NOTE 12. COMMITMENTS AND CONTINGENCIES Employment Contracts and Severance Payments In the normal course of business, we periodically enter into employment agreements which incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be reasonably estimated, we maintain insurance coverage, which we believe will effectively mitigate our obligations under these indemnification provisions. No amounts have been recorded in our financial statements with respect to any obligations under such agreements. We have employment contracts with certain officers and key management that include provisions for potential severance payments in the event of without-cause terminations or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested equity grants would accelerate following a change in control. Operating Leases We lease certain properties under various operating lease arrangements that expire over the next 14 years. We incurred rent expense of $0.5 million in 2018 and $0.4 million in 2017. Future minimum payments under these operating lease commitments as of December 31, 2018, are as follows (in thousands): 2019 $ 519 2020 525 2021 536 2022 548 2023 528 Thereafter 1,897 Total minimum lease payments $ 4,553 In March 2018, we entered into a triple net lease for approximately 5,380 square feet of office space in The Woodlands, Texas. We took possession of the space in May 2018. The initial term of the lease is sixty-five months and rent was abated for the first five months. Minimum monthly base rents total $0.1 million per year during the initial term of the lease. We may extend the term of the lease for an additional five-year period at a fair market base rent, as defined in the agreement. Our operating leases generally provide for rents which escalate over time and rents are payable monthly or annually. Legal Matters From time to time we are involved in litigation incidental to the conduct of our business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position or results of operations. Defense costs are expensed as incurred and are included in professional fees.