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, 2014 and 2013 amounted to $938 and $893, respectively. The Company received sub-lease income from subtenants during the three months ended September 30, 2014 and 2013 of $91 and $180, respectively. Therefore, for the three months ended September 30, 2014 and 2013, net rent expense amounted to $847 and $713, 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, 2014 and 2013 amounted to $2,736 and $2,654, respectively. The Company received sub-lease income from subtenants during the nine months ended September 30, 2014 and 2013 of $287 and $653, respectively. Therefore, for the nine months ended September 30, 2014 and 2013, net rent expense amounted to $2,449 and $2,001, 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 $2,023 that were reduced to $1,013 on August 31, 2010 and to $586 on August 31, 2014. The Company expects a further reduction of $80 to its letter of credit on its New York City lease.  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.  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.

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 the nine months ended September 30, 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.   The aggregate principal balance of capital leases was $301 and $19 as of September 30, 2014 and December 31, 2013, respectively and is included in other liabilities in the Condensed Consolidated Statements of Financial Condition.

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. The contingent consideration related to the MCG acquisition is recorded on the date when the contingency is resolved. Contingent consideration payments of $1,679 (which was accrued as of December 31, 2013) and $703 were made during the nine months ended September 30, 2014 and 2013, respectively, related to MCG and are reflected in investing activities in the Condensed Consolidated Statements of Cash Flows.

Quarterly contingent payments related to the Commodity Advisors acquisition were accrued when the contingency was resolved. The total accrual for these payments for the nine months ended September 30, 2014 and 2013 was $0 and $139, respectively, which was recorded as compensation expense in the Condensed Consolidated Statements of Operations.