Commitments and Contingencies

Lease obligations

The Company currently has two major locations, our corporate office located in Olathe, KS, and our East Greenwich, RI, office. Both locations are under operating leases which expire in 2018 and 2019, respectively.

Through the acquisition of AHS in 2015, the Company acquired two leased properties in Des Moines, IA and Indianapolis, IN under operating leases which would have expired in 2018. The Company determined that neither lease was necessary for its operations, thus, in April 2017, settlement agreements for the remaining lease obligations were reached with both landlords. Additionally, the Company was obligated under a lease related to the discontinued Hooper Holmes Services operations center through 2018 and had ceased use of this facility, and on March 9, 2017, the parties to the lease reached a settlement agreement for the remaining lease obligation. A $0.1 million gain from discontinued operations was recorded during the year ended December 31, 2017, based on this settlement agreement. The lease settlement liabilities for the three settled lease agreements of $0.3 million are accrued in other current liabilities in the accompanying consolidated balance sheet as of December 31, 2017.

The Company also leases vehicles, copiers, and other miscellaneous office equipment. Many of our leases expire at various times through 2019; however, some extend beyond 2022.

The table below presents future minimum lease payments for operating leases (with initial or remaining terms in excess of one year) as of December 31, 2017, and includes leases from both continuing and discontinued operations, as described above. This table does not reflect any changes related to the lease negotiations noted above.



Year ending December 31,	(in thousands)
2018	$	1,188
2019	185
2020	26
2021	9
2022	9
Thereafter	9
Total minimum lease payments	$	1,426

Rental expense under operating leases of continuing operations totaled $1.4 million and $1.2 million in 2017 and 2016, respectively.

Employment obligations

The Company has employment agreements with certain executive employees that provide for payment of base salary for a defined period in the event their employment with us is terminated in certain circumstances, including following a change in control, as further defined in the agreements.

The Company incurred certain severance and other costs related to its ongoing initiatives to increase the flexibility of its cost structure that were recorded in selling, general, and administrative expenses, and at December 31, 2017 and 2016, the Company recorded a $0.6 million and $0.3 million liability, respectively, related to these initiatives in other current liabilities in the accompanying consolidated balance sheet.

Loss contingencies

The Company accrued $1.3 million related to a vendor arrangement acquired in the Merger. The arrangement had a minimum purchase commitment for which it was probable that the Company would not achieve. This amount has been recorded in Accruals as part of the purchase price allocation disclosed in Note 3.

Legal contingencies and obligations

The Company is, in the normal course of business, a party to various claims and other legal proceedings. In the opinion of management, the Company has legal defenses and/or insurance coverage (subject to deductibles) with respect to all of its pending legal actions. If management believes that a material loss not covered by insurance arising from these actions is probable and can reasonably be estimated, the Company may record the amount of the estimated loss or, if a loss cannot be estimated but the minimum liability may be estimated using a range and no point is more probable than another, the Company may record the minimum estimated liability. As additional information becomes available, any potential liability related to these actions is assessed and the estimates are revised, if necessary. Management believes that the ultimate outcome of all pending legal actions, individually and in the aggregate, will not have a material adverse effect on our financial position that is inconsistent with its loss reserves or on its overall trends in results of operations. However, litigation and claims are subject to inherent uncertainties and unfavorable outcomes can occur that exceed any amounts reserved for such losses. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the results of operations in the period in which the outcome occurs or in future periods.

On August 5, 2016, the Company agreed to a settlement of $0.5 million related to a lawsuit involving the former Portamedic service line for which the Company retained liability. Accordingly, as of December 31, 2016, the Company has recorded a liability of $0.5 million related to this matter, which was paid in 2017. The litigation accrual for all periods was included in the other current liabilities line item on the accompanying consolidated balance sheet. The additional expense of $0.2 million recorded during the year ended December 31, 2016, was included in the discontinued operations line item on the consolidated statements of operations. The claim was not covered by insurance, and the Company incurred legal costs to defend the litigation which were also recorded in discontinued operations.

Prior to our merger with PHS, PHS settled a lawsuit filed in California state court in which a former employee claimed that PHS failed to follow specific requirements under California wage and hour laws and regulations. Under the settlement agreement, PHS agreed to pay the plaintiff approximately $0.8 million, a portion of which was covered by PHS's insurance, with final payment due by November 2018. The uninsured balance of $0.7 million has been accrued in other current liabilities in the consolidated balance sheet as of December 31, 2017.

On September 30, 2016, a former employee filed a class action complaint against us in state court in California, alleging employment-related claims. The parties have agreed in principle to settle the case for $0.3 million, subject to negotiation of a definitive settlement agreement, which has been accrued in other current liabilities in the consolidated balance sheet as of December 31, 2017.