-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A/PHSh3auxcwTUDJbbzjd6tzG4kZmZQt11QtdbwqX9wq5uRX5vLmKN9KQvrZ3wyQ ED3WKu1u7zQHKJ12cv5NGQ== 0001169232-03-006693.txt : 20031114 0001169232-03-006693.hdr.sgml : 20031114 20031114163731 ACCESSION NUMBER: 0001169232-03-006693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOWPOINT INC CENTRAL INDEX KEY: 0000746210 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 770312442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25940 FILM NUMBER: 031005246 BUSINESS ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 BUSINESS PHONE: 8054828277 MAIL ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 FORMER COMPANY: FORMER CONFORMED NAME: WIRE ONE TECHNOLOGIES INC DATE OF NAME CHANGE: 20000606 FORMER COMPANY: FORMER CONFORMED NAME: VIEW TECH INC DATE OF NAME CHANGE: 19950418 FORMER COMPANY: FORMER CONFORMED NAME: VIEWTECH INC DATE OF NAME CHANGE: 19950418 10-Q 1 d57414_10-q.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q |X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2003. or |_| Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number: 0-25940 GLOWPOINT, INC. (Exact Name of registrant as Specified in its Charter) Delaware 77-0312442 (State or other Jurisdiction of (I.R.S. Employer Number) Incorporation or Organization) 225 Long Avenue, Hillside, New Jersey 07205 (Address of Principal Executive Offices) 973-282-2000 (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Check whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act of 1934. Yes |_| No |X| The number of shares outstanding of the registrant's Common Stock as of November 10, 2003 was 29,844,260. GLOWPOINT, INC. Index PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements* ....................................................... 1 Consolidated Balance Sheets September 30, 2003 and December 31, 2002 ................. 1 Consolidated Statements of Operations For the Nine Months and Three Months Ended September 30, 2003 and 2002 ....................................................... 2 Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2003 and 2002 .......................................................................... 3 Notes to Consolidated Financial Statements ........................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .... 9 Item 3. Quantitative and Qualitative Disclosures and Market Risk ................................. 15 Item 4. Controls and Procedures .................................................................. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings ........................................................................ 15 Item 2. Changes in Securities and Use of Proceeds ................................................ 15 Item 3. Defaults Upon Senior Securities .......................................................... 15 Item 4. Submission of Matters to a Vote of Security Holders ...................................... 16 Item 5. Other Information ........................................................................ 17 Item 6. Exhibits and Reports on Form 8-K ......................................................... 17 Signatures .......................................................................................... 18 Certifications ........................................................................................ 38
* The Balance Sheet at December 31, 2002 has been taken from the audited financial statements at that date. All other financial statements are unaudited. Glowpoint, Inc. Consolidated Balance Sheets
September 30, 2003 December 31, 2002 ------------------ ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents ......................................... $ 8,283,187 $ 2,762,215 Accounts receivable-net ........................................... 2,076,139 1,277,891 Assets of discontinued AV operations .............................. 72,535 807,067 Assets of discontinued VS operations .............................. -- 41,314,701 Other current assets .............................................. 2,420,893 727,262 ------------- ------------- Total current assets .......................................... 12,852,754 46,889,136 Furniture, equipment and leasehold improvements-net .................... 11,794,128 11,512,415 Goodwill ............................................................... 2,547,862 2,547,862 Other assets ........................................................... 454,722 552,251 ------------- ------------- Total assets .................................................. $ 27,649,466 $ 61,501,664 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable .................................................. $ 1,560,250 $ 1,055,427 Accrued expenses .................................................. 1,654,199 681,369 Liabilities of discontinued VS operations ......................... -- 17,333,120 Current portion of capital lease obligations ...................... 130,161 -- ------------- ------------- Total current liabilities ..................................... 3,344,610 19,069,916 Noncurrent liabilities: Bank loan payable ................................................. -- 5,845,516 Capital lease obligations, less current portion ................... 72,041 -- ------------- ------------- Total noncurrent liabilities .................................. 72,041 5,845,516 ------------- ------------- Total liabilities ............................................. 3,416,651 24,915,432 ------------- ------------- Commitments and contingencies Subordinated debentures ................................................ 4,888,000 4,888,000 Discount on subordinated debentures .................................... (3,647,142) (4,888,000) ------------- ------------- Subordinated debentures, net ...................................... 1,240,858 -- ------------- ------------- Stockholders' Equity: Preferred stock, $.0001 par value; 5,000,000 shares authorized, none issued ................................................... -- -- Common Stock, $.0001 par value; 100,000,000 authorized; 29,729,820 and 28,931,660 shares outstanding, respectively .... 2,973 2,893 Treasury stock, 39,891 shares at cost ............................. (239,742) (239,742) Additional paid-in capital ........................................ 132,765,482 131,132,374 Accumulated deficit ............................................... (109,536,756) (94,309,293) ------------- ------------- Total stockholders' equity .................................... 22,991,957 36,586,232 ------------- ------------- Total liabilities and stockholders' equity .................... $ 27,649,466 $ 61,501,664 ============= =============
See accompanying notes to consolidated financial statements. 1 Glowpoint, Inc. Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, Three Months Ended September 30, ------------------------------- -------------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net revenues ................................... $ 7,482,963 $ 3,883,471 $ 2,581,476 $ 1,525,494 Cost of revenues ............................... 7,387,191 3,616,071 2,488,291 1,440,224 ------------ ------------ ------------ ------------ Gross margin ................................... 95,772 267,400 93,185 85,270 ------------ ------------ ------------ ------------ Operating expenses Research and development .................... 934,240 734,444 327,020 273,645 Selling ..................................... 3,693,703 2,961,210 1,359,461 1,238,204 General and administrative .................. 4,060,224 3,462,872 1,428,211 1,095,153 Impairment losses on long-lived assets ...... 1,379,415 -- 1,379,415 -- Restructuring ............................... -- 260,000 -- -- ------------ ------------ ------------ ------------ Total operating expenses ....................... 10,067,582 7,418,526 4,494,107 2,607,002 ------------ ------------ ------------ ------------ Loss from continuing operations ................ (9,971,810) (7,151,126) (4,400,922) (2,521,732) ------------ ------------ ------------ ------------ Other (income) expense Amortization of deferred financing costs .... 140,017 106,456 47,254 46,762 Interest income ............................. (6,684) (68,045) (884) (9,913) Interest expense ............................ 943,489 182,176 156,506 76,389 Amortization of discount on subordinated debentures ................................ 1,490,213 -- 497,338 -- ------------ ------------ ------------ ------------ Total other expenses, net ...................... 2,567,035 220,587 700,214 113,238 ------------ ------------ ------------ ------------ Net loss from continuing operations ............ (12,538,845) (7,371,713) (5,101,136) (2,634,970) Loss from discontinued AV operations ........... (1,173,067) (1,837,588) -- (569,114) Loss from discontinued VS operations ........... (1,515,551) (1,900,990) (577,058) (1,131,821) Loss from discontinued Voice operations ........ -- (151,339) -- (50,000) ------------ ------------ ------------ ------------ Net loss attributable to common stockholders ... $(15,227,463) $(11,261,630) $ (5,678,194) $ (4,385,905) ============ ============ ============ ============ Net loss from continuing operations per share: Basic and diluted ........................... $ (0.43) $ (0.26) $ (0.17) $ (0.09) ============ ============ ============ ============ Loss from discontinued AV operations per share: Basic and diluted ........................... $ (0.04) $ (0.06) $ -- $ (0.02) ============ ============ ============ ============ Loss from discontinued VS operations per share: Basic and diluted ........................... $ (0.05) $ (0.07) $ (0.02) $ (0.04) ============ ============ ============ ============ Loss from discontinued Voice operations per share: Basic and diluted ........................... $ -- $ -- $ -- $ -- ============ ============ ============ ============ Net loss attributable to common stockholders per share: Basic and diluted ........................... $ (0.52) $ (0.39) $ (0.19) $ (0.15) ============ ============ ============ ============ Weighted average number of common shares: Basic and diluted ........................... 29,189,338 28,731,560 29,641,031 28,942,177 ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 2 Glowpoint, Inc. Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, ------------------------------- 2003 2002 ------------ ------------ Cash flows from Operating Activities Net loss ................................................................ $(15,227,463) $(11,261,630) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization ....................................... 4,212,407 3,811,168 Amortization of deferred financing costs ............................ 140,017 106,456 Amortization of discount on subordinated debentures ................. 1,490,213 -- Non-cash compensation ............................................... 673,536 230,409 Impairment losses on long-lived assets .............................. 1,379,415 -- Discontinued operations ............................................. -- 151,339 Increase (decrease) in cash attributable to changes in assets and liabilities, net of effects of acquisitions: Accounts receivable ............................................ (798,249) 9,144,844 Inventory ...................................................... -- (2,774,005) Assets of discontinued AV operations ........................... 734,532 -- Assets of discontinued VS operations ........................... 6,874,912 -- Other current assets ........................................... (2,907,057) (6,359,056) Other assets ................................................... 23,880 (563,995) Accounts payable ............................................... (688,765) (1,134,620) Accrued expenses ............................................... 972,829 (937,473) Deferred revenue ............................................... -- (1,107,031) Other current liabilities ...................................... -- (1,465,049) ------------ ------------ Net cash used in operating activities ...................... (3,119,793) (12,158,643) ------------ ------------ Cash flows from Investing Activities Purchases of furniture, equipment and leasehold improvements ............ (1,936,831) (3,598,265) Proceeds from sale of VS operation ...................................... 16,233,312 -- ------------ ------------ Net cash (used in) provided by investing activities ................. 14,296,481 (3,598,265) ------------ ------------ Cash flows from Financing Activities Proceeds from common stock offering ..................................... -- 20,257,962 Costs of issuance of subordinated debentures ............................ (249,355) -- Exercise of warrants and options, net ................................... 535,421 370,735 Proceeds from bank loans ................................................ 75,545,455 47,072,644 Payments on bank loans .................................................. (81,390,971) (48,760,035) Deferred financing costs ................................................ (66,367) -- Payments on capital lease obligations ................................... (29,899) (44,394) ------------ ------------ Net cash provided by (used in) financing activities ................. (5,655,716) 18,896,912 ------------ ------------ Increase in cash and cash equivalents ...................................... 5,520,972 3,140,004 Cash and cash equivalents at beginning of period ........................... 2,762,215 1,689,451 ------------ ------------ Cash and cash equivalents at end of period ................................. $ 8,283,187 $ 4,829,455 ============ ============ Supplement disclosures of cash flow information: Cash paid during the period for: Interest ................................................................ $ 295,023 $ 182,176 ============ ============ Taxes ................................................................... $ -- $ -- ============ ============
Non-cash financing and investing activities: Equipment with costs totaling $258,110 was acquired under capital lease arrangements during the nine months ended September 30, 2003. See accompanying notes to consolidated financial statements. 3 GLOWPOINT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 Note 1 -- The Business Glowpoint, Inc. ("Glowpoint" or the "Company") operates the first IP-based subscriber network service dedicated to video communications. Launched in late 2000, Glowpoint carries video calls throughout the United States and to Europe, South America and Asia on a network provisioned through carrier-class backbone and last mile access partners over a variety of solutions including SDSL, HDSL, Fractional and Full T1's, DS3, T1, ATM and Gigabit Ethernet. The Glowpoint service presently carries over 8,000 video calls per month on behalf of nearly 250 customers. The network service offers guaranteed up-time, real-time billing and usage information, gateway services to ISDN, multi-point bridging, live operator assistance, encryption, scheduling features and international least-cost routing, among other value-added features. The Company operates a state-of-the-art network operations center at its corporate headquarters in Hillside, New Jersey, where research and development, software development, network engineering, product development, product management, customer service and help desk functions are located. The Company also maintains an operations center in Camarillo, California where multi-point bridging, live-operator assistance and other customer service functions are performed and redundant capability for the network is maintained. Glowpoint's network spans 14 points of presence across three continents and is able to host video calls to virtually any business center around the world. On September 23, 2003, the Company, formerly known as Wire One Technologies, Inc., completed the sale of substantially all of the assets of its Video Solutions ("VS") business to an affiliate of Gores Technology Group ("Gores"), a privately held international acquisition and management firm, in order to focus solely on growing its Glowpoint network service. Upon completing of the sale, the name "Wire One Technologies" was transferred to Gores and the resulting company, now exclusively focused on providing video communications services, changed its name to Glowpoint, Inc. The VS segment included the Company's videoconferencing equipment distribution, system design and engineering, installation, operation and maintenance activities and consisted of: a headquarters and warehouse facility in Miamisburg, Ohio; a help desk operation in Camarillo, California; 24 sales offices and demonstration facilities across the United States; and a client list of approximately 3,000 active customers with an installed base of approximately 22,000 video conferencing systems. As a result, this segment is classified as a discontinued operation in the accompanying financial statements with its assets and liabilities summarized in single line items on the consolidated balance sheets and its results from operations summarized in a single line item on the consolidated statement of operations. See Note 6 for further information. Note 2 -- Basis of Presentation The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report for the fiscal year ended December 31, 2002 as filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, AllComm Products Corporation ("APC"), VTC Resources, Inc. ("VTC") and Wire One Travel Services, Inc. ("WOTS"). All material intercompany balances and transactions have been eliminated in consolidation. Note 3 -- Effect of Recently Issued Accounting Standards In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures certain 4 financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within the scope of SFAS No. 150 as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective beginning September 1, 2003. The provisions of SFAS No. 150, which the Company adopted in 2003, did not have a material impact on the consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", addresses consolidation by business enterprises of variable interest entities. Under current practice, two enterprises generally have been included in consolidated financial statements because one enterprise controls the other through voting interests. This interpretation defines the concept of "variable interests" and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks among the parties involved. The provisions of FIN 46, which the Company adopted in 2003, did not have a material impact on the consolidated financial statements. In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of this interpretation are effective for interim and annual periods after December 15, 2002. The initial recognition and initial measurement requirements of this interpretation are effective prospectively for guarantees issued or modified after December 31, 2002. The provisions of FIN 45, which the Company adopted in 2003, did not have a material impact on the consolidated financial statements. In November 2002, the Emerging Issues Task Force (EITF) reached consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables". Revenue arrangements with multiple deliverables include arrangements which provide for the delivery or performance of multiple products, services and/or rights to use assets where performance many occur at different points in time or over different periods of time. EITF Issue No. 00-21 is effective for fiscal periods beginning after June 15, 2003. This standard, which the Company adopted in 2003, did not have a material impact on the consolidated financial statements. Note 4 -- Stock-Based Compensation At September 30, 2003, the Company accounts for its stock-based compensation plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and complies with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", and SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure". The following table illustrates, in accordance with the provisions of SFAS No. 148, the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. 5
Nine Months Ended Three Months Ended September 30, September 30, ----------------------------- --------------------------- 2003 2002 2003 2002 ------------ ------------ ----------- ----------- Net loss as reported ....................... $(15,227,463) $(11,261,630) $(5,678,194) $(4,385,905) Add: stock-based compensation expense included in reported loss, net of tax ... 166,811 230,409 55,216 69,719 Deduct: total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax .................. (5,452,137) (3,294,404) (3,597,455) (1,036,482) ------------ ------------ ----------- ----------- Pro forma net loss ......................... $(20,512,789) $(14,325,625) $(9,220,433) $(5,352,668) ============ ============ =========== =========== Loss per share: Basic and diluted - as reported ............ $ (0.52) $ (0.39) $ (0.19) $ (0.15) Basic and diluted - pro forma .............. $ (0.70) $ (0.50) $ (0.31) $ (0.19)
The fair value of the Company's stock-based option awards to employees was estimated assuming no expected dividends and the following weighted-average assumptions: Nine Months Ended Three Months Ended September 30, September 30, ------------------- ------------------- 2003 2002 2003 2002 ------- ------- ------- ------- Risk free interest rate .... 3.70% 4.02% 3.71% 4.02% Expected lives ............. 5.4 years 4.7 years 6.3 years 6.1 years Expected volatility ........ 91.95% 105.32% 71.78% 135.95% Note 5 -- Loss Per Share Basic loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding plus the weighted-average number of net shares that would be issued upon exercise of stock options and warrants using the treasury stock method and the deemed conversion of subordinated debentures using the if-converted method.
Nine Months Ended Three Months Ended September 30, September 30, ------------------------ ------------------------ 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Weighted average shares outstanding ........... 29,189,338 28,731,560 29,641,031 28,942,177 Effect of dilutive options and warrants ....... -- -- -- -- ---------- ---------- ---------- ---------- Weighted average shares outstanding including dilutive effect of securities .... 29,189,338 28,731,560 29,641,031 28,942,177 ========== ========== ========== ==========
Weighted average options and warrants to purchase 12,266,347 and 11,795,107 shares of common stock and subordinated debentures convertible into 2,036,677 common shares were outstanding during the nine and three months ended September 30, 2003. Weighted average options and warrants to purchase 10,818,595 and 11,241,703 shares of common stock were outstanding during the nine and three months ended September 30, 2002. These options and warrants were not included in the computation of diluted EPS because the Company reported a net operating loss for these periods and their effect would have been anti-dilutive. Note 6 -- Discontinued Operations In March 2003, the Company completed the sale of certain assets and liabilities of its Audio-Visual ("AV") division to Signal Perfection Limited ("SPL") for approximately $807,000, $250,000 of which was paid in cash at the close 6 of the transaction and the balance of which was paid in the form of a promissory note payable in five equal consecutive monthly payments commencing on April 15, 2003. The sale of the AV division was aimed at enabling the Company to focus more of its resources to the development and marketing of its subscriber-based IP network, Glowpoint, and to its VS segment. As a consequence, this division, previously part of the VS segment, has been classified as a discontinued operation in the accompanying financial statements, with its assets summarized in a single line item on the consolidated balance sheets and its results from operations summarized in a single line item on the consolidated statements of operations. Assets of discontinued AV operations consist of the following: September 30, 2003 December 31, 2002 ------------------ ----------------- Inventory ............................. $72,535 $300,000 Earnings in excess of billings ........ -- 507,067 ------- -------- Total ........................ $72,535 $807,067 ======= ======== Revenues and pretax loss from discontinued AV operations are as follows:
Nine Months Ended September 30, Three Months Ended September 30, ------------------------------- -------------------------------- 2003 2002 2003 2002 ----------- ------------ ------------- ----------- Revenues ........ $ 3,873,822 $ 13,760,642 $ -- $ 4,667,407 Pretax loss ..... $(1,173,067) $ (1,837,588) $ -- $ (569,114)
In September 2003, the Company completed the sale of all of the properties, rights, interests and other tangible and intangible assets that relate in any material respect to its VS segment to Gores pursuant to the terms of the asset purchase agreement dated as of June 10, 2003. The Company received total consideration of up to $24 million for the transaction, consisting of $21 million in cash, including $19 million at closing and a $2 million holdback, an unsecured $1 million promissory note maturing on December 31, 2004 and bearing an interest rate of 5% per annum and a $2 million earnout based on performance of the assets over the next two years. Gores held back $2 million to cover potential purchase price adjustments payable by Glowpoint arising under the asset purchase agreement. The $2 million cash holdback and the $1 million unsecured promissory note were not recorded on the consolidated balance sheet as of September 30, 2003 as the Company thought it prudent to wait until the 90 day post-closing review period had expired. Gores will also pay Glowpoint on each of June 30, 2004 and June 30, 2005 additional payments, not to exceed an aggregate of $2 million, equal to five percent of the sum of (1) the amounts billed by Gores from the operation of the VS segment by Gores after the closing, plus (2) the annual revenues derived from the video solutions business of Pierce Technology Services, Inc. (formerly Forgent Networks, Inc.) for such year in excess of $96 million. If Gores sells substantially all of the assets of its video solutions business prior to June 30, 2005, whether by merger, sale of stock or sale of assets, for total consideration greater than $35 million, Gores will pay the Company $2 million less amounts previously paid. As partial consideration for the purchase of assets, Gores assumed certain liabilities related to the VS segment, including (1) all liabilities to be paid or performed after the closing date that arise from or out of the performance or non-performance by Gores after the closing date of any contracts included in the assets or entered into after June 10, 2003 and (2) the Company's accounts payable, customer deposits, deferred revenue and accrued liabilities related to the VS segment. The sale of the Company's VS segment was approved by stockholders at the Company's 2003 Annual Meeting of Stockholders held Thursday, August 21, 2003. The closing of the sale took place on September 23, 2003. The VS segment included the Company's videoconferencing equipment distribution, system design and engineering, installation, operation and maintenance activities consisting of: a headquarters and warehouse facility in Miamisburg, Ohio; a help desk operation in Camarillo, California; 24 sales offices and demonstration facilities 7 across the United States; and a client list of approximately 3,000 active customers with an installed base of approximately 22,000 video conferencing systems. As a result, this segment is classified as a discontinued operation in the accompanying financial statements, with its assets and liabilities summarized in single line items on the consolidated balance sheets and its results from operations summarized in a single line item on the consolidated statement of operations. Assets of discontinued VS operations consist of the following: September 30, 2003 December 31, 2002 ------------------ ----------------- Accounts receivable .................. $ -- $24,163,666 Inventory ............................ -- 8,122,996 Other current assets ................. -- 6,149,214 Fixed assets ......................... -- 2,684,264 Other assets ......................... -- 194,561 -------------- ----------- Total ....................... $ -- $41,314,701 ============== =========== Liabilities of discontinued VS operations consist of the following: Accounts payable ..................... $ -- $ 7,994,535 Accrued expenses ..................... -- 1,441,444 Deferred revenue ..................... -- 7,871,267 Other liabilities .................... -- 25,874 -------------- ----------- Total ....................... $ -- $17,333,120 ============== =========== Revenues and pretax loss from discontinued VS operations are as follows:
Nine Months Ended September 30, Three Months Ended September 30, --------------------------------- -------------------------------- 2003 2002 2003 2002 ------------ -------------- -------------- ------------ Revenues ....... $ 40,253,589 $ 58,860,578 $ -- $ 17,295,369 Pretax loss .... $ (1,515,551) $ (1,900,990) $ (577,058) $ (1,131,821)
Note 7 -- Bank Loan Payable In May 2002, the Company entered into a $25 million working capital credit facility with JPMorgan Chase Bank. Under the terms of the three-year agreement for this facility, loan availability is based on (1) 80% of eligible accounts receivable and (2) the lesser of 50% against eligible finished goods inventory or 80% against the net eligible amount of the net orderly liquidation value by category of finished goods inventory as determined by an outside appraisal firm, subject to an inventory cap of $2 million. Borrowings bear interest at the lender's base rate plus 1 1/2% per annum. The credit facility contains certain financial and operational covenants. In March 2003, the Company concluded an amendment to the credit facility which, among other things, reduced the commitment amount of the line of credit from $25 million to $15 million. For the period from July 1, 2003 through September 30, 2003, the Company was in compliance with the covenants of its credit agreement. At September 30, 2003, there were no outstanding borrowings under the facility and the interest rate was 5.50%. Proceeds from the sale of the VS segment were used to pay down the outstanding balance under the facility to zero. The credit facility remained in place at September 30, 2003; however, the Company is currently in negotiations with the lender to amend the facility to reflect the borrowing needs of the Company's continuing operations. The loan has been classified as non-current in the accompanying consolidated balance sheet because the facility matures on May 31, 2005. 8 Note 8 -- Business Segments The Company followed SFAS No. 131, Disclosures about Segments of a Business Enterprise and Related Information, which establishes standards for reporting information about operating segments, for the period beginning January 1, 2002 and thereafter. Operating segments were defined as components of the Company about which separate financial information was evaluated regularly by the chief operating decision maker in deciding how to allocate resources and to assess financial performance. Prior to 2002, the Company was engaged in one business, providing customers with a single source for video products and services. During fiscal 2002, the Company's direct investment in the Glowpoint network had increased and the financial results of the Video Network segment became more material to the Company so that the Company determined that it was in two reportable segments for fiscal 2002 and, accordingly reported two operating segments, Video Solutions and Video Network. Pursuant to the Company's June 10, 2003 signing of the asset purchase agreement with Gores to sell the VS segment which resulted in the segment's results being reported as a discontinued operation, the Company is now engaged in one business, operating its IP-based subscriber network, Glowpoint. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the Company's consolidated financial statements and the notes thereto. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future. The statements contained herein, other than historical information, are or may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, and involve factors, risks and uncertainties that may cause the Company's actual results in future periods to differ materially from such statements. These factors, risks and uncertainties, include the relatively short operating history of the Company; market acceptance and availability of new products and services; rapid technological change affecting products and services sold by the Company; the impact of competitive products, services, and pricing, as well as competition from other service providers; possible delays in the shipment of new products; and the availability of sufficient financial resources to enable the Company to expand its operations. Overview Glowpoint operates the first communication service dedicated exclusively to video. Launched in late 2000, Glowpoint carries video calls within the United States and to Europe, South America and Asia on a network provisioned through top-tier backbone partners and last mile access partners over a variety of solutions including SDSL, HDSL, Fractional and Full T1's, DS3, ATM and Gigabit Ethernet. A recipient of Network World magazine's top rated World Class Award for "Quality of Service-guaranteed IP videoconferencing service", the Glowpoint service presently carries over 8,000 calls per month on behalf of nearly 250 customers. The network service offers guaranteed up-time, real-time billing and usage information, gateway services to legacy ISDN-based sites, multi-point bridging, live operator assistance, encryption, scheduling features and international least-cost routing, among other value-added features. Revenue related to the Glowpoint network subscriber service and the multi-point video and audio bridging services we offer is recognized through a monthly billing process after services have been rendered. In March 2003, we completed the sale of certain assets and liabilities of our AV division to SPL for approximately $807,000, $250,000 of which was paid in cash at the close of the transaction and the balance of which was paid in the form of a promissory note payable in five equal consecutive monthly payments commencing on April 15, 2003. The sale of our AV division was aimed at enabling us to focus more of our resources on the development and marketing of our Glowpoint network and to our VS business. As a result, this division, previously a component of the VS segment, is classified as a discontinued operation in the accompanying financial statements, with its assets 9 summarized in a single line item on our consolidated balance sheets and its results from operations summarized in a single line item on our consolidated statements of operations. See footnote 6 to the consolidated financial statements for further information. In September 2003, we completed the sale of all properties, rights, interests and other tangible and intangible assets that related in any material respect to our VS segment to Gores pursuant to the terms of the asset purchase agreement dated as of June 10, 2003. We received total consideration of up to $24 million for the transaction consisting of $21 million in cash, including $19 million at closing and a $2 million holdback, an unsecured $1 million promissory note maturing on December 31, 2004 and bearing an interest rate of 5% per annum and a $2 million earnout based on performance of the assets over the next two years. Gores held back $2 million to cover potential purchase price adjustments payable by Glowpoint arising under the asset purchase agreement. The sale of the VS business was aimed at enabling us to further focus our resources on the development and marketing of Glowpoint, our subscriber-based IP network. As a result, this segment is classified as a discontinued operation in the accompanying financial statements, with its assets and liabilities summarized in single line items on the consolidated balance sheets and its results from operations summarized in a single line item on the consolidated statements of operations. See footnote 6 to the consolidated financial statements for further information. Glowpoint, Inc. Results of Operations (Unaudited)
Nine Months Ended Three Months Ended September 30, September 30, -------------------- -------------------- 2003 2002 2003 2002 ------ ------ ------ ------ Net revenues ..................................... 100.0% 100.0% 100.0% 100.0% Cost of revenues ................................. 98.7 93.1 96.4 94.4 ------ ------ ------ ------ Gross margin ..................................... 1.3 6.9 3.6 5.6 ------ ------ ------ ------ Operating expenses Research and Development .................... 12.5 18.9 12.7 17.9 Selling ..................................... 49.4 76.3 52.7 81.2 General and administrative .................. 54.2 89.2 55.3 71.8 Impairment losses on long-lived assets ...... 18.4 -- 53.4 -- Restructuring ............................... -- 6.7 -- -- ------ ------ ------ ------ Total operating expenses ......................... 134.5 191.1 174.1 170.9 ------ ------ ------ ------ Loss from continuing operations .................. (133.2) (184.2) (170.5) (165.3) ------ ------ ------ ------ Other (income) expense Amortization of deferred financing costs .... 1.9 2.7 1.8 3.1 Interest income ............................. (0.1) (1.8) -- (0.6) Interest expense ............................ 12.6 4.7 6.1 5.0 Amortization of discount on subordinated debentures ............................... 19.9 -- 19.2 -- ------ ------ ------ ------ Total other expenses, net ........................ 34.3 5.6 27.1 7.5 ------ ------ ------ ------ Net loss from continuing operations .............. (167.5) (189.8) (197.6) (172.8) Loss from discontinued AV operations ............. (15.7) (47.3) -- (37.3) Loss from discontinued VSB operations ............ (20.3) (49.0) (22.4) (74.2) Loss from discontinued Voice operations .......... -- (3.9) -- (3.3) ------ ------ ------ ------ Net loss attributable to common stockholders ..... (203.5)% (290.0)% (220.0)% (287.6)% ====== ====== ====== ======
10 Nine Months Ended September 30, 2003 ("2003 period") Compared to Nine Months Ended September 30, 2002 ("2002 period") and Three Months Ended September 30, 2003 ("September 2003 quarter") Compared to Three Months Ended September 30, 2002 ("September 2002 quarter"). Net Revenues. Net revenues from continuing operations increased $3.6 million, or 93%, in the 2003 period to $7.5 million from $3.9 million for the 2002 period. Subscription and related revenue increased $3.3 million, or 237%, in the 2003 period to $4.7 million from $1.4 million for the 2002 period. Non-subscription revenue consisting of bridging, events and other one-time fees increased $0.3 million, or 11%, in the 2003 period to $2.8 million from $2.5 million for the 2002 period. The growth in subscription and related revenue was the result of having, on average, 545 more billable subscriber locations in the 2003 period than in the 2002 period and those billable subscriber locations each producing an average of $692 per month in revenue. There were 757 average billable subscriber locations in the 2003 period and 212 in the 2002 period. The average monthly subscription and related revenue per subscriber location fell 6% from $735 in the 2002 period to $692 in the 2003 period. The decline in average monthly subscription and related revenue per subscriber location is the result of the growth in the number of billable subscriber locations using the $199 per month pay as you go plan. The $0.3 million increase in non-subscription revenue resulted from the following: 1) a $0.4 million increase in H.323 bridging revenue from $0.5 million in the 2002 period to $0.9 million in the 2003 period resulting from increased billable subscriber locations; 2) a $0.2 million increase in installation revenue from $0.1 million in the 2002 period to $0.3 million in the 2003 period due to the increase in installations from 252 in the 2002 period to 534 in the 2003 period; and 3) a $0.3 million decline in H.320 bridging revenue from $1.7 million in the 2002 period to $1.4 million in the 2003 period. Net revenues of $2.6 million for the September 2003 quarter represent an increase of $1.1 million, or 69%, over the $1.5 million in revenues reported for the September 2002 quarter. Subscription and related revenue increased $1.2 million, or 174%, in the September 2003 period to $1.9 million from $0.7 million for the 2002 period. Non-subscription revenue decreased $0.1 million, or 16%, in the 2003 period to $0.7 million from $0.8 million for the September 2002 quarter. The growth in subscription and related revenue was the result of having, on average, 626 more billable subscriber locations in the September 2003 quarter than in the September 2002 quarter and those billable subscriber locations each producing an average of $692 per month in revenue. There were 932 average billable subscriber locations in the September 2003 quarter and 306 in the September 2002 quarter. The average monthly subscription and related revenue per subscriber location fell 10% from $742 in the September 2002 quarter to $668 in the September 2003 quarter. The decline in average monthly subscription and related revenue per subscriber location is the result of the growth in the number of billable subscriber locations using the $199 per month pay as you go plan. The $0.1 million decrease in non-subscription revenue resulted from a $160,000 decline in event driven revenue. The other three categories of non-subscription revenue (H.323 bridging, installation and H.320 bridging) in the September 2003 quarter were flat with the September 2002 quarter. Cost of Revenue. Cost of revenue increased $3.8 million, or 104%, in the 2003 period to $7.4 million from $3.6 million for the 2002 period. Infrastructure costs (defined as backbone related costs of network) increased $0.9 million, or 63%, in the 2003 period to $2.4 million from $1.5 million for the 2002 period. This increase resulted from two factors: 1) the build out of the network to handle the video traffic of approximately 4,000 billable subscriber locations - $0.6 million of the increase; and 2) the evolution of the network to gain long-term cost efficiencies or as a result of backbone provider issues - $0.3 million of the increase. Access costs (defined as costs of connecting subscriber locations to the network) increased $1.9 million, or 163%, in the 2003 period to $3.1 million from $1.2 million for the 2002 period. The growth in access costs was the result of having, on average, 545 more billable subscriber locations in the 2003 period than in the 2002 period and those billable subscriber locations each costing an average of $463 per month for access to the network. There were 757 average billable subscriber locations in the 2003 period and 212 in the 2002 period. The average monthly access costs per subscriber location fell 21% from $587 in the 2002 period to $463 in the 2003 period. The decline in average monthly access costs per subscriber location is the result of the growth in the number of billable subscriber locations using the $199 per month pay as you go plan and by the increasing use of DSL as the means of accessing the network. Other costs of revenue include the personnel costs related to providing the Glowpoint service along with the ISDN network costs of providing H.320 bridging services. These costs increased $0.7 million, or 56%, in the 2003 period to $1.9 million from $1.2 million for the 2002 period. This increase resulted primarily from two factors: 1) increased depreciation related to increased equipment deployed in the network - $341,000; and 2) in the September 2002 quarter we recorded credits of approximately $250,000 related to refunds of previously paid infrastructure and access fees. ISDN network costs fell $0.1 million in line with the decline in H.320 bridging revenue. Cost of revenue increased $1.1 million, or 73%, in the September 2003 quarter to $2.5 million from $1.4 million for the September 2002 quarter. Infrastructure costs increased $0.2 million, or 30%, in the September 2003 quarter to $0.8 million from $0.6 million for the September 2002 quarter. Though currently built out to handle the video traffic of approximately 4,000 billable subscriber locations, in each of the past two quarters, we have incurred approximately $0.1 million of costs to relocate our points of presence in Dallas, Chicago, Boston, Japan and the U.K. to gain cost efficiencies or as a result of backbone provider issues. Access costs increased $0.4 million, or 64%, in the September 2003 quarter to $1.0 million from $0.6 million for the September 2002 quarter. The growth in access costs was the result of having, on average, 626 more billable subscriber locations in the September 2003 quarter than in the September 2002 quarter and those billable subscriber locations each costing an average of $371 per month for access to the network. There were 932 average billable subscriber locations in the September 2003 quarter and 306 in the September 2002 quarter. The average monthly access costs per subscriber location fell 46% from $689 in the September 2002 quarter to $371 in the September 2003 quarter. The decline in average monthly access costs per subscriber location is the result of the growth in the number of billable subscriber locations using the $199 per month pay as you go plan and by the increasing use of DSL as the means of accessing the network. Other costs of revenue increased $0.2 million, or 47%, in the September 2003 quarter to $0.6 million from $0.4 million for the September 2002 quarter. This increase resulted primarily from the credits recorded in the September 2002 quarter of approximately $250,000 related to refunds of previously paid infrastructure and access fees. Gross Margins. Gross margins decreased approximately $0.2 million in the 2003 period from $0.3 million in the 2002 period to $0.1 million. As a percentage of revenue, gross margins decreased in the 2003 period to 1.3%, as compared to 6.9% of net revenues in the 2002 period. Gross margins were $0.1 million in both the September 2003 and 2002 quarters. The primary causes of the overall decline in the gross margins in the 2003 period were the increased fixed costs incurred to continue the build out of the network ($1.0 million impact), the costs to re-configure portions of the network that were incurred ($0.3 million impact) and the impact in the September 2002 quarter of approximately $250,000 in refunds of previously paid infrastructure and access fees. These items countered the increase in gross margin that was anticipated due to increased revenue ($1.4 million impact assuming a 40% marginal gross margin on the additional $3.6 million in revenue). We believe that we will improve our marginal gross margin over the coming months and quarters as we re-evaluate our product offering from the perspectives of profitability, competitiveness and meeting customer needs and make changes to standardize this offering with a focus on the most profitable pricing plans. We will also be focusing on minimizing our cost per subscriber location in order to deliver the Glowpoint service in the most efficient manner possible. Research and Development. Research and development costs, which include the costs of the personnel in this group, the equipment they use and their use of the network for development projects, increased $0.2 million in the 2003 period to $0.9 million from $0.7 million in the 2002 period but were down as a percentage of revenue from 18.9% in the 2002 period to 12.5% of revenue in the 2003 period. Research and development remained flat at $0.3 million in the September 2003 quarter and was down as a percentage of revenue from 17.9% in the 2002 quarter to 12.7% of revenue in the 2003 quarter. It is expected that research and development costs will remain flat in coming quarters as we design and develop new service offerings to meet customer demand and test new products and technologies across the network. Selling. Selling expenses, which include sales salaries, commissions, overhead, and marketing costs, increased $0.7 million in the 2003 period to $3.7 million, from $3.0 million but were down as a percentage of revenue from 76.3% in the 2002 period to 49.4% of revenue in the 2003 period. Selling expenses increased $0.1 million in the September 2003 quarter, to $1.3 million from $1.2 million in the September 2002 quarter, but were down as a percentage of revenue from 81.2% in the September 2002 quarter to 52.7% in the September 2003 quarter. The primary cause for the $0.7 million increase in costs for the 2003 period is the $0.5 million of marketing costs incurred in the 2003 period related to the NBA draft ($0.3 million) and customer trials ($0.2 million). The remainder of the variance results from higher commissions and bonuses associated with higher revenue levels. The $0.1 million increase in costs for the September 2003 quarter results from higher commissions and bonuses associated with higher revenue levels. General and Administrative. General and administrative expenses increased $0.6 million in the 2003 period to $4.1 million from $3.5 million in the 2002 period. General and administrative expenses as a percentage of net revenues for the 2003 period declined from 89.2% in the 2002 period to 54.2% in the 2003 period. General and administrative expenses increased $0.3 million to $1.4 million in the September 2003 quarter from $1.1 million in the September 2002 quarter, but were down as a percentage of revenue from 71.8% in the September 2002 quarter to 55.3% in the September 2003 quarter. The primary cause for the $0.6 million increase in costs for the 2003 period is the $0.5 million of professional fees incurred related to the search for a new CEO, filing the proxy and holding the annual meeting in August, divestitures and other corporate activities. The $0.3 million increase in costs for the September 2003 quarter results from higher higher professional fees related to the search for a new CEO and filing the proxy and holding the annual meeting in August. The normalized quarterly run rate for this category of expense is approximately $1.2 million and is fixed in nature in the short term. 11 Restructuring. A restructuring charge of $260,000 was recorded in the 2002 period. This restructuring charge was related to severance and other personnel-related costs and was taken to position us to realize $2.0 million in annual operating expense savings. Other (Income) Expenses. Other expenses increased $2.4 million to $2.6 million in the 2003 period from $0.2 million in the 2002 period. The increase was primarily due to the recognition of $1.5 million in amortization of discount on the subordinated debentures issued in December 2002. The other major component of this category, interest expense, increased $0.7 million to $0.9 million. This increase was primarily due to higher interest expense on our line of credit facility of $0.1 million; the Black-Scholes value assigned to the 100,000 warrants granted to JPMorgan Chase Bank in the 2003 period of $0.2 million; and interest accrued on the subordinated debentures of $0.4 million. Discontinued Operations. In the 2003 period, we treated our AV division and VS segment as a discontinued operations because: 1) the operations and cash flows of this division and segment have been eliminated from our ongoing operations as a result of disposal transactions; and 2) we do not have any significant continuing involvement in the operation of the division and segment. We incurred a loss from discontinued AV operations in the 2003 period of $1.2 million which was $0.6 million less than the $1.8 million loss incurred in the 2002 period. Loss from discontinued VS operations decreased $0.4 million in the 2003 period to $1.5 million from the $1.9 million loss incurred in the 2002 period. Net Loss. Net loss attributable to common stockholders increased to $15.2 million, or $0.52 per diluted share, from $11.3 million, or $0.39 per diluted share, for the 2002 period. Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations is a measurement tool management used to understand our results of operations. As EBITDA from continuing operations does not include non-cash charges and the results of discontinued operations, it serves as a more accurate gauge of our current operating results. In addition, our primary covenant with our asset-based lender is based on EBITDA results. The following table provides a reconciliation of the net loss attributable to common stockholders to EBITDA from continuing operations.
Nine Months Ended September 30, Three Months Ended September 30, ------------------------------- -------------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net loss from continuing operations ........ $(12,538,845) $ (7,371,713) $ (5,101,136) $ (2,634,970) Depreciation and amortization ......... 4,212,407 2,939,496 1,196,172 870,027 Amortization of deferred financing costs ............................... 140,017 106,456 47,254 46,761 Amortization of discount on subordinated debentures ............. 1,490,213 -- 497,338 -- Non cash compensation ................. 673,536 230,409 -- 69,719 Impairment losses on fixed assets ..... 1,379,415 -- 1,379,415 -- Interest expense, net ................. 374,865 114,131 155,622 66,477 ------------ ------------ ------------ ------------ EBITDA from continuing operations .......... $ (4,268,392) $ (3,981,221) $ (1,825,335) $ (1,581,986) Loss from discontinued AV operations .......................... (1,173,067) (1,837,588) -- (569,114) Loss from discontinued VS operations .......................... (523,415) (1,029,318) (577,058) (703,735) Loss from discontinued Voice operations .......................... -- (151,339) -- (50,000) ------------ ------------ ------------ ------------ TOTAL EBITDA ............................... $ (5,964,874) $ (6,999,466) $ (2,402,393) $ (2,904,835) ============ ============ ============ ============
Liquidity and Capital Resources At September 30, 2003, we had working capital of $9.5 million compared to $27.8 million at December 31, 2002, a decrease of approximately 65.8%. We had $8.3 million in cash and cash equivalents at September 30, 2003 compared to $2.8 million at December 31, 2002. The $18.3 million decrease in working capital resulted primarily 12 from the net pay down of $5.8 million of bank loans, the funding of the $7.3 million cash loss from operations in the 2003 period and the purchase of $1.9 million of furniture, equipment and leasehold improvements. Net cash used by operating activities for the 2003 period was $3.1 million as compared to net cash used in operations of $12.2 million during the 2002 period. The primary source of operating cash in 2003 was the decrease in net assets of discontinued operations of $7.6 million. We used this cash to fund the $7.3 million cash loss from operations and the $2.9 million increase in other current assets. Investing activities for the 2003 period included purchases of $1.9 million for network, computer and demonstration equipment and leasehold improvements. The Glowpoint network is currently built out to handle the anticipated level of subscriptions for 2003. Although we anticipate current expansion of the network, we have no significant commitments to make capital expenditures in 2003. In addition, the sale of the VS segment yielded net proceeds of $16.2 million. Financing activities in the 2003 period included net pay-downs under our revolving credit line totaling $5.8 million. We currently have a $15.0 million working capital credit facility with JPMorgan Chase Bank. Borrowings under this facility bear interest at the lender's base rate plus 1 1/2% per annum. At September 30, 2003, there were no outstanding borrowings under this facility. Proceeds from the sale of the VS segment were used to pay down the outstanding balance under the facility to zero. The credit facility remained in place subsequent to the closing of the VS sale transaction; however, we are currently in negotiations with the lender to amend the facitily to reflect the borrowing needs of our continuing operations. Our credit facility contains certain financial and operational covenants. To date in 2003, we were in compliance with these covenants. Management believes, based on current circumstances, we have adequate capital resources to support current operating levels for at least the next twelve months. Critical accounting policies We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The following paragraphs include a discussion of some critical areas where estimates are required. Revenue recognition Revenue related to the Glowpoint network subscriber service and the multi-point video and audio bridging services we offer are recognized through a monthly billing process after services have been rendered. Allowance for Doubtful Accounts We record an allowance for doubtful accounts based on specifically identified amounts that we believe to be uncollectible. We also record additional allowances based on certain percentages of our aged receivables, which are determined based on historical experience and our assessment of the general financial conditions affecting our customer base. If our actual collections experience changes, revisions to our allowance may be required. After all attempts to collect a receivable have failed, we write off the receivable against the allowance. Long-lived assets We evaluate impairment losses on long-lived assets used in operations, primarily fixed assets, when events and circumstances indicate that the carrying value of the assets might not be recoverable in accordance with FASB Statement No. 144 "Accounting for the Impairment or Disposal of Long-lived Assets". For purposes of evaluating the recoverability of long-lived assets, the undiscounted cash flows estimated to be generated by those assets are 13 compared to the carrying amounts of those assets. If and when the carrying values of the assets exceed their fair values, the related assets will be written down to fair value. Goodwill and other intangible assets In June 2001, the FASB finalized FASB Statements No. 141, "Business Combinations" (SFAS 141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interest method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also required that we recognize acquired intangible assets apart from goodwill if they meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. The FASB also requires, upon adoption of SFAS 142, that we classify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that we identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 was adopted in 2002 and we will review goodwill and other intangible assets on an annual basis with an as of date of September 30. Any future business combinations will be accounted for under the purchase method, which may result in the recognition of goodwill and other intangibles assets, some of which may subsequently be charged to operations, either by amortization or impairment charges. Recent Pronouncements of the Financial Accounting Standards Board In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within the scope of SFAS No. 150 as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective beginning September 1, 2003. The provisions of SFAS No. 150, which we adopted in 2003, did not have a material impact on the consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", addresses consolidation by business enterprises of variable interest entities. Under current practice, two enterprises generally have been included in consolidated financial statements because one enterprise controls the other through voting interests. This interpretation defines the concept of "variable interests" and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks among the parties involved. The provisions of FIN 46, which we adopted in 2003, did not have a material impact on the consolidated financial statements. In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of this interpretation are effective for interim and annual periods after December 15, 2002. The initial recognition and initial measurement requirements of this interpretation are effective prospectively for guarantees issued or modified after December 31, 2002. The provisions of FIN 45, which we adopted in 2003, did not have a material impact on the consolidated financial statements. 14 In November 2002, EITF reached consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables". Revenue arrangements with multiple deliverables include arrangements which provide for the delivery or performance of multiple products, services and/or rights to use assets where performance may occur at different points in time or over different periods of time. EITF Issue No. 00-21 is effective for fiscal periods beginning after June 15, 2003. The adoption of this standard did not have a material impact on the consolidated financial statements. Inflation Management does not believe inflation had a material adverse effect on the financial statements for the periods presented. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have exposure to interest rate risk related to our cash equivalents portfolio. The primary objective of our investment policy is to preserve principal while maximizing yields. Our cash equivalents portfolio is short-term in nature, therefore changes in interest rates will not materially impact our consolidated financial condition. However, such interest rate changes can cause fluctuations in our results of operations and cash flows. We maintain borrowings under a $15 million working capital credit facility with an asset based lender that are not subject to material market risk exposure except for such risks relating to fluctuations in market interest rates. The carrying value of these borrowings approximates fair value because they bear interest at a floating rate based on the "prime" rate. There are no other material qualitative or quantitative market risks particular to our business or operations. ITEM 4. CONTROLS AND PROCEDURES As of end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are defending several suits or claims in the ordinary course of business, none of which individually or in the aggregate is material to our business, financial condition or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Our Annual Meeting ("Annual Meeting") of Stockholders was held on August 21, 2003. The 28,740,889 shares of common stock present at the Annual Meeting out of a then total of 29,641,835 shares outstanding and entitled to vote acted as follows with respect to the following proposals; with the following results: Proposal 1. That the following constitutes the number of shares voted with respect to the approval of the sale of our Video Solutions business to an affiliate of Gores pursuant to the asset purchase agreement dated as of June 10, 2003: FOR AGAINST ABSTAIN 15,789,122 335,336 60,420 ---------- ------- ------ Proposal 2. That the following constitutes the number of shares voted with respect to the approval of an amendment to our amended and restated certificate of incorporation and to our amended and restated bylaws to effect a change of our corporate name from "Wire One Technologies, Inc." to "Glowpoint, Inc." immediately following the consummation of the asset sale: FOR AGAINST ABSTAIN 15,816,037 328,784 40,057 ---------- ------- ------ Proposal 3. (a) That the following constitutes the number of shares voted with respect to the election of James Kuster for Director: FOR AGAINST ABSTAIN 28,411,795 329,094 ---------- ------- ------ (b) That the following constitutes the number of shares voted with respect to the election of Michael Sternberg for Director: FOR AGAINST ABSTAIN 28,304,409 436,480 ---------- ------- ------ The terms of office of our directors Richard Reiss, Dean Hiltrik, Lewis Jaffe and Michael Toporek continue after the Annual Meeting. Proposal 4. That the following constitutes the number of shares voted with respect to the approval of an amendment to our 2000 Stock Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder from 4,400,000 to 6,500,000: FOR AGAINST ABSTAIN 12,257,123 3,885,273 42,482 ---------- ------- ------ Proposal 5. That the following constitutes the number of shares voted with respect to the approval of BDO Seidman as our independent auditors for the year ending December 31, 2003: FOR AGAINST ABSTAIN 28,580,356 113,499 47,034 ---------- ------- ------ 16 Proposal 6. That the following constitutes the number of shares voted with respect to the approval of an adjournment or postponement of the Annual Meeting, in order to solicit additional proxies, to such time and place as designated by the presiding officer of the Annual Meeting: FOR AGAINST ABSTAIN 27,795,042 753,772 192,075 ---------- ------- ------- ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Employment Agreement with David C. Trachtenberg, dated October 3, 2003. 10.2 Amended and Restated Employment Agreement with Richard Reiss, dated October 14, 2003. 10.3 Amended Employment Agreement with Michael Brandofino, dated September 23, 2003. 10.4 Termination Agreement with Leo Flotron, dated September 23, 2003. 10.5 Restricted Stock Award Agreement with David C. Trachtenberg, dated October 3, 2003 10.6 Form of Restricted Stock Award Agreements with Karen Basian, dated November 4, 2003, and with James Kuster, Michael Sternberg and Michael Toporek, each dated August 22, 2003. 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K (i) On July 23, 2003, we furnished a Form 8-K containing a press release announcing our preliminary results of operation and financial condition for the second quarter ended June 30, 2003. (ii) On August 6, 2003, we furnished a Form 8-K containing a press release announcing our results of operation and financial condition for the second quarter ended June 30, 2003. (iii) On September 29, 2003, we filed a Form 8-K containing a press release announcing that we completed the sale of substantially all of the assets of our Video Solutions segment to an affiliate of Gores Technology Group. 17 Signatures In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLOWPOINT, INC. Registrant Date: November 14, 2003 By: /s/ David C. Trachtenberg ------------------------------------ David C. Trachtenberg, Chief Executive Officer (principal executive officer) Date: November 14, 2003 By: /s/ Christopher A. Zigmont ------------------------------------ Christopher A. Zigmont, Chief Financial Officer (principal financial and accounting officer) 18 EX-10.1 3 d57414_ex10-1.txt DAVID C. TRACHTENBERG EMPLOYMENT AGREEMENT Exhibit 10.1 EMPLOYMENT AGREEMENT This Employment Agreement, dated October 3, 2003, is between Glowpoint, Inc., a Delaware corporation (the "Company"), and David Trachtenberg ("Executive"). WHEREAS, the Company wishes to employ Executive and Executive wishes to work for Company. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. POSITION AND RESPONSIBILITIES. 1.1 Position. Executive is employed by the Company to render services to the Company in the position of President and Chief Executive Officer. Executive shall perform such duties and responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties consistent with his position now or hereafter assigned to Executive by the Board of Directors. Executive shall abide by the rules, regulations, and practices of the Company as adopted or modified from time to time in the Company's reasonable discretion. 1.2 Board of Directors. The Company shall use its best efforts to cause the Board of Directors to appoint Executive to the temporary vacancy on the Board. In addition, at the next annual meeting of the stockholders, the Company shall use its best efforts to cause the Board to nominate Executive to a position on the Board. 1.3 Other Activities. Executive shall devote his full business time, attention and skill to perform any assigned duties, services and responsibilities while employed by the Company, for the furtherance of the Company's business, in a diligent, loyal and conscientious manner. Except upon the prior written consent of the Board of Directors, Executive will not, during the term of this Agreement: (i) accept any other employment; or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that interferes with Executive's duties and responsibilities hereunder or create a conflict of interest with the Company. It shall not be a breach or violation of this Agreement for the Executive to: (i) serve on corporate, civic or charitable boards or committees; (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions; (iii) manage personal investments and activities, so long as such investments and activities do not interfere with or detract from the performance of the Executive's responsibilities to the Company in accordance with this Agreement and provided that the Company shall not be responsible for providing any compensation, expense reimbursements or any other benefits to the Executive with respect to such activities. 19 1.4 No Conflict. Executive represents and warrants that Executive's execution of this Agreement, Executive's employment with the Company, and the performance of Executive's proposed duties under this Agreement shall not violate any obligations Executive may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity. 1.5 Commencement of Work. Executive will commence employment with the Company no later than thirty (30) days after the date of this Agreement. 2. COMPENSATION AND BENEFITS. 2.1 Base Salary. In consideration of the services to be rendered under this Agreement and so long as Executive remains employed by the Company, the Company shall pay Executive a salary equivalent to $315,000 per year for the first year of employment, $345,000 per year for the second year of employment, and $375,000 per year for the third year of employment (the "Base Salary"). The Base Salary shall be paid in accordance with the Company's regularly established payroll practice. Executive's Base Salary shall be reduced by withholdings required by law. Executive's Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated senior level employees and may be adjusted upward in the sole discretion of the Board of Directors. 2.2 Restricted Stock. The Company shall recommend to the Compensation Committee ("Compensation Committee") and to the Board of Directors (the "Board") that Executive be granted restricted stock ("Restricted Stock") in the amount of 360,000 shares of Common Stock of the Company. (a) Other than as expressly provided herein, the Restricted Stock shall be forfeited if the Executive's employment with the Company is terminated for any reason. As long as the Executive remains employed by the Company, the risk of forfeiture will lapse with respect to 120,000 shares on each anniversary of the commencement of the Executive's employment. The executive may, in his discretion and subject to the satisfaction of applicable income and employment tax withholding obligations, make an election under Section 83(b) of the Internal Revenue Code with respect to the Restricted Stock. Executive's entitlement to any Restricted Stock that may be approved by the Board and/or Compensation Committee is conditioned upon Executive's signing of a separate Restricted Stock Agreement and payment of the par value of the Restricted Stock if required. (b) The risk of forfeiture shall lapse upon a Change in Control or Corporate Transaction (as each is defined in the Restricted Stock Agreement) as long as Executive remains employed by the Company on the date of the Change of Control or Corporate Transaction; provided, however, if the surviving company of such Change in Control or Corporate Transaction offers Executive continued employment at an equivalent level in terms of position, compensation and benefits to that existing immediately prior to the Change in Control or 20 Corporate Transaction and the successor entity or its parent assumes the contractual obligations with respect the Restricted Stock, such risk of forfeiture shall not automatically lapse, but will lapse in accordance to the schedule set forth in paragraph 2.2(a). 2.3 Incentive Compensation. No later than sixty (60) days after Executive commences his employment, Executive and the Compensation Committee will establish appropriate goals and metrics by which Executive will be evaluated for 2004. Such goals and metrics will be updated by the Executive and the Compensation Committee on an annual basis thereafter. If in the opinion of the Compensation Committee, Executive meets the mutually agreed upon goals and metrics, Executive will receive incentive compensation in an amount equivalent to fifty percent (50%) of his then annual base salary. 2.4 Benefits. Executive shall be eligible to participate in the benefits made generally available by the Company to similarly-situated senior level employees, in accordance with the benefit plans established by the Company, and as may be amended from time to time in the Company's sole discretion. 2.5 Life Insurance. The Company will purchase life insurance on behalf of Executive. The life insurance policy will contain a death benefit payable to a beneficiary selected by Executive in the amount of $2,000,000. 2.6 Expenses. The Company shall reimburse Executive for reasonable travel and other business expenses incurred by Executive in the performance of Executive's duties hereunder in accordance with the Company's expense reimbursement guidelines, as they may be amended in the Company's sole discretion. 2.7 Car Lease and Parking. The Company will reimburse Executive up to $750 per month that he may use to lease a car to conduct Company business. The Company will reimburse Executive up to $500 per month that he may use to pay for parking his leased car in New York City. Reimbursement will be made upon presentation of receipts according to the Company's expense reimbursement guidelines. 2.8 Vacation. Executive will be entitled to accrue four weeks of paid vacation per year. Such vacation must be used in the year in which it is accrued and may not be carried over from year to year. 2.9 Indemnity. Executive will be indemnified by the Company against all claims against him related to his employment hereunder or to the performance of his duties hereunder to the fullest extent allowed by the laws of the State of Delaware. 3. EMPLOYMENT AND SEVERANCE. 3.1 Employment. Either the Company or Executive may terminate Executive's employment with the Company at any time, for any reason or no reason at all so long as they comply with the terms in this section 3. 3.2 Termination for Cause or Voluntary Resignation. If Executive is terminated for Cause (as defined below) or if Executive voluntarily resigns, Executive will be 21 entitled to all his Base Salary and other benefits through the last day actually worked. Thereafter, all benefits, compensation and perquisites of employment will cease. 3.3 Termination Without Cause, Resignation for Good Reason or Death. If Executive is terminated without Cause (as defined below) or if Executive Resigns for Good Reason (as defined below) or if Executive dies, Executive shall be entitled to severance equal to one year of his then annual Base Salary and one year of his then annual Incentive Compensation. Such severance shall be paid as follows: the first payment, equal to 50% of the total severance, shall be made within 14 days of the termination date. Thereafter, the second 50% shall be paid in four equal payments over the next four quarters following the termination date. In the event that Executive is terminated without Cause, or if Executive Resigns for Good Reason, or if Executive dies, Executive will also be entitled to one year of accelerated vesting on the Restricted Stock granted under this Agreement, and the forfeiture provisions as to the Restricted Stock which is subject to accelerated vesting will lift, and he will receive continuation payments of his Car Lease and Parking (as provided in paragraph 2.7) for a period of one year. In addition, in the event that Executive is terminated without Cause or if Executive Resigns for Good Reason and if Executive timely elects COBRA coverage, the Company will pay the employee contribution portion of the COBRA coverage on Executive's behalf for a period of up to one year. 3.4 Definition of Cause. For purposes of this Agreement, Cause shall mean in the judgment of the Company: (i) Executive willfully engages in any act or omission which is in bad faith and to the detriment of the Company; (ii) Executive exhibits unfitness for service, dishonesty, habitual gross neglect, persistent and serious deficiencies in performance, or gross incompetence; which conduct is not cured within fifteen (15) days after receipt by Executive of written notice of the conduct; (iii) Executive is convicted of a crime; or (iv) Executive refuses or fails to act on any reasonable and lawful directive or order from the Board of Directors, which refusal is not cured within fifteen (15) days after receipt by the Executive of written notice thereof. Notice of any termination for Cause shall be given in writing to the Executive, which notice shall set forth in reasonable detail all acts or omission upon which the Company is relying for such termination prior to the effective date of the termination. 3.5 Definition of Resignation for Good Reason. For purposes of this Agreement, Resignation for Good Reason shall mean if Executive resigns because: (i) there has been a diminution in his Base Salary; (ii) he is required to be based in an office that is more than 75 miles from the current location of the office; or (iii) he is assigned duties that are materially inconsistent with his position as Chief Executive Officer; (iv) there is a material diminution of his status, office, title or reporting requirements; or (v) the company fails to pay money or otherwise fails to provide benefits owed under this Agreement. 22 4. TERMINATION OBLIGATIONS. 4.1 Return of Property. Executive agrees that all property (including without limitation all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive's employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive's employment. 4.2 Cooperation. Following any termination of employment, Executive shall cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer of work to other employees. Executive shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Executive's employment by the Company. In the event that the Executive is asked to perform work pursuant to this paragraph, he shall be compensated at his then reasonable hourly rate for consulting services, together with reasonable expenses. 5. INVENTIONS AND PROPRIETARY INFORMATION; PROHIBITION ON THIRD PARTY INFORMATION. 5.1 Proprietary Information. Executive hereby covenants, agrees and acknowledges as follows: (a) The Company is engaged in a continuous program of research, design, development, production, marketing and servicing with respect to its business. (b) Executive's employment hereunder creates a relationship of confidence and trust between Executive and the Company with respect to certain information pertaining to the business of the Company or pertaining to the business of any customer of the Company which may be made known to the Executive by the Company or by any customer of the Company or learned by the Executive during the period of Executive's employment by the Company. (c) The Company possesses and will continue to possess information that has been created, discovered or developed by, or otherwise becomes known to it (including, without limitation, information created, discovered or developed by, or made known to, Executive during the period of Executive's employment or arising out of Executive's employment and which pertains to the Company's actual or contemplated business, products, intellectual property or processes) or in which property rights have been or may be assigned or otherwise conveyed to the Company, which information has commercial value in the business in which the Company is engaged and is treated by the Company as confidential. (d) Any and all inventions, products, discoveries, improvements, processes, manufacturing, marketing and services methods or techniques, formulae, designs, styles, specifications, data bases, computer programs (whether in source code or object code), know-how, strategies and data, whether or not patentable or registrable under copyright or similar statutes, made, developed or created by Executive (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular 23 hours of work or otherwise) during the period of Executive's employment by the Company which pertains to the Company's actual or contemplated business, products, intellectual property or processes (collectively hereinafter referred to as "Developments"), shall be the sole property of the Company and will be promptly and fully disclosed by Executive to the Board without any additional compensation therefore, including, without limitation, all papers, drawings, models, data, documents and other material pertaining to or in any way relating to any Developments made, developed or created by Executive as aforesaid. The Company shall own all right, title and interest in and to the Developments and such Developments shall be considered "works made for hire" for the Company under US Copyright Law. If any of the Developments are held for any reason not to be "works made for hire" for the Company or if ownership of all right, title and interest in and to the Developments has not vested exclusively and immediately in the Company upon creation, Executive irrevocably assigns, without further consideration, any and all right, title and interest in and to the Developments to the Company, including any and all moral rights, and "shop rights" in the Developments recognized by applicable law. Executive irrevocably agrees to execute any document requested by the Company to give effect to this Section 5.1 such as assignment of invention or other general assignments of intellectual property rights, without additional compensation therefore. (e) Executive will keep confidential and will hold for the Company's sole benefit any Development which is to be the exclusive property of the Company under this Section 5.1 irrespective of whether any patent, copyright, trademark or other right or protection is issued in connection therewith. (f) Executive also agrees that Executive will not, without the prior approval of the Board use for Executive's benefit or disclose at any time during Executive's employment by the Company, or thereafter, except to the extent required by the performance by Executive of Executive's duties, any information obtained or developed by Executive while in the employ of the Company with respect to any Developments or with respect to any customers, clients, suppliers, products, services, prices, executives, financial affairs, or methods of design, distribution, marketing, service, procurement or manufacture of the Company or any confidential matter, except information which at the time is generally known to the public other than as a result of disclosure by Executive not permitted hereunder. Notwithstanding the foregoing, the following will not constitute confidential information for purposes of this Agreement: (i) information which is or becomes publicly available other than as a result of disclosure by the Executive; (ii) information designated in writing by the Company as no longer confidential, or (iii) information known by Executive as of the date of this Agreement and identified as such in writing to the Board. Executive will comply with all intellectual property disclosure policies established by the Company from time to time with respect to the Company's confidential information, including without respect to Developments. 5.2 Non-Disclosure of Third Party Information. Executive represents and warrants and covenants that Executive shall not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others at any time, including but not limited to any proprietary information or trade secrets of any former employer, if any; and Executive acknowledges and agrees that any violation of this provision shall be grounds for Executive's immediate termination and could subject Executive to substantial civil liabilities and criminal penalties. Executive further 24 specifically and expressly acknowledges that no officer or other employee or representative of the Company has requested or instructed Executive to disclose or use any such third party proprietary information or trade secrets. 5.3 Injunctive Relief. Executive acknowledges and agrees that a remedy at law for any breach or threatened breach of the provisions of this Section 5 would be inadequate and, therefore, agrees that the Company shall be entitled to injunctive relief in addition to any other available rights and remedies in case of any such breach or threatened breach. 6. LIMITED AGREEMENT NOT TO COMPETE OR SOLICIT. 6.1 Non-Competition. During the term of this Agreement, and for one (1) year after the termination of Executive's employment with the Company for any reason, unless mutually agreed otherwise by the Executive and the Company, Executive shall not, directly or indirectly, work as an employee, consultant, agent, principal, partner, manager, officer, or director for any person or entity who or which engages in a substantially similar business as the Company. For purposes of this Agreement the Company is currently engaged in the business of designing, developing, manufacturing or selling video communication equipment and services. 6.2 Non-Solicitation. Executive shall not, during his employment and for a period of one (1) year immediately after termination of his employment, for any reason, either directly or indirectly: (a) call on or solicit for similar services, or, encourage or take away any of the Company's customers or potential customers about whom Executive became aware or with whom Executive had contact as a result of Executive's employment with the Company, either for benefit of Executive or for any other person or entity; or (b) solicit, induce, recruit, or encourage any of the Company's employees or contractors to leave the employ of the Company or cease providing services to the Company on behalf of the Executive or on behalf of any other person or entity; or (c) hire for himself or any other person or entity any employee who was employed or engaged by the Company within six months prior to the termination of Executive's employment. 6.3 Limitations; Remedies. The Executive further agrees that the limitations set forth in this Section 6 (including, without limitation, any time or territorial limitations) are reasonable and properly required for the adequate protection of the businesses of the Company. If any of the restrictions contained in Sections 6.1 and 6.2 are deemed by a court or arbitrator to be unenforceable by reason of the extent, duration or geographic scope thereof, or otherwise, then the parties agree that such court or arbitrator may modify such restriction to the extent necessary to render it enforceable and enforce such restriction in its modified form. The Executive acknowledges and agrees that a remedy at law for any breach or threatened breach of the provisions of this Section 6 would be inadequate and, therefore, agrees that the Company shall be entitled to injunctive relief in addition to any other available rights and remedies in cases of any such breach or threatened breach. 25 7. ALTERNATIVE DISPUTE RESOLUTION. The Company and Executive mutually agree that any controversy or claim arising out of or relating to this Agreement or the breach thereof, or any other dispute between the parties arising from or related to Executive's employment with the Company, shall be submitted to mediation before a mutually agreeable mediator. In the event mediation is unsuccessful in resolving the claim or controversy, such claim or controversy shall be resolved by arbitration Company and Executive agree that arbitration shall be held in New York, New York, before a mutually agreed upon single arbitrator licensed to practice law. The arbitrator shall have authority to award or grant legal, equitable, and declaratory relief. Such arbitration shall be final and binding on the parties. If the parties are unable to agree on an arbitrator, the matter may be submitted to the American Arbitration Association solely for appointment of an arbitrator. The claims covered by this Agreement ("Arbitrable Claims") include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract (including this Agreement) or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, religion, national origin, age, marital status, medical condition, or disability); claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure different from this one); and claims for violation of any federal, state, or other law, statute, regulation, or ordinance, except claims excluded in the following paragraph. The parties hereby waive any rights they may have to trial by jury in regard to Arbitrable Claims. Claims Executive may have for Workers' Compensation State disability or unemployment compensation benefits are not covered by this Agreement. Also not covered is either party's right to obtain provisional remedies, or interim relief from a court of competent jurisdiction. Arbitration under this Agreement shall be the exclusive remedy for all Arbitrable Claims. This agreement to mediate and arbitrate survives termination of Executive's employment. 8. AMENDMENTS; WAIVERS; REMEDIES. This Agreement may not be amended or waived except by a writing signed by Executive and by a duly authorized representative of the Company. Failure to exercise any right under this Agreement shall not constitute a waiver of such right. Any waiver of any breach of this Agreement shall not operate as a waiver of any subsequent breaches. All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law. 9. ASSIGNMENT; BINDING EFFECT. 9.1 Assignment. The performance of Executive is personal hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement. This Agreement may be 26 assigned or transferred by the Company; and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets. 9.2 Binding Effect. Subject to the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be binding upon each of the parties; the affiliates, officers, directors, agents, successors and assigns of the Company; and the heirs, devisees, spouses, legal representatives and successors of Executive. 10. SEVERABILITY. If any provision of this Agreement shall be held by a court or arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or arbitrator shall reduce the time period or scope to the maximum time period or scope permitted by law. 11. TAXES. All amounts paid under this Agreement (including without limitation Base Salary) shall be reduced by all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction. 12. GOVERNING LAW. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to New Jersey conflict of laws principles. 13. INTERPRETATION. This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement. Whenever the context requires, references to the singular shall include the plural and the plural the singular. 14. OBLIGATIONS SURVIVE TERMINATION OF EMPLOYMENT. Executive agrees that any and all of Executive's obligations under this agreement, shall survive the termination of employment and the termination of this Agreement. 27 15. AUTHORITY. Each party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in accordance with its terms. 16. ENTIRE AGREEMENT. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior or contemporaneous representations, discussions, proposals, negotiations, conditions, communications and agreements, whether written or oral, between the parties relating to the subject matter hereof and all past courses of dealing or industry custom. Executive acknowledges Executive has had the opportunity to consult legal counsel concerning this agreement, that Executive has read and understands the agreement, that Executive is fully aware of its legal effect, and that Executive has entered into it freely based on Executive's own judgment and not on any representations or promises other than those contained in this agreement. In Witness Whereof, the parties have duly executed this Agreement as of the date first written above. Glowpoint, Inc. David C. Trachtenberg /s/ Richard Reiss /s/ David C. Trachtenberg -------------------- ------------------------- 28 EX-10.2 4 d57414_ex10-2.txt AMENDMENT AND RESTATEMENT OF EMPLOYMENT AGREEMENT Exhibit 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (this "Agreement") is made as of the 14th day of October 2003 between Glowpoint, Inc., a Delaware corporation having its principal office at 225 Long Avenue, Hillside, New Jersey 07205 (hereinafter "Glowpoint"), and Richard Reiss, c/o Glowpoint, Inc., 225 Long Avenue, Hillside, New Jersey 07205 (hereinafter "Employee"). WHEREAS, Employee and Glowpoint entered into an Employment Agreement on January 2, 2001 which was amended April 24, 2002, July 30, 2002 and January 1, 2003 (collectively, the "Employment Agreement"); WHEREAS, under the Employment Agreement, Employee has served Glowpoint as its Chief Executive Officer and possesses certain executive-level knowledge of Glowpoint, the videoconferencing industry, and competitors of Glowpoint; WHEREAS, pursuant to this Agreement, effective as of October 14, 2003 (the "Effective Date"), Employee will no longer serve Glowpoint as its Chief Executive Officer; WHEREAS, this Agreement amends and restates the Employment Agreement in its entirety effective as of the Effective Date; and WHEREAS, Glowpoint wishes to retain Employee to assist Glowpoint's management in the development and marketing of Glowpoint's Glowpoint network, including participating in the development of additional network features and the formulation of pricing plans, and to provide general executive-level advice regarding Glowpoint, the videoconferencing industry, and competitors of Glowpoint. NOW, THEREFORE, in consideration of their mutual promises made herein, and for other good and valuable consideration, the parties hereby agree as follows: 1. Employee Duties. Employee shall (a) assist Glowpoint's management in the development and marketing of Glowpoint's Glowpoint network, including participating in the development of additional network features and the formulation of pricing plans, and (b) provide general executive-level advice regarding Glowpoint, the videoconferencing industry, and competitors of Glowpoint. Employee shall devote such portion of his business time as is reasonably required to fully perform his services under this Agreement. 2. Termination of Employment as Chief Executive Officer. Employee's final date of employment as Chief Executive Officer of Glowpoint is October 14, 2003. 3. Term of Agreement. The term of Employee's services under this Agreement (the "Employment Term") shall commence as of the date hereof and shall terminate on December 31, 2004. 4. Compensation. As compensation for Employee's services under this Agreement, for a period of three months, from October 1, 2003 until December 31, 2003, Glowpoint shall pay Employee salary payments in a total amount equal to $82,500, less authorized and required deductions. These salary payments shall be 29 in lieu of and not in addition to any payments to which Employee would otherwise be entitled pursuant to the Employment Agreement during this period and shall be paid in accordance with Glowpoint's regular payroll practices during this period on Glowpoint's regular paydays. Beginning January 1, 2004, Glowpoint shall pay Employee a salary of $150,000 (the "Salary") for the remainder of the Employment Term, in the amount of $12,500 per month, payable on the fifteenth day of each month. Employee's rights as an optionee under Glowpoint's 2000 Stock Incentive Plan (the "Plan") shall continue to be governed by the terms of the Plan and of the associated stock option agreements currently in effect (the "Award Agreements"). Glowpoint shall, in addition to Employee's compensation, reimburse Employee for any reasonable expenses incurred by Employee in the performance of his duties under this agreement, upon submission of evidence thereof reasonably satisfactory to Glowpoint, including but not limited to: (a) Employee's BMW car lease through its expiration on December 31, 2004, as well as related service and insurance costs; (b) Employee's cell phone monthly charges through December 31, 2004, including the cost of all calls made by Employee in the performance of his duties under this agreement; (c) the cost to maintain a Glowpoint line and a business telephone line at Employee's home through December 31, 2004, as well as the cost of all video and telephone calls made by Employee in the performance of his duties under this agreement; (d) Employee's business travel expenses related to performance of his duties under this Agreement through December 31, 2004, which expenses have been pre-approved by Glowpoint; and (e) the premiums on a life insurance policy in the principal amount of $1,000,000 for a term through December 31, 2004, containing substantially the same terms and conditions as the life insurance policy currently maintained by Glowpoint on Employee's life, payable to Employee's designated beneficiary or Employee's estate. 5. Bonus and Benefits. In addition to the above-listed compensation and expense reimbursements, Employee shall be entitled to: (a) payment upon execution of this Agreement of a cash bonus in the amount of $50,000 less authorized and required deductions. (b) retain the laptop computer, cell phone and Polycom ViewStation and associated monitor currently in Employee's possession which were purchased by Glowpoint for Employee's use. 30 (c) extension of the post-termination exercise period under the Plan and each Award Agreement to twenty-four (24) months after the expiration of the Employment Term; provided, however, that to the extent not exercised within the time permitted by law for the exercise of incentive stock options following the termination of Employee's employment, such options shall convert automatically to non-qualifying stock options. (d) In the event that Employee elects COBRA coverage following the termination of the Employment Term, Glowpoint will, for the eighteen (18) month period provided pursuant to COBRA following such termination, pay the applicable COBRA premiums on Employee's behalf to maintain Employee's individual and family Glowpoint health insurance coverage (including without limitation hospital and dental care). As of the termination of that 18-month period, Employee will be solely responsible for all applicable insurance premiums. 6. Confidential Information; Non-Solicitation. Except as required in connection with the performance of services to Glowpoint, Employee shall not, during or after the termination of the Employment Term, use or disclose to any person, partnership or corporation any confidential business information or trade secrets of Glowpoint obtained or learned by Employee during the Employment Term. Employee also agrees that he shall not, for a period of one (1) year following the termination of the Employment Term, induce any employee of Glowpoint to terminate his or her employment with Glowpoint. Solely with respect to this Paragraph 6 and Paragraph 7 herein, the term "Employment Term" shall include all periods of Employee's employment with Glowpoint, including those which precede the date hereof. 7. Work Product. Employee hereby agrees that all ideas, creations, improvements and other works of authorship created, developed, written or conceived by Employee within the scope of his employment under this agreement at any time during the Employment Term are works for hire and shall be the property of Glowpoint free of any claim whatever by Employee or any person claiming any rights or interests through Employee. 8. Employee's Other Endeavors. Glowpoint acknowledges that Employee plans to pursue employment or consultancy engagements by parties other than Glowpoint ("Other Endeavors") and that Employee shall (subject to the final sentence of Paragraph 1 above) have the unrestricted right to pursue Other Endeavors, whether or not any such Other Endeavor results in a conflict of interest with the interests of Glowpoint (a "Conflict"). If Employee secures any Other Endeavor (of which Employee shall promptly notify Glowpoint, for purposes of this Paragraph 8), (a) Employee shall have the right to terminate the Employment Term effective upon no less than least ten days' prior written notice to Glowpoint and (b) if Glowpoint reasonably determines that such Other Endeavor results in a Conflict, Glowpoint shall have the right to terminate the Employment Term effective upon no less than ten days' prior written notice to Employee (provided that, in the event of such a termination under this Paragraph 8, Employee shall 31 nevertheless continue to be entitled to receive any then-outstanding installments of the Salary when otherwise payable hereunder through the end of the Employment Term). 9. Miscellaneous. This agreement is made in the State of New Jersey and shall be governed by the laws of the State of New Jersey. The parties in any action arising from this Agreement shall be subject to the jurisdiction and venue of the federal and state courts, as applicable, situated within the State of New Jersey. This agreement constitutes the entire agreement, and shall supersede any prior or contemporaneous agreement oral or written, between the parties hereto regarding Employee's services to Glowpoint as an employee as and from the Effective Date forward and may not be modified or amended except by a written document signed by the party against whom enforcement is sought. This agreement may be signed in more than one counterpart, in which case each counterpart shall constitute an original of this agreement. IN WITNESS WHEREOF, the parties have signed this agreement as of the day and year first above written. GLOWPOINT, INC. By: /s/ Christopher A. Zigmont ------------------------------------- Name: Title: /s/ Richard Reiss ------------------------------------ Richard Reiss 32 EX-10.3 5 d57414_ex10-3.txt AMENDMENT AND RESTATEMENT OF EMPLOYMENT AGREEMENT Exhibit 10.3 Wire One Technologies, Inc. 225 Long Avenue Hillside, New Jersey 07205 As of September 23, 2003 Mr. Michael Brandofino c/o Wire One Technologies, Inc. 225 Long Avenue Hillside, NJ 07205 Dear Mike: This letter, when accepted by you, shall constitute an amendment to the employment agreement (the "Agreement"), dated January 2, 2001, as amended to date, between Wire One Technologies, Inc. (the "Company") and you. The Company and you hereby agree as follows: 10. Your base salary for the period October 1, 2003 through December 31, 2003 shall be payable at the annual rate of $225,000. Your base salary for the period January 1, 2004 through December 31, 2004 shall be payable at the annual rate of $245,000. You shall be entitled to a one-time guaranteed bonus of $35,000, payable on October 1, 2003. 11. Subject to the provisions of this paragraph 2, the Company agrees to grant to you an additional stock option (the "Option") under the Company's 2000 Stock Incentive Plan (the "Plan") to purchase 100,000 shares of the Company's common stock (the "Common Stock"), at an exercise price per share equal to the closing price of the Common Stock on the Nasdaq National Market on the date hereof. Notwithstanding any provision of the Plan to the contrary, your right to exercise the Option shall vest 50% on each of December 31, 2003 and 2004. The foregoing, as well as such other terms and conditions as the Company may deem appropriate, shall be set forth in a definitive stock option agreement in the Company's customary form. Your rights as an optionee shall, to the extent not inconsistent with this agreement, be governed by the terms of such stock option agreement and the Plan. The Company shall cause the shares of Common Stock issuable upon the exercise of the Option to be registered on Form S-8 and/or Form S-3 (or any successor form) under the Securities Act of 1933, as amended. If the Company enters into a Sale agreement at any time between the date hereof through December 31, 2004 and such Sale is subsequently consummated, and if you realize less than a total of $200,000 from the exercise of all options to purchase Common Stock in connection with such Sale, the Company shall pay you, as a bonus, an amount equal to the difference between $200,000 and the amount you realized. A "Sale" means the merger or consolidation of the Company with one or more other corporations where the Company is not the surviving entity or a sale of substantially all of the assets of the Company and excludes the sale of the Company's Video Solutions business to Gores Technology Group, expected to occur in August 2003. 33 12. Provided you are employed by the Company through December 31, 2004, you shall be entitled to a one-time guaranteed bonus equal to 10% of your then current salary, payable on March 31, 2005, if the Company has at least $1 million of "EBITDA" (that is, earnings before interest, taxes, depreciation and amortization, exclusive of non-recurring items and otherwise computed on a basis consistent with past practice, as the Company publicly discloses that figure) from continuing operations during fiscal year 2004. 13. Except as modified hereby, the Agreement remains in full force and effect. Yours very truly, WIRE ONE TECHNOLOGIES, INC. By: /s/ Richard Reiss --------------------- ACCEPTED: /s/ Michael Brandofino - ------------------------- Michael Brandofino 34 EX-10.4 6 d57414_ex10-4.txt EMPLOYMENT AGREEMENT Exhibit 10.4 TERMINATION AGREEMENT Termination Agreement (this "Agreement") made as of this 23rd day of September 2003 between Wire One Technologies, Inc., a Delaware corporation having its principal office at 225 Long Avenue, Hillside, New Jersey 07205 (hereinafter "Wire One"), and Leo Flotron, 1341 Laurelwood Road, Kettering, Ohio 45429 (hereinafter "Executive"). Whereas, Executive is currently employed by Wire One as President and Chief Operating Officer under an agreement dated January 2, 2001, as amended July 30, 2002 and January 1, 2003 (collectively, the "Employment Agreement"); Whereas, Executive and Wire One have determined it to be in their mutual best interests to terminate the term of the Employment Agreement, simultaneous with the consummation of the proposed sale of Wire One's Video Solutions business to Gores Technology Group (the "Transaction"). Now Therefore, in consideration of the mutual promises made herein, and for other good and valuable consideration, the parties hereby agree as follows: 1. The term of the Employment Agreement shall terminate on the date hereof (the "Termination Date"). 2. In consideration of the covenants and agreements contained herein, Wire One shall pay to Executive the balance of the salary that would have been payable to him under the Employment Agreement if he were to remain with Wire One in his present capacity until the expiration of the Employment Agreement on December 31, 2003, with such payment to be made on or about two weeks following the closing of the Transaction. 3. Executive and his representatives hereby release Wire One (except to the extent of Wire One's obligations under this Agreement), its affiliated, related, parent or subsidiary corporations, and their present and former directors, officers, and employees from all claims of any kind, known and unknown, which Executive may now have or have ever had against Wire One, including claims for compensation, bonuses, severance pay, stock options, accrued vacation and all claims arising from Executive's employment with Wire One or the termination of Executive's employment, whether based on contract, tort, statute, local ordinance, regulation or any comparable law in any jurisdiction ("Released Claims"). By way of example and not in limitation, the Released Claims shall include any 35 claims arising under Title VII of the Civil Rights Act of 1964 as amended and the Americans with Disabilities Act, as well as any claims asserting wrongful termination, breach of contract, breach of the covenant of good faith and fair dealing, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, and defamation. 4. Wire One hereby releases Executive (except to the extent of Executive's obligations under this Agreement) and his representatives from all claims of any kind, known and unknown, which Wire One may now have or have ever had against Executive, including claims arising from any alleged violation of any federal, state or local statutes, ordinances, executive orders or common law principles relating to employment or termination of employment. 5. Executive and Wire One agree that the provisions of Section 4 of the Employment Agreement shall remain in effect (1) on and after the Termination Date with respect to the confidentiality of the confidential business information or trade secrets of Wire One's Glowpoint business, and (2) for a period of one year following the Termination Date with respect to the non-solicitation of any employees of Wire One's Glowpoint business following the consummation of the Transaction. 6. Except as set forth in this Agreement, all obligations under the Employment Agreement are hereby terminated. 7. This agreement is made in the State of New Jersey and shall be governed by New Jersey law. This agreement constitutes the entire agreement, and shall supersede any prior or contemporaneous agreement, oral or written, between the parties hereto regarding Executive's services to Wire One as an employee or Executive following the Termination Date (it being understood that the provisions of the Employment Agreement that survive the termination of the "Employment Period" thereunder shall remain in full force and effect) and may not be modified or amended except by a written document signed by the party against whom enforcement is sought. This agreement may be signed in more than one counterpart, in which case each counterpart shall constitute an original of this agreement. 36 IN WITNESS WHEREOF, the parties have signed this agreement as of the day and year first above written. WIRE ONE TECHNOLOGIES, INC. By: /s/ Richard Reiss --------------------- Name: Richard Reiss Title: Chief Executive Officer /s/ Leo Flotron --------------------- Leo Flotron 37 EX-10.5 7 d57414_ex10-5.txt RESTRICTED STOCK AWARD Exhibit 10.5 GLOWPOINT, INC. NOTICE OF RESTRICTED STOCK AWARD Grantee's Name and Address: David C. Trachtenberg Glowpoint, Inc. 225 Long Avenue Hillside, NJ 07205 You have been granted shares of Common Stock of the Company for your service as Chief Executive Officer of the Company, subject to the terms and conditions of this Notice of Restricted Stock Award (the "Notice") and the Restricted Stock Award Agreement (the "Agreement") attached hereto, as follows (the "Award"). Defined terms used in this Notice but not defined herein shall have the same meanings given in the Agreement. Award Number RS-4 Date of Award October 3, 2003 Vesting Commencement Date October 15, 2003 Total Number of Shares of Common Stock Awarded 360,000 shares Aggregate Current Fair Market Value of Shares $1,116,000.00 Vesting Schedule: Subject to Grantee's maintenance of his status as Chief Executive Officer and other limitations set forth in this Notice and the Agreement, the Shares will "vest" in accordance with the following schedule: One-Third of the Total Number of Shares of Common Stock Awarded shall vest on each of the three anniversaries of the Vesting Commencement Date thereafter. Except as set forth in Sections 2.2(b) and 3.3 of the Employment Agreement dated as of the date hereof between the Company and the Grantee (the "Employment Agreement"), vesting shall cease upon the date of termination of the Grantee's status as Chief Executive Officer for any reason, including death or disability. For purposes of this Notice and the Agreement, the term "vest" shall mean, with respect to any Shares, that such Shares shall remain subject to other restrictions on transfer set forth in the Agreement. Shares that have not vested are deemed "Restricted Shares." If the Grantee would become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Grantee becomes vested in the entire Share. Notwithstanding the foregoing, the Shares subject to this Notice will be subject to the provisions 1 of the Agreement relating to the release of forfeiture provisions in the event of a Corporate Transaction or Change of Control. 2 IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Award is to be governed by the terms and conditions of this Notice and the Agreement. GLOWPOINT, INC. By: /s/ Richard Reiss ----------------- Title: Chairman & Chief Executive Officer ---------------------------------- THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE'S STATUS AS CHIEF EXECUTIVE OFFICER (NOT THROUGH THE ACT OF BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE OR THE AGREEMENT SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF GRANTEE'S STATUS AS CHIEF EXECUTIVE OFFICER, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE GRANTEE'S EMPLOYMENT PURSUANT TO THE TERMS OF THE EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND THE GRANTEE, DATED THE DATE HEREOF. The Grantee acknowledges receipt of a copy of the Agreement and represents that he is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice and the Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice and the Agreement shall be resolved in accordance with Section 16 of the Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice. Dated: October 4, 2003 Signed: /s/ David C. Trachtenberg --------------- ------------------------- 3 GLOWPOINT, INC. RESTRICTED STOCK AWARD AGREEMENT 1. Issuance of Shares. Glowpoint, Inc., a Delaware corporation (the "Company"), hereby issues to the Grantee (the "Grantee") named in the Notice of Restricted Stock Award (the "Notice"), the Total Number of Shares of Common Stock Awarded set forth in the Notice (the "Shares"), subject to the Notice and this Restricted Stock Award Agreement (this "Agreement"). All Shares issued hereunder will be deemed issued to the Grantee as fully paid and nonassessable shares, and the Grantee will have the right to vote the Shares at meetings of the Company's stockholders. The Company shall pay any applicable stock transfer taxes imposed upon the issuance of the Shares to the Grantee hereunder. Defined terms used in this Agreement but not defined herein shall have the same meanings given in the Notice. 2. Consideration. The Shares have been issued to the Grantee in consideration for his service to the Company as Chief Executive Officer, which consideration has a value of $3.10 per share, the closing price of the Company's Common Stock on the Nasdaq National Market on the Date of Award. The Grantee agrees to pay upon receipt of the Notice the par value of $.0001 for each Share issued in the total amount of $1,116,000.00. 3. Transfer Restrictions. The Shares issued to the Grantee hereunder may not be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by the Grantee prior to the date when the Shares become vested pursuant to the Vesting Schedule set forth in the Notice. Any attempt to transfer Restricted Shares in violation of this Section 3 will be null and void and will be disregarded. 4. Escrow of Stock. For purposes of facilitating the enforcement of the provisions of this Agreement, the Grantee agrees, immediately upon receipt of the certificate(s) for the Restricted Shares, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached hereto as Exhibit A, executed in blank by the Grantee and the Grantee's spouse (if required for transfer) with respect to each such stock certificate, to the Secretary or Assistant Secretary of the Company, or their designee, to hold in escrow for so long as such Restricted Shares have not vested pursuant to the Vesting Schedule set forth in the Notice, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof. The Grantee hereby acknowledges that the appointment of the Secretary or Assistant Secretary of the Company (or their designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled with an interest and is accordingly irrevocable. The Grantee agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent or engages in willful misconduct relative thereto. The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Upon the vesting of Restricted Shares, the escrow holder will, without further order or instruction, transmit to the Grantee the certificate evidencing such Shares, subject, however, to satisfaction of any withholding obligations provided in Section 6 below. 1 5. Distributions. The Company shall disburse to the Grantee all regular cash dividends with respect to the Shares and Additional Securities (whether vested or not), less any applicable withholding obligations. 6. Section 83(b) Election and Withholding of Taxes. The Grantee shall provide the Administrator with a copy of any timely election made pursuant to Section 83(b) of the Internal Revenue Code or similar provision of state law (collectively, an "83(b) Election"), a form of which is attached hereto as Exhibit B. If the Grantee makes a timely 83(b) Election, the Grantee shall immediately pay the Company the amount necessary to satisfy any applicable foreign, federal, state, and local income and employment tax withholding obligations. If the Grantee does not make a timely 83(b) Election, the Grantee shall, as Restricted Shares shall vest or at the time withholding is otherwise required by any applicable law, pay the Company the amount necessary to satisfy any applicable foreign, federal, state, and local income and employment tax withholding obligations. The Grantee hereby represents that he understands (a) the contents and requirements of the 83(b) Election, (b) the application of Section 83(b) to the receipt of the Shares by the Grantee pursuant to this Agreement, (c) the nature of the election to be made by the Grantee under Section 83(b), and (d) the effect and requirements of the 83(b) Election under relevant state and local tax laws. The Grantee further represents that if he intends to file an election pursuant to Section 83(b) with the Internal Revenue Service within thirty (30) days following the date of this Agreement, he will submit a copy of such election to the Company and with his federal tax return for the calendar year in which the date of this Agreement falls. 7. Additional Securities. Any securities or cash received (other than a regular cash dividend) as the result of ownership of the Restricted Shares (the "Additional Securities"), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the Company's capital structure, shall be retained in escrow in the same manner and subject to the same conditions and restrictions as the Restricted Shares with respect to which they were issued, including, without limitation, the Vesting Schedule set forth in the Notice. The Grantee shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but the Grantee may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible security, the Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities. 8. Stop-Transfer Notices. In order to ensure compliance with the restrictions on transfer set forth in this Agreement or the Notice, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 9. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the 2 provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 10. Restrictive Legends. Grantee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR GLOWPOINT, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED." 11. Lock-Up Agreement. (a) Agreement. Grantee, if requested by the Company and the lead underwriter of any public offering of the Common Stock or other securities of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of any interest in any Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended, or such shorter period of time as the Lead Underwriter shall specify. Grantee further agrees to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agrees that the Company may impose stop-transfer instructions with respect to such Common Stock subject until the end of such period. The Company and Grantee acknowledge that each Lead Underwriter of a public offering of the Company's stock, during the period of such offering and for the 180-day period thereafter, is an intended beneficiary of this Section 11. (b) No Amendment Without Consent of Underwriter. During the period from identification as a Lead Underwriter in connection with any public offering of the Company's Common Stock until the earlier of (i) the expiration of the lock-up period specified in Section 11(a) in connection with such offering or (ii) the abandonment of such offering by the Company and the Lead Underwriter, the provisions of this Section 11 may not be amended or waived except with the consent of the Lead Underwriter. 3 12. Registration of the Shares. If at any time the Company proposes to file a registration statement under the Securities Act with respect to an underwritten offering of Common Stock (except on Form S-4 or Form S-8 or any successor forms thereto), for its own account, then the Company shall give written notice of such proposed filing to the Grantee at least 15 days in advance of the anticipated filing date (the "Piggyback Notice"). The Piggyback Notice shall offer the Grantee the opportunity to register such amount of Shares as each such holder may request (a "Piggyback Registration"), subject in all events to the agreement of the underwriter or underwriters of the offering contemplated by such registration statement that such Shares can be included in such registration statement without adversely affecting such offering. Any reduction in the number of securities to be so offered shall be (i) first, pro-rata among all security holders who are exercising "piggyback" registration rights, based on the number of registrable securities originally proposed to be sold by each of them, and (ii) second, pro-rata among all security holders who are exercising "demand" registration rights pursuant to a registration rights agreement with the Company, based on the number of registrable securities originally proposed to be sold by each of them. 13. Grantee's Representations. In the event the Shares issuable pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of initial issuance to the Grantee, the Grantee shall, if required by the Company, concurrently with the receipt of the Shares, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit C. 14. Entire Agreement: Governing Law. The Notice and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. These agreements are to be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights and duties of the parties. Should any provision of the Notice or this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 15. Headings. The captions used in this Agreement are inserted for convenience and shall not be deemed a part of this Agreement for construction or interpretation. 16. Dispute Resolution. The provisions of this Section 16 shall be the exclusive means of resolving disputes arising out of or relating to the Notice and this Agreement. The Company, the Grantee, and the Grantee's assignees (the "parties") shall attempt in good faith to resolve any disputes arising out of or relating to the Notice and this Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party's position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or 4 relating to the Notice or this Agreement shall be brought in the United States District Court for the Southern District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in a New York state court in the County of New York) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 16 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 17. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party. 18. Corporate Transactions/Changes in Control (a) Acceleration of Award Upon Corporate Transaction. Subject to Section 2.2(b) of the Employment Agreement, in the event of any Corporate Transaction, the Award shall automatically become fully vested and exercisable and be released from any restrictions on transfer and forfeiture rights, immediately prior to the specified effective date of such Corporate Transaction, for all of the Shares at the time represented by the Award. (b) Acceleration of Award Upon Change in Control. Subject to Section 2.2(b) of the Employment Agreement, following a Change in Control, the Award shall automatically become fully vested and exercisable and be released from any restrictions on transfer and repurchase or forfeiture rights, immediately upon the consummation of such Change in Control. 19. Definitions. As used herein, the following definitions shall apply: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. (b) "Board" means the Board of Directors of the Company. (c) "Change in Control" means a change in ownership or control of the Company effected through either of the following transactions: (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or 5 exchange offer made directly to the Company's stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors. (d) "Chief Executive Officer" means the Chief Executive Officer of the Company. (e) "Code" means the Internal Revenue Code of 1986, as amended. (f) "Common Stock" means the common stock of the Company. (g) "Company" means Glowpoint, Inc., a Delaware corporation. (h) "Continuing Directors" means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. (i) "Corporate Transaction" means any of the following transactions: (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations); (iii) approval by the Company's shareholders of any plan or proposal for the complete liquidation or dissolution of the Company; (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or (v) acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities (whether or not in a transaction also constituting a Change in Control). 6 (j) "Director" means a member of the Board. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (l) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (m) "Share" means a share of the Common Stock. (n) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 7 EXHIBIT A STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE [Please sign this document but do not date it. The date and information of the transferee will be completed if and when the shares are assigned.] FOR VALUE RECEIVED, ____________________________ hereby sells, assigns and transfers unto _______________________, __________________ (____) shares of the Common Stock of Glowpoint, Inc., a Delaware corporation (the "Company"), standing in his name on the books of, the Company represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company attorney to transfer the said stock in the books of the Company with full power of substitution. DATED: ________________ ____________________ 1 EXHIBIT B ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986 The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code, to include in gross income for 20__ the amount of any compensation taxable in connection with the taxpayer's receipt of the property described below: The name, address, taxpayer identification number and taxable year of the undersigned are: TAXPAYER'S NAME: SPOUSE'S NAME: TAXPAYER'S SOCIAL SECURITY NO.: SPOUSE'S SOCIAL SECURITY NO.: TAXABLE YEAR: Calendar Year 20__ ADDRESS: The property which is the subject of this election is __________ shares of common stock of __________________________, Inc. The property was transferred to the undersigned on ____________, 20__. The fair market value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is: $_______ per share x ________ shares = $___________. The undersigned paid $______ per share x _________ shares for the property transferred or a total of $______________. The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The undersigned taxpayer is the person performing the services in connection with the transfer of said property. The undersigned will file this election with the Internal Revenue Service office to which he files his annual income tax return not later than 30 days after the date of transfer of the property. A copy of the election also will be furnished to the person for whom the services were performed. Additionally, the undersigned will include a copy of the election with his income tax return for the taxable year in which the property is transferred. The undersigned understands that this election will also be effective as an election under applicable state law. 1 Dated: ____________________________ ____________________________ Taxpayer The undersigned spouse of taxpayer joins in this election. Dated: ____________________________ ____________________________ Spouse of Taxpayer 2 EXHIBIT C GLOWPOINT, INC. INVESTMENT REPRESENTATION STATEMENT GRANTEE : DAVID C. TRACHTENBERG COMPANY : GLOWPOINT, INC. SECURITY : COMMON STOCK AMOUNT : ___________________________ DATE : ___________________________ In connection with the receipt of the above-listed Securities, the undersigned Grantee represents to the Company the following: (o) Grantee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Grantee is acquiring these Securities for investment for Grantee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (p) The Grantee is an "accredited investor" within the meaning of Rule 501 of Regulation D of the Securities and Exchange Commission, as presently in effect. (q) Grantee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon among other things, the bona fide nature of Grantee's investment intent as expressed herein. In this connection, Grantee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Grantee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Grantee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the Securities. Grantee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company. 1 (r) Grantee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the sale of the Shares to the Grantee, the sale will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time of sale of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (s) Grantee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Grantee understands that no assurances can be given that any such other registration exemption will be available in such event. (t) Grantee represents that he is a resident of the state of ____________________. Signature of Grantee: ________________________________________ Date: ____________________, ____________ 2 EX-10.6 8 d57414_ex10-6.txt RESTRICTED STOCK AWARD AGREEMENTS Exhibit 10.6 SCHEDULE TO FORM OF RESTRICTED STOCK AWARD AGREEMENT Glowpoint has entered into Restricted Stock Award Agreements with Karen Basian, James Kuster, Michael Sternberg and Michael Toporek. Each such Restricted Stock Award Agreement is identical in all material respects except as to the grantees, the dates of award, the vesting commencements dates and the aggregate current fair market values of shares. 1 GLOWPOINT, INC. NOTICE OF RESTRICTED STOCK AWARD Grantee's Name and Address: ______________________________ ______________________________ ______________________________ You have been granted shares of Common Stock of the Company for your service as an Independent Director on the Board, subject to the terms and conditions of this Notice of Restricted Stock Award (the "Notice") and the Restricted Stock Award Agreement (the "Agreement") attached hereto, as follows (the "Award"). Defined terms used in this Notice but not defined herein shall have the same meanings given in the Agreement. Award Number ______________________________ Date of Award ______________________________ Vesting Commencement Date ______________________________ Total Number of Shares of Common Stock Awarded ______________________________ Aggregate Current Fair Market Value of Shares ______________________________ Vesting Schedule: Subject to Grantee's maintenance of his status as an Independent Director and other limitations set forth in this Notice and the Agreement, the Shares will "vest" in accordance with the following schedule: 20,000 of the Total Number of Shares of Common Stock Awarded shall vest on the Vesting Commencement Date, and 20,000 of the Total Number of Shares of Common Stock Awarded shall vest on each of the first, second and third anniversaries of the Vesting Commencement Date thereafter. Vesting shall cease upon the date of termination of the Grantee's status as an Independent Director for any reason, including death or disability. For purposes of this Notice and the Agreement, the term "vest" shall mean, with respect to any Shares, that such Shares shall remain subject to other restrictions on transfer set forth in the Agreement. Shares that have not vested are deemed "Restricted Shares." If the Grantee would become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Grantee becomes vested in the entire Share. Notwithstanding the foregoing, the Shares subject to this Notice will be subject to the provisions of the Agreement relating to the release of forfeiture provisions in the event of a Corporate Transaction or Change of Control. 1 IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Award is to be governed by the terms and conditions of this Notice and the Agreement. GLOWPOINT, INC. By: ____________________________________ Title: _________________________________ GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE'S STATUS AS AN INDEPENDENT DIRECTOR (NOT THROUGH THE ACT OF BEING ELECTED TO THE COMPANY'S BOARD OF DIRECTORS, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE OR THE AGREEMENT SHALL CONFER UPON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF GRANTEE'S STATUS AS AN INDEPENDENT DIRECTOR, NOR SHALL IT INTERFERE IN ANY WAY WITH GRANTEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE GRANTEE AT ANY TIME, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. The Grantee acknowledges receipt of a copy of the Agreement and represents that he is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice and the Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice and the Agreement shall be resolved in accordance with Section 15 of the Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice. Dated: ______________________ Signed: ________________________________ 2 GLOWPOINT, INC. RESTRICTED STOCK AWARD AGREEMENT 1. Issuance of Shares. Glowpoint, Inc., a Delaware corporation (the "Company"), hereby issues to the Grantee (the "Grantee") named in the Notice of Restricted Stock Award (the "Notice"), the Total Number of Shares of Common Stock Awarded set forth in the Notice (the "Shares"), subject to the Notice and this Restricted Stock Award Agreement (this "Agreement"). All Shares issued hereunder will be deemed issued to the Grantee as fully paid and nonassessable shares, and the Grantee will have the right to vote the Shares at meetings of the Company's stockholders. The Company shall pay any applicable stock transfer taxes imposed upon the issuance of the Shares to the Grantee hereunder. Defined terms used in this Agreement but not defined herein shall have the same meanings given in the Notice. 2. Consideration. The Shares have been issued to the Grantee in consideration for his service to the Company as an Independent Director on the Board, which consideration has a value of $[ ] per share, the closing price of the Company's Common Stock on the Nasdaq National Market on the Date of Award. The Grantee agrees to pay upon receipt of the Notice the par value of $.0001 for each Share issued in the total amount of $8.00. 3. Transfer Restrictions. The Shares issued to the Grantee hereunder may not be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by the Grantee prior to the date when the Shares become vested pursuant to the Vesting Schedule set forth in the Notice. Any attempt to transfer Restricted Shares in violation of this Section 3 will be null and void and will be disregarded. 4. Escrow of Stock. For purposes of facilitating the enforcement of the provisions of this Agreement, the Grantee agrees, immediately upon receipt of the certificate(s) for the Restricted Shares, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached hereto as Exhibit A, executed in blank by the Grantee and the Grantee's spouse (if required for transfer) with respect to each such stock certificate, to the Secretary or Assistant Secretary of the Company, or their designee, to hold in escrow for so long as such Restricted Shares have not vested pursuant to the Vesting Schedule set forth in the Notice, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof. The Grantee hereby acknowledges that the appointment of the Secretary or Assistant Secretary of the Company (or their designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled with an interest and is accordingly irrevocable. The Grantee agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent or engages in willful misconduct relative thereto. The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. 1 5. Distributions. The Company shall disburse to the Grantee all regular cash dividends with respect to the Shares and Additional Securities (whether vested or not). 6. Additional Securities. Any securities or cash received (other than a regular cash dividend) as the result of ownership of the Restricted Shares (the "Additional Securities"), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the Company's capital structure, shall be retained in escrow in the same manner and subject to the same conditions and restrictions as the Restricted Shares with respect to which they were issued, including, without limitation, the Vesting Schedule set forth in the Notice. The Grantee shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but the Grantee may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible security, the Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities. 7. Stop-Transfer Notices. In order to ensure compliance with the restrictions on transfer set forth in this Agreement or the Notice, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 8. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 9. Restrictive Legends. Grantee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR GLOWPOINT, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE 2 SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED." 10. Lock-Up Agreement. (a) Agreement. Grantee, if requested by the Company and the lead underwriter of any public offering of the Common Stock or other securities of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of any interest in any Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended, or such shorter period of time as the Lead Underwriter shall specify. Grantee further agrees to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agrees that the Company may impose stop-transfer instructions with respect to such Common Stock subject until the end of such period. The Company and Grantee acknowledge that each Lead Underwriter of a public offering of the Company's stock, during the period of such offering and for the 180-day period thereafter, is an intended beneficiary of this Section 10. (b) No Amendment Without Consent of Underwriter. During the period from identification as a Lead Underwriter in connection with any public offering of the Company's Common Stock until the earlier of (i) the expiration of the lock-up period specified in Section 10(a) in connection with such offering or (ii) the abandonment of such offering by the Company and the Lead Underwriter, the provisions of this Section 10 may not be amended or waived except with the consent of the Lead Underwriter. 11. Registration of the Shares. If at any time the Company proposes to file a registration statement under the Securities Act with respect to an underwritten offering of Common Stock (except on Form S-4 or Form S-8 or any successor forms thereto), for its own account, then the Company shall give written notice of such proposed filing to the Grantee at least 15 days in advance of the anticipated filing date (the "Piggyback Notice"). The Piggyback Notice shall offer the Grantee the opportunity to register such amount of Shares as each such holder may request (a "Piggyback Registration"), subject in all events to the agreement of the underwriter or underwriters of the offering contemplated by such registration statement that such Shares can be included in such registration statement without adversely affecting such offering. Any reduction in the number of securities to be so offered shall be (i) first, pro-rata among all security holders who are exercising "piggyback" registration rights, based on the number of registrable securities originally proposed to be sold by each of them, and (ii) second, pro-rata among all security holders who are exercising "demand" registration rights pursuant to a registration rights agreement with the Company, based on the number of registrable securities originally proposed to be sold by each of them. 12. Grantee's Representations. In the event the Shares issuable pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, at the time of 3 initial issuance to the Grantee, the Grantee shall, if required by the Company, concurrently with the receipt of the Shares, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B. 13. Entire Agreement: Governing Law. The Notice and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. These agreements are to be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights and duties of the parties. Should any provision of the Notice or this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 14. Headings. The captions used in this Agreement are inserted for convenience and shall not be deemed a part of this Agreement for construction or interpretation. 15. Dispute Resolution. The provisions of this Section 15 shall be the exclusive means of resolving disputes arising out of or relating to the Notice and this Agreement. The Company, the Grantee, and the Grantee's assignees (the "parties") shall attempt in good faith to resolve any disputes arising out of or relating to the Notice and this Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party's position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice or this Agreement shall be brought in the United States District Court for the Southern District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in a New York state court in the County of New York) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 15 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 16. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party. 4 17. Corporate Transactions/Changes in Control (a) Acceleration of Award Upon Corporate Transaction. In the event of any Corporate Transaction, the Award shall automatically become fully vested and exercisable and be released from any restrictions on transfer and forfeiture rights, immediately prior to the specified effective date of such Corporate Transaction, for all of the Shares at the time represented by the Award. (b) Acceleration of Award Upon Change in Control. Following a Change in Control, the Award shall automatically become fully vested and exercisable and be released from any restrictions on transfer and repurchase or forfeiture rights, immediately upon the consummation of such Change in Control. 18. Definitions. As used herein, the following definitions shall apply: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. (b) "Board" means the Board of Directors of the Company. (c) "Change in Control" means a change in ownership or control of the Company effected through either of the following transactions: (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Common Stock" means the common stock of the Company. (f) "Company" means Glowpoint, Inc., a Delaware corporation. (g) "Continuing Directors" means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were 5 still in office at the time such election or nomination was approved by the Board. (h) "Corporate Transaction" means any of the following transactions: (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations); (iii) approval by the Company's shareholders of any plan or proposal for the complete liquidation or dissolution of the Company; (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or (v) acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities (whether or not in a transaction also constituting a Change in Control). (i) "Director" means a member of the Board. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) "Independent Director" means , with respect to each such scheduled vesting date, the Grantee (i) attended at least 75% of the meetings of the Board held in the twelve months prior to such date and (ii) remains "independent" under the Nasdaq rules prevailing on such scheduled vesting date. (l) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (m) "Share" means a share of the Common Stock. (n) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 6 EXHIBIT A STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE [Please sign this document but do not date it. The date and information of the transferee will be completed if and when the shares are assigned.] FOR VALUE RECEIVED, ____________________________ hereby sells, assigns and transfers unto _______________________, __________________ (____) shares of the Common Stock of Glowpoint, Inc., a Delaware corporation (the "Company"), standing in his name on the books of, the Company represented by Certificate No. __ herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company attorney to transfer the said stock in the books of the Company with full power of substitution. DATED: ________________ ______________________ 1 EXHIBIT B GLOWPOINT, INC. INVESTMENT REPRESENTATION STATEMENT GRANTEE : ________________________________________ COMPANY : GLOWPOINT, INC. SECURITY : COMMON STOCK AMOUNT : ________________________________________ DATE : ________________________________________ In connection with the receipt of the above-listed Securities, the undersigned Grantee represents to the Company the following: (a) Grantee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Grantee is acquiring these Securities for investment for Grantee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) The Grantee is an "accredited investor" within the meaning of Rule 501 of Regulation D of the Securities and Exchange Commission, as presently in effect. (c) Grantee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon among other things, the bona fide nature of Grantee's investment intent as expressed herein. In this connection, Grantee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Grantee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Grantee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the Securities. Grantee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company. (d) Grantee is familiar with the provisions of Rule 701 and Rule 144, each 1 promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the sale of the Shares to the Grantee, the sale will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time of sale of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (e) Grantee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Grantee understands that no assurances can be given that any such other registration exemption will be available in such event. (f) Grantee represents that he is a resident of the state of ____________________. Signature of Grantee: ________________________________________ Date:__________________________, _______ 2 EX-31.1 9 d57414_ex31-1.txt CERTIFICATION Exhibit 31.1 CERTIFICATION I, David C. Trachtenberg, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Glowpoint, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 14, 2003 /s/ David C. Trachtenberg ---------------------------------------- David C. Trachtenberg Chief Executive Officer 38 EX-31.2 10 d57414_ex31-2.txt CERTIFICATION Exhibit 31.2 CERTIFICATION I, Christopher A. Zigmont, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Glowpoint, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 14, 2003 /s/ Christopher A. Zigmont ---------------------------------------- Christopher A. Zigmont Chief Financial Officer 39 EX-32.1 11 d57414_ex32-1.txt CERTIFICATION Exhibit 32.1 CERTIFICATION In connection with the periodic reporting of Glowpoint, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, David C. Trachtenberg, Chief Executive Officer of Glowpoint the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of and for the periods indicated. This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission. November 14, 2003 /s/ David C. Trachtenberg ---------------------------------------- David C. Trachtenberg Chief Executive Officer 40 EX-32.2 12 d57414_ex32-2.txt CERTIFICATION Exhibit 32.2 CERTIFICATION In connection with the periodic reporting of Glowpoint, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, Christopher A. Zigmont, Chief Financial Officer of Glowpoint the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of and for the periods indicated. This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission. November 14, 2003 /s/ Christopher A. Zigmont ---------------------------------------- Christopher A. Zigmont Chief Financial Officer 41 -----END PRIVACY-ENHANCED MESSAGE-----