10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2010
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________________ to _____________________________

001-33737

(Commission File Number)

RODMAN & RENSHAW CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1374481
(State or Other Jurisdiction of Incorporation	(I.R.S. Employer Identification No.)
Or Organization)

1251 Avenue of the Americas
New York, New York 10020

(Address of principal executive offices)

Registrant’s telephone number: (212) 356-0500

(Former Name, Former Address and Former Fiscal Year, if Changes Since Last Report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     x No     o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes     o No     o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o  Accelerated Filer o  Non-Accelerated Filer o  Smaller Reporting Company   x

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     o No     x

     As of November 5, 2010, there were 33,738,094 shares of the registrant’s common stock outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

          This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the current view about future events and financial performance based on certain assumptions. They include opinions, forecasts, projections, assumptions, guidance, expectations, beliefs or other statements that are not statements of historical fact. In some cases, forward-looking statements can be identified by words such as “may,” “can,” “will,” “should,” “could,” “expects,” “hopes,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “projects,” “potential,” “intends,” “approximates” or the negative or other variation of such terms and other comparable expressions. Forward-looking statements in this report may include statements about:

• future financial and operating results, including projections of revenues, income, expenditures, cash balances and

• our capital requirements and the need for additional financing;

• our ability to secure new client engagements;

• our ability to successfully consummate financing and merger and acquisition transactions on behalf of our clients;

• our ability to execute our growth, expansion and acquisition strategies;

• the outcome of various regulatory and legal proceedings in which we are currently involved;

• the performance of any of our financial products and their potential to generate revenues;

• development of new financial products;

• current and future economic and political conditions;

• overall industry and market performance and trends;

• competition;

• management’s goals and plans for future operations;

• the impact of increased regulatory scrutiny on future operations;

• the revenue and profit volatility stemming from our operations;

• the performance of service providers upon which our operations rely;

• the additional risks and uncertainties stemming from entry into new businesses;

• our ability to protect our intellectual property rights and secure the right to use other intellectual property that we

• the impact of expanded corporate governance on the number of available business opportunities;

• the impact of legal liability on future operations;

• the impact of employee misconduct on future operations;

• the increased risk of financial liability and reputational harm resulting from adverse regulatory action;

• the impact of the Investment Company Act of 1940 on future operations; and

• other assumptions described in this prospectus underlying or relating to any forward-looking statements.

          The forward-looking statements in this report are only predictions. Actual results could, and likely will, differ materially from these forward-looking statements for many reasons, including the risks described under “Risk Factors” and elsewhere in this report. No guarantee about future results, performance or achievements can be made. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1.	Consolidated Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
Part II. Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	30
	Signatures	31

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

PART I
FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

	Page
Consolidated Statements of Financial Condition as of September 30, 2010 (unaudited) and December 31, 2009	2
Consolidated Statements of Operations for the three and nine month periods ended September 30, 2010 and 2009 (unaudited)	3
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income for the nine month periods ended September 30, 2010 (unaudited) and for the year ended December 31, 2009	4
Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2010 and 2009 (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6

1

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition as of September 30, 2010 (Unaudited) and December 31, 2009
Dollars in Thousands, Except Per Share Amounts

	September 30, 2010			December 31, 2009
Assets
Cash and cash equivalents:
Unrestricted	$	8,228		$	12,603
Restricted		1,447			2,943
Total cash and cash equivalents		9,675			15,546
Financial instruments owned, at fair value:
Corporate equity securities		10,559			6,493
Merchant banking investments		9,719			22,251
Warrants		13,810			22,945
Notes		2,499			1,920
Investments in shell companies		1,654			1,654
Other investments		617			893
Total financial instruments owned, at fair value		38,858			56,156
Private placement and other fees receivable		3,732			4,798
Receivable from brokers, dealers & clearing agencies		1,484			5,735
Prepaid expenses		866			781
Property and equipment, net		3,376			2,773
Other assets		12,004			7,136
Goodwill and other intangible assets, net		687			1,961
Total Assets	$	70,682		$	94,886
Liabilities and Stockholders’ Equity
Accrued compensation payable	$	12,307		$	10,098
Accounts payable and accrued expenses		5,025			6,217
Acquisitions related payables		806			2,826
Financial instruments sold, not yet purchased, at fair value		35			304
Total Liabilities		18,173			19,445
Commitments and contingencies (See Note 6)
Stockholders’ Equity
Common stock, $0.001, par value; 100,000,000 shares authorized; 34,029,469 and 35,918,222 issued as of September 30, 2010 and December 31, 2009, respectively		34			36
Preferred stock, $0.001 par value; 1,000,000 authorized; none issued		—			—
Additional paid-in capital		70,973			75,989
Treasury stock, 62,500 shares in 2010, 534,500 shares in 2009		(139	)		(1,034	)
Accumulated deficit		(18,359	)		(11,609	)
Total common stockholders’ equity		52,509			63,382
Non-controlling interest		—			12,059
Total Stockholders’ Equity		52,509			75,441
Total Liabilities and Stockholders’ Equity	$	70,682		$	94,886

The accompanying notes are an integral part of these consolidated financial statements.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations for the
Three and Nine Month Periods Ended September 30, 2010 and 2009 (Unaudited)
Amounts in Thousands, Except Per Share Amounts

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenues:
Investment banking	$	15,101			31,253			65,152			65,129
Merchant banking		76			28,628			1,316			28,628
Commissions		919			1,642			2,905			3,155
Conference fees		2,279			1,579			3,158			1,579
Principal transactions		(1,044	)		2,400			(11,204	)		6,073
Interest and other income		31			48			151			220
Total revenues		17,362			65,550			61,478			104,784
Operating expenses:
Compensation and benefits		13,530			25,470			40,546			49,381
Conference expense		3,916			3,211			9,932			3,211
Professional and consulting		1,464			2,210			5,165			5,050
Occupancy and equipment rentals		778			764			2,332			2,341
Advertising and marketing		179			740			1,256			1,140
Communication and market research		969			715			2,600			2,018
Depreciation and amortization		377			516			1,231			1,891
Business development		1,095			468			3,630			1,491
Office supplies		187			186			485			446
Impairment of goodwill / other intangibles		—			—			933			1,327
Bad debt expense		181			—			666			—
Other		713			688			2,361			2,252
Total operating expenses		23,389			34,968			71,137			70,548
Operating income (loss)		(6,027	)		30,582			(9,659	)		34,236
Income tax expense (benefit)		(1,754	)		42			(2,909	)		51
Net income (loss)		(4,273	)		30,540			(6,750	)		34,185
Less: Net income to non-controlling interest		—			(15,000	)		—			(15,000	)
Net income (loss) to common stockholders	$	(4,273	)		15,540			(6,750	)		19,185
Net income (loss) per common share:
Basic	$	(0.12	)		0.44			(0.19	)		0.54
Diluted	$	(0.12	)		0.40			(0.19	)		0.51
Weighted average common shares outstanding:
Basic		36,113			35,645			36,338			35,373
Diluted		36,113			38,522			36,338			37,379

The accompanying notes are an integral part of these consolidated financial statements.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income for the
Nine Month Period Ended September 30, 2010 (Unaudited) and the Year Ended December 31, 2009
Dollars in Thousands

	Nine Months Ended September 30, 2010			Year Ended December 31, 2009
Common stock:
Balance, beginning of the period	$	36			35
Issuance of common stock		—			1
Treasury stock retirement		(2	)		—
Balance, end of the period	$	34			36
Additional paid-in-capital:
Balance, beginning of the period	$	75,989			70,441
Stock based compensation		(517	)		5,799
Treasury stock retirement		(4,419	)		—
Other		(80	)		(251	)
Balance, end of the period	$	70,973			75,989
Accumulated deficit:
Balance, beginning of the period	$	(11,609	)		(38,907	)
Net (loss) income		(6,750	)		27,298
Balance, end of the period	$	(18,359	)		(11,609	)
Treasury stock, at cost:
Balance, beginning of the period	$	(1,034	)		(1,034	)
Treasury stock purchases		(3,526	)		—
Treasury stock retirement		4,421			—
Balance, end of the period	$	(139	)		(1,034	)
Non-controlling interest:
Balance, beginning of the period	$	12,059			—
Deconsolidation of Aceras BioMedical		(12,059	)		—
Net income to non-controlling interest		—			18,695
Distribution to non-controlling interest		—			(6,636	)
Balance, end of the period	$	—			12,059
Total stockholders’ equity	$	52,509			75,441
Comprehensive income (loss):
Net (loss) income	$	(6,750	)		27,298
Total comprehensive (loss) income	$	(6,750	)		27,298

The accompanying notes are an integral part of these consolidated financial statements.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows for the
Nine month periods ended September 30, 2010 and 2009 (Unaudited)
Dollars in Thousands

	Nine Months Ended September 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	(6,750	)		34,185
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,231			1,891
Restricted cash		1,496			2,333
Stock based compensation		(517	)		5,588
Impairment of goodwill and other intangible assets		933			1,327
Changes in operating assets and liabilities:
Financial instruments owned, at fair value		5,439			(47,896	)
Private placement and other fees receivable		1,066			(5,723	)
Receivable from brokers, dealers & clearing agencies		4,251			(156	)
Prepaid expenses		(85	)		(136	)
Other assets		(4,868	)		(445	)
Financial instruments sold not yet purchased, at fair value		(269	)		315
Accrued compensation payable		2,209			16,894
Accounts payable and accrued expenses		(1,272	)		(1,544	)
Net cash provided by operating activities		2,864			6,633
Cash flows from investing activities:
Purchases of property and equipment		(1,372	)		(1,698	)
Acquisitions related earn-out payments		(2,141	)		(2,917	)
Merchant banking investments		(200	)		(1,367	)
Net cash used in investing activities		(3,713	)		(5,982	)
Cash provided by (used in) financing activities:
Purchase of treasury stock		(3,526	)		—
Net cash used in financing activities		(3,526	)		—
Net increase (decrease) in cash and cash equivalents		(4,375	)		651
Cash and cash equivalents – beginning of period		12,603			18,383
Cash and cash equivalents – end of period	$	8,228			19,034
Supplemental disclosures of cash flow information:
Income taxes paid	$	3,600			1
Change in fair value of financial instruments owned due to the deconsolidation of Aceras BioMedical	$	12,059			—

The accompanying notes are an integral part of these consolidated financial statements.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - Organization, Nature of Operations and Basis of Presentation

General

          Rodman & Renshaw Capital Group, Inc. (“RRCG”) is a Delaware holding company that is engaged in the investment banking business through its various subsidiaries. The Company’s principal operating subsidiary is Rodman & Renshaw, LLC (“R&R”), a Delaware limited liability company formed on June 20, 2002. R&R is a registered broker-dealer with the Financial Industry Regulatory Authority, Inc. (“FINRA”). RRCG and its subsidiaries, including R&R, are collectively referred to herein as the “Company”.

          On July 10, 2007 Rodman & Renshaw Holding, LLC (“Holding”) consummated a reverse acquisition through an exchange transaction (the “Exchange”) with its subsidiary, Enthrust Financial Services, Inc. (“Enthrust”), which was a non-operating public “shell” company. For accounting purposes, Holding is treated as the continuing reporting entity and the acquisition has been treated as a recapitalization of Enthrust with Holding as the acquirer. On August 31, 2007, Enthrust changed its name to “Rodman & Renshaw Capital Group, Inc.”

NOTE 2 - Summary of Significant Accounting Policies

Interim Financial Statements

          The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2010, the results of operations for the three and nine months ended September 30, 2010 and 2009, the changes in stockholders’ equity and comprehensive income (loss) for the nine months ended September 30, 2010 and the year ended December 31, 2009 and cash flows for the nine months ended September 30, 2010 and 2009. The results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results to be expected for any subsequent quarter or the full fiscal year ending December 31, 2010.

          Certain information and footnote disclosures normally included in financial statements that are prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

          These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2009 as filed with the SEC.

Principles of Consolidation

          The Company’s policy is to consolidate all entities in which it owns more than 50% of the outstanding voting stock and has control. In addition, the Company consolidates entities which lack characteristics of an operating entity or business for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. In situations where the Company has significant influence but not control of an entity that does not qualify as a variable interest entity, the Company applies the equity method of accounting. In those cases where its investment is less than 20% and significant influence does not exist, the investments are carried at fair value. Significant influence generally is deemed to exist when the Company owns 20% to 50% of the voting equity of an entity or when it holds at least 3% of a limited partnership interest. If the Company does not consolidate an entity or applies the equity method of accounting, it accounts for the investment at fair value.

          All material intercompany accounts and transactions are eliminated in consolidation.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Financial Instruments at Fair Value

          Fair value generally is based on quoted market prices. If quoted market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations, price activity for equivalent instruments and valuation pricing models. Among the factors considered in determining the fair value of financial instruments are discount margins, weighted average spreads, discounted anticipated cash flows, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, as well as other measurements. Certain financial instruments have bid and ask prices that can be observed in the marketplace. For financial instruments whose inputs are based on bid-ask prices, mid-market pricing is applied and adjusted to the point within the bid-ask range that meets the Company’s best estimate of fair value. For offsetting positions in the same financial instrument, the same price within the bid-ask spread is used to measure both the long and short positions.

          The valuation process for financial instruments may include the use of valuation models and other techniques. Adjustments to valuations derived from valuation models may be made when, in management’s judgment, either the size of the position in the financial instrument in a non-active market or other features of the financial instrument such as its complexity, or the market in which the financial instrument is traded require that an adjustment be made to the value derived from the models. An adjustment may be made if a financial instrument is subject to sales restrictions that would result in a price less than the quoted market price. Adjustments from the price derived from a valuation model reflect management’s judgment that other participants in the market for the financial instrument being measured at fair value would also consider in valuing that same financial instrument and are adjusted for assumptions about risk uncertainties and market conditions. Results from valuation models and valuation techniques in one period may not be indicative of future period fair value measurements.

          Financial instruments owned and financial instruments sold, not yet purchased are stated at fair value, with related changes in unrealized appreciation or depreciation reflected in principal transactions, net in the accompanying Consolidated Statements of Operations. Equity interests in certain private equity securities and limited partnership interests are reflected in the Consolidated Financial Statements at fair value, which is often represented at initial cost until significant transactions or developments indicate that a change in the carrying value of the securities is appropriate. This represents the Company’s best estimate of exit price. Generally, the carrying values of these securities will be increased or decreased based on company performance in those instances where market values are readily ascertainable by reference to substantial transactions occurring in the marketplace or quoted market prices.

          Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company utilizes assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial instrument assets and liabilities carried at fair value have been classified and disclosed in one of the following three categories:

          Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as listed equities.

          Level 2 includes those financial instruments that are valued using models or other valuation methodologies calibrated to observable market inputs. These models are primarily industry-standard models that consider various assumptions, including discount margins, credit spreads, discounted anticipated cash flows, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, time value, yield curve, default rates, as well as other measurements. In order to be classified as Level 2, substantially all of these assumptions would need to be observable in the marketplace or able to be derived from observable data or supported by observable levels at which transactions are executed in the marketplace.

          Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are unobservable from objective sources. Included in this category are warrants, private securities, convertible notes and loans receivable received in conjunction with our investment banking and merchant banking activities and limited partnership interests.

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Value of Underwriter and Placement Agent Warrants

          As a part of the Company’s compensation for its activities as underwriter or placement agent, it may receive warrants exercisable to purchase securities similar to those that are offered and sold in the financing transaction. The Company values such warrants using the Black-Scholes Option Pricing Model (“Black-Scholes”). The model requires management to use five inputs: price, risk-free interest rate, exercise price, time remaining on the warrant and price volatility. When the Company initially receives a warrant in connection with, or prior to an initial public offering, its calculated volatility factor is based on the volatility of an index of comparable companies, since there is no price history for new publicly traded or private companies. As each warrant approaches its expiration date, its volatility factor is derived primarily from the historical prices of its underlying common stock. Management cannot assure that it ultimately will be able to liquidate any of the warrants received in a way that will realize the value attributed to the warrants in the financial statements through the application of Black-Scholes.

          The fair value of warrants is recorded in financial instruments owned, at fair value on the Company’s Consolidated Statements of Financial Condition. When a warrant is received, its fair value is included in investment banking revenue as of the close of the date on which it is earned. Subsequently, any change in fair value is recorded as principal transactions. When a warrant is exercised, the fair value is adjusted to reflect the value of the securities purchased, net of the exercise price, and the adjustment amount is recorded as income or loss for the relevant period. If a warrant expires unexercised, the fair value is adjusted to zero and the decrease is recorded as a loss in the relevant period.

Value of Merchant Banking Assets

          The value of the Company’s investment in Aceras BioMedical’s assets was determined based on a valuation performed as of September 30, 2010, taking into consideration cash received, cost of the investment, market participant inputs, estimated cash flows based on entity specific criteria, purchase multiples paid in other comparable third-party transactions, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which the Company’s investments are carried on its books are adjusted to estimated fair value at the end of each quarter taking into account general economic and stock market conditions and those characteristics specific to the underlying investments.

Cash and Cash Equivalents

          The Company generally invests its excess cash in money market funds. Restricted cash is due to an escrow account in connection with the Company’s office lease agreement and cash held at financial institutions for capital purposes.

Revenue Recognition

          Investment Banking. Underwriting and placement agent revenues and fees from mergers and acquisitions and other financial advisory assignments are recognized in the Consolidated Statements of Operations when the services related to the underlying transaction are completed under the terms of the engagement. Expenses associated with such transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded. Underwriting and placement agent revenues are presented net of related expenses.

          When the Company receives warrants as a component of its compensation for investment banking services, revenue is recognized based on the fair value of those instruments. Revenue from the receipt of warrants is recognized, as of the close of the date on which it is earned, based on the estimated fair value of the securities received using Black-Scholes, which takes into account the exercise price, remaining life of the warrant, the current price and expected price volatility of the underlying stock, expected dividends on the stock and the risk-free interest rate for the remaining term of the warrant. The following provides details of the Company’s investment banking revenue for the three and nine month periods ended September 30, 2010 and 2009 (in thousands of dollars):

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RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Private placements	$	3,613		17,128		32,095		33,900
Warrants		498		8,960		9,313		19,985
Strategic advisory		9,105		957		11,810		5,426
Underwriting		1,885		4,208		11,934		5,818
Total investment banking revenue	$	15,101		31,253		65,152		65,129

          Merchant Banking Revenue. Merchant banking revenue, consisting of unrealized gains on investments by the Company’s Aceras BioMedical joint venture and other principal investments activity, was $0.1 million. The value of Aceras BioMedical’s assets was determined based on a valuation performed as of September 30, 2010, taking into consideration cash received, cost of the investment, market participant inputs, estimated cash flows based on entity specific criteria, purchase multiples paid in other comparable third-party transactions, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which the Company’s investments are carried on its books are adjusted to estimated fair value at the end of each quarter taking into account, factors including, general economic and stock market conditions. The unrealized gain recognized in the first nine months of 2010 represents the change in the Aceras BioMedical valuation from December 31, 2009 and other principal investments activity.

          Principal Transactions. Financial instruments owned and financial instruments sold, but not yet purchased (all of which are recorded on a trade-date basis) are carried at fair value with gains and losses reflected in principal transactions on a trade-date basis.

          Commissions. The Company’s sales and trading business generates revenue from equity securities trading commissions paid by customers. Commissions are recognized on a trade-date basis.

          Conference Fees. The Company may receive conference deposits from presenters, which are recorded as a liability and then recognized as revenue when the conference is conducted. The Company also makes advance payments for conference facilities, entertainment and related costs, which are recorded as prepaid expenses and then recognized as expenses when the conference is conducted.

Property and Equipment

          Property and equipment are depreciated using the straight-line method over the estimated useful lives of the related assets (generally three to ten years). Leasehold improvements are amortized using the straight-line method over the term of related leases or the estimated useful lives of the assets, whichever is shorter.

Goodwill and Other Intangible Assets

          Goodwill is not amortized; instead, it is reviewed for impairment at least annually and written down when deemed impaired. Goodwill is deemed impaired when the carrying amount of the reporting unit exceeds the implied fair value of the reporting unit.

          Intangible assets consist of customer relationships and a trade name. Customer relationships and a trade name acquired in business combinations under the purchase method of accounting are recorded at fair value net of accumulated amortization since the acquisition date. Customer relationships are recorded at cost net of accumulated amortization. Intangible assets are amortized over their useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used. Amortization is calculated using the straight line method over the estimated useful lives at the following annual rates:

Customer relationships	33%
Trade name	10%

9

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

          The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of finite-lived intangible asset may not be recoverable. Recoverability of a finite-lived intangible asset is measured by a comparison of its carrying amount to the undiscounted future cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined based on discounted cash flows.

Earnings Per Share

          Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding, which includes restricted stock and restricted stock units (“RSUs”) for which service has been provided. Diluted EPS includes the components of basic EPS and also includes the dilutive effects of restricted stock and RSUs for which service has not yet been provided and employee stock options.

Income Taxes

          Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

          Management evaluates the realizability of its deferred tax assets quarterly. In determining the possible future realization of deferred tax assets, the future taxable income from the following sources is taken into account: (a) the reversal of taxable temporary differences; (b) future operations exclusive of reversing temporary differences; and (c) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire.

          The Income Taxes Topic of FASB ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Management does not believe that the Company has any material uncertain tax position requiring recognition or measurement in accordance with the provisions of Income Taxes Topic of FASB ASC 740-10.

          The Company’s policy is to classify penalties and interest associated with uncertain tax positions, if required, as a component of its income tax provision. As a result of having no material uncertain tax positions, the Company has no material amounts for associated interest and penalties recorded on the Consolidated Statements of Financial Condition or the Consolidated Statements of Operations.

Legal Reserves

          The Company recognizes a liability for a contingency when it is probable that a liability has been incurred and when the amount of loss can be reasonably estimated. When a range of probable loss can be estimated, the Company accrues the most likely amount of such loss, and if such amount is not determinable, then the Company accrues the minimum of the range of probable loss.

          Reserves related to legal proceedings are established and maintained. The determination of these reserve amounts requires significant judgment on the part of management. The Company’s management considers many factors including, but not limited to: the amount of the claim; the basis and validity of the claim; previous results in similar cases; and legal precedents and case law. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. As of September 30, 2010, there were no legal reserves accrued in the Consolidated Statements of Financial Condition.

Use of Estimates

          The preparation of financial statements is in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

10

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Concentrations of Credit Risk

          R&R is engaged in trading and provides a broad range of securities brokerage and investment services to institutional clients as well as private placement services to business entities. Counterparties to the R&R’s business activities include broker-dealers, clearing organizations, banks, investment banking clients, and other financial institutions.

          R&R uses a clearing broker to process transactions and maintain client accounts on a fee basis. R&R permits the clearing firm to extend credit to a client secured by cash and securities in the client’s account. R&R’s exposure to credit risk associated with the non-performance by its clients and counterparties in fulfilling their contractual obligations can be directly impacted by volatile or illiquid trading markets, which may impair the ability of clients and counterparties to satisfy their obligations to R&R. R&R has agreed to indemnify its clearing broker for losses incurred while extending credit to R&R’s clients. R&R’s policy is to review, as necessary, the credit standing of its clients and counterparties. Amounts due from clients that are considered uncollectible are charged back to R&R by the clearing brokers when such amounts become determinable.

          Financial instruments sold but not yet purchased commit R&R to deliver specified securities at predetermined prices. The transactions may result in market risk since, to satisfy the obligation, R&R must acquire the financial instruments at market prices, which may exceed the values reflected on the Consolidated Statements of Financial Condition.

Forgivable Loans

          The Company issues forgivable loans as a retention vehicle to certain new and existing employees. These loans are subject to a substantive service requirement by the employees and are amortized over the service period on a straight-line basis. As of September 30, 2010, the net balance of the loans was $1.6 million, which is included in other assets on the Consolidated Statements of Financial Condition. During the first nine months of 2010, the Company issued an additional $0.8 million in forgivable loans. The Company recorded $0.7 million and $1.9 million of compensation expense related to the amortization of these loans during the three and nine months ended September 30, 2010, respectively, and $0.5 million and $1.4 million of compensation expense related to the amortization of these loans during the three and nine months ended September 30, 2009, respectively.

Stock-Based Compensation

          The Company measures its compensation cost for all stock-based awards at fair value on the date of grant, taking into account any post vesting selling restrictions, and recognizes the compensation expense over the requisite service period. Expenses associated with such grants are generally recognized on a straight-line basis over the requisite service period, net of estimated forfeitures.

          Deferred stock based compensation costs with respect to shares of restricted stock and restricted stock units and stock options granted are presented as part of additional paid in capital in the Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss).

NOTE 3 - Recent Accounting Pronouncements

          FASB ASC 810. The Company adopted further accounting changes described in ASC 810, Consolidation Topic, as of January 1, 2010, which required that the party who has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity consolidate the variable interest entity. The changes to ASC 810, effective as of January 1, 2010, eliminated the quantitative approach previously applied to assessing the consolidation of a variable interest entity and required ongoing reassessments for consolidation. Starting on January 1, 2010, the Company deconsolidated its investment in Aceras BioMedical because its joint venture partner, Aceras Partners, not the Company, most significantly impacts Aceras BioMedical’s economic performance.

11

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

          ASU 210-06. In January 2010, the FASB issued Accounting Standards Update (“ASU”) 210-06, “Improving Disclosures about Fair Value Measurements”, which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The FASB also clarified existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. Some of the new and revised disclosures are required to be implemented in fiscal years beginning after December 15, 2009 and others in fiscal years beginning after December 15, 2010. The Company implemented the required disclosures in 2010.

NOTE 4 - Financial Instruments, at Fair Value

          The following is a summary of the Company’s financial assets and liabilities that are accounted for at fair value as of September 30, 2010 and December 31, 2009 by level within the fair value hierarchy (in thousands of dollars):

	September 30, 2010
	Level 1		Level 2		Level 3		Total
Assets:
Financial instruments owned:
Corporate equity securities	$	9,110		—		1,449		10,559
Merchant banking investments		—		—		9,719		9,719
Warrants		—		—		13,810		13,810
Notes		—		—		2,499		2,499
Investments in shell companies		—		—		1,654		1,654
Other investments		—		—		617		617
Total financial instruments owned	$	9,110		—		29,748		38,858
Liabilities:
Financial instruments sold, not yet purchased	$	35		—		—		35
Total financial instruments sold, not yet purchased	$	35		—		—		35

	December 31, 2009
	Level 1		Level 2		Level 3		Total
Assets:
Financial instruments owned:
Corporate equity securities	$	5,180		—		1,313		6,493
Merchant banking investments		—		—		22,251		22,251
Warrants		—		—		22,945		22,945
Notes		—		—		1,920		1,920
Investments in shell companies		—		—		1,654		1,654
Other investments		—		—		893		893
Total financial instruments owned	$	5,180		—		50,976		56,156
Liabilities:
Financial instruments sold, not yet purchased	$	304		—		—		304
Total financial instruments sold, not yet purchased	$	304		—		—		304

          Financial instruments are assessed on a quarterly basis to determine the appropriate classification within the fair value hierarchy, as defined by ASC Topic 820. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial instruments among the levels occur at the end of the reporting period. There were no material transfers between Level 1, Level 2 and Level 3 classified instruments during the three months and nine months ended September 30, 2010.

12

          The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities.

          Exchange Traded Equity Securities: Exchange-traded equity securities are measured based on quoted exchange prices, which are generally obtained from pricing services, and are categorized as Level 1 in the fair value hierarchy.

          Non-exchange Traded Equity Securities: Non-exchange traded equity securities are categorized as Level 3 financial instruments and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).

Merchant Banking Investments.

          The value of the Company’s investment in Aceras BioMedical’s assets is categorized as Level 3 financial instruments and was determined based on a valuation performed as of September 30, 2010, taking into consideration cash received, cost of the investment, market participant inputs, estimated cash flows based on entity specific criteria, purchase multiples paid in other comparable third-party transactions, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which the Company’s investments are carried on its books are adjusted to estimated fair value at the end of each quarter taking into account general economic and stock market conditions.

Warrants.

          As a part of the Company’s compensation for its activities as underwriter or placement agent, it may receive warrants exercisable to purchase securities similar to those that are offered and sold in the financing transaction. The Company values such warrants using Black-Scholes. The model requires management to use five inputs: price, risk-free interest rate, exercise price, time remaining on the warrant and price volatility. These warrants are categorized as Level 3 financial instruments.

Notes.

          Notes categorized within Level 3 are valued based on estimates of future cash flow incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure.

Investments in Shell Companies.

          Investments in shell companies are categorized as Level 3 financial instruments and are valued at cost, which for this type of instrument approximates fair value.

Other Investments.

          Other investments mostly consist of corporate loans categorized as Level 3 financial instruments. The loans are valued based on estimates of future cash flow incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure.

13

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

          The following is a summary of changes in fair value of the Company’s financial assets and liabilities that have been classified as Level 3 for the three and nine months ended September 30, 2010 and September 30, 2009 (in thousands of dollars):

	Three Months Ended September 30, 2010
	Corporate Equity Securities		Merchant Banking		Warrants			Notes			Shells		Other			Total
Balance, June 30, 2010	$	1,313		9,495		14,950			2,771			1,654		758			30,941
Purchases / issuances		136		200		89			19			—		—			444
Sales / settlements		—		—		(417	)		(50	)		—		—			(467	)
Realized and unrealized gains/(losses) (1)		—		24		(812	)		(241	)		—		(141	)		(1,170	)
Balance, September 30, 2010	$	1,449		9,719		13,810			2,499			1,654		617			29,748
Change in unrealized gains/(losses) relating to instruments still held at September 30, 2010	$	—		24		(783	)		(242	)		—		(141	)		(1,142	)

(1) Reported in Principal transactions in the Consolidated Statements of Operations.

	Nine Months Ended September 30, 2010
	Corporate Equity Securities		Merchant Banking			Warrants			Notes			Shells		Other			Total
Balance, December 31, 2009	$	1,313		22,251			22,945			1,920			1,654		893			50,976
Purchases / issuances		136		200			8,052			1,051			—		—			9,439
Sales / settlements		—		—			(4,845	)		(550	)		—		—			(5,395	)
Deconsolidation of Aceras BioMedical		—		(12,821	)		—			—			—		—			(12,821	)
Realized and unrealized gains/(losses) (1)		—		89			(12,342	)		78			—		(276	)		(12,451	)
Balance, September 30, 2010	$	1,449		9,719			13,810			2,499			1,654		617			29,748
Change in unrealized gains/(losses) relating to instruments still held at September 30, 2010	$	—		89			(11,728	)		77			—		(276	)		(11,838	)

(1) Reported in Principal transactions in the Consolidated Statements of Operations.

	Three Months Ended September 30, 2009
	Corporate Equity Securities		Merchant Banking		Warrants			Notes		Shells		Other		Total
Balance, June 30, 2009	$	627		624		18,241			1,666		1,774		1,056		23,988
Purchases / issuances		618		760		9,072			48		—		—		10,498
Sales / settlements		—		—		(3,296	)		—		—		—		(3,296	)
Realized and unrealized gains/(losses) (1)		68		28,628		1,159			—		—		69		29,924
Balance, September 30, 2009	$	1,313		30,012		25,176			1,714		1,774		1,125		61,114
Change in unrealized gains/(losses) relating to instruments still held at September 30, 2009	$	68		28,628		2,499			—		—		69		31,264

(1) Reported in Principal transactions in the Consolidated Statements of Operations.

14

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

	Nine Months Ended September 30, 2009
	Corporate Equity Securities		Merchant Banking		Warrants			Notes			Shells			Other		Total
Balance, December 30, 2008	$	627		—		5,622			1,917			1,824			762		10,752
Purchases / issuances		618		1,384		20,097			48			—			—		22,147
Sales / settlements		—		—		(6,426	)		—			—			—		(6,426	)
Realized and unrealized gains/(losses) (1)		68		28,628		5,883			(251	)		(50	)		363		34,641
Balance, September 30, 2009	$	1,313		30,012		25,176			1,714			1,774			1,125		61,114
Change in unrealized gains/(losses) relating to instruments still held at September 30, 2009	$	68		28,628		6,882			(251	)		(50	)		363		35,640

(1) Reported in Principal transactions in the Consolidated Statements of Operations.

NOTE 5 – Goodwill and Other Intangible Assets

          The following table represents a summary of the changes to goodwill and other intangible assets from December 31, 2008 to September 30, 2010 (in thousands of dollars):

	Goodwill			Customer			Trademark			Total
Balance, December 31, 2008	$	—			2,686			220			2,906
Additions		1,540			—			—			1,540
Impairment		(1,327	)		—			—			(1,327	)
Amortization		—			(1,136	)		(22	)		(1,158	)
Balance, December 31, 2009		213			1,550			198			1,961
Additions		121			—			—			121
Impairment		—			(933	)		—			(933	)
Amortization		—			(444	)		(18	)		(462	)
Balance, September 30, 2010	$	334			173			180			687

          The annual review of goodwill was performed as of September 30, 2010 and the fair value of the reporting unit was determined to be substantially in excess of the carrying value of goodwill.

NOTE 6 - Commitments and Contingencies

          Lease Commitments

          The Company leases its headquarters and other office locations under non-cancelable lease agreements which expire between 2011 and 2014. The Company lease for the 20th floor at 1251 Avenue of the Americas, New York, NY expires in October 2013. As of September 30, 2010, there were no significant changes in the Company’s lease agreements since December 31, 2009.

          Letter of Credit

          In connection with the lease for the 20th floor at 1251 Avenue of the Americas, New York, NY, the Company issued a letter of credit in favor of the landlord in the sum of $755,625, as a security deposit. The letter of credit expires in February 2011 but is subject to automatic extension.

15

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

          Equity Commitment

          The Company, through its wholly owned subsidiary, Rodman Principal Investments, LLC (“RPI”), has made an investment commitment to Aceras Partners to fund operations and the Aceras BioMedical joint venture’s principal investments in life science companies. At September 30, 2010, $12.9 million of this commitment remained unfunded.

NOTE 7 - Net Capital Requirements

          R&R is subject to various regulatory requirements, including the SEC’s Uniform Net Capital Rule (SEC Rule 15c3-1). These regulations place limitations on certain transactions, such as repaying subordinated borrowings, paying cash dividends, and making loans to a parent, affiliates or employees. Broker-dealers are prohibited from such transactions which would result in a reduction of its total net capital to less than 120% of its required minimum net capital. Moreover, broker-dealers are required to notify the SEC before entering into any such transactions, which if executed, would result in a reduction of 30% or more of its excess net capital (net capital less the minimum requirement). The SEC has the ability to prohibit or restrict such transactions if the result is detrimental to the financial integrity of the broker-dealer.

          At September 30, 2010, R&R had net capital of $6.2 million, which was $5.3 million in excess of its required net capital of $0.9 million.

NOTE 8 - Income Taxes

          Management evaluates the realizability of its deferred tax assets quarterly. In determining the possible future realization of deferred tax assets, the future taxable income from the following sources is taken into account: (a) the reversal of taxable temporary differences; (b) future operations exclusive of reversing temporary differences; and (c) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire. The Company recorded a valuation allowance against all of its deferred tax asset as of March 31, 2009, after considering all available evidence and potential tax-planning strategies related to the amount of the tax asset that is more likely than not to be realized. Substantially all of the valuation allowance was reversed in the fourth quarter of 2009 after considering all of the available evidence.

          Management evaluated the realizability of its deferred tax assets as of September 30, 2010 and determined that a valuation allowance was not necessary due to future operations and the reversal of taxable temporary differences.

          The Company does not anticipate any change in the amount of unrecognized tax benefits within the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is not currently under examination by any taxing jurisdictions. The Company is no longer subject to federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2006. Tax years 2006 through 2010 remain open to examination by the U.S. federal, state, and foreign tax authorities.

NOTE 9 - Stock-Based Compensation

          The Company recorded $0.4 million of stock-based compensation and a net $0.5 million reversal of stock-based compensation for the three and nine month periods ended September 30, 2010, respectively, and $0.7 million and $5.6 million of stock-based compensation for the three and nine month periods ended September 30, 2009, respectively. The unamortized deferred stock-based compensation balance as of September 30, 2010 was $1.4 million and will be fully amortized through 2013.

16

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

          There were no stock option grants in the first nine months of 2010. A summary of stock options outstanding as of September 30, 2010 is as follows (shares in thousands):

Stock Options
	Number of Options		Weighted Average Exercise Price		Weighted Average Grant Date Fair		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at December 31, 2009		4,107	$	4.07	$	0.96
No activity		—		—		—
Outstanding at September 30, 2010		4,107	$	4.07	$	0.96		1.7 years	$	0.0 million
Exercisable at September 30, 2010		4,087	$	4.07	$	0.95		1.7 years	$	0.0 million

          Total compensation cost associated with stock options was $10,000 and $86,000 for the three and nine months ended September 30, 2010, respectively, and $53,000 and $1.3 million for the three and nine months ended September 30, 2009, respectively.

The following table details the activity of restricted stock (shares in thousands):

Restricted Stock
	Number of Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2009		193		$	2.33
Forfeited		(3	)		2.28
Vested		(97	)		2.33
Balance at September 30, 2010		93		$	2.33

          Total compensation cost associated with the grant of restricted stock was $55,000 and $0.2 million for the three and nine months ended September 30, 2010, respectively, and $56,000 and $0.2 million for the three and nine months ended September 30, 2009, respectively.

          The following tables detail the activity of RSUs (shares in thousands):

Restricted Stock Units
		Shares						Weighted Average Grant Date Fair Value
	Future Service Required			No Future Service Required (1)			Future Service Required		No Future Service Required
Balance at December 31, 2009		2,667			2,506		$	1.00	$	1.02
Granted		1,538			—			1.12		—
Forfeited		(1,162	)		(1,917	)		1.05		0.97
Vested		(1,177	)		1,177			1.06		1.06
Distribution of underlying shares		—			(1	)		—		2.28
Balance at September 30, 2010		1,866			1,765		$	1.04	$	1.11

(1)Represents fully vested RSUs which are still subject to transferability restrictions.

          Total compensation cost associated with the grant of RSUs was $0.3 million and a net $0.8 million reversal for the three and nine months ended September 30, 2010, respectively, and $0.6 million and $4.1 million for the three and nine months ended September 30, 2009, respectively.

17

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 10 - Weighted Average Shares Outstanding

          The table below reconciles weighted average number of common shares outstanding, basic and diluted, for the three and nine month periods ended September 30, 2010 and 2009 (weighted average shares in thousands):

			Three months ended September 30,						Nine months ended September 30,
			2010			2009			2010			2009
Shares outstanding	(1	)		34,509			35,381			35,039			34,936
Unearned restricted stock	(2	)		(93	)		(192	)		(110	)		(244	)
Earned restricted stock units	(3	)		1,697			456			1,409			681
Shares outstanding, basic				36,113			35,645			36,338			35,373
Stock options	(4	)		—			—			—			51
Non-vested restricted stocks and RSUs	(4	)		—			2,877			—			1,955
Shares outstanding, diluted				36,113			38,522			36,338			37,379

(1)	Shares outstanding represents shares issued less shares repurchased in treasury stock.
(2)	As restricted stock is contingent upon a future service condition, unearned shares are removed from shares outstanding in the calculation of basic EPS as the Company’s obligation to issue these shares remains contingent.
(3)	As earned restricted stock units are no longer contingent upon a future service condition and are issuable upon a certain date in the future, earned restricted stock units are added to shares outstanding in the calculation of basic EPS.
(4)	Calculated under the treasury stock method. The treasury stock method assumes the issuance of only a net incremental number of shares as proceeds from issuance are assumed to be used to repurchase shares at the average stock price for the period.

NOTE 11 – Segment Reporting

          The Company operates in two business segments, Capital Markets and Merchant Banking. The Capital Markets reportable segment includes the Company’s investment banking, sales and trading activities and research. The Capital Markets reportable segment is managed as a single operating segment that provides the following principal sources of revenue:

• investment banking fees, which are derived from corporate finance activities and strategic advisory services;

• realized and unrealized gains with respect to securities held for the Company’s own account;

• commissions on sales and trading activities;

• conference fees; and

• other miscellaneous sources of revenues, such as interest.

          Although the Company has multiple sources of revenue derived within Capital Markets, most of its revenue is derived from investment banking services and consists of private placement, underwriting and strategic advisory fees earned upon the successful completion of financing or other types of corporate transactions, such as mergers, acquisitions and dispositions.

          The Merchant Banking segment is primarily comprised of operating activities related to Aceras BioMedical. On May 12, 2008, the Company formed Aceras BioMedical, a joint venture through which it, in partnership with Aceras Partners, LLC, makes principal investments in early-stage biotechnology and life sciences companies. In conjunction with the establishment of the joint venture, the Company formed a new wholly-owned subsidiary, RPI, which holds a 50% stake in Aceras BioMedical and serves as the holding vehicle for all of its principal-related businesses. At September 30, 2010, $12.9 million of this commitment remained unfunded. RPI receives 50% of Aceras BioMedical’s economic interest in all investments made.

18

RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Company’s net revenues, expenses, and total assets by segment are summarized below (in millions of dollars):

	Capital Markets		Merchant Banking		Non-Controlling Interest		Total
2010
Three Months Ended September 30,
Net revenues	$	17.3		0.1		—		17.4
Expenses	$	22.8		0.6		—		23.4
Segment assets	$	61.0		9.7		—		70.7
Nine Months Ended September 30,
Net revenues	$	60.2		1.3		—		61.5
Expenses	$	68.6		2.5		—		71.1
Segment assets	$	61.0		9.7		—		70.7
2009
Three Months Ended September 30,
Net revenues	$	36.9		13.6		15.0		65.5
Expenses	$	29.3		5.7		—		35.0
Segment assets	$	71.5		15.0		15.0		101.5
Nine Months Ended September 30,
Net revenues	$	76.2		13.6		15.0		104.8
Expenses	$	63.3		7.2		—		70.5
Segment assets	$	71.5		15.0		15.0		101.5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated
financial statements and the related notes included elsewhere in this report.

Overview

          We are a full-service investment bank dedicated to providing corporate finance, strategic advisory and related services to public and private companies across multiple sectors and regions. We also provide research and sales and trading services primarily to institutional investors. We are the leader in the PIPE (private investment in public equity) and RD (registered direct offering) transaction markets. We have been ranked the #1 Placement Agent by deal volume of PIPE and RD financing transactions completed every year since 2005. The sectors that we currently serve include life science/healthcare, energy, metals/mining, financial services and cleantech and the primary regions we currently serve include the United States and China. Our primary product and service offerings include financing transactions, including private placements and public offerings. We also provide research and sales and trading services to institutional investors.

Business Environment

          Market conditions and valuations for companies in the life science sector and other sectors in which we are active, as well as general market conditions, can materially affect our financial performance. On May 6, 2010, the market experienced its “flash crash”, with the Dow Jones Industrial Average declining 1,000 points, and from that day on the equity markets have been generally performing poorly. Between May 6, 2010 and September 30, 2010, many of our clients and target companies have experienced volatility in their stock prices. When the stock markets are in a downturn or in a period of volatility it is challenging to generate investment banking revenue from capital markets activity.

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Business Segments

          We operate in two business segments, Capital Markets and Merchant Banking. The Capital Markets reportable segment includes our investment banking, sales and trading activities and research. The Capital Markets reportable segment is managed as a single operating segment that provides the following principal sources of revenue:

• investment banking fees, which are derived from corporate finance activities and strategic advisory services;

• realized and unrealized gains with respect to securities held for our own account;

• commissions on sales and trading activities;

• conference fees; and

• other miscellaneous sources of revenues, such as interest.

          Although we have multiple sources of revenue derived within Capital Markets, most of our revenue is derived from our investment banking services and consists of private placement, underwriting and strategic advisory fees earned upon the successful completion of financing or other types of corporate transactions, such as mergers, acquisitions and dispositions.

          The Merchant Banking segment is primarily comprised of operating activities related to Aceras BioMedical. On May 12, 2008, we formed Aceras BioMedical, a joint venture through which we, in partnership with Aceras Partners, LLC, make principal investments in early-stage biotechnology and life sciences companies. In conjunction with the establishment of the joint venture, we formed a new wholly-owned subsidiary which holds a 50% stake in Aceras BioMedical and serves as the holding vehicle for all of our principal-related businesses. At September 30, 2010, our outstanding investment commitment to Aceras BioMedical to fund operations and the joint venture’s principal investments in life science companies was $12.9 million. We receive 50% of Aceras BioMedical’s economic interest in all investments made.

Critical Accounting Policies

          Our Consolidated Financial Statements are prepared in conformity with GAAP, which require management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and related notes. Actual results can and will differ from estimates. These differences could be material to the financial statements.

          We believe our application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly re-evaluated, and adjustments are made when facts and circumstances dictate a change. Historically, actual results have not differed materially from those determined using necessary estimates.

          Our management believes that our critical accounting policies (policies that are both material to the financial condition and results of operations and require management’s most difficult subjective or complex judgments) are our valuation of financial instruments, valuation of goodwill and other intangible assets, income taxes and our use of estimates related to compensation and benefits during the year.

Valuation of Financial Instruments

          Fair value generally is based on quoted market prices. If quoted market prices are not available, fair value is determined based on other relevant factors, including dealer price quotations, price activity for equivalent instruments and valuation pricing models. Among the factors considered in determining the fair value of financial instruments are discount margins, weighted average spreads, discounted anticipated cash flows, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, as well as other measurements. Certain financial instruments have bid and ask prices that can be observed in the marketplace. For financial instruments whose inputs are based on bid-ask prices, mid-market pricing is applied and adjusted to the point within the bid-ask range that meets our best estimate of fair value. For offsetting positions in the same financial instrument, the same price within the bid-ask spread is used to measure both the long and short positions.

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          The valuation process for financial instruments may include the use of valuation models and other techniques. Adjustments to valuations derived from valuation models may be made when, in our judgment, either the size of the position in the financial instrument in a non-active market or other features of the financial instrument such as its complexity, or the market in which the financial instrument is traded require that an adjustment be made to the value derived from the models. An adjustment may be made if a financial instrument is subject to sales restrictions that would result in a price less than the quoted market price. Adjustments from the price derived from a valuation model reflect management’s judgment that other participants in the market for the financial instrument being measured at fair value would also consider in valuing that same financial instrument and are adjusted for assumptions about risk uncertainties and market conditions. Results from valuation models and valuation techniques in one period may not be indicative of future period fair value measurements.

          Financial instruments owned and financial instruments sold, not yet purchased are stated at fair value, with related changes in unrealized appreciation or depreciation reflected in principal transactions, net in the accompanying Consolidated Statements of Operations. Equity interests in certain private equity securities and limited partnership interests are reflected in the Consolidated Financial Statements at fair value, which is often represented at initial cost until significant transactions or developments indicate that a change in the carrying value of the securities is appropriate. This represents our best estimate of exit price. Generally, the carrying values of these securities will be increased or decreased based on company performance in those instances where market values are readily ascertainable by reference to substantial transactions occurring in the marketplace or quoted market prices.

          Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we use various methods including market, income and cost approaches. Based on these approaches, we utilize assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, we are required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial instrument assets and liabilities carried at fair value have been classified and disclosed in one of the following three categories:

          Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as listed equities.

          Level 2 includes those financial instruments that are valued using models or other valuation methodologies calibrated to observable market inputs. These models are primarily industry-standard models that consider various assumptions, including discount margins, credit spreads, discounted anticipated cash flows, the terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, time value, yield curve, default rates, as well as other measurements. In order to be classified as Level 2, substantially all of these assumptions would need to be observable in the marketplace or able to be derived from observable data or supported by observable levels at which transactions are executed in the marketplace.

          Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are unobservable from objective sources. Included in this category are warrants, private securities, convertible notes and loans receivable received in conjunction with our investment banking and merchant banking activities and limited partnership interests.

Compensation and Benefits

          The use of estimates is important in determining compensation and benefits expenses for interim and year end periods. A substantial portion of our compensation and benefits represents discretionary bonuses. In addition to the level of net revenues and pre-tax income, our overall compensation expense in any given year is influenced by prevailing labor markets, revenue mix and our use of equity-based compensation programs. We believe the most appropriate way to allocate estimated annual discretionary bonuses among interim periods is in proportion to net revenues and pre-tax income earned or reasonably expected. Consequently, we generally accrue interim compensation and benefits based on annual targeted compensation amounts and interim revenues received.

Income Taxes

          Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

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          Management on an ongoing basis, at least quarterly, evaluates our tax positions and ascertains whether those tax positions that may be uncertain require de-recognition or re-measurement. We do not believe that there are any material uncertain tax position requiring de-recognition or measurement.

Third quarter of 2010 compared to third quarter of 2009

Results of Operations

          The following table sets forth the results of operations for the three months ended September 30, 2010 and 2009 (in thousands of dollars):

	Three Months Ended
	September 30, 2010						September 30, 2009
				% of Net Revenue						% of Net Revenue
Revenues:
Investment banking	$	15,101						31,253
Merchant banking		76						28,628
Commissions		919						1,642
Conference fees		2,279						1,579
Principal transactions		(1,044	)					2,400
Interest and other income		31						48
Total revenues		17,362						65,550
Operating expenses:
Compensation and benefits		13,530			77.9	%		25,470			38.9	%
Conference expense		3,916			22.6	%		3,211			4.9	%
Professional and consulting		1,464			8.4	%		2,210			3.4	%
Occupancy and equipment rentals		778			4.5	%		764			1.2	%
Advertising and marketing		179			1.0	%		740			1.1	%
Communication and market research		969			5.6	%		715			1.1	%
Depreciation and amortization		377			2.2	%		516			0.8	%
Business development		1,095			6.3	%		468			0.7	%
Office supplies		187			1.1	%		186			0.3	%
Impairment of goodwill / other intangibles		—			0.0	%		—			0.0	%
Bad debt expense		181			1.0	%		—			0.0	%
Other		713			4.1	%		688			1.0	%
Total operating expenses		23,389			134.7	%		34,968			53.3	%
Income (loss) before income taxes		(6,027	)		-34.7	%		30,582			46.7	%
Income tax expense (benefit)		(1,754	)					42
Net income (loss)		(4,273	)					30,540
Less: Net income to non-controlling interest		—						(15,000	)
Net income (loss) to common stockholders	$	(4,273	)					15,540

          Our operating income for the three months ended September 30, 2010 and 2009 included the following non-cash expenses (in thousands of dollars):

	Three Months Ended
	September 30, 2010		September 30, 2009
Stock-based compensation	$	361		665
Amortization of forgivable loans		709		457
Depreciation and amortization		377		516
Total	$	1,447		1,638

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Revenues

Merchant Banking Segment

          Merchant banking revenue, consisting of gains on investments by our Aceras BioMedical joint venture and other principal investments activity, was $0.1 million. The values at which our investments are carried on our books are adjusted to estimated fair value at the end of each quarter taking into account general economic and stock market conditions and those characteristics specific to the underlying investments.

Capital Market Segment

          Within our Capital Markets segment we derive revenues from two primary sources — investment banking and sales and trading.

          Total revenue for the three months ended September 30, 2010 was $17.3 million, representing a decrease of 53% from $36.9 million in the comparable period of 2009. The decrease was primarily due to a $16.2 million decrease in investment banking revenues.

Investment Banking Revenue

          Our investment banking revenue is derived from private placement and underwriting activities and strategic advisory services. The following table sets forth our revenue from our investment banking activities for the three months ended September 30, 2010 and 2009 (in thousands of dollars):

	Three Months Ended
	September 30, 2010		September 30, 2009
Revenue:
Private placement and underwriting	$	5,996		30,296
Strategic advisory		9,105		957
Total investment banking revenue	$	15,101		31,253

          Investment banking revenue was $15.1 million for the three months ended September 30, 2010, which included $0.5 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, as compared to revenue of $31.3 million, which included $9.0 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, in the comparable period of 2009:

• Private placement and underwriting revenue for the quarter was $6.0 million, including $0.5 million of fair value related to warrants received, compared to $30.3 million, including $9.0 million of fair value related to warrants received, in the comparable period of 2009. The decrease in investment banking revenue is a result of a decrease in industry wide capital markets activity.

• Strategic advisory fees for the three months ended September 30, 2010 were $9.1 million, compared to $1.0 million for comparable period of 2009. The increase in strategic advisory fees is due to the completion of two significant sell side engagements in the metals and mining space and the completion of one large advisory engagement in the oil and gas space.

Sales and Trading

          Commission revenues decreased by $0.7 million, or 44%, to $0.9 million for the three months ended September 30, 2010, compared with $1.6 million for the three months ended September 30, 2009.

Principal Transactions

          Principal transactions revenue was a $1.0 million loss for the three months ended September 30, 2010, compared with a $2.4 million gain for the three months ended September 30, 2009.

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                    The following discussion combines Capital Markets and Merchant Banking expenses.

Expenses

Compensation

          Compensation and benefits expense decreased $11.9 million, or 47%, while total net revenues decreased 66% for the three months ended September 30, 2010 as compared to the comparable 2009 period. The ratio of compensation to net revenues was 78% for the three months ended September 30, 2010 as compared to 50% for the comparable period of 2009. Employee compensation and benefits expense for the third quarter, excluding the $1.0 million principal transactions loss, represented 74% of transaction related revenue (revenue excluding principal transactions), compared to 53% in the third quarter of 2009. We target a compensation ratio of 55% to 60% of transaction related revenue on a cumulative year to date basis.

Non-Compensation Expenses

          Non-compensation expense was $9.9 million for the three months ended September 30, 2010, comparable to the $9.5 million for the prior year period. The increase was primarily due to the increase in conference expenses. Conference expense was $3.9 million for the third quarter of 2010 as compared to $3.2 million for the third quarter of 2009, due to an increase in presenting companies and participants at the fall 2010 conference as compared to the fall 2009 conference. Additionally, a $0.7 million decrease in professional and consulting expense was significantly offset by a $0.6 million increase in business development expense.

Income Taxes

          Income tax benefit for the third quarter was $1.8 million which represents a 29.1% effective tax rate. The quarterly tax rate was impacted by a tax rate differential due to lower than anticipated 2010 pre-tax income.

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First nine months of 2010 compared to first nine months of 2009

Results of Operations

          The following table sets forth the results of operations for the nine months ended September 30, 2010 and 2009 (in thousands of dollars):

	Nine Months Ended
	September 30, 2010						September 30, 2009
				% of Net Revenue						% of Net Revenue
Revenues:
Investment banking	$	65,152						65,129
Merchant banking		1,316						28,628
Commissions		2,905						3,155
Conference fees		3,158						1,579
Principal transactions		(11,204	)					6,073
Interest and other income		151						220
Total revenues		61,478						104,784
Operating expenses:
Compensation and benefits		40,546			66.0	%		49,381			47.1	%
Conference expense		9,932			16.2	%		3,211			3.1	%
Professional and consulting		5,165			8.4	%		5,050			4.8	%
Occupancy and equipment rentals		2,332			3.8	%		2,341			2.2	%
Advertising and marketing		1,256			2.0	%		2,018			1.9	%
Communication and market research		2,600			4.2	%		1,891			1.8	%
Depreciation and amortization		1,231			2.0	%		1,491			1.4	%
Business development		3,630			5.9	%		1,140			1.1	%
Office supplies		485			0.8	%		446			0.4	%
Impairment of goodwill / other intangibles		933			1.5	%		1,327			1.3	%
Bad debt expense		666			1.1	%		—			0.0	%
Other		2,361			3.8	%		2,252			2.2	%
Total operating expenses		71,137			115.7	%		70,548			67.3	%
Income (loss) before income taxes		(9,659	)		-15.7	%		34,236			32.7	%
Income tax expense (benefit)		(2,909	)					51
Net income (loss)		(6,750	)					34,185
Less: Net income to non-controlling interest		—						(15,000	)
Net income (loss) to common stockholders	$	(6,750	)					19,185

          Our operating income for the nine months ended September 30, 2010 and 2009 included the following non-cash expenses (in thousands of dollars):

	Nine Months Ended
	September 30, 2010			September 30, 2009
Stock-based compensation	$	(517	)		5,588
Amortization of forgivable loans		1,945			1,447
Depreciation and amortization		1,321			1,891
Impairment of goodwill / other intangibles		933			1,327
Total	$	3,682			10,253

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Revenues

Merchant Banking Segment

          Merchant banking revenue, consisting of gains (or losses) on investments by our Aceras BioMedical joint venture and other principal investments activity, was $1.3 million. The value of Aceras’ assets was determined based on a valuation prepared as of September 30, 2010, taking into consideration market prices, cash received, cost of the investment, market participant inputs, estimated cash flows based on entity specific criteria, purchase multiples paid in other comparable third-party transactions, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which our investments are carried on our books are adjusted to estimated fair value at the end of each quarter taking into account general economic and stock market conditions and those characteristics specific to the underlying investments. The gain recognized in the first nine months of 2010 represents the change in the Aceras BioMedical valuation from December 31, 2009 and other principal investments activity.

Capital Market Segment

          Within our Capital Markets segment we derive revenues from two primary sources — investment banking and sales and trading.

          Total revenue for the nine months ended September 30, 2010 was $60.2 million, representing a decrease of 21% from $76.2 million in the comparable period of 2009. The decrease was primarily due to a $17.3 million decrease in principal transactions revenues.

Investment Banking Revenue

          Our investment banking revenue is derived from private placement and underwriting activities and strategic advisory services. The following table sets forth our revenue from our investment banking activities for the nine months ended September 30, 2010 and 2009 (in thousands of dollars):

	Nine Months Ended
	September 30, 2010		September 30, 2009
Revenue:
Private placement and underwriting	$	53,342		59,703
Strategic advisory		11,810		5,426
Total investment banking revenue	$	65,152		65,129

          Investment banking revenue was $65.2 million for the nine months ended September 30, 2010, which included $9.3 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, as compared to revenue of $65.1 million, which included $20.0 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, in the comparable period of 2009:

• Private placement and underwriting revenue for the first nine months was $53.3 million, including $9.3 million of fair value related to warrants received, compared to $59.7 million, including $20.0 million of fair value related to warrants received, in the comparable period of 2009.

• Strategic advisory fees for the nine months ended September 30, 2010 were $11.8 million, compared to $5.4 million for comparable period of 2009. The increase in strategic advisory fees is due to the completion of two significant sell side engagements in the metals and mining space and the completion of one large advisory engagement in the oil and gas space.

Sales and Trading

          Commission revenues decreased by $0.3 million, or 8%, to $2.9 million for the nine months ended September 30, 2010, compared with $3.2 million for the nine months ended September 30, 2009.

Principal Transactions

          Principal transactions revenue was an $11.2 million loss for the nine months ended September 30, 2010, compared with a $6.1 million gain for the nine months ended September 30, 2009. The decline in our portfolio was consistent with the overall market decline in “micro-cap” China and biotechnology securities.

26

                    The following discussion combines Capital Markets and Merchant Banking expenses.

Expenses

Compensation

          Compensation and benefits expense decreased $8.8 million, or 18%, while total net revenues decreased 32% for the nine months ended September 30, 2010 as compared to the comparable 2009 period. The ratio of compensation to net revenues was 66% and 55% for the nine months ended September 30, 2010 and 2009, respectively. Employee compensation and benefits expense for the nine months ended September 30, 2010, excluding the $11.2 million principal transactions loss, represented 56% of transaction related revenue (revenue excluding principal transactions), compared to 59% in the comparable 2009 period. We target a compensation ratio of 55% to 60% of transaction related revenue on a cumulative year to date basis.

Non-Compensation Expenses

          Non-compensation expense was $30.6 million for the nine months ended September 30, 2010, versus $21.2 million for the prior year period, or 50% of net revenues for the 2010 period versus 24% of net revenues for the comparable period of 2009. The increase in non-compensation was primarily due to expenses related to the China, London and New York conferences held in the first, second and third quarters, respectively.

Income Taxes

          Income tax benefit for the first nine months was $2.9 million which represents a 30.1% effective tax rate. The tax rate was adversely affected by a tax rate differential due to lower than anticipated 2010 pre-tax income.

Liquidity and Capital Resources

          We have historically satisfied our capital and liquidity requirements through cash generated internally from operations.

          At December 31, 2009, we had liquid assets, consisting of unrestricted cash, restricted cash, “Level I” assets less “Level I” liabilities, and current receivables of $31.0 million. As of September 30, 2010, we had liquid assets of $26.8 million.

          The timing of bonus and retention compensation payments to our employees may significantly affect our cash position and liquidity from period-to-period. While our employees are generally paid salaries and draws on a semi-monthly basis during the year, bonus payments, which make up a significant portion of total compensation, will generally be paid semi-annually.

          As a registered securities broker-dealer, we are subject to the net capital requirements of the uniform net capital requirement set forth in Rule 15c3-1 promulgated by the SEC pursuant to the Exchange Act. SEC regulations also provide that equity capital may not be withdrawn or cash dividends paid if certain minimum net capital requirements are not met. At September 30, 2010, we had excess net capital of $5.3 million. Regulatory net capital requirements may change based on investment and underwriting activities.

          Because of the nature of settlement transactions in our investment banking and brokerage business, we regularly monitor our liquidity position, including our cash and net capital positions. In light of the uncertainty with respect to the timing of a market recovery and its potential impact on the timing of our receipt of anticipated funds from operating activities, we regularly explore capital raising alternatives.

Cash Flows

          Unrestricted cash and cash equivalents were $8.2 million at September 30, 2010, a decrease of $4.4 million from $12.6 million at December 31, 2009.

          Operating activities provided $2.9 million of cash and cash equivalents during the nine months ended September 30, 2010.

          The primary components of cash used for the nine months ended September 30, 2010 were: (a) $3.5 million in treasury stock purchases; (b) $2.1 million in acquisition related payments; and (c) $1.4 million in property, equipment and leasehold purchases.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

          Market risk represents the risk of loss that may result from the change in value of a financial instrument due to fluctuations in its market price. Market risk is inherent in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Our exposure to market risk is directly related to our role as a financial intermediary in customer trading and to our market-making and investment activities.

          We trade in equity securities as an active participant in both listed and OTC equity markets. We maintain securities in inventory to facilitate our market-making activities and customer order flow. Although we do not engage in proprietary trading, we may use a variety of risk management techniques and hedging strategies in the ordinary course of our trading business, including establishing position limits by product type and industry sector, closely monitoring inventory turnover, maintaining long and short positions in related securities, and using exchange-traded equity options and other derivative instruments. We do not use derivatives for speculative purposes.

          In connection with our trading business, management also reviews reports appropriate to the risk profile of specific trading activities. Typically, market conditions are evaluated and transaction details and securities positions are reviewed.

          These activities seek to ensure that trading strategies are within acceptable risk tolerance parameters, particularly when we commit our own capital to facilitate client trading. Our accounting department is actively involved in ensuring the integrity and clarity of the daily profit and loss statements, to the extent that we maintain trading positions for a period longer than one day. Activities include price verification procedures, position reconciliation and review of transaction booking. We believe that these procedures, which stress timely communications between our traders and senior management, are important elements of the risk management process.

          At September 30, 2010, $13.8 million, or 36% of $38.9 million of financial instruments owned, at fair value, represented investments in warrants received in conjunction with our investment banking activities. $9.7 million, or 25% of financial instruments owned is related to our merchant banking activity. The remaining 39% of the financial instruments owned represents listed equity securities, restricted securities and investments in affiliates at fair value and promissory notes received in conjunction with our investment banking activities.

          The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. The risk management strategies that we employ use various risk sensitivity metrics to measure such risk and to examine behavior under significant adverse market conditions. We use an interest rate sensitivity simulation to assess our interest rate risk exposure. For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period from our reporting date, we assume that all interest rate sensitive financial instruments will be impacted by a hypothetical, immediate 100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same degree.

          The sensitivity analyses of the interest rate sensitive financial instruments are hypothetical and should be used with caution. Changes in fair value based on a 1% or 2% variation in an estimate generally cannot be extrapolated because the relationship of the change in the estimate to the change in fair value may not be linear. Also, the effect of a variation in a particular estimate on the fair value of financial instruments is calculated independent of changes in any other estimate; in practice, changes in one factor may result in changes in another factor, which might magnify or counteract the sensitivities. In addition, the sensitivity analyses do not consider any action that we may take to mitigate the impact of any adverse changes in the key estimates.

          Based on our analysis, as of September 30, 2010, the effect of a 100+/- basis point change in interest rates on the value of our warrant portfolio and promissory note and the resultant effect on our pre-tax income is considered immaterial.

          The value of Aceras BioMedical’s assets in our merchant banking activity was determined based on a valuation performed as of September 30, 2010, taking into consideration the cost of the investment, market participant inputs, non-binding offers made by third parties, estimated cash flows based on entity specific criteria, purchase multiples paid in other comparable third-party transactions, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which our investments are carried on our books are adjusted to estimated fair value at the end of each quarter and the instability in general economic conditions, stock markets and regulatory conditions may result in significant changes in the estimated fair value of these investments. The primary quantifiable market risk associated with Aceras BioMedical’s assets is sensitivity to changes in interest rates. Based on our analysis as of September 30, 2010 assuming a 100 basis point increase in interest rates, we estimated the reduction of pre-tax income to be immaterial.

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Item 4. Controls and Procedures

          Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our “disclosure controls and procedures” as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

          There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

          We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation and regulatory proceedings against investment banking firms have been increasing. These risks include potential liability under Federal securities and other laws in connection with securities offerings and other transactions, as well as advice and opinions we may provide concerning strategic transactions. In addition, like most investment banking firms, we could be the subject of claims made by current and former employees arising out of their employment or termination of employment with us. These claims often relate to dissatisfaction with an employee’s bonus or separation payment, or involve allegations that the employee was the subject of some form of discrimination, retaliation or other unlawful employment practice.

          The following constitute our material pending legal proceedings as of the date of this Report:

Rodman & Renshaw, LLC, et al. v. Matthew N. Murray

          In October 2006, we, as claimant, filed a statement of claim with FINRA against Matthew N. Murray (“Murray”), a former research analyst whom we terminated on March 2, 2006 for engaging in unprofessional conduct (the “FINRA Action”). The petition asserted claims for defamation, tortious interference with business relations, breach of fiduciary duty, conversion, breach of contract, and prima facie tort. We sought compensatory damages of at least $10.0 million, plus punitive damages of at least $15.0 million, together with certain injunctive relief. The claims related to wrongful activities allegedly undertaken by Murray.

          Contemporaneously with the FINRA Action, we and our senior officers filed an action (the “SDNY Action”) in the U.S. Federal District Court for the Southern District of New York (Rodman & Renshaw, LLC, John Borer, Edward Rubin, Michael Vasinkevich, and Wesley K. Clark v. Mathew N. Murray, U.S. District Court, Southern District of New York, 06 CV 8210 (WHP)), alleging various claims for trademark dilution, trademark infringement, cybersquatting, cyberpiracy, and false designation of origin as a result of various websites allegedly created by or at the instance of Murray using, among other things, the given names and surnames of certain of our principals and high ranking employees. The SDNY Action, among other things, sought permanent injunctive relief restraining Murray from continuing the acts complained of, as well as compensatory and punitive damages, each in the amount of at least $10.0 million. On October 6, 2006, we and the other plaintiffs moved for a temporary restraining order and preliminary injunction seeking an order enjoining Murray from continuing to maintain the offending websites and directing that the sites be taken down and that the domain names be transferred to us and to the other plaintiffs. Murray signed an order on October 10, 2006, effectively agreeing to all of our demands, which document was so-ordered by the Court on October 11, 2006. Murray filed an answer and counterclaims for breach of contract, defamation, and declaratory relief, seeking at least $1.0 million each in compensatory damages and punitive damages in an amount to be determined at trial. Murray also alleged that he was promised an option to purchase two percent “of Rodman” for “book value.” By decision dated December 31, 2006, followed by order dated December 22, 2006, Judge Pauley stayed the SDNY Action and directed that the claims asserted there be brought in the FINRA Action.

          In April 2007, the statement of claim in the FINRA Action was amended to include the claims first set forth in the complaint in the SDNY Action and to include the individual plaintiffs in the SDNY Action as additional claimants in the FINRA Action.

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          Trial hearings in the FINRA Action were bifurcated into two phases: liability and damages. Trial hearings in the liability phase of the FINRA Action concluded in August 2009. On September 18, 2009 the FINRA Panel issued its ruling sustaining our claims for defamation, tortious interference with business relations, breach of fiduciary duty, conversion, breach of contract, and prima facie tort and denying each of Murray’s claims. Trial hearings in the damages phase of the FINRA Action concluded on March 18, 2010. On August 26, 2010, the FINRA Panel rendered an Award in our favor, granting Rodman $10.7 million in damages, plus 9% per annum interest for the four-year period of 2006 through 2010.

          In October 2010, we filed a Petition to Confirm the FINRA Panel Award with the Supreme Court of the State of New York, County of New York.

Item 1A. Risk Factors

          Information regarding our risk factors appears in Part I, Item 1A. of our annual report on Form 10-K for the fiscal year ended December 31, 2009, as amended. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations. There have been no material changes to the risk factors contained in our annual report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchase of Equity Securities

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1)
July 1 - July 31, 2010		205,500	$	2.84		205,500		1,479,533
August 1 - August 31, 2010		459,000	$	2.28		459,000		1,020,533
September 1 - September 30, 2010		335,000	$	2.35		335,000		685,533	(2)
Total		999,500	$	2.42		999,500

(1) On May 25, 2010 we announced a stock repurchase program of up to an aggregate of $5 million of our common stock.

(2) Based on the closing price per share of our common stock on September 30, 2010 ($2.15 per share).

Item 6. Exhibits

Exhibit No.	Description
10.1*	Operating Agreement of Aceras BioMedical LLC, as amended
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 15, 2010
	RODMAN & RENSHAW
	CAPITAL GROUP, INC.
	By:	/s/ Edward Rubin
		Name: Edward Rubin
		Title: Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ David J. Horin
		Name: David J. Horin
		Title: Chief Financial Officer
		(Principal Financial Officer)

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EX-10.1

Exhibit 10.1

Execution Counterpart

OPERATING AGREEMENT
(as amended)

OF

ACERAS BIOMEDICAL LLC
(a Delaware limited liability company)

OPERATING AGREEMENT
OF
ACERAS BIOMEDICAL LLC

(a Delaware Limited Liability Company)

          This Operating Agreement (the “Agreement”) of ACERAS BIOMEDICAL LLC (the “Company”) is made and entered into effective as of May 9, 2008 by and among each of the Members (as defined below) listed on the signature page hereto. This Agreement, as it may be amended from time to time, shall be binding on any person who at the time is a Member (as defined below).

ARTICLE I - DEFINITIONS

1.1. Definitions.

In addition to the terms defined in other provisions of this Agreement, including Section B.1 of Annex B, the following terms shall have the meanings set forth below:

          “Act” means the Delaware Limited Liability Company Act 6 Del Section 18.01-et. seq; as amended from time to time, and any successor to such statute.

          “Affiliate” means any person or entity which owns or controls more than fifty percent (50%) of the voting interests of a Member, or any entity, more than fifty percent (50%) of whose voting interests are owned or controlled by a Member or by a person or persons who are members of a Member.

          “Budget” has the meaning set forth in Section 5.1(b).

          “Capital Account” means the individual account maintained by the Company with respect to each Member as provided in Annex B.

          “Capital Contribution” means the amount of cash or the agreed value of the property contributed by each Member to the Company as provided in Section 4.1.

          “Cause Event” has the meaning set forth in Section 5.3(b).

          “Certificate” has the meaning set forth in Section 2.1.

          “Databases” has the meaning set forth in Section 5.1(g).

          “Disposition Date” has the meaning set forth in Section 4.5(c).

          “Distributable Funds” means all cash flow from capital transactions of the Company, including proceeds from the sale or other disposition of all or portions of the Company’s assets

including Portfolio Company investments, proceeds from financing or refinancing, as reduced by (i) expenses incurred in all sales or disposition transactions, and (ii) distributions for estimated taxes pursuant to Section 4.6.

          “Initial Capital Contributions” means those Capital Contributions made by the Members as set forth on Annex A.

          “Investment Amount” has the meaning set forth in Exhibit I hereto.

          “Investment Notice” has the meaning set forth in Section 4.1(a).

          “Liquidity Event” means (i) an “initial public offering” of the common stock or other equity securities of any Portfolio Company, or (ii) any other transaction which results in a class of a Portfolio Company’s securities being publicly traded.

          “Managing Member” means Aceras Partners, LLC, a Delaware limited liability company.

          “Member” means the Managing Member, the Special Member and any other Person who at the time is the Holder of Membership Shares pursuant to Section 3.3.

          “Membership Interest” means the interest of a Member in the Company, including interests in Profits and Losses, rights to distributions (liquidating or otherwise), allocations, information, and subject to the powers and limitations as set forth in this Agreement, to consent to or approve actions by the Company as represented by the Membership Shares owned by such Members.

          “Membership Shares” mean shares representing the interest of a Member in the Company.

          “MM Affiliate” means Daniel DiPietro, Peter Barber, John Liatos, Jeffrey Serbin, M.D., Matthew G. Wyckoff, M.D., in each case while such individual is a member of the Managing Member, and any other Person who may hereafter become a member of the Managing Member.

          “MM Operating Agreement” has the meaning set forth in Section 3.7.

          “New Budget” has the meaning set forth in Section 5.1(b).

          “Opportunity Notice” has the meaning set forth in Section 5.5.

          “Percentage Interest” means at any particular time a fraction the numerator of which is the number of Membership Shares held by any Member and the denominator of which is the number of Membership Shares held by all Members.

          “Person” means a natural person, corporation, partnership, limited liability company, trust, unincorporated association or other entity.

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          “Portfolio Company” has the meaning set forth in Section 2.4.

          “Portfolio Equity” has the meaning set forth in Section 4.5(b).

          “Primary Business” has the meaning set forth in Section 2.4.

          “Prospective Investee” has the meaning set forth in Section 4.1(a).

          “Rodman Services” means the services described on Annex C to be provided to the Company by Rodman & Renshaw Capital Group, Inc. (“Rodman”) without charge.

          “Special Member” means “Rodman Principal Investments, LLC.

          “Trademark” has the meaning set forth in Section 5.1(f).

          “Valuation Report” has the meaning set forth in Section 8.2 (d).

          “Year-end Valuation Report” has the meaning set forth in Section 8.2 (d).

ARTICLE II - ORGANIZATION

2.1. Formation.

The Company has been organized as a Delaware limited liability company by the filing of a Certificate of Formation dated April 3, 2008 (the “Certificate”) with the Secretary of State of the State of Delaware under and pursuant to the Act.

2.2. Name.

The name of the Company is ACERAS BIOMEDICAL LLC and all Company business shall be conducted under that name or such other names that comply with applicable law as the Managing Member may select from time to time.

2.3. Registered Office; Principal Place of Business; Other Offices.

The registered office of the Company shall be 847 Walker Road, Suite C, Dover, Delaware or such other office (which need not be a place of business of the Company) as the Managing Member may designate from time to time in the manner provided by law. The name and address of the Company’s registered agent for service or services in the State of Delaware is United Corporate Services, Inc. The principal place of business of the Company shall be at such place as the Members may jointly agree from time to time, which need not be in the State of Delaware. The Company may have such other offices as the Members may jointly agree from time to time.

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2.4. Purpose.

The purpose of the Company shall be to (i) invest in the healthcare sector by purchasing or licensing discrete assets through (A) the creation of newly formed entities which the Managing Member will initially manage until handing operations over to a dedicated management team identified by the Managing Member, and (B) investments in special situations involving biotech companies (public or private) that result in the Company having effective control over the operations of each such biotech company (collectively, the “Primary Business”), and (ii) engage in any other lawful activities under the Act. The Company expects that it will own shares of the capital stock, debt or other securities of companies in which it makes investments. Each entity in which the Company makes an investment is herein called a “Portfolio Company.”

2.5. Term.

The existence of the Company shall continue unless and until the Company is dissolved, wound up and terminated in accordance with Article IX. No Member shall have the right, and each Member hereby agrees not to, resign from the Company, nor to dissolve, terminate or liquidate, or to petition a court for the dissolution, termination or liquidation of the Company, in each case except as expressly provided in this Agreement. Except with the written consent of the Members, no Member at any time shall have the right to petition or to take any action to subject Company assets or any part thereof to the authority of any court or other governmental body in connection with any bankruptcy, insolvency, receivership or similar proceeding.

ARTICLE III - MEMBERSHIP INTERESTS

3.1. Initial and Subsequent Members.

The initial Members of the Company are the Managing Member and the Special Member. Additional Members may be admitted from time to time with the approval of both the Managing Member and the Special Member. When any Person is admitted as a Member, the Managing Member shall prepare a revised version of Annex A and distribute it to all the Members.

3.2. Membership Shares.

The Company shall have the right to issue Membership Shares. The initial issuance of Membership Shares shall be as set forth on Annex A. The Company may (but is not required to) issue certificates to evidence ownership of Membership Shares. Such certificates will provide no rights independent of this Agreement and shall be transferable only to the extent the Membership Shares evidenced thereby are transferable hereunder and may bear a legend expressing such restrictions. Fractions of a Membership Share may be created and issued. The rights, preferences, privileges and restrictions granted to and imposed upon the Membership Shares are set forth in this Agreement. No additional Membership Shares may be issued without the approval of both the Managing Member and the Special Member.

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3.3. Record Holders of Membership Shares.

The Company shall be entitled to treat the Person in whose name any Membership Shares of the Company stand on the books of the Company as the absolute owner thereof. The Company shall not be bound to recognize any equitable or other claim to, or interest in, such Membership Shares on the part of any other Person whether or not the Company has express or other notice of any such claim.

3.4. Transfers and Assignments of Membership Shares.

          (a) General Restriction on Transfer. Except as expressly provided for below in this Section 3.4 and in compliance with any applicable securities laws, Membership Shares in the Company and the Membership Interests represented thereby shall not be transferable or assignable (a transfer, for purposes of this Agreement, shall be deemed to include any sale, transfer, pledge, swap, creation of a security interest or other disposition or similar transaction having the effect of transferring economic ownership).

          (b) Transfer to Affiliates or Other Members. Notwithstanding any other provision in this Agreement, a transfer by a Member of all or part of such Member’s Membership Interest to an Affiliate of the Member or another Member shall be permitted. The transferring Member shall provide not less than 30 days prior written notice to the Company of such transfer.

          (c) Procedure. Transfers of Membership Shares shall be made on the Membership Share register of the Company. No transfer shall be made inconsistent with the provisions of Subchapter VII of the Act or other applicable provisions of law. The transferor and the transferee shall have complied with such other requirements as the Members may reasonably impose. The transferee shall agree in writing to be bound by all the terms and provisions of this Agreement then in effect and pay such fees as the Managing Member may require to pay the reasonable costs of the Company in effecting such substitution of a Member.

          (d) Capital Account of Transferee. Upon the transfer of a Membership Interest, the transferee shall succeed to the Capital Account (or pro rata portion thereof) of the transferor as provided in Section B.2(b) of Annex B.

3.5. No Right of Partition.

A Member shall not have the right to seek or obtain partition by court decree or operation of law of any Company property, or the right to own or use particular assets of the Company.

3.6

Other Ventures.

(a) Unless otherwise approved by the Special Member, neither the Managing Member nor any of its Affiliates other than the MM Affiliates shall at any time while the Managing Member is a Member and for twelve (12) months thereafter, own any equity or beneficial interest in, or serve as a director, manager, officer, employee or agent of, or consultant to, any Person whose business model is substantially similar to the Primary

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	Business; provided that the foregoing shall not prohibit the Managing Member or such Affiliates from making any passive investment. The foregoing restriction shall terminate upon the dissolution of the Company.
	(b) Unless otherwise approved by the Special Member, no MM Affiliate shall at any time while it is an MM Affiliate and for twelve (12) months thereafter, own any equity or beneficial interest in, or serve as a director, manager, officer, employee or agent of, or consultant to, any Person whose business model is substantially similar to the Primary Business; provided that the foregoing shall not prohibit such MM Affiliate from making any passive investment. The foregoing restriction shall terminate upon the dissolution of the Company. Notwithstanding the foregoing provisions of this Section 3.6(b), if any MM Affiliate is a party to an employment agreement with the Company containing restrictions comparable to those contained in this Section 3.6(b) and certain conditions come into existence or certain events occur that would cause the restrictions contained in such employment agreement not to apply to such MM Affiliate, then the restrictions contained in this Section 3.6(b) shall also not apply to such MM Affiliate.
3.7	Operating Agreement of Managing Member.

          The Managing Member has provided a copy of the Operating Agreement of the Managing Member (the “MM Operating Agreement”) to the Special Member. The Managing Member and each of the MM Affiliates hereby agree with the Special Member that they will not amend any of the following provisions of the MM Operating Agreement without the prior written consent of the Special Member:

          (1) Section 11.1 of the MM Operating Agreement, providing that if any member of Managing Member wants to sell his interest he may only do so to other members of Managing Member.

          (2) Section 11.6(a) of the MM Operating Agreement, providing that if any MM Affiliate is no longer employed by the Company they must sell their membership interest in Managing Member back to Managing Member for $1,200.00 (but they will retain an “economic” interest in any undistributed shares of companies which have not yet been monetized and/or distributed by the Company.

          (3) Section 3.2 of the MM Operating Agreement, providing that Special Member must approve admission of any new member to Managing Member, if such admission would result in the individuals who are MM Affiliates as of the date hereof no longer beneficially holding more than 66 2/3 percent of the membership interests of the Managing Member, which approval will not be unreasonably withheld.

          (4) Section 2.6 of the MM Operating Agreement, providing that member of Managing Member will not own any equity or beneficial interest in, or serve as a director, manager, officer, employee or agent of, or consultant to, any Person whose business model is substantially similar to the Primary Business.

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ARTICLE IV - FINANCIAL AND TAX MATTERS

4.1. Capital Contributions.

          (a) Total Capital Contributions. The Capital Contributions to the Company shall be comprised of the Initial Capital Contributions as set forth on Annex A and subsequent Capital Contributions of a Member, if any.

                    (1) Initial Capital Contributions. Upon the execution of this Agreement, the Members shall contribute to the Company the Initial Capital Contributions.

                    (2) Subsequent Capital Contributions.

                              (i) Working Capital. The Special Member shall make additional capital contibutions to the Company as required to fund the payment of amounts when due and payable under the Budget for the years ended December 31, 2008, 2009, 2010, 2011, 2012 and 2013.

                              (ii) Portfolio Companies.

                                        (a) At such time as the Managing Member shall have identified a potential Portfolio Company or an existing Portfolio Company in which it proposes the Company make an investment (a “Prospective Investee”), the Managing Member shall notify the Special Member in writing (an “Investment Notice”), which Investment Notice shall contain the information set forth on Exhibit I hereto. The Special Member shall provide such Investment Amount to the Company as an additional capital contribution, at the times set forth in the Investment Notice.

                                        (b) Notwithstanding anything to the contrary which may be contained herein, in no event shall the aggregate amount of all additional capital contributions required to be made by the Special Member pursuant to Section 4.1(a)(2)(ii) exceed $20,000,000.

                               (iii) No Additional Contribution. Except as provided in this Section 4.1(a)(2), no Member shall be required to contribute any additional capital to the Company, and no Member shall have any personal liability for any obligation of the Company or any other Member. Notwithstanding the foregoing, the Managing Member shall be liable to repay to the Special Member 50% of any additional capital contributions made by the Special Member in excess of the additional capital contributions contemplated by Section 4.1(a)(2)(i) and 4.1(a)(2)(ii) hereof in connection with (A) any settlement of a Proceeding (as defined in Section 7.1 below) involving the Company agreed to by the Managing Member and the Special Member and (B) any judgement issued or fine assessed against the Company.

          (b) Interest on Capital Contributions. All of the Capital Contributions made by the Special Member shall be held in an interest bearing bank account chosen by the Special Member, and all interest earned thereon shall be allocated as an item of income to the Special Member and shall be distributed to the Special Member quarterly. Except as provided herein, no interest shall

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be paid by the Company on any Member’s Capital Contribution or on the amount in any Member’s Capital Account.

          (c) Liability for Company Debts and Additional Capital Contributions. Except as specifically provided in this Agreement, no Member shall be liable for any of the debts of the Company or be required to make any additional Capital Contributions.

          (d) No Change to Membership Interests. For the avoidance of doubt, there will be no change to any Member’s Membership Interests or Membership Shares as a result of its having made any subsequent Capital Contribution in accordance with Section 4.1(a)(2) or otherwise.

4.2. Return of Contributions.

Except as otherwise provided in this Agreement, a Member is not entitled to the return of any part of the Member’s Capital Contribution. An unrepaid Capital Contribution is not a liability of the Company or of any Member. Except as specifically provided in this Agreement, a Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member’s Capital Contributions.

4.3. Capital Accounts.

A Capital Account shall be established and maintained for each Member as provided in Annex B.

4.4. Profits and Losses.

Profits and Losses shall be allocated to the Members as provided in Annex B.

4.5. Distributions.

          (a) Distributions of Distributable Funds. Distributions of Distributable Funds shall be made to the Members at such time and in such amounts as either the Managing Member or the Special Member shall request. Such distributions shall be made to the holders of Membership Shares pro-rata in relation to their respective Percentage Interest.

          (b) Portfolio Equity Distributions. Distributions of equity received by the Company in connection with an investment in a Portfolio Company (“Portfolio Equity”) shall not be made until a Liquidity Event has occurred with respect to such Portfolio Equity; and thereafter a distribution of such Portfolio Equity shall be made upon the request of either the Managing Member or the Special Member except as otherwise prohibited by law or contractual obligations. Such distributions shall be made to the holders of Membership Shares pro-rata in relation to their respective Percentage Interest.

          (c) Prior Notice of Transfer. The Managing Member, the Special Member and each MM Affiliate (including a former MM Affiliate who received a distribution of Portfolio Equity) agree that they will not sell, transfer or otherwise dispose of any Portfolio Equity without giving each other Member and each MM Affiliate (or former MM affiliate, as the case may be) at least one

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(1) business day prior notice of such sale, transfer or other disposition, which notice shall set forth the day on which such Member or MM Affiliate (or former MM affiliate, as the case may be), as the case may be, intends to make such disposition (a “Disposition Date”); it being agreed that each party may dispose of any or all of such Portfolio Equity on or after such Disposition Date without further notice.

          (d) Distribution of Other Property. Distributions of assets of the Company other than Distributable Funds and Portfolio Equity shall be made to the Members at such time and in such amounts as either the Managing Member or the Special Member shall request. Such distributions shall be made to the holders of Membership Shares pro-rata in relation to their respective Percentage Interest.

4.6. Tax Distributions.

The Company will use reasonable efforts, consistent with any restrictions which may be imposed by any creditor of the Company or applicable law, to make distributions to each Member in amounts such that, prior to April 15 of each calendar year, each Member has received distributions in aggregate amounts since the date such Person became a Member of not less than the sum for the immediately preceding Fiscal Year and for all prior Fiscal Years of (i) the amount of taxable income allocated to such Member for such Fiscal Years, reduced by the amount of taxable losses allocated to such Member for such Fiscal Years, multiplied by (ii) 40%. The Company will use reasonable efforts to cause such distributions to be made in a manner which permits such Members to use the proceeds of such distributions to make on a timely basis all required estimated payments of income taxes in respect of the taxable income so allocated to them.

ARTICLE V - MANAGEMENT

5.1. Management of the Company.

          (a) Exclusive Responsibility. Except as otherwise provided in this Agreement, the management of the business and affairs of the Company shall be the sole and complete responsibility of the Managing Member, who is authorized and directed to execute any and all documents and bind the Company thereby without the approval of any Member except as expressly provided for in Section 5.1(c), including (1) selecting the Prospective Investees, (2) management of the Company’s investments in Portfolio Companies, (3) voting of the Company’s investments in Portfolio Companies, (4) sale of the Company’s investments in Portfolio Companies and (5) executing and delivering leases, contracts, notes, bonds, indentures, mortgages and deeds.

          (b) Budget. The budget for the period from May 12, 2008 thru December 31, 2008 and the budget for the year 2009 have each been agreed to by the Members. On or before November 30 of each year beginning on November 1, 2009, the Managing Member and the Special Member shall by collective agreement establish a budget for the following year (a “New Budget”) provided that if on or before the first day of such following year the Managing Member and the Special Member do not agree on such New Budget, all line items in such New Budget shall be

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equal to one hundred ten percent (110%) of the amount of such line item in the Budget for the prior year. Each of the budgets for 2008, 2009 and each New Budget is referred to as a “Budget.” Subject to the aggregate expense amounts set forth in each Budget, the Managing Member shall have authority over expenditures of the Company.

          (c) Action by the Company. Notwithstanding anything to the contrary which may be contained herein, each of the following actions by the Company will at all times require the approval of the Special Member:

(1)	any material modification to the line item allocations of any Budget;
(2)	any transaction between the Company with any Members, any MM Affiliate or any of their respective Affiliates;
(3)	admission of new Members;
(4)	any material change in the nature and scope of the business of the Company;
(5)	any authorization or increase in the amount of Membership Interests;
(6)	any merger, consolidation, reorganization, reclassification, recapitalization, spin-off or similar transactions involving the Company;
(7)	any change in the Company’s legal form or change that would otherwise affect the tax treatment of the Company;
(8)	the liquidation, dissolution, winding up, voluntary bankruptcy, approval of receivers or similar events involving the Company;
(9)	the initiation of any claim or litigation involving the Company;
(10)	the entry into any consent decree, settlement or negotiation with a government regulatory or enforcement agency;
(11)	the entry into any consent decree or settlement as a result of legal action from a private party;
(12)	the commencement of any voluntary bankruptcy, insolvency or similar proceeding with the Company as debtor;
(13)	the entry into any non-competition or other similar agreement that directly or indirectly restricts or limits the actions of affiliates of the Company or its Members; and
(14)	the entry into any other transaction or series of related transactions out of the ordinary course of business.

          (d) Delegation. The Managing Member may delegate the right, power and authority to manage the business, affairs, operations and activities of the Company to any officer, employee or agent or affiliate of the Managing Member or the Company, subject to the ultimate direction, control and supervision of the Managing Member.

          (e) Provision of Rodman Services. The Special Member shall cause Rodman to provide the Rodman Services to the Company to the extent and to the same level that such services are conducted by Rodman for the benefit of itself or any of its Affiliates. Rodman shall use commercially reasonable efforts to provide the Rodman Services in accordance with the policies, procedures and practices then in effect at Rodman and in a manner substantially similar to the manner in which such services are provided by Rodman for the benefit of itself or any of its

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Affiliates. The parties shall use good faith efforts to cooperate with each other in all matters relating to the provision or receipt of the Rodman Services.

          (f) License of Aceras Trademark. The Managing Member hereby grants to the Company a non-exclusive, non-transferable, worldwide, paid-up license (without the right to grant sublicenses) to use the name “ACERAS” (the “Trademark”) in connection with the operation of the Primary Business. Such license shall terminate as provided in Section 9.2(c) herein. The use of the Trademark by the Company shall be subject to the prior review and approval of the Managing Member, which approval shall not unreasonably be withheld. Neither the Company nor any Member shall use the Trademark in such a way as to (i) injure, damage, or otherwise negatively affect the Managing Member’s goodwill in the Trademark or (ii) otherwise dilute such Trademark. It is understood and acknowledged that the Managing Member is the owner of the Trademark. Neither the Company nor any Member shall at any time do, cause to be done, or permit any act or thing inconsistent with, contesting or in any way impairing or tending to impair such ownership. Neither the Company nor any Member shall challenge the title or ownership of the Managing Member to the Trademark or attack or contest the validity of the Trademark.

          (g) License of Certain Databases. The Managing Member hereby grants to the Company a non-exclusive, non-transferable, worldwide, paid-up license (without the right to grant sublicenses) to use certain databases of the Managing Member that have been developed (or are to be developed) and contain proprietary information regarding the Primary Business (the “Databases”). Such license shall terminate as provided in Section 9.2(c) herein at which time the Company shall, at the option of the Managing Member, return or destroy all copies of the Databases, provided, however, that the Special Member may maintain one copy of any such database if, in the opinion of its counsel, it is required to do so by applicable law or regulation. Should the Special Member be so required to maintain a copy of any such database, it shall maintain it in a secure fashion, so that access is made available only to legal and compliance personnel. Nothing contained herein shall be deemed to convey any title or ownership interest in the Databases or in any intellectual property contained therein to the Company. Neither the Company nor any Member shall take any action which will adversely affect the Managing Member’s proprietary rights in the Databases, including the Managing Member’s patent, copyright, trademark and trade secret rights. Neither the Company nor any Member shall make use of the Databases for any purpose other than to engage in the Primary Business. The Company may copy the Databases only as needed for backup and disaster-recovery purposes, provided that the Company reproduces all copyright notices and other proprietary notices, regardless of form, contained in the Databases. Neither the Company nor the Members shall reverse engineer, decompile or disassemble the Databases or any part thereof. The Company and the Members shall keep the Databases and all the intellectual property contained therein confidential and take all steps reasonably necessary to prevent the unauthorized disclosure thereof, but, in any event, such parties shall take at least such steps as those which such party takes to protect its own proprietary information. Neither the Company nor any Member shall disclose all or any portion of the Databases, the intellectual property contained therein or any passwords thereto to any third party without the prior written consent of the Managing Member.

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5.2. Officers; Delegation and Duties.

The Managing Member may elect any Person to serve as an officer of the Company. The Managing Member may assign titles to the officers they elect. Unless the Managing Member decides otherwise, if the title is one commonly used for officers of a business corporation, the assignment of such title shall constitute the delegation of the authority and duties that are normally associated with that office, subject to any specific delegation of authority and duties made by the Managing Member. Any number of offices may be held by the same Person. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed in accordance with the Budget in effect from time to time.

5.3. Removal.

          (a) Removal. Upon the occurrence of a Cause Event the Special Member shall thereafter have all of the power and authority designated to the Managing Member hereunder.

          (b) Cause Event. A “Cause Event” shall mean fraud, gross negligence or willful misconduct on the part of the Managing Member in the performance of its duties hereunder.

5.4. Compensation of Managing Member.

The Managing Member shall not receive any compensation for serving as the Managing Member. Each of the MM Affiliates shall enter into an employment agreement with the Company in a form mutually agreeable to the parties to such agreement and the Special Member.

5.5 Conflicts of Interest.

Subject to the other express provisions of this Agreement the Special Member at any time and from time to time may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including, ones which are or might be deemed to be in competition with the Company; provided, however, that with respect to any business venture that is within the scope of the Primary Business, the Special Member and each of its Affiliates shall first offer the Company the opportunity to undertake such venture through the Company on the same terms and conditions as follows: (i) the Special Member shall deliver a written notice to the Managing Member (the “Opportunity Notice”) setting forth the terms of such business venture in sufficient detail for the Managing Member to assess the nature of such business venture, including, but not limited to, the parties to be involved, the expected timing of the underlying transactions and the terms of payment; (ii) within two (2) business days after receipt of the Opportunity Notice, the Managing Member shall notify the Special Member in writing of the Managing Member’s decision whether the Company will seek to undertake such business venture; and (iii) if the Managing Member has elected to decline such business venture, or has not replied to the Special Member in writing within such two (2) business day period, then the Special Member or one of its Affiliates may enter into such business venture. The Company shall have a thirty (30) day period to enter into a term sheet in connection with each respective opportunity it elects to pursue pursuant to this Section 5.5 (and an additional thirty- (30-) day period if the Company has been actively engaged in negotiations with respect to such a term

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sheet) and upon the expiration of such period, if a term sheet has not been executed, the Special Member or one of its Affiliates may freely pursue such business venture.

Notwithstanding anything to the contrary contained in this Agreement, the Managing Member acknowledges that the receipt by Rodman or its affiliates of any fees in connection with transactions wherein Rodman has acted as an agent shall not be “a business venture that is within the scope of the Primary Business.”

5.6 Limitation of Liability.

The Managing Member shall not be liable, as such, for monetary damages for any action taken, or any failure to take any action, unless (i) the Managing Member has breached or failed in any material manner to perform its duties and (ii) the breach or failure to perform constitutes fraud, willful misconduct or gross negligence.

ARTICLE VI - MEMBERS

6.1. Action by Members; Voting

Except as otherwise may be specifically provided in this Agreement or required by the Act notwithstanding this Agreement, whenever any action is to be taken by vote of the Members, it shall be authorized upon receiving the affirmative vote of the Members holding more than fifty percent (50%) of the Membership Shares voting as a single class.

6.2. Action by Written Consent or Telephone Conference.

          (a) Action by Consent. Any action required or permitted to be taken at a meeting of Members may be taken without a meeting, without prior notice, and without a vote, upon the unanimous written consent of all Members. The consents shall be filed with the Managing Member.

          (b) Telephone Conferences. Members may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all Persons participating in the meeting can hear each other. Participation in a meeting pursuant to this subsection shall constitute presence in person at the meeting.

ARTICLE VII - INDEMNIFICATION OF MANAGING MEMBER, OFFICERS AND OTHER AUTHORIZED REPRESENTATIVES

7.1. Scope of Indemnification.

          (a) General Rule. The Company shall indemnify an Indemnified Person against any liability incurred in connection with any Proceeding in which the Indemnified Person may be involved as a party or otherwise by reason of the fact that the Indemnified Person is or was serving in an Indemnified Capacity, including liabilities resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, or negligence, except:

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(1)	where the indemnification is expressly prohibited by applicable law;
(2)	where the conduct of the Indemnified Person has been finally determined by a court of competent jurisdiction (i) to constitute fraud, gross negligence or willful misconduct, or (ii) to be based upon or attributable to the receipt by the Indemnified Person from the Company of a personal benefit to which the Indemnified Person is not legally entitled, or
(3)	to the extent the indemnification has been finally determined to be otherwise unlawful.

          (b) Partial Payment. If an Indemnified Person is entitled to indemnification in respect of a portion, but not all of any liabilities to which the Person may be subject, the Company shall indemnify the Indemnified Person to the maximum extent for such portion of the liabilities.

          Definitions. For purposes of this Article:

(1)	“Indemnified Capacity” means any and all past, present and future service by an Indemnified Person (in one or more capacities as a Member, Managing Member, an officer, employee or agent of the Company, or, at the request of the Company, as a director, officer, employee, agent, fiduciary or trustee of another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other entity or enterprise) in good faith and in a manner reasonably believed to be within the scope of the authority conferred on such Indemnified Person;
(2)	“Indemnified Person”, means any and all Members, employees and officers of the Company;
(3)	“Proceeding” means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the Company, its Members or otherwise; and

          (c) Covered Liabilities. The liabilities for which indemnification, contribution and advancement of expenses are provided under this Article include any damage, judgment amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense, of any nature (including reasonable attorneys’ fees and disbursements).

7.2. Proceedings Initiated By Indemnified Persons.

Notwithstanding any other provision of this Article, the Company shall not indemnify under this Article an Indemnified Person for any liability incurred in a Proceeding initiated (which shall not be deemed to include counterclaims or affirmative defenses) or participated in as an intervenor or amicus curiae by the Person seeking indemnification unless the initiation of or participation in

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the Proceeding is authorized, either before or after its commencement, by the affirmative vote of Members. This section shall not apply to successfully prosecuting or defending the rights of an Indemnified Person granted by or pursuant to this Article.

7.3. Advancing Expenses.

          (a) General Rule. The Company shall pay the expenses (including reasonable attorneys’ fees and disbursements) incurred in good faith by an Indemnified Person in advance of the final disposition of a Proceeding described in Section 7.1 or the initiation of or participation in which is authorized pursuant to Section 7.2 upon receipt of an undertaking by or on behalf of the Indemnified Person to repay the amount if it is ultimately determined by a court of competent jurisdiction that the person is not entitled to be indemnified by the Company pursuant to this Article. A showing of the financial ability of an Indemnified Person to repay an advance shall not be a prerequisite to the making of the advance. Except as provided in subsection (b), advancement of expenses shall be automatic upon receipt of the undertaking to repay the amount advanced and shall not require approval of the Members. Advancement of expenses shall not of itself give the Company the right to select or participate in the selection of, counsel for the Indemnified Person.

          (b) Exception. Subsection (a) shall not apply to a Proceeding in which an Indemnified Person is a defendant if the initiation of the Proceeding is authorized by the affirmative vote of the Members.

7.4. Securing of Indemnification Obligations.

To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the Company may, at its sole option, maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Company, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Members shall approve.

7.5. Time for Payment.

An Indemnified Person shall be entitled to indemnification within 30 days after a written request for indemnification, contribution or advancement of expenses has been delivered to the Managing Member.

7.6. Contribution.

If the indemnification provided for in this Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the Company in lieu of indemnifying such Indemnified Person hereunder, shall contribute the amount paid or payable by such Indemnified Person as a result of the Covered Liabilities to which the Indemnified Person may be subject in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Indemnified Person on the other.

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7.7. Mandatory Indemnification of Managing Member, Officers, Etc.

To the extent that an Indemnified Person has been successful on the merits or otherwise in defense of any action or proceeding relating to the Indemnified Person’s service as a representative of the Company or in defense of any claim, issue or matter therein, the Indemnified Person shall be indemnified against expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by the Indemnified Person in connection therewith.

7.8. Contract Rights; Amendment or Repeal.

Each Indemnified Person shall be a third party beneficiary of this Agreement. This Agreement is not intended to give, and shall not be construed as giving, any Person other than the Company, any Members, the Indemnified Persons (solely as provided in this Article VII) and their respective successors and permitted assigns, any interest or rights (including third party beneficiary rights) with respect to or in connection with any agreement or provision herein or any matter contemplated hereby. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations accrued or then existing.

7.9 Scope of Article.

The rights granted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of Members or otherwise both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by, or granted pursuant to, this Article shall continue as to a Person who has ceased to be an Indemnified Person in respect of matters arising prior to such time, and shall inure to the benefit of the heirs and personal representatives of such a Person.

7.10 Reliance on Provisions.

Each Person who shall act as an Indemnified Person of the Company shall be deemed to be doing so in reliance upon the rights provided by this Article.

ARTICLE VIII — BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

8.1. Maintenance of Books.

          (a) Financial Records. The Company shall keep books and records of accounts which shall be maintained in accordance with generally accepted accounting principles, or such other method as the Special Member determines is required for Federal income tax purposes, in accordance with the terms of this Agreement, except that the Capital Accounts of the Members shall be maintained in accordance with Annex B.

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          (b) Company Records. In addition to financial records required to be maintained under subsection (a), the Company shall keep the following records:

(1)	a list setting forth the full name and last known mailing address of each Member;
(2)	a copy of the Certificate and all amendments thereto;
(3)	copies of the Company’s Federal, state and local income tax returns and financial statements for the six most recent years or, if those returns and statements were not prepared for any reason, copies of the information and statements provided to the Members to enable them to prepare their federal, state and local state tax returns for the period;
(4)	copies of the currently effective written Operating Agreement and all amendments thereto, and copies of any operating agreements no longer in effect; and
(5)	minutes of the meetings of the Members.

          (c) Upon reasonable prior notice to the Managing Member, all Members shall have the right to inspect the books and records of the Company referenced in subsections (a) and (b) above.

8.2. Reports.

          (a) In General; Business Plan and Budget. The Special Member shall be responsible for the preparation of financial reports of the Company and for the coordination of the financial matters of the Company with the Company’s certified public accountants. The financial statements described in subsections (b) and (c) shall be prepared in accordance with accounting principles generally employed when financial records are kept in accordance with United States generally accepted accounting principles. The Company shall bear the costs of preparing the reports required by subsections (b) and (c).

          (b) Annual Reports. On or before the 90^th day following the end of each fiscal year of the Company, the Special Member shall cause each Member to be furnished with a balance sheet, an income statement, and a statement of changes in Member’s capital of the Company for, or as of the end of, that year, which have been audited by the Company’s certified public accountants, who shall be selected at the sole discretion of the Special Member. Additionally, on or before such 90^th day, the Special Member shall cause each Member to be furnished with a Schedule K-1 and any other information required by law to be furnished to the Member for reporting the Member’s distributive share of the annual income of the Company for federal income tax purposes.

          (c) Other Reports. The Special Member also may cause to be prepared or delivered such other reports as they may deem appropriate.

          (d) Valuation of Portfolio Companies.

(1) On or before the 15^th day of each April, July and October (beginning on July 15, 2008) the Managing Member shall prepare a report which sets forth the

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“fair value” of the investment of the Company in each Portfolio Company as of the end of the immediately preceding month. Such report shall set forth in reasonable detail the methodology utilized in determining the fair value of each such Portfolio Company (a “Valuation Report”). Each such Valuation Report shall be delivered to the Special Member within two days of completion.

(2)

On or before November 30, in each year (beginning on November 30, 2008) the Managing Member shall engage an “expert” (which expert shall be reasonably acceptable to the Special Member) to prepare a Valuation Report as of the last day of such year (a “Year-end Valuation Report”), which Year-end Valuation Report shall be delivered to each Member on or prior to the 20th day of January following the date of such Year-end Valuation Report.

8.3. Financial Accounts.

The Special Member shall establish and maintain one or more separate bank and investment accounts in the Company name with financial institutions and firms that the Special Member determine. Company funds may be invested in a manner the same as or similar to the Special Member’s investment of its own funds or investments by its affiliates. The prior consent of the Members shall not be required for the Company’s bank accounts and investment of the Company’s funds pursuant to this Section 8.3 so long as the bank and investment accounts are federally insured.

ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION

9.1. Dissolution.

          (a) The Company shall dissolve and its affairs shall be wound up on the first to occur of the following:

(1)	a vote of both the Managing Member and the Special Member;
(2)	entry of a decree of judicial dissolution of the Company under the Act;
(3)	at the sole election in writing of the Special Member (i) at any time after June 30, 2011, if the Company has not invested in at least two Portfolio Companies by June 30, 2011 and (ii) at any time after December 31, 2012, if the Company has not invested in at least four Portfolio Companies by December 31, 2012;
(4)	at the sole election in writing of the Special Member or the Managing Member at any time after December 31, 2013; or
(5)	at the election in writing of either Member if the other Member has breached any material obligation of such Member under this Agreement and such breach remains uncured for thirty days after written notice to the breaching Member of such breach; and further provided that such notice under this Section is provided within ten (10) business days of the expiration of such thirty (30) day cure period.

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          (b) For the avoidance of doubt, each obligation of the Special Member to make a Capital Contribution pursuant to Section 4.1 is a “material obligation” for purposes of this Section 9.1. Notwithstanding anything to the contrary contained herein, the right set forth in Section 9.1(a)(5) is not a Member’s exclusive remedy with respect to any such breach by the other Member.

          (c) The death, dissolution, retirement resignation, expulsion or bankruptcy of a Member or the occurrence of any other event that terminates the continued membership of a Member shall not cause a dissolution of the Company.

9.2. Liquidation and Termination.

          (a) Upon the dissolution of the Company, the Special Member shall act as liquidator or may appoint one or more representatives or Members as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Managing Member. The steps to be accomplished by the liquidator are as follows:

(1)	as promptly as possible after dissolution and again after final liquidation, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;
(2)	the liquidator shall first pay, satisfy or discharge from Company funds all of the debts, liabilities and obligations of the Company to its creditors or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine), all in accordance with the provisions of the Act as may be applicable;
(3)	after all of the payments required by paragraph (2) have been made, any remaining assets of the Company shall be distributed to the Members as follows:

                         (i) the liquidator shall use reasonable efforts to sell, or, in the case of securities, distribute, any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members;

                         (ii) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Account of the Members shall be adjusted consistent with Section B.2. of Annex B to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and

                         (iii) after completion of the steps in subparagraphs (i) and (ii), the remaining assets shall be distributed to the Members in accordance with their positive Capital Account

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balances and then in accordance with respective Membership Interests consistent with the distribution provisions of Section 4.5.

          (b) All distributions in kind to the Members shall be made subject to the liability of each distributee for costs, expenses, and liabilities relating to the assets distributed in kind theretofore incurred or for which the Company has committed prior to the date of termination and those costs, expenses, and liabilities shall be allocated to the distributees pursuant to this section. The distribution of cash and/or property to a Member in accordance with the provisions of this section constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company’s property. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.

          (c) Notwithstanding anything to the contrary contained herein, the license provided by Sections 5.1(f) and 5.1(g) will terminate upon the dissolution of the Company and the Managing Member shall retain ownership of all intellectual property rights in and to (i) the Trademark and (ii) the Databases. In addition, the parties acknowledge that the Managing Member shall be entitled to report the investment results of the Company as part of its so-called “track record” for all purposes under applicable law.

9.3. Deficit Capital Accounts.

Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or rule of law to the contrary, to the extent that the deficit, if any, in the Capital Account of any Member results from or is attributable to deductions and losses of the Company (including non-cash items such as depreciation), or distributions of money pursuant to this Agreement to all Members in proportion to their respective Percentage Interests, upon dissolution of the Company such deficit shall not be an asset of the Company and such Members shall not be obligated to contribute such amount to the Company to bring the balance of such Member’s Capital Account to zero.

9.4. Certificate of Dissolution.

On completion of the distribution of Company assets as provided herein, the Company is terminated, and the Managing Member (or such other person or persons as the Act may require or permit) shall file a Certificate of Dissolution with the Secretary of State of the State of Delaware and take such other actions as may be necessary to terminate the existence of the Company.

ARTICLE X - GENERAL PROVISIONS

10.1 Offset.

Whenever the Company is to pay any sum to any Member, any amounts that a Member owes the Company may be deducted from that sum before payment.

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10.2 Notices.

Except as expressly set forth to the contrary in this Agreement, all notices and other communications given under this Agreement must be in writing and must be given either by depositing that writing in the United States mail, addressed to the recipient postage paid, and registered or certified with return receipt requested or by delivering that writing to the recipient in person, by courier, by nationally recognized express mail delivery service or by facsimile transmission. A notice or other communication given under this Agreement is effective upon delivery or upon any refusal by an authorized representative of a Member to accept delivery. All notices and other communications to be sent to a Member shall be sent to the Member at the address for the Member shown on Annex A. All notices and other communications to be sent to an MM Affiliate (or former MM affiliate, as the case may be) shall be sent to the MM Affiliate (or former MM affiliate, as the case may be) at the address shown on Annex A. Whenever any notice is required to be given by law, the Certificate or this Agreement, a written waiver thereof signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice.

10.3 Entire Agreement.

This Agreement constitutes the entire agreement of the Members with respect to the Company and supersedes all prior contracts or agreements with respect thereto, whether oral or written.

10.4 Effect of Waiver or Consent.

A waiver or consent express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the period of the applicable statute of limitations has run.

10.5 Amendment.

          (a) This Agreement may be amended from time to time only if the amendment is approved by both the Managing Member and the Special Member at any annual or special meeting of the Members, or by unanimous written consent of the Members, provided, however, that without the consent of each of the Members to be adversely affected by an amendment, this Agreement may not be amended so as to (i) modify the limited liability of a Member, (ii) alter the interest of a Member in Profits and Losses or distributions of the Company or (iii) alter any capital commitment of a Member.

          (b) This Agreement may be amended in the manners prescribed herein, and all rights conferred upon Members in this Agreement are granted subject to this reservation.

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10.6 Binding Effect.

This Agreement is binding on and inures to the benefit of the Members and their respective heirs, personal representatives, successors and assigns.

10.7 Governing Law.

This Agreement shall be governed by and interpreted in accordance with the substantive laws of the State of Delaware, without reference to the principles governing the conflict of laws applicable in that or any other jurisdiction.

10.8 Severability.

If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by law.

10.9 Arbitration.

Except as otherwise provided in this Agreement, all disputes arising under this Agreement shall promptly be submitted to arbitration in New York, New York, before one arbitrator in accordance with the rules of the American Arbitration Association. The arbitrator may assess costs, including counsel fees, in such manner as he deems fair and equitable. The award of the arbitrator shall be final and binding upon all parties, and judgment upon the award may be entered in any court of competent jurisdiction.

10.10 Construction.

Whenever the context requires, the gender of any word used in this Agreement includes the masculine, feminine or neuter, and the number of any word includes the singular or plural. The words “include”, “includes” and “including” shall be deemed to be followed by the words “without limitation” whether or not such words are set forth herein. References to any statute or Treasury Regulations means such statute or regulations as amended at the time and include any successor legislation or regulations. The headings to the articles and sections are for convenience of reference and shall not affect the meaning or interpretation of this Agreement. All references to articles and sections refer to articles and sections of this Agreement, and all references to annexes are to annexes attached hereto, each of which is made a part hereof for all purposes.

10.11 Counterpart Originals.

This Agreement may be executed in counterpart originals and all executed counterparts shall, when taken together, constitute the entire Agreement. Facsimile signatures shall be valid and binding for all purposes.

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10.12.  Public Announcements.

Except as otherwise agreed to by the parties hereto, no party shall issue any report, statement or press release or otherwise make public statements with respect to this Agreement, the Company and/or the Company’s business, including the Primary Business, and no party shall use the name, trademark, trade name or logo of the other party, its Affiliates or their respective employee(s) except (i) to the extent reasonably required in connection with the operation of the business of the Company or the Special Member and in a manner consistent with prior public press releases by the parties hereto or (ii) as in the reasonable judgment of such party may be required by law or in connection with the obligations of a publicly held company under applicable laws and the listing standards of any stock exchange on which its securities are traded, in which case the parties hereto will use commercially reasonable efforts to consult with each other with respect to the issuance of a report, statement or press release as to the language of such report, statement or press release.

          IN WITNESS WHEREOF, the Members of the Company have caused this Operating Agreement to be executed as of the day and year first above written.

RODMAN PRINCIPAL INVESTMENTS, LLC
By:	/s/
ACERAS PARTNERS, LLC
By:	/s/

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Annex A

Member	Capital Contribution	Number of Membership Shares Owned	Membership Percentage
Rodman Principal Investments, LLC 1270 Avenue of the Americas New York, NY 10020 Attn.: Chief Executive Officer	$              5,000	10,000		50	%
Aceras Partners, LLC 15 Broad Street Apt# 1912 New York, NY 10005 Attention: Managing Member	$              5,000	10,000		50	%

MM Affiliates’ Addresses:

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Annex B

FINANCIAL AND TAX MATTERS

B.1. Definitions.

In addition to the terms defined in other provisions of this Agreement, the following terms shall have the meanings set forth below:

          “Adjusted Capital Account Deficit” shall mean with respect to any Member, the deficit balance, if any, in the Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments (i) increasing the Capital Account by any amounts that the Member is obligated to restore or is deemed to be obligated to restore pursuant to Treas. Reg. Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) reducing the Capital Account by the items described in Treas. Reg. Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treas. Reg. Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

          “Asset Adjusted Basis” with respect to any asset shall mean the assets adjusted basis for Federal income tax purposes, except as follows:

                    (1) The initial Asset Adjusted Basis of any asset contributed by a Member to the Company shall be the gross fair market value of the asset, as determined by the contributing Member and the Company.

                    (2) The Asset Adjusted Basis of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Special Member, as of the following times:

                              (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis contribution of money or other property;

                              (ii) the distribution by the Company to a Member of more than a de minimis amount of money or other property as consideration for an interest in the Company;

                              (iii) the liquidation of the Company for Federal income tax purposes within the meaning of Treas. Reg. Section 1.704-1(b)(2)(ii)(g); except that the adjustments pursuant to clauses (i) and (ii) above shall be made only if the Special Member reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company.

                    (3) The Asset Adjusted Basis of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution.

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                    (4) The Asset Adjusted Basis of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of those assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that the adjustments are taken into account in determining Capital Accounts pursuant to Treas. Reg. Section 1.704-1(b)(2)(iv)(m) and Section B.2, except that Asset Adjusted Basis shall not be adjusted pursuant to this paragraph (4) to the extent the Special Member reasonably determines that an adjustment pursuant to paragraph (2) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (4).

                    (5) If the Asset Adjusted Basis of an asset has been determined pursuant to paragraphs (1), (2), or (4), that Asset Adjusted Basis shall thereafter be adjusted by the Depreciation taken into account with respect to that asset for purposes of computing Profits and Losses.

          “Business Day” means any day other than a Saturday, a Sunday, or a holiday or such other day on which national banking associations in the City of New York are closed.

          “Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.

          “Company Minimum Gain” has the same meaning as “partnership minimum gain” set forth in Treas. Reg. Sections 1.704-2(b)(2) and 1.704-2(d).

          “Depreciation” shall mean for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Asset Adjusted Basis of an asset differs from its adjusted basis for Federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Asset Adjusted Basis as the Federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; except that if the Federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Asset Adjusted Basis using any reasonable method selected by the Special Member, and if the Company uses the “remedial allocation method” under Treas. Reg. Section 1.704-3(d) with respect to any asset Depreciation for that asset shall be computed in accordance with Treas. Reg. Section 1.704-3(d)(2).

          “Member Nonrecourse Debt” has the same meaning as “partner nonrecourse debt” set forth in Treas. Reg. Sections 1.704-2(b)(4) and 1.704-2(i).

          “Member Nonrecourse Debt Minimum Gain” shall have the same meaning as “partner nonrecourse debt minimum gain” set forth in Treas. Reg. Section 1.704-2(i) and shall be determined in accordance with the principles of that Section.

          “Member Nonrecourse Deductions” has the same meaning as “partner nonrecourse deductions” set forth in Treas. Reg. Sections 1.704-2(i)(1) and 1.704-2(i)(2).

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          “Nonrecourse Deductions” are deductions having the meaning set forth in Treas. Reg. Sections 1.704-2(b)(1) and 1.704-2(c).

          “Profits and Losses” shall mean for each fiscal year or other period, an amount equal to the Company’s taxable income or loss for that year or period, determined in accordance with Code Section 703(a) (for these purposes, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

                    (1) Any income of the Company that is exempt from Federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to the foregoing shall be added to such taxable income or loss.

                    (2) Any expenditures of the Company described in Code Section 705(a)(2)(B) or that are treated as Code Section 705(a)(2)(B) expenditures pursuant to Treas. Reg. Section 1.704-1 (b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to the foregoing shall be subtracted from such taxable income or loss.

                    (3) In the event the Asset Adjusted Basis of any Company asset is adjusted pursuant to paragraph (2), (3) or (4) of the definition of Asset Adjusted Basis, the amount of the adjustment shall be taken into account as gain or loss from the disposition of the asset for purposes of computing Profits or Losses.

                    (4) Gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the Asset Adjusted Basis of the property disposed of, notwithstanding that the adjusted tax basis of the property differs from its Asset Adjusted Basis.

                    (5) In lieu of the depreciation, amortization, and other cost recovery deduction taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for the fiscal year or other period, computed in accordance with the definition of Depreciation under this Agreement.

                    (6) Notwithstanding the above, any items that are specially allocated pursuant to Sections B.5, B.6 or B.7 shall not be taken into account in computing Profits and Losses.

B.2. Preparation and Maintenance of Capital Accounts.

          (a) The Capital Account for each Member shall:

                    (1) be increased by (i) the amount of money contributed by that Member to the Company, (ii) the fair market value of property contributed by that Member to the Company (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (iii) allocations to that Member of Profits and any other Company income and gain (or items thereof), including income and gain exempt from

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tax and income and gain described in Treas. Reg. Section 1.704- 1 (b) (2)(iv)(g), but excluding income and gain described in Treas. Reg. Section 1.704-1(b)(4)(1), and

                    (2) be decreased by (i) the amount of money distributed to that Member by the Company, (ii) the fair market value of property distributed to that Member by the Company (net of liabilities secured by the distributed property that the Member is considered to assume or take subject to under Section 752 of the Code), (iii) allocations to that Member of expenditures of the Company described in Section 705(a)(2)(B) of the Code, and (iv) allocations of Losses and any other Company loss and deduction (or items thereof), including loss and deduction described in Treas. Reg. Section 1.704-1(b)(2)(iv)(g), but excluding items described in clause (2)(iii) above and loss or deduction described in Treas. Reg. Section 1.704-1(b)(4)(i) or Section 1.704-1(b)(4)(iii).

          (b) The Members’ Capital Accounts also shall be maintained and adjusted as permitted by the provisions of Treas. Reg. Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treas. Reg. Section 1.704-1(b)(2)(iv) and Section 1.704-1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Treas. Reg. Section 1.704-1(b)(2)(iv)(g). On the transfer or all or part of a Membership Interest, the Capital Account of the transferor that is attributable to the transferred Membership Interest or part thereof shall carry over to the transferee Member in accordance with the provisions of Treas. Reg. Section 1.704-1(b)(2)(iv)(1).

B.3. Profits.

After giving effect to the special allocations set forth in Sections B.5 and B.6, Profits for any fiscal year shall be allocated to the Members in accordance with their Percentage Interests in the Company.

B.4. Losses.

All losses shall first be allocated to the Special Member to the extent that the Special Member’s capital account exceeds the Managing Member’s capital account. Thereafter, except as otherwise set forth in this Section B.4, after giving effect to the special allocations set forth in Sections B.5 and B.6, Losses for any fiscal year shall be allocated among the Members in proportion to their respective Percentage Interests, subject to the limitation in Section B.4(2) below.

The Losses allocated under this Section B.4 shall not exceed the maximum amount of Losses that may be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any fiscal year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section B.4, the limitation set forth in this sentence shall be applied on a Member by Member basis so as to allocate the maximum permissible Losses to each Member under Treas. Reg. Section 1.704-1(b)(2)(ii)(d).

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B.5. Special Allocations.

The following special allocations shall be made in the following order:

                    (1) Minimum Gain Chargeback. Notwithstanding any other provision of this Annex B, if there is a net decrease in Company Minimum Gain during any Company taxable year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in accordance with Treas. Reg. Section 1.704-2(f). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. This Section B.5(l) is intended to comply with the minimum gain chargeback requirement in such Section of the Treasury Regulations and shall be interpreted consistently therewith.

                    (2) Member Minimum Gain Chargeback. Notwithstanding any other provision of this Agreement except Section B.5(l), if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Company fiscal year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treas. Reg. Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in accordance with Treas. Reg. Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Treas. Reg. Section 1.704-2(i)(4). This Section B.5(2) is intended to comply with the minimum gain chargeback requirement in that Section of the Treasury Regulations and shall be interpreted consistently therewith.

                    (3) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1 (b)(2)(ii)(d)(5), or 1.704-1 (b)(2)(ii)(d)(6) that would create an Adjusted Capital Account Deficit for such Member, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section B.5(3) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Agreement have been tentatively made as if this Section B.5(3) were not in the Agreement.

                    (4) Gross Income Allocation. In the event any Member has an Adjusted Capital Account Deficit at the end of any Company fiscal year, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section B.5(4) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Agreement have been tentatively made as if Section B.5(3) and this Section B.5(4) were not in the Agreement.

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                    (5) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other period shall be allocated among the Members in proportion to their respective Percentage Interests.

                    (6) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Member who bills the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treas. Reg. Section 1.704-2(i).

B.6. Curative Allocations.

The allocations set forth in Section B.4 and in Section B.5 (the “Regulatory Allocations”) are intended to comply with certain requirements of Treas. Reg. Section 1.704-1 (b). Notwithstanding any other provisions of this Agreement (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Profits, Losses, and items of income, gain, loss, and deduction among the Members so that to the extent possible, the net amount of such allocations of Profits, Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred. Notwithstanding the preceding sentence, Regulatory Allocations relating to (i) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a reduction in Company Minimum Gain, and (ii) Member Nonrecourse Deductions shall not be taken into account except to the extent that there has been a reduction in Member Minimum Gain.

B.7. Tax Allocations: Code Section 704(c).

          (a) In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for Federal income tax purposes and its initial Asset Adjusted Basis.

          (b) In the event the Asset Adjusted Basis of any Company asset is adjusted pursuant to paragraph (2) of the definition of Asset Adjusted Basis, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for Federal income tax purposes and its Asset Adjusted Basis in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder.

          (c) Any elections or other decisions relating to allocations pursuant to this Section B.7 shall be made by the Special Member in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section B.7 are solely for purposes of Federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

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B.8. Miscellaneous Allocation Provisions.

          (a) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the Special Member using any permissible method under Code Section 706 and the Treasury Regulations promulgated thereunder.

          (b) Except as otherwise provided in this Agreement, all items of Company income gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Profits or Losses, as the case may be, for the year.

          (c) For the purpose of determining each Member’s share of excess nonrecourse liabilities pursuant to Treas. Reg. Section 1.752-3(a)(3), and solely for such purpose, each Member’s interest in Company Profits is hereby specified to be such Member’s Percentage Interest.

          (d) In the event of the dissolution of the Company, Profits shall first be allocated to Members to the extent necessary to cause their Capital Accounts to be proportionate to their Membership Interests.

B.9. Establishment of Reserves.

The Managing Member shall have the right and obligation to establish reasonable reserves for maintenance, improvements, acquisitions, capital expenditures and other contingencies, such reserves to be funded with such portion of the operating revenues of the Company for any fiscal year as the Managing Member may deem necessary or appropriate for that purpose.

B.10. Tax Returns.

The Special Member shall cause to be prepared and filed all necessary Federal and state income tax returns for the Company, including making the elections described in Section B.11. Each Member shall furnish to the Special Member all pertinent information in its possession relating to Company operations that is necessary to enable the Company’s income tax returns to be prepared and filed.

B.11. Tax Elections.

          (a) To the extent permitted by applicable tax law, the Company shall make the following elections on the appropriate tax returns,

                    (1) to adopt the calendar year as the Company’s fiscal year,

                    (2) to adopt the equity method of accounting and to keep the Company’s books and records on the income-tax method;

                    (3) if a transfer of a Membership Interest as described in Section 743 of the Code occurs, on written request of any transferee Member, or if a distribution of Company property is

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made on which gain described in Section 734(b)(1)(A) of the Code is recognized or there is an excess of adjusted basis as described in Section 734(b)(1)(B) of the Code, to elect, pursuant to Section 754 of the Code, to adjust the basis of Company properties;

                    (4) to elect to amortize the organizational expenses of the Company and the start-up expenditures of the Company ratably over a period of 60 months as permitted by Sections 195 and 709(b) of the Code; and

                    (5) any other election the Special Member may deem appropriate and in the best interests of the Members.

          (b) Neither the Company nor any Member may make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter I of subtitle A of the Code or any similar provisions of applicable state law, and no provision of this Agreement shall be construed to sanction or approve such an election.

B.12. Tax Matters Partner.

          (a) Special Member is hereby designated as the “tax matters partner” of the Company pursuant to Section 6231 (a)(7) of the Code. The tax matters partner shall take such action as may be necessary to cause each other Member to become a “notice partner” within the meaning of Section 6223 of the Code. The tax matters partner shall inform each other Member of all significant matters that may come to its attention in its capacity as tax matters partner by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. The tax matters partner shall promptly furnish to each Member a copy of each tax return prepared and filed in accordance with Section B.10, together with any schedules or other information that the Member may require in connection with the Member’s own tax affairs.

          (b) The Special Member shall cause each Member to be furnished with a Schedule K-1 and any other information required by law to be furnished to the Member for reporting the Member’s distributive share of the annual income of the Company for federal income tax purposes.

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ANNEX C

RODMAN SERVICES

Services to be Provided to Company:

1)	Basic legal support – for day-to-day operations (CDAs, Contracts with Vendors, consulting agreements, etc.)
2)	IT support
3)	Payroll and processing
4)	Benefits
5)	Office space & furniture
6)	Office equipment – laptops and desktops, software subscriptions, internet, email, blackberry, copiers, printers, phones, etc.
7)	Industry subscriptions and data sources to which Rodman currently subscribes or has access that would be useful or necessary for the Company’s business. Subscriptions could include:
		a.	Thomson One or Bloomberg and Firstcall
		b.	Thomson Pharma
		c.	Clinical Advisors or similar service
		d.	Biocentury
		e.	Bioworld
		f.	Other trade publications, databases and services to which Rodman has subscriptions
		g.	Datamonitor
		h.	IMS or NDC
8)	Access to Rodman analysts and all research products
9)	Ability to attend Rodman analyst events with consultants and advisors
10)	Access to all Rodman sponsored healthcare conferences and events
11)	Access to Rodman’s consultants or advisors
12)	Record keeping and preparation of reports as necessary under Article VIII and required for Special Member’s use.
13)	Support necessary for financial and tax matters as described in Annex B

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EXHIBIT I

INVESTMENT NOTICE INFORMATION

Each Investment Notice provided hereunder pursuant to Section 4.1(a)(ii) shall contain the following information:

A.	the name of the Prospective Investee;
B.	the nature of the investment (i.e., stock, convertible debt, partnership interest, etc.);
C.	the expected timing of the funding of the investment (which may not provide for any amount to be invested in the Prospective Investee prior to the 30th day after the giving of the Investment Notice); and
D.	the expected total amount that the Company intends to invest in the Prospective Investee, which amount may not be in excess of $500,000 (the “Investment Amount”) without the consent of the Special Member, which consent the Special Member may withhold in its sole discretion..

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Edward Rubin, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Rodman & Renshaw Capital Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2010
	/s/ Edward Rubin
	Edward Rubin
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, David J. Horin, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Rodman & Renshaw Capital Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 15, 2010	/s/ David J. Horin
	David J. Horin
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report of Rodman & Renshaw Capital Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2010, as filed with the U.S. Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), we, the undersigned, Edward Rubin, Chief Executive Officer of the Company, and David J. Horin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

          A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

	/s/ Edward Rubin
	Edward Rubin
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ David J. Horin
	David J. Horin
	Chief Financial Officer
	(Principal Financial Officer)
Dated: November 15, 2010