10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases office space pursuant to operating leases that are subject to specific escalation clauses. Rent expense charged to operations for the three months ended September 30, 2015 and 2014 amounted to $949 and $938, respectively. The Company received sub-lease income from subtenants during the three months ended September 30, 2015 and 2014 of $96 and $91, respectively. Therefore, for the three months ended September 30, 2015 and 2014, net rent expense amounted to $853 and $847, respectively, and is included in general and administrative expenses in the Condensed Consolidated Statement of Operations.  

Rent expense charged to operations for the nine months ended September 30, 2015 and 2014 amounted to $2,817 and $2,736, respectively. The Company received sub-lease income from subtenants during the nine months ended September 30, 2015 and 2014 of $284 and $287, respectively. Therefore, for the nine months ended September 30, 2015 and 2014, net rent expense amounted to $2,533 and $2,449, respectively, and is included in general and administrative expenses in the Condensed Consolidated Statement of Operations.

As security for performance under the leases, the Company is required to maintain letters of credit in favor of the landlord totaling $586 as of September 30, 2015 and December 31, 2014.  The letter of credit is collateralized by a certificate of deposit in an equal amount.  Furthermore, the Company maintains an $80 letter of credit in favor of its Boston landlord that is collateralized by the Company’s revolving credit facility with City National Bank.

In March 2014, the Company entered into a lease agreement for additional office space in Richmond, VA.  The lease commenced on May 1, 2014 and expires July 31, 2019. The lease is subject to escalation clauses and provides for a rent-free period of three months.  Monthly rent expense is $5.  The Company paid a refundable security deposit of $3.

In June 2015, the Company entered into a lease agreement for office space in Charlottesville, VA.  The lease commenced on June 30, 2015 and expires on June 30, 2018.  The lease is subject to escalation clauses and provides for a rent-free period of two months.  Monthly rent expense is $2.  The Company paid a refundable security deposit of $2.

With the Jamison Acquisition, the Company assumed lease agreements for office space in Bedminster and Princeton, NJ.  The Bedminster lease expires on November 1, 2016.  Monthly rent expense on this lease is $11.  The Princeton lease expires on March 1, 2016.  Monthly rent expense on this lease is $5.  Both leases are subject to escalation clauses.        

Future minimum lease payments and rentals under lease agreements which expire through 2019 are as follows:

The Company has capital leases for certain office equipment. The Company entered into a new capital lease agreement for a telephone system during 2014.  The amount financed was $321 and the lease has a term of five years, which began on March 1, 2014.   Monthly minimum lease payments are $5, and continue through November 30, 2018.   On June 30, 2015, the Company assumed certain capital leases for equipment totaling $253 as part of the Jamison Acquisition.  In July 2015, the Company entered into a new capital lease for a copier.  The amount financed was $21 and the lease has a term of three years, which began on July 1, 2015.  Monthly minimum lease payments are $1, and continue through June 30, 2018.  The aggregate principal balance of capital leases was $468 and $282 as of September 30, 2015 and December 31, 2014, respectively.

The assets relating to capital leases that are included in equipment as of September 30, 2015 and December 31, 2014 are as follows:

Depreciation expense relating to capital lease assets was $46 and $20 for the three months ended September 30, 2015 and 2014, respectively.  Depreciation expense relating to capital lease assets was $82 and $60 for the nine months ended September 30, 2015 and 2014, respectively.

Future minimum lease payments under capital leases are as follows:

Contingent Consideration

In connection with its acquisition of MCG in October 2008, SLP entered into a contingent consideration agreement whereby the former members of MCG were entitled to contingent consideration equal to 22% of adjusted annual EBITDA in addition to any performance fee payments for each of the five years subsequent to the date of acquisition. As the acquisition was completed prior to January 1, 2009, contingent consideration is recognized when the contingency is resolved pursuant to the authoritative guidance on business combinations in effect at the date of the closing of the acquisition. Contingent consideration payments of $0 and $1,679 were made during the nine months ended September 30, 2015 and 2014, respectively, related to MCG and are reflected in investing activities in the Condensed Consolidated Statements of Cash Flows.