NOTE 20 - COMMITMENTS AND CONTINGENCIES

As of December 31, 2015, except for the executive compensation, the Company did not believe it was probable that any payments would be required under any of its contingencies and, accordingly, no liabilities were recorded in the consolidated financial statements. The Company's commitments and contingencies as of December 31, 2015 were as follows:

Leases. The Company leases office space and equipment under leases with varying expiration dates through 2023. Rental expense, net of subleases, was $2.2 million, $1.9 million and $1.4 million for 2015, 2014 and 2013, respectively. The Company’s office space leases in New York and in Philadelphia contain extension clauses. The Company has the ability to extend the New York lease for an additional five-year term, and one of the Philadelphia leases provides one option to extend for an additional five-year term. In addition, one of the Philadelphia office leases allows the Company to terminate the lease early with a termination payment to the landlord in January 2020. At December 31, 2015, future minimum rental commitments (net of subleases) under operating and capital leases over the next five years during December 31, and thereafter, were as follows (in thousands):



	Operating		Capital		Total
2016	$	2,591	$	377	$	2,968
2017	2,231		369		2,600
2018	2,168		124		2,292
2019	1,802		—		1,802
2020	1,214		—		1,214
Thereafter	2,198		—		2,198
Total	$	12,204	$	870	$	13,074

Corporate

Broker-Dealer capital requirement. Resource Securities serves as a dealer-manager for the sale of securities of direct participation investment programs, both public and private, sponsored by subsidiaries of the Company who also serve as general partners and/or managers of these programs. Additionally, Resource Securities serves as an introducing agent for transactions involving sales of securities of financial services companies, REITs and insurance companies for the Company and for RSO. As a broker-dealer, Resource Securities is required to maintain minimum net capital, as defined in regulations under the Securities Exchange Act of 1934, as amended, which was $259,000 and $100,000 as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, Resource Securities net capital was $1.0 million and $1.4 million, respectively, which exceeded the minimum requirements by $780,000 and $1.3 million, respectively.

Legal proceedings. The Company is also a party to various routine legal proceedings arising out of the ordinary course of business. Management believes that none of these actions, individually or, in the aggregate, will have a material adverse effect on the Company's consolidated financial condition or operations.

Executive compensation. The Company is also party to employment agreements with certain executives that provide for compensation and other benefits, including severance payments under specified circumstances.

Financial fund management

Clawback liability. One of the Company's structured finance partnerships that invests in public and private regional banks has a potential clawback of up to 75% of the management fees paid to the Company ($1.2 million as of December 31, 2015) to the extent that the limited partners’ aggregate capital contributions exceed the total partner distributions from the fund. As of December 31, 2015, the fair value of the fund's assets were sufficient to cover the distribution requirement and, as such, no liability has been recorded for this contingency.

Fund capital commitments. In connection with the Company's investment in CVC Credit Partners, in its capacity as the fund manager for some of its managed accounts/funds, the Company is contractually committed to invest capital along with third party investors. Accordingly, as of December 31, 2015, the Company’s pro-rata portion of the unfunded capital commitments totaled $5.1 million across five such funds/accounts. The Company expects these unfunded commitments to be called over the next two years.

Real estate

REIT capital commitments. As a specialized asset manager, the Company sponsors and manages investment funds in which it may make an equity investment along with outside investors. This equity investment is generally based on a percentage of funds raised and varies among investment programs. With respect to Innovation Office REIT, the Company made a $2.0 million capital investment in February 2016 which satisfied our commitment regarding this fund. With respect to Apartment REIT III, in addition to its $200,000 initial capital investment, the Company is further committed to invest up to 1% of the first $100.0 million of equity raised to a maximum of $2.0 million. The liability for these commitments will be recorded in the future as the amounts become due and payable.

Pearlmark joint venture capital commitment. In connection with the Pearlmark agreement, the Company is committed to invest up to $8.0 million in cash in the joint venture, of which $6.0 million (the 2015 limit) has been funded. The investment in Pearlmark will receive a preference in distributions, plus a 10% internal rate of return, from the joint venture before any monies will be distributed to the other investors.

Commercial finance

Commercial finance partnership guarantee. In connection with the sale of a portfolio of leases and notes by one of the Company's commercial finance partnerships, the Company provided a guarantee to the buyer whereby the Company will reimburse the buyer in the event that one of the leases in the portfolio fails to make a $183,000 balloon payment on the due date. As of December 31, 2015, the lease is current and there is no indication that the payment will not be made timely; accordingly, no liability has been recorded for this contingency. The liability for this commitment, if any, will be recorded in the future as the amounts become due and payable.