12. Commitments and Contingencies

Capital Commitments

As of March 31, 2016, a portion of the proceeds of the Business Combination had been committed to expand existing product lines. Up to $51 million of equity capital has been committed to a majority owned subsidiary of ZAIS Group which would allow the subsidiary to invest in ZAIS Group managed CLO vehicles and thereby satisfy the risk retention requirements for CLO managers under the Securities Exchange Act of 1934. As of March 31, 2016, approximately $20.5 million in capital has been contributed to the subsidiary.

Lease Obligations

ZAIS Group is obligated under operating lease agreements for office space expiring through October 2017. The Company recognizes expense related to its operating leases on a straight-line basis over the lease term. Aggregate future minimum annual rental payments for the periods subsequent to March 31, 2016 are approximately as follows:

Period	Amount
	( Dollars in thousands )
Nine Months Ending December 31, 2016	$	685
Ten Months Ending October 31, 2017		712
	$	1,397

Rent expense is amortized on a straight-line basis and is included in general, administrative and other in the consolidated statements of comprehensive income (loss). For the three months ended March 31, 2016 and March 31, 2015, rent expense amounted to approximately $244,000 and $359,000, respectively.

Litigation

From time to time, ZAIS Group may become involved in various claims, formal regulatory inquiries and legal actions arising in the ordinary course of business. The Company discloses information regarding such inquiries if disclosure is required pursuant to accounting and financial reporting standards. While we are currently involved in a formal regulatory inquiry, in management’s opinion the matter is not appropriate for accrual or disclosure in the financial statements at March 31, 2016.

Other Contingencies

In the normal course of business, ZAIS Group enters into contracts that provide a variety of indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to ZAIS Group under these arrangements could involve future claims that may be made against ZAIS Group. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.

Gain Contingencies

On April 7, 2016 the Company received notification from one of its insurance providers that the Company’s claim for reimbursement of certain legal costs relating to a formal regulatory inquiry had been approved. The total approved claim reimbursement for all legal costs incurred in excess of the $500,000 deductible was approximately $697,000. Pursuant to the guidance under ASC 450, "Contingencies – Gain Contingencies”, approximately $545,000 of the insurance reimbursements receivable has been recorded to other income (expense) in the consolidated statements of total comprehensive income (loss) for the portion that related to the costs incurred for the year ended December 31, 2015 in excess of the Company’s insurance deductible and a corresponding amount has been recorded to other assets in the consolidated statements of financial position. The Company also recorded approximately $155,000 of the insurance reimbursements receivable to other assets and a corresponding amount to other liabilities in the consolidated statements of financial position for the portion that related to legal bills received for the three months ended March 31, 2016. At March 31, 2016, approximately $700,000 of insurance reimbursements receivable noted above is included in other assets in the consolidated statements of financial position.