our common stock at the close of business on
April 16, 2004 are entitled to vote at the annual meeting. As of the record
date, approximately 37,189,583 shares of common stock were issued and
outstanding, each of which entitles its holder to cast one vote on each matter
to be presented at the annual meeting. A quorum is present at the annual meeting
if a majority of shares of common stock issued and outstanding and entitled to
vote on the record date are represented in person or by proxy. If a quorum is
not present, the annual meeting may be adjourned from time to time until a
quorum is obtained.
VOTING PROCEDURES
The shares represented by the proxies received, properly dated and executed
and not revoked will be voted at the annual meeting in accordance with the
instructions of the stockholders. Properly executed proxies that do not contain
voting instructions will be voted (1) FOR each of the nominees named below for
election as directors, and (2) FOR ratification of BDO Seidman, LLP as our
independent auditors for the fiscal year ending December 31, 2004, and with
respect to other matters that may come before the annual meeting, at the
discretion of the proxy holders.
Abstentions and broker "non-votes" will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. An abstention is the voluntary act of not voting by a stockholder who is
present at a meeting and entitled to vote. Abstentions are counted as a "no"
vote for any proposals submitted to stockholders for a vote, excluding the
election of directors. A broker "non-vote" occurs when a broker nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary power for that particular item and has not
received instructions from the beneficial owner. A broker "non-vote" will be
treated as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. A plurality of the votes duly cast is
required for the election of directors. This means that the two nominees
receiving the highest number of affirmative votes will be elected. Abstentions
and broker "non-votes" are not counted for purposes of the election of
directors.
Stockholders have the option to vote over the Internet or by telephone. If
you have Internet access, WE ENCOURAGE YOU TO RECORD YOUR VOTE ON THE INTERNET.
It is convenient, and it saves significant postage and processing costs. In
addition, when you vote via the Internet or by phone prior to the meeting date,
your vote is recorded immediately and there is no risk that postal delays will
cause your vote to arrive late and therefore not be counted.
SOLICITATION AND REVOCATION
After you have submitted a proxy, you may change your vote at any time
before the proxy is exercised by submitting a notice of revocation or a proxy
bearing a later date. Regardless of whether you voted using a traditional proxy
card, over the Internet or by telephone, you may use any of those three methods
to change your vote. You may change your vote either by submitting a proxy card
prior to the date of the annual meeting or by voting again prior to the time at
which the Internet and telephone voting facilities close by following the
procedures applicable to those methods of voting. In each event, the later
submitted vote will be recorded and the earlier vote revoked. You may also
revoke a proxy by voting in person at the annual meeting. Your attendance at the
annual meeting will not by itself constitute revocation of a proxy.
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We will bear the cost of the solicitation of proxies from our stockholders,
including the cost of preparing, assembling and mailing the proxy solicitation
materials. In addition to solicitation by mail, our directors, officers and
employees may solicit proxies from stockholders by telephone or other electronic
means or in person, but any such person will not be specifically compensated for
such services. We will cause brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of stock
held of record by such persons. We will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in doing so. We have
engaged American Stock Transfer and Trust Company to aid in the distribution of
the proxy materials and will reimburse the related reasonable out-of-pocket
expenses.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 2005 Annual
Meeting of Stockholders must deliver the proposal to the Corporate Secretary,
Glowpoint, Inc., 225 Long Avenue, Hillside, New Jersey 07205, no later than
December 28, 2004 if such proposal is to be considered for inclusion in our
proxy materials for that meeting.
In addition, our by-laws provide that, in order for a stockholder to
propose business for consideration at an annual meeting of stockholders, the
stockholder must give written notice to our Corporate Secretary at our principal
executive offices not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided however, that in the event the annual meeting is called for a date that
is not within 30 days before or after such anniversary date, notice by the
stockholder in order to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure of the date the annual
meeting was made, whichever occurs first.
QUESTIONS AND ANSWERS ABOUT THE 2004 ANNUAL MEETING
Q: WHAT IS THE PROPOSAL RELATING TO THE ELECTION OF DIRECTORS THAT I WILL BE
VOTING ON AT THE ANNUAL MEETING?
A: You will be asked to consider and vote upon a proposal to elect the following
individuals to the board of directors: Michael Toporek and David Trachtenberg.
Q: WHAT IS THE PROPOSAL RELATING TO THE RATIFICATION OF THE AUDIT COMMITTEE'S
APPOINTMENT OF INDEPENDENT ACCOUNTANTS THAT I WILL BE VOTING ON AT THE ANNUAL
MEETING?
A: You will be voting to ratify the audit committee's appointment of BDO
Seidman, LLP, independent accountants, as our independent auditors for the
fiscal year ending December 31, 2004.
Q: WHO IS SOLICITING MY PROXY?
A: Your board of directors.
Q: HOW DOES THE BOARD RECOMMEND THAT I VOTE ON THE MATTERS PROPOSED?
A: Your board unanimously recommends that stockholders vote "FOR" each of the
proposals submitted at the annual meeting.
Q: WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
A: Only holders of record of our common stock as of the close of business on
April 16, 2004 will be entitled to notice of and to vote at the annual meeting.
Q: WHEN AND WHERE IS THE ANNUAL MEETING?
A: The annual meeting of our stockholders will be held at 9:00 a.m. local time,
on Thursday, May 27, 2004, at the Holiday Inn, 304 Route 22 West, Springfield,
New Jersey 07081.
Q: WHERE CAN I VOTE MY SHARES?
A: You can vote your shares where indicated by the instructions set forth on the
proxy card, including by Internet or by telephone, or you can attend and vote
your shares in person at the annual meeting.
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Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker may not be permitted to exercise voting discretion with respect
to some of the matters to be acted upon. Thus, if you do not give your broker or
nominee specific instructions, your shares may not be voted on those matters,
and will not be counted in determining the number of shares necessary for
approval. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send in a written revocation or a later dated, signed proxy card
before the annual meeting or vote again by telephone or over the Internet, or
simply attend the annual meeting and vote in person. Simply attending the annual
meeting, however, will not revoke your proxy; you must vote at the annual
meeting.
Q: WHAT DO I NEED TO DO NOW?
A: Please vote your shares as soon as possible so that your shares may be
represented at the annual meeting. You may vote by signing and dating your proxy
card and mailing it in the enclosed return envelope or by telephone or over the
Internet, or you may vote in person at the annual meeting.
Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS?
A: If you have questions about any of the proposals on which you are voting, you
may call Christopher Zigmont, our Chief Financial Officer, at 1-603-898-0800.
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PROPOSAL NO. 1 -
ELECTION OF DIRECTORS
Our directors are divided into three classes. The number of directors is
determined from time to time by our board of directors. A single class of
directors is elected each year at the annual meeting of stockholders. Each
director elected at an annual meeting will serve for a term ending at the third
annual meeting of stockholders after his or her election and until his or her
successor is elected and duly qualified. Leo Flotron resigned his position as a
Class II Director as of September 23, 2003 and David Trachtenberg was appointed
to fill the vacancy created by his resignation. Michael Sternberg resigned his
position as a Class I director as of November 3, 2003 and Karen Basian was
appointed to fill the vacancy created by his resignation.
The directors to be elected at the Annual Meeting are Class II Directors
and are to serve until the 2007 annual meeting or until their respective
successors are duly elected and qualified. The nominees who will stand for
election are Michael Toporek and David Trachtenberg, both of whom are currently
members of our board of directors. The two nominees receiving the highest number
of affirmative votes will be elected as Class II Directors. In the event any
nominee is unable or unwilling to serve as a nominee, the board of directors may
select a substitute nominee. If a substitute nominee is selected, proxies will
be voted in favor of such nominee. Our board of directors has no reason to
believe that either of Messrs. Toporek or Trachtenberg will be unable or
unwilling to serve as a nominee or as a director if elected.
The following table sets forth information with respect to our current
directors, director nominees and executive officers.
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
Director Nominees
Michael Toporek(1)(2)(3) 39 Director
David Trachtenberg 41 Chief Executive Officer, President and
Director
Other Directors
Richard Reiss 47 Chairman
Karen Basian(1)(2) 42 Director
Dean Hiltzik(2)(3) 50 Director
Lewis Jaffe 47 Director
James Kuster(1)(3) 45 Director
Non-Director Executive Officers
Christopher Zigmont 42 Chief Financial Officer and Executive
Vice President, Finance
Michael Brandofino 39 Chief Technology Officer and Executive
Vice President
----------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
BIOGRAPHIES
Class II Director Nominees
DAVID C. TRACHTENBERG, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR. Mr.
Trachtenberg was named our Chief Executive Officer and President and a member of
our board of directors in October 2003. Mr. Trachtenberg served as President and
Chief Marketing Officer of StarBand Communications from August 2000 to September
2002. Starband filed a Chapter 11 bankruptcy petition in May 2002 and emerged
from Chapter 11 in November 2003. Before Starband, he was President and Chief
Operating Officer at Prodigy Communications Corporation from December 1998 to
June 2000. Prior thereto, Mr. Trachtenberg spent nine years at MCI. Mr.
Trachtenberg holds an M.B.A. from the Wharton School of Business, and an M.A. in
International Affairs from the University of Pennsylvania and a B.A. from Tufts
University. Mr. Trachtenberg currently serves on the Board of Governors of the
Lauder Institute at the University of Pennsylvania.
MICHAEL TOPOREK, DIRECTOR. Mr. Toporek has been a member of our board of
directors since July 2002. He is presently the Managing General Partner of
Brookstone Partners, a private equity firm. From August 2000 to May 2002,
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Mr. Toporek was a Director at SG Cowen Corporation, providing investment banking
and mergers and acquisitions advice to technology companies. From September 1996
to August 2000, Mr. Toporek was an investment banker at Dillon Read & Co. and
its successor entity, UBS Warburg, providing investment banking and mergers and
acquisitions advice to industrial companies.
REQUIRED VOTE AND BOARD RECOMMENDATION
Directors must be elected by a plurality of the shares of our common stock
present at the annual meeting in person or by proxy entitled to vote. The two
nominees for director receiving the highest number of affirmative votes will be
elected as directors. Votes withheld from any nominee are counted for purposes
of determining the presence or absence of a quorum, but have no other legal
effect under Delaware law. Stockholders do not have the right to cumulate their
votes in the election of directors. The board of directors recommends that the
stockholders vote for the election of each nominee for director named above.
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
RICHARD REISS, CHAIRMAN OF THE BOARD OF DIRECTORS. Mr. Reiss has been our
Chairman of the Board of Directors since May 2000 and served as our Chief
Executive Officer from May 2000 to October 2003. Mr. Reiss served as our
President from May 2000 to April 2002. Mr. Reiss served as Chairman of the Board
of Directors, President and Chief Executive Officer of All Communications
Corporation (ACC) from ACC's formation in 1991 until the formation of
Glowpoint's predecessor pursuant to the merger of ACC and View Tech, Inc. (VTI)
in May 2000.
KAREN BASIAN, DIRECTOR. Ms. Basian has been a member of our board of
directors since November 2003. Ms. Basian is currently President of KB Capital
Management Strategy and Financial Consulting, a consulting and financial
advisory firm. Prior thereto, Ms. Basian served as Chief Financial Officer and
Senior Vice President, Corporate Services for 724 Solutions Inc., from February
1999 to November 2002. Between 1994 and 1999, Ms. Basian served in various
positions at Frito-Lay, including as Chief Financial Officer and Vice President,
Finance for Canada. Ms. Basian received a B.A. from the University of Western
Ontario, a C.A. from the Canadian Institute of Chartered Accountants and an
M.B.A. from IMD, Lausanne, Switzerland.
DEAN HILTZIK, DIRECTOR. Mr. Hiltzik has been a member of our board of
directors since May 2000. From September 1999 until May 2000, Mr. Hiltzik was a
member of ACC's board of directors. Mr. Hiltzik, a certified public accountant,
is a partner and director of the securities practice at Schneider & Associates
LLP, which he joined in 1979. Schneider provides tax and consulting services to
Glowpoint. Mr. Hiltzik received a B.A. from Columbia University and an M.B.A. in
Accounting from Hofstra University.
JAMES KUSTER, DIRECTOR. Mr. Kuster has been a member of our board of
directors since June 2001, when he joined in connection with our acquisition of
GeoVideo Networks, Inc. Mr. Kuster has been Managing Director of the investment
banking and private equity firm Crest Advisors, LLC since October 1999. From
March 1999 to September 1999, Mr. Kuster served as Vice President for Corporate
Development of Reciprocal, Inc. Mr. Kuster was Managing Director of the media
and telecommunications group of Chase Securities, where he worked from 1986
until 1999. Mr. Kuster received his M.B.A. degree from the Fuqua School of
Business of Duke University and holds a B.A. from Davidson College. He also
serves on the Board of Directors of Loudeye Corp. Inc. (Nasdaq: LOUD).
LEWIS JAFFE, DIRECTOR. Mr. Jaffe has been a member of our board of
directors since September 2001 and served as our President from April 2002 until
August 2002. Since August 2003, Mr. Jaffe has been self employed. From July 2002
to July 2003, Mr. Jaffe was an independent consultant to us. From June 2000 to
March 2002, Mr. Jaffe served as President and Chief Operating Officer of
PictureTel Corporation. From September 1998 to June 2000, Mr. Jaffe was a
managing director in the Boston office of Arthur Andersen LLP in the global
finance practice. From January 1997 to March 1998, Mr. Jaffe was the President
of C Systems, LLC, a designer and manufacturer of mobile military shelters,
housing, communication, radar and missile launch systems. Mr. Jaffe completed an
executive M.B.A. program at Stanford University and holds a B.S. degree from
LaSalle University. He also serves on the Board of Directors of Media 100 Inc.
(Nasdaq: MDEA).
EXECUTIVE OFFICERS
The following individuals are our executive officers but are not directors
or nominees for director:
CHRISTOPHER ZIGMONT, CHIEF FINANCIAL OFFICER AND EXECUTIVE VICE PRESIDENT,
FINANCE. Mr. Zigmont has been our Chief Financial Officer since May 2000 and is
also our Executive Vice President, Finance. From June 1999 until May
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2000, Mr. Zigmont served as VTI's Chief Financial Officer. From March 1990 to
May 1999, Mr. Zigmont held various positions at BankBoston Corporation, most
recently as Director of Finance. Prior to joining BankBoston Corporation, Mr.
Zigmont was a Senior Audit Manager with the accounting and auditing firm of KPMG
Peat Marwick. He received a B.S. degree in Business Administration with a double
major in Accounting/Finance from Boston University.
MICHAEL BRANDOFINO, EXECUTIVE VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER.
Mr. Brandofino has served as our Executive Vice President and Chief Technology
Officer since October 2000. From 1988 to September 2000, Mr. Brandofino held
several positions at Johns Brook Co., Inc., a technology consulting company,
most recently in the position of President. Mr. Brandofino holds a B.S. degree
in Management Information Systems from Pace University.
BOARD OF DIRECTORS, BOARD COMMITTEES AND MEETINGS
Corporate governance is typically defined as the system that allocates
duties and authority among a company's stockholders, board of directors and
management. The stockholders elect the board and vote on extraordinary matters;
the board is the company's governing body, responsible for hiring, overseeing
and evaluating management, particularly the chief executive officer; and
management runs the company's day-to-day operations. The primary
responsibilities of the board of directors are oversight, counseling and
direction to our management in the long-term interests of us and our
stockholders. Our board of directors currently consists of seven directors as
described in "Proposal No. 1: Election of Directors." The current board members
and nominees for election include four independent directors and two current
members and one former member of our senior management.
Our board of directors met twelve times during the year ended December 31,
2003. During this period, each of the directors attended or participated in more
than 75% of the aggregate of (i) the total number of meetings of the board of
directors held during the period for which he or she was a director and (ii) the
total number of meetings of committees of the board on which he or she served,
held during the period for which he or she served. The board has an audit
committee, a compensation committee and a nominating committee.
As a general matter, board members are expected to attend our annual
meetings. Four members of our then current board of directors attended our 2003
annual meeting of stockholders. Messrs. Jaffe and Toporek were unable to attend
due to scheduling conflicts and Mr. Flotron did not attend because he intended
to resign from the board shortly after the meeting.
"Independent" Directors. Each of our directors other than Messrs. Reiss,
Trachtenberg and Jaffe qualify as "independent" in accordance with the published
listing requirements of Nasdaq. The Nasdaq independence definition includes a
series of objective tests, such as that the director is not an employee of the
company and has not engaged in various types of business dealings with the
company. In addition, as further required by the Nasdaq rules, the board has
made a subjective determination as to each independent director that no
relationship exist which, in the opinion of the board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. In making these determinations, the directors reviewed and discussed
information provided by the directors and the company with regard to each
director's business and personal activities as they may relate to Glowpoint and
Glowpoint's management.
In addition, as required by Nasdaq rules, the members of the audit
committee each qualify as "independent" under special standards established by
the Securities and Exchange Commission (the "SEC") for members of audit
committees. The audit committee is also required to have at least one
independent member who is determined by the board to meet the qualifications of
an "audit committee financial expert" in accordance with SEC rules, including
that the person meets the relevant definition of an "independent director." Each
member of the audit committee has been determined to be an audit committee
financial expert. Stockholders should understand that this designation is a
disclosure requirement of the SEC related to these directors' experience and
understanding with respect to certain accounting and auditing matters. The
designation does not impose upon these directors any duties, obligations or
liability that are greater than are generally imposed on them as a member of the
audit committee and the board, and their designation as an audit committee
financial expert pursuant to this SEC requirement does not affect the duties,
obligations or liability of any other member of the audit committee or the
board.
AUDIT COMMITTEE
We currently have an audit committee consisting of Karen Basian, James
Kuster and Michael Toporek. Ms. Basian is the chairperson of the audit
committee. The audit committee consults and meets with our auditors and chief
financial officer and accounting personnel, reviews potential conflict of
interest situations where appropriate, and reports
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and makes recommendations to the full board of directors regarding such matters.
The audit committee met three times during the year ended December 31, 2003.
COMPENSATION COMMITTEE
We currently have a compensation committee consisting of Karen Basian, Dean
Hiltzik and Michael Toporek. James Kuster resigned from the compensation
committee as of March 25, 2004 and Mr. Hiltzik was appointed as his replacement.
Each member of the compensation committee meets the independence requirements of
Nasdaq. The compensation committee is responsible for supervising our executive
compensation policies, reviewing officers' salaries, approving significant
changes in employee benefits and recommending to the board of directors such
other forms of remuneration as it deems appropriate. The compensation committee
met two times during the year ended December 31, 2003.
NOMINATING COMMITTEE
We currently have a nominating committee consisting of Dean Hiltzik, James
Kuster and Michael Toporek. Each member of the nominating committee meets the
independence requirements of Nasdaq. The nominating committee is responsible for
assessing the performance of our board of directors and making recommendations
to our board regarding nominees for the board. The nominating committee was
formed in February 2004. Prior to the formation of the committee, its functions
were performed by the board of directors. The nominating committee operates
under a written nominating committee charter, which is attached hereto as
Appendix A.
The nominating committee considers qualified candidates to serve as a
member of our board of directors suggested by our stockholders. Stockholders can
suggest qualified candidates for director by writing to our Corporate Secretary
at 225 Long Avenue, Hillside, New Jersey 07205. Stockholder submissions that are
received in accordance with our by-laws and that meet the criteria outlined in
the nominating committee charter are forwarded to the members of the nominating
committee for review. Stockholder submissions must include the following
information:
o A statement that the writer is our stockholder and is proposing a
candidate for our board of directors for consideration by the
nominating committee;
o The name of and contact information for the candidate;
o A statement of the candidate's business and educational experience;
o Information regarding each of the factors set forth in the nominating
committee charter sufficient to enable the nominating committee to
evaluate the candidate;
o A statement detailing any relationship between the candidate and any
of our customers, suppliers or competitors;
o Detailed information about any relationship or understanding between
the proposing stockholder and the candidate; and
o A statement that the candidate is willing to be considered and willing
to serve as our director if nominated and elected.
In considering potential new directors and officers, the nominating
committee will review individuals from various disciplines and backgrounds.
Among the qualifications to be considered in the selection of candidates are
broad experience in business, finance or administration; familiarity with
national and international business matters; familiarity with our industry; and
prominence and reputation. The nominating committee will also consider whether
the individual has the time available to devote to the work of our board of
directors and one or more of its committees.
The nominating committee will also review the activities and associations
of each candidate to ensure that there is no legal impediment, conflict of
interest, or other consideration that might hinder or prevent service on our
board of directors. In making its selection, the nominating committee will bear
in mind that the foremost responsibility of a director of a corporation is to
represent the interests of the stockholders as a whole. The nominating committee
will periodically review and reassess the adequacy of its charter and propose
any changes to the board of directors for approval.
7
STOCK OPTION COMMITTEE
We dissolved our stock option committee in November 2003. The stock option
committee did not meet during the year ended December 31, 2003.
DIRECTOR COMPENSATION
Directors who are not our executive officers or employees receive a
director's fee of a cash payment of $2,000 and options to purchase 1,000 shares
of common stock for each board meeting attended, a cash payment of $1,000 and
500 shares of common stock for each committee meeting attended, whether in
person or by telephone, and a cash payment of $5,000 and options to purchase
4,000 shares of common stock for attendance at the annual meeting of
stockholders. Each chairperson of a standing committee of our board of directors
receives a cash payment of $1,000 per year, paid following each annual meeting
of our stockholders.
Each director who is independent in accordance with the published listing
requirements of Nasdaq receives a one-time grant of 80,000 restricted shares of
our common stock. The restricted shares have an exercise price equal to the
closing price of our common stock on the Nasdaq National Market on the date of
grant. 20,000 shares vest on the date of grant and 20,000 shares vest on each of
the first, second and third anniversaries of the date of grant, provided that,
with respect to each scheduled vesting date, the director in question (i)
attended at least 75% of the meetings of the board of directors held in the
twelve months prior to the scheduled vesting date and (ii) remains independent
under the Nasdaq listing standards prevailing on the scheduled vesting date. The
restricted shares become fully vested and exercisable upon a change in control
of our company.
CONTACTING THE BOARD OF DIRECTORS
Any stockholder who desires to contact our board of directors, committees
of the board of directors and individual directors may do so by writing to:
Glowpoint, Inc.
[Addressee*]
225 Long Avenue
Hillside, New Jersey 07205
* Audit Committee of the Board of Directors
* Compensation Committee of the Board of Directors
* Nominating Committee of the Board of Directors
* Name of individual directors
These communications are sent by us directly to the specified addressee.
CODE OF BUSINESS CONDUCT AND ETHICS
We have adopted a code of business conduct and ethics, which is designed to
promote: honest and ethical conduct; full, fair, accurate, timely and
understandable disclosure in our filings with the SEC and other public
communications; compliance with applicable laws, rules and regulations; prompt
internal reporting of violations of the code of business conduct and ethics; and
accountability for adherence to the code of business conduct and ethics. The
code of business conduct and ethics applies to our employees, officers and
directors, including our principal executive officer, principal financial
officer, principal accounting officer or controller. A copy of our code of
business conduct and ethics is available at our website at www.glowpoint.com.
You may request a copy of the code of business conduct and ethics, at no cost,
by telephoning us at (973) 282-2000 or writing us at the following address:
Glowpoint, Inc., 225 Long Avenue, Hillside, New Jersey 07205, Attention:
Investor Relations. We may post amendments to or waivers of the provisions of
the code of business conduct and ethics, if any, made with respect to our
principal executive officer, principal financial officer, principal accounting
officer or controller on that website. Please note, however, that the
information contained on the website is not incorporated by reference in, or
considered to be part of, this document.
8
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The audit committee is composed of three directors. Each member meets the
current independence standards under the applicable SEC and Nasdaq rules. The
audit committee operates under a written audit committee charter, which was
filed with our proxy statement for the 2003 annual meeting of our stockholders.
As described more fully in its charter, the purpose of the audit committee
is to assist the board in its general oversight of Glowpoint's financial
reporting, internal controls and audit functions. Management is responsible for
the preparation, presentation and integrity of Glowpoint's financial statements;
accounting and financial reporting principles; internal controls; and procedures
designed to reasonably assure compliance with accounting standards, applicable
laws and regulations. BDO Seidman, LLP, our independent auditing firm, is
responsible for performing an independent audit of the consolidated financial
statements in accordance with generally accepted auditing standards. In
accordance with law, the audit committee has ultimate authority and
responsibility to select, compensate, evaluate and, when appropriate, replace
our independent auditors. The audit committee has the authority to engage its
own outside advisers, including experts in particular areas of accounting, as it
determines appropriate, apart from counsel or advisers hired by management.
The audit committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditors, nor can the audit committee certify
that the independent auditors are "independent" under applicable rules. The
audit committee serves a board-level oversight role, in which it provides
advice, counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors, and the
experience of the audit committee's members in business, financial and
accounting matters. Each member of the audit committee has been determined by
the board to meet the qualifications of an "audit committee financial expert" in
accordance with SEC rules. Stockholders should understand that this designation
is an SEC disclosure requirement related to these directors' experience and
understanding with respect to certain accounting and auditing matters. The
designation does not impose on these directors any duties, obligations or
liability that are greater than are generally imposed on them as a member of the
audit committee and the board, and their designation as an audit committee
financial expert pursuant to this SEC requirement does not affect the duties,
obligations or liability of any other member of the audit committee or the
board.
In accordance with law, the audit committee is responsible for establishing
procedures for the receipt, retention and treatment of complaints received by
Glowpoint regarding accounting, internal accounting controls or auditing
matters, including the confidential, anonymous submission by Glowpoint
employees, received through established procedures, of concerns regarding
questionable accounting or auditing matters.
Among other matters, the audit committee monitors the activities and
performance of Glowpoint's external auditors, including the audit scope,
external audit fees, auditor independence matters and the extent to which the
independent auditors may be retained to perform non-audit services.
In accordance with audit committee policy and the requirements of law, all
services to be provided by BDO Seidman are pre-approved by the audit committee.
Pre-approval includes audit services, audit-related services, tax services and
other services. To avoid certain potential conflicts of interest, the law
prohibits a publicly traded company from obtaining certain non-audit services
from its auditing firm. We obtain these services from other service providers as
needed.
The audit committee has reviewed our audited financial statements and met
and held discussions with management regarding the audited financial statements.
Management has represented to the audit committee that our consolidated
financial statements were prepared in accordance with accounting principles
generally accepted in the United States.
The audit committee has discussed with BDO Seidman, LLP, our independent
auditors, the matters required to be discussed by Statement of Auditing
Standards No. 61 (Communication with Audit Committees). These discussions have
included a review as to the quality, not just the acceptability, of our
accounting principles.
Our independent auditors also provided to the audit committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees), and the audit committee
discussed with the independent auditors the auditors' independence from
management and our company. The audit committee has also considered the
compatibility of non-audit services with the auditors' independence.
Based on the audit committee's discussion with management and the
independent auditors, the audit committee's review of the audited financial
statements, the representations of management and the report of the independent
auditors to
9
the audit committee, the audit committee recommended that the board of directors
include the audited consolidated financial statements in our annual report on
Form 10-K for the year ended December 31, 2003 filed with the SEC.
Respectfully submitted,
Karen Basian
James Kuster
Michael Sternberg (member until November 3, 2003)
Michael Toporek
10
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The table below summarizes information concerning the compensation we
paid during 2003 to our Chief Executive Officer and our four other most highly
paid executive officers during that year (collectively, the "Named Executive
Officers"), each of whom, other than Leo Flotron, is currently one of our named
executive officers:
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------- --------
RESTRICTED
STOCK SECURITIES ALL OTHER
AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) ($) OPTIONS ($)
------ -------- -------- -------- -------- --------
David Trachtenberg, Chief Executive
Officer and President (October 15, 2003 to
present) 2003 $ 64,212 $ -- $ 1,116,000(1) -- $ 2,969(2)
2002 $ -- $ -- -- $ --
2001 $ -- $ -- -- $ --
Richard Reiss, Chief Executive Officer
(January 1, 2003 to October 14, 2003) and
Chairman of the Board 2003 $ 359,492(3) $ 50,000 $ -- -- $ --
2002 $ 379,250 $ 75,000(4) $ -- -- $ 5,764(6)
2001 $ 345,000 $ 135,000 $ -- 1,537,500(5) $ 5,764(6)
Leo Flotron, President and Chief Operating
Officer (January 1, 2003 to September 23,
2003) 2003 $ 300,000 $ -- $ -- -- $ --
2002 $ 346,875 $ -- $ -- 192,500(7) $ --
2001 $ 325,000 $ 193,935(8) $ -- 240,000 $ --
Christopher Zigmont, Chief Financial
Officer, Executive Vice President -
Finance (January 1, 2003 to present) and
Secretary (February 1, 2003 to present) 2003 $ 190,000 $ 50,000 $ -- 50,000 $ --
2002 $ 188,654 $ -- $ -- 50,500 $ --
2001 $ 175,000 $ -- $ -- 190,000 $ --
Michael Brandofino, Chief Technology
Officer and Executive Vice President 2003 $ 194,694 $ 35,000 $ -- 100,000 $ --
2002 $ 183,938 $ -- $ -- 64,875 $ --
2001 $ 165,000 $ 25,000(9) $ -- 100,000 $ --
-------------
(1) Reflects 360,000 restricted shares valued at $3.10 per share vesting in
three equal installments over the life of Mr. Trachtenberg's employment
agreement.
(2) Reflects reimbursed expenses as set forth in Mr. Trachtenberg's employment
agreement (see "Employment Agreements" and "Compensation Committee Report
on Executive Compensation").
(3) Reflects pay out of $29,492 with respect to accrued vacation.
(4) Formula bonus as set forth in Mr. Reiss' employment agreement (see
"Employment Agreements" and "Compensation Committee Report on Executive
Compensation").
(5) Includes the extension of the term of a previously granted option to
purchase 1,237,500 shares of common stock (see "Compensation Committee
Report on Executive Compensation").
(6) Reflects premiums paid for a life insurance policy.
(7) Includes the extension of the term of a previously granted option to
purchase 123,750 shares of common stock (see "Compensation Committee Report
on Executive Compensation").
(8) Amount is in respect of services rendered in 2000.
(9) One-time cash bonus in connection with the commencement of Mr. Brandofino's
employment (see "Compensation Committee Report on Executive Compensation").
11
OPTION GRANTS IN 2003
The following table sets forth information regarding stock options granted
pursuant to our stock option plan during 2003 to each of the named executive
officers.
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE POTENTIAL REALIZABLE VALUE AT
OPTIONS IN FISCAL PRICE ASSUMED ANNUAL RATES OF STOCK
NAME GRANTED YEAR 2002 (PER SHARE) EXPIRATION DATE PRICE APPRECIATION FOR OPTION TERM
===================== =========== ============= =========== ======================= ==========================================
0% 5% 10%
David Trachtenberg -- -- -- -- -- --
Richard Reiss -- -- -- -- -- --
Leo Flotron -- -- -- -- -- --
Christopher Zigmont 50,000 8.1% $2.68 August 5, 2013 $ -- $218,272 $347,561
Michael Brandofino 100,000 16.1% $3.39 September 23, 2013 $ -- $552,195 $879,279
AGGREGATED OPTION EXERCISES IN FISCAL 2003 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the value of
unexercised in-the-money options held by the Named Executive Officers as of
December 31, 2003.
SHARES NUMBER OF SECURITIES UNDERLYING $ VALUE OF UNEXERCISED
ACQUIRED VALUE UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL
NAME ON EXERCISE REALIZED OPTIONS AT FISCAL YEAR-END YEAR-END
================================= ============= ============ ================================= =================================
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
============= =============== ============= ===============
David Trachtenberg -- $ -- -- -- $ -- $ --
Richard Reiss 132,000 $ 335,280 1,659,643 -- $ -- $ --
Leo Flotron 33,000 $ 93,720 927,500 -- $ 747,713 $ --
Christopher Zigmont -- $ -- 415,500 -- $ 15,810 $ --
Michael Brandofino -- $ -- 214,875 50,000 $ 18,523 $ --
EMPLOYMENT AGREEMENTS
We entered into employment agreements with our executive officers. The
following is a summary of the material terms and conditions of such agreements
and is subject to the detailed provisions of the respective agreements attached
as exhibits to our filings with the Securities and Exchange Commission.
EMPLOYMENT AGREEMENT WITH DAVID TRACHTENBERG
We entered into an agreement with David Trachtenberg to serve as President
and Chief Executive Officer having a three-year term commencing October 15,
2003. Under the agreement, Mr. Trachtenberg is entitled, in year one, two and
three of his employment, to annual base compensation of $315,000, $345,000 and
$375,000. Mr. Trachtenberg is also entitled to annual incentive compensation in
an amount equivalent to 50% of his then annual base salary subject to the
achievement of goals and metrics established by Mr. Trachtenberg and our
Compensation Committee and updated on an annual basis. The agreement provides
for an award of 360,000 restricted shares of our common stock, the fair value of
which was determined to be $1,116,000. These restricted shares will be forfeited
if Mr. Trachtenberg's employment with us is terminated for any reason, with risk
of forfeiture lapsing with respect to 120,000 shares on each anniversary of the
commencement of his employment. Mr. Trachtenberg is also entitled to
reimbursement for the costs of a car to conduct company business and for parking
his car in New York City. Under the agreement, we must secure and pay the
premium on a $2,000,000 life insurance policy payable to Mr. Trachtenberg's
designated beneficiary. Either we or Mr. Trachtenberg may terminate his
employment at any time, for any reason or no reason; however, if Mr.
Trachtenberg is terminated without cause or if he resigns for good reason or
dies, he is entitled to one year of his then annual base salary, one year of his
then annual incentive compensation, one year of continued reimbursement for his
car and parking expenses and one year of
12
accelerated vesting on the restricted shares granted under the employment
agreement. If Mr. Trachtenberg's employment is terminated for cause or if he
voluntarily resigns, he is entitled to his base salary and other benefits
through the last day actually worked.
EMPLOYMENT AGREEMENT WITH RICHARD REISS
The employment agreement with Mr. Reiss, as amended, has a three-year term
commencing January 1, 2001. Under the agreement, as amended, Mr. Reiss is
entitled to base compensation of $330,000 and a discretionary bonus. The
agreement provides for the grant of an option to purchase 300,000 shares of
common stock under our 2000 Stock Incentive Plan, vesting in three equal annual
installments.
On October 14, 2003, we entered into an amended and restated employment
agreement with Mr. Reiss in connection with his resignation as our Chief
Executive Officer. Under the agreement, from October 14, 2003 to December 31,
2004, Mr. Reiss will assist our management in the development and marketing of
our videoconferencing service and provide general executive level advice. Mr.
Reiss is entitled to a salary of $82,500 for the period from October 1, 2003
through December 31, 2003, a salary of $150,000 for calendar year 2004 and a
cash bonus of $50,000 upon execution of the amended agreement. The
post-termination exercise period of Mr. Reiss' stock options granted under the
2000 plan was extended to 24 months after the expiration of his employment.
Under the amended agreement, we are required to pay Mr. Reiss' car lease through
its expiration on December 31, 2004, Mr. Reiss' cell phone monthly charges
through December 31, 2004, the cost to maintain a Glowpoint videoconferencing
connection and a business telephone line at Mr. Reiss' home through December 31,
2004, and premiums through December 31, 2004 on a $1.0 million life insurance
policy payable to Mr. Reiss' designated beneficiary or estate. In addition, we
are required to pay COBRA premiums to maintain Mr. Reiss' individual and family
health insurance coverage for 18 months following the termination of Mr. Reiss'
employment.
EMPLOYMENT AGREEMENT WITH CHRISTOPHER ZIGMONT
The employment agreement with Mr. Zigmont, our Executive Vice President,
Finance and Chief Financial Officer, has a three-year term that commenced on
January 1, 2001. Mr. Zigmont is entitled to base compensation of $190,000 in
calendar year 2003, as well as to a discretionary bonus. The agreement provides
for the grant of an option to purchase 150,000 shares under the 2000 plan,
vesting in three equal annual installments. Mr. Zigmont continues to serve under
the terms and at the annual base compensation of his expired amended employment
agreement.
EMPLOYMENT AGREEMENT WITH MICHAEL BRANDOFINO
The employment agreement, as amended, with Mr. Brandofino, our Executive
Vice President and Chief Technology Officer, has a three-year term that
commenced on January 1, 2001. Mr. Brandofino is entitled to base compensation of
$185,250 for calendar year 2003 and a discretionary bonus. Effective September
23, 2003, the agreement was further amended to reset base compensation for the
period October 1, 2003 through December 31, 2003 at the annual rate of $225,000
and for the period January 1, 2004 through December 31, 2004 at the annual rate
of $245,000. The agreement also provided for a one-time guaranteed bonus of
$35,000, payable on October 1, 2003 and a grant of an option to purchase 100,000
shares under the 2000 Plan, vesting 50% on each of December 31, 2003 and 2004.
In addition, Mr. Brandofino's agreement stipulates that if we enter into an
agreement to merge or consolidate with one or more other corporations where we
are not the surviving entity or a sale of substantially all of our assets during
the term of the agreement and Mr. Brandofino realizes less than $200,000 from
the exercise of all outstanding options, then he is entitled to a bonus in an
amount equal to the difference between $200,000 and the amount realized.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
SCOPE OF THE COMMITTEE'S WORK
The compensation committee of the board of directors has the authority and
responsibility to establish our overall compensation strategy, including salary
and bonus levels, and to review and make recommendations to the board with
respect to the compensation of our executive officers. The compensation
committee was established in 1999; prior thereto, compensation decisions and
grants of stock options were made only by the full board.
EXECUTIVE COMPENSATION PHILOSOPHY AND POLICIES
13
Our overall compensation philosophy is to provide a total compensation
package that is competitive and enables us to attract, motivate, reward and
retain key executives and other employees who have the skills and experience
necessary to promote our short- and long-term financial performance and growth.
The compensation committee recognizes the critical role of its executive
officers in our growth and success to date and in our future prospects.
Accordingly, our executive compensation policies are designed to (1) align the
interests of executive officers with those of stockholders by encouraging stock
ownership by executive officers and by making a significant portion of executive
compensation dependent on our financial performance, (2) provide compensation
that will attract and retain talented professionals, (3) reward individual
results through base salary, annual cash bonuses, long-term incentive
compensation in the form of stock options, restricted stock awards and various
other benefits and (4) manage compensation based on skill, knowledge, effort and
responsibility needed to perform a particular job successfully.
In establishing salary, bonuses and long-term incentive compensation for
its executive officers, the compensation committee takes into account both the
position and the expertise of a particular executive, as well as the committee's
understanding of competitive compensation for similarly situated executives in
our sector of the technology industry.
EXECUTIVE COMPENSATION
BASE SALARY. Salaries for executive officers for 2003 were generally
determined by the compensation committee on an individual basis in connection
with the determination of the terms of such executive's applicable employment
agreement, based on the following criteria: the executive's scope of
responsibility, performance, prior experience and salary history, as well as the
salaries for similar positions at comparable companies.
BONUS. The amount of bonuses paid to executives for 2003 was based on our
financial results, special circumstances and, in the case of Mr. Reiss, the
satisfaction of the conditions in the formula set forth in his employment
agreement. Mr. Reiss received a cash bonus of $50,000 for 2003 as a result of
satisfaction of those conditions. Mr. Zigmont received a cash bonus of $50,000
for 2003 in consideration for his efforts in connection with the sale of our
Video Solutions business. Mr. Brandofino received a cash bonus of $35,000 in
consideration for his execution of an amended employment agreement.
LONG-TERM INCENTIVE AWARDS. The compensation committee believes that
equity-based compensation in the form of stock options or restricted stock links
the interests of executives with the long-term interests of our stockholders and
encourages executives to remain in our employ. We grant stock options in
accordance with our various stock option plans. Grants of options and/or
restricted stock are awarded based on a number of factors, including the
individual's level of responsibility, the amount and term of options already
held by the individual, the individual's contributions to the achievement of our
financial and strategic objectives, and industry practices and norms.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Reiss served as our Chief Executive Officer through October 14, 2003.
Mr. Trachtenberg became our Chief Executive Officer effective as of October 15,
2003.
COMPENSATION OF DAVID TRACHTENBERG
We entered into an agreement with David Trachtenberg to serve as President
and Chief Executive Officer having a three-year term commencing October 15,
2003. Under the agreement, Mr. Trachtenberg is entitled, in year one, two and
three of his employment to annual base compensation of $315,000, $345,000 and
$375,000. Mr. Trachtenberg is also entitled to annual incentive compensation in
an amount equivalent to 50% of his then annual base salary subject to the
achievement of goals and metrics established by Mr. Trachtenberg and our
Compensation Committee and updated on an annual basis. The agreement provides
for an award of 360,000 restricted shares of our common stock, the fair value of
which was determined to be $1,116,000. These restricted shares will be forfeited
if Mr. Trachtenberg's employment with us is terminated for any reason, with risk
of forfeiture lapsing with respect to 120,000 shares on each anniversary of the
commencement of his employment. Mr. Trachtenberg is also entitled to
reimbursement for the costs of a car to conduct company business and for parking
his car in New York City. Under the agreement, we must secure and pay the
premium on a $2,000,000 life insurance policy payable to Mr. Trachtenberg's
designated beneficiary. Either we or Mr. Trachtenberg may terminate his
employment at any time, for any reason or no reason; however, if Mr.
Trachtenberg is terminated without cause or if he resigns for good reason or
dies, he is entitled to one year of his then annual base salary, one year of his
then annual incentive compensation, one year of continued reimbursement for his
car and parking expenses and one year of accelerated vesting on the restricted
shares granted under the employment agreement. If Mr. Trachtenberg's employment
is
14
terminated for cause or if he voluntarily resigns, he is entitled to his base
salary and other benefits through the last day actually worked.
COMPENSATION OF RICHARD REISS
Mr. Reiss, who served as ACC's Chairman of the Board of Directors,
President and Chief Executive Officer from its formation in 1991 until May 2000,
and has served as Glowpoint's Chairman and Chief Executive Officer since its
formation in May 2000 and as Glowpoint's President from May 2000 until April
2002, was paid a base salary of $330,000 in 2003. As noted above, he was also
paid a cash bonus of $50,000 for his services in 2003.
We entered into an employment agreement, as amended, with Mr. Reiss (see
"Employment Agreements") pursuant to which he serves as Chief Executive Officer.
Mr. Reiss's salary and other compensation and the terms of his employment
agreement have been established by reference to the salaries and equity
participations of chief executive officers of other companies in our industry
and related industries, and in recognition of Mr. Reiss's unique skills and
importance to our company.
Under the employment agreement, as amended, Mr. Reiss is entitled to base
compensation of $330,000 and a discretionary bonus in calendar year 2003. On
October 14, 2003, we entered into an amended and restated employment agreement
with Mr. Reiss in connection with Mr. Reiss' resignation as our Chief Executive
Officer. Under the agreement, from October 14, 2003 to December 31, 2004, Mr.
Reiss will assist our management in the development and marketing of our video
conferencing service and provide general executive-level advice. Mr. Reiss is
entitled to a salary of $82,500 for the period from October 1, 2003 through
December 31, 2003, a salary of $150,000 for calendar year 2004 and a cash bonus
of $50,000 upon execution of the amended agreement. The post-termination
exercise period of Mr. Reiss' stock options granted under the 2000 plan was
extended to 24 months after the expiration of his employment. Under the amended
agreement, we are required to pay Mr. Reiss' car lease through its expiration on
December 31, 2004, Mr. Reiss' cell phone monthly charges through December 31,
2004, the cost to maintain a Glowpoint video conferencing connection and a
business telephone line at Mr. Reiss' home through December 31, 2004, and
premiums through December 31, 2004 on a $1.0 million life insurance policy
payable to Mr. Reiss' designated beneficiary or estate. In addition, we are
required to pay COBRA premiums to maintain Mr. Reiss' individual and family
health insurance coverage for 18 months following the termination of Mr. Reiss'
employment.
INTERNAL REVENUE CODE SECTION 162(m) LIMITATION
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million per year paid to certain executive officers. The limitation applies
only to compensation that is not considered to be performance-based. The
non-performance based compensation paid to our executive officers in 2003 did
not, in the case of any officer, exceed the $1 million per year limit. The
compensation committee generally intends to limit the dollar amount of all
non-performance based compensation payable to our executive officers to no more
than $1 million per year.
Respectfully submitted,
Karen Basian (member since November 2003)
James Kuster (member until March 2004)
Michael Sternberg (member until November 2003)
Michael Toporek
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Karen Basian, James Kuster, Michael Sternberg and Michael Toporek served as
members of the compensation committee of the board of directors during 2003. Mr.
Hiltzik replaced Mr. Kuster as a member of the compensation committee on March
25, 2004. No member of the compensation committee was at any time during 2003 or
at any other time our officer or employee. No member of the compensation
committee served on the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the board
or our compensation committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We receive financial and tax services from Schneider & Associates LLP, an
accounting firm in which Dean Hiltzik, one of our directors, is a partner. Since
Mr. Hiltzik became a director of ACC on September 15, 1999, we have incurred
fees of approximately $274,000 for services received from this firm, $24,000 of
which were incurred in 2003. We
15
also entered into a consulting agreement with Mr. Hiltzik, dated January 2,
2001, for the provision of tax and financial services for one year. Mr. Hiltzik
received an option to purchase 30,000 shares of common stock at an exercise
price of $3.94 per share pursuant to that agreement.
We entered into a one-year consulting agreement, commencing July 22, 2002,
with Lewis Jaffe, one of our directors, pursuant to which Mr. Jaffe served as a
management consultant to our company in the areas of corporate development and
investor relations. In consideration for these services, we granted Mr. Jaffe an
option to purchase 50,000 shares of our common stock at an average exercise
price of $3.00 per share vesting in ten installments of 5,000 shares per month
commencing September 30, 2002. We entered into a one-year consulting agreement,
dated September 21, 2001, with Mr. Jaffe pursuant to which Mr. Jaffe served as a
management consultant to our company in the areas of corporate development and
investor relations. In consideration for these services, we granted Mr. Jaffe an
option to purchase 30,000 shares of our common stock at an exercise price of
$5.16 per share.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of common stock as of April 16, 2004 by each of the following:
o each person (or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) known by us to own beneficially 5% or
more of the common stock;
o our directors and named executive officers; and
o all of our directors and executive officers as a group.
As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition of
any security. A person is considered the beneficial owner of securities that can
be acquired within 60 days of April 16, 2004 through the exercise of any option,
warrant or right. Shares of common stock subject to options, warrants or rights
which are currently exercisable or exercisable within 60 days of April 16, 2004
are considered outstanding for computing the ownership percentage of the person
holding such options, warrants or rights, but are not considered outstanding for
computing the ownership percentage of any other person. The amounts and
percentages are based on 37,369,583 shares of common stock outstanding as of
April 16, 2004.
Number of Shares Percentage of
Name and address of beneficial owners(1) Owned(2) Outstanding Shares
------------------------------------- ================ ======================
Executive Officers and Directors:
David Trachtenberg 360,000 *
Richard Reiss 5,192,250 (3) 13.4%
Karen Basian 85,000 (4) *
Leo Flotron 1,323,500 (5) 3.5%
Dean Hiltzik 309,393 (6) *
James Kuster 618,544 (7) 1.7%
Lewis Jaffe 183,000 (8) *
Michael Toporek 102,500 (9) *
Christopher Zigmont 415,500 (10) 1.1%
Michael Brandofino 217,910 (11) *
All directors and executive officers as a group (12 people) 8,807,597 (12) 21.6%
5% Owners:
North Sound Capital LLC 2,924,998 (13) 7.9%
53 Forest Avenue, Suite 202
Old Greenwich, Connecticut 06870
16
Royal Bank of Canada 1,975,904 (14) 5.3%
One Liberty Plaza
165 Broadway
New York, New York 10006
---------------
* Less than 1%
(1) Unless otherwise noted, the address of each person listed is c/o Glowpoint,
Inc., 225 Long Avenue, Hillside, New Jersey 07205.
(2) Unless otherwise noted indicated by footnote, the named persons have sole
voting and investment power with respect to the shares of common stock
beneficially owned.
(3) Includes 1,659,643 shares subject to presently exercisable stock options
and 82,500 shares held by a trust for the benefit of Mr. Reiss' children,
of which he is the trustee.
(4) Includes 5,000 shares subject to presently exercisable stock options.
(5) Includes 927,500 shares subject to presently exercisable stock options.
(6) Includes 88,200 shares subject to presently exercisable stock options.
(7) Includes 35,500 shares subject to presently exercisable stock options. Mr.
Kuster's shares also include 498,044 shares held by Crest Communications
Partners, LP and Crest Entrepreneurs Fund LP. Mr. Kuster is a managing
director of Crest Communications Holdings, LLC and disclaims beneficial
ownership of Glowpoint shares held by Crest Communications Partners, LP and
Crest Entrepreneurs Fund LP.
(8) Includes 183,000 shares subject to presently exercisable stock options.
(9) Includes 22,500 shares subject to presently exercisable stock options.
(10) Includes 415,500 shares subject to presently exercisable stock options.
(11) Includes 214,875 shares subject to presently exercisable stock options.
(12) Includes 3,551,718 shares subject to presently exercisable stock options.
(13) Ownership information is based on the Schedule 13G filed by North Sound
Capital Management, L.L.C. on December 31, 2003.
(14) Includes 333,334 shares of common stock which are issuable upon exercise of
warrants and 833,333 of common stock which are issuable upon conversion of
shares of Series B preferred stock. Steven Milke has voting and dispositive
power over the Glowpoint securities held by Royal Bank of Canada. Ownership
information is based on information provided by Royal Bank of Canada to us
in connection with our registration statement on Form S-3 (File No.
333-114179).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors and persons who beneficially own more than 10%
of a registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% stockholders are required by
regulations of the Securities and Exchange Commission to furnish us with copies
of all Section 16(a) reports they file.
Based solely on our review of the copies of reports we received, or written
representations that no such reports were required for those persons, we believe
that, for 2003, all statements of beneficial ownership required to be filed with
the Securities and Exchange Commission were filed on a timely basis except that
reports on Forms 3 and 4 were late in being filed for each of Ms. Basian and
Messrs. Brandofino, Hiltzik, Jaffe, Kuster, Toporek, Trachtenberg and Zigmont.
The delay generally was the result of our administrative difficulties and was
not the fault of any of the directors or executives. These reports reflected
options granted to our non-employee directors for their attendance at meetings
of the board of directors and audit committee, options and restricted shares of
our common stock granted to some of our executives in consideration for their
service to us, restricted shares of our common stock granted to an independent
director, and the exercise of options where the grant had already been reported
on a Section 16 (a) report.
17
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information regarding the aggregate number of
securities to be issued under all of our stock options and equity-based plans
upon exercise of outstanding options, warrants and other rights and their
weighted-average exercise prices as of December 31, 2003. The securities issued
under equity compensation plans not approved by security holders consist
entirely of options issued with respect to individual compensation arrangements
for officers, directors, consultants and one employee. Specifically, we issued
most of these options to Richard Reiss, our Chairman and former Chief Executive
Officer, and Leo Flotron, our former President and Chief Operating Officer, in
connection with their employment agreements. We issued the remainder of these
options to two consultants and two directors as compensation for services.
Number of
securities
remaining
available for
future
Number of Weighted- issuance under
securities to average equity
be issued upon exercise price compensation
exercise of plans
of outstanding outstanding (excluding
options, options, securities
warrants, and warrants, reflecting in
rights and rights column (a))
-------- -------- --------
PLAN CATEGORY
Equity compensation plans approved by security holders 3,983,366 $3.24 1,024,528
Equity compensation plans not approved by security holders 1,809,407 $2.86 --
----------- -------- -----------
Total 5,792,773 $3.12 1,024,528
=========== ======== ===========
18
PROPOSAL NO. 2 -
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The audit committee, composed entirely of independent, non-employee members
of the board of directors, has appointed the firm of BDO Seidman, LLP as
independent auditors to audit the consolidated financial statements of our
company and its subsidiaries for fiscal 2004 and is asking the stockholders for
ratification of the appointment. Stockholder ratification is not required by our
company's bylaws or under any other applicable legal requirement. If the
stockholders do not approve the selection of BDO Seidman, the audit committee
will reconsider the appointment.
BDO Seidman has audited our company's consolidated financial statements
since 2000. As our independent auditors, BDO Seidman would audit our
consolidated financial statements for fiscal 2004 and perform audit-related
services and consultation in connection with various accounting and financial
reporting matters. BDO Seidman also performs certain non-audit services for our
company. The audit committee has determined that the provision of the services
provided by BDO Seidman as set forth herein are compatible with maintaining BDO
Seidman's independence and the prohibitions on performing non-audit services set
forth in the Sarbanes-Oxley Act and relevant Securities and Exchange Commission
rules.
BDO Seidman will have a representative present at the annual meeting who
will be available to respond to appropriate questions. The representative will
also have the opportunity to make a statement if he or she desires to do so.
AUDIT FEES
BDO Seidman has billed us $151,334 in 2003 and $173,080 in 2002 in the
aggregate for professional services rendered by it for the audit of our annual
financial statements for the 2002 and 2003 fiscal years and the reviews of the
financial statements included in our quarterly reports on Form 10-Q for the 2002
and 2003 fiscal years.
AUDIT-RELATED FEES
BDO Seidman has billed us $49,733 in 2003 and $29,424 in 2002 in the
aggregate for assurance and related services that are reasonably related to the
performance of the audit and review of our financial statements that are not
already reported in the paragraph immediately above. These fees were billed in
connection with our filings with the Securities and Exchange Commission,
consultation with respect to financial accounting pronouncements and attendance
at audit committee and annual stockholder meetings.
TAX FEES
BDO Seidman did not render any professional services to us for tax
compliance, tax advice and tax planning in 2003 or 2002.
ALL OTHER FEES
BDO Seidman has billed us $9,322 in 2003 and $0 in 2002 in the aggregate
for all other services rendered to us. These fees were billed in connection with
assistance provided relating to the sale of our Video Solutions business.
In accordance with audit committee policy and the requirements of law, all
services to be provided by BDO Seidman are pre-approved by the audit committee.
Pre-approval includes audit services, audit-related services, tax services and
other services. To avoid certain potential conflicts of interest, the law
prohibits a publicly traded company from obtaining certain non-audit services
from its auditing firm. We obtain these services from other service providers as
needed.
REQUIRED VOTE AND BOARD RECOMMENDATION
Approval of the independent auditor proposal requires the affirmative vote
of a majority of the votes cast by holders of common stock present at the annual
meeting in person or by proxy entitled to vote. The board of directors
recommends that stockholders vote for the ratification of the selection of BDO
Seidman as our independent auditors for the fiscal year ending December 31,
2004.
19
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on our
common stock with the cumulative total return on the Nasdaq National Market
Index and a peer group selected by our company on an industry and
line-of-business basis. The period shown commences on December 31, 1998 and ends
on December 31, 2003, the end of our last fiscal year. The graph assumes an
investment of $100 on December 31, 1998, and the reinvestment of any dividends.
The comparisons in the graph below are based on historical data and are not
indicative of, nor intended to forecast, future performance of our common stock.
[CHART OMITTED]
INDEXED STOCK QUOTES 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
Glowpoint, Inc. 100.000 106.577 96.053 130.947 58.737 36.842
The Nasdaq National Market Index 100.000 185.585 112.671 88.950 60.907 91.366
Nasdaq Telecommunications Index 100.000 202.711 92.520 47.240 21.718 36.647
STOCK QUOTES 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
Glowpoint, Inc. 4.750 5.062 4.563 6.220 2.790 1.750
The Nasdaq National Market Index 2,192.690 4,069.310 2,470.520 1,950.400 1,335.510 2,003.370
Nasdaq Telecommunications Index 500.910 1,015.400 463.440 236.630 108.790 183.570
20
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF GLOWPOINT, INC.
FOR THE 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 2004
The undersigned stockholder of GLOWPOINT, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
proxy statement, each dated April 27, 2004, and hereby appoints David C.
Trachtenberg and Christopher Zigmont proxy, with full power of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
2004 Annual Meeting of Stockholders of GLOWPOINT, INC. to be held on May 27,
2004 at 9:00 a.m., local time, at the Holiday Inn, 304 Route 22 West,
Springfield, New Jersey 07081 and at any adjournment or adjournments thereof,
and to vote all shares of Common Stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth below.
(Continued and to be signed on the reverse side)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GLOWPOINT, INC.
MAY 27, 2004
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES IN PROPOSAL NO. 1, AND FOR RATIFICATION OF THE INDEPENDENT
AUDITORS IN PROPOSAL NO. 2, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. PROPOSAL NO. 1: ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as indicated) vote for all nominees listed below
Michael Toporek
David C. Trachtenberg
If you wish to withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
------------
2. PROPOSAL NO. 2: RATIFICATION OF BDO SEIDMAN, LLP AS GLOWPOINT'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED: __________________, 2004
_________________________________
Signature
_________________________________
Signature
THIS PROXY SHOULD BE MARKED, DATED AND SIGNED BY THE STOCKHOLDER(S) EXACTLY AS
HIS OR HER NAME APPEARS HEREON, AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE.
PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE. IF SHARES ARE HELD
BY JOINT TENANTS OR AS COMMUNITY PROPERTY, BOTH SHOULD SIGN.
Appendix A
CHARTER OF THE NOMINATING COMMITTEE
OF GLOWPOINT, INC.
AUTHORITY AND PURPOSE
The Nominating Committee of Glowpoint, Inc. (the "Corporation") is
appointed by the Corporation's Board of Directors (the "Board") to assist the
Board in selecting nominees for election to the Board and to monitor the
composition of the Board. The Nominating Committee (the "Committee") shall
undertake those specific duties and responsibilities listed below and such other
duties as the Board shall from time to time prescribe.
The purpose of the Committee shall be to assess the performance of the
Board and to make recommendations to the Board from time to time, or whenever it
shall be called upon to do so, regarding nominees for the Board. All powers of
the Committee are subject to the restrictions designated in the Corporation's
By-laws and by applicable law.
COMMITTEE MEMBERSHIP
The Committee members (the "Members") shall be appointed by the Board
and will serve at the discretion of the Board. The Committee will consist of at
least three (3) independent members of the Board. The Nominating Committee (the
"Committee") shall be composed of members of the Corporation's Board of
Directors (the "Board"). Unless otherwise directed by the Board, each Member
shall serve until such Member ceases to serve as a member of the Board, or until
his or her successor has been duly appointed by the Board.
DUTIES AND RESPONSIBILITIES
The duties of the Committee shall include, without limitation, the
following:
(1) Monitoring the size and composition of the Board.
(2) Considering and making recommendations to the Board with respect
to the nominations or elections of directors of the Corporation.
In considering potential new directors and officers, the Committee will review
individuals from various disciplines and backgrounds. Among the qualifications
to be considered in the selection of candidates are broad experience in
business, finance or administration; familiarity with national and international
business matters; familiarity with the Corporation's industry; and prominence
and reputation. Since prominence and reputation in a particular profession or
field of endeavor are what bring most persons to the Board's attention, there is
the further consideration of whether the individual has the time available to
devote to the work of the Board and one or more of its committees.
A review is also to be made of the activities and associations of each
candidate to ensure that there is no legal impediment, conflict of interest, or
other consideration that might hinder or
prevent service on the Board. In making its selection, the Committee will bear
in mind that the foremost responsibility of a director of a Corporation is to
represent the interests of the stockholders as a whole.
The Committee shall periodically review and reassess the adequacy of
this Charter and propose any changes to the Board for approval.
CONDUCT OF BUSINESS
The Committee shall conduct its business in accordance with this
Charter and any direction by the whole Board of Directors. The Committee shall
report, at least annually, to the Board. Prior to the annual meeting of
stockholders, the Committee will recommend to the Board the persons who will be
the nominees of the Board of Directors for the election of whom the Board will
solicit proxies. As part of this process, the Committee will consider candidates
recommended by stockholders of the Corporation.
MEETINGS
The Committee will meet at least one time each year. The Committee may
establish its own schedule which it will provide to the Board in advance.
MINUTES
The Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board.