Commitments and Contingencies

Operating Leases

We lease two facilities in Denver, CO and Oxnard, CA that are under operating leases through December 2018 and March 2020, respectively. Both of these leases require us to pay increases in real estate taxes, operating costs and repairs over certain base year amounts. Lease payments for the years ended December 31, 2016 and 2015 were $287,000 and $342,000, respectively.

Future minimum rental commitments under all non-cancelable operating leases are as follows (in thousands):



Year Ending December 31,
2017	$	301
2018	308
2019	88
2020	23
	$	720

Commercial Commitments

We have entered into a number of agreements with our suppliers to purchase communications and consulting services. Some of the agreements require a minimum amount of services to be purchased over the life of the agreement, or during a specified period of time. Glowpoint believes that it will meet its commercial commitments. With the exception of the UTC matter discussed below, in prior instances where Glowpoint did not meet the minimum commitments, no penalties for minimum commitments have been assessed and the Company has entered into new agreements. It has been our experience that the prices and terms of successor agreements are similar to those offered by other suppliers. Glowpoint does not believe that any loss contingency related to a potential shortfall should be recorded in the consolidated financial statements because it is not probable, from the information available and from prior experience, that Glowpoint has incurred a liability.

Contingencies

On July 23, 2015, UTC Associates Inc. (“UTC”) filed suit in the United States District Court for the Southern District of New York against the Company (the “UTC Litigation”). The UTC Litigation involved allegations that Glowpoint failed to pay amounts allegedly due under a Technology Development & Operations Outsourcing arrangement dated June 30, 2010 (the “Proposal”). UTC sought monetary damages totaling $2,107,000, including $1,107,000 for damages arising from the breach of an alleged guaranteed minimum provision, and $1,000,000 for damages arising from the breach of an alleged exclusivity provision. On September 22, 2015, the Company filed a motion to dismiss the complaint. On October 13, 2015, in response to the Company’s motion, UTC filed an amended complaint. On November 2, 2015, the Company filed a motion to dismiss the amended complaint. On February 1, 2016, the Court partially granted and partially denied the dismissal motion. The Court dismissed with prejudice the fraud claim and declined to dismiss the two breach of contract claims. On April 1, 2016, the Company filed its answer to UTC’s Complaint and asserted counterclaims against UTC, including for breach of contract, fraud in the inducement, fraud in the execution and fraud, pursuant to which the Company was seeking a judgment awarding monetary damages against UTC in an amount to be determined at trial, voiding the Proposal ab initio and awarding the Company its costs and disbursements, including attorneys’ fees, incurred in defending the action. On April 25, 2016, UTC filed an answer to the Company’s counterclaims, denying such counterclaims and asserting purported defenses to them.

On September 30, 2016, the Company entered into a settlement agreement with UTC related to claims that have been or could have been asserted against one another, including but not limited to claims in the UTC Litigation. Pursuant to the settlement agreement, (i) the Company paid $325,000 to UTC on September 30, 2016; (ii) the Company and UTC entered into a new services agreement pursuant to which the Company will purchase services from UTC subject to certain terms and conditions set forth therein; and (iii) the Company issued 600,000 shares of the Company’s common stock to UTC in October 2016. The value of the common stock, or $204,000 (equal to 600,000 shares multiplied by the closing price of the Company’s stock of $0.34 per share on the issuance date), was recorded as stock-based expense in general and administrative expenses for the year ended December 31, 2016. The $325,000 cash payment was also recorded in general and administrative expenses for the year ended December 31, 2016. Upon payment and delivery of the foregoing, both the Company and UTC dismissed their respective claims in the UTC Litigation, and each party has released the other party of all potential claims against the other party, including those that were or could have been asserted in the UTC Litigation.

Letter of Credit

As of December 31, 2016, the Company had an outstanding irrevocable standby letter of credit with Wells Fargo Bank for $18,000 to serve as our security deposit for our lease of office space in Colorado (see Note 4).