10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 June 30, 2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35924

RCS Capital Corporation

(Exact name of registrant as specified in its charter)

Delaware	38-3894716
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
405 Park Avenue, 14th Floor New York, New York	10022
(Address of Principal Executive Office)	(Zip Code)

(866) 904-2988

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed 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 x 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.

Large accelerated filer o		Accelerated filer x
Non-accelerated filer o	(Do not check if a smaller reporting company)	Smaller reporting company o

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

The number of outstanding shares of the registrant’s Class A common stock and Class B common stock on August 10, 2015 was 77,296,297 shares and one share, respectively.

RCS Capital Corporation and Subsidiaries

Index to Consolidated Financial Statements

Form 10-Q

June 30, 2015

	Page
PART I — FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Consolidated Statements of Financial Condition as of June 30, 2015 (unaudited) and December 31, 2014	1
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014 (unaudited)	2
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014 (unaudited)	3
Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2015 and 2014 (unaudited)	4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (unaudited)	5
Notes to Consolidated Financial Statements (unaudited)	6
Note 1. Organization and Description of the Company	6
Note 2. Recent Acquisitions	6
Note 3. Summary of Significant Accounting Policies	17
Note 4. Fair Value Disclosures	19
Note 5. Available-for-Sale Securities	26
Note 6. Accounts and Notes Receivable	26
Note 7. Goodwill and Intangible Assets	28
Note 8. Long-Term Debt	31
Note 9. Derivative Contracts	33
Note 10. Preferred Stock	35
Note 11. Stockholders’ Equity	37
Note 12. Equity-Based Compensation	38
Note 13. Income Taxes	40
Note 14. Earnings Per Share	41
Note 15. Off-Balance Sheet Risk and Concentrations	42
Note 16. Commitments and Contingencies	43
Note 17. Net Capital Requirements	47
Note 18. Related Party Transactions	47
Note 19. Employee Benefits	49
Note 20. Segment Reporting	49
Note 21. Subsequent Events	52
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	56
Item 3. Quantitative and Qualitative Disclosures About Market Risk	81
Item 4. Controls and Procedures	82
PART II — OTHER INFORMATION	83
Item 1. Legal Proceedings	83
Item 1A. Risk Factors	83
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities	84
Item 3. Defaults Upon Senior Securities	84
Item 4. Mine Safety Disclosures	84
Item 5. Other Information	84
Item 6. Exhibits	85
SIGNATURES	86

i

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

RCS CAPITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(Dollars in thousands, except shares and par value amounts)

	June 30, 2015			December 31, 2014
	(Unaudited)
Assets
Cash and cash equivalents	$	175,652		$	199,435
Cash and securities segregated under federal and other regulations	19,073			19,030
Available-for-sale securities	2,701			11,473
Trading securities	10,777			10,242
Accounts receivable:
Due from related parties	19,725			31,580
Due from non-related parties	155,598			141,309
Prepaid expenses and other assets	81,900			85,674
Property and equipment (net of accumulated depreciation of $9,527 and $5,488, respectively)	39,276			24,746
Deferred compensation plan investments	86,654			83,456
Notes receivable (net of allowance of $1,086 and $914, respectively)	75,039			68,989
Deferred financing fees	36,993			27,808
Intangible assets (net of accumulated amortization of $122,214 and $68,106, respectively)	1,122,969			1,243,525
Goodwill	530,949			519,361
Total assets	$	2,357,306		$	2,466,628
Liabilities, Mezzanine Equity and Stockholders’ Equity
Payable to customers	$	22,764		$	13,832
Commissions payable	113,556			102,056
Accrued expenses and accounts payable:
Due to related parties	1,847			2,479
Due to non-related parties	111,551			93,898
Derivative contracts	39,647			81,032
Other liabilities	51,147			37,036
Deferred compensation plan accrued liabilities	87,297			84,963
Net deferred tax liability	220,639			266,202
Contingent and deferred consideration	109,298			145,430
Long-term debt	804,285			804,411
Total liabilities	1,562,031			1,631,339
Commitments and contingencies — See Note 16 for more information.	—			—
Mezzanine Equity
11% Series B Preferred Stock $0.001 par value, 100,000,000 shares authorized, 5,800,000 issued and outstanding as of June 30, 2015, and December 31, 2014	152,458			146,700
7% Series C Convertible Preferred Stock $0.001 par value, 100,000,000 shares authorized, 4,400,000 issued and outstanding as of June 30, 2015, and December 31, 2014	114,145			111,288
Stockholders’ Equity
Class A common stock, $0.001 par value, 300,000,000 shares authorized, 77,151,089 issued and outstanding as of June 30, 2015, and 100,000,000 shares authorized, 70,571,540 issued and outstanding as of December 31, 2014	77			71
Class B common stock, $0.001 par value, 100,000,000 shares authorized, 1 issued and outstanding as of June 30, 2015, and December 31, 2014	—			—
Additional paid-in capital	755,808			723,113
Accumulated other comprehensive income (loss)	80			(120		)
Retained deficit	(259,106		)	(179,804		)
Total stockholders’ equity	496,859			543,260
Non-controlling interests	31,813			34,041
Total liabilities, mezzanine and stockholders’ equity	$	2,357,306		$	2,466,628

See Notes to Consolidated Financial Statements.

1

RCS CAPITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues:
Retail commissions	$	283,426		$	175,229		$	561,494		$	223,118
Selling commissions:
Related party products	55,588			169,591			100,071			262,011
Non-related party products	15,124			2			28,417			159
Dealer manager fees:
Related party products	26,322			78,632			47,262			123,070
Non-related party products	6,802			—			12,782			72
Investment banking fees:
Related party products	6,489			17,677			11,903			49,409
Non-related party products	—			3,375			—			3,375
Advisory and asset-based fees (non-related party)	176,901			98,822			334,167			130,533
Transfer agency revenue (related party products)	4,745			5,638			9,011			9,024
Services revenue:
Related party products	8,511			12,066			15,274			20,166
Non-related party products	3,165			101			6,037			182
Reimbursable expenses:
Related party products	465			1,803			799			7,836
Non-related party products	—			33			154			63
Investment fee revenue	10,927			—			23,093			—
Transaction fees	44,807			23,015			92,794			29,596
Other revenue	35,094			59,035			60,692			59,773
Total revenues	678,366			645,019			1,303,950			918,387
Expenses:
Retail commissions and advisory	409,101			253,132			794,978			321,602
Wholesale commissions:
Related party products	36,730			147,148			64,873			234,144
Non-related party products	14,118			2			26,802			159
Wholesale reallowance:
Related party products	5,839			22,794			10,318			35,615
Non-related party products	2,370			—			4,560			29
Investment fee expense	6,387			—			13,273			—
Internal commissions, payroll and benefits	84,147			73,385			166,423			116,744
Conferences and seminars	12,325			11,015			21,195			18,011
Travel	4,377			2,925			8,420			5,417
Marketing and advertising	4,047			3,056			8,213			6,130
Professional fees	16,207			9,933			28,290			14,533
Data processing	11,085			8,772			21,531			12,549
Quarterly fee (related party)	—			248			—			2,030
Acquisition and related integration costs	5,200			6,546			7,656			13,263
Interest expense	18,603			12,699			37,045			12,930
Occupancy	8,438			5,792			16,182			8,831
Depreciation and amortization	29,152			15,529			58,502			17,546
Goodwill and intangible assets impairment charge	156,801			—			156,801			—
Clearing and exchange fees	10,803			5,118			20,981			7,106
Outperformance bonus (related party)	—			2,559			—			9,709
Change in fair value of contingent and deferred consideration	(54,023		)	156			(50,367		)	163
Other expenses	14,881			4,898			28,916			7,512
Total expenses	796,588			585,707			1,444,592			844,023
Income (loss) before taxes	(118,222		)	59,312			(140,642		)	74,364
Provision for (benefit from) income taxes	(52,073		)	10,840			(59,112		)	13,743
Net income (loss)	(66,149		)	48,472			(81,530		)	60,621
Less: net income (loss) attributable to non-controlling interests	(1,002		)	256			(2,228		)	9,120
Less: preferred dividends and deemed dividend	7,001			198,077			13,602			198,077
Net loss attributable to Class A common stockholders	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Per Share Data
Net (loss) income per share attributable to Class A common stockholders (Note 14)
Basic	$	(0.97	)	$	(3.49	)	$	(1.28	)	$	(4.21	)
Diluted	$	(1.11	)	$	(3.59	)	$	(1.59	)	$	(4.53	)
Weighted-average basic shares	74,006,580			43,030,018			72,576,193			34,975,636
Weighted-average diluted shares	88,605,947			48,295,269			87,175,560			37,622,806
Cash dividend declared per common share	$	—		$	0.18		$	—		$	0.36

See Notes to Consolidated Financial Statements.

2

RCS CAPITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income	$	(66,149	)	$	48,472		$	(81,530	)	$	60,621
Other comprehensive income (loss) adjustments, net of tax:
Available-for-sale securities	(52		)	92			200			508
Total other comprehensive income (loss), net of tax	(52		)	92			200			508
Total comprehensive income	(66,201		)	48,564			(81,330		)	61,129
Less: net comprehensive income (loss) attributable to non-controlling interests	(1,002		)	256			(2,228		)	9,575
Less: preferred dividends and deemed dividends	7,001			198,077			13,602			198,077
Net comprehensive income (loss) attributable to RCS Capital Corporation	$	(72,200	)	$	(149,769	)	$	(92,704	)	$	(146,523	)

See Notes to Consolidated Financial Statements.

3

RCS CAPITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(Dollars in thousands, except share amounts)

	Class A common stock				Class B common stock
	Number of Shares		Par Value		Number of Shares		Par Value			Additional Paid-In Capital				Retained Earnings (Deficit)			Accumulated Other Comprehensive Gain (Loss)			Total Stockholders’ Equity			Non-Controlling Interests			Stockholders’ Equity and Non-controlling Interest
Balance, December 31, 2013	13,764,929		$	14	24,000,000		$	24		$	180,528			$	1,164		$	(46	)	$	181,684		$	34,670		$	216,354
Equity-based compensation (OPP)	—		—		—		—			—				—			—			—			210			210
Unrealized gain on available for sale securities, net of tax	—		—		—		—			—				—			47			47			455			502
Net income	—		—		—		—			—				917			—			917			8,840			9,757
Balance, February 10, 2014	13,764,929		14		24,000,000		24			180,528				2,081			1			182,648			44,175			226,823
Exchange Transactions	23,999,999		24		(23,999,999	)	(24		)	44,676			(a)	—			—			44,676			(43,473		)	1,203
Equity-based compensation (OPP)	—		—		—		—			—				—			—			—			9,499			9,499
Issuance of restricted stock awards	2,366,703		3		—		—			14,214				(5,243		)	—			8,974			—			8,974
Unrealized gain on available-for-sale securities, net of tax	—		—		—		—			—				—			6			6			—			6
Public offering of common stock, net of offering costs	19,870,248		20		—		—			373,851				—			—			373,871			—			373,871
Private offering of common stock, net of offering costs	2,469,136		2		—		—			47,725				—			—			47,727			—			47,727
Shares issued in connection with the Summit acquisition	498,884		—		—		—			10,431				—			—			10,431			—			10,431
Shares issued in connection with the J.P. Turner acquisition	239,362		—		—		—			4,860				—			—			4,860			—			4,860
Dividends declared on LTIP units	—		—		—		—			—				—			—			—			(280		)	(280		)
Net loss	—		—		—		—			(161,997		)		14,504			—			(147,493		)	280			(147,213		)
Dividend equivalents on restricted stock, net of tax	—		—		—		—			(327		)		(384		)	—			(711		)	—			(711		)
Dividends declared on Class A common stock	—		—		—		—			(4,770		)		(10,958		)	—			(15,728		)	—			(15,728		)
Balance June 30, 2014	63,209,261		$	63	1		$	—		$	509,191			$	—		$	7		$	509,261		$	10,201		$	519,462
Balance, December 31, 2014	70,571,540		$	71	1		$	—		$	723,113			$	(179,804	)	$	(120	)	$	543,260		$	34,041		$	577,301
Retirement of shares	(161	)	—		—		—			—				—			—			—			—			—
Preferred stock conversion(b)	2,042,022		2		—		—			(2		)		—			—			—			—			—
First Allied restricted stock plan issuance	69,427		—		—		—			1,283				—			—			1,283			—			1,283
Issuance of restricted stock awards and warrants	1,236,490		1		—		—			9,168				—			—			9,169			—			9,169
Shares issued in connection with the settling of contingent consideration due to the JP Turner acquisition	245,813		—		—		—			2,730				—			—			2,730			—			2,730
Shares issued in connection with the VSR acquisition	2,436,429		2		—		—			26,772				—			—			26,774			—			26,774
Shares issued in connection with the Girard acquisition	549,529		1		—		—			6,346				—			—			6,347			—			6,347
Unrealized gain on available-for-sale securities, net of tax	—		—		—		—			—				—			200			200			—			200
Net loss	—		—		—		—			(13,602		)		(79,302		)	—			(92,904		)	(2,228		)	(95,132		)
Balance, June 30, 2015	77,151,089		$	77	1		$	—		$	755,808			$	(259,106	)	$	80		$	496,859		$	31,813		$	528,672

_____________________

(a)Includes deferred tax impact of $1.2 million due to the exchange of Class B units in the Company’s operating subsidiaries for shares of Class A common stock.

(b) Represents shares of Class A common stock issued on February 23, 2015 on account of shares of Series A preferred stock submitted for conversion on December 12, 2014.

See Notes to Consolidated Financial Statements.

4

RCS CAPITAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net (loss) income	$	(81,530	)	$	60,621
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	4,394			2,014
Amortization	54,108			15,532
Goodwill and intangible assets impairment	156,801			—
Equity-based compensation	9,168			18,683
Deferred income taxes	(62,040		)	3,668
Loss/(gain) on the sale of available-for-sale securities	369			(171		)
Change in fair value of contingent and deferred consideration	(50,367		)	163
Gain on derivative contracts	(56,393		)	(58,452		)
Deferred compensation plan investments, net	(864		)	135
Forgiveness of notes receivable	4,124			2,507
Change in fair value of trading securities	576			(908		)
Deferred financing fees amortization	6,178			1,280
Other	(213		)	(36		)
Increase (decrease) resulting from changes in:
Cash and securities segregated under federal and other regulations	(43		)	2,000
Trading securities	5,190			(301		)
Accounts receivable:
Due from related parties	11,855			31,018
Due from non-related parties	(13,792		)	(32,521		)
Prepaid expenses and other assets	5,902			(2,372		)
Notes receivable	(10,294		)	(7,160		)
Payable to customers	8,932			(6,588		)
Commissions payable	11,261			36,117
Accrued expenses and accounts payable:
Due to related parties	(632		)	(2,629		)
Due to non-related parties	17,544			(16,048		)
Other liabilities	4,380			(77,161		)
Payment of contingent consideration in excess of acquisition date fair value	(2,680		)	(18		)
Net cash provided by (used in) operating activities	21,934			(30,627		)
Cash flows from investing activities:
Change in restricted cash	—			(26,000		)
Purchases of available-for-sale securities	(26		)	(215		)
Proceeds from the sale of available-for-sale securities	8,780			9,013
Purchase of property and equipment	(7,286		)	(2,221		)
Proceeds from the written put option	—			21,216
Payment for Cetera acquisition, net of cash acquired	—			(891,101		)
Payment for Summit acquisition, net of cash acquired	—			(33,374		)
Payment for Hatteras acquisition, net of cash acquired	—			(29,195		)
Payment for J.P. Turner acquisition, net of cash acquired	—			(2,615		)
Payment for SK Research — intangible assets and property and equipment	—			(10,092		)
Payment for VSR acquisition, net of cash acquired	(19,104		)	—
Payment for Girard acquisition, net of cash acquired	(9,107		)	—
Net cash used in investing activities	(26,743		)	(964,584		)
Cash flows from financing activities:
Proceeds from the issuance of first lien revolving facility and term loans, respectively	23,000			685,633
Payments on long-term debt	(21,831		)	(1,352		)
Payment of contingent and deferred consideration	(7,877		)	(13,154		)
Net proceeds from the issuance of convertible notes (including embedded derivative)	—			83,551
Net proceeds from issuance of Series A convertible preferred stock (including embedded derivative)	—			197,504
Net proceeds from issuance of common stock	—			421,598
Dividends paid	—			(5,515		)
Payment of consent and arrangement fees	(12,266		)	—
Net cash (used in) provided by financing activities	(18,974		)	1,368,265
Net (decrease) increase in cash	(23,783		)	373,054
Cash and cash equivalents, beginning of period	199,435			70,059
Cash and cash equivalents, end of period	$	175,652		$	443,113

See Notes to Consolidated Financial Statements.

5

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

1.Organization and Description of the Company

Formation. RCS Capital Corporation (“we”, “us”, “our company” or the “Company”) is a holding company incorporated under the laws of the State of Delaware on December 27, 2012, originally named 405 Holding Corporation. On February 19, 2013, 405 Holding Corporation changed its name to RCS Capital Corporation. The Company was initially formed to hold Realty Capital Securities, LLC (“Realty Capital Securities”), RCS Advisory Services, LLC (“RCS Advisory”) and American National Stock Transfer, LLC (“ANST” and together with Realty Capital Securities and RCS Advisory, the “Original Operating Subsidiaries”) and to grow business lines under the Original Operating Subsidiaries.

During the year ended December 31, 2014, the Company entered into a series of restructuring transactions beginning in February and ending in December (the “2014 Restructuring Transactions”) designed to help simplify the Company’s capital structure. As a result of the completion of the 2014 Restructuring Transactions, the non-controlling interests in the Original Operating Subsidiaries and RCS Capital Holdings, LLC (“RCS Holdings”), an intermediate holding company formed to own the Original Operating Subsidiaries in connection with the 2014 Restructuring Transactions, were eliminated. Pursuant to the 2014 Restructuring Transactions, (i) the Company formed RCS Holdings, (ii) all of the Class B Units in each of the Original Operating Subsidiaries (each, an “Original Operating Subsidiaries Unit”), which had been held by RCAP Holdings, LLC (“RCAP Holdings”) were exchanged for shares of Class A common stock of the Company, par value $0.001 per share (“Class A common stock”), or canceled, (iii) all but one share of the Class B common stock of the Company, par value $0.001 per share (“Class B common stock”), was canceled, (iv) RCS Capital Management, LLC (“RCS Capital Management”), the Company’s external services provider, contributed to RCS Holdings all of its LTIP Units in the Original Operating Subsidiaries in exchange for LTIP Units in RCS Holdings, (v) a portion of the LTIP Units in RCS Holdings, all of which were held by the individual members (the “Members”) of RCS Capital Management, who were also members of RCAP Holdings, were determined by the board of directors to be earned in April 2014 and the balance of the LTIP Units in RCS Holdings not earned at that date were terminated, and (vi) all of the Class C Units in RCS Holdings held by the Members, which were received upon automatic conversion of the LTIP Units in RCS Holdings due to their early vesting on December 31, 2014, were exchanged for shares of Class A common stock.

During the year ended December 31, 2014, the Company also completed a public offering and a concurrent private offering of Class A common stock and issued long-term debt and preferred stock. This allowed the Company to undertake a series of acquisitions, which are described in Note 2, aimed at diversifying the Company’s revenue stream. The Company is now engaged in the Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management and Investment Research businesses.

2.Recent Acquisitions

During the year ended December 31, 2014, the Company completed the acquisitions of Cetera Financial Holdings, Inc. (“Cetera”), Summit Financial Services Group, Inc. (“Summit”), J.P. Turner & Company, LLC and J.P. Turner & Company Capital Management, LLC (together, “J.P. Turner”), Hatteras Funds Group (“Hatteras”), First Allied Holdings Inc. (“First Allied”), Investors Capital Holdings, Ltd. (“ICH”), Validus/Strategic Capital Partners, LLC (“StratCap”), Trupoly, LLC (“Trupoly”) and a controlling interest in Docupace Technologies, LLC (“Docupace”) and during the six months ended June 30, 2015, the Company completed the acquisitions of VSR Group, Inc. (“VSR”) and Girard Securities, Inc. (“Girard”) (collectively, the “recent acquisitions”). The recent acquisitions were made in order for the Company to diversify its revenue stream. The resulting goodwill associated with the recent acquisitions is made up of synergies related to higher strategic partner revenues as well as expense synergies associated with back office management, technology efficiencies, savings from the renegotiation of the Company’s clearing contracts, the elimination of duplicative public company expenses and other factors. All of the recent acquisitions have been accounted for using the purchase method of accounting except for the First Allied acquisition.

The First Allied acquisition, which closed on June 30, 2014, was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements as of and for the three and six months ended June 30, 2014 have been prepared to reflect the financial position and results of operations of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings.

Following the announcement concerning certain accounting errors by VEREIT, Inc., formally known as American Realty Capital Properties, Inc. (“ARCP”), the market price of the Company’s Class A Common stock as well as its market capitalization declined.

6

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

During the second quarter of 2015, as a result of our determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in our expectations of future growth and profitability for certain reporting units and the sustained decline in our market capitalization, the Company determined that it would be appropriate to test its goodwill and intangible assets for impairment as of June 30, 2015 for its most significant reporting units. For purposes of goodwill and intangible asset testing the Company’s reporting units are based on how management reviews its operating results at one level below our reportable segment. Therefore individual impairment testing was performed for each of Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap.

The Company tested goodwill for impairment at the reporting unit level using income and market-based approaches with the exception of the goodwill related to J.P. Turner and StratCap, where a net asset approach was used.

The Company also tested its intangible assets for impairment using the income approach with the exception of the intangible assets related to J.P. Turner and StratCap, where a net asset approach was used.

The Company believes the income and market-based methods selected are the most reliable indicators of the fair values of the reporting units within the independent retail, wholesale distribution and investment management businesses acquired except for J.P. Turner and StratCap where a net-asset methodology is a more reliable indicator, given that during the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015, at which time any advisors who have not been invited to join Summit will be terminated, and therefore, the operations of J.P. Turner are effectively considered to be in a run-off mode. As a result, J.P. Turner’s advisor relationships were not expected to generate future cash flows sufficient enough to justify the intangible assets, despite the fact that certain financial advisors will be retained.

Because Step 1 of the quantitative goodwill impairment test indicated that the carrying value of each of StratCap, which is part of the Wholesale Distribution segment, and J.P. Turner, which is part of the Independent Retail Advice segment, exceeded its estimated fair value, a second phase of the quantitative goodwill impairment test (“Step 2”) was performed specific to StratCap and J.P. Turner. Under Step 2, the fair value of all of the assets and liabilities of StratCap and J.P. Turner were estimated, including tangible assets, advisor relationships and sponsor relationships for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill was then compared to the carrying value of the goodwill to determine the amount of the impairment. Assumptions used in measuring the fair value of these assets and liabilities included the discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins, control premiums as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies.

As a result of the Step 2 analysis, during the three and six months ended June 30, 2015, the Company wrote-off $30.6 million and $13.6 million in goodwill which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

The impairments were the result of these acquired companies experiencing slower growth in 2015 and the Company’s expectations of future growth and profitability are now lower than previous estimates and in the case of J.P. Turner, the decisions with respect to terminating the ongoing business operations, except for a limited number of financial advisors.

In addition, as a result of our assessment of the fair value of the StratCap and J.P. Turner intangible assets, during the three and six months ended June 30, 2015, the Company also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. The decision to impair the StratCap intangible assets reflects, in part, the more transparent market price of the intangible assets in connection with the valuation of the StratCap reporting unit in the strategic transactions entered into on August 6, 2015. See Note 21 for more information. These impairments were all recorded in goodwill and intangible assets impairment in the statements of operations. For more information on the Company’s goodwill and intangible assets see Note 7.

The Company’s results of operations only include the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard beginning on the date of each respective acquisition.

7

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Details of each recent acquisition are as follows:

Cetera Financial Holdings. On April 29, 2014, the Company completed the acquisition of Cetera. The purchase price was $1.15 billion (subject to certain adjustments), and the Company paid $1.13 billion in cash after adjustments. Cetera is a financial services holding company formed in 2010 that provides independent broker-dealer services and investment advisory services through four distinct independent broker-dealer platforms: Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC and Cetera Financial Specialists LLC. The acquisition, including related costs, was financed with a $575.0 million senior secured first lien term loan, a $150.0 million senior secured second lien term loan (together, with a $25.0 million senior secured first lien revolving credit facility, the “Bank Facilities”), the issuance of $120.0 million (aggregate principal amount) of 5.0% Senior Convertible Notes due 2021 (the “convertible notes”) and $270.0 million (aggregate stated liquidation value) of 7.0% Series A Convertible Preferred Stock, $0.001 par value per share (“Series A Preferred Stock”), as described in further detail in Notes 8 and 10, and cash on hand.

The assignment of the total consideration for the Cetera acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	241,641
Cash and segregated securities	7,999
Trading securities	741
Receivables	49,443
Property and equipment	17,735
Prepaid expenses	15,083
Deferred compensation plan investments	76,010
Notes receivable	38,805
Other assets	37,096
Accounts payable	(94,074		)
Accrued expenses	(32,421		)
Other liabilities	(112,977		)
Deferred compensation plan accrued liabilities	(75,294		)
Total fair value excluding goodwill and intangible assets	169,787
Goodwill	292,165
Intangible assets	944,542
Deferred tax liability	(273,752		)
Total consideration	$	1,132,742

As of June 30, 2015, approximately $7.9 million of the goodwill from Cetera’s historic pre-acquisition goodwill is deductible for income tax purposes.

The total Cetera consideration consisted of the following:

($ in thousands)
Contractual purchase price	$	1,150,000
Purchase price adjustments	17,258
Total consideration	$	1,132,742

The Company’s supplemental pro forma results of operations for Cetera for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	600.5
Loss before taxes	(37.0		)

8

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets in connection with the closing of the acquisition on April 29, 2014. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $15.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

Summit Financial Services Group. On June 11, 2014, the Company completed the acquisition of Summit. Summit was a publicly traded company that had financial advisors providing securities brokerage and investment retail advice in the United States with its common stock listed on the OTC Markets Group, Inc. under the symbol “SFNS.”

Pursuant to the merger agreement, each share of Summit common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive $1.588 in merger consideration, which consisted of cash and Class A common stock. Summit shareholders who received merger consideration were also entitled to receive the pro rata portion of certain tax refunds generated after the closing of the merger as a result of certain net operating losses incurred by Summit in 2014 and which were not acquired by the Company pursuant to the merger agreement. The aggregate amount of these refunds was $2.5 million, or approximately $0.06 per share of Summit common stock, which was paid (without interest) on June 29, 2015.

As consideration in the merger, the Company issued 498,884 shares of Class A common stock pursuant to a registration statement on Form S-4 and paid consideration in cash of $38.6 million, which does not include cash distributed by Summit to its shareholders. The aggregate cash consideration paid was $46.7 million which is inclusive of the cash distributed by Summit.

The assignment of the total consideration for the Summit acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	13,353
Receivables	3,147
Property and equipment	362
Prepaid expenses	1,531
Notes receivable	1,092
Other assets	2,366
Accounts payable	(9,973		)
Accrued expenses	(3,100		)
Total fair value excluding goodwill and intangible assets	8,778
Goodwill	23,891
Intangible assets	31,240
Deferred tax liability	(6,751		)
Total consideration	$	57,158

As of June 30, 2015, approximately $0.1 million of the goodwill from Summit’s historic pre-acquisition goodwill is deductible for income tax purposes.

The total Summit consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	46,727
Stock issued by the Company	10,431
Total consideration	$	57,158

The Company’s supplemental pro forma results of operations for Summit for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	48.8
Loss before taxes	(0.7		)

9

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $4.7 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

J.P. Turner & Company. On June 12, 2014, the Company completed the acquisition of J.P. Turner for cash in the aggregate amount of $12.8 million, subject to post-closing adjustments, plus 239,362 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). J.P. Turner is a retail broker-dealer and investment adviser which also offers a variety of other services, including investment banking.

Pursuant to the purchase agreement, on June 12, 2015 (the one-year anniversary of the closing date of the J.P. Turner acquisition), the Company agreed to an additional aggregate cash payment of $7.6 million to the sellers and issue to the sellers an aggregate number of shares of Class A common stock equal to (i) $3.2 million divided by (ii) the average of the per share closing price of Class A common stock for the five trading days ending on the trading day immediately prior to June 12, 2015.

Pursuant to the purchase agreement, the Company also agreed to make earn-out payments to the sellers with respect to each of the fiscal years ending December 31, 2014, December 31, 2015 and December 31, 2016, based on the achievement of certain agreed-upon revenue or earnings before interest, taxes and depreciation and amortization (“EBITDA”) performance targets in those years (subject to an annual combined minimum performance hurdle of 8.0% and an annual dollar cap of $2.5 million). Each earn-out payment, if any, was to be made by the Company 50% in cash and 50% in the form of Class A common stock (unless the sellers elect to receive a greater amount of Class A common stock). On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $4.5 million and $10.6 million, respectively.

On March 4, 2015, the Company amended its agreement with the sellers of J.P. Turner to settle the remaining consideration. As part of the amendment, the Company paid aggregate consideration of $9.1 million, which consisted of $6.4 million in cash and 245,813 shares of Class A common stock, or an aggregate value of $2.7 million based on $11.106 per share, the average of the per share closing price of Class A common stock for the five trading days prior to March 4, 2015. In addition, the Company recorded new deferred consideration of $4.8 million payable six months from the settlement date which will be paid 50% in cash and 50% in shares of Class A common stock. The Company also settled its receivable in respect of an indemnification claim of $1.8 million as part of the amendment which resulted in a gain of $1.2 million for the six months ended June 30, 2015 which was reflected as a reduction in other expenses in the statement of operations.

During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate broker-dealer subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who have not been invited to join Summit will be terminated.

During the three and six months ended June 30, 2015, the Company wrote-off $13.6 million in goodwill and $12.6 million in intangible assets, which represented all of the goodwill and remaining intangible assets related to the acquisition of J.P. Turner.

The assignment of the total consideration for the J.P. Turner acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	10,171
Receivables	712
Property and equipment	232
Prepaid expenses	892
Notes receivable	1,660
Other assets	2,171
Accounts payable	(1,710		)
Accrued expenses	(8,543		)
Other liabilities	(656		)
Total fair value excluding goodwill and intangible assets	4,929
Goodwill	13,579
Intangible assets	14,200
Total consideration	$	32,708

10

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

As of June 30, 2015, approximately $4.0 million of the goodwill from the J.P. Turner acquisition is deductible for income tax purposes.

The total J.P. Turner consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	12,786
Stock issued by the Company	4,860
Contingent consideration	4,500
Deferred consideration	10,562
Total consideration	$	32,708

The Company’s supplemental pro forma results of operations with J.P. Turner for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.6
Income before taxes	2.0

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.

Hatteras Funds Group. On June 30, 2014, the Company completed the purchase of substantially all the assets related to the business and operations of Hatteras and assumed certain liabilities of Hatteras. Hatteras was a private company, and it is the sponsor of, investment advisor to and distributor for the Hatteras Funds complex, a family of alternative investment funds registered as investment companies with the SEC.

Pursuant to the purchase agreement, the aggregate initial purchase price was $40.0 million (subject to certain adjustments for net working capital, net assets under management and consolidated pre-tax net income) payable as follows: (A) 75.0% was paid on the closing date of the Hatteras acquisition; (B) 7.5% was payable on June 30, 2015, the first anniversary of the closing date of the Hatteras acquisition. The payment due on June 30, 2015 has not been made and is accruing interest in accordance with the purchase agreement. (C) 7.5% will be payable on June 30, 2016, the second anniversary of the closing date of the Hatteras acquisition; and (D) 10.0% will be payable on June 30, 2017, the third anniversary of the closing date of the Hatteras acquisition. Additionally, pursuant to the purchase agreement, the Company will pay additional consideration calculated and payable based on the consolidated pre-tax net operating income generated by the businesses of Hatteras in the fiscal years ending December 31, 2016 and December 31, 2018. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $24.9 million and $9.4 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $30.5 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statement of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.

The assignment of the total consideration for the Hatteras acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	805
Receivables	7,747
Property and equipment	192
Prepaid expenses	326
Other assets	120
Accounts payable	(3,721		)
Accrued expenses	(5,277		)
Total fair value excluding goodwill and intangible assets	192
Goodwill	15,348
Intangible assets	48,770
Total consideration	$	64,310

11

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

As of June 30, 2015, the goodwill from the Hatteras acquisition is not deductible for income tax purposes.

The total Hatteras consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	30,000
Contingent consideration	24,880
Deferred consideration	9,430
Total consideration	$	64,310

The contingent and deferred consideration in the table above represents the fair value at the date of acquisition which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	12,300	$	84,740

The Company’s supplemental pro forma results of operations for Hatteras for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.7
Income before taxes	3.1

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

First Allied Holdings. On June 30, 2014, RCAP Holdings contributed all its equity interests in First Allied to the Company. As consideration for the contribution, 11,264,929 shares of Class A common stock were issued to RCAP Holdings in a private placement offering exempt from registration under the Securities Act. First Allied is an independent broker-dealer with financial advisors in branch offices across the United States. First Allied was acquired by RCAP Holdings through a merger transaction on September 25, 2013 for an effective cost of $177.0 million, consisting of $145.0 million in merger consideration (including exchangeable notes issued by RCAP Holdings in the initial aggregate principal amount of $26.0 million (the “First Allied notes”)) paid to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger.

The number of shares issued as consideration was determined based on a value of $207.5 million for the equity of First Allied and the one-day volume weighted average price (“VWAP”) of Class A common stock on January 15, 2014, the day prior to the announcement of the signing of the Cetera merger agreement. The value of $207.5 million for the equity of First Allied established by the Company’s board of directors in January 2014 was determined as the effective cost to RCAP Holdings for First Allied of $177.0 million (consisting of $145.0 million in merger consideration (including First Allied notes) paid by RCAP Holdings to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger), minus indebtedness (net of cash) of First Allied of $7.0 million plus a carrying cost of $37.5 million. The value of the shares of Class A common stock issued by the Company as consideration in the First Allied acquisition was $239.2 million, based on the closing price for Class A common stock of $21.23 per share on June 30, 2014, the date of the consummation of the contribution. Accordingly, the effective cost to the Company for the First Allied acquisition was $271.2 million (including $32.0 million of First Allied indebtedness), which is $94.2 million more than the effective cost to RCAP Holdings for First Allied on September 25, 2013 under the terms of the original First Allied merger agreement. As of September 25, 2013, the date of common control, the Company recorded $137.2 million of net assets related to First Allied as a result of the contribution.

12

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

In addition, following consummation of the contribution, $32.0 million of First Allied indebtedness was outstanding. On July 28, 2014, the First Allied outstanding indebtedness was repaid by the Company as required by the terms of the Bank Facilities, which the Company entered into in connection with the acquisition of Cetera on April 29, 2014.

The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings immediately following the acquisition of First Allied by RCAP Holdings on September 25, 2013. See Note 3 for additional detail.

As of June 30, 2015, approximately $7.1 million of the goodwill from First Allied’s historic pre-acquisition goodwill was deductible for income tax purposes.

Investors Capital Holdings. On July 11, 2014, the Company completed the acquisition of ICH. ICH was a publicly traded company with its common stock listed on the NYSE MKT under the symbol “ICH”. ICH provides broker-dealer services to investors in support of trading and investment in securities, alternative investments and variable life insurance as well as investment advisory and asset management services.

The aggregate consideration was $52.5 million. The Company issued 2,027,966 shares of Class A common stock (2,029,261 shares issued on July 11, 2014, of which 1,295 shares were subsequently canceled on October 6, 2014 as an adjustment to the final consideration) pursuant to a registration statement on Form S-4 and paid aggregate consideration in cash of $8.4 million.

The assignment of the total consideration for the ICH acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	6,881
Short term investments and securities owned	499
Receivables	7,500
Property and equipment	275
Notes receivable	1,875
Deferred compensation	2,250
Deferred tax asset	2,613
Other assets	1,055
Accounts payable and accrued expenses	(1,945		)
Other liabilities	(7,593		)
Notes payable and long-term debt	(2,918		)
Non-qualified deferred compensation	(2,611		)
Total fair value excluding goodwill, intangible assets, and deferred tax liability	7,881
Goodwill	26,680
Intangible assets	30,100
Deferred tax liability	(12,152		)
Total consideration	$	52,509

As of June 30, 2015, the goodwill from the ICH acquisition is not deductible for income tax purposes.

The total ICH consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	8,412
Stock issued by the Company	44,097
Total consideration	$	52,509

The Company’s supplemental pro forma results of operations for ICH for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	46.4
Loss before taxes	(1.5		)

13

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.

Validus/Strategic Capital Partners. On August 29, 2014, the Company completed the acquisition of StratCap. StratCap, through its subsidiaries, is a wholesale distributor of alternative investment programs. StratCap’s subsidiaries distribute a platform of offerings consisting of two non-traded REITs, a non-traded business development company (“BDC”) and two public, non-traded limited liability companies. StratCap holds minority interests in four of the investment programs that it distributes, and is a joint venture partner along with the sponsor to the fifth investment program.

The aggregate consideration paid on the date of the acquisition was $77.5 million. The Company issued 464,317 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and $67.5 million paid in cash. Additionally, the Company paid $10.0 million in cash on December 1, 2014 and will pay earn-out payments in 2016 and 2017 based on the achievement of certain agreed-upon EBITDA performance targets. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $75.0 million and $10.0 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $24.4 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statements of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.

During the quarter-end close as of and for the three and six months ended June 30, 2015, the Company became aware that previous calculations of the contingent consideration were incorrectly calculated.  This miscalculation had an impact on the Goodwill and the Contingent consideration recorded in the Statement of Financial Condition and presented in the tables below as of the acquisition date.  The tables have been updated to reflect an increase in goodwill of $7.7 million with a corresponding increase in the contingent consideration. As a result of this error, the results of operations as of and for the three and nine months ended September 31, 2014, as of and for the year ended December 31, 2014 and as of and for the three months ended March 31, 2015 were misstated by an immaterial amount.  The current period three and six months ended June 30, 2015 consolidated statement of operations includes an out of period adjustment of $2.8 million and $3.0 million, respectfully, as an increase to Other expenses.  The Company has evaluated this error and determined that it was not material to the previously issued audited and unaudited financial statements as well as the current unaudited financial statements.

As mentioned above, during the three and six months ended June 30, 2015, the Company completed an analysis of all of its goodwill and intangible assets as of June 30, 2015, and determined that all of the goodwill associated with StratCap was impaired and the intangible assets were also impaired. During the three and six months ended June 30, 2015, the Company therefore wrote-off $30.6 million in goodwill and $100.0 million in intangible assets related to the acquisition of StratCap.

In addition, as discussed in “Management’s Discussion and Analysis - Results of Operations”, the Company recorded a substantial decrease in the fair value of the contingent consideration liability reflecting a decline in expected future revenues from StratCap.

The assignment of the total consideration for the StratCap acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	4,522
Short term investments and securities owned	2,239
Receivables	4,858
Property and equipment	96
Prepaid expenses and other assets	629
Accounts payable	(706		)
Accrued expenses	(201		)
Other liabilities	(908		)
Total fair value excluding goodwill and intangible assets	10,529
Goodwill	30,571
Intangible assets	121,380
Total consideration	$	162,480

14

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

As of June 30, 2015, the goodwill from the StratCap acquisition is not deductible for income tax purposes.

The total StratCap consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	67,510
Stock issued by the Company	10,000
Contingent consideration	75,000
Deferred consideration	9,970
Total consideration	$	162,480

The contingent and deferred consideration in the table above represents the fair value at the acquisition date which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	30,110	$	36,790

The Company’s supplemental pro forma results of operations for StratCap for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	113.2
Loss before taxes	(0.2		)

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.1 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

Trupoly. On July 21, 2014, the Company announced that it is establishing a crowdfunding investment platform which it has rebranded under the name, “DirectVest.” In connection with this initiative, the Company acquired substantially all the assets of New York based Trupoly, a white-label investor relationship management portal, which will be integrated into the Company’s new crowdfunding investment platform. The assets of Trupoly primarily consist of intangible assets related to existing technology and a non-compete agreement.

On the closing date of the Trupoly acquisition, the Company issued shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and paid the remaining consideration in cash. The Company paid 50.0% of the deferred consideration in shares of Class A common stock and 50.0% in cash on July 17, 2015.

As of June 30, 2015, approximately $0.7 million of the goodwill from the Trupoly acquisition is deductible for income tax purposes.

Docupace. On November 21, 2014, the Company completed the acquisition of a controlling financial interest in Docupace, a provider of integrated, electronic processing technologies and systems for financial institutions and wealth management firms.

The aggregate consideration on the date of the acquisition was $35.1 million, excluding $0.3 million of accrued interest on the deferred payment. On the closing date, the Company paid cash consideration of $18.8 million to the seller of Docupace and acquired a 51.0% ownership interest.

In addition, the Company made a $4.0 million capital contribution on the date of the acquisition, which increased its total ownership interest to 53.525%. Subject to certain covenants in the operating agreement, and if needed to achieve the strategic goals of Docupace’s business as determined by the board of managers, the Company may be required by Docupace’s management to make additional capital contributions of $28.0 million and $20.0 million in cash during the years ended December 31, 2015 and 2016, respectively.

15

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The post-closing consideration under the agreement between the Company and Docupace is to be adjusted, if necessary, in accordance with Docupace’s 2014 revenues. The Company has determined that the appropriate clawback amount is $2.4 million, which if implemented would reduce the Company’s ownership in Docupace to 52.043%. The Company expects to pay net post-closing consideration equal to $16.3 million, excluding the accrued interest, in cash, Class A common stock or a combination thereof, contingent upon resolution of certain matters under discussion.

The total preliminary fair value of Docupace on the date of the acquisition prior to the capital contribution was $68.8 million. The fair value of the non-controlling interest as of the date of the acquisition prior to the capital contribution was $33.7 million. The fair value of the non-controlling interest was determined based on the fair value of the controlling interest held by the Company grossed-up to 100% value in order to derive a per-share price to be applied to the non-controlling shares. This method assumes that the non-controlling shareholder will participate equally with the controlling shareholder in the economic benefits of the post combination entity.

On July 10, 2015, the Company made a $1.5 million capital contribution to Docupace, which increased its total ownership interest to 52.981%.

Based on the preliminary purchase price allocations, approximately $23.6 million of the goodwill from the Docupace acquisition is deductible for income tax purposes as of June 30, 2015.

VSR. On March 11, 2015, the Company completed the acquisition of VSR.

The aggregate consideration was $68.1 million (subject to certain adjustments detailed below). At the closing, the Company issued 2,436,429 shares of Class A common stock in a private placement with an aggregate value of $26.8 million, based on $10.989 per share, the VWAP of Class A common stock for the ten trading days ending March 9, 2015, and paid aggregate consideration in cash of $26.8 million. In addition, the Company will pay deferred consideration of $9.4 million, which will increase or decrease by the amount by which total revenue, adjusted EBITDA, group capital, net capital, indebtedness and certain transaction expenses, each as measured at the closing date (the “Adjustment Amounts”) is greater than or less than their respective target amounts. The deferred consideration will be paid upon resolution of a final settlement statement specifying the Adjustment Amounts initially delivered by the Company to the sellers no later than 120 days after the closing date, at which time the sellers will have 30 days to review the Adjustment Amounts. The sellers have a right to contest the Adjustment Amounts within 30 days of the initial receipt of Adjustment Amounts. Subsequently, the buyer and the seller have 30 days to resolve any of the seller’s objections. Also, the Company will pay deferred consideration, at fair value, of $5.1 million (payable 50% in cash and 50% in shares of Class A common stock) no later than 20 days after the second anniversary of the closing date, subject to reduction for amounts paid by the Company in connection with certain claims for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. Additionally, pursuant to the purchase agreement, the Company has established a preliminary $1.7 million indemnification asset since legal expenses incurred by the Company for matters indemnified under the purchase agreement are required to be reimbursed by the sellers. The indemnification asset is included in other assets on the Company’s statement of financial condition.

As of June 30, 2015, the goodwill from the VSR acquisition is not deductible for income tax purposes.

Girard. On March 18, 2015 (the “Girard Closing Date”), the Company completed the acquisition of Girard.

The aggregate consideration on acquisition day was $27.8 million (subject to certain adjustments below), which is inclusive of the preliminary estimate of amounts payable on the first, second and third anniversaries of the Girard Closing Date pursuant to an advisor recruiting plan (the “Girard Recruiting and Retention Payments”) and the deferred consideration. The Company issued 549,529 shares of Class A common stock in a private placement with an aggregate value of $6.3 million, based on $11.549 per share, the VWAP of Class A common stock for the ten trading days ending March 17, 2015 (such price, the “Girard Closing Date VWAP”), and paid aggregate consideration in cash of $14.5 million. In addition, pursuant to the purchase agreement, within 20 days after the 15th-month anniversary of the Girard Closing Date, the Company will issue the number of shares of Class A common stock equivalent to $1.6 million divided by the Girard Closing Day VWAP, subject to reduction for amounts paid by the Company in connection with certain losses for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. The preliminary fair value as of the Girard Closing Date of the Girard Recruiting and Retention Payment is $5.4 million and it is payable 60% in cash and 40% in shares of Class A common stock. The Girard Recruiting and Retention payments will increase or decrease based on the amount of gross dealer concessions generated by Girard’s financial advisors for the twelve-month period prior to each anniversary.

On July 24, 2015, the Company paid a $0.3 million post-closing adjustment pursuant to the purchase agreement. The Company issued 6,563 shares of Class A common stock in a private placement with an aggregate value of $0.08 million, based on the Girard Closing Date VWAP, and paid aggregate consideration in cash of $0.2 million.

As of June 30, 2015, the goodwill from the Girard acquisition is not deductible for income tax purposes.

16

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Consolidated pro forma results. The Company’s supplemental pro forma results of operations, which include the Original Operating Subsidiaries, Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap for the six months ended June 30, 2014, are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	1,577.9
Income before taxes	34.9
Provision for income taxes(1)	14.0
Net income	20.9
Less: income attributable to non-controlling interest	9.1
Less: preferred dividends and deemed dividend(2)	204.3
Net loss attributable to Class A common stockholders	$	(192.5	)

________________________

(1) Reflects pro forma adjustment to record the income tax provision based on the assumed 40% tax rate.

(2) Includes deemed dividend of $194.8 million representing the difference between redemption value of the Series A Preferred Stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

The consolidated supplemental pro forma results of operations do not include pro forma results for Trupoly, Docupace, VSR and Girard as they would have had an immaterial impact. The consolidated supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets and interest expense. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $32.0 million based on the assumption that these transactions were completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree or the Company to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

3.Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company, Realty Capital Securities, RCS Advisory, ANST, SK Research, LLC (“SK Research”), Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard for the periods since acquisition and of First Allied for the periods since it was under the control of RCAP Holdings. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Regulation S-X. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results.

The consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2014. The statement of financial condition as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings. The acquisition of First Allied by RCAP Holdings was accounted for by RCAP Holdings using the purchase method of accounting; therefore, the purchase price was allocated to First Allied’s assets and liabilities at fair value and any excess purchase price was then attributed to intangible assets and goodwill. When the Company acquired First Allied from RCAP Holdings, no additional intangible assets or goodwill was recorded.

17

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Reclassifications

Certain reclassifications have been made to the prior period financial statement presentation to conform to the current period presentation primarily as a result of the need to harmonize the financial statements of the Company with those of the entities acquired during 2014.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and these differences could be material.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) to clarify the principles for recognizing revenue and to develop common revenue accounting guidance for U.S. GAAP and International Financial Reporting Standards. For public entities, the amendments were to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB deferred the effective date of ASU 2014-09 and the guidance will be effective for public entities for annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is still evaluating the impact of ASU 2014-09.

In November 2014, the FASB issued Accounting Standards Update 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”), which requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract, when evaluating whether the host contract is more akin to debt or equity. The amendments in ASU 2014-16 did not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required but rather clarified how U.S. GAAP should be interpreted in concluding on the nature of the host contract. The Company adopted ASU 2014-16 during the fourth quarter of 2014. The adoption of ASU 2014-16 did not have an impact on the Company’s previously reported financial condition or results of operations.

In February 2015, the FASB issued Accounting Standards Update 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new guidance applies to entities in all industries and amends the current consolidation guidance. The amendments are effective for fiscal years beginning after December 15, 2016 and for interim periods within fiscal periods beginning after December 15, 2017. Early application is permitted. The Company is still evaluating the impact of ASU 2015-02 but does not expect the adoption to have a material impact to its financial condition or results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The key provisions of ASU 2015-03 are a) that debt issuance costs be reported on the statement of financial condition as a reduction in the liability for long-term debt rather than as an asset and b) that the amortization of debt issuance costs be reported as interest expense. For public companies, ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity will apply ASU 2015-03 retrospectively to all prior periods. The Company intends to adopt ASU 2015-03 beginning with the financial statements as of and for the year ended December 31, 2015. The adoption of ASU 2015-03 is expected to have an impact on the Company’s statement of financial condition as the deferred financing fees will be reported net against the long-term debt. The adoption of ASU 2015-03 is not expected to have an impact on the Company’s statement of operations.

In May 2015, the FASB issued Accounting Standards Update 2015-07, “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize investments within the fair value hierarchy for which their fair value is measured at net asset value using the practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value practical expedient. Instead, those disclosures would be limited to investments for which the entity has elected to estimate the fair value using that practical expedient. For public companies, the final consensus will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. A reporting entity will apply the final consensus retrospectively. While the Company is still evaluating the impact of ASU 2015-07, it will not have an impact on the Company’s financial condition, results of operations or cash flows because the update only affects disclosure requirements. ASU 2015-07 is not expected to have a significant impact on the Company’s fair value disclosures as the Company currently has few investments for which their fair values are determined using net asset value.

18

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

4.Fair Value Disclosures

Fair Value of Instruments by Level. The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the data inputs that market participants would use in the pricing of the asset or liability and are consequently not based on market activity

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is the most significant to the fair value measurement in its entirety.

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. The Company assumes all transfers occur at the beginning of the quarterly reporting period in which they occur. For the six months ended June 30, 2015 and for the year ended December 31, 2014 there were no transfers in or out of Level 3.

Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Mutual funds, substantially all deferred compensation plan investments and publicly traded securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets. Accordingly, these securities are primarily classified within Level 1. Government bonds, U.S. Treasury securities, corporate bonds, certificates of deposit and mutual funds are fair valued by management using references to prices for similar instruments, quoted prices or recent transactions in less active markets and these securities are primarily classified within Level 2. The Company’s free-standing and embedded derivative contracts are not traded on an exchange. Consequently, the fair value was determined by a third-party valuation company and reviewed by the Company. A binomial lattice model was used to derive the fair value for the embedded derivatives related to the Series C preferred stock while the embedded derivatives related to the Series A preferred stock, convertible notes and the put/call were based on a Monte Carlo simulation that incorporates assumptions including duration, probability of redemption, the volatility of the market price of Class A common stock, the risk free rate of interest and the discount rate. The derivative contracts are classified as Level 3 in the Company’s fair value hierarchy.

The fair value of the Company’s investments in private equity funds is based on the net asset value (“NAV”) as a practical expedient since there is no readily available market. Adjustments to the NAV would be considered if it was probable that the private equity funds would be sold at a value materially different than the reported NAV. The private equity funds do not have notice periods, or restrictions on redemptions. The private equity funds primarily invest in nonpublic companies and other private equity funds, and distributions from will be received as the underlying investments of the funds are liquidated. The Company also holds an investment in a REIT whose fair value is based on NAV. Given the use of unobservable inputs used in the valuation, investments in private equity funds and the REIT are classified as Level 3 in the Company’s fair value hierarchy.

Pursuant to the terms of the related purchase agreements, the Company is obligated to pay contingent consideration to the sellers of Hatteras, StratCap and Girard and contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013. During the three months ended March 31, 2015, the Company settled the contingent consideration related to the J.P. Turner acquisition and substantially all of the contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013.

The Company estimated the fair value of the contingent consideration at the close of the transactions using discounted cash flows. The fair value of the contingent consideration was based on financial forecasts determined by management that included assumptions about growth in assets under administration, assets under management, earnings, financial advisor retention and discount rates. The financial targets are sensitive to financial advisor retention, market fluctuations and the ability of financial advisors to grow their businesses. The Company evaluates the actual progress toward achieving the financial targets quarterly and adjusts the estimated fair value of the contingent consideration based on the probability of achievement, with any changes in fair value recognized in earnings. Given the significant unobservable inputs used in the valuation the contingent consideration is classified as Level 3 in the Company’s fair value hierarchy.

19

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of June 30, 2015 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	64,067	$	—	$	—		$	64,067
Available-for-sale securities:
Mutual funds	2,701		—		—			2,701
Total available-for-sale	2,701		—		—			2,701
Trading securities:
Equity securities	163		—		—			163
Mutual funds	9,592		—		—			9,592
Certificate of deposits	—		429		—			429
U.S. government bonds	2		9		—			11
State and municipal bonds	1		—		—			1
Corporate bonds	—		72		—			72
Other	39		—		470			509
Total trading securities	9,797		510		470			10,777
Deferred compensation plan investments:
Money market fund	4,470		—		—			4,470
International global funds	19,126		—		—			19,126
U.S. equity funds	49,035		—		—			49,035
U.S. fixed-income funds	10,937		—		—			10,937
Mutual funds	—		3,086		—			3,086
Total deferred compensation plan investments	83,568		3,086		—			86,654
Prepaid expenses and other assets(1)	—		1,365		4,443			5,808
Total	$	160,133	$	4,961	$	4,913		$	170,007
Liabilities:
Derivative contracts	$	—	$	—	$	46,515	(2)	$	46,515
Other liabilities:
Equity securities	43		—		—			43
Mutual funds and unit investment trusts	158		—		—			158
State and municipal government obligations	130		202		—			332
Certificate of deposit	—		—		—			—
Contingent consideration	—		—		60,635		(3)	60,635
Total	$	331	$	202	$	107,150		$	107,683

_____________________

(1) Primarily represents investments in REITs, oil and gas interests and other illiquid investments.

(2) Includes $6.9 million of derivatives classified in long-term debt.

(3) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

20

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of December 31, 2014 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	82,973	$	—	$	—		$	82,973
Available-for-sale securities:
Mutual funds	11,473		—		—			11,473
Total available-for-sale	11,473		—		—			11,473
Trading securities:
Equity securities	262		—		—			262
Mutual funds	9,457		—		—			9,457
U.S. government bonds	2		10		—			12
Other	41		—		470			511
Total trading securities	9,762		10		470			10,242
Deferred compensation plan investments:
Money market fund	6,246		—		—			6,246
International global funds	17,722		—		—			17,722
U.S. equity funds	46,999		—		—			46,999
U.S. fixed-income funds	9,787		—		—			9,787
Mutual funds	—		2,702		—			2,702
Total deferred compensation plan investments	80,754		2,702		—			83,456
Prepaid expenses and other assets - oil and gas interests	—		—		151			151
Total	$	184,962	$	2,712	$	621		$	188,295
Liabilities:
Derivative contracts	$	—	$	—	$	102,908	(1)	$	102,908
Other liabilities:
Equity securities	161		—		—			161
Mutual funds and unit investment trusts	4		—		—			4
State and municipal government obligations	222		—		—			222
Contingent consideration	—		—		107,278		(2)	107,278
Total	$	387	$	—	$	210,186		$	210,573

_______________

(1) Includes $21.9 million of derivatives classified in long-term debt.

(2) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

Transfers Between Levels of the Fair Value Hierarchy.During the six months ended June 30, 2015, the Company transferred $0.2 million of municipal government bonds out of Level 1 to Level 2 of the fair value hierarchy due to pricing inputs becoming less observable. There were no transfers in the fair value hierarchy during the six months ended June 30, 2014.

Level 3 Rollforward.The following table presents changes during the six months ended June 30, 2015 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2015:

21

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized gains/(losses)			Purchases		Issuances		Sales			Settlements		Fair value as of June 30, 2015
Assets:
Trading securities- other	$	470	$	—		$	—	$	—	$	—		$	—	$	470
Prepaid expenses and other assets - oil and gas interests	151		(12		)	—		—		(10		)	—		129
Prepaid expenses and other assets - REIT and other illiquid investments	—		(65		)	4,522		—		(143		)	—		4,314
Total	$	621	$	(77	)	$	4,522	$	—	$	(153	)	$	—	$	4,913

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized (gains)/losses			Purchases		Issuances		Sales		Settlements			Fair value as of June 30, 2015
Liabilities:
Derivative contracts	$	102,908	$	(56,393	)	$	—	$	—	$	—	$	—		$	46,515
Contingent consideration	107,278		(49,787		)	—		13,081		—		(9,937		)	60,635
Total	$	210,186	$	(106,180	)	$	—	$	13,081	$	—	$	(9,937	)	$	107,150

On March 11, 2015, the Company acquired approximately $4.5 million of financial instruments as part of the VSR transaction, which the Company classified as Level 3 in the fair value hierarchy due to a lack of an active market and infrequent observable inputs.

The following table presents changes during the six months ended June 30, 2014 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2014:

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized gains/(losses)		Purchases		Issuances		Settlements		Fair value as of June 30, 2014
Assets:
Trading securities- other	$	—	$	—	$	120	$	—	$	—	$	120
Total	$	—	$	—	$	120	$	—	$	—	$	120

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized (gains)/losses			Purchases		Issuances		Settlements			Fair value as of June 30, 2014
Liabilities:
Derivative contracts	$	—	$	(58,452	)	$	—	$	162,614	$	—		$	104,162
Contingent consideration	2,180		163			12,868		29,380		(13,173		)	31,418
Total	$	2,180	$	(58,289	)	$	12,868	$	191,994	$	(13,173	)	$	135,580

The realized and unrealized gains and losses on derivative contracts and contingent consideration are included in other revenues and other expenses, respectively, in the consolidated statements of operations.

The change in unrealized gain relating to Level 3 assets and liabilities held as of June 30, 2015 was $105.7 million. The change in unrealized gain relating to Level 3 assets and liabilities held as of June 30, 2014 was $58.3 million.

22

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Significant Unobservable Inputs. The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of June 30, 2015:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	129	Discounted cash flows	10% discount rate
Prepaid expenses and other assets - REITs and other illiquid investments	$	4,314	Sponsorship valuation	Third party valuation from sponsors
Liabilities:
Derivative contracts	$	46,515	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.3 years, 7.5 years, 7.5 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 18.95%, 21.1%, 21.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.75%
Contingent consideration - Hatteras	$	30,460	Discounted cash flow	• Projected earnings: $6.4 million to $27.8 million, December 31, 2016 and 2018, respectively. • Projected earn-out: $7.3 million to $23.1 million, December 31, 2016 and 2018, respectively. • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.6 to 0.8
Contingent consideration - StratCap	$	24,400	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.8 to 0.9 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	394	Discounted cash flow	• Revenue achievement • WACC 20%
Contingent consideration - Girard	$	5,381	Discounted cash flow	• Projected gross dealer concessions (GDC): - Retention payments: 5.0% of retained advisors' GDC (0.0%, if GDC is less than $36.4 million); payable on the first and second anniversary of the closing date - Recruiting payments: 5.0% of new advisors' GDC less forgivable loans and other payouts; payable on the second anniversary and third anniversary of the closing date

23

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of December 31, 2014:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	151	Discounted cash flows	10% discount rate
Liabilities:
Derivative contracts	$	102,908	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.8 years, 8.0 years, 8.0 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 12.95%, 15.1%, 15.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.4%
Contingent consideration - J.P. Turner	$	6,200	Discounted cash flow	• Probability exceeding percentage threshold: 99.7% to 100.0% • Present value factor: 0.71 to 0.95 • Time until payments: 0.4 years to 2.4 years
Contingent consideration - Hatteras	$	28,310	Discounted cash flow	• Projected earnings: $11.0 million to $17.3 million, December 31, 2016 and 2018, respectively • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.50 to 0.70
Contingent consideration - StratCap	$	68,200	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.65 to 0.79 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	4,568	Discounted cash flow	• Revenue achievement • WACC 20%

Investments in Funds That Are Calculated Using NAV Per Share. The following table presents information related to the Company’s investments that calculate NAV per share as of June 30, 2015. For these investments, which are measured at fair value on a recurring basis, the Company used the NAV per share as a practical expedient to measure fair value:

($ in thousands)	Investment Category Includes	Fair Value Using NAV Per Share		Unfunded Commitments
Trading securities- other- private equity fund	Investments in private equity funds	$	113	$	7
Trading securities- other- REIT	Investment in a REIT	357		—

24

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Fair Value of Financial Instruments Carried at Amortized Cost. The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of June 30, 2015:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	63,991	$	—	$	—	$	60,220
Series B Preferred Stock	152,458		—		—		93,066
Series C Preferred Stock	114,145		—		—		83,166
First lien term facility	534,756		—		—		529,408
Second lien term facility	148,024		—		—		146,544
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
First lien revolving facility	23,000		—		—		23,000
Capital lease obligations	10,346		—		10,346		—
Total	$	1,064,020	$	—	$	25,646	$	937,404

The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of December 31, 2014:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	61,632	$	—	$	—	$	78,005
Series B Preferred Stock	146,700		—		—		117,367
Series C Preferred Stock	111,288		—		—		136,242
First lien term facility	555,700		—		—		530,491
Second lien term facility	147,903		—		—		142,500
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
Total	$	1,040,523	$	—	$	15,300	$	1,006,605

The fair value of the convertible notes, the Company’s 11% Series B Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”) and the Company’s 7% Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”) were determined by an independent valuation company and reviewed by the Company. The fair value of the convertible notes, the Series B Preferred Stock and the Series C Preferred Stock as of June 30, 2015 was determined using inputs such as conversion price, conversion period, equity volatility, risk-free rate, credit spread, and discount rate. The convertible notes, the Series B Preferred Stock and the Series C Preferred Stock are classified as Level 3 in the Company’s fair value hierarchy. The fair value of the Company’s first and second lien term debt facilities were determined based upon indicative market data obtained from a third party that makes markets in these financial instruments. As of June 30, 2015, the first and second lien term debt facilities and the senior secured first lien revolving credit facility were classified as Level 3 of the fair value hierarchy due to a lack of adequate observable market activity related to these financial instruments. The promissory note, which was entered into in the fourth quarter of 2014 between the Company and ARCP has been classified as Level 2 in the Company’s fair value hierarchy because it lacks observable market data to be classified in Level 1.

The carrying value of accounts receivable and notes receivable approximates the fair value as they have limited credit risk and short-term maturities. Therefore, customer and notes receivables are classified as Level 2 in the non-recurring fair value hierarchy.

Goodwill and intangible assets established upon each acquisition were fair valued and were classified as Level 3 in the non-recurring fair value hierarchy. See Note 7 for more information.

25

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

5.Available-for-Sale Securities

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2015:

			For the Six Months Ended June 30, 2015
($ in thousands)	Fair value at December 31, 2014		Purchases(1)		Sales			Realized Gains/ (Losses)(2)			Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2015		Cost
Mutual funds	$	11,473	$	26	$	(8,780	)	$	(369	)	$	351	$	2,701	$	2,561

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Unrealized losses for the three months ended June 30, 2015 were $0.1 million. There were no realized gains or losses for the three months ended June 30, 2015.

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2014:

			For the Six Months Ended June 30, 2014
($ in thousands)	Fair value at December 31, 2013		Purchases(1)		Sales			Realized Gains/ (Losses)(2)		Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2014		Cost
Mutual funds	$	8,528	$	215	$	(9,013	)	$	171	$	544	$	445	$	410

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Realized gains and unrealized losses for the three months ended June 30, 2014 were $0.3 million and $0.2 million, respectively.

The Company’s basis on which the cost of security sold or the amount reclassified out of accumulated other comprehensive income into earnings is determined using specific identification. The Company did not recognize any other-than-temporary impairments for the three and six months ended June 30, 2015 and June 30, 2014.

6.Accounts and Notes Receivable

Accounts Receivable. The Company’s accounts receivable consist of the following as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Fees and commissions receivable	$	95,101	$	86,193
Reimbursable expenses receivable	19,549		20,922
Receivable from customers	14,315		17,224
Investment banking fees receivable	1,749		12,430
Receivables from brokers, dealers, clearing organizations and other	41,218		33,865
Due from RCAP Holdings and other related parties	3,391		2,255
Total	$	175,323	$	172,889

Notes Receivable. The Company loans money to certain of its financial advisors under two types of promissory note agreements, which bear interest at various rates and have various maturities. Such agreements include forgivable notes and payback notes. Management establishes an allowance that it believes is sufficient to cover any probable losses. When establishing this allowance, management considers a number of factors, including its ability to collect from the financial advisor and the Company’s historical experience in collecting on such transactions.

26

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The forgivable notes contain provisions for forgiveness of principal and accrued interest if the financial advisor meets specified revenue production levels or length of service. The forgiveness determination is made at specified intervals that coincide with scheduled principal and interest payments. The Company amortizes the principal balance of the forgivable notes along with accrued interest as commission expense ratably over the contractual term of the notes. In the event the financial advisor does not meet the specified production level, the scheduled principal and interest are due. The Company intends to hold the notes for the term of the agreements.

Payback notes are promissory notes extended primarily to financial advisors with the obligation to pay back the principal and accrued interest.

The Company monitors its outstanding notes on a monthly basis to identify potential credit loss and impairment. Notes receivable are considered impaired when, based upon current information and events, management estimates it is probable that the Company will be unable to collect amounts due according to the terms of the promissory note. Criteria used to determine if impairment exists include, but are not limited to: historical payment and collection experience of the individual loan, historical production levels, the probability of default on the loan, status of the representative’s affiliation agreement with the Company, and, or any regulatory or legal action related to the representative.

The Company’s notes receivable, net of allowance, for the six months ended June 30, 2015 and the year ended December 31, 2014, were as follows:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	23,075		$	45,914		$	68,989		$	11,104		$	2,166		$	13,270
Originated/acquired loans	2,400			12,137			14,537			16,747			52,200			68,947
Collections	(917		)	(5,182		)	(6,099		)	(1,672		)	(8,805		)	(10,477		)
Forgiveness	(4,124		)	—			(4,124		)	(8,329		)	298			(8,031		)
Accretion	1,791			117			1,908			5,368			402			5,770
Allowance	430			(602		)	(172		)	(143		)	(347		)	(490		)
Ending balance	$	22,655		$	52,384		$	75,039		$	23,075		$	45,914		$	68,989

The following table presents the Company’s allowance for uncollectible amounts due from financial advisors for the six months ended June 30, 2015 and the year ended December 31, 2014:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	511		$	403		$	914		$	368		$	56		$	424
Provision for bad debt	(379		)	840			461			327			735			1,062
Charge off - net of recoveries	(51		)	(238		)	(289		)	(184		)	(388		)	(572		)
Total change	(430		)	602			172			143			347			490
Ending balance	$	81		$	1,005		$	1,086		$	511		$	403		$	914

The following table presents the Company’s change in the allowance for uncollectable amounts due from financial advisors for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Change in allowance for uncollectable amounts - notes receivable	$	192	$	315	$	172	$	315

27

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

7.Goodwill and Intangible Assets

Goodwill. Goodwill associated with each acquisition is allocated to the segments, based on how the Company manages its segments. The following table presents the goodwill by segment:

	Goodwill as of
($ in thousands)	June 30, 2015		December 31, 2014
Independent Retail Advice	$	468,771	$	434,398
Wholesale Distribution	—		22,871
Investment Management	15,348		15,348
Investment Banking and Capital Markets	46,075		45,989
Corporate and Other	755		755
Total goodwill	$	530,949	$	519,361

The following table presents changes in the carrying amount of goodwill for the six months ended June 30, 2015:

($ in thousands)
Total goodwill, as of December 31, 2014	$	519,361
Changes during the period from:
Docupace adjustment (preliminary)	86
VSR acquisition (preliminary)	30,282
Girard acquisition (preliminary)	15,767
Other (see Note 2 - Cetera acquisition)	1,903
StratCap adjustment	7,700
J.P. Turner impairment	(13,579		)
StratCap impairment	(30,571		)
Total goodwill, as of June 30, 2015	$	530,949

During the quarter-end close as of and for the three and six months ended June 30, 2015, the Company became aware that the calculation of the contingent consideration related to StratCap incorrectly included the results of operations for StratCap’s broker-dealer. The merger agreement requires the results of StratCap’s broker-dealer be excluded from the calculation. This would have increased the goodwill and the liability for contingent consideration recorded as of the acquisition date. See Note 2 for more information.

During the three and six months ended June 30, 2015, the Company recorded $30.6 million and $13.6 million in goodwill impairment in the statements of operations which represented all of the goodwill previously recognized related to the acquisitions of StratCap and J.P. Turner, respectively. See Note 2 for more information.

28

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Intangible Assets. The components of intangible assets as of June 30, 2015 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,062,065	$	12,530	$	1,049,535	$	90,331	$	959,204
Sponsor relationships	8	113,000		100,000		13,000		10,464		2,536
Trade names	27	67,857		46		67,811		3,081		64,730
Investment management agreements	12	47,390		—		47,390		3,933		43,457
Customer relationships	11	20,686		—		20,686		2,427		18,259
Internally developed software and technologies	6	22,541		—		22,541		2,543		19,998
Intellectual property	8	10,642		—		10,642		1,437		9,205
Non-competition agreements	3	10,443		75		10,368		7,928		2,440
Distribution networks	39	3,210		—		3,210		70		3,140
Total finite-lived intangible assets		$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

The intangible assets for each reportable segment as of June 30, 2015 are as follows:

($ in thousands)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,151,151	$	12,651	$	1,138,500	$	102,982	$	1,035,518
Wholesale Distribution	121,380		100,000		21,380		11,595		9,785
Investment Management	48,770		—		48,770		4,018		44,752
Investment Banking and Capital Markets	23,761		—		23,761		1,745		22,016
Investment Research	10,642		—		10,642		1,437		9,205
Corporate and Other	2,130		—		2,130		437		1,693
Total finite-lived intangible assets	$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

During the three and six months ended June 30, 2015, the Company wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of the intangible assets from the J.P. Turner acquisition. These impairments were all recorded in goodwill and intangible assets impairment charge in the statements of operations. See Note 2 for more information.

29

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The components of intangible assets as of December 31, 2014 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,019,353	$	52,070	$	967,283
Sponsor relationships	9	113,000		4,186		108,814
Trade names	29	65,192		1,638		63,554
Investment management agreements	12	47,390		1,966		45,424
Customer relationships	11	20,686		1,473		19,213
Internally developed software and technologies	7	22,510		779		21,731
Intellectual property	9	10,642		849		9,793
Non-competition agreements	2	9,648		5,136		4,512
Distribution networks	40	3,210		9		3,201
Total finite-lived intangible assets		$	1,311,631	$	68,106	$	1,243,525

The intangible assets for each reportable segment as of December 31, 2014 are as follows:

($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,104,979	$	60,113	$	1,044,866
Wholesale Distribution	121,380		4,617		116,763
Investment Management	48,770		2,009		46,761
Investment Banking and Capital Markets	23,730		313		23,417
Investment Research	10,642		849		9,793
Corporate and Other	2,130		205		1,925
Total finite-lived intangible assets	$	1,311,631	$	68,106	$	1,243,525

The following tables present amortization expense for the three and six months ended June 30, 2015 and June 30, 2014 and the estimated future amortization for intangible assets:

Amortization Expense	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Amortization expense	$	26,905	$	13,765	$	54,108	$	15,532

Estimated Future Amortization Expense ($ in thousands)	Twelve Months Ended June 30,
2016	$	92,320
2017	90,473
2018	90,317
2019	89,901
2020	88,281
Thereafter	671,677
Total	$	1,122,969

30

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Goodwill and Intangible Assets — Fair Value. Goodwill and intangible assets established upon each acquisition were fair valued and were classified as Level 3 in the non-recurring fair value hierarchy. As a result of the Company’s determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in the Company’s expectations of future growth and profitability for certain reporting units and the decline in the Company’s market capitalization the Company determined that it would be appropriate to test its goodwill and intangible assets for impairment as of June 30, 2015 for all of its significant reporting units. Upon completion of the impairment tests, the goodwill from both of the acquisitions of StratCap and J.P. Turner was determined to be impaired as of June 30, 2015.

As a result of the impairment tests the Company wrote-off $30.6 million and $13.6 million during the three and six months ended June 30, 2015, which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

During the three and six months ended June 30, 2015, the Company also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. These impairments were all recorded in goodwill and intangible assets impairment charge in the statements of operations. For more information see Note 2.

Based on the impairment testing, the carrying value of the remaining goodwill and intangible assets as of June 30, 2015 closely approximates fair value. Unobservable inputs considered in determining fair value at the acquisition date include discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies. The decision to impair the StratCap intangible assets reflects, in part, the more transparent market price of the intangible assets in connection with the valuation of the StratCap reporting unit in the strategic transactions entered into on August 6, 2015. See Note 21 for more information.

8.Long-Term Debt

The following table presents the Company’s long-term borrowings as of June 30, 2015 and December 31, 2014 and their contractual interest rates, net of unamortized original issue discounts:

	June 30, 2015			December 31, 2014
($ in thousands)	Balance		Interest Rate	Balance		Interest Rate
First lien term facility	$	534,756	7.50%	$	555,700	6.50%
Second lien term facility	148,024		11.50%	147,903		10.50%
Convertible notes(1)	70,859		5.00%	83,508		5.00%
First lien revolving facility	23,000		7.50%	—		—%
Promissory note	15,300		8.00%	15,300		8.00%
Capital lease obligations	10,346		5.94%	—		—%
Subordinated borrowings	2,000		8.25%	2,000		8.25%
Total borrowings	804,285			804,411
Less: Current portion of borrowings	62,405			43,891
Total long-term debt, net of current portion	$	741,880		$	760,520

_____________________

(1) The Company’s convertible notes balance includes the fair value of the compound derivative of $6.9 million and $21.9 million as of June 30, 2015 and December 31, 2014, respectively.

First Lien Term Facility, Second Lien Term Facility and First Lien Revolving Facility. Concurrently with the closing of the Cetera acquisition on April 29, 2014, the Company entered into the Bank Facilities: a $575.0 million senior secured first lien term loan facility, a $150.0 million senior secured second lien term loan facility and a $25.0 million senior secured first lien revolving credit facility. During the six months ended June 30, 2015, the Company repaid $21.6 million of the senior secured first lien term loan facility as regularly scheduled principal repayments.

The proceeds of the term facilities were used by the Company to pay a portion of the consideration paid in the Cetera acquisition, to refinance certain existing indebtedness and to pay related fees and expenses. The proceeds of the senior secured first lien revolving credit facility are expected to be used for permitted capital expenditures, to provide for the ongoing working capital requirements and for general corporate purposes.

31

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

On June 30, 2015, the Company entered into Amendment No. 1 to the First Lien Credit Agreement and Amendment No. 1 to the Second Lien Credit Agreement (together, the “Amendments”). The Amendments increased the interest rates for the Bank Facilities by 1.00% per annum and decreased the restrictions pertaining to the required Secured Leverage Ratios (Secured Net Debt to Consolidated EBITDA, as defined and more particularly set forth in the Bank Facilities) until December 31, 2016. In connection with the Amendments, the Company paid $12.3 million of consent and arrangement fees to the lenders which are included in deferred financing fees in the consolidated statements of financial condition.

As of June 30, 2015, $23.0 million was outstanding under the senior secured first lien revolving credit facility (not including a backstop letter of credit). This senior secured first lien revolving credit facility has an interest rate equal to LIBOR plus 6.50% per annum, which may be reduced to 6.25% if the First Lien Leverage Ratio (as defined in the Bank Facilities) is less than or equal to 1.25 to 1.00. LIBOR can be no less than 1.00% per annum. On July 21, 2014, the Company utilized $1.1 million from the senior secured first lien revolving credit facility in the form of a backstop letter of credit. As of December 31, 2014, no amounts were outstanding under the senior secured first lien revolving facility (other than the backstop letter of credit).

Convertible Notes. On April 29, 2014, the Company also issued $120.0 million aggregate principal amount of convertible notes in a private placement. The convertible notes are senior unsecured obligations that are effectively subordinate to the Bank Facilities, which are secured facilities, and any refinancing thereof. The convertible notes are convertible in $1,000 increments at the option of the holder, to the extent permitted by the Bank Facilities, into shares of Class A common stock, at a conversion price equal to $21.18 per share of Class A common stock, which conversion price is subject to anti-dilution adjustments upon the occurrence of certain events and transactions.

Promissory Note. On December 4, 2014, the Company issued a $15.3 milliontwo-year promissory note bearing interest at a rate of 8% per annum pursuant to the terms of a litigation settlement. The principal amount of the promissory note is due in three payments of $7.7 million, $3.8 million and $3.8 million on March 31, 2016, September 30, 2016 and March 31, 2017, respectively. See Note 16 for more information.

Capital Lease Obligations. As of June 30, 2015, the Company had assets recorded in property and equipment in the consolidated statements of financial condition leased under the terms of capital leases.

Subordinated Borrowings. The Company assumed $2.0 million in subordinated debt when it acquired ICH. The subordinated borrowings are covered by an agreement with ICH’s clearing firm approved by the Financial Industry Regulatory Authority (“FINRA”) on March 8, 2013 and are thus available for computing net capital under the SEC’s uniform net capital rule. To the extent that such borrowings are required for ICH’s continued compliance with minimum net capital requirements, they may not be repaid. The subordinated borrowings mature on March 8, 2016.

The following table presents the contractual maturities of long-term debt, net of the current portion as of June 30, 2015:

($ in thousands)	Twelve Months Ended June 30,
2017	$	97,820
2018	88,591
2019	332,475
2020	1,585
Thereafter	270,000
Long-term portion of the original issue discount	(55,459		)
Fair value of embedded derivative	6,868
Total long-term debt, net of current portion	$	741,880

The following table presents the scheduled contractual maturities of the current portion of long-term debt as of June 30, 2015:

($ in thousands)	Three Months Ended,
September 30, 2015	$	14,678
December 31, 2015	14,968
March 31, 2016	24,627
June 30, 2016	14,968
Short-term portion of the original issue discount	(6,836		)
Total current portion of long-term debt	$	62,405

32

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The tables above present the maturities for the borrowings that are repayable prior to their maturity at the option of the Company at their contractual maturity dates.

On January 9, 2015, the Company issued a letter of credit in the amount of $0.1 million on behalf of First Allied. The letter of credit was issued to the lessor on a lease entered into by First Allied.

9.Derivative Contracts

During the second quarter of 2014, the Company entered into a series of contemporaneous transactions that qualify as derivative contracts or include derivative contracts. These derivative contracts include a put/call agreement, which is a free-standing derivative contract, and embedded derivative contracts related to the Company’s issuance of convertible notes and Series A Preferred Stock (“hybrid instruments”).

The embedded derivative contracts’ features require separate accounting as derivative instruments; therefore, the issuance proceeds for the convertible note and Series A Preferred Stock were first allocated to the fair value of the put/call agreement and then, on a relative fair value basis, to the hybrid instruments. The proceeds allocated to each hybrid instrument were then attributed between the host contract and the embedded derivative contracts. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

On November 18, 2014 and December 12, 2014, a portion of the Series A Preferred Stock was submitted for conversion, and on December 10, 2014, December 19, 2014 and February 23, 2015, shares of Class A common stock were issued on account of such conversions. Accordingly, the bifurcated derivatives associated with the converted Series A Preferred Stock were adjusted to their fair value on the date of each submission for conversion, with the changes in fair value reflected in other revenues in the consolidated statements of operations. The bifurcated derivatives associated with the converted Series A Preferred Stock were then written off against additional paid-in capital.

On December 19, 2014, the remaining Series A Preferred Stock was exchanged for Series B Preferred Stock and Series C Preferred Stock. Accordingly, the bifurcated derivatives associated with the remaining Series A Preferred Stock were adjusted to their fair value as measured on the date of the exchange, with the change in fair value reflected in other revenues in the consolidated statements of operations. The remaining bifurcated derivatives associated with the Series A Preferred Stock, which were exchanged, were written off against additional paid-in capital.

The Series B Preferred Stock and Series C Preferred Stock also have embedded derivative contracts features that require separate accounting as derivative instruments. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

The following table sets forth the fair value of the Company’s derivative contracts as of June 30, 2015 and December 31, 2014 as follows:

($ in thousands)	June 30, 2015		December 31, 2014
Luxor Put	$	8,383	$	11,623
Luxor Call	—		—
Embedded derivative related to the Series B preferred stock	—		—
Embedded derivative related to the Series C preferred stock	31,264		69,409
Total derivative contracts	$	39,647	$	81,032
Embedded derivative related to the convertible notes (included in long-term debt)	$	6,868	$	21,876

33

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The following table sets forth the change in fair value of the Company’s derivative contracts which was recorded in other revenues in the consolidated statement of operations for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended				Six Months Ended
($ in thousands)	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
Luxor Put	$	2,946	$	8,466	$	3,241	$	8,466
Luxor Call	—		—		—		—
Embedded derivative related to the Series A preferred stock	—		35,239		—		35,239
Embedded derivative related to the Series B preferred stock	—		—		—		—
Embedded derivative related to the Series C preferred stock	21,767		—		38,143		—
Embedded derivative related to the convertible notes (included in long-term debt)	8,252		14,747		15,009		14,747
Total change in fair value	$	32,965	$	58,452	$	56,393	$	58,452

Put/Call. On April 29, 2014, the Company entered into a put/call agreement with affiliates of Luxor Capital Group LP (collectively with its affiliates, “Luxor”), which was amended on December 19, 2014 in connection with the exchange of Series A Preferred Stock for Series B Preferred Stock and Series C Preferred Stock. Under this agreement, subject to certain conditions, (i) the Company has the right to repurchase Luxor’s interest in RCS Capital Management, which is currently 19.46% (the “Luxor percentage interest”) from Luxor in exchange for its fair market value (as determined by the Company and Luxor pursuant to the agreement) in shares of Class A common stock (or, at the Company’s option, a cash equivalent); and (ii) Luxor has the right to require the Company to purchase the Luxor percentage interest in exchange for a number of shares of Class A common stock (or, at the Company’s option, a cash equivalent) that is equal to 15.00% multiplied by the Luxor percentage interest multiplied by the then outstanding number of shares of Class A common stock (assuming the conversion immediately prior thereto of the then outstanding convertible notes and Series C Preferred Stock).

The put/call agreement also provides that the Members may elect to purchase all the Luxor percentage interest offered to the Company for an amount equal to the value of the Class A common stock required to be delivered by the Company for cash, shares of Class A common stock or a combination thereof. If the Company is prohibited by the Bank Facilities from purchasing the Luxor percentage interest, the Members will be required to purchase the Luxor percentage interest under the same terms.

Embedded derivatives related to the preferred stock and convertible notes. The Series B Preferred Stock is not convertible but includes an option for the Company to call the instrument in connection with a consolidation or merger of our company with one or more entities that are not its affiliates which results in a Change of Control (as defined in the Series B COD) and as a result of which the Company is not the surviving entity that is considered an embedded derivative that is not clearly and closely related to the host instrument. As a result, this feature must be bifurcated and accounted for as a separate compound derivative.

The Series C Preferred Stock is convertible, at the option of the holder, into shares of Class A common stock. The convertible features and other features are considered embedded derivatives that are not clearly and closely related to the host instrument. As a result, these features must be bifurcated and accounted for as a separate compound derivative. The Company adjusts the carrying value of the compound derivative to fair value at each reporting date, or the date of conversion, and recognizes the change in fair value in the consolidated statements of operations.

The Company’s convertible notes are convertible, at the option of the holders of the Company’s convertible notes, into shares of Class A common stock. The convertible feature and other features are considered embedded derivatives that are not clearly and closely related to the host instrument. As a result, these features must be bifurcated and accounted for as a separate compound derivative. The Company adjusts the carrying value of the compound derivative to fair value at each reporting date, or the date of conversion, and recognizes the change in fair value in the statements of operations.

34

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

10.Preferred Stock

Series A Preferred Stock. On April 29, 2014, the Company issued 14,657,980 shares of Series A Preferred Stock to affiliates of Luxor in a private placement. The shares of Series A Preferred Stock were entitled to a dividend of 7% of the liquidation preference in cash and a dividend of 8% of the liquidation preference if a quarterly dividend was not paid in cash on the dividend payment date. The shares of Series A Preferred Stock were convertible, at the option of the holders of the Series A Preferred Stock, into shares of Class A common stock, at the lower of (i) a 2% discount to VWAP of Class A common stock for the ten trading days prior to the date of the holder’s election to convert; (ii) a 2% discount to the closing price of Class A common stock on the date of the holder’s election to convert; and (iii) $20.26, the fixed conversion price. If both the one-day VWAP and the daily closing price of Class A common stock for the prior 30 consecutive trading days exceeded 2.5 times the fixed conversion price, or $50.65, and at least $10.0 million of Class A common stock was traded each day for 30 consecutive days at any time after the first two years from the issuance date of the Series A Preferred Stock, then the Company may have required the holders to convert the Series A Preferred Stock into shares of Class A common stock at the same price as set forth above. Accrued and unpaid dividends on the Series A Preferred Stock were also entitled to the same liquidation preference and were convertible into additional shares of Class A common stock on the same terms as actual shares of Series A Preferred Stock.

During the period April 29, 2014 through June 30, 2014, the Company accrued $3.3 million in dividends and recognized a deemed dividend of $194.8 million on its Series A Preferred Stock. See Note 14 for more information.

Exchange and Conversion of Outstanding Series A Preferred Stock. During the period April 29, 2014 through December 19, 2014, Luxor elected to convert 3,073,553 shares of Series A Preferred Stock into 5,405,601 shares of Class A common stock. On December 19, 2014 the Company exchanged the remaining 11,584,427 shares of Series A Preferred Stock for 5,800,000 shares of Series B Preferred Stock and 4,400,000 shares of Series C Preferred Stock. $3.0 million of accrued and unpaid dividends on Series A Preferred Stock through December 12, 2014, the date of submission for conversion, were proportionately added to the amount of dividends due on the Series B Preferred Stock and the Series C Preferred Stock on January 12, 2015, the first dividend payment date.

Series B Preferred Stock. On December 19, 2014, the Company issued 5,800,000 of Series B Preferred Stock to affiliates of Luxor. If paid in cash, dividends on shares of Series B Preferred Stock accrue quarterly at 11.00% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue at 12.50% per annum of the liquidation preference.

The initial liquidation preference of shares of Series B Preferred Stock was $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

The holders of Series B Preferred Stock have no conversion rights.

At any time prior to June 12, 2016, the Company has the right to redeem all (and not less than all) of the outstanding shares of Series B Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption.

Starting on December 12, 2022, the Company will have a right to redeem, and holders of shares of Series B Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares of Series B Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption. If any redemption by the Company would result in less than $35.0 million in aggregate liquidation preference of Series B Preferred Stock remaining outstanding, then the Company will be required to redeem all (and not less than all) of the outstanding shares of Series B Preferred Stock.

The shares of Series B Preferred Stock are also redeemable in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which the Company is not the surviving entity.

The Series B Preferred Stock ranks pari passu with the Series C Preferred Stock.

35

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

In the event of (A) a dissolution or winding up of the Company, whether voluntary or involuntary, (B) a consolidation or merger of the Company with and into one or more entities which are not our affiliates which results in a change of control, or (C) a sale or transfer of all or substantially all of the Company’s assets other than to an affiliate of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of equity securities junior to the Series B Preferred Stock, the holders of shares of Series B Preferred Stock are entitled (subject to the redemption rights of such holders in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which our company is not the surviving entity) to receive an amount equal to the liquidation preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of the final distribution to such holder.

The terms of the Series B Preferred Stock set forth in the related certificate of designation include voting rights relating to the issuance of additional preferred securities, amending the provisions of the related certificate of designation, affiliate transactions and the incurrence of indebtedness.

Series C Preferred Stock. On December 19, 2014, the Company issued 4,400,000 of Series C Preferred Stock to affiliates of Luxor. If paid in cash, dividends on shares of Series C Preferred Stock accrue quarterly at 7.00% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue at 8.00% per annum of the liquidation preference.

The initial liquidation preference of shares of Series C Preferred Stock was $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

The shares of Series C Preferred Stock are convertible, at the option of the holders of the Series C Preferred Stock, into shares of Class A common stock, at $13.00, which conversion price is subject to anti-dilution adjustments upon the occurrence of certain events and transactions. If both the one-day VWAP and the daily closing price of Class A common stock for the prior 30 consecutive trading days exceeds $50.66 and at least $10.0 million of Class A common stock is traded each day for 30 consecutive days at any time after the first two years from the issuance date of the Series C Preferred Stock, then the Company may require the holders to convert the Series C Preferred Stock into shares of Class A common stock at the same price as set forth above.

The following limitations on the ownership of Class A common stock are contained in the certificate of designation related to the Series C Preferred Stock.

At any time when a holder of Series C Preferred Stock then beneficially owns 9.9% or less, but greater than 4.9%, of the shares of Class A common stock outstanding, in no event will such holder be allowed to accept shares of Class A common stock issuable upon conversion of Series C Preferred Stock that, when taken together with the shares of Class A common stock otherwise beneficially owned, collectively exceeds 9.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock. This ownership limitation can be waived by any holder of Series C Preferred Stock on 65 days prior written notice to the Company.

At any time when a holder of Series C Preferred Stock then beneficially owns 4.9% or less of the shares of Class A common stock outstanding, in no event will such holder be allowed to accept shares of Class A common stock obtained upon conversion of Series C Preferred Stock that, when taken together with the shares of Class A common stock otherwise held, collectively exceeds 4.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock. This ownership limitation can be waived by any holder of Series C Preferred Stock on 65 days prior written notice to the Company.

In no event will a holder of Series C Preferred Stock be allowed to accept shares of Class A common stock issuable upon conversion of Series C Preferred Stock that would result in that holder owning an aggregate number of shares of Class A common stock, when taken together with any other shares of Class A common stock then held by such holder and persons aggregated with such holder under the rules of the FINRA, in excess of 24.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock, unless such ownership of shares of Class A common stock in excess of 24.9% is duly approved in advance by FINRA.

The ownership limitations described above are identical to the limitations contained in the indenture governing the convertible notes and the put/call agreement governing Luxor’s right to exchange its membership interest in RCS Capital Management for shares of Class A common stock.

36

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Starting on December 12, 2022, the Company will have a right to redeem, and holders of shares of Series C Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares of Series C Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption. If any redemption by the Company would result in less than $35.0 million in aggregate liquidation preference of Series C Preferred Stock remaining outstanding, then the Company will be required to redeem all (and not less than all) of the outstanding shares of Series C Preferred Stock.

The shares of Series C Preferred Stock are also redeemable in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which the Company is not the surviving entity.

The Series C Preferred Stock ranks pari passu with the Series B Preferred Stock.

In the event of (A) a dissolution or winding up of the Company, whether voluntary or involuntary, (B) a consolidation or merger of the Company with and into one or more entities which are not our affiliates which results in a change of control, or (C) a sale or transfer of all or substantially all the Company’s assets other than to an affiliate of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of equity securities junior to the Series C Preferred Stock, the holders of shares of Series C Preferred Stock are entitled (subject to the redemption rights of such holders in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which our company is not the surviving entity) to receive an amount equal to the greater of: (i) the liquidation preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of the final distribution to such holder; and (ii) an amount per share of Series C Preferred Stock equal to the amount or consideration which would have been payable had each share of Series C Preferred Stock been converted into shares of Class A common stock.

The terms of the Series C Preferred Stock set forth in the related certificate of designation include voting rights relating to the issuance of additional preferred securities, amending the provisions of the related certificate of designation, affiliate transactions and the incurrence of indebtedness.

Preferred Stock Dividends. As of June 30, 2015 and December 31, 2014, the Company accrued $4.2 million and $0.8 million, respectively, of preferred stock dividends on the Series B Preferred Stock and $2.0 million and $0.4 million, respectively, of preferred stock dividends on the Series C Preferred Stock. The Series B Preferred Stock and Series C Preferred Stock dividend accruals are included in other liabilities in the consolidated statements of financial condition.

Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date. The following table presents the liquidation preferences for the Series B Preferred Stock and the Series C Preferred Stock:

($ in thousands)	Series B Preferred Stock		Series C Preferred Stock
Beginning liquidation preference, December 12, 2014	$	145,000	$	110,000
Allocation of Series A Preferred Stock accrued and unpaid dividends	1,700		1,288
2014 4th quarter dividend accrual	797		385
2014 4th quarter dividend paid-in-kind increase	352		239
2015 1st quarter dividend accrual	4,056		1,954
2015 1st quarter dividend paid-in-kind increase	553		279
Ending liquidation preference, June 30, 2015	$	152,458	$	114,145

On July 13, 2015, the liquidation preferences of the Series B Preferred Stock and Series C Preferred Stock increased by $4.7 million and $2.3 million, respectively, to reflect the accrued and unpaid dividends.

11.Stockholders’ Equity

As of June 30, 2015, the Company had the following classes of common stock and non-controlling interests:

Class A common stock. Class A common stock entitles holders to one vote per share and economic rights (including rights to dividends, if any, and distributions upon liquidation). Holders of Class A common stock hold a portion of the voting rights of the Company.

37

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

On February 11, 2014, as part of the 2014 Restructuring Transactions and pursuant to an existing exchange agreement, RCAP Holdings exchanged 23,999,999 Original Operating Subsidiaries Units for 23,999,999 shares of Class A common stock.

On June 10, 2014, the Company issued 19,000,000 shares of Class A common stock in a public offering at a price of $20.25 per share. In connection with the public offering, the Company granted the underwriters the option to purchase up to 3,600,000 additional shares of Class A common stock to cover over-allotments, if any, for a period of 30 days. On June 18, 2014, the underwriters purchased an additional 870,248 shares pursuant to the over-allotment option at the public offering price of $20.25 per share.

On June 10, 2014, the Company issued 2,469,136 shares of Class A common stock at the public offering price of $20.25 per share to Luxor in a private offering.

During the six months ended June 30, 2015 and June 30, 2014, the Company granted 1,305,917 and 2,366,703 shares, net of forfeited and retired grants, of its Class A common stock in the form of restricted stock awards under the RCAP Equity Plan (as defined below) and FA RSU Plan (as defined below). See Note 12 for more information.

On February 23, 2015, the Company issued 2,042,022 shares of its Class A common stock pursuant to the conversion of a portion of the Company’s outstanding Series A Preferred Stock. See Note 10 for more information.

During the six months ended June 30, 2014, the Class A common stock issued as consideration in connection with the acquisitions of Summit, J.P. Turner, and First Allied was 498,884 shares, 239,362 shares and 11,264,929 shares, respectively. In March 2015, the Company amended its agreement with J.P. Turner to settle the remaining contingent and deferred consideration for the J.P. Turner acquisition and issued 245,813 shares of Class A common stock. During the six months ended June 30, 2015, the Class A common stock issued as consideration in connection with the acquisitions of VSR and Girard was 2,436,429 shares and 549,529 shares, respectively. See Note 2 for more information.

On March 20, 2014, the Company’s board of directors authorized, and the Company declared, a cash dividend for the first quarter of 2014 for its Class A common stock. The cash dividend was paid on April 10, 2014 to record holders of Class A common stock at the close of business on March 31, 2014 in an amount equal to $0.18 per share.

On June 17, 2014, the Company’s Board of Directors authorized and the Company declared a cash dividend for the quarter ended June 30, 2014 for its Class A common stock. The cash dividend was paid on July 10, 2014 to record holders of Class A common stock at the close of business on June 30, 2014 in an amount equal to $0.18 per share.

Class B common stock. As of June 30, 2015, RCAP Holdings owns the sole outstanding share of Class B common stock, which entitles it to one vote more than 50% of the voting rights of the Company, and thereby controls the Company. Holders of Class B common stock have no economic rights (including no rights to dividends and distributions upon liquidation).

Docupace non-controlling interest. The non-controlling shareholder of Docupace participates with the Company in the economic benefits of the post combination entity. Accordingly, the Company included the appropriate portion of Docupace’s net assets and operating loss that it does not own in non-controlling interests on the consolidated statement of financial condition and the consolidated statements of operations, respectively. See Note 2 for more information.

12.Equity-Based Compensation

RCAP Equity Plan

The RCAP Equity Plan provides for the grant of stock options, stock appreciation rights, restricted shares of Class A common stock, restricted stock units, dividend equivalent rights and other stock-based awards (which may include grants of shares of Class A common stock in payment of the amounts due under a plan or arrangement sponsored or maintained by the Company or an affiliate) to individuals who are, as of the date of grant, non-executive directors, officers and other employees of the Company or its affiliates, to certain advisors or consultants of the Company or any of its affiliates who are providing services to the Company or the affiliate, or, subject the Services Agreement (as defined below) remaining in effect on the date of grant, to RCS Capital Management, an entity under common control with RCAP Holdings, and individuals who are, as of the date of grant, employees, officers or directors of RCS Capital Management or one of its affiliates.

38

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The following table details the restricted shares activity during the six months ended June 30, 2015:

	Shares of Restricted Common Stock	Weighted-Average Issue Price		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	2,276,713	$	34.86	$	79,375	3.09
Granted	1,652,082	11.61		19,181		4.24
Less: vested	428,095	31.01		13,275		N/A
Less: forfeited	183,036	38.49		7,045		N/A
Less: retired	232,556	32.13		7,472		N/A
Nonvested, June 30, 2015	3,085,108	$	22.93	$	70,764	3.16

During the three and six months ended June 30, 2015, the Company recorded $7.2 million and $11.2 million, respectively, of stock-based compensation expenses pursuant to the RCAP Equity Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $5.8 million and $6.5 million, respectively, of stock-based compensation expenses pursuant to the RCAP Equity Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations.

Restricted Stock Awards Granted by an Entity that was Previously a Related Party

An entity that was previously a related party also granted restricted stock awards (of the related party’s stock) to certain employees of the Company for services provided by Company employees on behalf of such related party. During the three and six months ended June 30, 2015, the Company recorded contra-expenses of $0.1 million and expenses of $0.3 million, respectively, of stock-based compensation derived from these grants which are included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $0.2 million and $2.5 million, respectively, of stock-based compensation expenses derived from these grants which are included in internal commissions, payroll and benefits expense in the consolidated statements of operations.

The following table details the restricted shares activity related to restricted stock awards of an entity that was previously a related party granted to RCAP employees during the six months ended June 30, 2015:

	Shares of Restricted Common Stock of a Related Party	Weighted-Average Fair Value Per Share		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	368,625	$	9.05	$	3,335	2.83
Granted	—	—		—		—
Less: vested	85,992	8.13		699		N/A
Less: forfeited	5,000	8.13		41		N/A
Nonvested, June 30, 2015	277,633	$	8.13	$	2,257	2.13

FA RSU Plan

Restricted units were issued to certain employees under the First Allied Holdings 2013 Restricted Unit Plan (the “FA RSU Plan”) to provide for the grant of phantom stock in connection with the acquisition of First Allied by RCAP Holdings. During the six months ended June 30, 2015, the company issued 69,427 shares to settle a portion of the restricted units issued under the FA RSU Plan. During the three and six months ended June 30, 2015, the Company recorded contra-expenses $0.4 million and expenses of $0.1 million, respectively, of stock-based compensation pursuant to the FA RSU Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $0.7 million and $1.5 million, respectively, of stock-based compensation pursuant to the FA RSU Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. As of June 30, 2015, 155,785 nonvested restricted units were outstanding under the FA RSU Plan.

2014 Stock Purchase Program

Select employees, financial advisors and executive officers of the Company and its affiliates and of certain subsidiaries of the Company were eligible to participate in the 2014 Stock Purchase Program pursuant to which participants purchased shares of Class A common stock and were automatically granted one warrant to purchase one share of Class A common stock for each three shares purchased, at an exercise price equal to the purchase price per share purchased.

39

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

For the three and six months ended June 30, 2015, the Company recorded to an immaterial amount of expenses to internal commissions, payroll and benefits in the consolidated statements of operations for expenses derived from the 2014 Stock Purchase Program. The Company did not incur expenses pursuant to the 2014 Stock Purchase Program during the three and six months ended June 30, 2014.

13.Income Taxes

The following table presents the net deferred tax liability primarily related to intangible assets acquired as a result of the recent acquisitions:

($ in thousands)	June 30, 2015		December 31, 2014
Net deferred tax liability	$	220,639	$	266,202

The following table presents the Company’s effective tax rate:

	Six Months Ended June 30,
	2015		2014
Effective tax rate	42.03	%	18.48	%

For the six months ended June 30, 2015, state income taxes had a significant impact on the difference between our statutory U.S. federal income tax rate and our effective tax rate. In addition the difference between our U.S. statutory rate and our effective rate is the result of permanent items such as travel and entertainment and transaction costs as well as discrete items such as changes in the fair value of our contingent consideration and derivative liabilities.

The Company believes that, as of June 30, 2015, it had no material uncertain tax positions. Interest and penalties relating to unrecognized tax expenses are recognized in income tax expense, when applicable. There was no liability for interest or penalties accrued as of June 30, 2015.

The Company files tax returns in the U.S. federal and various state jurisdictions. The Company will be open to audit under the statute of limitations by the Internal Revenue Service for its 2011 to 2014 tax years. The Company or its subsidiaries’ state income tax returns will be open to audit under the statute of limitations for 2010 to 2014.

40

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

14.Earnings Per Share

For a discussion of the computation of basic and diluted earnings per share, see Note 15 of the Company’s 2014 Annual Report on Form 10-K/A.

The following tables present the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands, except share and per share data)	2015			2014			2015			2014
Basic earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Net loss attributable to Class A common stockholders	(72,148		)	(150,245		)	(92,904		)	(147,287		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Net loss per share	$	(0.97	)	$	(3.49	)	$	(1.28	)	$	(4.21	)
Diluted earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	(26,235		)	(23,213		)	(45,582		)	(23,213		)
Net loss attributable to Class A common stockholders	(98,383		)	(173,458		)	(138,486		)	(170,500		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	14,599,367			5,265,251			14,599,367			2,647,170
Total weighted average diluted shares outstanding	88,605,947			48,295,269			87,175,560			37,622,806
Net loss per share	$	(1.11	)	$	(3.59	)	$	(1.59	)	$	(4.53	)

_____________________

(1) Included in net loss attributable to Class A common stockholders for the three and six months ended June 30, 2014 is a deemed dividend of $194.8 million. This deemed dividend represents the difference between redemption value of the convertible preferred stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative and was recognized in the period in which the preferred stock was issued. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

(2) Weighted average shares outstanding for the three and six months ended June 30, 2015 were calculated assuming that the 2,042,022 shares of Class A common stock issued on February 23, 2015 pursuant to the submission for conversion of Series A preferred stock on December 12, 2014 were outstanding for the entire period.

(3) Weighted average shares outstanding for the three and six months ended June 30, 2014 were calculated assuming that the 11,264,929 shares of Class A common stock issued on June 30, 2014 in connection with the closing of the First Allied acquisition were outstanding for the entire period.

41

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

(4) The following items were excluded from the calculation of earnings per share as the effect was antidilutive:

• Shares issuable under the terms of Luxor’s put option, incremental restricted shares, shares issuable under the second and third tranches of the FA RSU plan, shares of Class A common stock contingently issuable as consideration for certain recent acquisitions and outstanding warrants issued under the 2014 Stock Purchase Program for the three and six months ended June 30, 2015.

• LTIP Units, incremental restricted shares, shares issuable under the terms of the Series A Preferred Stock, shares issuable under the FA RSU plan and shares of Class A common stock contingently issuable as consideration for certain recent acquisitions for the three and six months ended June 30, 2014. Additionally, shares issuable under the terms of the Series C Preferred Stock were excluded for the three and six months ended June 30, 2014 as the Series C Preferred Stock was not issued until December 19, 2014.

15.Off-Balance Sheet Risk and Concentrations

The Company is engaged in various trading, brokerage activities and capital raising with counterparties primarily including broker-dealers, banks, direct investment programs and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. It is the Company’s policy to review, as necessary, the credit standing of each counterparty.

The Company’s customer activities involve the execution, settlement, and financing of various securities transactions. These activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to the customer, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customer’s account. In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased and the writing of options contracts. Such transactions may expose the Company to off-balance sheet risk in the event that margin requirements are not sufficient to fully cover losses that customers incur or counterparties are unable to meet the terms of the contracted obligations. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing of each counterparty with which it conducts business.

In the event a customer or broker fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the customer’s obligations. The Company seeks to control the risk associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or reduce positions, when necessary.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and temporary cash investments in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by maintaining the Company’s banking and brokerage relationships with high credit quality financial institutions.

The Company holds securities that can potentially subject the Company to market risk. The amount of potential gain or loss depends on the securities performance and overall market activity. The Company monitors its securities positions on a monthly basis to evaluate its positions, and, if applicable, may elect to sell all or a portion to limit the loss.

As of June 30, 2015 and December 31, 2014, the Company had no significant accounts receivable concentrations with any of its counterparties.

42

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

16.Commitments and Contingencies

Leases. The Company leases certain facilities and equipment under various operating leases. These leases are generally subject to scheduled base rent and maintenance cost increases, which are recognized on a straight-line basis over the period of the leases. Total rent expense for all operating leases was approximately $3.4 million and $6.6 million for the three and six months ended June 30, 2015, respectively, and $1.9 million and $2.9 million for the three and six months ended June 30, 2014, respectively. The following table shows the future annual minimum rental payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	11,567
2017	10,638
2018	9,123
2019	7,557
2020	7,045
Thereafter	21,961
Total	$	67,891

Service contracts. The Company has contracted with third parties to perform back-office processing services. The following table shows the future annual minimum payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	10,204
2017	8,574
2018	6,567
2019	6,567
2020	6,567
Thereafter	694
Total	$	39,173

Lines of credit. As of June 30, 2015, the Company had three lines of credit. The first line of credit pursuant to the Bank Facilities is for $25.0 million, and as of June 30, 2015, $23.0 million was outstanding. The second line of credit is related to Cetera’s clearing business, which was acquired in the Cetera acquisition, is for $50.0 million with no maturity date and as of June 30, 2015, no amount was outstanding. The third line of credit, which was acquired in the ICH acquisition, is for $1.0 million with no maturity date and as of June 30, 2015, no amount was outstanding. See Note 8 for more information.

Revolving line of credit commitment. On April 16, 2015, the Company entered into an agreement to provide a fund manager with a $4.0 million revolving line of credit and as of June 30, 2015, $0.3 million was outstanding.

Private equity commitment. As of June 30, 2015, the Company had a commitment to invest up to $0.01 million in private equity funds.

Legal proceedings

Legal proceedings related to business operations. In addition to the matters described below, the Company and its subsidiaries are involved in judicial, regulatory and arbitration proceedings arising out of their business operations. Many of these proceedings are in their early stages, and many seek an indeterminate amount of damages.

The Company recognizes a liability with regard to a legal proceeding when it believes it is probable a liability has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount, however, the Company accrues the minimum amount in the range. The Company maintains insurance coverage, including general liability, directors and officers, errors and omissions, excess entity errors and omissions and fidelity bond insurance. The Company records legal reserves and related insurance recoveries on a gross basis. As of June 30, 2015, the Company recorded legal reserves related to several matters of $14.1 million in other liabilities in the consolidated statement of financial condition.

43

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Defense costs with regard to legal proceedings are expensed as incurred and classified as professional services within the consolidated statements of operations. When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters.

There are several matters that are “reasonably possible” but for which we are unable to determine at this time a reasonable estimate. These generally are arbitrations or other matters brought against various broker-dealers now owned by the Company.

ARCP Litigation

On September 30, 2014, the Company entered into a definitive agreement to acquire Cole Capital Partners LLC and Cole Capital Advisors, Inc. (“Cole Capital “) from ARC Properties Operating Partnership, L.P. (“ARCP OP”), a subsidiary and the operating partnership of ARCP for $700.0 million plus contingent consideration. Cole Capital is the private capital management business of ARCP, which includes a broker-dealer, wholesale distribution, and a non-traded REIT sponsor and advisory businesses.

The definitive agreement provided that the acquisition of Cole Capital would be consummated in two closings.

At the first closing (the “First Closing”) on October 22, 2014, subsidiaries of the Company entered into interim sub-advisory arrangements with the current advisors (which are subsidiaries of ARCP) of the five non-traded REITs sponsored and advised by Cole Capital.

In addition, Realty Capital Securities entered into wholesaling agreements whereby a subsidiary of Cole Capital engaged Realty Capital Securities as its distribution agent for the three non-traded REITs for which it then served as “dealer-manager.” Realty Capital Securities was entitled to receive a sourcing fee on sales through dealers it sourced.

The Company paid a portion of the purchase price equal to $10.0 million at the First Closing. The balance of the consideration would have been paid and Cole Capital would have been acquired by the Company at a second closing, which did not occur.

On October 29, 2014, ARCP announced that its audit committee had concluded that the previously issued financial statements and other financial information contained in certain public filings should no longer be relied upon. ARCP reported that this conclusion was based on the preliminary findings of an investigation conducted by ARCP’s audit committee which concluded that certain accounting errors were made by ARCP personnel that were not corrected after being discovered, resulting in an overstatement of adjusted funds from operations and an understatement of ARCP’s net loss for the three and six months ended June 30, 2014. ARCP also announced the resignation of its chief accounting officer and its chief financial officer, who is a member of RCAP Holdings and AR Capital, LLC, and served as the Company’s chief financial officer until December 2013. This individual also served as a member of the board of directors of the Company until July 2014 and had also served as an executive and director of non-traded REITs sponsored by AR Capital, LLC. This individual does not have a role in the management of the Company’s business. Although ARCP was previously sponsored by an entity under common control with RCAP Holdings and was advised by a subsidiary of such entity until January 2014, ARCP is a separate company that is no longer sponsored or advised by an entity under common control with RCAP Holdings.

On November 3, 2014, the Company announced that it had terminated the previously disclosed definitive agreement to acquire Cole Capital from ARCP OP. Also on November 3, 2014, ARCP issued a press release asserting that, in its view, the Company had no basis to terminate the agreement and that the Company’s termination of the agreement was itself a breach of the agreement. On November 11, 2014, ARCP filed suit for specific performance, injunctive relief and other relief against the Company in the Court of Chancery of the State of Delaware, (the “ARCP Action”) and, on November 12, 2014, ARCP issued a press release asserting that the Company’s termination of the agreement constituted a breach of contract.

On December 4, 2014, the Company entered into a binding term sheet with ARCP to settle the ARCP Action. Pursuant to the terms of the settlement, the Company paid ARCP a negotiated break-up fee consisting of a cash payment of $32.7 million and a $15.3 million, two-year promissory note bearing interest at a rate of 8% per annum, and ARCP dismissed with prejudice its lawsuit against the Company and, accordingly, the acquisition of Cole Capital did not proceed. The promissory note is recorded in long-term debt on the consolidated statements of financial condition, and the principal amount of the promissory note is due in three payments of $7.7 million, $3.8 million and $3.8 million on March 31, 2016, September 30, 2016 and March 31, 2017, respectively. The Company and ARCP also agreed, among other things, that ARCP would keep the $10.0 million payment delivered by the Company in connection with the First Closing and the Company would release ARCP from its obligation to pay $2.0 million in respect of structuring services provided by Realty Capital Securities in connection with ARCP’s May 2014 equity offering. As part of the binding term sheet, we agreed with ARCP to work together in good faith to terminate any remaining agreements between ARCP and the Company, and this process is ongoing.

44

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

American Realty Capital Healthcare Trust Litigation

In connection with the proposed acquisition by Ventas, Inc. (“Ventas”) of all the outstanding stock of American Realty Capital Healthcare Trust, Inc. (“ARCH”), purported shareholders of ARCH have filed multiple class action lawsuits in the Circuit Court for Baltimore City, Maryland and other jurisdictions. Two of these actions named Realty Capital Securities among others, as a defendant. The actions are: Shine v. American Realty Capital Healthcare Trust, Inc. et al filed June 13, 2014 and Abbassi, et al. v. American Realty Capital Healthcare Trust, Inc. et al. filed July 9, 2014. The actions also assert derivative claims on behalf of ARCH against Realty Capital Securities. On October 10, 2014, lead plaintiffs in the Maryland state court action filed a “Consolidated Amended Derivative and Direct Class Action Complaint,” asserting direct and derivative claims of aiding and abetting a breach of fiduciary duty against multiple defendants, including Realty Capital Securities, arising from their roles providing services to ARCH in connection with the proposed acquisition of ARCH by Ventas and seek (i) to enjoin the proposed acquisition and (ii) recover damages if the proposed acquisition is completed. A similar shareholder action, Rosenzweig v. American Realty Capital Healthcare Trust, Inc. et al, 1:14-cv-02019-GLR, was filed in federal court for the District of Maryland.

On January 2, 2015 and January 5, 2015, the parties to the consolidated state court action and the Rosenzweig action executed separate memoranda of understanding regarding settlement of all claims asserted on behalf of each alleged class of ARCH stockholders in each case. In connection with the settlement contemplated by each memoranda of understanding, each action and all claims asserted therein will be dismissed, subject to approval by each applicable court. Pursuant to the executed memoranda of understanding, ARCH made certain additional disclosures related to the Ventas transaction. The memoranda of understanding further contemplate that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, upon the conclusion of confirmatory discovery and court approval following notice to ARCH’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the applicable court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding.

The Company believes that such lawsuits are without merit, but the ultimate outcome of the matter cannot be predicted with certainty. Neither the outcome of the lawsuits nor an estimate of a probable loss or any reasonable possible losses is determinable at this time. No provisions for any losses related to the lawsuits have been recorded in the accompanying consolidated financial as of June 30, 2015. An adverse judgment for monetary damages could have a material adverse effect on the operations and liquidity of the Company. All defendants have stated in court filings that they believe that the claims are without merit and are defending against them vigorously.

RCAP Shareholder Class Action Litigation

On or about December 29, 2014, a securities law class action lawsuit was filed in federal court in the Southern District of New York (Weston v. RCS Capital Corporation et al, 14 CV 10136) against the Company and certain former or current officers and directors of the Company. The lawsuit asserts the Company and the individual defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading public statements pertaining to the Company’s financial position and future business and acquisition prospects. Specifically, plaintiffs allege that defendants made false and/or misleading statements and/or failed to disclose that: (i) the financial statements of ARCP were material false and misleading as a result of accounting errors that were disclosed by ARCP on October 29, 2014; (ii) the Company’s announced acquisition of Cole Capital Partners LLC and Cole Capital Advisors was at serious risk due to the accounting issues at ARCP; and (iii) the Company’s revenue stream from its relationship with ARCP was in jeopardy as a result of the accounting issues at ARCP announced on October 29, 2014.

A newly-appointed lead plaintiff filed an amended complaint on June 1, 2015, naming the Company, RCAP Holdings LLC, RCAP Equity LLC, and certain former and current officers and directors of the Company as defendants. The amended complaint alleges that the Company’s public statements in 2014 discussing the strength and success of the Company’s wholesale and investment banking businesses, as well its public statements regarding the benefits of the announced acquisition of Cole Capital, were materially false and misleading because they failed to provide an accurate portrait of the true strength and specific risks to the Company and its wholesale brokerage and investment banking businesses. Such statements allegedly misrepresented and/or failed to disclose that certain Company executives, who also held roles with ARCP, were engaged in a fraudulent scheme to misstate the financial results of ARCP. The amended complaint alleges defendants (except RCAP Equity LLC, a holding company under common ownership with RCAP Holdings with no ongoing operations, assets or liabilities) violated Sections 11, 12 and 15 of the 1933 Securities Act in in connection with the Company’s June 2014 secondary stock offering. It further alleges that the Company and certain defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934.

The Company believes the Weston amended complaint is without merit and intends to vigorously defend itself against its allegations.

45

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

ARCP Shareholder Class Action Litigation

The Company was named as a defendant in a consolidated federal securities law class action (Teachers Insurance and Annuity Association of America, et al. v. American Realty Capital Properties, Inc. et al, Civ. A. 15-cv-00421) filed in federal court in New York on January 21, 2015 brought on behalf of all persons who purchased or otherwise acquired securities of ARCP between May 6, 2013 and October 29, 2014, including ARCP common stock, preferred stock and debt securities. The lawsuit’s claims, premised on Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 14(a), 10(b) and 20(a) of the Securities Exchange Act of 1934, allege generally that defendants issued or assisted in the issuance of false and misleading statements to the investing public, including in registration statements, prospectuses, proxies and other public statements and press releases, concerning ARCP’s financial results as part of a scheme to artificially inflate the value of ARCP’s securities.

More specifically, the complaint alleges that the Company is a “control person” of ARCP under the securities laws and thus plaintiffs seek to hold the Company responsible for the alleged misstatements of ARCP and its officers and directors. The Company is also alleged to be a “structuring advisor” to ARCP. Realty Capital Securities is named as a defendant based on its role as a co-manager of ARCP’s July 2013 convertible notes offering.

On April 17, 2015, plaintiffs filed an amended complaint, which, like the original complaint, alleges that the Company is a “control person” of ARCP under the securities laws. The amended complaint also names Realty Capital Securities as a defendant based on its role as a co-manager of ARCP’s July 2013 convertible notes offering.

The Company believes the amendedcomplaint is without merit and intends to vigorously defend itself against the allegations contained in the complaint. The Company has filed a motion to dismiss all of the claims against it and Realty Capital Securities.

Massachusetts Securities Division Subpoenas

On November 7, 2014 and December 19, 2014, Realty Capital Securities received subpoenas from the Massachusetts Secretary of the Commonwealth, Securities Division (the “Division”), requiring the production of certain documents and other materials, dated from January 1, 2014 to the present, relating to sales by Realty Capital Securities of certain non-traded REITs and similar products sponsored, co-sponsored or advised by AR Capital, LLC and the organizational structure of Realty Capital Securities. Realty Capital Securities has complied with the subpoenas.

On December 19, 2014, the Company received a subpoena from the Division, requiring the production of certain documents and other materials, dated from January 1, 2014 to the present, relating the Company’s organizational structure. The Company has complied with the subpoena.

On March 2, 2015 Realty Capital Securities received a subpoena from the Division seeking minor additional information concerning certain former employees. Realty Capital Securities has complied with the subpoena.

Other matters

Since the disclosure of accounting issues at ARCP in October 2014, the Company and certain of its subsidiaries, including Realty Capital Securities, have received requests for information and subpoenas from various state and federal agencies as well as self-regulatory organizations, including the SEC, Massachusetts Securities Division and FINRA. The Company and its subsidiaries have responded to all of the regulatory inquiries and produced documents and information in response to formal and informal requests.

46

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

17.Net Capital Requirements

The Company’s broker-dealers are each subject to the SEC Uniform Net Capital Rule 15c3-1. SEC Uniform Net Capital Rule 15c3-1 requires the maintenance of the greater of the minimum dollar amount of net capital required, which is based on the nature of each broker-dealer’s business, or 1/15^th of the aggregate indebtedness, as defined, and requires that the ratio of aggregate indebtedness to net capital, both as defined, not exceed 15 to 1. Certain of the Company’s broker-dealers have elected to use the alternative method of computing net capital which requires the maintenance of minimum net capital of the greater of $250,000 or 2% of aggregate debit items. While the net capital requirement is specific to each broker-dealer, the table below provides the aggregated net capital requirements by segment of the Company’s broker-dealers as of June 30, 2015 and December 31, 2014.

($ in thousands)	June 30, 2015		December 31, 2014
Independent retail advice(1):
Net capital	$	57,832	$	63,871
Required net capital	3,064		2,640
Net capital in excess of required net capital	$	54,768	$	61,231
Wholesale distribution:
Net capital	$	11,393	$	20,774
Required net capital	1,155		1,424
Net capital in excess of required net capital	$	10,238	$	19,350
Investment management:
Net capital	$	2,034	$	2,145
Required net capital	5		5
Net capital in excess of required net capital	$	2,029	$	2,140

___________________

(1) VSR Financial Services, Inc. and Girard Securities, Inc. were not under the control of the Company as of December 31, 2014. Therefore, they were not included in the net capital calculation as of December 31, 2014.

As of and during the six months ended June 30, 2015 all of the Company’s subsidiaries were in compliance with their net capital requirements except J.P. Turner & Company LLC and VSR Financial Services, Inc. J.P. Turner & Company LLC received a capital contribution of $4.0 million from the Company on April 17, 2015 to correct a net capital deficiency from March 20, 2015 through April 16, 2015. J.P. Turner & Company LLC was in compliance with minimum net capital requirements as of June 30, 2015. VSR Financial Services, Inc. received a capital contribution of $4.0 million from the Company on May 6, 2015, to correct a net capital deficiency from April 1, 2015 through May 5, 2015. VSR Financial Services, Inc. was in compliance with minimum net capital requirements as of June 30, 2015.

18.Related Party Transactions

A significant portion of the Company’s revenues relate to fees earned from transactions with or on behalf of AR Capital, LLC and its affiliates or related parties as well as certain transactions that are co-sponsored by an affiliate or related party of ARC Capital LLC, including investment banking fees, services fees, transfer agent fees and wholesale broker-dealer commissions and concessions, in the ordinary course of its trade or business. During the three and six months ended June 30, 2015, the Company earned revenues of $102.1 million and $184.3 million, respectively, from related party transactions. During the three and six months ended June 30, 2014, the Company earned revenues of $285.4 million and $471.5 million, respectively, from related party transactions. As of June 30, 2015 and December 31, 2014, the receivables for such revenues were $19.7 million and $31.6 million, respectively.

Pursuant to a shared services agreement, beginning on January 1, 2013, AR Capital, LLC charges the Company for the services of information technology, human resources, accounting services and office services and facilities. For these services, the Company incurred expenses of $2.1 million and $3.2 million for the three and six months ended June 30, 2015, respectively, and $1.4 million and $2.8 million for the three and six months ended June 30, 2014, respectively. As of June 30, 2015 and December 31, 2014, the payables for such expenses were $0.6 million and $0.5 million, respectively.

47

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The Company incurs expenses directly for certain services. The Company either allocates certain of these expenses to its operating subsidiaries or causes RCAP Holdings to pay its portion based on RCAP Holdings’ ownership interest. Expenses that are directly attributable to a specific subsidiary are fully allocated to the appropriate subsidiary. Expenses that are not specific to a subsidiary are allocated on a reasonable basis, as determined by the Company its sole discretion. Interest expense on the Company’s long-term debt, share-based compensation related to the Company’s board of directors, expenses related to the 2013 Manager Multi-Year Outperformance Agreement entered into between the Company and RCS Capital Management (the “OPP”), changes in the fair value of the Company’s derivative contracts and acquisition-related expenses are not allocated to the subsidiaries. The intercompany receivables and payables for the allocated expenses are eliminated in consolidation and are settled quarterly. During the three and six months ended June 30, 2015, the Company’s operating subsidiaries incurred $3.6 million and $7.3 million, respectively, related to such expenses. During the three and six months ended June 30, 2014, the Company’s operating subsidiaries incurred $4.9 million and $6.8 million, respectively, related to such expenses. There were no expenses payable by RCAP Holdings as of June 30, 2015 and December 31, 2014.

As of June 30, 2015 and December 31, 2014, the Members owned 39.64% and 43.34%, respectively, of Class A common stock outstanding primarily obtained as a result of the 2014 Restructuring Transactions and the contribution of First Allied. From time to time, RCAP Holdings, or the Members, may purchase shares of Class A common stock in the secondary market.

In March 2014, Realty Capital Securities leased a lodging facility in Newport, Rhode Island from a related party, ARC HTNEWRI001, LLC. Realty Capital Securities also entered into an agreement with another affiliate, Crestline Hotels and Resorts, LLC (“Crestline”) to manage and operate the lodging facility. Crestline remits the lodging facility’s revenue to the Company, net of the fees from Crestline. During the three and six months ended June 30, 2015, the Company incurred $0.03 million and $0.1 million, respectively, in rent expense in connection with this lease. During the three and six months ended June 30, 2014, the Company incurred $0.1 million in rent expense in connection with this lease. The Company did not earn any revenue from the Crestline agreement during the three and six months ended June 30, 2015 and 2014.

Services Agreement (formerly the Management Agreement).The Company pays RCS Capital Management a quarterly fee in an amount equal to 10% of its aggregate pre-tax U.S. GAAP net income, not including the quarterly fee, calculated and payable quarterly in arrears, subject to its aggregate U.S. GAAP net income being positive for the current and three preceding calendar quarters. The Company also pays RCS Capital Management an incentive fee, calculated and payable quarterly in arrears, that is based on the Company’s earnings and stock price. In connection with the agreement with Apollo and Luxor on August 6, 2015 to purchase a newly issued series of preferred shares, the Company and RCS Capital Management, LLC have agreed that the Services Agreement will be terminated within five business days of the date of the agreement. See Note 21 for more information.

The Company did not incur a quarterly fee for the three and six months ended June 30, 2015. The quarterly fee earned by RCS Capital Management for the three and six months ended June 30, 2014 was $0.2 million and $2.0 million, respectively, which is the expense recorded by the Company. The Company did not have a payable related to the quarterly fee as of June 30, 2015 or December 31, 2014.

The Company did not incur an incentive fee for the three and six months ended June 30, 2015 or June 30, 2014. The Company did not have a payable related to the incentive fee as of June 30, 2015 or December 31, 2014.

Amended and Restated 2013 Manager Multi-Year Outperformance Agreement.The Company entered into the OPP, as of June 10, 2013, with the Original Operating Subsidiaries and RCS Capital Management. The OPP provided a performance-based bonus award to RCS Capital Management intended to further align RCS Capital Management’s interests with those of the Company and its stockholders.

In April 2014, the OPP was amended to provide that the first valuation date would be April 28, 2014 and that any LTIP Units in RCS Holdings not earned as of such date were forfeited without payment of any compensation. The Company’s board of directors determined that as of such valuation date, 310,947 LTIP Units in RCS Holdings were earned (the “Earned LTIP Units”) and 1,014,053 LTIP Units in RCS Holdings were forfeited. Following this amendment, no additional LTIP Units could be earned under the OPP.

On December 31, 2014, the Company, RCS Capital Management, and RCS Holdings, entered into another amendment to the OPP, which provided for the early vesting of the Earned LTIP Units such that all the Earned LTIP Units became fully vested on December 31, 2014.

For the three and six months ended and June 30, 2014, the Company recognized $2.6 million and $9.7 million, respectively, for the award under the OPP. Prior to December 31, 2014, the award under the OPP was included in the consolidated statements of operations, with an offset recorded to non-controlling interest.

48

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Mutual Funds. As of June 30, 2015 and December 31, 2014, the Company had investments in mutual funds of $10.1 million and $19.0 million, respectively, that are advised by related parties. During the three and six months ended June 30, 2015, the Company recognized losses of $0.4 million and $0.5 million, respectively, relating to these investments which are recorded in other revenue in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recognized gains of $0.7 million and $1.4 million, respectively, relating to these investments which are recorded in other revenue in the consolidated statements of operations.

19.Employee Benefits

401(k) and Health and Welfare Benefit Plan for Employees. The Company has several 401(k) and health and welfare defined contribution plans which have various eligibility standards, vesting requirements, and guidelines for matching. For the three and six months ended June 30, 2015, the Company recorded expenses of $4.8 million and $9.5 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014, the Company recorded expenses of $2.0 million and $3.8 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits.

Deferred Compensation Plans for Financial Advisors. The Company offers a plan to certain of its financial advisors which allows them to defer a portion of their compensation which earns a rate of return based on the financial advisor’s selection of investments. In order to economically hedge this exposure, the Company invests in money market, international, U.S. equity and U.S. fixed income funds. The liability to the financial advisor is recorded in deferred compensation plan accrued liabilities and the related economic hedges are recorded in deferred compensation plan investments in the consolidated statement of financial condition.

For the three and six months ended June 30, 2015 the Company recorded expenses of $0.1 million and $1.8 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014 the Company recorded expenses of $2.7 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2015, the Company recorded revenue of $0.1 million and $1.8 million from the economic hedges in the consolidated statements of operations in other revenue. For the three and six months ended June 30, 2014, the Company recorded revenue of $2.7 million from the economic hedges in the consolidated statements of operations in other revenue.

Additionally, the Company offers a deferred compensation plan in connection with a Rabbi Trust Agreement to certain of its financial advisors. For this plan, the Company recorded expenses of $0.2 million and $0.5 million for the three and six months, respectively, ended June 30, 2015 in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014, the Company did not record any revenues or expenses related to this deferred compensation plan because the plan relates to one of the recent acquisitions and, therefore, those results are not included in the Company’s results prior to the acquisition date.

20.Segment Reporting

The Company operates through its operating subsidiaries in six principal segments: Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management; Investment Research; and Corporate and Other.

The Independent Retail Advice segment offers financial advice and investment solutions to investors through the broad network of financial advisors. Cetera, Summit, J.P. Turner, First Allied, ICH, VSR and Girard operate as independent subsidiaries under their own brand and management. During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate broker-dealer subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who have not been invited to join Summit will be terminated.

The Wholesale Distribution segment includes the Company’s alternative investment program activities and Realty Capital Securities’ operations as the distributor or dealer manager consisting of nine public, non-traded REITs, two public, non-traded BDCs and an oil and gas program. Proprietary programs are sponsored directly or indirectly by AR Capital, LLC, an affiliate. Realty Capital Securities distributes these securities through selling groups comprised of FINRA member broker-dealers located throughout the United States. The Wholesale Distribution segment also includes StratCap, which through its broker-dealer subsidiary, distributes a platform of offerings consisting of two non-traded REITS, a non-traded BDC and two public, non-traded limited liability companies through a selling group comprised of FINRA member broker-dealers and RIAs.

49

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The Investment Banking, Capital Markets and Transaction Management Services segment provides comprehensive strategic advisory, transaction management and transfer agency services focused on direct investment programs, particularly non-traded REITs through RCS Advisory, ANST and the investment banking division of Realty Capital Securities. These strategic advisory services include mergers and acquisitions advisory, capital markets activities, registration management, and other transaction support services. This segment also includes the results from the Company’s majority interest in Docupace, a provider of integrated, electronic processing technologies and systems for financial institutions and wealth management firms.

The Investment Management segment provides investment advisory, distribution and other services to the Hatteras family of mutual funds and other registered investment products.

The Investment Research segment provides focused research, consulting, training and education, and due diligence on traditional and non-traditional investment products through SK Research.

Corporate and Other primarily includes interest expense on the Company’s long-term debt, share-based compensation related to the Company’s board of directors and certain employees, expenses related to the OPP, changes in the fair value of the Company’s derivative contracts, certain acquisition-related expenses, changes in the fair value of contingent consideration, certain public company expenses and the results of operations for the Company’s crowdfunding platform and Trupoly (which has been rebranded under the name DirectVest).

The reportable business segment information is prepared using the following methodologies:

• Net revenues and expenses directly associated with each reportable business segment are included in determining earnings before taxes.

• Net revenues and expenses not directly associated with specific reportable business segments are allocated based on the most relevant measures applicable, including each reportable business segment’s net revenues, time spent and other factors.

• Reportable business segment assets include an allocation of indirect corporate assets that have been fully allocated to the Company’s reportable business segments, generally based on each reportable business segment’s capital utilization.

50

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The following table presents the Company’s net revenues, expenses and income before taxes by segment for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2015			2014			2015			2014
Independent retail advice(1):
Revenues	$	528,980		$	324,153		$	1,032,539		$	416,911
Expenses	567,667			329,364			1,071,141			422,970
Loss	$	(38,687	)	$	(5,211	)	$	(38,602	)	$	(6,059	)
Wholesale distribution(2):
Revenues	$	107,249		$	250,586		$	196,394		$	389,696
Expenses	252,196			246,101			358,042			388,736
Income (loss)	$	(144,947	)	$	4,485		$	(161,648	)	$	960
Investment banking, capital markets and transaction management services:
Revenues	$	21,815		$	39,101		$	40,627		$	87,645
Expenses	12,510			16,860			27,315			39,086
Income	$	9,305		$	22,241		$	13,312		$	48,559
Investment management(3):
Revenues	$	12,281		$	—		$	25,661		$	—
Expenses	12,540			—			25,698			—
Loss	$	(259	)	$	—		$	(37	)	$	—
Investment research:
Revenues	$	1,397		$	691		$	2,580		$	691
Expenses	4,375			3,857			7,522			4,301
Loss	$	(2,978	)	$	(3,166	)	$	(4,942	)	$	(3,610	)
Corporate and other:
Revenues	$	33,003		$	58,470		$	56,036		$	58,470
Expenses	(26,341		)	17,507			4,761			23,956
Income	$	59,344		$	40,963		$	51,275		$	34,514
Revenue reconciliation
Total revenues for reportable segments	$	704,725		$	673,001		$	1,353,837		$	953,413
Less: intercompany revenues	26,359			27,982			49,887			35,026
Total revenues	$	678,366		$	645,019		$	1,303,950		$	918,387
Income reconciliation
Total income (Loss) before taxes for reportable segments	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364
Reconciling items	—			—			—			—
Income (loss) before income taxes	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364

_____________________

(1) Includes First Allied’s operating results from September 25, 2013, the date First Allied was acquired by RCAP Holdings. Also, includes a goodwill and intangible assets impairment charge of $26.2 million for the three and six months ended June 30, 2015 related to the J.P. Turner acquisition. See Note 2 for more details.

(2) Includes a goodwill and intangible asset impairment charge of $130.6 million for the three and six months ended June 30, 2015 related to the StratCap acquisition. See Note 2 for more details.

(3) Did not begin operations until the acquisition of Hatteras on June 30, 2014.

51

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The following table presents the Company’s total assets by segment as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Segment assets:
Independent retail advice	$	2,073,393	$	1,980,614
Wholesale distribution	55,176		192,669
Investment banking, capital markets and transaction management services	103,079		116,980
Investment management	72,159		79,343
Investment research	12,819		12,291
Corporate and other(1)	70,021		112,423
Total assets for reportable segments	$	2,386,647	$	2,494,320
Assets reconciliation:
Total assets for reportable segments	$	2,386,647	$	2,494,320
Less: intercompany eliminations	29,341		27,692
Total consolidated assets	$	2,357,306	$	2,466,628

_____________________

(1) Excludes amounts related to investment in subsidiaries.

21.Subsequent Events

Sale of Wholesale Business

On August 6, 2015, the Company and RCS Holdings entered into a Membership Interest Purchase Agreement (the “MIPA”) with Apollo Management Holdings, L.P. (“APH”) pursuant to which the Company and RCS Holdings agreed to sell their wholesale distribution business, consisting of Realty Capital Securities and StratCap, and certain other assets, including the Company and RCS Holdings’ transfer agent, ANST, to APH or an affiliate of APH, for an aggregate purchase price of $25.0 million, payable in cash and subject to adjustment. RCS Capital, the investment banking and capital markets division of Realty Capital Securities, is excluded from the transaction and will be transferred from Realty Capital Securities to another broker-dealer subsidiary of the Company and RCS Holdings prior to closing. The Company and RCS Holdings intend on using the net proceeds from the sale to make principal payments under its senior secured credit facilities, as required under the senior credit facilities.

The purchase price is subject to a downward adjustment equal to the greater of (A) the amount (if any) by which the target net working capital of $5.0 million exceeds the Company and RCS Holdings’ closing net working capital at closing, and (B) the amount (if any) by which the target regulatory capital exceeds the closing regulatory capital at closing (which is the net capital required to be maintained under the rules of the SEC), as such terms are defined in the MIPA. However, if (X) the Company and RCS Holdings’ closing net working capital exceeds the target net working capital, or (Y) the closing regulatory capital exceeds the target regulatory capital, the Company and RCS Holdings may cause its subsidiaries to distribute the lesser of such excess capital amounts to the Company and RCS Holdings prior to the closing, subject to the FINRA not objecting or imposing a restriction or burdensome condition on such distribution.

The Company and RCS Holdings have agreed to use commercially reasonable efforts to obtain the payment in full, settlement or termination of earn-out payments payable to the StratCap sellers under the agreements pursuant to which the Company and RCS Holdings acquired StratCap, the termination or waiver of all covenants limiting the operations of StratCap or its owners thereunder, and the consent of parties to advisory contracts with StratCap to the pertinent change of control and modifications of exclusivities terms therein (the “StratCap Waiver”). If the StratCap Waiver is not obtained prior to closing, APH has the right not to acquire StratCap, in which event APH would remain obligated to purchase Realty Capital Securities and ANST and the aggregate purchase price would be reduced by $5.0 million. In such case, the Company and RCS Holdings have agreed to certain agreements with APH that, until the earlier of the date the StratCap Waiver is obtained or otherwise satisfied or December 31, 2017, it will operate StratCap in the manner prescribed in the MIPA, including providing that Realty Capital Securities receive compensation (including dealer manager fees, advisory fees and other compensation) for sales of StratCap products equivalent to that received by StratCap. If the StratCap Waiver is received after closing and prior to December 31, 2017, APH will be obligated to acquire StratCap for a purchase price equal to $5.0 million, subject to a working capital adjustment, representations, warranties and indemnities, and other terms substantially as set forth in the MIPA (to the extent relevant to a purchase of StratCap).

52

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

In addition, the MIPA provides that the Company and RCS Holdings will deliver to Apollo an updated seller disclosure letter to the MIPA on or before August 13, 2015 and APH has a right to terminate the MIPA within 3 business days of receipt of the updated disclosure letter if the representations or warranties, but for the disclosures contained in such updated seller disclosure letter, would have been untrue (subject to certain materiality standards contained in the MIPA) as of the date of the MIPA.

The MIPA contains certain representations and warranties and covenants. The MIPA also includes customary indemnities and a special indemnity for legal and governmental proceedings, as more particularly set forth in the MIPA. The closing of the transaction pursuant to the MIPA is subject to certain conditions, including (i) the accuracy of the other party’s representations and warranties (subject to specified qualifications), (ii) the other party’s material compliance with its covenants and agreements contained in the MIPA, (iii) absence of certain changes with respect to legal proceedings, and (iv) no material adverse effect. In addition, APH’s obligation to consummate the transactions contemplated by the MIPA is subject to (a) the receipt of certain requisite consents from third parties (other than the StratCap Waiver), (b) approval from the FINRA of the proposed change of control of the broker-dealer subsidiaries, not subject to any FINRA Burdensome Condition (as defined in the MIPA), or the waiver of this condition by APH if at least 35 days have passed since the filing was submitted to FINRA and FINRA has not denied the application for approval or advised that the parties are prohibited from consummating the closing, (c) closing of the “AR Capital Transaction Agreement” (as defined below) and (d) Realty Capital Securities continuing to employ a stated number of external wholesalers. The obligations of the Company and RCS Holdings to consummate the transactions contemplated by the MIPA is conditioned on certain conditions, including receipt of proceeds from the sale of the Series D Preferred Stock (as described below). The closing of the transactions contemplated by the MIPA is expected to be consummated in 2015.

The MIPA includes certain post-closing agreements, including a non-competition agreement that restricts the Company and RCS Holdings from engaging for 5 years in the wholesale brokerage business and raising or sponsoring public or private, traded or non-traded investment companies. In addition, pursuant to the MIPA, the Company and RCS Holdings and APH will enter into an Operating Agreement and a Strategic Relationship Agreement on the terms set forth in term sheets which are exhibits to the MIPA. The Operating Agreement term sheet addresses the provision by the Company and RCS Holdings, Docupace, LLC (a joint venture in which the Company and RCS Holdings holds the controlling interest) and StratCap of services and capabilities to Realty Capital Securities and its affiliates, including APH, in order to support and maintain the operations of the wholesale broker-dealer and related businesses acquired pursuant to the MIPA, and includes agreements to license certain technology of StratCap and Docupace, LLC. The Operating Agreement term sheet also provides that the Company and RCS Holdings will agree that, in the event APH does not acquire StratCap, Realty Capital Securities will be provided the opportunity to concurrently distribute StratCap’s investment programs and will receive one-half of StratCap’s revenues. The Strategic Relationship Agreement provides for agreements relating to APH and its affiliates’ products being distributed through the Company and RCS Holdings’ retail advice platform on terms specified in the Strategic Relationship Agreement term sheet.

On August 6, 2015, AR Capital LLC (“AR Capital”), entered into a Transaction Agreement (the “AR Capital Transaction Agreement”) with AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership and an affiliate of APH (“AMH”) and a newly formed entity, AR Global, LLC (“AR Global”). The AR Capital Transaction Agreement provides that AR Capital will transfer to AR Global substantially all of the assets of its ongoing asset management business to AR Global. Following the consummation of the transactions contemplated by the AR Capital Transaction Agreement, AMH will hold a 60% % interest in AR Global and AR Capital will hold a 40% interest in AR Global. The business and affairs of AR Global will be overseen by a board of managers comprised of ten members, six of which will be appointed by AMH and four of which will be appointed by AR Capital. AR Capital is currently under common control with RCAP Holdings, LLC, the Company’s controlling shareholder, and the Company’s Chief Executive Officer, who is also a director and one other of the Company’s directors are members of AR Capital. The closing of the AR Capital Transaction is conditioned on, among other things, the closing of the transactions under the MIPA.

Investment Agreements

On August 6, 2015, the Company and each of APH and Luxor entered into separate Investment Agreements (the “Investment Agreements”) under which APH agreed to purchase 1,000,000 shares of Series D-1 Preferred Stock (the “Series D-1 Preferred Stock”) for a purchase price of $25.0 million and Luxor agreed to acquire 500,000 shares of Series D-2 preferred stock (the “Series D-2 Preferred Stock” and collectively with the Series D-1 Preferred Stock, the “Series D Preferred Stock”) for a purchase price of $12.5 million. The proceeds from the sale of the Series D Preferred Stock will be used for general corporate and working capital purposes.

53

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

The Investment Agreements contains certain representations and warranties and covenants. In addition, closing of each of the Investment Agreements is subject to various conditions, including (i) the accuracy of the other party’s representations and warranties (subject to specified qualifications), (ii) the other party’s material compliance with its covenants and conditions contained in the Investment Agreements, (iii) absence of certain changes with respect to legal proceedings, (iv) no material adverse effect; (v) the Company entering into a customary registration rights agreement and (vi) the closing of the other Investment Agreement. In addition, each of AMH and Luxor can terminate the Investment Agreements if the Company’s disclosure letter to that Investment Agreement (which is required to be delivered on or before August 13, 2015) discloses information which would be material to a reasonable investor and a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading the Investment Agreement and the Company’s SEC filings (excluding any disclosures contained under the captions “Risk Factors” or “Forward Looking Statements”, any non-specific, predictive, cautionary or forward looking disclosures).

The Series D-1 Preferred Stock and Series D-2 Preferred Stock will have identical rights except for the right of the Series D-1 Preferred Stock to elect two directors, as described below. The following summarizes the material terms of the Series D Preferred Stock Certificates of Designation (collectively referred to as the “Series D COD”) and does not purport to be complete.

Dividends

If paid in cash, dividends on shares of Series D Preferred Stock will accrue quarterly at 11.0% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue quarterly at 12.5% per annum of the liquidation preference.

Liquidation Preference

The initial liquidation preference of shares of Series D Preferred Stock is $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

Conversion Rights

The holders of shares of Series D Preferred Stock have the right, at their option at any time and from time to time, to convert some or all of their shares of Series D Preferred Stock into the number of shares of the Company’s Class A common stock, obtained by dividing the aggregate liquidation preference of such shares plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of conversion by an initial conversion price of $5.00, which will be adjustable upon the occurrence of certain events and transactions to prevent dilution.

However, the Series D-2 Preferred Stock will not be convertible until stockholder approval has been obtained in accordance with the rules of the NYSE to the issuance of Series D-2 Preferred Stock and the Common Stock issuable on conversion thereof. The Company has agreed to as soon as reasonably practicable to file an information statement on Schedule 14-C with the SEC and use its commercially reasonable efforts to have the information statement cleared with the SEC and RCAP Holdings, LLC, the holder of Class B share, has executed a written consented to the issuance and the stockholder approval will be effective on the 20^th calendar day after the information statement is sent to stockholders.

Redemption Rights

Starting on December 12, 2022, the Company will have a right to redeem, and holders of Series D Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares Series D Preferred Stock for cash at the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption.

Rank

The Series D Preferred Stock ranks pari passu with each other and the Series B and Series C Preferred Stock with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Company.

Board of Director Rights

For so long as APH and its affiliates own at least a majority of the then outstanding shares of Series D-1 Preferred Stock or at least 25% of the Series D-1 Preferred Stock originally issued to them, the holders of a majority of the outstanding share of Series D-1 Preferred Stock will be entitled to elect two directors. 

54

RCS Capital Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

June 30, 2015

Voting Rights

Series D Preferred Stock generally has the right to vote on an as converted basis with the holders of the Class A common stock. However, the Series D-2 Preferred Stock will not have such voting rights until stockholder approval has been obtained in accordance with the rules of the NYSE, as discussed above.

In addition, the affirmative vote of at least a majority of shares of Series D Preferred Stock, voting as a single class, is required for the Company to: (i) authorize or approve the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for, shares of, preferred stock or any other capital stock of the Company, which shares rank senior to or on a parity with Series D Preferred Stock, subject to limited exceptions; (ii) enter into any transaction or series of related transactions with any affiliate of the Company other than in the ordinary course of business and on terms and conditions substantially as favorable as a comparable arm’s-length transaction with a non-affiliate; or (iii) contract, create, incur, or assume any Indebtedness (as defined in the Series D COD or guarantee any Indebtedness if, at the time of or after giving effect to such contract, creation, incurrence, assumption or guarantee, the aggregate outstanding amount of all Indebtedness on a consolidated basis of the Company equals or exceeds or would equal or exceed 4.0 times LTM Adjusted EBITDA (as such term is defined in the Series D COD).

In addition, the affirmative vote of the holders of at least a majority of shares of the Series D-1 Preferred Stock and Series D-2 Preferred Stock voting separately is required to amend, alter or repeal any of the provisions of the Series D-1 COD and Series D-2 COD, as applicable, the Certificate of Incorporation of the Company or the Bylaws of the Company so as to materially and adversely affect the powers, designations, preferences and rights of the Series D-1 Preferred Stock and Series D-2 Preferred Stock, as applicable.

Limitation

In no event will a holder of Series D Preferred Stock be allowed to accept Class A Common issuable upon conversion of the Series D Preferred Stock or have voting rights with respect to the Series D Preferred Stock that would result in the ownership of an aggregate number of Common Stock, when taken together with any other Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, in excess of 24.9% of the outstanding Class A common stock or in excess of 24.9% of the voting power, unless such ownership of Common Shares or voting in excess of the 24.9% Share Cap is duly approved in advance by FINRA.

Luxor’s Interest in the Company

In addition to shares of Series A Preferred Stock, Luxor owns shares of Class A common stock (which were either purchased on the open market or purchased directly from the Company and RCS Holdings in a private placement),$120.0 million principal amount of Convertible Notes (representing all the issued and outstanding Convertible Notes as of December 17, 2014) and $152.5 million liquidation of preference of Series B Preferred Stock and $114.1 million liquidation preference of Series C Preferred Stock. As of August 7, 2015, without giving effect to the issuance of any of the transactions described herein, Luxor held 8,495,402 shares of Class A common stock in the aggregate held by Luxor representing 10.99% of the shares of Class A common stock outstanding and 5.50% of the combined voting power of the Company and RCS Holdings and RCS Holdings. As of August 7, 2015, and assuming on the conversion of the Series C Preferred Stock and the Convertible Notes, Luxor would be the beneficial owner of 25,594,768 shares of Class A common stock.

Termination of Amended and Restated Services Agreement

The Company and RCS Holdings have entered into an agreement (the “Termination Agreement”) with RCS Capital Management, LLC (“RCM”), each of the members of RCM, who are also members of RCAP Holdings, LLC, and Luxor pursuant to which RCM and its members have agreed to terminate the Services Agreement, pursuant to which RCM serves as service provider to the Company and RCS Holdings, within five business days. Pursuant to the Termination Agreement, the members of RCAP Holdings, LLC will receive 2,608,697 shares of Class A common stock as consideration for the termination of the Services Agreement. Luxor will receive 3,000,000 shares of Class A common stock as consideration for the termination of the Services Agreement and its rights under the Put & Call Agreement. Under the Put & Call Agreement, Luxor has the right to put its interest in RCM to the Company and RCS Holdings for a number of shares (or an equivalent cash payment) equal to Luxor’s membership interest in RCM (which is equal to 19.46%) multiplied by the outstanding shares of Class A common stock (assuming conversion of convertible securities issued to Luxor) multiplied by 0.15. The issuance of more than 0.99% of the outstanding Class A common stock to Luxor and to certain other members who are related parties of the Company is subject to stockholder approval in accordance with the rules of the NYSE, as discussed above. A second closing will take place following receipt of such approval, at which the balance of the Class A common stock will be issued. The issuance will be included in the information statement described above. Following and in connection with these transactions, RCM will liquidate.

The Termination Agreement includes mutual releases by the Company and RCS Holdings and the members of RCM in connection with matters arising from or related to the Services Agreement and the Put & Call Agreement.

55

RCS Capital Corporation and Subsidiaries

June 30, 2015

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

This report contains or incorporates by reference “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “believe,” “intend,” “may,” “will,” “should,” or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, and other results, and may include statements of future performance, plans and objectives. Forward-looking statements also include statements pertaining to our strategies for future development of our business and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in this report and other documents we file. You should read and interpret any forward-looking statement together with these documents, including the following:

• the description of our business and risk factors contained in our Annual Report on Form 10-K/A dated April 12, 2015;

• the discussion of our analysis of financial condition and results of operations contained in this report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

• the notes to the unaudited consolidated financial statements contained in this report; and

• cautionary statements we make in our public documents, reports and announcements.

Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

Executive Summary

We are an integrated financial services company principally focused on retail investors. We are engaged in the following businesses: the provision of retail advice through independent channel broker-dealers and registered investment advisers, wholesale distribution, investment banking, capital markets, investment management and investment research.

Our Business

We operate through our operating subsidiaries in six principal segments: Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management; Investment Research; and Corporate and Other.

The results of operations of Cetera Financial Holdings, Inc. (“Cetera”), Summit Financial Services Group, Inc. (“Summit”), J.P. Turner & Company, LLC and J.P. Turner & Company Capital Management, LLC (together, “J.P. Turner”), Hatteras Funds Group (“Hatteras”), Investors Capital Holdings, Ltd. (“ICH”), Validus/Strategic Capital Partners, LLC (“StratCap”), Trupoly, LLC (“Trupoly”, which has been rebranded under the name DirectVest), Docupace Technologies, LLC (“Docupace”), VSR Group, Inc. (“VSR”) and Girard Securities, Inc. (“Girard”) are included in our results of operations from their dates of acquisition. Our acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because we and First Allied were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings.

On August 6, 2015, we entered into an agreement with an affiliate of Apollo Management Holdings, L.P. (the “Apollo affiliate”)to sell our Wholesale Distribution business, which consists of Realty Capital Securities, LLC (“Realty Capital Securities”) (excluding investment banking business), StratCap, and certain related assets, including our transfer agent, American National Stock Transfer, LLC. to the Apollo affiliate.  If the transaction is consummated, we will no longer be engaged in the wholesale business.

Also on August 6, 2015, AR Capital entered into a transaction agreement with the Apollo affiliate, pursuant to which it will transfer to AR Global substantially all of the assets of its ongoing asset management business.  Assuming the consummation of the transactions contemplated by the transaction agreement, the Apollo affiliate of will hold a 60% interest in AR Global and AR Capital will hold a 40% interest in AR Global. The business and affairs of AR Global will be overseen by a board of managers comprised of ten members, six of which will be appointed by the Apollo affiliate and four of which will be appointed by ARC. 

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In addition to the our Wholesale Distribution business, a substantial portion of which involves the distribution of interests in non-traded REITs, BDCs and investment companies sponsored by AR Capital, our revenues from transaction management and investment banking primarily consists of services to, and transactions, involving AR Capital and non-traded REITS and other entities sponsored or advised by AR Capital and its affiliates.

Independent Retail Advice

Our Independent Retail Advice business is conducted through a network of independent channel broker-dealers and registered investment advisers acquired during 2014 and 2015 (the “Retail Firms”), namely Cetera, First Allied, J.P. Turner, Summit, ICH, VSR and Girard, which operate collectively under the marketing brand of “Cetera Financial Group.” Each Retail Firm operates independently under its own brand and management, but with certain shared services with the other Retail Firms.

During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated independently under its own brand and management. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who are not invited to join Summit will be terminated.

Through financial advisors, the Retail Firms offer independent retail advice, financial products and investment solutions to “mass affluent” individuals and households, which we define as individuals and households with $100,000 to $1,000,000 of investable assets. Each of our Retail Firms provides independent groups of affiliated financial advisors or other financial professionals with the technology, infrastructure and other support and services they need to serve their clients. Each Retail Firm also provides its financial advisors with a wide array of practice development and operational support services that we believe help those financial advisors launch new relationships and strengthen existing ones.

As of June 30, 2015, our Retail Firms serve approximately 2.5 million client accounts with $238.4 billion in assets under administration through approximately 9,500 financial advisors.

Wholesale Distribution

Since its inception in 2007, Realty Capital Securities has focused on providing financial products and investment solutions through its wholesale distribution of non-traded REITs, BDCs and other direct investment programs sponsored, co-sponsored or advised by our affiliate, AR Capital, LLC (“American Realty Capital”). In August 2014, we acquired StratCap, which was engaged in a similar business not involving American Realty Capital. On August 6, 2015, we entered into an agreement to sell our Wholesale Distribution business.

The offerings distributed by Realty Capital Securities and StratCap are direct investment programs and registered investment companies registered with the SEC, which, as of June 30, 2015, consisted of 10 public, non-traded REITs, three public, non-traded BDCs, four mutual funds, two closed-end interval funds, an oil and gas program and two public, non-traded limited liability companies.

We believe that the combination of Realty Capital Securities and StratCap constitute the leading multi-product distribution platform of direct investment program offerings to independent broker-dealers and the retail financial advisor community as measured by total equity capital raised and number of direct investment programs distributed, according to Robert A. Stanger & Co. As of June 30, 2015, Realty Capital Securities and StratCap were distributing a total of 15 public non-listed direct investment program offerings effective with the SEC and none of their competitors was distributing more than three.

All of the results of operations of Hatteras, including the results of the wholesale distribution of registered investment companies by Hatteras are included in our Investment Management segment.

Investment Banking, Capital Markets and Transaction Management Services

Operating under the name RCS Capital, Realty Capital Securities and RCS Advisory provide direct investment programs, primarily publicly registered non-traded REITs and BDCs as well as open- and closed-end mutual funds sponsored, co-sponsored or advised by American Realty Capital and distributed by Realty Capital Securities, with strategic advisory and capital markets services including mergers and acquisitions, capital markets activities, registration management, and other transaction support services. ANST acts as registrar, provides record-keeping services and executes the transfer, issuance and cancellation of shares or other securities in connection with offerings conducted by issuers sponsored directly or indirectly by American Realty Capital. Docupace became a part of our Investment Banking, Capital Markets and Transaction Management Services division when we completed the acquisition of a majority interest in Docupace in November 2014. On August 6, 2015, we entered into an agreement to sell our transfer agency and certain other transaction management services.

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Investment Management

Our Investment Management segment consists of Hatteras. Hatteras provides investment advisory and distribution to the Hatteras family of registered investment company funds, which is focused on liquid alternatives. The Hatteras family of funds includes retail funds (both open- and closed-end) with approximately $2.0 billion in assets under management as of June 30, 2015.

Investment Research

In March 2014, we launched SK Research. SK Research provides due diligence on traditional and non-traditional investment products to Cetera Financial Group. SK Research also provides focused research, consulting, training and education to Cetera Financial Group, which we believe enhances the financial advice our financial advisors can provide to their clients. SK Research also provides due diligence services in connection with direct investment programs, including direct investment programs sponsored, co-sponsored or advised by American Realty Capital, to other broker-dealers and registered investment adviser firms, as well as individual registered representatives and investment adviser representatives.

Corporate and Other

Corporate and other primarily includes interest expense on our long-term debt, share-based compensation related to our board of directors and certain employees, expenses related to the OPP, changes in the fair value of our derivative contracts, certain acquisition-related expenses, certain public company expenses, changes in the fair value of contingent consideration and the results of our crowdfunding investment platform which we have recently rebranded under the name “DirectVest.”

Critical Accounting Policies and Estimates

Set forth below is a summary of the critical accounting policies and significant accounting estimates that management believes are important to the preparation of our consolidated financial statements or are essential to understanding of our financial position and results of operations. These significant accounting policies and estimates include:

Revenue and expense recognition for selling commissions and dealer manager fees and the related expenses

We, through certain of our broker-dealer subsidiaries, receive selling commissions and dealer manager fees from related party and non-related party issuers for their wholesale distribution efforts. The commission and dealer manager fee rates are established jointly in a single contract negotiated with each individual issuer. We generally receive commissions of up to 7.0% of gross offering proceeds for funds raised by direct investment programs through the participating independent broker-dealer channel, all of which are reallowed as commissions, and 4.0% in connection with sales of open-end and closed-end mutual funds sold by Realty Capital Securities in accordance with industry practices. Commission percentages are generally established in the issuers’ offering documents leaving us no discretion as to the payment of commissions. Commission revenues and related expenses are recorded on a trade date basis as securities transactions occur.

We, serving as a dealer manager, receive fees and compensation in connection with the wholesale distribution of registered non-traded securities. We contract directly with independent broker-dealers and registered investment advisers (“RIAs”) to solicit share subscriptions. The non-traded securities are offered on a “best efforts” basis and we are not obligated to underwrite or purchase any shares for our own account. We generally receive up to 3.0% of the gross proceeds from the sale of common stock as a dealer manager fee and also receive fees from the sale of common stock through RIAs. We have sole discretion as to reallowance of dealer manager fees to participating broker-dealers, based on such factors as the volume of shares sold and marketing support incurred by respective participating broker-dealers as compared to those of other participating broker-dealers. Dealer manager fees and reallowances are recorded on a trade date basis as securities transactions occur.

We contract directly with broker-dealers and RIAs to solicit subscriptions to shares of registered investment company funds. The funds are offered on a “best efforts” basis and we are not obligated to underwrite or purchase any shares of the funds for our own account. We generally receive up to 50 basis points of the gross proceeds from the shares of the fund and also may receive fees from the shares of the funds from broker-dealers and RIAs.

We analyze our contractual arrangements to determine whether to report revenue on a gross basis or a net basis. The analysis considers multiple indicators regarding the services provided to our customers and the services received from our distributors. The goal of the analysis is to determine if we are the primary obligor in the arrangement. After weighing many indicators, including our position as the exclusive distributor or dealer manager primarily responsible for the distribution of our customers’ shares, our discretion in supplier selection, that our distributors bear no credit risk and that the commission and dealer manager fee rates are agreed to with each participating broker-dealer, we concluded that the gross basis of accounting for its commission and fee revenues is appropriate.

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Investment banking advisory services

We, through our investment banking and capital markets division, receive fees and compensation for providing investment banking, capital markets and related advisory services. Such fees are charged based on agreements entered into with related party and non-related party public and private issuers of securities and their sponsors and advisors, on a negotiated basis. Fees and expenses that are unpaid are recorded in accounts receivable in the statement of financial condition. Investment banking agreements either have a fixed fee or a percentage of the total deal value which are typically contingent upon the consummation of the transaction; these agreements may also include a minimum fee that will be paid even in the event the transaction is not consummated provided that services have been rendered. Income from investment banking agreements is generally recognized upon consummation of the transaction. However, in certain cases, we recognize income from investment banking agreements prior to the consummation of the transaction if services have been rendered and there are no substantive remaining contingencies as of the reporting date. Income from certain investment banking agreements is recorded as deferred revenue as part of other liabilities in the statement of financial condition and is recognized over the remaining life of the offering. These fees are typically a fixed dollar amount.

Internal commissions, payroll and benefits expenses

Included in internal commissions, payroll and benefits in the consolidated statements of operations is performance-based compensation including cash and shared-based compensation. The determination of performance-based compensation involves a high degree of judgment by management and takes into account our actual operating performance, conditions in our industry and other macroeconomic factors. It is possible that revisions to our estimate of performance-based compensation could affect our results of operations in any reporting period.

Presentation of certain expenses net versus gross

We consider the nature of certain cash consideration received from a vendor in determining whether the consideration is payment for assets or services delivered to the vendor or is reimbursement of costs incurred by the customer. If the cash consideration represents payments for assets or services delivered to the vendor and the vendor receives an identifiable benefit in exchange for the consideration, the consideration is characterized as revenue. To meet that condition, the identified benefit must be sufficiently separable from the customer’s purchase of the vendor’s products such that the customer would have entered into an exchange transaction with a party other than the vendor in order to provide that benefit, and the customer can reasonably estimate the fair value of the benefit provided. If the cash consideration represents a reimbursement of specific, incremental, identifiable cost incurred by the customer in selling the vendor’s products or services, the cash consideration shall be characterized as a reduction of that cost.

Our broker-dealer subsidiaries partner with a number of vendors to enable their registered representatives to access important technological tools and platforms, data feeds and subscriptions that will enable them to better serve their clients. In addition, the broker-dealers are required to maintain adequate insurance coverage to operate and conduct business. These fees are recognized as consideration for assets or services delivered to the registered representatives. Consideration received for other regulatory fees and clearing costs represent reimbursement of costs incurred by the broker-dealers and is characterized as a reduction of those costs.

The determination of the gross versus net treatment involves a high degree of judgment by management. While the ultimate conclusion does not have an impact on our net income, it is possible that changes in our conclusions could affect our revenues and expenses in any reporting period.

Income taxes

We are subject to the income tax laws of the U.S. and those state and local jurisdictions in which we conduct business. These laws can be complex and subject to interpretation. To prepare the consolidated financial statements we may make assumptions or use judgment when interpreting these income tax laws which could impact the provision for income taxes as well as the deferred tax assets and liabilities.

Our provision for income taxes includes current and deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis. We recognize deferred income tax assets if, in management’s judgment, it is more likely than not that they will be realized. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. This determination is based upon a review of all available evidence, both positive and negative, including our earnings history, the timing, character and amount of future earnings potential, the reversal of taxable temporary differences and the tax planning strategies available. As of both June 30, 2015 and December 31, 2014, we recorded a valuation allowance of $0.3 million, related to state net operating losses.

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Our net deferred tax liability is subject to changes in tax laws, assumptions, estimates or methods used in the accounting for income taxes, that if significantly negative or unfavorable, could have a material adverse effect on amounts or timing of realization or settlement. Such effects could result in a material acceleration of income taxes currently payable or valuation charges for realization uncertainties, which could have a material adverse effect on our future financial condition or results of operations.

We have a tax receivable agreement with RCAP Holdings. This agreement requires us to pay RCAP Holdings if certain reductions in tax liabilities occur. Due to the uncertainty surrounding these taxable events, management must use assumptions and estimates in determining if a liability is necessary. See Note 18 of our Company’s Annual Report on Form 10-K/A for the year ended December 31, 2014. It is possible that changes in our assumptions regarding these taxable events could affect our results of operations in any reporting period. As of June 30, 2015, there was no impact to our financial statements from the tax receivable agreement.

Acquisition accounting/intangible asset valuation and goodwill impairment/contingent and deferred consideration

We acquired Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH, StratCap, Trupoly and Docupace during 2014 and acquired VSR and Girard during the six months ended June 30, 2015.

Accounting for acquisitions, the related valuation of intangible assets and goodwill, and any subsequent impairment are critical accounting policies involving significant estimates. We test our goodwill balances for impairment at least annually as of October 31, or more frequently if there are indicators of impairment, also referred to as triggering events, using the fair value approach at the reporting unit level. Testing for goodwill impairment involves the use of significant estimates and judgment to determine the fair value of the reporting units that may include the use of discounted future cash flows, projected earnings, control premiums and peer group analysis. With respect to the First Allied acquisition, the contribution has been accounted for at historical cost rather than the purchase method because First Allied and our company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings.

As a result of our determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in our expectations of future growth and profitability for certain reporting units and the decline in our market capitalization which is discussed below in “Management’s Discussion and Analysis—Results of Operations”, we determined that it would be appropriate to test our goodwill and intangible assets for impairment as of June 30, 2015 for all of our significant reporting units. Upon completion of the impairment tests, the goodwill from both of the acquisitions of StratCap and J.P. Turner was determined to be impaired as of June 30, 2015.

As a result of the impairment tests we wrote-off $30.6 million and $13.6 million during the three and six months ended June 30, 2015, which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

During the three and six months ended June 30, 2015, we also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. These impairments were all recorded in goodwill and intangible assets impairment in the statements of operations. For more information see Notes 2 and 7 to our consolidated financial statements.

The following table presents the estimated fair value and the excess fair value over the book value of the equity for all of our significant reporting units for which we tested our goodwill and intangible assets for impairment as of June 30, 2015 that did not have impairment.

($ in thousands)	Cetera			Summit			Hatteras			First Allied			ICH
Estimated fair value	$	1,106,500		$	62,315		$	69,750		$	225,100		$	56,340
Book value of equity	1,036,368			55,280			64,451			167,988			51,305
Excess of fair value over book value (in dollars)	$	70,132		$	7,035		$	5,299		$	57,112		$	5,035
Excess of fair value over book value (percent)	7		%	13		%	8		%	34		%	10		%
Goodwill, June 30, 2015	$	292,165		$	23,891		$	15,348		$	79,986		$	26,680

Assumptions used in measuring the value of the assets and liabilities in connection with the goodwill impairment test included the discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies. These assumptions involve a high degree of judgment by management and changes in these assumptions in future periods could adversely affect our results of operations.

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In connection with certain of our recent acquisitions, the purchase price includes contingent consideration, also referred to as earn-outs, and deferred payments, which represent future payments of cash or equity interests to the former owners of the businesses acquired. These earn-outs and deferred payments are recorded at fair value in the consolidated statements of financial condition. Earn-outs are subsequently remeasured each reporting period. The discount on the deferred payments is accreted into earnings. The fair value of the earn-outs and deferred payments are determined by the use of third-party valuation firms that use internally developed proprietary models using various input parameters which is then reviewed by us.

Fair Value

The fair value of the majority of our financial instruments, except for our derivative contracts, is based on quoted market prices in active markets or observable market parameters, or is derived from such prices or parameters. These instruments include government and agency securities, listed equities, mutual funds, certificates of deposit, money market funds and corporate debt.

In addition, we hold financial instruments for which no market prices are available, and which have reduced or no price transparency. For these instruments the determination of fair value requires subjective assessment and varying degrees of judgment depending on the risks affecting the specific instrument. In such circumstances, valuation is determined based on management’s best estimate of fair value. These instruments include certain derivatives, contingent consideration and other long-term investments. The fair values for our derivatives and contingent consideration are determined by a third-party valuation firm that uses internally developed proprietary models using various input parameters which is then reviewed by us.

Litigation Contingencies

We and our subsidiaries are involved in legal proceedings from time to time arising out of our business operations, including arbitrations and lawsuits involving private claimants, and subpoenas, investigations and other actions by government authorities and self-regulatory organizations. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek substantial or indeterminate damages, we cannot estimate what the possible loss or range of loss related to such matters will be. We recognize a liability with regard to a legal proceeding when we believe it is probable a liability has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, we accrue that amount. When no amount within the range is a better estimate than any other amount, however, we accrue the minimum amount in the range. We maintain insurance coverage, including general liability, errors and omissions, excess entity errors and omissions and fidelity bond insurance. When there is indemnification or insurance, we may engage in defense or settlement discussions and subsequently seek reimbursement for such matters. We record legal reserves and related insurance recoveries on a gross basis.

Defense costs with regard to legal proceedings are expensed as incurred and classified as professional fees in the consolidated statements of operations.

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Results of Operations

The following table provides an overview of our consolidated results of operations for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in thousands, except per share data)	2015			2014			% Change		2015			2014			% Change
Revenues	$	678,366		$	645,019		5	%	$	1,303,950		$	918,387		42	%
Expenses	796,588			585,707			36	%	1,444,592			844,023			71	%
Income (loss) before taxes	(118,222		)	59,312			(299	)%	(140,642		)	74,364			(289	)%
Provision for (benefit from) income taxes	(52,073		)	10,840			(580	)%	(59,112		)	13,743			(530	)%
Net (loss) income	$	(66,149	)	$	48,472		(236	)%	$	(81,530	)	$	60,621		(234	)%
Basic loss per share(1)	$	(0.97	)	$	(3.49	)	72	%	$	(1.28	)	$	(4.21	)	70	%
Diluted loss per share(1)	$	(1.11	)	$	(3.59	)	69	%	$	(1.59	)	$	(4.53	)	65	%
EBITDA (Non-GAAP)(2)	$	(70,467	)	$	87,540		(180	)%	$	(45,095	)	$	104,840		(143	)%
Adjusted EBITDA (Non-GAAP)(2)	$	26,942		$	52,301		(48	)%	$	55,310		$	90,269		(39	)%
Adjusted net income (Non-GAAP)(2)	$	15,258		$	33,440		(54	)%	$	30,783		$	64,275		(52	)%
Adjusted net income per adjusted share (Non-GAAP)(2)	$	0.21		$	0.78		(73	)%	$	0.42		$	1.59		(74	)%

_____________________

(1) See Note 14 to our consolidated financial statements for more information on our calculation.

(2) See “Non-GAAP Measures” for more information on our calculation.

We recorded a net loss of $66.1 million for the three months ended June 30, 2015 compared to net income of $48.5 million for the three months ended June 30, 2014 primarily as a result of the write-off of goodwill and intangible assets related to our acquisitions of StratCap and J.P. Turner which is further explained below, losses from our wholesale distribution business, which is further explained below, lower fair value gains on our derivative contracts, an increase in amortization expense on the intangible assets from the recent acquisitions, a decline in investment banking revenues and higher interest expense reflecting our incurrence of long-term debt during April 2014 partially offset by changes in the fair value of our contingent consideration liability.

We recorded a net loss of $81.5 million for the six months ended June 30, 2015 compared to net income of $60.6 million for the six months ended June 30, 2014 primarily as a result of losses from our wholesale distribution business, which is further explained below, the write-off of goodwill and intangible assets related to our acquisitions of StratCap and J.P. Turner which is further explained below, higher interest expense reflecting our incurrence of long-term debt during April 2014, a decline in investment banking revenues and an increase in amortization expense on the intangible assets from the recent acquisitions partially offset by changes in the fair value of our contingent consideration liability.

Our adjusted net income for the three months ended June 30, 2015 totaled $15.3 million, or $0.21 per adjusted share, versus adjusted net income of $33.4 million, or $0.78 per adjusted share, for the three months ended June 30, 2014 as a result of the change in net income which is discussed above, except for the write-off of goodwill and intangible assets related to our acquisitions of StratCap and J.P. Turner, lower fair value gains on our derivative contracts, an increase in amortization expense on the intangible assets from the recent acquisitions and changes in the fair value of our contingent consideration liability which are added back in the calculation of adjusted net income.

Our adjusted net income for the six months ended June 30, 2015 totaled $30.8 million, or $0.42 per adjusted share, versus adjusted net income of $64.3 million, or $1.59 per adjusted share, for the six months ended June 30, 2014 as a result of the change in net income which is discussed above, except for the write-off of goodwill and intangible assets related to our acquisitions of StratCap and J.P. Turner, the increase in amortization expense on the intangible assets from the recent acquisitions and the fair value of our contingent consideration liability which are added back in the calculation of adjusted net income.

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The results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Docupace for the entire three and six months ended June 30, 2015 and the results of VSR and Girard beginning on March 11, 2015 and March 18, 2015, respectively, were included for the three and six months ended June 30, 2015. Our results of operations for the three and six months ended June 30, 2014 only include the results of operations of Cetera, Summit and J.P. Turner which closed before June 30, 2014, beginning on April 29, 2014, June 11, 2014 and June 12, 2014, respectively, the date of each company’s acquisition. The results for Hatteras, ICH, StratCap, Docupace, VSR and Girard are not included in our results of operations for the three and six months ended June 30, 2014 as none of these acquisitions closed before June 30, 2014.

In addition, our acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because we and First Allied were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings.

As a result of the announcement concerning certain accounting errors by ARCP, a number of broker-dealer firms that had been participating in the distribution of offerings of public, non-traded REITs sponsored directly or indirectly by American Realty Capital that are distributed by us have temporarily suspended their participation in the distribution of those offerings and such suspensions have adversely impacted equity capital raised. Although certain of these broker-dealer firms have reinstated their participation in the distribution of our offerings, we cannot predict the length of time these temporary suspensions will continue, whether all such participating broker-dealers will reinstate their participation in the distribution of our offerings or whether there will be additional suspensions.

Although the amount of decline in revenue has been affected by factors in addition to the ARCP announcement, as described under “Results of Operations — Wholesale Distribution”, the ARCP announcement has had a material adverse effect on equity capital raised by direct investment programs distributed by us during this period, and, accordingly, has had an adverse impact on our results of operations for all periods subsequent to the ARCP announcement.

Revenues for the three months ended June 30, 2015 increased $33.3 million, or 5%, to $678.4 million, as compared to $645.0 million for the three months ended June 30, 2014 primarily due to:

(i) $211.6 million in increased revenue related to the inclusion of the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Docupace, VSR and Girard (beginning on March 11, 2015 and March 18, 2015, respectively, the date of each company’s acquisition, for VSR and Girard) for the three months ended June 30, 2015 and only the results of the businesses we acquired in the recent acquisitions that closed before June 30, 2014 beginning on the date of each company’s acquisition included for both the three months ended June 30, 2014 and 2015;

(ii) partially offset by a $143.3 milliondecrease in revenues from our wholesale distribution business due to a decrease in equity capital raised by direct investment program offerings distributed by us from $2.6 billion (which only included Realty Capital Securities for the three months ended June 30, 2014, to $1.2 billion (which included, in addition to Realty Capital Securities, $238.4 million of equity capital raised by StratCap) during the three months ended June 30, 2015;

(iii) $25.4 million in lower gains during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 related to the fair value of our derivative contracts which generally have an inverse relationship with the market price of our Class A common stock; and

(iv) $17.3 million in decrease revenues in Investment Banking, Capital Markets and Transaction Management Services due to a decrease in the deal size of capital markets, mergers and acquisition transactions and strategic advisory transactions for the three months ended June 30, 2015 compared to the three months ended June 30, 2014.

Revenues for the six months ended June 30, 2015 increased $385.6 million, or 42%, to $1.3 billion, as compared to $918.4 million for the six months ended June 30, 2014 primarily due to:

(i) $599.1 million in increased revenue related to the inclusion of the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Docupace, VSR and Girard (beginning on March 11, 2015 and March 18, 2015, respectively, the date of each company’s acquisition, for VSR and Girard) for the six months ended June 30, 2015 and only the results of the businesses we acquired in the recent acquisitions that closed before June 30, 2014 beginning on the date of each company’s acquisition were included for both the six months ended June 30, 2015 and 2014;

(ii) partially offset by a $193.3 milliondecrease in revenues from our wholesale distribution business due to a decrease in equity capital raised by direct investment program offerings distributed by us from $4.2 billion (which only included Realty Capital Securities) for the six months ended June 30, 2014 to $2.1 billion (which included, in addition to Realty Capital Securities, $454.6 million of equity capital raised by StratCap) during the six months ended June 30, 2015; and

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(iii) $47.0 million in decreased revenues in Investment Banking, Capital Markets and Transaction Management Services due to a decrease in the deal size of capital markets, mergers and acquisition transactions and strategic advisory transactions for the six months ended June 30, 2015 compared to the six months ended June 30, 2014.

As a result of the sustained decline in our market capitalization mentioned above, and specific events at two of our reporting units, we tested our goodwill and intangible assets for impairment as of June 30, 2015.

Upon completion of the impairment tests, the goodwill from the acquisitions of StratCap and J.P. Turner was determined to be impaired as of June 30, 2015. As a result of our determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in our expectations of future growth and profitability for certain reporting units and the decline in our market capitalization we determined that it would be appropriate to test our goodwill and intangible assets for impairment as of June 30, 2015 for all of our significant reporting units.

During the three and six months ended June 30, 2015, we wrote-off all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

During the three and six months ended June 30, 2015, we also wrote-off a substantial portion of the intangible assets related the StratCap acquisition and all of J.P. Turner’s intangible assets. These impairments were all recorded in goodwill and intangible assets impairment in the statements of operations. For more information see Notes 2 and 7 of our consolidated financial statements.

Expenses for the three months ended June 30, 2015 increased $210.9 million, or 36%, to $796.6 million, as compared to $585.7 million for the three months ended June 30, 2014 primarily due to:

(i) $238.3 million in increased expenses related to the inclusion of the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Docupace, VSR and Girard, including $26.3 million relating to the amortization of intangible assets, for the three months ended June 30, 2015 (only the results of the businesses we acquired in the recent acquisitions that closed by June 30, 2015 were included for both the three months ended June 30, 2015 and 2014). Amortization expense for the three months ended June 30, 2014 was only $1.8 million;

(ii) $156.8 million in higher expenses reflecting the write-off of goodwill and intangible assets related to the acquisitions of StratCap and J.P. Turner.

(iii) partially offset by a $127.8 milliondecrease in the selling expense portion of expenses from Realty Capital Securities’ wholesale distribution business, which decreased in tandem with the decrease in revenues;

(iv) $43.8 million in decrease expenses in Corporate and Other reflecting $54.0 million in changes in the fair value of contingent consideration liability partially offset by increases in interest expense due to our incurrence of interest expense on our long-term debt during the second quarter of 2014 and higher share-based compensation related to our board of directors and certain employees, expenses related to the OPP, certain acquisition-related expenses and certain public company expenses; and

(v) $4.4 million in decreased expenses in Investment Banking, Capital Markets and Transaction Management Services due to higher acquisition-related expenses and quarterly fees during the three months ended June 30, 2014 as compared to no quarterly fees during the three months ended June 30, 2015.

Expenses for the six months ended June 30, 2015 increased $600.6 million, or 71%, to $1.4 billion, as compared to $844.0 million for the six months ended June 30, 2014 primarily due to:

(i) $648.1 million in increased expenses related to the inclusion of the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Docupace, VSR and Girard, including $51.3 million relating to the amortization of intangible assets, for the six months ended June 30, 2015 (only the results of the businesses we acquired in the recent acquisitions that closed by June 30, 2015 beginning on the date of each company’s acquisition being included for both the six months ended June 30, 2014 and 2015). Amortization expense for the six months ended June 30, 2014 was only $15.2 million;

(ii) $156.8 million in higher expenses reflecting the write-off of goodwill and intangible assets related to the acquisitions of StratCap and J.P. Turner.

(iii) partially offset by a $169.2 million decrease in the selling expense portion of expenses from Realty Capital Securities’ wholesale distribution business, which decreased in tandem with the decrease in revenues;

(iv) $19.2 million in decreased expenses in Corporate and Other reflecting $50.4 million of changes in the fair value of contingent consideration liability partially offset by higher interest expense reflecting our incurrence of interest expense on our long-term debt during the second quarter of 2014 and higher share-based compensation related to our board of directors and certain employees, expenses related to the OPP, certain acquisition-related expenses and certain public company expenses; and

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(v) $11.8 million in decreased expenses in Investment Banking, Capital Markets and Transaction Management Services due to higher expenses in the six months ended June 30, 2014 as compared to the six months ended June 30, 2015 related to the recent acquisitions, most of which occurred in 2014 and higher quarterly fees during the six months ended June 30, 2014 as compared to no quarterly fees during the six months ended June 30, 2015.

We expect to incur higher professional fees, interest expense and intangible asset amortization in connection with the recent acquisitions and we may incur losses in future periods because of the level of amortization of intangible assets acquired and new interest expense as a result of debt incurred in connection with the recent acquisitions.

Independent Retail Advice

The following table provides an overview of the results of operations of our Independent Retail Advice business:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in thousands)	2015			2014			% Change		2015			2014			% Change
Revenues	$	528,980		$	324,153		63	%	$	1,032,539		$	416,911		148	%
Expenses	567,667			329,364			72	%	1,071,141			422,970			153	%
Loss	$	(38,687	)	$	(5,211	)	(642	)%	$	(38,602	)	$	(6,059	)	(537	)%

Following the completion of the Cetera, Summit, J.P. Turner, First Allied and ICH acquisitions during 2014 and the completion of the acquisitions of VSR and Girard in 2015, we are engaged in the Independent Retail Advice business. Our results include the results of operations of Cetera, Summit, J.P. Turner, ICH, VSR and Girard beginning on the date of each company’s acquisition and the inclusion of First Allied’s results for the entire six months ended June 30, 2015 and June 30, 2014. Accordingly, our results for the three and six months ended June 30, 2014 lack comparability with those of the three and six months ended June 30, 2015.

In managing our Independent Retail Advice business, we are focused on increasing assets under administration, recruiting new advisors with gross dealer concessions greater than financial advisors who are terminated or leave, improving financial advisors’ productivity in terms of both number of client accounts and commission and fee revenues and achieving cost savings through synergies. We expect the results of our Independent Retail Advice business to continue to benefit during the second half of 2015 from the recognition of synergies related to higher strategic partner revenues as well as expense synergies associated with back office, technology and clearing efficiencies and other factors.

Revenues - Revenues for the three and six months ended June 30, 2015 were $529.0 million and $1.0 billion, respectively, and primarily included commissions on securities transactions which are driven by trading volumes, advisory fees which are based on the value of our clients’ portfolios, asset-based fees and other revenues and transaction fees.

Expenses - Expenses for the three and six months ended June 30, 2015 were $567.7 million and $1.1 billion, respectively, and primarily included commission expenses which are correlated to the volume of revenues in a given period, employee compensation expenses, the $26.2 million write-off of the goodwill and intangible assets related to the acquisition of J.P. Turner and the amortization of intangible assets.

Our results for the three months ended June 30, 2015 include the results of operations of Cetera, Summit, J.P. Turner, First Allied and ICH for the entire three months and results of operations beginning on the date of acquisition for VSR and Girard. Our pro forma results include the results of operations for material acquisitions, which include Cetera, Summit, J.P. Turner, First Allied and ICH for the entire three months ended June 30, 2014 as if they were completed on January 1, 2013.

Revenues for the Independent Retail Advice business were $529.0 million for the three months ended June 30, 2015, as compared to pro forma revenues of $496.8 million for the three months ended June 30, 2014, an increase of $32.2 million primarily due to the inclusion of revenue from VSR and Girard during the three months ended June 30, 2015. For the three months ended June 30, 2015, basic expenses, inclusive of acquisition related costs, increased at a slightly lower rate as compared to the three months ended June 30, 2014, despite the inclusion of VSR and Girard, the write-off of goodwill and intangible assets from the acquisition of J.P. Turner and lower transaction costs related to the recent acquisitions. Pre-tax net loss for the Independent Retail Advice business was $38.7 million for the three months ended June 30, 2015, as compared to a pro forma pre-tax net loss of $43.6 million for the three months ended June 30, 2014 reflecting higher commissions and asset-based fees, net of the related commission expenses.

Our results for the six months ended June 30, 2015 include the results of operations of Cetera, Summit, J.P. Turner, First Allied and ICH for the entire six months and results of operations beginning on the date of acquisition for VSR and Girard. Our pro forma results include the results of operations for material acquisitions, which include Cetera, Summit, J.P. Turner, First Allied and ICH for the entire six months ended June 30, 2014 as if they were completed on January 1, 2013.

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Revenues for the Independent Retail Advice business were $1.0 billion for the six months ended June 30, 2015, as compared to pro forma revenues of $961.1 million for the six months ended June 30, 2014, an increase of $71.5 million, primarily due to the inclusion of revenue from VSR and Girard during the six months ended June 30, 2015. For the six months ended June 30, 2015, basic expenses, inclusive of acquisition related costs, increased at a slightly lower rate as compared to the six months ended June 30, 2014, despite the inclusion of VSR and Girard, the write-off of the goodwill and intangible assets from the acquisition of J.P. Turner and lower transaction costs related to the recent acquisitions. Pre-tax net loss for the Independent Retail Advice business was $38.6 million for the six months ended June 30, 2015, as compared to a pro forma pre-tax net loss of $54.5 million for the six months ended June 30, 2014 reflecting higher commissions and asset-based fees, net of the related commission expenses.

Wholesale Distribution

The following table provides an overview of the results of operations of our Wholesale Distribution business:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
($ in thousands)	2015			2014		% Change		2015			2014		% Change
Revenues	$	107,249		$	250,586	(57	)%	$	196,394		$	389,696	(50	)%
Expenses	252,196			246,101		2	%	358,042			388,736		(8	)%
Income (loss)	$	(144,947	)	$	4,485	(3,332	)%	$	(161,648	)	$	960	(16,938	)%

Revenues - Our Wholesale Distribution results include the results of operations of StratCap beginning on August 29, 2014, the date of the acquisition. All of the results of operations of Hatteras, including the results of the wholesale distribution of registered investment companies by Hatteras are included in our Investment Management segment. Wholesale Distribution revenues are primarily driven by the amount of equity capital raised by the selling of direct investment programs distributed by us through sales of shares in such direct investment programs by broker-dealers with whom we have a dealer manager relationship. The offerings we have distributed have limited durations and different closing dates, which can cause fluctuations in equity capital raised from quarter to quarter. The rate of equity capital raised generally increases, in some cases very sharply, over the life of an offering so that an increase in equity capital raised would be expected when an offering is in the mid to latter stages of its lifecycle.

Revenues for the three months ended June 30, 2015, decreased $143.3 million, or 57%, to $107.2 million, compared to $250.6 million for the three months ended June 30, 2014. The decrease was primarily due to a decrease in equity capital raised due to the reasons explained in greater detail below. These decreases were partially offset by a $24.1 million increase in revenues due to the inclusion of revenues from StratCap during the three months ended June 30, 2015. StratCap was acquired on August 29, 2014 and its results are therefore not included in results of the Wholesale Distribution for the three months ended June 30, 2014. Equity capital raised by direct investment program offerings distributed by us decreased from $2.6 billion for the three months ended June 30, 2014 (which only includes equity capital raised by Realty Capital Securities) to $1.2 billion for the three months ended June 30, 2015 (which includes, in addition to equity capital raised by Realty Capital Securities, $238.4 million of equity capital raised by StratCap during the three months ended June 30, 2015).

Revenues for the six months ended June 30, 2015, decreased $193.3 million, or 50%, to $196.4 million, compared to $389.7 million for the six months ended June 30, 2014. The decrease was primarily due to a decrease in equity capital raised due to the reasons explained in greater detail below. These decreases were partially offset by a $46.2 million increase in revenues due to the inclusion of revenues from StratCap during the six months ended June 30, 2015. StratCap was acquired on August 29, 2014 and its results are therefore not included in results of the Wholesale Distribution for the six months ended June 30, 2014. Equity capital raised by direct investment program offerings distributed by us decreased from $4.2 billion for the six months ended June 30, 2014 (which only includes equity capital raised by Realty Capital Securities) to $2.1 billion for the six months ended June 30, 2015 (which includes, in addition to equity capital raised by Realty Capital Securities, $454.6 million of equity capital raised by StratCap during the six months ended June 30, 2015).

The decrease in revenues and equity capital raised for the three and six months ended June 30, 2015 as compared to the three and six months ended June 30, 2014 was due to:

(i) As a result of the announcement concerning certain accounting errors by ARCP on October 29, 2014, a number of broker-dealer firms that had been participating in the distribution of offerings of public, non-traded REITs sponsored directly or indirectly by American Realty Capital temporarily suspended their participation in the distribution of those offerings. The impact of the ARCP announcement, including these temporary suspensions, had an adverse effect on our ability to raise equity capital and as a result, generate wholesale revenues during the three and six months ended June 30, 2015.

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(ii) Two offerings closed during the latter part of 2014 and contributed to a sharp increase in equity capital raised during the three and six months ended June 30, 2014. Non-traded REIT offerings typically have an increase in equity capital raised when they are in the later stages of their lifecycle, so the number of offerings closing during a period contributes significantly to the amount of equity capital raised during that period. Although the closed offerings were replaced by second-generation offerings, the normal process of building the selling group at the outset of any offering results in lower initial sales relative to the later stages of an offering’s life. The decrease was partially offset by an increase in equity capital raised on the three offerings that closed or are expected to close in 2015 as compared to the three and six months ended June 30, 2014. However, the increase in equity capital raised during the three and six months ended June 30, 2015 for these offerings has been less robust than what we have historically experienced. In addition, we had more liquidity events during the three and six months ended June 30, 2014 as compared to the three and six months ended June 30, 2015. Liquidity events typically resulted in a redeployment of cash by investors in the non-traded REITs, which in turn, can result in an increase in equity capital raised. The liquidity event in 2015 did not appear to produce as significant an effect as previous liquidity events.

(iii) An industry-wide decrease in equity capital raised. We believe that this decrease is due, in part, to concerns by financial advisors over recent amendments to FINRA Rule 15-02 which require reporting of estimated share values of direct participation programs and unlisted REITs using the “net investment” methodology.

On August 6, 2015, we entered into an agreement to sell our Wholesale Distribution business.

During the three months ended June 30, 2015, we had related party commissions and dealer manager fees of $55.6 million and $26.3 million, respectively, as compared to $169.6 million and $78.6 million, respectively during the three months ended June 30, 2014. During the three months ended June 30, 2015, we had non-related party commissions and dealer manager fees of $15.1 million and $6.8 million, respectively, as compared to an immaterial amount during the three months ended June 30, 2014. The increase in non-related party commissions and dealer manager fees for the three months ended June 30, 2015, as compared to the three months ended June 30, 2014 reflected the inclusion of the results of StratCap during the three months ended June 30, 2015.

During the six months ended June 30, 2015, we had related party commissions and dealer manager fees of $100.1 million and $47.3 million, respectively, as compared to $262.0 million and $123.1 million, respectively during the six months ended June 30, 2014. During the six months ended June 30, 2015, we had non-related party commissions and dealer manager fees of $28.4 million and $12.8 million, respectively, as compared to $0.2 million and $0.1 million, respectively during the six months ended June 30, 2014. The increase in non-related party commissions and dealer manager fees for the six months ended June 30, 2015, as compared to the six months ended June 30, 2014 reflected the inclusion of the results of StratCap during the six months ended June 30, 2015.

Expenses - Expenses related to the activities of serving as dealer manager are correlated to the volume of revenues in a given period. Corresponding general and administrative expenses generally have remained relatively constant compared to revenues. We expect expenses to decrease during the second half of 2015 due to cost cutting initiatives implemented during the second quarter of 2015.

For the three months ended June 30, 2015, expenses increased $6.1 million, or 2%, to $252.2 million compared to $246.1 million for the three months ended June 30, 2014 as the selling expense portion of expenses decreased in tandem with the decrease in revenues while non-selling expenses were approximately the same for both periods except for the $27.0 million increase in expenses related to the inclusion of StratCap in our results for the three months ended June 30, 2015, the $100.0 million write-off of intangible assets related to the acquisition of StratCap and the $30.6 million write-off of goodwill related to the acquisition of StratCap.

For the six months ended June 30, 2015, expenses decreased $30.7 million, or 8%, to $358.0 million compared to $388.7 million for the six months ended June 30, 2014 as the selling expense portion of expenses decreased in tandem with the decrease in revenues while non-selling expenses were approximately the same for both periods except for the $51.6 million increase in expenses related to the inclusion of StratCap in our results for the six months ended June 30, 2015, the $100.0 million write-off of intangible assets related to the acquisition of StratCap and the $30.6 million write-off of goodwill related to the acquisition of StratCap.

During the three months ended June 30, 2015, we had related party wholesale commissions and reallowance expenses of $36.7 million and $5.8 million, respectively, as compared to $147.1 million and $22.8 million, respectively, during the three months ended June 30, 2014. During the three months ended June 30, 2015, we had non-related party wholesale commissions and reallowance expenses of $14.1 million and $2.4 million, respectively, as compared to an immaterial amount during the three months ended June 30, 2014. The increase in non-related party wholesale commissions and reallowance expenses for the three months ended June 30, 2015, as compared to the three months ended June 30, 2014, reflected the inclusion of the results of StratCap.

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June 30, 2015

During the six months ended June 30, 2015, we had related party wholesale commissions and reallowance expenses of $64.9 million and $10.3 million, respectively, as compared to $234.1 million and $35.6 million, respectively, during the six months ended June 30, 2014. During the six months ended June 30, 2015, we had non-related party wholesale commissions and reallowance expenses of $26.8 million and $4.6 million, respectively, as compared to $0.2 million and $0.03 million, respectively during the six months ended June 30, 2014. The increase in non-related party wholesale commissions and reallowance expenses for the six months ended June 30, 2015, as compared to the six months ended June 30, 2014, reflected the inclusion of the results of StratCap.

Investment Banking, Capital Markets and Transaction Management Services

The following table provides an overview of the results of operations of our Investment Banking, Capital Markets and Transaction Management Services business:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2015		2014		% Change		2015		2014		% Change
Revenues	$	21,815	$	39,101	(44	)%	$	40,627	$	87,645	(54	)%
Expenses	12,510		16,860		(26	)%	27,315		39,086		(30	)%
Income	$	9,305	$	22,241	(58	)%	$	13,312	$	48,559	(73	)%

Revenues - Investment Banking, Capital Markets and Transaction Management Services revenues primarily consist of fees earned from capital markets and financial advisory services for offerings and liquidity events of direct investment programs sponsored, co-sponsored, or advised by American Realty Capital and its affiliates and other investment banking and financial advisory services for companies which were sponsored, co-sponsored or advised by American Realty Capital and its affiliates. We also may earn fees from capital markets and financial advisory services for offerings and liquidity events of direct investment programs sponsored, co-sponsored or advised by StratCap. Services revenues and reimbursable expense revenues are earned from transaction management services and revenues are earned as a result of the service fees charged by our transfer agent to the various REITs and other issuers for which it serves as transfer agent that are based on transactions or number of active accounts (new account setup, account maintenance and closed accounts), or service level driven (in-bound and out-bound telephone calls).

Revenues for the three months ended June 30, 2015 were $21.8 million, a decrease of 44%, compared to the three months ended June 30, 2014. Revenues for the six months ended June 30, 2015 were $40.6 million, a decrease of 54%, compared to the six months ended June 30, 2014. The decrease for both the three and six months ended June 30, 2015 as compared to the three and six months ended June 30, 2014 primarily reflected $28.4 million earned as advisor in the merger of ARCP and Cole Real Estate Investments, Inc. during the three months ended June 30, 2014. Transaction management revenues were also lower primarily due to decreases in reimbursable expense revenues attributable to decreased mergers and acquisitions activity and liquidity events from affiliate-sponsored REITs. Revenues from transfer agency services were approximately the same in both periods.

Expenses - Investment Banking, Capital Markets and Transaction Management Services expenses primarily consisted of personnel costs and the costs of a third-party system and service provider under a third-party services agreement, whereby ANST pays a vendor for its efforts in providing certain transfer agency related services, including information warehousing.

Expenses for the three months ended June 30, 2015, were $12.5 million, a decrease of 26%, compared to the three months ended June 30, 2014. Expenses for the six months ended June 30, 2015, were $27.3 million, a decrease of 30%, compared to the six months ended June 30, 2014. The decrease for both the three and six months ended June 30, 2015 as compared to the three and six months ended June 30, 2014 reflects higher costs related to the recent acquisitions and higher quarterly fees during the three and six months ended June 30, 2014 as compared to no quarterly fees during the three and six months ended June 30, 2015.

On August 6, 2015, we entered into an agreement to sell our transfer agency and certain other transaction management services.

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Investment Management

Following the completion of the Hatteras acquisition on June 30, 2014, we are now engaged in the investment management business. The following table provides an overview of the results of operations of our Investment Management business:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2015			2014		% Change	2015			2014		% Change
Revenues	$	12,281		$	—	—	$	25,661		$	—	—
Expenses	12,540			—		—	25,698			—		—
Loss	$	(259	)	$	—	—	$	(37	)	$	—	—

The results of operations of Hatteras did not have an impact on our results for the period prior to its acquisition on June 30, 2014.

As of June 30, 2015, Hatteras had $2.0 billion in assets under management, a decrease from $2.5 billion in assets under management as of December 31, 2014 reflecting redemptions. We expect management fees and servicing fees to continue to increase or decrease proportionately with levels of assets under management.

Revenues - Revenues for the three and six months ended June 30, 2015 were $12.3 million and $25.7 million, respectively, and primarily included management fees, servicing fees and incentive fees from the investment companies for which we served as the investment adviser. Management fees and servicing fees are driven by the level of net assets of the funds under management.

Expenses - Expenses for the three and six months ended June 30, 2015 were $12.5 million and $25.7 million, respectively, and primarily included fund expenses, service fees and management fees as well as employee compensation expenses and benefits expenses and amortization of intangible assets.

Our results for the three months ended June 30, 2015 include the results of operations of Hatteras for the entire three months. Our pro forma results include the results of operations of Hatteras for the entire three months ended June 30, 2014 as if the acquisition of Hatteras was completed on January 1, 2013. Revenues for the Investment Management business were $12.3 million for the three months ended June 30, 2015, as compared to pro forma revenues of $15.7 million for the three months ended June 30, 2014, a decrease of $3.4 million. Pre-tax net loss was $0.3 million for the three months ended June 30, 2015, as compared to pro forma pre-tax net income of $1.8 million for the three months ended June 30, 2014 reflecting lower investment fee revenues.

Our results for the six months ended June 30, 2015 include the results of operations of Hatteras for the entire six months. Our pro forma results include the results of operations of Hatteras for the entire six months ended June 30, 2014 as if the acquisition of Hatteras was completed on January 1, 2013. Revenues for the Investment Management business were $25.7 million for the six months ended June 30, 2015, as compared to pro forma revenues of $29.7 million for the six months ended June 30, 2014, a decrease of $4.0 million. Pre-tax net loss was $0.04 million for the six months ended June 30, 2015, as compared to pro forma pre-tax net income of $2.5 million for the six months ended June 30, 2014 reflecting lower investment fee revenues.

Investment Research

The following table provides an overview of the results of operations of our Investment Research business:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in thousands)	2015			2014			% Change		2015			2014			% Change
Revenues	$	1,397		$	691		102	%	$	2,580		$	691		273	%
Expenses	4,375			3,857			13	%	7,522			4,301			75	%
Loss	$	(2,978	)	$	(3,166	)	6	%	$	(4,942	)	$	(3,610	)	(37	)%

Revenues - Investment Research had revenues of $1.4 million and $2.6 million for the three and six months, respectively, ended June 30, 2015, reflecting fees earned from due diligence performed on non-traded REITs and BDCs. The increases reflect the fact that Investment Research did not begin operations until March 2014.

Expenses - Expenses for the three and six months ended June 30, 2015 were $4.4 million and $7.5 million, respectively, which primarily represented personnel and occupancy costs and amortization of intellectual property. The increase reflects an increase in personnel and occupancy costs and the fact that Investment Research did not begin operations until March 2014.

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Corporate and Other

The following table provides an overview of the results of operations of our Corporate and Other segment:

	Three Months Ended							Six Months Ended
	June 30,							June 30,
($ in thousands)	2015			2014		% Change		2015		2014		% Change
Revenues	$	33,003		$	58,470	(44	)%	$	56,036	$	58,470	(4	)%
Expenses	(26,341		)	17,507		(250	)%	4,761		23,956		(80	)%
Income	$	59,344		$	40,963	45	%	$	51,275	$	34,514	49	%

Revenues - Corporate and Other had revenues of $33.0 million and $58.5 million for the three months ended June 30, 2015 and 2014, respectively and $56.0 million and $58.5 million for the six months ended June 30, 2015 and 2014, respectively primarily reflecting changes in the fair value of our derivative contracts which generally have an inverse relationship with the market price of our Class A common stock.

Expenses - Corporate and Other expenses primarily included interest expense on our long-term debt, share-based compensation related to our board of directors and certain employees, expenses related to the OPP during the three and six months ended June 30, 2014, certain acquisition-related expenses, changes in the fair value of our contingent consideration liability and certain public company expenses. Corporate and Other expenses were negative $26.3 million for the three months ended June 30, 2015 and $17.5 million for the three months ended June 30, 2014 and $4.8 million and $24.0 million for the six months ended June 30, 2015 and 2014, respectively. The negative expenses for the three months ended June 30, 2015 were due to a $54.0 million change in the fair value of our contingent consideration liability reflecting a decline in expected future revenues from two of our acquisitions. Excluding the impact of the change in the fair value of our consideration liability, expenses were approximately the same as the three months ended June 30, 2014. Expenses for the six months ended June 30, 2015 included a $50.4 million decrease as a result of the change in the fair value of our contingent consideration liability. Excluding the impact of the change in the fair value of our contingent consideration liability, expenses increased as compared to the three months ended June 30, 2014 due to higher interest expense reflecting our incurrence of long-term debt during April 2014, expenses related to the recent acquisitions and our initiation of share-based compensation during 2014.

Income Taxes

We recorded an income tax benefit of $59.1 million for the six months ended June 30, 2015 and income tax expense of $13.7 million for the six months ended June 30, 2014. The effective tax rates for the six months ended June 30, 2015 and 2014 were 42.03% and 18.48%, respectively. For the six months ended June 30, 2015, state income taxes had a significant impact on the difference between our statutory U.S. federal income tax rate and our effective tax rate. In addition the difference between our U.S. statutory rate and our effective rate is the result of permanent items such as travel and entertainment and transaction costs as well as discrete items such as changes in the fair value of our contingent consideration and derivative liabilities.

As of June 30, 2015, we had a net deferred tax liability of $220.6 million. This net deferred tax liability will likely reverse in future years as the intangible assets are amortized for book purposes and could negatively impact cash flows from operations in the years in which reversal occurs. Changes in tax laws, assumptions, estimates or methods used in the accounting for income taxes, if significantly negative or unfavorable, could have a material adverse effect on amounts or timing of realization or settlement. Such effects could result in a material acceleration of income taxes currently payable or valuation charges for realization uncertainties, which could have a material adverse effect on our future financial condition or results of operations.

Non-Controlling Interest

Prior to February 11, 2014, we had a controlling interest and 9.4% of the economic interest in each of the Original Operating Subsidiaries, and, as a result, our financial statements include the consolidated financial results of the Original Operating Subsidiaries, but we were required to present the 90.6% we did not own (the non-controlling interest) in our consolidated financial statements. We engaged in the 2014 Restructuring Transactions to, among other things, eliminate this non-controlling interest.

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On February 11, 2014, this non-controlling interest ceased to exist (other than a de minimis interest related to the sole outstanding share of Class B common stock and LTIP Units) when RCAP Holdings exchanged all its Class B common stock and Original Operating Subsidiaries Units except for one share of Class B common stock and one Original Operating Subsidiaries Unit for a total of 23,999,999 shares of our Class A common stock. In connection with this exchange, RCS Capital Management contributed to RCS Holdings an aggregate of 3,975,000 LTIP Units in the Original Operating Subsidiaries (all of the 1,325,000 LTIP Units in each Original Operating Subsidiary) in exchange for 1,325,000 LTIP Units in RCS Holdings. LTIP Units in RCS Holdings are structured as a profits interest in RCS Holdings with all the rights, privileges and obligations associated with Class A Units in RCS Holdings, subject to certain exceptions, and do not have any voting rights and therefore are classified as non-controlling interest.

Pursuant to our certificate of incorporation then in effect, a share of Class B common stock could not be transferred, except in connection with an exchange of an Original Operating Subsidiaries Unit for a share of our Class A common stock pursuant to an existing exchange agreement. Further, an Original Operating Subsidiaries Unit could not be exchanged for a share of our Class A common stock under the exchange agreement without the corresponding share of our Class B common stock being delivered together at the time of exchange, at which time, such Class B common stock would be automatically canceled.

Accordingly, concurrently with the exchange of Original Operating Subsidiary Units described above all but one of the outstanding shares of Class B common stock, all of which were held by RCAP Holdings, were canceled.

In July 2014, following receipt of stockholder approval, we amended our certificate of incorporation, and, in August 2014, we amended the exchange agreement. Following these amendments, corresponding shares of Class B common stock were no longer required to be cancelled in connection with any exchange of Original Operating Subsidiaries Units for shares of Class A common stock. Subsequently, the remaining Original Operating Subsidiaries Unit owned by RCAP Holdings was exchanged for one share of Class A common stock, which was not issued as RCAP Holdings waived the right to receive it.

As a result we no longer have a non-controlling interest related to Original Operating Subsidiaries Units.

In April 2014, our board of directors determined that 310,947 LTIP Units in RCS Holdings were earned and 1,014,053 LTIP Units in RCS Holdings were forfeited. Following this amendment, no additional LTIP Units may be earned under the OPP. Concurrently, RCS Capital Management distributed all of the 310,947 LTIP Units that were earned to the Members pro rata in accordance with their respective percentage interests in RCS Capital Management as of immediately prior to the acquisition by Luxor of an interest in RCS Capital Management.

On December 31, 2014, we, RCS Capital Management, and RCS Holdings entered into another amendment to the OPP, which provided for the early vesting of all of the LTIP Units.

Under the terms of the limited liability company agreement of RCS Holdings, LTIP Units in RCS Holdings automatically converted, upon vesting and after achieving economic equivalence with Class A Units in RCS Holdings (which had already been achieved), into Class C Units in RCS Holdings on a one-for-one basis. Accordingly, the Earned LTIP Units held by the Members automatically converted into Class C Units in RCS Holdings. Under the terms of the limited liability company agreement of RCS Holdings, a holder of Class C Units in RCS Holdings had the right to elect to convert Class C Units in RCS Holdings, on a one-for-one basis, into shares of Class A common stock, or, at our option, a cash equivalent.

In connection with this amendment of the OPP, we also entered into a redemption and exchange agreement with RCS Holdings and the Members, pursuant to which the Members exchanged their Class C Units in RCS Holdings on a one-for-one basis for 310,947 shares of Class A common stock and all applicable notice and deliver waiting and notice periods were waived.

As a result we no longer have a non-controlling interest related to LTIP Units.

On November 21, 2014, we completed the acquisition of a 53.525% ownership interest in Docupace. As of June 30, 2015, we own a 52.043% ownership in Docupace. We reflect the portion of Docupace that we do not own as a non-controlling interest.

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Non-GAAP Measures

We use EBITDA, adjusted EBITDA and adjusted net income, which are non-GAAP measures, as supplemental measures of our performance that are not required by, or presented in accordance with GAAP. None of the non-GAAP measures should be considered as an alternative to any other performance measure derived in accordance with GAAP. We use EBITDA, adjusted EBITDA and adjusted net income as an integral part of our report and planning processes and as one of the primary measures to, among other things:

• monitor and evaluate the performance of our business operations;

• facilitate management’s internal comparisons of the historical operating performance of our business operations;

• facilitate management’s external comparisons of the results of our overall business to the historical operating performance of other companies that may have different capital structures and debt levels;

• analyze and evaluate financial and strategic planning decisions regarding future operating investments;

• provide useful information to investors regarding financial and business trends related to our results of operations; and

• plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

We define EBITDA as earnings before taxes, depreciation and amortization and interest. We define adjusted EBITDA as earnings before taxes, depreciation and amortization, interest, adjusted to exclude equity-based compensation, acquisition and related integration costs (including integration-related employee compensation and related costs), amortization of capitalized advisor costs, change in the fair value of contingent and deferred consideration, impairment charges for goodwill and intangible assets and other items.

We define adjusted net income as net income attributable to the Company (using the effective tax rate) and adjusted to exclude equity-based compensation, acquisition related expenses, amortization of capitalized advisor compensation, change in contingent and deferred consideration, amortization of intangible assets and other items.

We believe similarly titled, but not necessarily similarly comprised, measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, many of which present EBITDA, adjusted EBITDA and adjusted net income and other similar metrics when reporting their financial results. Our presentation of EBITDA, adjusted EBITDA and adjusted net income should not be construed to imply that our future results will be unaffected by unusual or nonrecurring items.

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The following table provides a reconciliation of net income (loss) attributable to us (GAAP) to our EBITDA (Non-GAAP) and adjusted EBITDA (Non-GAAP) for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2015			2014			2015			2014
Net income (loss) (GAAP)	$	(66,149	)	$	48,472		$	(81,530	)	$	60,621
Add back: Provision (benefit) for (from) income taxes	(52,073		)	10,840			(59,112		)	13,743
Add back: Depreciation and amortization expense	29,152			15,529			58,502			17,546
Add back: Interest expense	18,603			12,699			37,045			12,930
EBITDA (Non-GAAP)	(70,467		)	87,540			(45,095		)	104,840
Add back: Non-cash equity compensation(1)	6,748			7,196			11,595			11,222
Add back: Acquisition and related integration costs(2)	9,179			7,826			16,438			14,789
Add back: Amortization of capitalized advisor compensation(3)	3,333			2,895			6,656			3,485
Add back: Change in the fair value of contingent and deferred consideration(4)	(54,023		)	156			(50,367		)	163
Add back: Change in the fair value of embedded derivative contracts(5)	(32,966		)	(58,452		)	(56,393		)	(58,452		)
Add back: Goodwill and intangible assets impairment charge(6)	156,801			—			156,801			—
Add back: Professional Fees(7)	4,918			987			7,102			987
Add back: Other(8)	3,419			4,153			8,573			13,235
Adjusted EBITDA (Non-GAAP)	$	26,942		$	52,301		$	55,310		$	90,269

________________

(1) Includes compensation expense related to restricted stock and other equity grants, which are amortized over the vesting period.

(2) Includes accounting, legal, consulting and other professional fees incurred in connection with completed or terminated acquisitions and integration-related expenses, which include allocated compensation and related costs of officers and employees of the Company based on estimated time engaged in integration-related activities. Third party acquisition and integration-related expenses comprise $9.1 million and $14.7 million of the adjustment and allocated employee compensation and related costs comprise $.1 million and $1.7 million of the adjustment in the three and six months ended June 30, 2015, respectively. For the third and fourth quarters of quarters of 2014, third party acquisition and integration-related expenses comprise $3.7 million and $11.4 million of the adjustment and allocated employee compensation and related costs comprise $3.4 million and $1.8 million of the adjustment. Allocated employee compensation and related costs include employees that were employed prior to such acquisitions and we expect will continue their employment following the integration.

These officers and employees may continue in the employ of the Company after completion of the acquisition and integration-related activities, and their compensation and related costs generally were not affected by their acquisition and integration related activities. The Company believes that it was required to incur additional expenses by having third party professionals and service providers perform tasks on behalf of the Company that could not be performed by such officers and employees due to the fact they were actively involved in these acquisition and integration related activities.

(3) Consists of amortization of the principal amount of forgivable promissory notes from financial advisors.

(4) See Note 2 of our consolidated financial statements.

(5) See Note 9 of our consolidated financial statements.

(6) See Note 2 and 7 of our consolidated financial statements.

(7) Consists of fees for professional services that the Company believes are outside the normal course of business and not indicative of the Company’s ongoing operations, including legal costs for certain regulatory or internal examinations and investigations and certain litigations. The professional fees for the six months of June 30, 2015 also include matters relating to the Company’s retail business that arose in connection with activities of prior owners in which the Company no longer engages, which the Company believes are not part of its normal business operations, consisting of (i) $0.3 million for legal fees and losses relating to claims associated with sale by prior owners of interests in certain venture capital funds (an activity in which the Company is no longer engaged) and $1.6 million for losses from impermissible trading activities of one trader. For the third and fourth quarters of quarters of 2014, the Company included $3.0 million and $62.5 million, respectively, of professional fees that it believed were outside the normal course of business as part of Other.

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(8) Includes for the three months ended June 30, 2015, $0.4 million of fees payable to our independent auditors relating to the Company’s financial statements for 2014, which exceeded the original estimate. For the six months ended June 30, 2015, Other also includes an additional $2.5 million of professional fees payable to our independent auditors for their year end audit procedures resulting from complex accounting matters at the parent and additional substantive analyses, consultations and procedures at the parent and our broker-dealer subsidiaries related to financial reporting and Sarbanes-Oxley testing.

Also, includes $1.6 million of start-up costs for the three months ended June 30, 2015 and an additional $1.5 million for the six months ended June 30, 2015 relating to the first quarter of 2015 relating to costs related to the development of new businesses ventures. These expenses consist of employee, travel and entertainment costs. For the third and fourth quarters of quarters of 2014, the Company included $2.0 million and $3.9 million, respectively, of start-up costs as part of Other.

Also includes for the six months ended June 30, 2015 $0.1 million of costs incurred during the first quarter of 2015 for Sarbanes Oxley compliance relating to the establishment of systems required to meet certain Sarbanes Oxley requirements due to establishing systems for Sarbanes Oxley compliance with respect to acquired companies. The Company’s external Sarbanes Oxley accountants establish the fee attributable to Sarbanes Oxley compliance allocable to the Company and certain of its subsidiaries and the Company has estimated the percentage of such fees that relates to establishing the systems needed to satisfy Sarbanes Oxley requirements.

Includes for the three and six months ended June 30, 2014, the OPP bonus.

In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items or other items discussed herein, some of which may be the same or different from those described above.

The following table provides a reconciliation of net income (loss) attributable to us (GAAP) to our adjusted net income (Non-GAAP) and adjusted earnings per share (Non-GAAP) for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2015			2014			2015			2014
Net income (loss) (GAAP)	$	(66,149	)	$	48,472		$	(81,530	)	$	60,621
Adjusted net income (loss) adjustments:
Add back: Non-cash equity compensation(1)	3,776			5,881			6,722			9,148
Add back: Acquisition and related integration costs(2)	5,136			6,395			9,529			12,056
Add back: Amortization of capitalized advisor compensation(3)	1,865			2,366			3,858			2,841
Add back: Change in the fair value of contingent and deferred consideration(4)	(30,226		)	127			(29,198		)	133
Add back: Change in the fair value of embedded derivative contracts(5)	(18,444		)	(47,767		)	(32,691		)	(47,650		)
Add back: Goodwill and intangible assets impairment charge(6)	87,730			—			90,898			—
Add back: Professional Fees(7)	2,752			807			4,117			805
Add back: Other(8)	1,913			3,394			4,970			10,789
Total adjusted net income (loss) adjustments	54,502			(28,797		)	58,205			(11,878		)
Amortization of intangible assets(9)	26,905			13,765			54,108			15,532
Adjusted net income (Non-GAAP)	$	15,258		$	33,440		$	30,783		$	64,275
Adjusted net income per adjusted share (Non-GAAP)	$	0.21		$0.78			$	0.42		$	1.59
Adjusted share reconciliation:
Weighted-average basic shares (GAAP)	74,006,580			43,030,018			72,576,193			34,975,636
Weighted average of Class B common stock (January 1 to February 10, 2014)	—			—			—			5,436,464
Total adjusted weighted-average shares (GAAP and Non-GAAP, respectively)	74,006,580			43,030,018			72,576,193			40,412,100
Effective tax rate used in the reconciliation of net income to adjusted net income	44.05		%	18.28		%	42.03		%	18.48		%

________________

(1-8) Refer to the footnotes under the EBITDA and adjusted EBITDA table.

(9) Amount is not tax effected.

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The non-GAAP measures have limitations as analytical tools, and you should not consider any of these measures in isolation or as a substitute for analyses of our income or cash flows as reported under GAAP.

Some of these limitations are:

• they do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;

• they do not reflect changes in, or cash requirements for, our working capital needs;

• they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and

• depreciation and amortization and impairment charges are non-cash expense items that are reflected in our statements of cash flows.

In addition, other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure. We compensate for these limitations by relying primarily on our GAAP results and using the non-GAAP measures only for supplemental purposes. Please see our consolidated financial statements and the related notes thereto.

The Bank Facilities and our convertible notes include covenants and other provisions based on a definition of EBITDA, which we refer to as “Covenant EBITDA,” that differs from the definition of EBITDA described above. Furthermore, our Series B Preferred Stock and our Series C Preferred Stock also include covenants and other provisions based on a definition of EBITDA that differs from both the definition of EBITDA described above and Covenant EBITDA, which is defined in the Series B COD and the Series C COD, as LTM, or last twelve months, Adjusted EBITDA.

Covenant EBITDA is used, among other things, in calculating the Leverage Ratio, First Lien Leverage Ratio, Secured Leverage Ratio and Fixed Charge Covenant Ratio, as defined in the Bank Facilities, in calculating similar ratios in the indenture governing the convertible notes. These ratios are used under both agreements as part of covenants relating to, among other things, incurrence of debt and payment of dividends and distributions.

Covenant EBITDA is only generally comparable to EBITDA and adjusted EBITDA. Under the Bank Facilities and the indenture governing the convertible notes, Covenant EBITDA is similar to EBITDA, subject to certain additional adjustments, including further adjustments to add back (i) equity-based compensation and other non-cash charges and extraordinary, nonrecurring or unusual losses or expenses; (ii) fees and expenses incurred in connection with equity issuances and debt incurrences, and certain fees and expenses incurred in connection with the financing of the acquisition of Cetera, the acquisitions of Cetera, Hatteras, ICH, Summit and J.P. Turner and Permitted Acquisitions (as defined in the Bank Facilities), which, in the aggregate (other than fees and expenses for the financing of the acquisition of Cetera and the recent acquisitions to the extent scheduled), do not exceed 10% of Covenant EBITDA for the relevant period; (iii) certain projected net cost savings and synergies related to the acquisitions of Cetera, Hatteras, ICH, Summit and J.P. Turner and the financing of the acquisition of Cetera based on actions to be taken within 18 months; and (iv) projected net cost savings and synergies related to other acquisitions and asset sales permitted under the credit agreement based on actions to be taken within 12 months, which, in the aggregate and prior to giving effect to such net cost savings and synergies, do not exceed 10% of Covenant EBITDA for the four quarters preceding the relevant determination date. The adjustments made to EBITDA to derive adjusted EBITDA are similar to the adjustments made to EBITDA to derive Covenant EBITDA, but there are also differences that could lead the results to not be comparable under certain circumstances, such as the differences in adjustments made to add back acquisition related expenses.

In addition, LTM Adjusted EBITDA is used as part of the covenants relating to incurrence of debt in the Series B COD and the Series C COD. LTM Adjusted EBITDA is similar to EBITDA, subject to certain differences in the adjustments, including adjustments for employee share-based compensation expense, acquisition and integration related expenses and equity issuance and related offering costs. The adjustments made to EBITDA to derive adjusted EBITDA are similar to the adjustments made to EBITDA to derive LTM Adjusted EBITDA, but there are also differences that could lead the results to not be comparable under certain circumstances.

We also use Core Earnings, a non-GAAP measure, to calculate the incentive fee payable to RCS Capital Management under our services agreement. While Core Earnings includes certain adjustments for non-cash items, it is based on after-tax GAAP net income and also includes adjustments for items such as unrealized gains or losses recorded for the period and the payment of incentive fees. Accordingly, Core Earnings is not comparable to EBITDA or adjusted EBITDA.

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Liquidity and Capital Resources

Currently, our principal use of existing funds, funds from operations and any funds raised in the future is to maintain adequate capital to our lines of businesses, provide payment for the payment of contingent and deferred consideration related to the recent acquisitions and pay operating expenses. In addition, we have agreed to make additional capital contributions to Docupace of up to $28.0 million in cash in 2015 and up to $20.0 million in cash in 2016, although the actual capital contributions may be lower based on Docupace’s operations and may be required to pay contingent and/or deferred consideration based on the acquired companies’ meeting certain performance criteria with regard to certain of our other recent acquisitions. On August 6, 2015 we entered into a series of strategic transactions, and assuming those transactions are consummated, a portion of the proceeds will be used to repay principal on our senior secured indebtedness as required by our senior debt facilities and provide additional liquidity and working capital.  If one or more of those strategic transactions is not consummated, then, without improvement in our cash flow from operations, we may  require additional financing to meet our currently anticipated cash requirements or otherwise may have to reduce budgeted expenses or capital expenditures. 

Concurrently with the closing of the Cetera acquisition on April 29, 2014, we entered into the Bank Facilities, consisting of: (i) a $575.0 million senior secured first lien term loan facility, having a term of five years; (ii) a $150.0 million senior secured second lien term loan facility, having a term of seven years; and (iii) a $25.0 million senior secured first lien revolving credit facility having a term of three years (which was not drawn down at closing). The proceeds to us from the Bank Facilities were $685.1 million after original issue discount and following the payment of fees and expenses due at closing. On July 21, 2014, we drew down $1.1 million in the form of a backstop letter of credit and on March 11, 2015, we drew down $23.0 million on the senior secured first lien revolving credit facility. As of June 30, 2015, we have repaid $35.9 million of the senior secured first lien term loan facility as regularly scheduled principal repayments.

On the same day, also in connection with the closing of the Cetera acquisition, we issued $120.0 million (face amount) of 5% convertible notes at a price of $666.67 per $1,000 of par value and $270.0 million (aggregate liquidation preference) of 7% Series A convertible preferred stock, par value $0.001 per share (the “Series A convertible preferred stock”), issued at a price of 88.89% of the liquidation preference per share.

On December 12, 2014 we entered into a Securities Exchange Agreement with Luxor (the “Securities Exchange Agreement”) pursuant to which, on December 19, 2014, we exchanged the remaining 11,584,427 shares of Series A convertible preferred stock held by Luxor for 5,800,000 shares of Series B Preferred Stock and 4,400,000 shares of Series C preferred stock. $3.0 million of accrued and unpaid dividends on Series A convertible preferred stock through December 12, 2014, the date of their submission for conversion, were included proportionately as part of the first dividend payments accrued on the Series B Preferred Stock and the Series C Preferred Stock. See Note 10 of our consolidated financial statements for more information.

In addition to the $25.0 million senior secured first lien revolving credit facility described above of which $23.0 million was outstanding as of June 30, 2015, Cetera had a line of credit for $50.0 million related to its clearing business, with no maturity date and as of June 30, 2015 no amount was outstanding, and ICH had a line of credit for $1.0 million, with no maturity date and as of June 30, 2015 no amount was outstanding.

On June 30, 2015, we entered into Amendment No. 1 to the First Lien Credit Agreement and Amendment No. 1 to the Second Lien Credit Agreement (together, the “Amendments”). The Amendments increased the interest rates for the Bank Facilities by 1.00% per annum and decreased the restrictions pertaining to the required Secured Leverage Ratios (Secured Net Debt to Consolidated EBITDA, as defined and more particularly set forth in the Bank Facilities) until December 31, 2016. In connection with the Amendments, we paid $12.3 million of customary consent and arrangement fees to the lenders which are included in deferred financing fees in the consolidated statements of financial condition.

We expect to meet our future short-term operating liquidity requirements through cash on hand and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses, the payment of principal and interest on our indebtedness, and the quarterly fee and incentive fee to RCS Capital Management if such fees are earned.

In order to meet our future long-term liquidity requirements or to continue to pursue strategic acquisition or other opportunities, we expect to utilize cash on hand and cash generated from our current operations and we may issue equity securities and debt securities in both public and private offerings in the future. The issuance of these securities will depend on future market conditions, funding needs and other factors, and there can be no assurance that any such issuance will occur or be successful.

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Regulated Subsidiaries

Our broker-dealers are each subject to the SEC Uniform Net Capital Rule 15c3-1. SEC Uniform Net Capital Rule 15c3-1 requires the maintenance of the greater of the minimum dollar amount of net capital required, which is based on the nature of each broker-dealer’s business, or 1/15^th of aggregate indebtedness, as defined, and requires that the ratio of aggregate indebtedness to net capital, both as defined, not exceed 15 to 1. Certain of our broker-dealers have elected to use the alternative method of computing net capital which requires the maintenance of the greater of the minimum dollar amount of net capital required, which is based on the nature of the broker-dealer’s business, or 2% of aggregate debit items.

As of and during the six months ended June 30, 2015 all of the Company’s subsidiaries were in compliance with their net capital requirements except J.P. Turner & Company LLC and VSR Financial Services, Inc. J.P. Turner & Company LLC received a capital contribution of $4.0 million from the Company on April 17, 2015 to correct a net capital deficiency from March 20, 2015 through April 16, 2015. J.P. Turner & Company LLC was in compliance with minimum net capital requirements as of June 30, 2015. VSR Financial Services, Inc. received a capital contribution of $4.0 million from the Company on May 6, 2015, to correct a net capital deficiency from April 1, 2015 through May 5, 2015. VSR Financial Services, Inc. was in compliance with minimum net capital requirements as of June 30, 2015.

Dividends

At the present time, we do not expect to pay quarterly dividends on our Class A common stock or on our Series B Preferred Stock and Series C Preferred Stock in the near term, as our ability to pay cash dividends is restricted due to negative covenants in the Bank Facilities.

During the six months ended June 30, 2015, we did not declare dividends on our Class A common stock. During the three and six months ended June 30, 2014, we declared $11.3 million and $16.4 million, respectively, in dividends and dividend equivalents on our Class A common stock.

During the three and six months ended June 30, 2014, we also recorded $0.3 million in dividends on the LTIP units. The LTIP units were entitled to a catch-up dividend when the units were determined to have been earned on April 28, 2014.

During the three and six months ended June 30, 2014, we declared $3.3 million in dividends on our Series A Preferred Stock.

During the three and six months ended June 30, 2015, we accrued $4.2 million and $9.1 million in dividends on our Series B Preferred Stock which were not paid in cash. During the three and six months ended June 30, 2015, we accrued $2.0 million and $4.5 million in dividends on our Series C Preferred Stock which were not paid in cash. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date. Accordingly, on July 13, 2015, April 13, 2015 and January 12, 2015, the liquidation preference of the Series B Preferred Stock increased by $4.7 million, $4.6 million and $2.8 million, respectively, to reflect the accrued and unpaid dividends. On July 13, 2015, April 13, 2015 and January 12, 2015, we increased the liquidation preference of the Series C Preferred Stock by $2.3 million, $2.2 million and $1.9 million, respectively, to reflect the accrued and unpaid dividends. See Note 10 to our consolidated financial statements for more information.

Cash Flows

We had cash balances of $175.7 million, $199.4 million and $443.1 million as of June 30, 2015, December 31, 2014 and June 30, 2014, respectively.

Net cash provided by operating activities was $21.9 million for the six months ended June 30, 2015. Net cash used in operating activities was $30.6 million for the six months ended June 30, 2014. The difference between the cash provided by operating activities for the six months ended June 30, 2015, as compared to the cash used in operating activities for the six months ended June 30, 2014 was primarily due to the changes in net income, amortization, goodwill and intangible assets impairment, fair value of contingent and deferred consideration, other liabilities and timing of the payment of payable balances at period-end. Our change in the other liabilities relates to deferred revenue and share-based compensation. The change in deferred revenue was driven by the timing of the Cetera acquisition, which closed on April 29, 2014. Cetera collects quarterly advisory fees in the first month of a quarter and then recognizes that revenue over the course of the quarter. The change in other liabilities related to share-based compensation reflects payments made to certain Cetera employees as a result of the automatic vesting of share-based compensation in connection with the change in control. Payables to broker-dealers, however, can represent up to six days of commissions as payment is typically made on a weekly basis, while commissions, which are included in accrued expenses, are paid twice monthly.

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June 30, 2015

Net cash used in investing activities was $26.7 million for the six months ended June 30, 2015. Net cash used in investing activities was $964.6 million for the six months ended June 30, 2014. The net cash used in investing activities for the six months ended June 30, 2015 was primarily a result of payments made for the recent acquisitions and the purchase of property and equipment partially offset by sales of available-for-sale securities. The investing activities for the six months ended June 30, 2014 was primarily a result of the payments made for the recent acquisitions and the purchase of intellectual property, property and equipment partially offset by sales of available-for-sale securities.

Net cash used in financing activities was $19.0 million for the six months ended June 30, 2015. Net cash provided by financing activities was $1.4 billion for the six months ended June 30, 2014. The financing activities for the six months ended June 30, 2015 included a $23.0 million drawdown on the senior secured first lien partially offset by $21.8 million, $7.9 million and $12.3 million in regularly scheduled principal payments for long-term debt, payments for the settlement of contingent and deferred consideration, and payments for deferred financing fees, respectively. The financing activity for the six months ended June 30, 2014 was driven by our follow-on public offering, our concurrent private offering of common stock, the issuance of term loans, our issuances of convertible notes and issuances of convertible preferred stock. Our follow-on public offering of our Class A common stock, which closed on June 10, 2014, including shares issuable on exercise by the underwriters of their option to purchase additional shares from us to cover over-allotment, resulted in net proceeds after offering costs and underwriting discounts and commissions of $373.9 million. Our concurrent private offering of our Class A common stock to Luxor, which closed also on June 2014, resulted in net proceeds after offering costs and underwriting discounts and commissions of $47.7 million. On April 29, 2014, in connection with the closing of the Cetera acquisition, we issued convertible notes and convertible preferred stock to Luxor. Additionally, the Company entered into a senior secured first lien term loan facility and a senior secured second lien term loan facility to finance the Cetera acquisition.

Fair Value of Financial Instruments

We use fair value measurements to record certain financial assets and liabilities at fair value and to determine fair value disclosures. The determination of where an asset or liability falls within the fair value hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input. The value of our derivative contracts are determined by the use of third-party valuation firm that uses models with various input parameters which is then reviewed by us.

Total Level 3 financial assets were $4.9 million and $0.6 million as of June 30, 2015 and as of December 31, 2014, respectively. Total Level 3 financial assets were not material to our total assets.

Total Level 3 financial liabilities were $107.2 million and $210.2 million as of June 30, 2015 and as of December 31, 2014, respectively. Total Level 3 financial liabilities were 7% and 13% of our total liabilities as of June 30, 2015 and as of December 31, 2014, respectively.

See Note 4 to the consolidated financial statements for further information about Level 3 financial assets and liabilities, including changes in Level 3 financial instruments.

Off-Balance Sheet Arrangements

During the second quarter of 2014, we entered into a series of contemporaneous transactions that qualify as derivative contracts or include derivative contracts. These derivative contracts include a put/call agreement, which is a free-standing derivative contract, and embedded derivative contracts related to our issuance of convertible notes and Series A convertible preferred stock (“hybrid instruments”).

The embedded derivative contracts’ features require separate accounting as derivative instruments; therefore, the issuance proceeds for the convertible note and Series A convertible preferred stock were first allocated to the fair value of the put/call agreement and then, on a relative fair value basis, to the hybrid instruments. The proceeds allocated to each hybrid instrument were then attributed between the host contract and the embedded derivative contracts. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

On November 18, 2014 and December 12, 2014, a portion of the Series A convertible preferred stock was submitted for conversion, and on December 10, 2014, December 19, 2014 and February 23, 2015, shares of Class A common stock were issued on account of such conversions. Accordingly, the bifurcated derivatives associated with the converted Series A convertible preferred stock were adjusted to their fair value on the date of each submission for conversion, with the changes in fair value reflected in other revenues in the consolidated statements of operations. The bifurcated derivatives associated with the converted Series A convertible preferred stock were then written off against retained earnings.

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On December 19, 2014, the remaining Series A convertible preferred stock was exchanged for Series B Preferred Stock and Series C Preferred Stock. Accordingly, the bifurcated derivatives associated with the remaining Series A convertible preferred stock were adjusted to their fair value as measured on the date of the exchange, with the change in fair value reflected in other revenues in the consolidated statements of operations. The remaining bifurcated derivatives associated with the Series A convertible preferred stock, which were exchanged, were written off against retained earnings.

The Series B Preferred Stock and Series C Preferred Stock issued on December 19, 2014 also have embedded derivative contracts features that require separate accounting as derivative instruments. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

See Notes 4 and 9 to our consolidated financial statements for more information.

Contractual Obligations

We have certain contractual obligations that require us to make cash payments. As of June 30, 2015, these contractual obligations include deferred and contingent consideration related to recent acquisitions, borrowings in connection with the financing of the recent acquisitions as described below, various operating leases and contracts with third parties to perform back-office processing services.

The following table presents our contractual obligations as of June 30, 2015:

($ in thousands)	< 1 year		1-3 years		4-5 years		> 5 years		Total
Acquisition related	$	60,206	$	96,579	$	—	$	—	$	156,785
Long-term debt	69,241		186,411		334,060		270,000		859,712
Contractual interest payments	66,155		113,511		65,252		21,269		266,187
Operating leases	11,567		19,761		14,602		21,961		67,891
Other obligations	10,204		15,141		13,134		694		39,173
Total	$	217,373	$	431,403	$	427,048	$	313,924	$	1,389,748

The Bank Facilities

Concurrently with the closing of the Cetera acquisition on April 29, 2014, we entered into the Bank Facilities: (i) a $575.0 million senior secured first lien term loan facility, or the first lien term facility, having a term of five years; (ii) a $150.0 million senior secured second lien term loan facility, having a term of seven years, or the second lien term facility, and together with the first lien term facility, the term facilities; and (iii) a $25.0 million senior secured first lien revolving credit facility having a term of three years. During the six months ended June 30, 2015, we repaid $21.6 million of the senior secured first lien term loan facility as a regularly scheduled principal repayment. As of June 30, 2015, approximately $539.1 million was outstanding under the first lien term facility, approximately $150.0 million was outstanding under the second lien term facility and $23.0 million was outstanding under the senior secured first lien revolving credit facility (not including a backstop letter of credit). On July 21, 2014, we utilized $1.1 million from the senior secured first lien revolving credit facility in the form of a backstop letter of credit.

The first lien term facility included an original issue discount of 1.0% for gross proceeds to us upon incurrence of $569.3 million. The second lien term facility included an original issue discount of 1.5% for gross proceeds to us upon incurrence of $147.8 million.

On June 30, 2015, we entered into Amendment No. 1 to the First Lien Credit Agreement and Amendment No. 1 to the Second Lien Credit Agreement (together, the “Amendments”). The Amendments increased the interest rates for the Bank Facilities by 1.00% per annum and decreased the restrictions pertaining to the required Secured Leverage Ratios (Secured Net Debt to Consolidated EBITDA, as defined and more particularly set forth in the Bank Facilities) until December 31, 2016. In connection with the Amendments, we paid $12.3 million of customary consent and arrangement fees to the lenders which are included in deferred financing fees in the consolidated statements of financial condition.

The first lien term facility has an interest rate equal to LIBOR plus 6.50% per annum, the senior secured first lien revolving credit facility has an initial interest rate equal to LIBOR plus 6.50% per annum, which may be reduced to 6.25% if the First Lien Leverage Ratio (as defined in the Bank Facilities) is less than or equal to 1.25 to 1.00, and the second lien term facility has an interest rate equal to LIBOR plus 10.50% per annum. In the case of both term facilities and the senior secured first lien revolving credit facility, LIBOR can be no less than 1.00% per annum.

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The Bank Facilities are subject to: (i) certain mandatory prepayment requirements, including asset sales, insurance/condemnation proceeds, incurrence of certain indebtedness, excess cash flow (as described in more detail below; (ii) certain agreed prepayment premiums; (iii) customary affirmative covenants; (iv) certain negative covenants, including limitations on incurrence of indebtedness, liens, investments, restricted payments), asset dispositions, acquisitions and transactions with affiliates; and (v) financial covenants of a maximum total leverage ratio, a minimum fixed charge coverage ratio and minimum regulatory net capital. As of June 30, 2015, we were in compliance with these covenants.

The Bank Facilities include the requirement to prepay the aggregate principal amount of the Bank Facilities in the amount of 50% of “Excess Cash Flow” (as defined in the Bank Facilities), subject to reduction based on the First Lien Leverage Ratio (as defined in the Bank Facilities).

Our obligations under the Bank Facilities are guaranteed, subject to certain other customary or agreed-upon exceptions, by RCS Capital Management, RCAP Holdings and each of our direct or indirect domestic subsidiaries that are not SEC-registered broker-dealers. We, together with the guarantors, have pledged substantially all our assets to secure the Bank Facilities, subject to certain exceptions. Subsidiaries that have been acquired must become guarantors and pledge their assets no later than 60 days after such acquisition.

Luxor Arrangements

On April 29, 2014, we issued to Luxor $120.0 million (face amount) of 5% convertible notes, issued at a price of $666.67 per $1,000 of par value and $270.0 million (aggregate liquidation preference) of 7% Series A convertible preferred stock, issued at a price of 88.89% of the liquidation preference per share.

On November 18, 2014 and December 12, 2014, a portion of the Series A convertible preferred stock was submitted for conversion, and on December 10, 2014, December 19, 2014 and February 23, 2015, shares of Class A common stock were issued on account of such conversions. On December 12, 2014 we entered into the Securities Exchange Agreement, pursuant to which we exchanged the remaining shares of Series A convertible preferred stock for shares of Series B Preferred Stock and shares of Series C Preferred Stock on December 19, 2014. Based on the redemption and conversion features of the Series B Preferred Stock and Series C Preferred Stock, we have classified the Series B Preferred Stock and Series C Preferred Stock as mezzanine equity on the statement of financial condition. The Series B Preferred Stock is not convertible. The Series C Preferred Stock is convertible, at the holder’s option, into shares of Class A common stock. See Notes 9 and 10 to our consolidated financial statements for more information.

Also on April 29, 2014, we entered into a put/call agreement with Luxor, which was amended on December 19, 2014 to reflect the issuance of the Series C Preferred Stock. Under this agreement, subject to certain conditions, (i) we have the right to repurchase Luxor’s 19.46% interest in RCS Capital Management (the “Luxor percentage interest”) from Luxor in exchange for its fair market value (as determined by us and Luxor pursuant to the agreement) in shares of Class A common stock (or, at our option, a cash equivalent); and (ii) Luxor has the right to require us to purchase the Luxor percentage interest in exchange for a number of shares of Class A common stock (or, at our option, a cash equivalent) that is equal to 15.00% multiplied by the Luxor percentage interest multiplied by the then outstanding number of shares of Class A common stock (assuming the conversion immediately prior thereto of the then outstanding convertible notes and Series C Preferred Stock).

The put/call agreement also provides that the members of RCS Capital Management (who are also the members of RCAP Holdings, American Realty Capital and RCS Holdings) may elect to purchase all the Luxor percentage interest offered to us for an amount equal to the value of the Class A common stock required to be delivered by us for cash, shares of Class A common stock or a combination thereof. If we are prohibited by the Bank Facilities from purchasing the Luxor percentage interest, the members of RCS Capital Management will be required to purchase the Luxor percentage interest under the same terms.

In connection with securities issuances and arrangements described above, we agreed to file with the SEC a continuously effective resale registration statement with respect to certain securities owned and beneficially owned by Luxor that were acquired in April 2014 or June 2014 by July 1, 2014. A Registration Statement on Form S-3 (File No. 333-197148) in fulfillment of this obligation was filed with the SEC on July 1, 2014 and became effective on July 16, 2014. In connection with the issuance of the Series B Preferred Stock and the Series C Preferred Stock pursuant to the Securities Exchange Agreement, the Company agreed to file with the SEC a continuously effective resale registration statement by February 2, 2015. A Registration Statement on Form S-3 (File No. 333- 201763) in fulfillment of this obligation was filed with the SEC on January 30, 2015 and became effective on February 12, 2015.

Recently Issued Accounting Pronouncements

See Note 3 to the consolidated financial statements for further information about recently issued accounting pronouncements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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. A significant portion of our exposure to market risk is directly related to our reliance on the direct investment program industry.

We also offer a plan to certain of our financial advisors which allows them to defer a portion of their compensation which earns a rate of return based on the financial advisor’s selection of investments. In order to economically hedge this exposure, we invest in money market, international, U.S. equity and U.S. fixed income funds. While these investments are exposed to interest rate, credit spread and equity price risk, we have an offsetting liability to the employee which is recorded in deferred compensation plan accrued liabilities.

We have research models that are used to develop client portfolios. We purchase positions to track the actual performance of these portfolios that are exposed to interest rate, credit spread and equity price risk. The size and number of such portfolios is limited.

We have entered into a put/call agreement and we have embedded derivatives related to our convertible notes and preferred stock that are subject to market risk.

Our broker-dealer, RIA and investment management subsidiaries earn fees based on the levels of assets being managed. These fees can be subject to fluctuations due to changes in market risk.

We have $10.8 million of trading securities on our balance sheet in connection with our customer facilitation activities. Included in trading securities are $0.2 million of equity securities and $9.6 million of mutual funds that may expose us to market risk. A 10% decrease in market value would result in losses of $1.0 million on trading securities related to holdings in equity securities and mutual funds.

We have $2.7 million of available-for-sale securities on our balance sheet in connection with investing activities. Our available-for-sale securities consist entirely of mutual funds that may expose us to market risk. A 10% decrease in market value would result in unrealized losses of $0.3 million on available-for-sale securities.

Interest Rate Risk

As with other yield-oriented securities, shares of direct investment programs are impacted by their level of distributions to their investors. The distribution rate is often used by investors to compare and rank similar yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the level of distributions that direct investment programs may make and influence the decisions of investors who are considering investing in their common stock. A rising interest rate environment could have an adverse impact on the common stock price of direct investment programs, their ability to issue additional equity and the cost to them of any such issuance or incurrence. Because we rely on the direct investment program industry, any macroeconomic conditions affecting the industry adversely may negatively impact our results of operations and the price of your shares of Class A common stock.

Concurrently with the closing of the Cetera acquisition on April 29, 2014, we entered into the Bank Facilities. The Bank Facilities consist of: (i) a $575.0 million senior secured first lien term loan facility, having a term of five years; (ii) a $150.0 million senior secured second lien term loan facility, having a term of seven years; and (iii) a $25.0 million senior secured first lien revolving credit facility having a term of three years.

The first lien term facility and the senior secured first lien revolving credit facility have interest rates equal to LIBOR plus 6.50% per annum, which may be reduced to 6.25% if the First Lien Leverage Ratio (as defined in the Bank Facilities) is less than or equal to 1.25 to 1.00, and the second lien term facility has an interest rate equal to LIBOR plus 10.5% annum. In the case of both term facilities, LIBOR can be no less than 1% per annum. A rising interest rate could have an adverse impact as our interest rate could increase.

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The following table presents the impact of increases to LIBOR:

	Principal Balance		Annual Impact of an Interest Rate Increase of
($ in thousands)	as of June 30, 2015		10 Basis Points(1)		50 Basis Points(1)		100 Basis Points
First lien term facility	$	539,063	$	—	$	—	$	1,005
Second lien term facility	150,000		—		—		280
First lien revolving facility	23,000		—		—		43
Total	$	712,063	$	—	$	—	$	1,328

_____________________

(1) This increase does not result in LIBOR rising above 1%. The interest rates on the Bank Facilities will not change until LIBOR rises above 1%.

Credit Risk

Credit risk is the risk of loss due to a failure to meet the terms of a contractual obligation. We are exposed to credit risk if our clients fail to fulfill their obligations. We also are exposed to credit risk in connection with transactions executed with clients on margin. To mitigate this risk, we obtain collateral; however, if the levels of collateral are insufficient we could be subject to credit risk. We also are exposed to credit risk from notes receivable from certain of our financial advisors.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and procedures are effective.

Change in Internal Control over Financial Reporting

During the three months ended June 30, 2015, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The information contained in Note 16 of our notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our subsidiaries are subject to, any material pending legal proceedings.

Item 1A. Risk Factors

We are including the following revised risk factor, which should be read in conjunction with our description of risk factors provided in Part I, Item 1A of our Annual Report on Form 10-K/A for the year ended December 31, 2014 which was filed on April 2, 2015.

Extensive or frequent changes in regulations could adversely affect our business.

The financial services industry is subject to extensive and frequently changing regulatory requirements under federal and state laws and regulations and self-regulatory organization (“SRO”) rules. Such regulation continues to grow more extensive and complex, and regulatory proceedings continue to become more frequent and sanctions more severe. The SEC, FINRA, the Municipal Securities Rulemaking Board (“MSRB”), national securities exchanges and other governmental authorities and SROs continue to propose new regulatory initiatives which may result in the adoption of new or revised regulations, as well as changes to interpretations of existing regulations. We may be adversely affected by new regulations, changes in regulatory interpretations, or more rigorous enforcement of applicable regulations, any of which could limit our business activities, increase our costs, adversely affect our results of operations and financial condition and harm our reputation.

Regulatory changes that may have an adverse impact on our business include potential new regulations resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). These may include the development of alternative standards of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail investors, including the imposition of a fiduciary standard on broker-dealers. The SEC is also considering the potential harmonization of certain other aspects of the regulation of broker-dealers and investment advisers. Additionally, in April 2015 the Department of Labor (the “DOL”) proposed regulations under the Employee Retirement Income Security Act (“ERISA”) to expand the scope of those who become fiduciaries to capture more of the current services of 401(k) and IRA providers and, among other things, could affect our advisors’ ability to receive certain fees or commissions from investments in such retirement plans, unless an exemption is available. Among other things, the DOL proposed regulations would prohibit certain forms of compensation (such as commissions) to be paid in connection with recommendations as to certain types of investments currently distributed by us to 401(k) and IRA plans, including non-traded REITs and other illiquid investments. The first comment period with respect to the proposed regulations has been completed, public hearings are scheduled to begin on August 10, 2015 and a second comment period is scheduled to close on September 8, 2015. There may be modifications before the final regulations, if any, are adopted. The adoption of any such SEC or DOL regulations could require changes to certain business practices and require us to invest significant management attention and resources to evaluate and make necessary changes, which could impact our business and financial results.

Additionally, the SEC has approved amendments to the FINRA and NASD rules that address values of certain direct investment programs referred to as direct participation programs (“DPPs”) and unlisted REIT securities. The amendments, which will become effective in 2016, modify the requirements for inclusion of per share estimated values of DPP and REIT securities in customer account statements and make corresponding changes to the requirements applicable to participation by broker-dealers in public offerings of DPP and REIT securities. These rule amendments may result in changes to the values of DPP and REIT securities which appear on customer account statements. If investors or financial advisors react negatively to the new disclosure regime, the demand for these products could be reduced, which could harm our results of operations.

Additional goodwill and intangible assets impairments could adversely affect the results of our business.

Goodwill and intangible assets are reviewed annually for impairment as of October 31 or upon certain identifiable triggering events. The value of the goodwill and intangible assets from each acquisition are determined by an independent valuation company and reviewed by the Company using estimates such as future revenues attributable to financial advisors and the financial advisors’ client retention rates which are used to derive economic cash flows that are fair valued at an appropriate rate of return over their respective useful lives. During the second quarter of 2015, we determined that identifiable triggering events had taken place and performed an impairment assessment.  As a result  we incurred significant write-downs of the goodwill and intangible assets related to J.P. Turner and StratCap during the three and six-months ended June 30, 2015

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Downward changes in our expectations of future growth and profitability for our reporting units and a further sustained decline in the Company’s market capitalization could lead to additional impairment charges related to goodwill and identifiable assets, which could adversely affect our results of operations in future periods.

There are certain risks in connection with our recent agreements to sell our wholesaling business and obtain new financing.

We have entered into an agreement with Apollo Management Holdings, L.P. (“APH”) for the sale of our wholesale business (the “MIPA”) and investment agreements with APH for the acquisition of Series D-1 Preferred Stock (the “Apollo Investment Agreement”) and with Luxor Capital Partners, LP for the acquisition of Series D-2 Preferred Stock for an aggregate purchase price of $35 million. Completion of these transactions is conditioned on certain closing conditions specific to each transaction, which include, among other things, with respect to the sale of the wholesale business, FINRA approval and consummation of a transaction between an affiliate of APH and AR Capital, LLC (“AR Capital”), pursuant to which an affiliate of APH will own a 60% interest in a new entity which will acquire substantially all of AR Capital’s business. In addition, APH has the right to terminate the MIPA and the Apollo Investment Agreement and Luxor has a right to terminate the Luxor Investment Agreement, in each case under certain circumstances based on the nature of the disclosure, following deliver of a disclosure letter to the applicable agreement. Accordingly, there can be no assurance that these transactions close.

The wholesale business was the Company’s historical business prior to the acquisition of the retail advice business and remains one of its operating businesses. The disposition of the wholesale business will result in the Company being focused on its retail advice business. As part of the disposition of the wholesale business, the Company will also dispose of its transfer agency and certain other transaction management services, which were part of its Investment Banking, Capital Markets and Transaction Management Services business. In addition, the revenues from the Company’s investment banking business primarily have related to services provided to non-traded REITs sponsored by AR Capital LLC. It is uncertain the extent to which this transaction will affect the Company’s retained businesses.

The shares issuable on conversion of the Series D-1 Preferred Stock to be issued APH represent 6.47% of the outstanding Class A Common Stock and the shares issuable on conversion of the Series D-2 Preferred Stock represent 3.23% of the outstanding Class A Common Stock. In addition, Luxor would hold 27.11% of the outstanding Class A Common Stock assuming conversion of the Series D-2 Preferred Stock, Series C convertible preferred stock and convertible notes issued on April 29, 2014 held by it. You may suffer substantial dilution on conversion of these securities by APH or Luxor. The market price of our Class A common stock could be affected as a result of sales of a large number of shares of our Class A common stock or the perception that such sales could occur.

We may require financing, in addition to the proceeds from our pending sale of Series D-1 Preferred Stock and Series D-2 Preferred Stock to meet our cash requirements.

We may require financing, in addition to the proceeds from our pending sale of Series D-1 Preferred Stock and Series D-2 Preferred Stock, if consummated, to meet our anticipated cash requirements to provide adequate capital to our businesses, the payment of contingent and deferred consideration related to the recent acquisitions, the payment of operating expenses and our agreement to make additional capital contributions to Docupace of up to $28.0 million in cash in 2015 and up to $20.0 million in cash in 2016, although the actual capital contributions may be lower based on Docupace’s projected operations. On August 6, 2015 we entered into a series of strategic transactions, and assuming those transactions are consummated, a portion of the proceeds will be used to repay principal on our senior secured indebtedness as required by our senior debt facilities and provide additional liquidity and working capital.  If one or more of those strategic transactions is not consummated, then, without improvement in our cash flow from operations, we may  require additional financing to meet our currently anticipated cash requirements or otherwise may have to reduce budgeted expenses or capital expenditures. 

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

RCS Capital Corporation and Subsidiaries

Index to Consolidated Financial Statements

Form 10-Q

June 30, 2015

Item 6. Exhibits

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

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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.

		RCS Capital Corporation
Date:	August 11, 2015	By:	/s/ EDWARD M. WEIL, JR.
			Edward M. Weil, Jr.
			Chief Executive Officer and Director
			(Principal Executive Officer)
Date:	August 11, 2015	By:	/s/ BRIAN D. JONES
			Brian D. Jones
			Chief Financial Officer and Director
			(Principal Financial and Accounting Officer)

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Exhibits

The following exhibits are included in the Form 10-Q for the quarter ended June 30, 2015 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
2.1*	Membership Interest Purchase Agreement, dated as of August 6, 2015, by and among Apollo Management Holdings, L.P., as buyer, and RCS Capital Corporation and RCS Capital Holdings, LLC, as sellers.
10.1*	Third Amendment to the RCS Capital Corporation Equity Plan, as amended June 5, 2013 and December 29, 2014.
10.2*	Investment Agreement, dated August 6, 2015, by and between Apollo Management Holdings, L.P., as investor, and RCS Capital Corporation.
10.3*	Investment Agreement, dated August 6, 2015, by and between Luxor Capital Partners, LP, Luxor Capital Partners Offshore Master Fund, LP, Luxor Wavefront, LP and Thebes Offshore Master Fund, LP, as investors, and RCS Capital Corporation.
10.4*	Termination Agreement, dated August 6, 2015, by and among RCS Capital Corporation, RCS Capital Holdings, LLC, RCS Capital Management, LLC, Nicholas S. Schorsch, Shelley D. Schorsch, William M. Kahane, Peter M. Budko, Edward M. Weil, Jr., and Brian S. Block and Luxor Capital Partners, LP, Blue Sands LLC, Blue Sands B Inc., Blue Sands C Inc. and Blue Sands D Inc.
10.5(1)	Amendment No. 1, dated as of June 30, 2015, to the First Lien Credit Agreement, dated as of April 29, 2014, among RCS Capital Corporation, as borrower, Barclays Bank PLC, as administrative agent and collateral agent, and the other lender and guarantor parties thereto
10.6(1)	Amendment No. 1, dated as of June 30, 2015, to Second First Lien Credit Agreement, dated as of April 29, 2014, among RCS Capital Corporation, as borrower, Bank of America, N.A., as administrative agent and collateral agent, and the other lender and guarantor parties thereto
31.1*	Certification of the Principal Executive Officer of RCS Capital Corporation pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Principal Financial Officer of RCS Capital Corporation pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Written statements of the Principal Executive Officer and Principal Financial Officer of RCS Capital Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	XBRL (eXtensible Business Reporting Language). The following materials from RCS Capital Corporation’s Quarterly Report on Form 10-Q as of and for the three and six months ended June 30, 2015, formatted in XBRL: (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this information in furnished and not filed for purpose of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934

_____________________

* Filed herewith.

(1) Filed as an exhibit to the Company’s Current Report on Form 8-k filed with the SEC on June 30, 2015.

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EX-2.1

Exhibit 2.1

EXECUTION VERSION

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

RCS CAPITAL CORPORATION,

RCS CAPITAL HOLDINGS, LLC

and

APOLLO MANAGEMENT HOLDINGS, L.P.

Dated as of August 6, 2015

TABLE OF CONTENTS

		Page
Article I Transaction		5
1.1	Purchase and Sale	5
1.2	The Closing	6
1.3	Closing Deliveries	6
1.4	Withholding	7
1.5	StratCap Carve-Out	7
1.6	Post Closing True-Up	8
Article II Representations and Warranties pertaining to the BUSINESS		10
2.1	Organization, Power	10
2.2	Authority	11
2.3	Non-Contravention	11
2.4	Consents, etc.	12
2.5	Capitalization	12
2.6	Financial Statements	13
2.7	Litigation	14
2.8	Compliance with Laws; Permits and Licenses	15
2.9	Absence of Certain Changes; No Undisclosed Liabilities	16
2.10	Personnel and Employee Benefits Matters	17
2.11	Taxes	19
2.12	Properties and Assets	22
2.13	Certain Labor Matters	22
2.14	Material Contracts; Luxor Consent	23
2.15	Intellectual Property and IT Systems	23
2.16	Data Protection and Privacy	24
2.17	Books and Records	25
2.18	Broker-Dealer Matters	25
2.19	Compliance Matters	27
2.20	Insurance	29
2.21	Affiliate Arrangements	29
2.22	Compliance with Environmental Law	29
2.23	Brokers	30
Article III Representations and Warranties of Apollo		30
3.1	Organization	30
3.2	Authority	30
3.3	Non-Contravention	31
3.4	Consents, etc.	31
3.5	Available Funds	32

3.6	Investment Intent	32
3.7	Brokers	32
3.8	ARC Transaction Matters	32
Article IV Covenants		33
4.1	Conduct of Business	33
4.2	Access; Confidentiality; Planning Committee	36
4.3	Reasonable Best Efforts; Regulatory Approvals	37
4.4	Communications; Confidentiality	39
4.5	Supplemental Disclosure	39
4.6	Third Party Proposals	40
4.7	Financial Statements; Cooperation	41
4.8	Non-Solicitation; Non-Competition	42
4.9	Termination of Affiliate Agreements	44
4.10	Expenses	44
4.11	ARC Transaction	44
4.12	Employee Matters	44
4.13	Pre-Closing Restructuring Actions	46
4.14	Separation and Transition Matters; Commingled Contracts	46
4.15	Intellectual Property Cross-License	49
4.16	Use of Seller Marks	49
4.17	Transition Services	51
4.18	Release	51
4.19	Further Assurances	52
Article V Conditions to the Closing		52
5.1	Mutual Conditions	52
5.2	Additional Conditions to the Obligations of Apollo	52
5.3	Additional Conditions to the Obligations of the Sellers	54
Article VI Termination		56
6.1	Termination	56
6.2	Effect of Termination	57
Article VII Indemnification		58
7.1	Indemnification by the Sellers	58
7.2	Indemnification by Apollo	59
7.3	Indemnification Procedures	60
7.4	General	61
Article VIII Tax Matters		63
8.1	Tax Indemnity	63
8.2	Straddle Periods	63
8.3	Tax Returns	64
8.4	Tax Contests	65

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8.5	Books and Records; Cooperation	66
8.6	Transfer Taxes	66
8.7	Tax Agreements; Powers of Attorney	66
8.8	Overlap	66
8.9	Section 754 Elections	67
8.10	FIRPTA Certificate	67
8.11	Allocation	67
8.12	Tax Treatment of Certain Payments	67
Article IX General Provisions		68
9.1	Survival	68
9.2	Notices	68
9.3	Interpretation	69
9.4	Amendment and Modification; Waiver	69
9.5	Entire Agreement	70
9.6	Disclosure Letters	70
9.7	Third Party Beneficiaries	70
9.8	Specific Performance	71
9.9	Assignment; Binding Effect	71
9.10	Governing Law	71
9.11	Jurisdiction; Waiver of Jury Trial	71
9.12	Severability	72
9.13	Counterparts	72
Article X Definitions		72

SCHEDULES

Schedule A	Sample Calculation of Regulatory Capital and Net Working Capital
Schedule B	Accounting Principles

EXHIBITS

Exhibit A	Term Sheet for Operating Agreement
Exhibit B	Term Sheet for Strategic Relationship Agreement

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

This membership interest purchase AGREEMENT, dated as of August 6, 2015 (this “Agreement”), is made by and among Apollo Management Holdings, L.P., a Delaware limited partnership (“Apollo”), RCS Capital Corporation, a Delaware corporation (“RCAP”) and RCS Capital Holdings, LLC (“RCS Holdings” and, together with RCAP, the “Sellers”). Capitalized terms used and not otherwise defined in this Agreement have the meanings specified in Article X.

RECITALS

A.          RCAP owns, indirectly through its wholly-owned direct subsidiary RCS Holdings, (i) 100% of the authorized, issued and outstanding Equity Securities of Realty Capital Securities, LLC, a Delaware limited liability company (“RCS”), (ii) 100% of the authorized, issued and outstanding Equity Securities of American National Stock Transfer, LLC, a Delaware limited liability company (“ANST”), and (iii) 100% of the authorized, issued and outstanding Equity Securities of Strategic Capital Management Holdings, LLC, a Delaware limited liability company (“StratCap” and, collectively with RCS and ANST, the “Acquired Companies” and each an “Acquired Company”).

B.           Subject to the consummation of the Pre-Closing Restructuring Actions (as hereinafter defined), the Sellers desire to sell, and Apollo desires to acquire, all of the issued and outstanding Equity Securities in the Acquired Companies (the “Acquired Interests”).

C.           The board of directors of RCAP, acting upon the unanimous recommendation of a committee of such board consisting only of independent and disinterested directors of RCAP, unanimously has approved and declared advisable, the execution, delivery and performance of this Agreement and the transactions contemplated thereby.

D.           Concurrently with the execution of this Agreement, the Company has received from Luxor Capital Group, LP (“Luxor”), a consent and agreement relating to the transactions contemplated hereby and certain other related matters, a copy of which has been furnished to the parties hereto (the “Luxor Consent”).

E.           Concurrently with the execution of this Agreement, AMH Holdings (Cayman), L.P. (“AMH”) have entered into a Transaction Agreement with AR Capital, LLC, a Delaware limited liability company (“ARC”), and AR Global, LLC, a Delaware limited liability company (“Newco”), pursuant to which, and subject to the terms and conditions thereof, (i) ARC shall transfer to Newco all of the assets (including equity interests in Subsidiaries) used in the conduct of its business, other than certain excluded assets, and Newco shall assume certain liabilities relating to ARC’s business, in exchange for 100% of the equity units of Newco and (ii) ARC shall transfer to AMH 60% of the equity units of Newco in exchange for the consideration set forth therein (the “ARC Transaction Agreement”).

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F.           Concurrently with the execution of this Agreement, the Sellers have entered into a Termination Agreement, dated as of the date hereof, with RCS Management, the original members of RCS Management, and Luxor Capital Partners, LP, Blue Sands LLC, Blue Sands B Inc., Blue Sands C Inc. and Blue Sands D Inc. (collectively, the “Luxor Group”) pursuant to which, and subject to the terms and conditions thereof, the parties thereto have agreed to (i) terminate that certain services agreement, dated as of February 11, by and among the Sellers and RCS Management pursuant to which RCS Management provides certain services to RCAP on the terms set forth therein, and (ii) terminate that that certain put and call agreement, dated as of April 29, 2014, as amended by Amendment No. 1 dated December 19, 2014, by and among RCAP, the original members of RCS Management, RCS Management, pursuant to which the Luxor Group has a right to put, and RCAP and such original members have a right to call, the Luxor Group’s interest in RCS Management on the terms, and subject to the conditions, set forth therein (the “Services Termination Agreement”).

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

Article I
Transaction

1.1          Purchase and Sale.

(a)          Transfer of Acquired Interests. Subject to the terms and conditions of this Agreement, including Section 1.5, at the Closing, the Sellers shall assign, transfer, convey and deliver to Apollo, and Apollo shall purchase and accept from the Sellers, the Acquired Interests, free and clear of any Liens (other than Liens arising as a result of this Agreement or under applicable securities Laws).

(b)          Consideration In exchange for the Acquired Interests, Apollo shall pay and convey to the Sellers an amount of cash equal to (i) twenty-five million dollars ($25,000,000) (subject to adjustment in accordance with Section 1.5, the “Base Purchase Price”), minus (ii) the greater of (A) the excess (if any) of the Target Regulatory Capital over the Estimated Closing Regulatory Capital or (B) the excess (if any) of the Target Net Working Capital over the Estimated Closing Net Working Capital (the “Estimated Purchase Price” and, as adjusted pursuant to Section 1.6, the “Purchase Price”). Apollo shall pay the Purchase Price by wire transfer of immediately available funds to the account or accounts designated by RCAP to Apollo in writing at least three (3) Business Days prior to the Closing Date.

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(c)          Estimated Regulatory and Net Working Capital. Not later than the fifth (5th) Business Day prior to the Closing Date, the Sellers shall deliver to Apollo a written statement (the “Estimated Closing Statement”) setting forth, with reasonable supporting detail a good faith estimate of (i) the Closing Regulatory Capital (prepared in accordance with the definitions and principles of the SEC Uniform Net Capital Rule 15c3-1) (the “Estimated Closing Regulatory Capital”) and (ii) the Closing Net Working Capital (prepared in accordance with the Accounting Principles) (the “Estimated Closing Net Working Capital”), in each case, for the avoidance of doubt, after giving effect to the Pre-Closing Restructuring Transactions. A sample calculation of the Closing Regulatory Capital and Closing Net Working Capital is attached as Schedule A. In the event that Apollo objects to or disputes the Estimated Closing Statement, the Estimated Closing Regulatory Capital or the Estimated Net Working Capital (in each case, in whole or in part), the Sellers and Apollo will each make a good faith effort to resolve such objections or disputes; provided that if any such objections or disputes are not resolved by the second (2nd) Business Day immediately prior to the Closing Date, the Estimated Closing Regulatory Capital and/or Estimated Closing Net Working Capital, as applicable, will be adjusted (x) to reflect the resolution of any such objections and disputes that have been resolved and (y) such that the amounts included for any remaining disputed items shall represent the mid-point between the positions taken by the Sellers, on the one hand, and Apollo, on the other.

(d)          Pre-Closing Distribution. To the extent that (i) the Estimated Closing Regulatory Capital exceeds the Target Regulatory Capital or (ii) the Estimated Closing Net Working Capital exceeds the Target Net Working Capital (the lesser of such excesses, if any, the “Excess Capital”), RCAP may cause the Acquired Companies to distribute to the Sellers an amount not in excess of the Excess Capital, provided that with respect to any distribution made by RCS and/or SC Distributors, FINRA does not object or otherwise place any restriction or other burdensome condition on such distribution.

1.2          The Closing. The closing of the purchase and sale of the Acquired Interests (the “Closing”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m. local time on the fifth Business Day following the Closing Condition Satisfaction Date (subject to the satisfaction or waiver of those conditions that by their terms are to be satisfied by actions taken at the Closing), provided that the parties may agree in writing on another time, date or place for the Closing. The date on which the Closing actually occurs is referred to hereinafter as the “Closing Date”.

1.3          Closing Deliveries. At the Closing:

(a)          The Sellers’ Deliveries. The Sellers shall deliver, or shall cause to be delivered, to Apollo each of the following:

(i)          the RCAP-ARC-Newco Transition Services Agreement, duly executed by RCAP;

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(ii)         a release, in a form reasonably acceptable to Apollo, evidencing the release of the Subject Companies from their obligations and any security interests granted by them in connection with the RCAP Credit Facilities;

(iii)        written resignations, in a form reasonably acceptable to Apollo, from each officer or director of the Subject Companies or evidence reasonably satisfactory to Apollo that duly authorized action has been taken by each of the Subject Companies to remove each officer and director of the Subject Companies (in each case other than those listed on Section 1.3(a)(iii) of the Seller Disclosure Letter);

(iv)        the certificates described in Section 8.11;

(v)         such other instruments of conveyance, assignment and transfer as may be reasonably requested by Apollo with respect to the Acquired Interests.

(b)          Apollo’s Deliveries. Apollo shall deliver, or shall cause to be delivered, to RCAP the RCAP-ARC-Newco Transition Services Agreement, duly executed by Newco.

1.4          Withholding. Notwithstanding any other provision of this Agreement, (a) each payment made pursuant to this Agreement shall be made net of any Taxes required by Applicable Law to be deducted or withheld from such payment and (b) any amounts deducted or withheld from any such payment shall be remitted to the applicable taxing authority and shall be treated for all purposes of this Agreement as having been paid.

1.5          StratCap Carve-Out. Anything to the contrary in this Agreement notwithstanding, if the StratCap Waiver has not been obtained by the date on which the Closing would otherwise occur, the purchase of the Equity Securities of ANST and RCS shall occur and Apollo shall not acquire the Equity Securities of StratCap (unless it chooses to waive the nonreceipt of the StratCap Waiver). In such event:

(a)          The “Acquired Companies” shall exclude StratCap and the “Subject Companies” shall exclude StratCap and its Subsidiaries.

(b)          The “Acquired Interests” shall exclude the Equity Securities of StratCap.

(c)          The Base Purchase Price shall be reduced to $20,000,000.

(d)          Thereafter the Sellers shall (i) own and operate StratCap in a manner consistent with the Membership Interest Purchase Agreement dated May 19, 2014 among the Sellers, the Executives and the Individual Seller defined therein (the “StratCap MIPA”): (ii) procure that StratCap shall not become liable for any Indebtedness for borrowed money or enter into any agreement that restricts its ability to engage in any business, sell any product or compete; (iii) procure that StratCap not enter into distribution arrangements effective after December 31, 2016 without Apollo’s consent (which consent shall not be un reasonably withheld); (iv) procure that RCS receives compensation for sales of StratCap products equivalent to the compensation received by Strat Cap, including dealer manager fees, revenue shares, distribution and advisory fees and like amounts; (v) to the extent there is sufficient cash available, pay the earnout payments due under the StratCap MIPA; and (vi) seek to cause to be obtained or otherwise satisfied the various aspects of the Stratcap Waiver.

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(e)          At any time from and after the Closing and prior to December 31, 2017 when the StratCap Waiver has been obtained or otherwise satisfied, Apollo shall purchase and the Sellers shall sell the Equity Securities of StratCap for a base purchase price of $5,000,000 on substantially the terms set forth in this Agreement (to the extent relevant to a purchase of StratCap), including a working capital and regulatory capital adjustment, comparable representations, warranties and indemnities, and other comparable provisions.

(f)          The Sellers and Apollo shall have no further obligations under this Section 1.5 if the purchase and sale of StratCap contemplated hereby has not been consummated by December 31, 2017.

(g)          If StratCap monetizes an advisory contract through a buyout, cash flow allocable to future periods shall be retained and shall not be included in Closing Net Working Capital.

1.6          Post-Closing True-Up.

(a)          Closing Statement. Not later than the ninetieth (90th) day following Closing, Apollo shall deliver to the Sellers a written statement (the “Closing Statement”) setting forth a calculation of the Closing Regulatory Capital (prepared in accordance with the definitions and principles of the SEC Uniform Net Capital Rule 15c3-1) and the Closing Net Working Capital (prepared in accordance with the Accounting Principles), in each case, for the avoidance of doubt, after giving effect to the Pre-Closing Restructuring Transactions. The Sellers will assist and cooperate with Apollo in all commercially reasonable respects in the preparation of the Closing Statement and the calculation of the Closing Regulatory Capital and the Closing Net Working Capital, including by providing Apollo with reasonable access to any relevant personnel, books and records related to the Business or the Subject Companies that are in its possession.

(b)          Disputes; Finalization of Closing Statement.

(i)          The Sellers and their accountants will be provided with reasonable access to the work papers of Apollo and its accountants and to the books and records of the Subject Companies, in connection with their review of the Closing Statement and the calculations of the Closing Regulatory Capital and Closing Net Working Capital (subject to the Sellers and their accountants signing customary agreements relating to access to such working papers in form and substance reasonably acceptable to Apollo’s accountants).

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(ii)         The Sellers may dispute any amounts on the Closing Statement by notifying Apollo in writing, not later than the thirtieth (30^th) day (the “Dispute Deadline”) following its receipt of the Closing Statement from Apollo, of any such disputed amounts or calculations and setting forth, in reasonable detail, the basis for such dispute. In the event of such a dispute, the Sellers and Apollo will attempt to reconcile their differences and any resolution by them as to any disputed amounts or calculations shall be in writing and shall be final, binding and conclusive on the parties. If the Sellers and Apollo are unable to reach a resolution with such effect within thirty (30) days after the Dispute Deadline, any of the Sellers or Apollo may elect to submit the items remaining in dispute for resolution to the Accounting Firm, which will be instructed to determine and report to the Sellers and Apollo, within forty-five (45) days after such submission, upon such remaining disputed items or calculations, and such report shall be final, binding and conclusive on the Sellers and Apollo, absent manifest error. In resolving the disputed items, the Accounting Firm (A) will be bound by the provisions of this Section 1.6, (B) may not assign a value to any item greater than the greatest value claimed for such item or less than the smallest value for such item claimed by the Sellers, on the one hand, or Apollo, on the other hand, and (C) will limit its decision to such items as are in dispute and to only those adjustments as are necessary for the Closing Statement and the calculations of the Closing Regulatory Capital and Closing Net Working Capital to comply with the provisions of this Agreement. The Sellers and Apollo shall make reasonably available to the Accounting Firm all relevant books and records, any work papers (including those of the parties’ respective accountants, to the extent applicable) and supporting documentation relating to the Closing Statement, the calculation of the Closing Regulatory Capital and Closing Net Working Capital and any other items reasonably requested by the Accounting Firm. The fees and disbursements of the Accounting Firm will be borne by the Sellers, on the one hand, and Apollo, on the other hand, in inverse proportion to the amounts by which their respective calculations at issue prevail relative to the total amount of the disputed items, all as finally determined by the Accounting Firm.

(iii)        The Closing Statement and calculations of the Closing Regulatory Capital and Closing Net Working Capital shall be deemed final for the purposes of this Section 1.6 upon the earliest of (i) the failure of the Sellers to notify Apollo of a dispute by the Dispute Deadline, (ii) the resolution of all disputes, pursuant to this Section 1.6(b), by the Sellers and Apollo or (iii) the resolution of all disputes, pursuant to this Section 1.6(b), by the Accounting Firm.

(c)          True-Up Payments. Not later than the tenth (10^th) Business Day following the Closing Statement being deemed final pursuant to Section 1.6(b)(iii):

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(i)          If (x) the Closing Regulatory Capital is less than the Estimated Closing Regulatory Capital and/or (y) the Closing Net Working Capital is less than the Estimated Closing Net Working Capital, the Sellers shall pay to an account specified by Apollo an amount equal to the greater of the shortfall (if any) described in (x) or (y).

(ii)         If (x) the Closing Regulatory Capital exceeds the Estimated Closing Regulatory Capital and/or (y) the Closing Net Working Capital exceeds the Estimated Closing Net Working Capital, Apollo shall use reasonable best efforts to cause the Acquired Companies to distribute an amount sufficient to pay to an account specified by the Sellers an amount equal to the lesser of the excess (if any) described in (x) or (y), provided that with respect to any distribution made by RCS and/or SC Distributors, FINRA does not object or otherwise place any restriction or other burdensome condition on such distribution.

(d)          The provisions in this Section 1.6 relating to resolutions of disputes by the Accounting Firm are not intended to and shall not be interpreted to require that the parties refer to such a firm (i) any dispute arising out of a breach by any party of its obligations under this Agreement or (ii) any dispute the resolution of which requires the construction or interpretation of this Agreement (apart from the mathematical calculation of Closing Regulatory Capital and Closing Net Working Capital and the accounting treatment of current assets and current liabilities insofar as such treatment affects the Closing Statement).

(e)          Any amount paid in respect of any adjustments made pursuant to this Section 1.6 will be treated as an adjustment to the Purchase Price for tax reporting purposes.

Article II
Representations and Warranties pertaining to the BUSINESS

Except as set forth in the corresponding section of the Seller Disclosure Letter, the Sellers represent and warrant to Apollo as follows:

2.1          Organization, Power. Each of the Sellers and the Subject Companies is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and, where applicable, is duly qualified or licensed as a foreign limited liability company, corporation or other business entity to do business and is in good standing in each jurisdiction in which the nature of its business or the character or location of the properties, assets and rights owned, leased or operated by it makes such qualification or license necessary, and each of the Sellers and the Subject Companies has the requisite limited liability company, corporate or similar power and authority necessary to own all of its properties, assets and rights and to carry on its business as it is now being conducted, except where any failure to be so qualified, licensed or in good standing or to have such power or authority would not, individually or in the aggregate, be Material to a Reasonable Investor. The Sellers have previously provided or otherwise made available to Apollo true, complete and correct copies of the Organizational Documents of the Sellers and each Subject Company, as in effect as of the date hereof. None of the Sellers or the Subject Companies is in material violation of any provision of its Organizational Documents.

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2.2          Authority. Each of the Sellers has the requisite power and authority to execute and deliver this Agreement and all Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of the Sellers of this Agreement and the Ancillary Agreements to which it is a party, the performance of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all necessary limited liability, corporate or similar action of each of the Sellers and no other limited liability, corporate or similar action on the part of either Seller is necessary to authorize the execution and delivery by each of the Sellers of this Agreement and the Ancillary Agreements to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements entered into as of the date hereof have been, and at the Closing each of the other Ancillary Agreements to which a Seller is party will be, duly and validly executed and delivered by such Seller and, assuming the due authorization, execution and delivery by the other parties thereto, constitute legal and binding obligations of such Seller enforceable against such Seller in accordance with their terms, except as (a) the enforceability hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

2.3          Non-Contravention. The execution and delivery by each Seller of this Agreement and the Ancillary Agreements to which it is a party do not, and the consummation of the transactions contemplated hereby and thereby and the performance of its obligations hereunder and thereunder will not (with or without the giving of notice, the termination of any grace period or both): (a) violate, conflict with, or result in a breach or default under any provision of the Organizational Documents of any Seller or Subject Company or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 2.4(a) and all Third Party Consents referred to in Section 2.4(b) have been obtained or made, (i) violate any Applicable Law, (ii) violate, result in a violation or breach by any Seller or Subject Company of, or cause the termination, acceleration or cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, or conflict with or constitute a default (or give rise to a right of termination, acceleration, cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, any mortgage, indenture, lease, license, note, website terms of use, privacy policy or statement, contract or agreement (each, whether oral or written, a “Contract”) to which any Seller or Subject Company is a party or by which any Seller or Subject Company or any of their respective properties is bound, whether with the passage of time, giving of notice, or both, or (iii) result in the creation of any Lien on the Acquired Interests or any of the assets or properties of any Seller or Subject Company, except, in the cases of clauses (i), (ii) and (iii), for any such violation, breach, termination, acceleration, conflict, default or Lien as would not, individually or in the aggregate, be Material to a Reasonable Investor.

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2.4          Consents, etc.

(a)          Except for as described in Section 2.4(a) of the Seller Disclosure Letter, no consent, authorization, order or approval of, filing or registration with, or notice to, any Governmental Authority (collectively, “Governmental Approvals”) is required for the execution and delivery by either Seller of this Agreement or the Ancillary Agreements to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby, except in any such case for any such Governmental Approval which is required solely by reason of the specific regulatory status of Apollo or its Affiliates or the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          No consent, authorization, approval or waiver from any party (other than a Governmental Authority) to any Contract (collectively, “Third Party Consents”) is required for the execution and delivery by either Seller of this Agreement or the Ancillary Agreements to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby or thereby, except in any such case for any such Third Party Consent the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

2.5          Capitalization .

(a)          Acquired Companies. Except as set forth Section 2.5(a) of the Disclosure Letter, as of the date hereof, all of the issued and outstanding Equity Securities of each of the Acquired Companies, which consist solely of membership interests (w) owned beneficially and of record by RCS Holdings, free and clear of any Liens, (x) have been validly issued, (y) have not been issued in violation of any preemptive or similar rights and (z) have been issued in compliance with applicable securities laws or exemptions therefrom. Upon the Closing, RCS Holdings will transfer and deliver to Apollo good and valid title to the Acquired Interests, free and clear of any Lien (other than Liens arising as a result of this Agreement or under applicable securities laws), and Apollo will own the Acquired Interests, beneficially and of record, free and clear of any Lien (other than Liens arising as a result of this Agreement or under applicable securities laws) and will be duly admitted as the sole member of each Acquired Company. There are no outstanding securities convertible into or exchangeable or exercisable for any Equity Securities of any of the Acquired Companies, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any Equity Securities of any Acquired Company or any rights to receive payments based on the value of, or payments in respect of, any Equity Securities of any Acquired Company. There are no voting trusts, rights of first refusal, rights of first offer, limited liability company agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any Equity Securities of or any other interests in any of the Acquired Companies.

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(b)          Subsidiaries. Section 2.5(b) of the Seller Disclosure Letter lists, as of the date hereof, all of the Subsidiaries of any of the Acquired Companies, listing for each Subsidiary its name, its jurisdiction of organization, and the ownership of such Equity Securities, which consist solely of membership interests. All of the issued and outstanding Equity Securities of each such Subsidiary (w) are indirectly owned by RCS Holdings, free and clear of any Liens. Except as set forth in Section 2.5(b) of the Disclosure Letter, (x) have been validly issued and are fully paid and non-assessable, (y) have not been issued in violation of any preemptive or similar rights and (z) have been issued in compliance with applicable securities laws or exemptions therefrom. There are no outstanding securities convertible into or exchangeable or exercisable for any Equity Securities of any such Subsidiary, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any Equity Securities of any such Subsidiary, or any rights to receive payments based on the value of, or payments in respect of, any Equity Securities of any such Subsidiary. There are no voting trusts, rights of first refusal, rights of first offer, limited liability company agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any Equity Securities of any such Subsidiary, or any securities convertible into or exchangeable or exercisable for any Equity Securities of any such Subsidiary.

(c)          Section 2.5(c) of the Seller Disclosure Letter sets forth all Contracts under which Indebtedness has been incurred or guaranteed by any of the Subject Companies.

(d)          Except as set forth on Section 2.5(d) of the Seller Disclosure Letter, none of the Subject Companies owns, directly or indirectly, any equity interest in any Person other than another Subject Company, and none of the Subject Companies is a party to, member of or participant in any partnership, joint venture or similar business entity.

2.6          Financial Statements.

(a)          The Sellers have previously provided or otherwise made available to Apollo true, complete and correct copies of the Financial Statements described in clause (i) of the definition thereof. Each balance sheet included in the Financial Statements presents fairly in all material respects in accordance with GAAP the consolidated financial position of the applicable Subject Companies or the Business (as set forth therein) as of the date thereof, and the other financial statements included in the Financial Statements present fairly in accordance with GAAP in all material respects the consolidated results of the operations, cash flows and changes in members’ equity of the applicable Subject Companies or the Business (as set forth therein) for the periods set forth therein (subject, in the case of financial statements for interim periods, to normal year-end adjustments and the absence of footnote disclosure, which will not be material to the Business or the Subject Companies, in each case, taken as a whole). The Financial Statements have been prepared and presented in accordance with GAAP consistently applied during the periods involved (subject, in the case of financial statements for interim periods, to normal year-end adjustments and the absence of footnote disclosure, which will not be material to the Business or the Subject Companies, in each case, taken as a whole) and consistent with the Books and Records.

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(b)          RCAP maintains accounting records which fairly and accurately reflect, in all material respects, the transactions at the Subject Companies, and RCAP has devised and maintains accounting controls sufficient to provide reasonable assurances that (i) such transactions are executed in accordance with management’s general or specific authorization, (ii) such transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, (iii) access to their property and assets is permitted only in accordance with management’s general or specific authorizations and (iv) recorded accountability for items is compared with actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

2.7          Litigation.

(a)          Sections 2.7(a)(i) and 2.7(a)(ii), respectively of the Seller Disclosure Letter contain a true, complete and correct list, since January 1, 2014 through the date of this Agreement, of all pending and, to the Sellers’ Knowledge, threatened legal, administrative, arbitral or other proceeding (including disciplinary proceedings), action, cease and desist letter, offer to license in lieu of further action, demand, claim, suit or governmental or regulatory investigation or inquiry of any nature (collectively, “Proceedings”) (i) against or relating to any Subject Company or any of its properties, assets or businesses and (ii) against or relating to any of the Sellers, any of their Subsidiaries or any of their respective directors, officers or employees (other than as set forth in Section 2.7(a)(i) of the Seller Disclosure Letter) that could reasonably be related to the Business or any Subject Company or any of its properties, assets or businesses. As of the date hereof, there is no Proceeding pending or, to the Sellers’ Knowledge, threatened against or relating to the Sellers or any of their respective Subsidiaries (including any Subject Company) or any of their respective properties, assets or businesses (including the Business) that would, individually or in the aggregate, be Material to a Reasonable Investor.

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(b)          Section 2.7(b) of the Seller Disclosure Letter contains a true, complete and correct list of all material judgments, decrees, injunctions or orders of any Governmental Authority to which any Subject Company or any Seller or other Subsidiary thereof (to the extent relating to the Business) is or was subject or any of its properties is or was bound, in each case from January 1, 2014 through the date of this Agreement. As of the date hereof, there are no settlement agreements or similar written agreements with any Governmental Authority or outstanding judgments, decrees, injunctions or orders of any Governmental Authority to which any Seller or other Subsidiary thereof (to the extent affecting or relating to the Business) is subject or any of its properties is bound that would, individually or in the aggregate, that would, individually or in the aggregate, be Material to a Reasonable Investor. As of the date hereof, no Subject Company is, or has been, subject to any felony, misdemeanor, decree, order, proceeding or examination that would cause the Subject Company, or any issuer of which the Subject Company was a subsidiary at the time of such event, to be an ”ineligible issuer” as such term is defined in Rule 405 under the Securities Act of 1933, nor is there any Proceeding pending or, to the Knowledge of Seller, threatened by any Governmental Authority that would result in any Subject Company becoming an “ineligible issuer.”

2.8          Compliance with Laws; Permits and Licenses.

(a)          The operations of the Business and the Subject Companies are and since January 1, 2014 have been conducted in compliance in all material respects with all Applicable Laws. No Subject Company or any Seller or other Subsidiary thereof (to the extent affecting or relating to the Business) is in material default under any Applicable Law or, to the Knowledge of the Sellers, is under investigation by any Governmental Authority with respect to any material violation of any Applicable Law. Each Subject Company holds, and at all times as required by Applicable Law has held, all material permits, certificates, licenses, Governmental Approvals and other authorizations of any Governmental Authority (“Permits”) that are necessary for the operation of its business as presently conducted or the ownership, operation or use by such Subject Company of its properties, assets and rights, except where the failure to hold any such Permit would not, individually or in the aggregate, be Material to a Reasonable Investor. All Permits held by the Subject Companies are in full force and effect and are not subject to any suspension, cancellation or revocation or any Proceedings related thereto, and, to the Knowledge of the Sellers, no such suspension, cancellation, modification or revocation or Proceeding is threatened. Each of the Subject Companies is in compliance in all material respects with all the Permits held it. As of the date hereof, none of the Subject Companies or the Sellers or other Subsidiaries thereof has received any written notification from any Governmental Authority asserting that any Subject Company is not in compliance with any Applicable Law that such Governmental Authority enforces or that such Governmental Authority intends to revoke or suspend any Permit, except where such noncompliance, revocation or suspension would not, individually or in the aggregate, be Material to a Reasonable Investor.

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(b)          As of the date hereof, no Proceeding, examination, audit or review (other than routine examinations, audits and reviews in the ordinary course of business consistent with past practice) with respect to any Subject Company has been initiated or is ongoing, unresolved or, to the Knowledge of the Sellers, threatened by any applicable Governmental Authority. None of the Subject Companies or the Sellers or other Subsidiaries thereof has received since January 1, 2014 any written notice or communication of any unresolved violation or exception from any applicable Governmental Authority with respect to any report or statement by any applicable Governmental Authority relating to any examination that would, individually or in the aggregate, be Material to a Reasonable Investor. Except to the extent restricted from doing so by Applicable Law, the Sellers have previously provided or otherwise made available to Apollo true, complete and correct copies of all written correspondence relating to any investigation or examination provided to or by any Seller or Subject Company by the SEC or any other Governmental Authority since January 1, 2014.

(c)          No director or officer of any Subject Company or any Seller or other Subsidiary thereof, or to the Sellers’ Knowledge, no employee or agent of any Subject Company or any Seller or other Subsidiary thereof acting for or on behalf of any Subject Company has, directly or indirectly (i) used any funds for contributions, gifts, gratuities, entertainment or other expenses related to political activity, in each case in violation of Applicable Law, (ii) made any payment in violation of Applicable Law or offered, promised or authorized the payment of anything of value, regardless of form, whether in money, property or services, to or for the benefit of any U.S. or non-U.S. government official or employee, any official or employee of a public international organization, or any political party or candidate for political office in each case in violation of Applicable Law and for the purpose of influencing any act or decision of such individual or of any Governmental Authority or public international organization, or securing any improper advantage, in order to obtain or retain business or direct business to any Person in violation of Applicable Law, (iii) made any other payment, regardless of form, whether in money, property or services which constitutes criminal bribery under Applicable Law, or (iv) violated any applicable export control, money laundering or anti-terrorism law or regulation, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery law or regulation, of any applicable jurisdiction, or any Applicable Law of similar effect.

2.9          Absence of Certain Changes; No Undisclosed Liabilities.

(a)          Since December 31, 2014, through the date of this Agreement, except as otherwise contemplated by this Agreement, (i) there has been no change, event or development that, individually or in the aggregate, has had a Material Adverse Effect, and (ii) the Business and the Subject Companies have operated in the ordinary course of business consistent with past practice in all material respects.

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(b)          Except as contemplated by this Agreement, except as set forth in Section 2.9(b) of the Seller Disclosure Letter, and except for (i) liabilities disclosed, reserved for or otherwise reflected in the Financial Statements, (ii) liabilities that, individually and in the aggregate, would not be Material to a Reasonable Investor, (iii) liabilities incurred by the Subject Companies after December 31, 2014 in the ordinary course of business consistent with past practice, or (iv) liabilities under contracts, agreements or other understandings to which any Subject Company is a party or by which it is bound relating to the extent relating to performance after the date of this Agreement, the Subject Companies do not have any liabilities (accrued, absolute, contingent or otherwise) whether or not such liabilities would be required to be disclosed on a consolidated balance sheet in accordance with GAAP.

2.10        Personnel and Employee Benefits Matters.

(a)          Section 2.10 of the Seller Disclosure Letter lists each material Employee Benefit Plan (including a written description of any material oral Employee Benefit Plan) and specifically identifies Employee Benefit Plans that are Acquired Benefit Plans. With respect to each Acquired Benefit Plan, the Sellers have previously provided or made available to Apollo a true, complete and correct copy of: (i) such Acquired Benefit Plan, including the plan document and any amendments or other writings constituting a part thereof, and each trust agreement, insurance contract and other funding vehicle related thereto; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedules, if any; (iii) the current summary plan description and any material modifications thereto, if any (in each case, whether or not required to be furnished under ERISA); (iv) the most recent annual financial report, if any; (v) the most recent actuarial report, if any; (vi) the most recent determination letter from the IRS, if any and (vii) all material communications received from or sent to the IRS, the PBGC, the Department of Labor or any other Governmental Authority. Except as delivered to Apollo in the foregoing documents, neither the Sellers nor any of their Affiliates (including the Subject Companies) have made a commitment to adopt, amend or terminate any Acquired Benefit Plan.

(b)          No liability under Title IV or Sections 302, 303 or 304 of ERISA or Sections 412, 430 or 431 of the Code has been incurred by any Subject Company that has not been satisfied in full and no condition exists that could present a material risk to any Subject Company that would reasonably be expected to result in any such liability to any Subject Company. No Acquired Benefit Plan is subject to Title IV of ERISA and no Subject Company or any ERISA Affiliate thereof has, at any time during the last six (6) years, contributed to or been obligated to contribute to any plan that is (i) subject to Title IV or (ii) a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA. No nonexempt “prohibited transactions” as such term is set forth in Section 406 of ERISA or Section 4975 of the Code have occurred with respect to any Employee Benefit Plan and no Subject Company has any material Tax liability under Section 4975 of the Code. Except as would not, individually or in the aggregate, reasonably be expected to be Material to a Reasonable Investor, all contributions required to be made in respect of Employees to any Employee Benefit Plan by Applicable Law or by any Employee Benefit Plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Acquired Benefit Plan, in each case for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been adequately reflected on the Financial Statements in accordance with GAAP.

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(c)          Except as would not, individually or in the aggregate, reasonably be expected to be Material to a Reasonable Investor, (i) each Acquired Benefit Plan has been operated and administered in accordance with its terms and Applicable Law, including ERISA and the Code and (ii) each Acquired Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a determination letter from the Internal Revenue Service that it is so qualified and that any trust maintained thereunder is exempt from taxation under Section 501(a) of the Code, in each case which letter has not been revoked, and, to the Sellers’ Knowledge, there are no existing circumstances or events that have occurred which would reasonably be expected to adversely affect the qualified status of any such Acquired Benefit Plan or related trust.

(d)          No Employee Benefit Plan provides, and neither Seller nor any Subject Company has committed to provide, benefits, including death or medical benefits (whether or not insured), with respect to current or former Employees after retirement or other termination of service (other than coverage mandated by Section 4980B of the Code or Section 601 et seq. of ERISA or similar Applicable Law).

(e)          There are no pending or, to the Sellers’ Knowledge, threatened or anticipated claims by or on behalf of any Acquired Benefit Plan, by any Employee or beneficiary under any such Acquired Benefit Plan or otherwise involving any Acquired Benefit Plan (other than routine claims for benefits) that, individually or in the aggregate, have resulted in, or would reasonably be expected to result in, material liability for the Subject Companies, taken as a whole, and, to the Sellers’ Knowledge, no set of circumstances exists which would reasonably be expected to give rise to such a claim.

(f)           Except as would not, individually or in the aggregate, reasonably be Material to a Reasonable Investor, (i) each of the Subject Companies is in compliance with all Applicable Laws respecting labor, employment, worker classification, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety and health requirements, wages and hours, withholding of taxes, employment discrimination, disability rights or benefits, equal opportunity, labor relations, employee leave issues and unemployment insurance and related matters, (ii) no claim with respect to payment of wages, salary, compensation or benefits pay is pending or, to Knowledge of the Sellers, threatened, by or before any Governmental Authority with respect to any current or former Employees, officers, directors, managers or consultants of any Subject Company or the Business, (iii) the Sellers and the Subject Companies have paid all Employees and all of current and former directors, officers and consultants of the Subject Companies or the Business or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such Persons, and (iv) each individual who renders, or since January 1, 2014 has rendered, services to any Subject Company or the Business who is classified by the Sellers or any of their Affiliates (including any of the Subject Companies) as having the status of an independent contractor or other non-employee status or the status of an exempt employee or nonexempt employee for any purpose, including for purposes of participation in any Employee Benefit Plan, is properly so characterized under all Applicable Laws.

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(g)          Except as set forth on Section 2.10(g) of the Seller Disclosure Letter, the execution, delivery and performance of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated by this Agreement shall not (alone or in combination with any other event), (i) entitle any current or former Employee director, officer or consultant of any Subject Company or the Business to severance pay or any other payment, (ii) result in any payment becoming due, accelerate the time of payment or vesting of benefits, or increase the amount of compensation due to any such employee, director, officer or consultant, (iii) result in any forgiveness of indebtedness, trigger any funding or payment obligation under any Acquired Benefit Plan or impose any restrictions or limitations on the ability any Subject Company’s rights to administer, amend or terminate any Acquired Benefit Plan or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation section 1.280G-1) that would reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in section 280G(b)(1) of the Code). No person is entitled to receive any additional payment (including any tax gross-up or other payment) as a result of the imposition of the excise Taxes required (alone or in combination with any other event) by section 4999 of the Code or any Taxes required by section 409A of the Code as a result of the execution, delivery and performance of this Agreement and the consummation of any of the transactions contemplated by this Agreement.

2.11        Taxes.

(a)          All material U.S. income and other material Tax Returns required to be filed by, on behalf of or with respect to the Subject Companies have been duly and timely filed and all Tax Returns filed by, on behalf of, or with respect to the Subject Companies are true, complete and correct in all material respects. All material Taxes (whether or not reflected on such Tax Returns) required to be paid by or with respect to, or that could give rise to a Lien on the assets of, any of the Subject Companies have been duly and timely paid other than those Taxes not yet due. All Taxes required to be withheld by any of the Subject Companies have been duly and timely withheld, and such withheld Taxes have been either duly and timely paid to the proper Governmental Authority or properly set aside in accounts for such purpose. Except for Permitted Liens, there are no Liens for material Taxes on any of the assets of the Subject Companies.

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(b)          All accounting entries (including charges and accruals) for Taxes with respect to the Subject Companies reflected on the books of the Subject Companies (excluding any provision for deferred income taxes reflecting either differences between the treatment of items for accounting and income tax purposes or carryforwards) are adequate to cover any material Tax liabilities accruing through the end of the last period for which the Subject Companies ordinarily record items on their respective books.

(c)          No written agreement or other document waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any Taxes with respect to any of the Subject Companies, and no written power of attorney with respect to any such Taxes has been filed or entered into with any Governmental Authority. No Taxes with respect to any of the Subject Companies are currently under audit, examination or investigation by any Governmental Authority or the subject of any judicial or administrative proceeding. No Governmental Authority has asserted or threatened in writing to assert any deficiency, claim or issue with respect to Taxes or any adjustment to Taxes against any of the Subject Companies with respect to any taxable period for which the period of assessment or collection remains open. No jurisdiction (whether within or without the United States) in which any of the Subject Companies has not filed a particular type of Tax Return or paid a particular type of Tax has asserted in writing that any such Subject Company is required to file such Tax Return or pay such type of Tax in such jurisdiction.

(d)          None of the Subject Companies (i) has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or any similar provision of state, local or foreign law), in either case that would be binding upon any Subject Company after the Closing Date, (ii) is or has been a member of any affiliated, consolidated, combined or unitary group for purposes of filing Tax Returns or paying Taxes, except for groups whose only members are two or more Subject Companies or (iii) has any liability for the Taxes of any Person (other than another Subject Company) (whether under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law, as a transferee or successor, pursuant to any Tax sharing or indemnity agreement or other contractual agreements (other than any customary tax sharing or allocation provisions in commercial contracts not primarily related to Taxes and where the aggregate liability thereunder is not material) (“Tax Agreements”), or otherwise).

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(e)          None of the Subject Companies shall be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date, as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code (or any corresponding provision of state, local or foreign income Tax law), (ii) installment sale or open transaction disposition made on or prior to the Closing Date, (iii) prepaid amount received on or prior to the Closing Date, (iv) any election pursuant to Section 108(i) of the Code (or any similar provision of state, local or foreign law) made with respect to any Pre-Closing Tax Period or (v) any distribution made by any Subject Company prior to the Closing. None of the Subject Companies has participated in a reportable transaction within the meaning of Treasury Regulations Section 1.6011-4(b).

(f)           Section 2.11(f) of the Seller Disclosure Letter sets forth the classification of each Subject Company for U.S. federal income tax purposes. The Subject Companies have, since their formation, been classified as either a partnership or a “disregarded entity” for all applicable U.S. federal, state and local income Tax purposes and will be so classified for all periods through and including the Closing Date. No Subject Company has made an entity classification election under Treasury Regulation Section 301.7701-3 for U.S. federal income Tax purposes. Each Subject Company that reports its classification for U.S. federal income tax purposes as a partnership or disregarded entity is, and has been since its formation, properly so treated for tax purposes.

(g)          (i) None of the Subject Companies is or has been a controlled foreign corporation, as defined in Section 957 of the Code and (ii) no Subject Company holds an interest (directly or indirectly) in an entity that is or has been treated as a passive foreign investment company, as defined in Section 1297 of the Code.

(h)          Any incentive equity interests issued by any Subject Company that were intended to qualify as “profits interests” in a partnership for U.S. federal income tax purposes and any comparable provisions of state, local or non-U.S. tax law have been consistently treated as such by the issuers and holders thereof for all relevant taxable years and, to the Sellers’ Knowledge, there is no reason that any such interest does not so qualify.

(i)           None of the assets of any of the Subject Companies are “section 197(f)(9) intangibles” within the meaning of Treasury Regulations section 1.197-2(h)(l)(i).

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2.12        Properties and Assets.

(a)          Each Subject Company has a valid and enforceable leasehold interest in each of the leased premises in which it currently conducts its business, except as may be affected by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles. Section 2.12(a) of the Seller Disclosure Letter identifies, as of the date hereof, all of the leases for real property to which each Subject Company is a party (the “Leases”). Except as set forth in Section 2.12(a) of the Disclosure Letter, the Leases constitute all real property owned, leased, subleased, licensed or otherwise used in the operation of the Business. The Sellers have previously provided or otherwise made available to Apollo true, complete and correct copies of such Leases. As of the date hereof, except as would not reasonably be expected to have, individually or in the aggregate, be Material to a Reasonable Investor, there is no default by the lessee or, to the Sellers’ Knowledge, the lessor under any such lease and to the Sellers’ Knowledge the use and operation of the property subject to the Leases does not violate any Applicable Law. Except as may be affected by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles, (i) each Lease is the legal, valid and binding obligation of the Subject Company party thereto and, to the Knowledge of the Sellers, each other party to such Lease and (ii) each Lease is enforceable against such Subject Company and, to the Knowledge of the Sellers, each other party to such Lease. No Subject Company owns any real property.

(b)          Except as set forth in Section 2.12(a) of the Disclosure Letter, the Subject Companies own and have (and as of the Closing, shall own and have) good, valid and marketable title to or, in the case of leased property, good and valid leasehold interests in, or otherwise have (and as of the Closing, shall have) full or sufficient and legally enforceable rights to use, all of the properties, assets and rights (tangible or intangible, and real, personal or mixed) used or held for use in connection with, necessary for the conduct of, or otherwise material to the operations of, the Business as it is conducted as of the date hereof and as it will be conducted immediately prior to the Closing, in each case free and clear of any Lien other than Permitted Liens, except for any failure to have any such title, interest or right that would not, individually or in the aggregate, be Material to a Reasonable Investor. The Subject Companies have maintained in all material respects all tangible assets in good repair, working order and operating condition, subject only to ordinary wear and tear, except for any failure to be in good repair, working order or operating condition that would not, individually or in the aggregate, be Material to a Reasonable Investor.

2.13        Certain Labor Matters. No Subject Company is a party to, and none of the Employees are covered by, any collective bargaining agreement.

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2.14        Material Contracts; Luxor Consent.

(a)          Section 2.14(a) of the Seller Disclosure Letter lists each Material Contract in effect as of the date of this Agreement (other than the Material Contracts described in clause (xviii) of the definition thereof). The Sellers have previously provided or otherwise made available to Apollo a true, complete and correct copy of each such Material Contract (other than the Material Contracts described in clause (xviii) of the definition thereof). With respect to the Material Contracts described in clause (xviii) of the definition thereof, the Sellers have previously provided or otherwise made available to Apollo a representative sample of such Material Contracts, and no such Material Contract deviates in any material respect from the sample provided to Apollo. Each Material Contract is a legal, valid and binding obligation of the applicable Subject Company, and, to the Sellers’ Knowledge, each other party thereto, in each case in full force and effect and enforceable in accordance with its terms, except as may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles. No Subject Company or any Seller or Subsidiary thereof has received any written or, to the Sellers’ Knowledge, oral notice of cancellation or termination under any option or right reserved to the other party to any Material Contract or any written or, to the Sellers’ Knowledge, oral notice of default under such Material Contract. As of the date hereof, no condition exists or event has occurred which (whether with or without notice or lapse of time or both) would constitute a breach or default by any Seller or Subject Company or, to the Sellers’ Knowledge, any other party thereto under, or result in a right in termination of, any such Material Contract, except as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          The Sellers have previously provided or otherwise made available to Apollo a true, complete and correct copy of the Luxor Consent. To Seller’s Knowledge, the Luxor Consent is a legal, valid and binding obligation of Luxor, in full force and effect and enforceable in accordance with its terms.

2.15        Intellectual Property and IT Systems.

(a)          Section 2.15(a) of the Seller Disclosure Letter sets forth a true, complete and correct list of all Owned Intellectual Property that is issued, registered or subject to an application for issuance or registration. The Owned Intellectual Property set forth in Section 2.15(a) of the Seller Disclosure Letter is subsisting, and, to the Sellers’ Knowledge, is valid and enforceable. No Subject Company or any Seller or other Subsidiary thereof has conducted the Business in a manner that would reasonably be expected to result in (i) the cancellation or unenforceability of any issued, registered or applied for Owned Intellectual Property except as would not, individually or in the aggregate, reasonably be expected to be Material to a Reasonable Investor, or (ii) the unauthorized disclosure of any material confidential Intellectual Property used in the Business. After giving effect to the transactions contemplated by this Agreement, the Subject Companies shall (x) be the owners of all of the Owned Intellectual Property free and clear of any Liens other than Permitted Liens and (y) own, license or otherwise have the right to use all the Intellectual Property necessary and sufficient to conduct the Business as currently conducted.

(b)          Since January 1, 2014, (i) the conduct of the Business has not been and, as currently conducted, is not infringing, misappropriating, diluting or otherwise violating (“Infringing”) in any material respect the rights of any Person in respect of any Intellectual Property and (ii) to the Sellers’ Knowledge, none of the material Owned Intellectual Property has been or is being Infringed by any Person.

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(c)          All Persons (including current and former employees and independent contractors) who create or contribute to any material portion of, or otherwise would have rights in or to, Owned Intellectual Property have executed enforceable written agreements that validly and irrevocably assign to a Subject Company or a Seller or other Subsidiary thereof all of their rights in and to such Owned Intellectual Property, or, pursuant to Applicable Law, a Subject Company or a Seller or other Subsidiary owns all such Owned Intellectual Property.

(d)          Other than as set forth on Section 2.15(d) of the Seller Disclosure Letter, no Subject Company or any Seller or other Subsidiary thereof uses or has used any Software licensed, provided or distributed under any open source license, including any license meeting the Open Source Definition (as promulgated by the Open Source Initiative) or the Free Software Definition (as promulgated by the Free Software Foundation), or any Software that contains or is derived from any such Software, in any manner that would require any source code of Software owned by any of the Subject Companies to be disclosed, licensed pursuant to a license meeting the Open Source Definition or the Free Software Definition, publicly distributed, attributed to any person or dedicated to the public.

(e)          The IT Systems (i) are in reasonably good repair and operating condition, subject only to ordinary wear and tear, and are adequate and suitable (including with respect to working condition and capacity) for the purposes for which they are being used or held for use, and (ii) to the Sellers’ Knowledge, do not contain any Malware that would reasonably be expected to interfere with the ability of any of the Subject Companies to conduct the Business. The Sellers and their Subsidiaries (including the Subject Companies) (x) have implemented and maintain commercially reasonable security, business continuity, and backup and disaster recovery plans and procedures with respect to the IT Systems, (y) act in material compliance therewith, and (z) have taken commercially reasonable steps to test such plans and procedures on a periodic basis, and such plans and procedures have been proven effective upon such testing in all material respects. The Sellers and their Subsidiaries (including the Subject Companies) have implemented or are in the process of implementing in a timely manner all security patches or security upgrades that are generally available for the IT Systems that process data or non-public information that is sensitive in nature about their investors.

2.16        Data Protection and Privacy.

(a)          Since January 1, 2014, each Subject Company and each Seller and other Subsidiary thereof (to the extent affecting or relating to the Business) has been and is in compliance in all material respects with any and all Applicable Laws, contractual requirements, terms of use and privacy policies pertaining to data protection or information privacy, security, collection, use, disclosure, disposal, maintenance and transmission.

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(b)          Each Seller and other Subsidiary thereof (to the extent affecting or relating to the Business) uses commercially reasonable industry standards to protect the secrecy of data and non-public information that it (or any third Person on behalf of it) collects, stores, uses, maintains or transmits and to prevent unauthorized access to, and use or disclosure of, such data or non-public information by any other Person. Since January 1, 2014, no Subject Company or Seller or other Subsidiary thereof or, to the Sellers’ Knowledge, any third Person working on behalf of any of them, has had an incident of unauthorized (i) access, (ii) disclosure, (iii) use, (iv) destruction or (v) loss of any data or non-public information that any of the Subject Companies (or a third Person on behalf of any of them) collects, stores, uses, maintains or transmits.

2.17        Books and Records. The Books and Records have been maintained in all material respects in accordance with all Applicable Laws.

2.18        Broker-Dealer Matters.

(a)          Registration. Section 2.18(a) of the Seller Disclosure Letter lists each Subject Company that is registered as a broker-dealer with the SEC (collectively, the “Broker-Dealer Subsidiaries”). Each Broker-Dealer Subsidiary is, and at all times since January 1, 2014 has been, duly registered under Section 15 of the Exchange Act with the SEC. Each Broker-Dealer Subsidiary is, and at all times since January 1, 2014 has been, (i) in compliance with Applicable Laws governing its activities as a broker-dealer and (ii) current in all filings required by the SEC or any other Governmental Authority to which it is subject, except, in each case, as would not have, individually or in the aggregate be Material to a Reasonable Investor. Except as set forth in Section 2.18(a) of the Seller Disclosure Letter, since January 1, 2014, none of the Broker-Dealer Subsidiaries has received written notice of any material violation of any Applicable Laws governing its activities. The Broker-Dealer Subsidiaries are, and at all times since January 1, 2014 have been, (x) members in good standing of the Financial Industry Regulatory Authority (“FINRA”) and any other Self-Regulatory Organizations in which their membership is required in order to conduct their business as conducted and (y) in compliance with all applicable rules and regulations of FINRA and any such other Self-Regulatory Organizations, except as would not have, individually or in the aggregate, be Material to a Reasonable Investor. As of the date hereof, no Subject Company other than the Broker-Dealer Subsidiaries is registered or required to be registered as a broker or dealer with the SEC or any other Governmental Authority.

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(b)          Disqualification. None of the Broker-Dealer Subsidiaries nor, to the Sellers’ Knowledge, any “associated person” (within the meaning of the Exchange Act) thereof, is ineligible pursuant to Section 15(b) of the Exchange Act to act as a broker or dealer or as an associated person of a registered broker-dealer as a result of a “statutory disqualification,” as such term is defined in Section 3(a)(39) the Exchange Act. As of the date of this Agreement, there are no Proceedings pending or, to the Sellers’ Knowledge, threatened that would reasonably be expected to result in a Broker-Dealer Subsidiary having its authorization to conduct business as a broker-dealer denied, suspended, revoked or restricted. Except as set forth in Section 2.18(b) of the Seller Disclosure Letter, as of the date of this Agreement, there are no Proceedings pending or, to the Sellers’ Knowledge, threatened that would reasonably be expected to result in any director, officer or employee of a Broker-Dealer Subsidiary having his or her registration or license to conduct investment-related activities denied, suspended, revoked or restricted. Since January 1, 2014, each of the directors, officers, employees, contractors and agents employed, supervised or controlled by any Broker-Dealer Subsidiary who is required to be licensed or registered as a principal, registered representative, salesperson, investment advisory representative or insurance agent with any Governmental Authority in connection with his or her activities for or with a Subject Company has been duly licensed or registered, except as would not have, individually or in the aggregate, be Material to a Reasonable Investor.

(c)          Form BD. The Sellers have previously provided or otherwise made available to Apollo true, complete and correct copies of each of the Broker-Dealer Subsidiary’s Form BD as most recently filed with the SEC and all state registration forms, each as amended to date. The information contained in each such form was accurate and complete at the time of filing and the Broker-Dealer Subsidiary has made all amendments to such form as it is required to make under any Applicable Law, except as would not have, individually or in the aggregate, be Material to a Reasonable Investor. No Broker-Dealer Subsidiary’s Form BD contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  

(d)          Minimum Net Capital. Each of the Broker-Dealer Subsidiaries maintains its minimum net capital in compliance with the Applicable Laws of the SEC and any other applicable Governmental Authority and in an amount sufficient to ensure that it has not been required to file notice under Rule 17a-11 under the Exchange Act.

(e)          Compliance Policies. The Broker-Dealer Subsidiaries have, and at all times since January 1, 2014 have had, in place, to the extent required by Applicable Law, processes to establish, maintain, review, test and modify written compliance and supervisory policies and procedures reasonably designed to achieve compliance with all Applicable Laws, including the rules and regulations of the SEC and FINRA and other Governmental Authority.

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2.19        Compliance Matters.

(a)          Registration.

(i)           No Subject Company other than ANST is registered or required to be registered as a transfer agent under the Exchange Act. ANST (i) is, and at all times required by Applicable Law since January 1, 2014 has been, registered as a transfer agent pursuant to Section 17A(c) of the Exchange Act and (ii) is registered and licensed as a transfer agent under any other Applicable Laws or is exempt therefrom, except, as would not, individually or in the aggregate, be Material to a Reasonable Investor. ANST is in compliance in all respects with the applicable provisions of the Exchange Act except as would not have, individually or in the aggregate, be Material to a Reasonable Investor.

(ii)         As of the date hereof, no Subject Company or, in connection with their service to the Subject Company, any of their respective directors, officers or employees, is (i) required to be registered, licensed or qualified as a bank, investment adviser, trust company, commodity pool operator, commodity trading advisor, approved swap firm, commodity broker-dealer, futures commission merchant, introducing broker, municipal advisor, municipal securities dealer, insurance company or insurance broker or agent, or sales person with the SEC, CFTC, National Futures Association (“NFA”), FINRA or any other applicable Governmental Authority, or (ii) subject to any liability or disability by reason of any failure to be so registered, licensed or qualified, except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect. No Subject Company has received notice of any pending judicial, arbitral or administrative action, suit, proceeding or investigation concerning any failure to obtain any bank, investment adviser, trust company, commodity pool operator, commodity trading advisor, approved swap firm, commodity broker-dealer, futures commission merchant, introducing broker, municipal advisor, municipal securities dealer, insurance company or insurance broker or agent, or sales person registration, license or qualification, except for as would not have, individually or in the aggregate, be Material to a Reasonable Investor. No Subject Company acts as a solicitor for a registered investment adviser in an arrangement that is subject to Rule 206(4)-3 under the Advisers Act.

(b)          Filings.

(i)          Except as would not have, individually or in the aggregate, be Material to a Reasonable Investor, each Subject Company has filed all regulatory reports and schedules, applications for registration, financial statements and regulatory notices (“Governmental Reports”), together with any amendments, since January 1, 2014 that were required to be filed with any Governmental Authority, including with respect to ANST, each Form TA-1 that was required to be filed in compliance with Applicable Law.

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(ii)         Each Subject Company has timely paid in full all fees and assessments due and payable in connection with the filing of all Government Reports, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. The information contained in all Government Reports was accurate and complete at the time they were filed except as would not, individually or in the aggregate, be Material to a Reasonable Investor, and did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(c)          Disqualification.

(i)          There is no proceeding pending or, to the Knowledge of the Sellers, threatened against ANST or an associated person of ANST that would reasonably be expected to result in ANST being ineligible pursuant to Section 17A of the Exchange Act to act as a transfer agent.

(ii)         No Subject Company nor any “affiliated person” (as defined in the Investment Company Act) of any of Subject Company is ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve as an investment adviser, depositor or principal underwriter to a registered investment company nor is there any Proceeding pending or, to the Knowledge of the Sellers, threatened by any Governmental Authority that would result in the ineligibility of any Subject Company or any such “affiliated person” to serve as an investment adviser, depositor or principal underwriter to a registered investment company pursuant to Section 9(a) or 9(b) of the Investment Company Act.

(iii)        No Subject Company nor, to the Knowledge of the Sellers, after reasonable inquiry, any director, executive officer or any other officer of a Subject Company is ineligible pursuant to Rule 506(d) of Regulation D under the Securities Act to serve as an investment manager, solicitor, promoter or in any other capacity (including beneficially owning 20% of the voting securities of an issuer relying on Rule 506 of Regulation D under the Securities Act) with respect to an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act, nor is there any Proceeding pending or, to the Knowledge of the Sellers, threatened by any Governmental Authority that would result in the ineligibility of any Subject Company or any director, executive officer or any other officer of a Subject Company to serve as an investment manager, solicitor, promoter or in any other capacity with respect an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act.

(iv)        No Subject Company is an “affiliate” of any “banking entity” (as such terms are defined in the Volcker Rule).

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(d)          No Action Letters and Exemptive Orders. Section 2.19(d) of the Seller Disclosure Letter identifies each no-action letter and exemptive order issued by the SEC to any Subject Company that remains applicable to its business as conducted on the date of this Agreement. The Sellers have previously provided or otherwise made available to Apollo a true, complete and correct copy of each such no-action letter and exemptive order. Since January 1, 2014, the Subject Companies, as applicable, have complied with all terms and conditions of such no-action letters and exemptive orders necessary to rely on the relief granted thereby.

2.20        Insurance. Each Seller and its Subsidiaries (including the Subject Companies), as the case may be, has complied in all material respects with the terms and provisions of insurance policies in force on the date hereof covering or relating to the business of, or properties, assets or rights of, any of the Subject Companies that are maintained by (i) any Subject Company or (ii) any of the Sellers or their Subsidiaries (other than the Subject Companies), including such worker’s compensation, comprehensive property and casualty, liability, errors and omissions, directors’ and officers’, fidelity and other insurance required to be maintained under all Applicable Laws, and such insurance policies are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis). As of the date hereof, there is no material claim by any Seller or any Subsidiary thereof (including any Subject Company) pending under any such policy as to which coverage has been denied or disputed by the underwriters of such policy or in respect of which such underwriters have reserved their rights. Since January 1, 2014, each Seller and its Subsidiaries (including the Subject Companies) has properly reported all material claims, acts, omissions, events, circumstances, occurrences and losses relating to the Business, or to the properties, rights or assets of any of the Subject Companies, to the extent required under each such policy, except as would not reasonably be expected to have, individually or in the aggregate, be Material to a Reasonable Investor.

2.21        Affiliate Arrangements. Except as set forth on Section 2.21 of the Seller Disclosure Letter, there are no Contracts between any Subject Company, on the one hand, and RCAP, RCAP Holdings or any of their respective Affiliates (other than the Subject Companies), directors, officers, employees or equity holders, on the other hand (any such Contract, an “Affiliate Agreement”). None of RCAP, RCAP Holdings or any of their respective Affiliates (other than the Subject Companies), directors, officers, employees or equity holders owns any material asset or right, real or personal, tangible or intangible, used in the Business by any Subject Company.

2.22        Compliance with Environmental Law. The Subject Companies have complied in the past three years and are in compliance with all applicable Environmental Laws pertaining to any of the properties, assets or rights of the Subject Companies and the use and ownership thereof and the operation of the Business, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. No violation by any Subject Company or Seller or other Subsidiary thereof (to the extent affecting or relating to the Business) is being or has been alleged in writing or, to the Knowledge of the Sellers, orally of any applicable Environmental Law relating to the Business or the operation thereof, or any of the properties, assets or rights of any of the Subject Companies or the use or ownership thereof. There are no Proceedings pending or, to the Knowledge of the Sellers, threatened against any Subject Company or Seller or other Subsidiary thereof (to the extent affecting or relating to the Business)under any Environmental Law.

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2.23        Brokers. No broker, investment banker, financial advisor or other Person, other than Centerview Partners LLC, the fees and expenses of which shall be paid by RCAP, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from any Subject Company in connection with the transactions contemplated by this Agreement.

Article III
Representations and Warranties of Apollo

Apollo represents and warrants to the Sellers as follows:

3.1          Organization. Apollo is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and, where applicable, is duly qualified or licensed as a foreign limited liability company to do business and is in good standing in each jurisdiction in which the nature of its business or the character or location of the properties, assets and rights owned, leased or operated by it makes such qualification or license necessary, and Apollo has the requisite limited liability company power and authority necessary to own all of its properties, assets and rights and to carry on its business as it is now being conducted, except where any failure to be so qualified, licensed or in good standing or to have such power or authority would not, individually or in the aggregate, be materially adverse to Apollo and its Subsidiaries, in each case, taken as a whole, or prohibit or materially impair the ability of Apollo to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

3.2          Authority. Apollo has the requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Apollo of this Agreement and the Ancillary Agreements to which it is a party, the performance of its obligations hereunder and thereunder and the consummation by Apollo of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or other organizational action, and no other corporate or other organizational action on the part of Apollo is necessary to authorize the execution and delivery by Apollo of this Agreement and the Ancillary Agreements to which it is a party, the performance of its obligations hereunder and thereunder and the consummation by Apollo of the transactions contemplated hereby and thereby. This Agreement has been, and at the Closing each of the Ancillary Agreements to which it is party shall be, duly and validly executed and delivered by Apollo and, assuming the due authorization, execution and delivery by the other parties thereto, constitute a legal and binding obligation of Apollo, enforceable against Apollo in accordance with their terms, except as (a) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

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3.3          Non-Contravention. The execution and delivery by Apollo of this Agreement and the Ancillary Agreements to which it is a party do not, and the consummation by Apollo of the transactions contemplated hereby and thereby and the performance by Apollo of its obligations hereunder and thereunder shall not (with or without the giving of notice, the termination of any grace period or both): (a)  violate, conflict with, or result in a breach or default under any provision of its Organizational Documents or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 3.4(a) and all Third Party Consents referred to in Section 3.4(b) have been obtained or made, (i) violate any Applicable Law or (ii) violate, result in a violation or breach by Apollo of, or the termination or the acceleration of, or conflict with or constitute a default under, any Contract to which Apollo is a party or by which any of its property is bound, except, in the case of clauses (i) and (ii), for any such violation, breach, termination, acceleration, conflict or default as would not, individually or in the aggregate, be materially adverse to Apollo and its Subsidiaries, in each case, taken as a whole, or prohibit or materially impair the ability of Apollo to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

3.4          Consents, etc.

(a)          Except as set forth in the Apollo Disclosure Letter, no Governmental Approval is required for the execution and delivery of this Agreement by Apollo, the performance of its obligations hereunder and its consummation of the transactions contemplated hereby, except in any such case for (x) any such Governmental Approval which is required solely by reason of the specific regulatory status of RCAP or its Affiliates and (y) any such Governmental Approval the failure of which to be obtained or made would not reasonably be expected to prohibit or materially impair the ability of Apollo to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

(b)          No Third Party Consent is required for the execution and delivery by Apollo of this Agreement and the Ancillary Agreements to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby or thereby, except in any such case for any such Third Party Consent the failure of which to be obtained or made would not, individually or in the aggregate, be materially adverse to Apollo, taken as a whole, or prohibit or impair the ability of Apollo to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder and thereunder on a timely basis.

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3.5          Available Funds. Apollo has available all funds necessary to satisfy all of its obligations hereunder and in connection with the transactions contemplated hereby, and its ability to consummate such transactions is not dependent or conditional upon the receipt of financing (whether debt or equity) from any third Person.

3.6          Investment Intent. Apollo is acquiring the Acquired Interests for its own account, for investment purposes only and not with a view to, or for resale in connection with, the distribution thereof. Apollo understands that the Acquired Interests may not be sold, transferred or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act.

3.7          Brokers. No broker, investment banker, financial advisor or other Person, other than Lazard Ltd, the fees and expenses of which shall be paid by Apollo, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from Apollo in connection with the transactions contemplated by this Agreement.

3.8          ARC Transaction Matters.

(a)          Neither Apollo nor any of its Affiliates is part of a group with ARC or any of its Affiliates within the meaning of Section 13(d)(3) of the Exchange Act with respect to ownership or voting securities of RCAP or has any agreements with ARC or any of its Affiliates, other than agreements relating to the ARC Transaction Agreement.

(b)          A true, correct and complete copy of the ARC Transaction Agreement has been provided to the Sellers.

(c)          Apollo has not taken any action, and to Apollo’s Knowledge, as of the date hereof, there has been no change, event or circumstance that would reasonably be expected to result in a failure of any condition to the closing under the ARC Transaction Agreement.

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Article IV
Covenants

4.1          Conduct of Business. During the period from the date hereof and continuing through the Closing, except to the extent required by Applicable Law, with Apollo’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed) or as expressly required by this Agreement, the Sellers shall, and shall cause their Subsidiaries (including the Subject Companies) to, use commercially reasonable best efforts to (i) operate the Business in the ordinary course of business consistent with past practice; (ii) keep available the present services of the Business’ employees and other independent contractors; (iii) preserve intact the Business and the Subject Companies’ rights, franchises, goodwill and relations with customers and others with whom the Subject Companies conduct business; and (iv) maintain regulatory net capital at a level that is in compliance with Applicable Laws. Without limiting the generality of the foregoing, except to the extent required by Applicable Law, with Apollo’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), as expressly required by this Agreement, or as set forth on Section 4.1 of the Seller Disclosure Letter, the Sellers shall not, and shall cause their Subsidiaries (including the Subject Companies) not to, to the extent affecting the Business, any Subject Company or the transactions contemplated hereby (including the likelihood and timing of the satisfaction of the conditions to the Closing):

(a)          amend the Organizational Documents of any Subject Company;

(b)          issue or agree to issue, sell, pledge, transfer, dispose of or encumber any Equity Securities of any Subject Company, or reclassify, combine, split, subdivide, redeem, purchase or otherwise acquire any Equity Securities of any Subject Company;

(c)          declare, set aside or pay any dividends on, or make any other distributions of stock or property (but not cash) in respect of, any Equity Securities of any Subject Company;

(d)          except as expressly contemplated by this Agreement, modify or amend or enter into any Affiliate Agreement, or waive, release or assign any rights or claims thereunder;

(e)          make any material change in any financial accounting methods, principles or practices used by any Subject Company in the preparation of financial statements except as required by GAAP or Applicable Law;

(f)           enter into, renew, amend, assign, terminate or cancel any Material Contract of the type set forth in the definition of Material Contract, except in the ordinary course of business consistent with past practice (provided that, without limiting the foregoing, the entering into or renewal of any Material Contract described in clauses (ii), (iii), (iv), (vi), (vii), (viii), (ix), or (xvii) of the definition of Material Contract shall in no event be deemed to be in the ordinary course consistent with past practice);

(g)          other than in the ordinary course of business consistent with past practice, (i) sell, assign, transfer, license, lease, offer to sell, abandon or otherwise dispose of any of its properties, assets or rights, or (ii) grant or suffer to exist any Lien (other than Permitted Liens) on any of the properties, assets or rights of the Subject Companies or otherwise used in the Business, in each case of clauses (i) and (ii) above, with respect to properties, assets or rights that are material to the Subject Companies or the Business, in each case, taken as a whole;

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(h)          cancel any debts owed to any Subject Company in amounts in excess of $50,000 individually or $250,000 in the aggregate;

(i)           make or commit to make any capital expenditures in excess of $20,000 individually or $200,000 in the aggregate for all Subject Companies;

(j)           except as required by any Employee Benefit Plan in effect on the date hereof or Applicable Law, (i) increase the compensation or benefits payable or to become payable to any Employees or directors or other independent contractors of the Subject Companies or the Business, other than to increase salary and wages for Employees with annual total compensation opportunities no greater than $150,000 by not more than 7.5% on an individual employee basis in the ordinary course of business consistent with past practice, (ii) grant any current or former Employee, director or other independent contractor of the Subject Companies or the Business any increase in severance or termination pay or benefits, (iii) other than new hires of six external wholesalers who are compensated on terms consistent with the Subject Companies’ historic precedent, enter into any employment, consulting, severance or termination agreement with any officer, director, Employee or other independent contractor, other than offer letters with newly hired employees that are entered into in the ordinary course of business consistent with past practice, that provide for annual total compensation opportunities that are no greater than $150,000, are terminable by a Subject Company at will at any time for severance pay and benefits not greater than $150,000 and that otherwise contain terms substantially comparable to the Subject Company’s standard offer letter, (iv) pay any bonus or other incentive compensation (including any retention, change-in-control or transaction-related bonus) other than the payment of any bonus or other incentive compensation earned or granted prior to the date hereof, in accordance with the terms of such compensation as in effect on the date hereof (including the satisfaction of any applicable performance or vesting criteria and timing of payment contemplated under such terms), (v) establish, adopt, enter or terminate any collective bargaining agreement, Acquired Benefit Plan or, if it would have the effect of increasing any liabilities, costs or expenses of the Subject Companies, any Employee Benefit Plan, (vi) accelerate or enhance any rights or benefits or fund benefits under any Acquired Benefit Plan, or (vii) terminate the employment of more than six external wholesalers or any Employee or other independent contractor (other than for cause or misconduct, without violating any other clause of this Section 4.1(j)) who has annual total compensation (base salary and incentive) opportunities of $150,000 or more;

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(k)          incur or assume any Indebtedness or otherwise take any action with respect to Indebtedness that would result in the acceleration of any material amounts payable by any Subject Company;

(l)           merge or consolidate with, or acquire all or a material portion of the assets or Equity Securities of, any other Person, or acquire, including by way of merger, consolidation or purchase of any Equity Securities or assets, any business of any Person or other business organization or division thereof;

(m)         settle any Proceeding involving any liability for money damages or in a manner involving non-monetary relief that results in any material restrictions upon the conduct of the Business or any of the Subject Companies (or, after the Closing, on Apollo or any of its Affiliates);

(n)          make any loan or advance to any of its Affiliates, officers, directors, employees, consultants, agents or other representatives of any Subject Company or any Seller or other Subsidiary thereof;

(o)          acquire any real property or enter into any lease of real property (other any renewal of existing leases in the ordinary course of business consistent with past practice);

(p)          make or change any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, amend any material Tax Returns or file any claims for material Tax refunds, enter into any material closing agreement, settle any material Tax claim, audit or assessment or surrender any right to claim a material Tax refund, offset or other reduction in Tax liability;

(q)          (i) except pursuant to existing agreements or in accordance with past practice, make any payment to, or on behalf of, any Seller or any Affiliate of any Seller (other than any Subject Company); (ii) incur any liability to, or on behalf of, any Seller or any Affiliate of any Seller (other than any Subject Company), including in the case of clauses (i) and (ii), with respect to (x) any fees, costs or expenses in connection with the sale of the Subject Companies, the preparation and negotiation of this Agreement and the performance and consummation of transactions contemplated by this Agreement or the other Ancillary Agreements, including the fees and disbursements of counsel, financial advisors, actuaries and accountants and authorities made in connection with the transactions contemplated by this Agreement or (y) any filing fees payable in connection with filings with Governmental Authorities made in connection with the transactions contemplated by this Agreement;

(r)           waive any payments or other amounts owed to any of the Subject Companies by any Seller or any Affiliate thereof (other than a Subject Company);

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(s)          enter into any new line of business than the Business currently conducted by such Subject Company; and

(t)          authorize, resolve, commit or agree, whether in writing or otherwise, to take any action prohibited by subsections (a) through (s) above.

4.2          Access; Confidentiality; Planning Committee.

(a)          The Sellers shall provide Apollo and its employees, accountants, counsel and other authorized representatives, during the period from the date hereof until the Closing, with reasonable access to the premises, employees, books and records and properties of each Subject Company and of the Sellers and their other Subsidiaries (to the extent relating to the Business), upon reasonable advance notice during normal business hours, provided that such access does not interfere with the normal operations of the Subject Companies or the Sellers and their other Subsidiaries. The Sellers shall, and shall cause each Subject Company to, furnish Apollo with such financial, operational and regulatory and compliance data, reports and other information relating to the Business or the Subject Companies and their respective properties, assets, rights, liabilities and obligations, in each case as Apollo may from time to time reasonably request. Notwithstanding the obligations contained in this Section 4.2(a), the Sellers and the Subject Companies shall not be required to provide access to or to disclose information where such access or disclosure would result in the loss of any attorney-client privilege or contravene any Applicable Law; provided that the Sellers shall use reasonable best efforts to permit disclosure of such information in a manner that does not result in any of the foregoing consequences.

(b)          Any information obtained by Apollo or its representatives pursuant to Section 4.2(a) shall be subject to the terms of the Confidentiality Agreement, and such information shall be held by Apollo and its representatives in accordance with the terms of the Confidentiality Agreement.

(c)          From and after the date of this Agreement, the Sellers shall, and shall cause their Subsidiaries (including, until the Closing, the Subject Companies) to, hold in strict confidence and not use except as expressly agreed in writing by Apollo any non-public, confidential or otherwise proprietary information or Intellectual Property (including any client and customer lists) of any Subject Company (except, prior to the Closing, in the conduct of the business of such Subject Company consistent with past practice). Without limiting the foregoing, the Sellers shall not, and shall not permit StratCap or its Subsidiaries to, use or have access to any non-public, confidential or otherwise proprietary information or Intellectual Property of RCS or ANST (including any client and customer lists prior to the Closing). The Sellers shall use commercially reasonable efforts to prevent the unauthorized use, dissemination or disclosure of any information or Intellectual Property described in this Section 4.2(c).

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(d)          Promptly following the date of this Agreement, the Sellers and Apollo shall form a joint planning committee, consisting of representatives of RCS and Apollo, that shall meet regularly to coordinate and cooperate with respect to the design and launch of credit, alternative investment, insurance-related or other institutional products sponsored by Apollo or its Affiliates with the goal of distributing such products through RCS.

4.3          Reasonable Best Efforts; Regulatory Approvals.

(a)          Each of Apollo and the Sellers shall use its reasonable best efforts to, as promptly as possible, take or cause to be taken all action and do or cause to be done all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including the satisfaction on a timely basis of the conditions to the Closing within their respective control. Each of Apollo and the Sellers shall use its reasonable best efforts to, as promptly as practicable and in no event later than ten (10) Business Days after the date hereof, file all documents and information required in connection with obtaining FINRA Approval (the “FINRA Notice”).

(b)          Without limiting the generality of Section 4.3(a) hereof, each of Apollo and the Sellers shall (i) as soon as practicable after the date hereof, (A) file (on a confidential basis if reasonably requested by a party and permitted under Applicable Law) such applications, notices, registrations and requests as may be required or advisable to be filed by it with any Governmental Authority as set forth in Section 4.3 of the Seller Disclosure Letter in order to consummate the transactions contemplated hereby, (B) use its reasonable best efforts to obtain all consents, authorizations, orders and approvals of all such Governmental Authorities referred to in the preceding clause (A) and (C) use its reasonable best efforts to satisfy all conditions, undertakings and requirements as may be necessary or appropriate to obtain all such consents, authorizations, orders and approvals or as may be set forth therein, (ii) subject to Applicable Law restricting the exchange of such information, furnish the other parties hereto with copies of all documents and correspondence (x) prepared by or on behalf of such party for submission to any Governmental Authority and (y) received by or on behalf of such party from any Governmental Authority, in each case, in connection with the transactions contemplated hereby and (iii) subject to Applicable Law, use its reasonable best efforts to consult with and keep the other parties hereto informed as to the status of such matters. Subject to Applicable Law, to the extent that any application, notice, registration or request so filed by any party contains any significant information relating to the other parties hereto or any Subject Company, prior to submitting such application, notice, registration or request to any Governmental Authority, such party shall permit the other parties to review such information and shall consider in good faith the suggestions of such other parties with respect thereto.

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(c)          Without limiting the generality of Section 4.3(a) hereof, and subject to Applicable Law, each of Apollo and the Sellers will use reasonable best efforts to cooperate with the others in the preparation and filing of any applications, notices, registrations and responses to requests for additional information from Governmental Authorities in connection with the transactions contemplated by this Agreement, including providing such information as may be reasonably necessary for inclusion in such applications, notices, registrations and responses. Each of Apollo and the Sellers shall use reasonable best efforts to agree to any requirements of or remedies imposed by the applicable Governmental Authority; provided that in no case shall Apollo or any of its Affiliates be required to agree to any FINRA Burdensome Condition or such remedies or requirements that (i) would be materially adverse to Apollo and its Affiliates, including, after the Closing, the Subject Companies, or (ii) involves divestiture of an existing business of Apollo or any of its Affiliates, including, after the Closing, the Subject Companies (each of the foregoing, a “Burdensome Condition”). Each of Apollo and the Sellers shall promptly advise the other parties upon receiving any communication relating to the transactions contemplated by this Agreement or any Ancillary Agreement or otherwise materially affecting its ability to timely consummate the transactions contemplated by this Agreement pursuant to the terms hereof from any Governmental Authority.

(d)          The Sellers shall not, and shall cause their Subsidiaries not to, (i) effect the sale of any their respective assets or Equity Securities if such sale would subject the transactions contemplated by this Agreement to lender consent under the RCAP Credit Facilities, or (ii) enter into any Contract or other arrangement, whether oral or written, to effect any transaction (including any acquisition or merger) that would require Sellers obtain any additional Third Party Consent or consent, authorization, order or approval of any Governmental Authority that would, in either case, reasonably be expected to prevent or materially delay the ability of the Sellers to complete the transaction contemplated by this Agreement or perform their obligations hereunder.

(e)          To the extent that any Third Party Consent is required under any Contract in connection with the consummation of the transactions contemplated by this Agreement, the Sellers and the Subject Companies shall use their reasonable best efforts to obtain such Third Party Consent on or prior to the Closing Date. Notwithstanding anything to the contrary herein, the Sellers and the Subject Companies shall not agree to any economic concessions (including any fee reduction or waiver, increase in payments or seller commissions, new non-cash compensation arrangement, reimbursement obligation, expense cap or similar offset or arrangement, or any reduction in commitment amount, investment period or fund term), except as set forth on Section 4.3(d) of the Seller Disclosure Letter, without the written consent of Apollo in its sole discretion, which consent shall not be unreasonably withheld, conditioned or delayed.

(f)          The Sellers shall use their commercially reasonable efforts to, as promptly as practicable, enter into the StratCap Waiver, in a form reasonably acceptable to Apollo, with Strategic Capital Companies, LLC and Carter Validus Holdings I, LLC; provided that, if, after exercising commercially reasonably efforts for a period not less than ninety (90) days, the Sellers reasonably determine that they will be unable to obtain the StratCap Waiver, the Sellers will have no further obligation under this Section 4.3(g) to seek the StratCap Waiver.

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4.4          Communications; Confidentiality.

(a)          Prior to the Closing, neither the Sellers or their Subsidiaries shall, without the prior written approval of Apollo, make any internal or external communication, statement or announcement (whether to their employees, clients, customers, business partners, equity holders or otherwise) regarding this Agreement or the transactions contemplated hereby, or otherwise disclose any of the contents of this Agreement, unless otherwise required by Applicable Law, in which case the Person making such disclosure shall give prior written notice to Apollo and consider in good faith Apollo’s suggestions with respect thereto.

(b)          The parties shall be bound by and comply with the provisions set forth in the Confidentiality Agreement, the provisions of which are hereby incorporated herein by reference; provided that, effective upon the Closing, Apollo’s obligations under the Confidentiality Agreement shall terminate with respect to information to the extent relating to the Subject Companies and with respect to disclosure relating to the transactions contemplated hereby.

4.5          Supplemental Disclosure.

(a)          No later than the fifth (5^th) Business Day after the date hereof, the Sellers shall provide to Apollo an updated version of the Seller Disclosure Letter, including any fact, event, circumstance, occurrence or existence of any condition in existence as of the date of this Agreement that has caused any of the Sellers’ representations or warranties contained in this Agreement to be untrue or inaccurate as of the date of this Agreement (the “Updated Disclosure Letter”). If, but for the disclosure of any of such facts, events, circumstances, occurrences or existence of conditions disclosed in the Updated Disclosure Letter but not disclosed in the Seller Disclosure Letter delivered as of the date hereof (the foregoing, “New Disclosures”), (i) any Fundamental Representation would have been untrue or inaccurate in any respect (with only such exceptions as are de minimis) as of the date of this Agreement, (ii) any representation or warranty described in the second sentence of Section 5.2(a) (read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor”, “Material Adverse Effect” or similar qualification, except for references to “Material Contracts”) would have been untrue or inaccurate in any material respect as of the date of this Agreement, or (iii) any other representation or warranty of the Sellers contained in Article II of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor”, “Material Adverse Effect” or similar qualification, except for references to “Material Contracts”) would have been untrue or inaccurate except for such failures to be true and correct that individually or in the aggregate would not be Material to a Reasonable Investor, then Apollo may, at its sole election, either (i) terminate this Agreement by delivering written notice of such termination to the Sellers within three (3) Business Days of receiving the Updated Disclosure Letter, or (ii) not terminate this Agreement, in which case any New Disclosure shall not affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions of the obligations of the parties under this Agreement, including with respect to the Sellers’ indemnification obligations under Section 7.1.

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(b)          Each of Apollo and the Sellers shall, prior to the Closing, give prompt notice to the other parties, to the extent it has Knowledge (i) of the occurrence, or failure to occur, of fact, event, circumstance, occurrence or existence of any condition, that has caused or could reasonably be expected to cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time after the date of this Agreement such that the conditions to closing set forth in Sections 5.2 or 5.3, as applicable, would reasonably be expected not to be met; (ii) of the occurrence of any matter or event, that would, in the case of the Subject Companies, have a Material Adverse Effect, or, in the case of Apollo, prohibit or materially impair the ability of Apollo to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis; (iii) of any failure on its part to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; (iv) of any notice or other written communication from any Person alleging that the consent of such Person is or may be required in connection with the consummation of the transactions contemplated by this Agreement and (v) of any lawsuit, action or proceeding pending or, to the Knowledge of Apollo or to the Knowledge of the Sellers (as applicable), threatened against the party or the parties relating to the transactions contemplated herein; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; provided, further, that any failure to comply with this Section 4.5 shall not in and of itself constitute a breach or noncompliance of a covenant by such party for purposes of determining the satisfaction of the conditions set forth in Section 5.2(b) or Section 5.3(b) or for purposes of Section 7.1(a)(ii) or Section 7.2(a)(ii). In addition, the Sellers shall provide to Apollo promptly after the filing thereof a true, complete and correct copy of each Governmental Report filed by any Subject Company after the date hereof and prior to the Closing.

4.6          Third Party Proposals. The Sellers shall not, nor shall they permit any of their respective Affiliates, and shall use reasonable best efforts to not permit any of its or their respective Affiliates’ officers, directors, employees, representatives or agents, including any investment banker, attorney or accountant engaged by any of them to, directly or indirectly solicit, encourage or facilitate inquiries or proposals, or enter into any agreement with respect to, or initiate or conduct any negotiations or discussions with any Person (other than Apollo and its Affiliates) concerning, any purchase of all or a significant portion of the assets of any Subject Company or of any capital stock of or other ownership interest in any Subject Companies or any merger or business combination involving any Subject Company (each, an “Acquisition Proposal”), or furnish any information to any Person (other than Apollo and its Affiliates) contacting them or making an inquiry with respect to a potential Acquisition Proposal.

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4.7          Financial Statements; Cooperation.

(a)          The Sellers shall promptly deliver to Apollo, within twenty-five (25) days of the end of each month from the date hereof and until the Closing, an unaudited consolidated balance sheet of each of the Acquired Companies, together with the related unaudited consolidated statement of income and changes in members’ equity for the fiscal period then ended, accompanied by a column detailing the assets, liabilities, revenue and expenses of the Excluded RCS Business and a column detailing the revenue and expenses associated with the Marketing/Event Business to be transferred to a Subject Company prior to the Closing.

(b)          The Sellers shall prepare and deliver, or cause to be prepared and delivered, to Purchaser, at Apollo’s expense, each of the following (the “Required Financial Statements”):

(i)          as soon as practicable after the date hereof, the audited combined balance sheet of the Business as held and conducted by the Sellers and their Subsidiaries as of December 31, 2014, and the related audited combined statements of income, cash flows and changes in members’ equity and footnotes for the twelve months ended December 31, 2014; and

(ii)         no later than the Stub Financials Delivery Date, (i) an unaudited balance sheet of the Business as held and conducted by the Sellers and their Subsidiaries as of the Stub Financial Date, and the related unaudited combined statements of income, cash flows and changes in members’ equity and footnotes for the period commencing January 1, 2015 and ending on the Stub Financial Date, and (ii) an unaudited balance sheet of the Business as held and conducted by the Sellers and their Subsidiaries as of the date that is one year prior to the Stub Financial Date, and the related unaudited combined statements of income, cash flows and changes in members’ equity for the period commencing January 1, 2014 and ending on the date that is one year prior to the Stub Financial Date.

The “Stub Financial Date” shall mean June 30, 2015, provided that if the Closing has not occurred by November 6, 2015, then the Stub Financial Date shall mean a quarter end date that occurs no more than one hundred thirty-five (135) days prior to the fourth Business Day after the Closing. The “Stub Financials Delivery Date” means the date that is ninety (90) days following the Stub Financial Date.

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(c)          The Required Financial Statements (including the notes thereto) will be prepared from the books and records of the Sellers and their Subsidiaries and present fairly in all material respects the consolidated financial position, consolidated results of the operations and consolidated cash flows of the Business, as applicable, for the periods set forth therein (subject, in the case of financial statements for interim periods, to normal year-end adjustments, which will not be material to the Business, taken as a whole). Prior to the Closing, at Apollo's expense, the Sellers will use their reasonable best efforts to, and will cause the Subject Companies and their respective officers, employees, consultants, counsel, advisors and other representatives (collectively, “representatives”) to use reasonable best efforts to, provide such cooperation and assistance as may be reasonably requested by Apollo (in each case as promptly as reasonably practicable following such request) in connection with preparing any financial statements or other information that will be consolidated with, or otherwise reflected or referenced in, any forms, statements and reports of Apollo filed with or furnished to the SEC. The Sellers agree that none of the information supplied in writing by or their behalf prior to the Closing for use in any Required Financial Statements will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.8          Non-Solicitation; Non-Competition.

(a)          During the Restricted Period, each of the Sellers agrees that neither it nor any of its controlled Affiliates shall, without Apollo’s prior written consent, directly or indirectly (including, without limitation, through the Sellers’ or their respective controlled Affiliates’ representatives), solicit or hire for employment (whether as an employee, consultant or temporary employee) any employee of the Subject Companies, except that this paragraph shall not preclude the Sellers or any other person from entering into discussions with or soliciting or hiring any person who (i) responds to any public advertisement or general solicitation, (ii) has left the employ of the Subject Companies or their Affiliates three months prior to commencement of discussions with the soliciting party or (iii) has been terminated by the Subject Companies or their Affiliates.

(b)          During the Restricted Period, each of the Sellers agrees that neither it nor any of its controlled Affiliates shall, without Apollo’s prior written consent, directly or indirectly (including, without limitation, through the Sellers’ or their respective controlled Affiliates’ representatives), solicit, endeavor to entice away from the Subject Companies or their Affiliates, or otherwise directly or indirectly interfere with the relationship of the Subject Companies or any of their Affiliates, with any Person or entity who is as of the Closing Date, or was within the twelve month period preceding the Closing Date, a customer, client (including other broker dealers) or, to the knowledge of the Sellers, a prospective customer or client (including other broker dealers), of the Subject Companies.

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(c)          During the Restricted Period, each of the Sellers agrees that neither it nor any of its controlled Affiliates shall, without Apollo’s prior written consent, directly or indirectly, for itself or on behalf of or in conjunction with any Person, whether as an agent, partner, joint venture, investor or otherwise, engage in any Competitive Enterprise; provided that the restrictions contained in this Section 4.8(c) shall not apply to the business conducted by Hatteras Funds, LLC and its Subsidiaries of sponsoring and distributing investment companies and  private investment funds (other than non-traded REITS and BDCs) and shall not apply to StratCap. The restrictions applicable to the Hatteras Funds, LLC pursuant to this section shall terminate following a bona fide sale, transfer or other disposition of all of the capital stock of the applicable entity to an Independent Third Party.

(d)          For purposes of this Agreement:

(i)          “Competitive Enterprise” means any business or business enterprise that (x) provides wholesale brokerage services, as that term is generally understood in the industry and including without limitation the services provided by the Acquired Companies (including, notwithstanding anything to the contrary in this Agreement, SC Distributors), and (y) raises or sponsors public or private, traded or non-traded investment companies (as defined in the Investment Company Act of 1940 without taking into account any exceptions from that definition); and

(ii)         “Restricted Period” means the period commencing on the Closing Date and ending on the fifth (5^th) anniversary thereof.

(e)          Apollo and the Sellers agree that the covenants included in Section 4.8 are, taken as a whole, reasonable in their geographic and temporal coverage and are necessary to protect the goodwill of the businesses of the Subject Companies, and the substantial investment made by Apollo, and the Sellers shall not raise any issue of geographic or temporal reasonableness in any proceeding to enforce such covenant, provided, however, that if the provisions of Section 4.8 should ever be deemed to exceed the time or geographic limitations or any other limitations permitted by Applicable Law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the minimum extent required by Applicable Law to cure such problem and such provisions shall be enforced with such reforms. Without intending to limit the remedies available to Apollo, the Sellers acknowledge that a breach of any of the covenants contained in this Section 4.8 shall result in material irreparable injury to Apollo and the Subject Companies for which there is no adequate remedy at law, that it shall not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, Apollo shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, restraining the Sellers and their Subsidiaries from engaging in activities prohibited by this Section 4.8 or such other relief as may be required specifically to enforce any of the covenants in this Section 4.8.

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4.9          Termination of Affiliate Agreements. Except as set forth in Section 4.9 of the Seller Disclosure Letter, effective at the Closing, all Affiliate Agreements shall be terminated without any further right, obligation or liability of any Person thereunder.

4.10        Expenses. Except as expressly set forth herein, each party shall bear the fees, costs and expenses of it, its Subsidiaries (including, in the case of the Sellers, the Subject Companies) incurred in connection with the negotiation and preparation of this Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated hereby (including legal, accounting and financial advisors).

4.11        ARC Transaction. Apollo shall, and shall cause its Affiliates, to use their reasonable best efforts to take or cause to be taken all actions, and promptly do or cause to be done, all things necessary, proper or advisable in order to effectuate the provisions and purposes of the ARC Transaction Agreement and to consummate the transactions contemplated thereby.

4.12        Employee Matters.

(a)          On or prior to the Closing Date, the Sellers shall use their commercially reasonable efforts to transfer, or cause to be transferred, effective as of immediately prior to the Closing Date, the employment of any Employees of the Business (other than Employees of the Subject Companies) to any of the Subject Companies designated in writing by Buyer at least ten (10) business days prior to the Closing Date; provided that the Sellers shall be solely responsible for any severance pay or benefits that becomes due to any such Employees solely as a result of such transfer of employment and any other obligations to such Employee (including any liabilities under any Seller Benefit Plan) for any period of service prior to the date of such transfer. On or prior to the Closing Date, the Sellers shall transfer, or cause to be transferred to Sellers or their Affiliates (other than the Subject Companies) the employment of any Employees any of the Subject Companies primarily engaged in the Excluded RCS Business and any other Employees that Sellers and Apollo mutually agree in writing to allow to be transferred to Sellers effective as of the Closing Date; provided that the Sellers shall be solely responsible for any severance pay or benefits that becomes due to any such Employees solely as a result of such transfer of employment and any other obligations to such Employee (including any liabilities under any Seller Benefit Plan) for any period of service prior to, or after, the date of such transfer.

(b)          As of the Closing, the Acquired Companies shall terminate their participation in each Seller Benefit Plan and in no event shall any Employee be entitled to accrue any benefits under such Seller Benefit Plans with respect to services rendered or compensation paid on or after the Closing Date, except for rights that have vested prior to or at the Closing. Without limiting the foregoing, the Sellers shall retain responsibility for all claims incurred by Employees (and their covered dependents) prior to the Closing under all Seller Benefit Plans. To the extent any of the Acquired Benefit Plans cover employees of Seller and its Affiliates, other than the Employees, the Sellers shall, as of the Closing, assume all liability in respect of such Persons under the applicable Acquired Benefit Plans.

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(c)          Apollo shall assume, and Subject Companies shall retain, all liability in respect of vacation accrued by any such individuals in respect of the period ending on the Closing Date, except to the extent any payment in respect of accrued vacation is required by Applicable Law as a result of the transactions contemplated by this Agreement.

(d)          Effective no later than the Closing (but conditioned upon the Closing having occurred), RCAP shall award the Employees the restricted stock awards that Sellers and the Subject Companies have accrued, as of that date, in respect of bonuses for the full 2015 fiscal year.  In addition, prior to the Closing Date, RCAP shall take all action necessary to provide that continued service as an employee of the Sellers and their Affiliates (other than the Subject Companies) after the Closing shall not be a vesting condition of these awards; provided that the transferability of any such RCAP shares (or the RCAP shares that would be delivered upon vesting of any such restricted stock units) shall be restricted until the originally scheduled vesting dates (or the vesting dates that would have been scheduled for such awards absent this Agreement and the transactions contemplated hereby). 

(e)          Without limiting the generality of Section 9.7, the provisions of this Section 4.12 are solely for the benefit of the Sellers and Buyer, and no current or former Employee, director or service provider of the Subject Companies or the Business or any other Person shall be regarded for any purpose as a third-party beneficiary of this Section 4.12. In no event shall the terms of this Section 4.12 be deemed to (i) establish, amend, or modify any Employee Benefit Plan (including any Acquired Benefit Plan) or any “employee benefit plan” as defined in Section 3(3) of ERISA or any other benefit plan, program, agreement or arrangement maintained or sponsored by Buyer or any of its Affiliates (including, following the Closing, the Subject Companies); (ii) alter or limit the ability of Buyer or any of its Affiliates (including, following the Closing, the Subject Companies) to amend, modify or terminate any Acquired Benefit Plan, or any other benefit plan, program, agreement or arrangement after the Closing; or (iii) confer upon any current or former Employee, director or other service provider or other Person any right to employment or continued employment or continued service with Buyer or any of its Affiliates (including, following the Closing, the Subject Companies), preclude the ability of Buyer or any of its Affiliates (including, following the Closing, the Subject Companies) to terminate the employment or services of or demote the position of any employee for any reason, or constitute or create an employment agreement with any such Person.

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(f)           If, in respect of calendar year ended December 31, 2015, the aggregate cash bonus compensation paid to Existing Employees of the Business (the “Aggregate Cash Bonuses”) is less than $7,026,000, Apollo will pay, or cause to be paid to, RCAP in cash an amount equal to (A) a fraction the numerator of which is the number of days from and after January 1, 2015 through and excluding the Closing Date and the denominator of which is 365, multiplied by (B) the difference between (i) $7,026,000 and the (ii) the Aggregate Cash Bonuses (such amount being hereinafter referred to as the “Bonus True-Up Payment”).  No later than February 15, 2016, Apollo will deliver to RCAP a certificate, duly executed by an authorized officer of Apollo, setting forth a true, complete and accurate list of the cash bonuses paid by the Subject Companies to each Existing Employee of the Business in respect of the calendar year ended December 31, 2015.  If the Aggregate Cash Bonuses set forth on such certificate are less than $7,026,000, Apollo shall, within five (5) days after the delivery of such certificate, pay to RCAP, by wire transfer in immediately available funds, the Bonus True-Up Payment. For purposes of this Agreement, the “Existing Employee of the Business” means an employee of the Business in respect of which an accrued bonus was taken into account in the calculation of Closing Regulatory Capital and Closing Net Working Capital.

4.13        Pre-Closing Restructuring Actions. As promptly as practicable after the date hereof (and in any event, prior to the Closing), the Sellers shall, at the Sellers’ expense, cause the actions and transactions described in Section 4.13 of the Seller Disclosure Letter (the “Pre-Closing Restructuring Actions”) to be implemented as set forth therein, and shall indemnify Apollo and its Affiliates (including, from and after the Closing, the Subject Companies) from any liability or obligation arising in connection with such actions or transactions.

4.14        Separation and Transition Matters; Commingled Contracts.

(a)          RCAP-ARC-Newco Transition Services Agreement. Promptly following the date hereof, the Sellers shall, and shall cause their relevant Subsidiaries to, negotiate in good faith with ARC and Newco and use reasonable best efforts to agree upon and finalize the RCAP-ARC-Newco Transition Services Agreement prior to the Closing.

(b)          Transition Planning. By no later than ten (10) days after the date hereof, the Sellers, the Acquired Companies and Apollo shall, in cooperation with ARC and Newco, in accordance with their obligations pursuant to Section 4.16(b) of the ARC Transaction Agreement, appoint a transition team to cooperate in good faith to develop, and such transition team shall develop, a plan for the separations described in Section 4.14(c) and Section 4.14(d) so as to minimize the adverse impact of such separation on the businesses of each.

(c)          Separation of SC IT Systems and Retained Seller IT Systems. As soon as practicable after the date hereof, the Sellers shall, and shall cause their Subsidiaries to, at the Sellers’ expense, in compliance with Applicable Law, separate logically and physically the SC IT Systems from the Retained Seller IT Systems in such a manner that the Retained Seller IT Systems are not accessible to the Subject Companies and the SC IT Systems are not accessible to the Sellers or their Subsidiaries (other than the Subject Companies), except as and to the extent such access is necessary for the provision or receipt of services pursuant to the Ancillary Agreements or as otherwise set forth herein, and, in undertaking such separation, shall take all commercially reasonable precautions necessary to safeguard the confidentiality of any confidential information (including all data) of the Business.

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(d)          Separation of Newco IT Systems and Retained Seller IT Systems. As soon as practicable after the date hereof, the Sellers shall, and shall cause their Subsidiaries to, in cooperation with ARC and Newco in accordance with their obligations pursuant to Section 4.16(d) of the ARC Transaction Agreement, at the Sellers’ expense, in compliance with Applicable Law, separate logically and physically the Newco IT Systems from the Retained Seller IT Systems in such a manner that the Retained Seller IT Systems are not accessible to Newco and its Subsidiaries, and the Newco IT Systems are not accessible to the Sellers or any of their Subsidiaries (other than Newco and its Subsidiaries), except as and to the extent such access is necessary for the provision or receipt of services pursuant to the Ancillary Agreements (as such term is defined in each of this Agreement and the ARC Transaction Agreement) or as otherwise set forth herein, and, in undertaking such separation, shall take all commercially reasonable precautions necessary to safeguard the confidentiality of any confidential information (including all data) of the Business.

(e)          Internal RCAP Commingled Contracts. Promptly after the date hereof, the Sellers shall, and shall cause each of their Subsidiaries to, use commercially reasonable efforts to identify all Internal RCAP Commingled Contracts, provide a schedule of such identified Internal RCAP Commingled Contracts to Apollo, and supplement such schedule from time to time after the initial delivery thereof if additional Internal RCAP Commingled Contracts are subsequently identified. Upon Apollo’s request, with respect to any Internal RCAP Commingled Contract, the Sellers, the Subject Companies and Apollo shall, and shall cause their respective Subsidiaries to, use commercially reasonable efforts to (i) cause the counterparty to any such Internal RCAP Commingled Contract to enter into a new contract with Apollo or its designee, on terms substantially similar to those contained in such Internal RCAP Commingled Contract including with respect to pricing, in order for the Business to receive the applicable benefits under such Internal RCAP Commingled Contract (each such new contract, a “New Business Contract”), or (ii) if practicable, assign to Apollo or its designee the benefits and obligations under such Internal RCAP Commingled Contract as they relate to the Business. If the Sellers, the Subject Companies and Apollo and their respective Subsidiaries are not able to obtain a New Business Contract with a counterparty to any such Internal RCAP Commingled Contract or assign such Internal RCAP Commingled Contract prior to the Closing, then (x) the Sellers, the Subject Companies, and Apollo and their respective Subsidiaries shall continue, following the Closing, to use commercially reasonable efforts to cause such counterparty to enter into a New Business Contract or assign to Apollo or its designee the benefits and obligations under such Internal RCAP Commingled Contract as they relate to the Business, and (y) until such time as a New Business Contract is executed or an Internal RCAP Commingled Contract is so assigned, the Sellers, the Subject Companies and Apollo shall use and shall cause their respective Subsidiaries to use commercially reasonable efforts to secure an alternative arrangement reasonably satisfactory to both parties under which the Business would, in compliance with Applicable Law, obtain the benefits associated with the applicable Internal RCAP Commingled Contract such that the Business would be placed in a substantially similar position as if a New Business Contract were executed. All fees, costs and expenses incurred under or in connection with this Section 4.14(e) shall be borne by the Sellers (other than the fees charged in the ordinary course of performance under any New Business Contract, which shall be borne by Apollo and its Affiliates).

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(f)          Newco/RCAP Commingled Contracts. Promptly after the date hereof, (a) the Sellers shall, and shall cause each of their Subsidiaries to, in cooperation with ARC and Newco in accordance with their obligations pursuant to Section 4.16(e) of the ARC Transaction Agreement, use commercially reasonable efforts to identify all Newco/RCAP Commingled Contracts, provide a schedule of such identified Newco/RCAP Commingled Contracts to Apollo, and supplement such schedule from time to time after the initial delivery thereof if additional Newco/RCAP Commingled Contracts are subsequently identified by either the Sellers or ARC, and (b) the Sellers, the Acquired Companies and Apollo shall, and shall cause their respective Subsidiaries to, together with ARC and Newco in accordance with their obligations pursuant to Section 4.16 of the ARC Transaction Agreement, cooperate in good faith to agree upon and execute, for each Newco/RCAP Commingled Contract, a treatment of such Newco/RCAP Commingled Contract that is reasonably acceptable to Apollo, the Sellers, the Acquired Companies, Newco, and ARC, which may include (i) using commercially reasonable efforts to cause the counterparty to such Newco/RCAP Commingled Contract to enter into a new contract with the Sellers or Newco, or a designee of any of them, on terms substantially similar to those contained in such Newco/RCAP Commingled Contract including with respect to pricing, in order for the applicable business of any of them to receive the applicable benefits under such Newco/RCAP Commingled Contract (each such new contract, a “New Contract”), (ii) if practicable, assigning to the Sellers or Newco, or a designee of either of them, the benefits and obligations under such Newco/RCAP Commingled Contract as they relate to the applicable business of any of them, or (iii) if the Sellers, the Acquired Companies, Apollo, ARC and Newco and their respective Subsidiaries are not able to obtain a New Contract with a counterparty to any such Newco/RCAP Commingled Contract or assign such Newco/RCAP Commingled Contract, securing an alternative arrangement reasonably satisfactory to each of Apollo, the Sellers, the Acquired Companies, Newco, and ARC under which the applicable business of the Sellers or Newco, as the case may be, would, in compliance with Applicable Law, obtain the benefits associated with the applicable Newco/RCAP Commingled Contract such that such business would be placed in a substantially similar position as if a New Contract were executed. All fees, costs and expenses incurred under or in connection with this Section 4.14(f) shall be borne by ARC (in accordance with its obligations pursuant to Section 4.16 of the ARC Transaction Agreement) and the Sellers (other than the fees charged in the ordinary course of performance under any New Contract, which shall be borne by the party to such contract).

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4.15        Intellectual Property Cross-License

(a)          From the Sellers to Apollo. Subject to compliance with the terms and conditions hereof, and effective as of the Closing, each Seller, on behalf of itself and its Subsidiaries (other than the Subject Companies), hereby grants to Apollo and its Affiliates (whether in existence as of the date hereof or at any time in the future, including the Subject Companies) a non-exclusive, worldwide, perpetual, irrevocable, non-transferable (except in connection with a merger or reorganization of, or sale of all or substantially all of the assets of, one or more businesses of such party to which the license set forth in this Section 4.15(a) relates), sublicensable, paid-up and royalty-free right and license to use and practice (i) the Sellers Licensed IP Rights solely in connection with the Business, as conducted as of the Closing Date, and any natural or reasonably foreseeable expansions thereof, and (ii) the SCORE Technology solely in connection with the Business and any natural or reasonably foreseeable expansions thereof. Apollo shall, and shall cause its Affiliates and sublicensees to, use commercially reasonable care to maintain and protect the Trade Secrets included in the Sellers Licensed IP Rights.

(b)          From Apollo to the Sellers. Subject to compliance with the terms and conditions hereof, and effective as of the Closing, Apollo, on behalf of the Subject Companies, hereby grants to the Sellers and their Subsidiaries a non-exclusive, worldwide, perpetual, irrevocable, non-transferable (except in connection with a merger or reorganization of, or sale of all or substantially all of the assets of, one or more businesses of such party to which the license set forth in this Section 4.15(b) relates), sublicensable, paid-up and royalty-free right and license to use and practice the Subject Companies’ Licensed IP Rights solely in connection with the Retained Business, as conducted as of the Closing Date, and any natural or reasonably foreseeable expansions thereof. Each Seller shall, and shall cause its Subsidiaries and sublicensees to, use commercially reasonable care to maintain and protect the Trade Secrets included in the Subject Companies’ Licensed IP Rights.

4.16        Use of Seller Marks.

(a)          Promptly after the date hereof, the Sellers shall, and shall cause each of their Subsidiaries to, use commercially reasonable efforts to expressly identify all Seller Marks, provide a schedule of such identified Seller Marks to Apollo, and supplement such schedule from time to time after the initial delivery thereof if additional Seller Trademarks are subsequently identified.

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(b)          Subject to compliance with the terms and conditions hereof, including in Section 4.16(c) and effective as of the Closing, each Seller, on behalf of itself and its Subsidiaries, hereby grants to Apollo and its Affiliates a limited, non-exclusive, non-transferable, non-sublicensable, paid-up and royalty-free right and license for a period of twenty-four (24) months following the Closing Date to use the Seller Marks (not including domain names, subdomains, vanity URLs, or social media user names) in connection with the conduct of the Business, solely in the manner in which the Seller Marks were used in the Business as of the Closing Date. Seller shall, for one (1) year following the Closing Date, either (i) redirect all visitors to any domain names used solely in the Business prior to Closing that incorporate Seller Marks in such domain names (collectively, the “Redirected Domain Names”) to a domain name of Apollo’s or its applicable Affiliate’s choosing, other than a domain name that includes any Seller Marks in such domain name, or (ii) display a Separation Notice on the home page of any domains that were used in both the Business and the Retained Business prior to Closing and identified by domain names incorporating Seller Marks.

(c)          Subject to Section 4.16(d), notwithstanding the license contained in Section 4.16(b), Apollo shall, and shall cause its controlled Affiliates to, use commercially reasonable efforts to transition the businesses of the Subject Companies from use of the Seller Marks as promptly as practicable following the Closing. Promptly upon the expiration of the twenty-four (24) month period set forth in Section 4.16(b), Apollo shall, and shall cause its controlled Affiliates to, cease any and all use of the Seller Marks and destroy and dispose of all advertising, marketing, sales and promotional materials in their possession bearing any Seller Marks (other than materials retained for internal purposes or archived). Notwithstanding the foregoing, nothing in this Agreement shall prohibit Apollo and its controlled Affiliates from referencing the Seller Marks to make accurate statements (written or oral) about the activities and history of the Subject Companies, including in regulatory filings and circulations to prospective acquirors or financing sources.

(d)          Notwithstanding the foregoing Sections 4.16(b) and (c), from and after the date hereof until such date that is five (5) years after the Closing Date, to the extent Apollo identifies any Seller Trademarks that are necessary for the operation of the Business, as operated as of the Closing, then Seller and Apollo shall negotiate in good faith a perpetual, royalty-free, non-transferrable (except in connection with a merger or reorganization of, or sale of all or substantially all of the assets of, one or more businesses of such party to which such license relates), fully paid-up license to such Seller Marks.

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4.17        Transition Services.

(a)          RCAP shall provide, or cause to be provided, to Apollo and the Subject Companies, for a period of nine (9) months, with an option for Apollo to extend up to an additional three (3) months (for a total of twelve (12) months) following the Closing (or such other period as may be mutually agreed by RCAP and Apollo), any such services as may be requested by Apollo or any Subject Company that were provided by RCAP or any of its Subsidiaries to any Subject Company at any time during the twelve-month period prior to the Closing and that are reasonably necessary for the continued operation of such Subject Company consistent with its operation during such period (any such service, a “Transition Service”). RCAP agrees that the manner in which, and the degree of care with which, RCAP provides, or causes to be provided, Transition Services hereunder shall be substantially consistent with the manner in which, and the degree of care with which, RCAP provided, or caused to be provided, the Transition Services for the Subject Companies during the twelve-month period prior to the Closing (with appropriate modifications to the manner in which the Transition Services are provided to reflect that the Subject Companies shall no longer be owned by the Sellers).

(b)          The amount charged by RCAP for any such Transition Service shall equal RCAP’s actual cost of providing such Transition Service, which shall, (i) in the case of any Transition Service provided through a third party provider (but only to the extent such third party provider provided such Transition Service to such Subject Company prior to the Closing or is otherwise approved in writing by Apollo), be the out-of-pocket cost to RCAP of providing such Transition Service, and (b) shall the actual cost to RCAP of providing such service to such Subject Company on a fully allocated basis. RCAP or the Subject Company receiving such Transition Service shall be entitled to deduct and withhold, or cause to be deducted and withheld, from all amounts payable pursuant to this Section 4.17(b) such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or any other provision of federal, provincial, state, local or foreign Tax law.

(c)          The Sellers shall be responsible for obtaining and maintaining any governmental or third party licenses or consents required for the provision of any service, and shall bear all costs of obtaining or maintaining such licenses or consents.

(d)          The Sellers shall maintain in confidence and shall not use or permit to be used (other than in the provision of the Transition Services) any information of the Business or Apollo or the Subject Companies received or obtained by the Sellers in the course of providing Transition Services hereunder. The Sellers shall use the standard of care consistent with their current practice to prevent the unauthorized use, dissemination or disclosure of any such information.

4.18        Release. Effective upon the Closing, each of the Sellers (on behalf of itself and on behalf of its Subsidiaries (other than the Subject Companies)) hereby irrevocably waives, releases and discharges Apollo and each of its Affiliates (including, from and after the Closing, the Subject Companies and Newco and its Subsidiaries) from any and all liabilities and obligations to it or its Subsidiaries of any kind or nature whatsoever, in each case whether absolute or contingent, liquidated or unliquidated, known or unknown, and whether arising under any agreement or understanding (other than this Agreement and any Ancillary Agreements executed and delivered in connection herewith), any right of contribution or indemnification or otherwise at law or in equity, and each of the Sellers (on its behalf and on behalf of its Subsidiaries (other than the Subject Companies)) agrees that it shall not seek to recover any amounts in connection therewith or thereunder from Apollo and each of its Affiliates (including, from and after the Closing, the Subject Companies and Newco and its Subsidiaries); provided, that the waivers contained in this Section 4.21 shall not apply to claims asserted pursuant to this Agreement or any Ancillary Agreement, but such claims shall remain subject to the limitations set forth elsewhere in this Agreement, including Article VII. For the avoidance of doubt, ARC shall not be deemed an Affiliate of Apollo for purposes of this Section 4.18.

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4.19        Further Assurances. Each party shall cooperate with the others, and execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and transfer, and take all such other actions as such party may reasonably be requested to take by the other parties hereto from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the transactions contemplated hereby.

Article V
Conditions to the Closing

5.1          Mutual Conditions. The respective obligations of Apollo, RCAP and RCS Holdings to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the parties hereto) as of the Closing of the following condition:

(a)          No Injunction. There shall be no (i) injunction, restraining order or decree of any nature of any Governmental Authority of competent jurisdiction in effect that restrains or prohibits the consummation of the transactions contemplated hereby or (ii) pending action, suit or proceeding brought by any Governmental Authority which seeks to restrain the consummation of the transactions contemplated hereby.

5.2          Additional Conditions to the Obligations of Apollo. The obligations of Apollo to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by Apollo) as of the Closing of each of the following additional conditions:

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(a)          Representations and Warranties of the Sellers. The representations and warranties of the Sellers contained in Sections 2.1, 2.2, 2.5, and 2.23 (such representations and warranties, the “Fundamental Representations”) shall be true and correct in all respects (with only such exceptions as are de minimis) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. The representations and warranties of the Sellers contained in Sections 2.7(a), 2.7(b), 2.8(a), 2.8(b), 2.12(b) and the first two sentences of Section 2.14(a) (with respect to any Contract of a type described in clause (ii), (iii), (iv), (v), (vi), (vii), (viii) or (ix)) (in each case, read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor”, “Material Adverse Effect” or similar qualification, except for references to “Material Contracts”) shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all material respects as of such specified date. Other than the Fundamental Representations and the representations and warranties set forth in the prior sentence, the representations and warranties of the Sellers contained in Article II of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor”, “Material Adverse Effect” or similar qualification, except for references to “Material Contracts”) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except, in each case, for such failures to be true and correct that individually or in the aggregate would be Material to a Reasonable Investor.

(b)          Performance of Seller Covenants. Each of the Sellers shall have performed and complied with in all material respects all covenants contained in this Agreement to be performed or complied with by it prior to or at the Closing.

(c)          No Material Adverse Effect. Since the date hereof, there shall not have occurred a Material Adverse Effect.

(d)          Officer’s Certificate. Apollo shall have received a certificate, dated as of the Closing Date, executed by a senior officer of RCAP on behalf of each of the Sellers, to the effect that the conditions specified in paragraphs (a), (b) and (c) have been fulfilled.

(e)          Ancillary Agreements. Each of the Sellers shall have delivered to Apollo each of the Ancillary Agreements to which it or any of its Affiliates is a party.

(f)           Services Termination Agreement. The Services Termination Agreement shall have become and shall remain effective in the form provided to Apollo prior to the date hereof.

(g)          Material Consents. The Sellers shall have received the Consents set forth in Section 5.2(g) of the Seller Disclosure Letter.

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(h)          Material Proceedings. Since the date hereof, there has been no (i) new Proceeding instituted by a Governmental Authority or claim filed in state or federal court by any Person against any Subject Company, in each case alleging actions, occurrences or omissions, or (ii) new development in any Proceeding set forth in Section 2.7(a)(i) or Section 2.7(a)(ii) of the Seller Disclosure Letter, in each case for clause (i) and (ii), that would, individually or in the aggregate, reasonably be expected to be materially adverse to the Business or the Subject Companies, taken as a whole.

(i)           FINRA Approval. The FINRA Approval shall have been obtained and shall not have been withdrawn, and FINRA has not imposed any FINRA Burdensome Condition for which indemnification pursuant to Article VII would be an inadequate remedy. Notwithstanding the foregoing, Apollo has the right but not the obligation to waive the condition to Closing relating to the receipt of FINRA Approval if (i) at least 35 days have passed since the FINRA Notice was submitted, (ii) all of the other conditions to closing set forth in Article V (subject to the satisfaction or waiver of those conditions that by their terms are to be satisfied by actions taken at the Closing) have been satisfied or waived, and (iii) FINRA has not denied the FINRA Approval or advised that the parties are prohibited from consummating the closing. In the event that Apollo exercises the right set forth in the prior sentence, Sellers shall have the obligation to proceed to Closing on the time frame established by Apollo in its reasonable discretion.

(j)           ARC Transaction. The conditions set forth in Article V of the ARC Transaction Agreement shall have been satisfied or waived and the closing under the ARC Transaction Agreement shall have occurred.

(k)          External Wholesalers. RCS shall continue to employ at least fifty-two (52) of the external wholesalers employed by it as of the date of this Agreement.

5.3          Additional Conditions to the Obligations of the Sellers. The obligations of the Sellers to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by RCAP) as of the Closing of each of the following additional conditions:

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(a)          Representations and Warranties. The representations and warranties of Apollo contained in Sections 3.1, 3.2 and 3.7 shall be true and correct in all respects (with only such exceptions as are de minimis) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. Other than the representations and warranties referred to in the immediately preceding sentence, the representations and warranties of Apollo contained in Article III of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality or similar qualification) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except, in each case, for such failures to be true and correct that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay the ability of Apollo to complete the transactions contemplated by this Agreement or to perform its obligations hereunder

(b)          Performance of Covenants. Apollo shall have performed and complied with in all material respects all covenants contained in this Agreement to be performed or complied with it prior to or at the Closing.

(c)          Certificate. RCAP shall have received a certificate, dated as of the Closing Date, executed by Apollo, to the effect that the conditions specified in paragraphs (a) and (b) above have been fulfilled.

(d)          Ancillary Agreements. Apollo shall have delivered to RCAP each of the Ancillary Agreements to which it or any of its Affiliates is a party.

(e)          Services Termination Agreement. The Services Termination Agreement shall have become and shall remain effective in the form provided to Apollo prior to the date hereof.

(f)           FINRA Approval. The FINRA Approval shall have been obtained and shall not have been withdrawn; provided, however, that this condition shall not apply if Apollo has exercised its right under the second sentence of Section 5.2(i).

(g)          Investment Agreement. RCAP shall have received the proceeds of the equity investments to be made pursuant to (i) the Investment Agreement, dated as of the date hereof, between RCAP and Apollo, and (ii) the Investment Agreement, dated as of the date hereof, between RCAP and Luxor and certain of its Affiliates.

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Article VI
Termination

6.1          Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:

(a)          by mutual written consent of RCAP and Apollo;

(b)          by (i) Apollo upon written notice to RCAP at any time following the termination of the ARC Transaction Agreement provided that Apollo may not terminate this Agreement if such termination of the ARC Transaction Agreement was the result of any willful and material breach by Apollo or any of its Affiliates of any of their respective representations or warranties or any of their respective covenants or agreements contained in the ARC Transaction Agreement or (ii) RCAP upon written notice to Apollo at any time following the termination of the ARC Transaction Agreement, provided that RCAP may not terminate this Agreement if Apollo waives the condition set forth in Section 5.2(j) within ten (10) Business Days following the termination of the ARC Transaction Agreement;

(c)          by RCAP or Apollo upon written notice to the other parties in the event that any Governmental Authority (including any court of competent jurisdiction) shall have issued an order, decree or ruling or taken any other official action enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; provided that the right to terminate this Agreement pursuant to this Section 6.1(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been a material cause of, or resulted in, the occurrence of such order, decree, ruling or other action.

(d)          by RCAP, if there shall be a breach by Apollo of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.3(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to Apollo of such breach; provided that RCAP shall not have the right to terminate this Agreement pursuant to this Section 6.1(d) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.2 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied.

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(e)          by Apollo, if there shall be a breach by any of the Sellers of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.2(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to such Seller of such breach; provided that Apollo shall not have the right to terminate this Agreement pursuant to this Section 6.1(e) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.3 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied; or

(f)          by RCAP or Apollo upon written notice given to the other parties in the event that the Closing shall not have taken place on or before June 30, 2016 (the “Outside Date”), unless such party has breached any covenant or agreement hereunder and such breach has resulted in the failure of the Closing to occur on or prior to the Outside Date.

6.2          Effect of Termination.

(a)          In the event of the termination of this Agreement as provided above, this Agreement (other than this Section 6.2) shall become void and of no further force and effect, and there shall be no duties, liabilities or obligations of any kind or nature whatsoever on the part of any party hereto to the other parties based either upon this Agreement or the transactions contemplated hereby, provided that (a) no such termination (nor any provision of this Agreement) shall relieve any party from liability for any damages for actual and intentional fraud or any willful and material breach of any covenant hereunder prior to such termination and (b) the obligations of the parties referred to in the first sentence of Section 4.2(b), Section 4.4, Section 4.10, this Section 6.2 and Article IX shall continue to apply following any such termination of this Agreement. For purposes of this Agreement, “willful and material breach” means a material breach of any covenant set forth in this Agreement that is a consequence of an act or failure to act by or on behalf of the breaching party with knowledge that the taking of such act or failure to take such act would, or would reasonably be expected or likely to, result in a breach of this Agreement.

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Article VII
Indemnification

7.1          Indemnification by the Sellers.

(a)          From and after the Closing, subject to the other provisions of this Article VII, the Sellers shall jointly and severally indemnify Apollo and its officers, directors, employees and Affiliates (collectively, the “Indemnified Apollo Parties”), and hold each of them harmless from and against, any and all actions, suits, proceedings, demands, assessments, judgments, claims, liabilities, losses (including losses arising from the diminution of value), costs, damages, expenses, interest or penalties, and reasonable attorneys’ fees, expenses and disbursements, whether or not resulting from a Third Party Claim (collectively, “Damages”), suffered, paid or incurred by such Indemnified Apollo Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties (read without giving effect to any qualifications regarding materiality, Material Adverse Effect or similar qualifications other than with respect to the representations in Section 2.6 and Section 2.9(a)) made by the Sellers in Article II, or in any certificate or other document delivered in connection with this Agreement, as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates), (ii) any breach by a Seller of any covenant or agreement of such Seller contained in this Agreement, (iii) any matter described in Section 7.1(a)(iii) of the Seller Disclosure Letter, (iv) the Excluded RCS Business or any other businesses operated or conducted by the Sellers and its Subsidiaries (other than the Subject Companies), (v) any matter described in Section 7.1(a)(v) of the Seller Disclosure Letter, (vi) the Pre-Closing Restructuring Actions, (vii) any FINRA Burdensome Condition (provided, however, that the obligation to indemnify for any FINRA Burdensome Condition shall not apply if Apollo has exercised its right under the second sentence of Section 5.2(i)), and (viii) any New Disclosure that would entitle Apollo to terminate the Agreement pursuant to Section 4.5.

(b)          Notwithstanding anything to the contrary contained in this Section 7.1, except with respect to actual fraud or breaches of Fundamental Representations (and, for the avoidance of doubt, Section 2.11, the indemnification for which shall be governed under Article VIII), as to which the limitations in this Section 7.1(b) shall not apply, the Indemnified Apollo Parties shall be entitled to indemnification for breaches of representations and warranties pursuant to Section 7.1(a)(i):

(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified Apollo Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(i), exceed $500,000 (the “Deductible”), whereupon (subject to the provisions of clause (ii) below) the Sellers shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of the amount of the Deductible; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to RCAP on or before the date that is eighteen (18) months after the Closing Date (other than claims for indemnification arising from a breach of any Fundamental Representation, which must be asserted by the Indemnified Apollo Parties not later than sixty days following the expiration of the relevant statute of limitations).

In addition, the Sellers shall not be liable for indemnification pursuant to Section 7.1(a)(i) with respect to any Damages suffered, paid or incurred by an Indemnified Apollo Party of less than $20,000 (a “De Minimis Damage”), and all De Minimis Damages shall be disregarded for purposes of the Deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence.

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(c)          Notwithstanding anything to the contrary contained in this Section 7.1, the Indemnified Apollo Parties shall be entitled to indemnification pursuant to Section 7.1(a)(iii) only if, and then only to the extent that, the aggregate Damages to all Indemnified Apollo Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(iii), exceed $1,000,000, whereupon the Sellers shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $1,000,000.

7.2          Indemnification by Apollo.

(a)          From and after the Closing Date, subject to the other provisions of this Article VII, Apollo shall indemnify the Sellers and their respective officers, directors, employees and Affiliates (collectively, the “Indemnified RCS Parties”) and to hold each of them harmless from and against any and all Damages suffered, paid or incurred by such Indemnified RCS Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties made by Apollo in Article III as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates); or (ii) any breach by Apollo of any covenant or agreement of Apollo contained in this Agreement.

(b)          Notwithstanding anything to the contrary contained in this Section 7.2, except with respect to actual fraud or breaches of representations and warranties contained in Sections 3.1, 3.2, 3.7 and 3.8 as to which the limitations of this Section 7.2(b) shall not apply, the Indemnified RCS Parties shall be entitled to indemnification pursuant to Section 7.2(a)(i):

(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified RCS Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.2(a)(i), exceed the amount of the Deductible, whereupon (subject to the provisions of clause (ii) below) Apollo shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of the amount of the Deductible; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to Apollo on or before the date that is eighteen (18) months after the Closing Date.

In addition, Apollo shall not be liable for indemnification pursuant to Section 7.2(a)(i) with respect to any De Minimis Damages suffered, paid or incurred by an Indemnified RCS Party, and all De Minimis Damages shall be disregarded for purposes of the Deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence.

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7.3          Indemnification Procedures.

(a)          If an Indemnified Apollo Party or an Indemnified RCS Party (each, an “Indemnified Party”) believes that a claim, demand or other circumstance exists that has given or may reasonably be expected to give rise to a right of indemnification under this Article VII (whether or not the amount of Damages relating thereto is then quantifiable), such Indemnified Party shall assert its claim for indemnification by giving written notice thereof (a “Claim Notice”) to RCAP (if indemnification is sought from a Seller (an “Indemnifying RCS Party”)) or to Apollo (if indemnification is sought from Apollo (an “Indemnifying Apollo Party”)) (in either such case, the “Indemnifying Party”) (i) if the event or occurrence giving rise to such claim for indemnification is, or relates to, a claim, suit, action or proceeding brought by a Person not a party to this Agreement or affiliated with any such party (a “Third Party Claim”), promptly and in any event no later than thirty (30) days after it has received notice of such claim, suit, action or proceeding by such Indemnified Party, or (ii) if the event or occurrence giving rise to such claim for indemnification is not, or does not relate to, a Third Party Claim, promptly after the discovery by the Indemnified Party of the circumstances giving rise to such claim for indemnity; provided, however, that any failure or delay in providing such notice shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent the Indemnifying Party is actually prejudiced by such failure or delay. Each Claim Notice shall describe the claim in reasonable detail based on information available at the time.

(b)          If any claim or demand by an Indemnified Party under this Article VII relates to a Third Party Claim, the Indemnifying Party may elect to assume, conduct and control the defense of the Indemnified Party against such Third Party Claim (including using counsel of the Indemnifying Party's choosing). The Indemnified Party may participate at its own expense, with counsel of its choosing, in the defense of such Third-Party Claim although such Third-Party Claim shall be controlled by the Indemnifying Party. Until the Indemnifying Party has assumed the defense of the Indemnified Party against such Third Party Claim, the Indemnified Party may defend such Third Party Claim but in no event shall the Indemnified Party negotiate a settlement or a compromise of such Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), and if such Indemnifying Party provides such prior written consent, any such settlement or compromise by the Indemnified Party and the Indemnified Party’s reasonable costs and expenses arising out of such defense, settlement or compromise of such Third Party Claim shall be Damages subject to indemnification hereunder to the extent provided herein. Except with the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed), the Indemnifying Party shall not settle or otherwise compromise or pay such Third Party Claim; provided that any such settlement or compromise shall be permitted hereunder without the written consent of the Indemnified Party if such settlement or compromise (w) involves only money damages paid by or on behalf of the Indemnifying Party, (x) does not encumber any of the assets of any Indemnified Party or its Affiliates or include any restriction or condition that would apply to or adversely affect any Indemnified Party or any of its Affiliates or the conduct of any Indemnified Party’s or its Affiliates’ business, (y) includes a complete release by such Third Party of such Indemnified Party and (z) does not include any admission of wrongdoing or misconduct by such Indemnified Party.

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(c)          Each Indemnified Party shall make available to the Indemnifying Party all information and documents in its possession or reasonably available to such Indemnified Party relating to such action or claim which is not confidential or proprietary in nature or which is made available under the terms of a confidentiality agreement or is delivered or obtained under appropriate protective orders reasonably satisfactory to such party, together with all pertinent information regarding the amount of the Damages that it asserts it has sustained or incurred. In addition, the parties shall render to each other such assistance as may reasonably be requested in order to help ensure the proper and adequate defense of any such action or claim. The party in charge of the defense shall keep the other parties reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.

7.4       General.

(a)          The aggregate amount which the Sellers are or may be required to pay pursuant to Section 7.1(a)(i), 7.1(a)(ii) and 7.1(a)(vii) shall not exceed fifty percent (50%) of the Purchase Price, and the aggregate amount which Apollo is or may be required to pay pursuant to Section 7.2(a)(i) and 7.2(a)(ii) shall not exceed fifty percent (50%) of the Purchase Price.

(b)          Notwithstanding anything herein to the contrary, no Indemnifying Party shall be liable for any Damages that are not reasonably foreseeable, that are speculative, that are based on reputational damage to Apollo or any of its Affiliates (including the Subject Companies), or that constitute punitive or other exemplary Damages, except to the extent that such Damages have been awarded to a Third Party against an Indemnified Party.

(c)          The amount which the Indemnifying Party is or may be required to pay to any Indemnified Party pursuant to this Article VII shall be reduced (retroactively, if necessary) by any insurance proceeds, indemnification from other sources or other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Damages, net of any deductibles or other similar expenses incurred in connection therewith, it being understood and agreed that an Indemnified Party shall use commercially reasonable efforts to seek recovery under any applicable insurance policies, other contracts or arrangements that provide for indemnification or from other sources that may provide recovery for such Damages. If an Indemnified Party shall have received payment from the Indemnifying Party in respect of Damages and shall subsequently receive insurance or indemnification proceeds or other amounts in respect of such Damages, then such Indemnified Party shall promptly repay to the Indemnifying Party a sum equal to the amount of such net insurance or indemnification proceeds or other net amounts actually received. The Indemnifying Party shall be subrogated to any right of action which the Indemnified Party may have against any other Person with respect to any matter giving rise to a claim for indemnification hereunder. Any Indemnified Party that becomes aware of Damages for which it seeks indemnification shall be required to use commercially reasonable efforts to mitigate the Damages.

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(d)          The amount of any Damages for which indemnification is provided under this Article VII or Article VIII shall be adjusted to take account of any net Tax benefit (or cost) actually realized by the Indemnified Party or any of its Affiliates in the year such Damages are incurred or paid arising from the incurrence or payment of any such Damages. In computing the amount of any such Tax benefit (or cost), the Indemnified Party (or its applicable Affiliate) shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Damages.

(e)          An Indemnified Party shall be entitled to indemnification pursuant to Sections 7.1(a)(ii) and 7.2(a)(ii) only if a notice asserting the right to indemnification has been given to the Indemnifying Party not later than the earlier of sixty days following the expiration of the relevant statute of limitations, if applicable.

(f)          The indemnification provided in this Article VII shall be the exclusive post-Closing remedy available to any party with respect to any breach of any representation, warranty, covenant or agreement in this Agreement, or otherwise in respect of the transactions contemplated by this Agreement, except (i) in the case of actual fraud or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available, or (ii) with respect to Taxes and other Damages in respect of Taxes (the indemnification for which is governed under by Article VIII).

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Article VIII
Tax Matters

8.1          Tax Indemnity. Seller shall bear and pay, reimburse, indemnify and hold harmless the Indemnified Apollo Parties for, from and against any and all Taxes and other Damages in respect of Taxes that (a) are imposed on, allocated or attributable to or incurred or payable by any of the Subject Companies for any Pre-Closing Tax Period, together with any interest, penalty or additions to Tax accruing after the Closing Date on Taxes described in this clause (a), (b) arise under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law by virtue of any of the Subject Companies having been a member of a consolidated, combined, affiliated, unitary or other similar tax group prior to the Closing, (c) are imposed by reason of any of the Subject Companies having liability for Taxes of another Person arising under principles of transferee or successor liability or by contract (other than as a result of any customary tax sharing or allocation provisions in commercial contracts not primarily related to Taxes) as a result of activities or transactions taking place at or prior to the Closing, (d) arise from or are attributable to any inaccuracy in or breach of any representation or warranty made in Section 2.11 , (e) arise from or are attributable to any breach by the Sellers of any covenant made in this Article VIII or Section 4.1(p), (f) arise from the inclusion of any income or gain by any of the Subject Companies in any Post-Closing Tax Period (i) under Section 453 of the Code (or any similar provision of state, local or foreign law) in respect of any transaction occurring prior to the Closing or (ii) under Section 108(i) of the Code (or any similar provision of state, local or foreign law) in respect of any reacquisition occurring at or prior to the Closing, (g) arise from or are attributable to any payment to RCAP or any of its Affiliates pursuant to this Agreement, including any withholding tax imposed on any such payment, or (h) Taxes that are the responsibility of the Sellers under Section 8.6. The amount of any payments required to be made pursuant to this Section 8.1 shall be computed without regard to any net operating loss, net capital loss or other Tax deduction, credit or benefit that is attributable to, arises from or relates to any Post-Closing Tax Period. Notwithstanding any other provision of this Agreement and for the avoidance of doubt, the limitations in Section 7.1(b), 7.1(c) and Section 7.4 shall not apply to this Section 8.1. The indemnity set forth in this Section 8.1 shall survive until sixty days following the expiration of the relevant statute of limitations provided, that this indemnity shall survive the time at which it would otherwise terminate pursuant to this Section 8.1 if notice of the claim giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

8.2          Straddle Periods. For purposes of this Article VIII, any liability for Taxes attributable to a taxable period that begins before and ends after the Closing Date (a “Straddle Period”) shall be apportioned between the portion of such period ending on the Closing Date and the portion beginning on the day after the Closing Date (a) in the case of real and personal property Taxes, by apportioning such Taxes on a per diem basis and (b) in the case of all other Taxes, on the basis of a closing of the books as of the close of business on the Closing Date, provided that exemptions, allowances or deductions that are calculated on an annual basis shall be apportioned on a per diem basis. For the avoidance of doubt, for purposes of this Section 8.2, in the case of any income Tax attributable to the ownership of an entity that is taxed as a partnership or of any other entity that is treated as a “flow-through” entity for Tax purposes (excluding a “controlled foreign corporation” within the meaning of Section 957(a) of the Code), the portion of such income Tax that relates to the Pre-Closing Tax Period shall be deemed to be the amount that would be payable if the relevant Tax period of such “flow-through” entity ended on the Closing Date, provided that if the information necessary to determine such portion is unavailable, such portion shall be determined by apportioning such Taxes attributable to a Straddle Period on a per diem basis or by using such method as the parties hereto reasonably agree.

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8.3          Tax Returns.

(a)         From the date of this Agreement through and after the Closing Date, the Sellers shall prepare and file as required by Applicable Law with the appropriate taxing authority (or cause to be prepared and filed) in a timely manner all Tax Returns of the Subject Companies that are required to be filed on or prior to the Closing Date. All such Tax Returns shall be prepared in a manner consistent with most recent past practice, except as otherwise required by Applicable Law.

(b)         The Sellers shall prepare and file as required by Applicable Law with the appropriate taxing authority (or cause to be prepared and filed) in a timely manner all other Pre-Closing Tax Period Tax Returns of the Subject Companies. All such Tax Returns shall be prepared in a manner consistent with most recent past practice, except as otherwise required by Applicable Law. Apollo shall prepare and file as required by Applicable Law with the appropriate taxing authority (or cause to be prepared and filed) in a timely manner all Straddle Period Tax Returns of the Subject Companies. All such Tax Returns shall be prepared in a manner consistent with most recent past practice, except as otherwise required by Applicable Law.

(c)          RCAP shall take 100% of each item shown on the Tax Returns described in this Section 8.3 for Tax Periods (or portions thereof) ending on or prior to the Closing Date that is imposed or determined on a “flow through” basis (where no Subject Company is the taxpayer under applicable Tax law) into account on its Tax Returns. The Sellers shall pay to Apollo, or cause to be paid to Apollo, all Tax amounts shown as due on such Tax Returns for periods (or portions thereof) ending on or before the Closing Date with respect to Taxes imposed on the Subject Companies.

(d)         Each party responsible for the preparation of a Tax Return under this Section 8.3 shall submit such Tax Return to the other party (together with schedules, statements and, to the extent requested by such other party, supporting documentation) at least thirty (30) Business Days prior to the due date (including extensions) of such Tax Return. If such other party objects to any item on any such Tax Return (including a pro forma Tax Return) described in Section 8.4(b) it shall, within fifteen (15) Business Days after delivery of such Tax Return, notify the other party responsible for preparation of such Tax Return in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection is duly delivered, Apollo and RCAP shall negotiate in good faith and use their reasonable best efforts to resolve such items. In the event of any disagreement that cannot be resolved between Apollo and RCAP, such disagreement shall be resolved by an accounting firm of international reputation mutually agreeable to RCAP and Apollo (the “Tax Accountant”), and any such determination by the Tax Accountant shall be final. The fees and expenses of the Tax Accountant shall be borne equally by Apollo and RCAP. If the Tax Accountant does not resolve any differences between RCAP and Apollo with respect to such Tax Return at least five days prior to the due date therefor, such Tax Return shall be filed as prepared by Apollo and amended to reflect the Tax Accountant’s resolution. The preparation and filing of any Tax Return that does not relate to a Pre-Closing Tax Period or a Straddle Period shall be exclusively within the control of Apollo.

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(e)          After the Closing, RCAP shall not, and shall not permit any of its Affiliates to, without the written consent of Apollo, amend any Tax Returns or change any Tax elections or accounting methods with respect to any of the Subject Companies relating to any Pre-Closing Tax Period to the extent such amendment or change could reasonably be expected to have a material cost to Apollo or any of the Subject Companies.

8.4          Tax Contests. Apollo shall promptly notify RCAP in writing upon receipt by any of the Subject Companies, or by Apollo or any of its Affiliates, of notice of any Tax audits, examinations or assessments that could give rise to a liability for which the Sellers are responsible under Section 8.1 of this Agreement, provided that Apollo’s failure so to notify RCAP shall not limit Apollo’s rights under this Article VIII except to the extent the Sellers are materially prejudiced by such failure. RCAP shall promptly notify Apollo in writing upon receipt by RCAP or any of its Affiliates of notice of any Tax audits, examinations or assessments that could give rise to Taxes of or with respect to any of the Subject Companies. Except as otherwise provided herein, (a) RCAP shall control any such audit, examination or proceeding that relates exclusively to a Pre-Closing Tax Period and (b) Apollo shall control (i) any Tax audit, examination or proceeding that is not described in clause (a) and (ii) any Tax audit, examination or proceeding described in clause (a) if ARC fails to assume control of such audit, examination or proceeding within a reasonable period after receiving notice thereof. In either case, the party controlling such Tax audit, examination or proceeding shall (w) notify the other party of significant developments with respect to such Tax audit, examination or proceeding and keep the other party reasonably informed and consult with the other party as to the resolution of any issue that would materially affect such other party, (x) give to the other party a copy of any Tax adjustment proposed in writing with respect to such Tax audit, examination or proceeding and copies of any other written correspondence with the relevant taxing authority relating to such Tax audit, examination or proceeding, (y) not settle or compromise any issue without the consent of such other party, which consent shall not be unreasonably withheld, conditioned or delayed and (z) otherwise permit the other party to participate in all aspects of such Tax audit, examination or proceeding, at such other party’s own expense.

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8.5          Books and Records; Cooperation. Each of the Sellers and Apollo shall (and shall cause their respective Affiliates to) (a) provide the other party and its Affiliates with such assistance as may be reasonably requested in connection with the preparation of any Tax Return or claim for refund, the determination of a tax liability for Taxes or a right to refund of Taxes or the conduct of any audit or other examination by any taxing authority or any judicial or administrative proceeding relating to Taxes and (b) retain (and provide the other party and its Affiliates with reasonable access to) all records or information which may be relevant to such Tax Return, claim for refund, Tax determination, audit, examination or proceeding. Such cooperation and information shall include providing copies of all relevant Tax Returns, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations made by taxing authorities and records concerning the ownership and tax basis of property, which either party may possess. Each party shall make its employees available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Except as otherwise provided in this Agreement, the party requesting assistance hereunder shall reimburse the other for any reasonable out of pocket costs incurred in providing any Tax Return, document or other written information, and shall compensate the other for any reasonable costs (excluding wages and salaries and related costs) of making employees available, upon receipt of reasonable documentation of such costs. Any information obtained under this Section 8.5 shall be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting any audit, examination or other proceeding. Apollo and the Sellers agree that the sharing of information and cooperation contemplated by this Section 8.6 shall be done in a manner so as not to interfere unreasonably with the conduct of the business of the parties.

8.6          Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any real property transfer tax and any similar Tax, and including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be borne 50% by the Sellers and 50% by Apollo, and the Sellers shall file all necessary Tax returns and other documentation with respect to all such Taxes and fees, and, if required by Applicable Law, Apollo shall, and shall cause its Affiliates to, join in the execution of any such Tax returns and other documentation.

8.7          Tax Agreements; Powers of Attorney. Prior to the Closing, the participation of the Subject Company in all Tax Agreements to which any of the Subject Companies is a party (other than agreements to which the Subject Companies are the only parties) shall be terminated such that none of the Subject Companies shall have any obligations thereunder following the Closing. RCAP shall cause any and all existing powers of attorney with respect to Taxes or Tax Returns to which any of the Subject Companies is a party to be terminated as of the Closing.

8.8          Overlap. To the extent of any inconsistency between this Article VIII and Article VII, this Article VIII shall control as to Tax matters.

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8.9          Section 754 Elections. To the extent that an election described in this Section 8.9 is required by Applicable Law to be reflected on a Tax Return filed by the Sellers following the Closing in order to be effective at Closing, or to the extent that a Seller’s consent to such an election is otherwise required, the Sellers shall cooperate with Apollo in the making of a valid election under Section 754 of the Code and any analogous or similar provision of state or local law (such election to be effective as of no later than the Closing Date) with respect to any Subject Company that is properly classified as a partnership for U.S. federal income tax purposes. To the extent the Sellers do not have the unilateral right to cause any Subject Company to make an election described in this Section 8.9, the Seller shall use their commercially reasonable efforts to cause such Subject Company to make such an election.

8.10        FIRPTA Certificate. Each of the Sellers shall have delivered to Apollo a statement, meeting the requirements of Section 1.1445-2(b) of the Treasury Regulations, to the effect that such Seller is not a “foreign person” within the meaning of Section 1445 of the Code and the Treasury Regulations thereunder.

8.11        Allocation. Within 90 days after the Closing Date, Apollo shall provide to RCAP a statement (the “Allocation Statement”) allocating the Consideration and any other items that are treated as additional Consideration for tax purposes among the Subject Companies and among the different assets of the Subject Companies. Apollo shall provide RCAP a reasonable opportunity to review and comment on the Allocation Statement and cooperate in good faith with RCAP to resolve any disagreement relating to the calculations or allocations set forth in the Allocation Statement. If Apollo and RCAP do not reach an agreement with respect to the Allocation Statement, any such disputed items shall be resolved by the Accounting Firm using the procedures set out in Section 1.6, provided that if the Accounting Firm determines that there is a reasonable basis for Apollo’s position with respect to any disputed item, the Accounting Firm shall resolve such disputed item in accordance with Apollo’s position Apollo and RCAP shall file all Tax Returns in a manner that is consistent with the final Allocation Statement and refrain from taking any action inconsistent therewith.

8.12        Tax Treatment of Certain Payments. The parties shall treat any indemnity payment made under this Agreement as an adjustment to the Purchase Price for all U.S. federal, state, local and foreign Tax purposes to the extent permitted by law, and the parties shall, and shall cause their respective Affiliates to, file their Tax Returns accordingly.

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Article IX

General Provisions

9.1           Survival. Except for the Fundamental Representations and the representations contained in Section 2.11, in each case, which shall survive until the earlier of (i) sixty days following the expiration of the relevant statute of limitations and (ii) the fifth anniversary of the Closing Date, each of the representations and warranties of the parties hereunder shall survive the Closing until the date which is eighteen (18) months after the Closing Date, at which time they shall terminate and be of no further force or effect; provided that any representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to this Section 9.1 if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

9.2           Notices. All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail with postage prepaid and return receipt requested or sent by commercial overnight courier, courier fees prepaid (if available; otherwise, by the next best class of service available), to the parties at the following addresses:

(a)	if to Apollo, to it at:
	Apollo Management Holdings, L.P.
	9 West 57th Street, 43rd Floor
	New York, New York 10019
	Attn:   John J. Suydam
	Email:  jsuydam@ApolloLP.com
	with a copy (which shall not constitute notice) to:
	Debevoise & Plimpton LLP
	919 Third Avenue
	New York, NY 10022
	Attn:   Jeffery J. Rosen
	Gregory V. Gooding
	Email:  jrosen@debevoise.com
	ggooding@debevoise.com
(b)	if to the Sellers, to:
	RCS Capital Corporation
	405 Park Ave
	New York, NY 10022
	Attention:  James A. Tanaka (JTanaka@rcscapital.com)
	with a copy (which shall not constitute notice) to:
	Proskauer Rose LLP
	11 Times Square
	New York, NY  10036
	Attn:  Steven L. Lichtenfeld (SLichtenfeld@proskauer.com)

or to such other Person or address as any party shall specify by notice in writing to the other parties in accordance with this Section 9.2. All such notices or other communications shall be deemed to have been received on the date of the personal delivery, on the third Business Day after the mailing or dispatch thereof, or in the case of electronic mail or facsimile transmission, on the date received, subject to confirmation of receipt; provided that notice of change of address shall be effective only upon receipt.

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9.3          Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “party” or “parties” shall refer to parties to this Agreement. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. All Disclosure Letters referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Disclosure Letter but not otherwise defined therein shall have the meaning given to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including any such date. Any reference to “days” means calendar days unless Business Days are expressly specified. If any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter. All references to “$” or “dollars” set forth in this Agreement are to U.S. dollars.

9.4          Amendment and Modification; Waiver.

(a)          This Agreement may not be amended except by an instrument or instruments in writing signed and delivered on behalf of each of Apollo and RCAP.

(b)          At any time prior to the Closing, any party that is entitled to the benefits hereof may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracy in the representations and warranties of any other party contained herein or in any Disclosure Letter or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements of any other party or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid if set forth in an instrument in writing signed and delivered on behalf of such party. Waivers shall operate to waive only the specific matter described in the writing and shall not impair the rights of the party granting the waiver in other respects or at other times. A party’s waiver of a breach of a provision of this Agreement, or failure (on one or more occasions) to enforce a provision of, or to exercise a right under, this Agreement, shall not constitute a waiver of a similar breach, or of such provision or right other than as explicitly waived.

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9.5          Entire Agreement. This Agreement (including the Disclosure Letters and the Ancillary Agreements) and the Confidentiality Agreement constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, of the parties with respect to the subject matter hereof.

9.6          Disclosure Letters. For purposes of the representations and warranties of the Sellers and Apollo in this Agreement, items disclosed in one section of a Disclosure Letter shall be considered to be made for purposes of all other sections of such Disclosure Letter to the extent that the relevance of any such disclosure to any other such section of such Disclosure Letter is reasonably apparent from the text of such disclosure. For purposes of the representations and warranties of the Sellers in this Agreement, items disclosed with respect to the Subject Companies in the forms, statements and reports of RCAP publicly available, filed with, or furnished (on a publicly available basis) to the SEC on or after January 1, 2014 and prior to the date of this Agreement shall be considered to be disclosed for purposes of the Seller Disclosure Letter (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks or other matters included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to, or disclosure for purposes of, any representation or warranty set forth in Article II). The disclosure of any item or matter in any Disclosure Letter shall not be construed as an admission, representation or indication that such item or other matter is “material” or would have a Material Adverse Effect or that such item or other matter is required to be referred to or disclosed in such Disclosure Letter. The disclosure of any item or matter relating to any possible breach or violation of any law or contract shall not be construed as an admission or indication that any such breach or violation exists or has actually occurred.

9.7          Third Party Beneficiaries. Except with respect to Indemnified Parties in their capacity as such pursuant to Articles VII and VIII and except with respect to Newco (in connection with Section 4.18 and any assignment to Newco pursuant to Section 9.9), nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

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9.8          Specific Performance. The parties agree that if any of the provisions of this Agreement were not performed by the parties in accordance with their specific terms or were otherwise breached thereby, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that each party hereto shall be entitled to specific performance to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it may be entitled at law or in equity.

9.9          Assignment; Binding Effect. This Agreement may not be assigned by any party without the prior written consent of the other parties, provided that Apollo may assign this Agreement, including Apollo’s right to acquire the Acquired Interests and obligation to pay the Purchase Price, to any Affiliate of Apollo (including, from and after the Closing, Newco) without consent of the Sellers, but any such assignment shall not relieve Apollo of its obligations hereunder to the extent that such assignee fails to perform such obligations; provided, further, that notwithstanding any such assignment, Apollo shall continue to have the right to enforce this Agreement. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

9.10        Governing Law. This Agreement shall be governed in all respects (including as to validity, interpretation and effect) by the internal laws of the State of New York, without giving effect to any conflict of laws rules or principles that would require or permit the application of another jurisdiction’s laws.

9.11        Jurisdiction; Waiver of Jury Trial.

(a)          Each party hereby irrevocably agrees that any action or proceeding arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights or obligations shall be brought exclusively in the courts of the State of New York located in the Borough of Manhattan or the federal courts of the United States of America located in the Southern District of New York (and appellate courts thereof) and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail or by overnight courier service, postage prepaid, to its address set forth in Section 9.2.

(b)          Each party hereby waives all rights to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights and obligations. Each party (i) certifies that no representative, agent or attorney of any party has represented, expressly or otherwise, that such party would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the other parties have been induced to enter into this Agreement and the transactions contemplated hereby by, among other things, the waivers and certifications contained herein.

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9.12        Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

9.13        Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

Article X
Definitions

The following terms when used in this Agreement shall have the following meanings:

“Accounting Firm” means KPMG.

“Acquired Benefit Plans” means Employee Benefit Plans maintained, sponsored or contributed to by the Subject Companies or with respect to which any of the Subject Companies could incur or has incurred liability under Applicable Law, including the Code or ERISA.

“Accounting Principles” means, in the following order of priority: (i) the policies, practices and procedures set forth in Schedule B, (ii) the policies, practices and procedures utilized in arriving at sample calculation of Regulatory Capital and Net Working Capital set forth in Schedule A, and (iii) to the extent not covered by clause (i) or (ii) hereof, GAAP, consistently applied.

“Acquired Companies” has the meaning set forth in the Recitals hereto.

“Acquired Interests” has the meaning set forth in the Recitals hereto.

“Acquisition Proposal” has the meaning set forth in Section 4.6.

“Affiliate” of a Person means a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the first Person. “Control” (and “controlled by” and “under common control with”) means possessing, directly or indirectly, the power to direct or cause the direction of a Person’s management or policies, through owning voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

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“Aggregate Cash Bonuses” has the meaning set forth in Section 4.12(f)

“Aggregate Indebtedness” has the meaning as interpreted by the SEC in SEC Rule 15c3-1(c)(1) under the Exchange Act.

“Agreement” has the meaning set forth in the introductory paragraph hereof.

“Allocation Statement” has the meaning set forth in Section 8.11.

“AMH” has the meaning set forth in the Recitals hereto.

“Ancillary Agreements” means the Strategic Relationship Agreement, the Operating Agreement, the RCAP-ARC-Newco Transition Services Agreement, the Luxor Consent, the Services Termination Agreement and the StratCap Waiver and the other documents to be delivered pursuant to Section 1.3 and all other agreements or instruments to be executed and delivered in connection with the transactions contemplated hereby.

“ANST” has the meaning set forth in the Recitals hereto.

“Apollo” has the meaning set forth in the introductory paragraph hereof.

“Apollo Disclosure Letter” means the disclosure letter delivered by Apollo to ARC at the time of execution hereof.

“Applicable Law” means any domestic or foreign federal, state or local statute, law (whether statutory or common law), ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, policy, guidelines or other requirement applicable to the Business, RCAP, RCAP’s Subsidiaries, including the Subject Companies, Apollo, or any of their respective Affiliates, holders of Equity Securities, properties, assets, officers, directors, employees or agents, as the case may be.

“ARC” has the meaning set forth in the Recitals.

“ARC Transaction Agreement” has the meaning set forth in the Recitals.

“Base Purchase Price” has the meaning set forth in Section 1.1(b)

“Bonus True-Up Payment” has the meaning set forth in Section 4.12(f).

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“Books and Records” means all books, records, files, data, reports, plans, catalogs, computer data, certificates and other documents of the Business and the Subject Companies (including records with respect to historic product performance), all sales and promotional literature, or copies thereof, used or held for use in connection with the conduct of the business and operations of the Business and the Subject Companies.

“Broker-Dealer Subsidiaries” has the meaning set forth in Section 2.18.

“Burdensome Condition” has the meaning set forth in Section 4.3(c).

“Business” means the business of the Subject Companies, excluding the Excluded RCS Business and including the Marketing/Event Business.

“Business Day” means any day which is not a Saturday, Sunday or a day on which banks in New York, New York are authorized or obligated by law or executive order to be closed.

“CFTC” means the Commodity Futures Trading Commission.

“Claim Notice” has the meaning set forth in Section 7.3(a).

“Closing” has the meaning set forth in Section 1.2.

“Closing Condition Satisfaction Date” means the date on which the conditions set forth in Article V have been satisfied or waived (other than those conditions that by their terms are to be satisfied by actions taken at the Closing, but subject to the satisfaction or waiver of those conditions at such time).

“Closing Date” has the meaning set forth in Section 1.2.

“Closing Net Working Capital” means the Net Working Capital of the Subject Companies as of 12:01 am on the Closing Date.

“Closing Regulatory Capital” means the “Net Capital” (determined in accordance with the definitions and principles of the SEC Uniform Net Capital Rule 15c3-1) of the Subject Companies as of 12:01 am on the Closing Date.

“Closing Statement” has the meaning set forth in Section 1.6.

“Code” means the Internal Revenue Code of 1986, as amended.

“Competitor” means any of the Persons listed on Section 10.1 of the Apollo Disclosure Letter.

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“Confidentiality Agreement” means the letter agreement, dated February 9, 2015, between Apollo and RCAP.

“Consent” means any consent, approval, authorization, waiver, permit, license, grant, agreement, exemption or order of, or registration, declaration or filing with, any Person, including any Governmental Authority, that is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

“Contract” has the meaning set forth in Section 2.3.

“Damages” has the meaning set forth in Section 7.1(a).

“Deductible” has the meaning set forth in Section 7.1(b)(i).

“De Minimis Damage” has the meaning set forth in the last paragraph of Section 7.1(b).

“Disclosure Letters” means the Seller Disclosure Letter and the Apollo Disclosure Letter.

“Employee” means each current or former employee of (x) the Subject Companies, (y) the Sellers and their Affiliates whose duties and responsibilities are principally related to the Business and listed on Section 10.1 of the Seller Disclosure Letter and (z) of RCS Advisory Services engaged in the Marketing/Event Business that Buyer shall request be transferred to one or more of the Subject Companies no later than ten (10) Business Days prior to the Closing Date, which employees shall be transferred effective as of immediately prior to the Closing Date.

“Employee Benefit Plan” means each employee benefit plan, scheme, program, policy, arrangement or contract, whether written or unwritten, including, but not limited to, any “employee benefit plan”, as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and any bonus, deferred compensation, equity purchase, equity grant or other equity-based arrangement (including, to the extent applicable, under Organizational Documents of Seller or any of its Affiliates, including the Subject Companies, and any employment, termination, retention, bonus, change in control or severance plan, program, policy, arrangement or contract for the benefit of any current or former officer, employee, partner, director or other service provider of the Subject Companies or the Business or in which any of them participate as of the date hereof.

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“Environmental Law” means any law, code, license, permit, authorization, approval, consent, common law, legal doctrine, requirement or agreement with any Governmental Authority relating to (i) the protection, preservation or restoration of the environment (including air, water, vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of hazardous substances.

“Equity Securities” means, with respect to any Person, any and all limited liability company interests, partnership interests, capital stock, options or other equity securities in such Person, and all securities exchangeable for or convertible or exercisable into, any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated thereunder.

“Estimated Closing Net Working Capital” has the meaning set forth in Section 1.1(c)

“Estimated Closing Regulatory Capital” has the meaning set forth in Section 1.1(c)

“Estimated Closing Statement” has the meaning set forth in Section 1.1(c)

“Estimated Purchase Price” has the meaning set forth in Section 1.1(b).

“Excess Capital” has the meaning set forth in Section 1.1(d).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.

“Excluded RCS Business” means the provision of investment banking services by RCS as of the date hereof and immediately prior to the Closing.

“Existing Employee of the Business” has the meaning set forth in Section 4.12(f).

“Financial Statements” means (i) the audited balance sheet of RCS as of December 31, 2014, and the related audited statements of income, cash flows and changes in members’ equity and footnotes for the twelve months ended December 31, 2014; (ii) the audited balance sheet of SC Distributors as of December 31, 2014, and the related audited statements of income, cash flows and changes in members’ equity and footnotes for the twelve months ended December 31, 2014; and (iii) the Required Financial Statements to be delivered by the Sellers pursuant to Section 4.7(b).

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“FINRA” has the meaning set forth in Section 2.18(a).

“FINRA Approval” means that, as of the Closing Date, FINRA shall have approved the sale of the Subject Companies pursuant to NASD Rule 1017.

“FINRA Burdensome Condition” means any requirements of or remedies imposed by FINRA in connection with the FINRA Approval that (i) would be materially adverse to Apollo and/or its Affiliates, including, after the Closing, the Acquired Companies and/or the Subject Companies as defined in the ARC Transaction Agreement, (ii) involves divestiture of an existing business of Apollo or any of its Affiliates, including, after the Closing, the Acquired Companies and/or the Subject Companies as defined in the ARC Transaction Agreement, or (iii) involves unreasonable expense.

“Fundamental Representations” has the meaning set forth in Section 5.2(a).

“GAAP” means U.S. generally accepted accounting principles.

“Governmental Approvals” has the meaning set forth in Section 2.4(a).

“Governmental Authority” means any United States or foreign government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC, CFTC or any other authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any Self-Regulatory Organization.

“Governmental Report” means all regulatory reports, schedules, forms, registrations, financial statements, sales literature, statements, notices, filings and other documents, together with any amendments, that are required to be filed by any Subject Company with any Governmental Authority.

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“Indebtedness” means, without duplication, all obligations of the Subject Companies, determined on a consolidated basis in accordance with GAAP, for (a) borrowed money, including all indebtedness evidenced by any note, bond, debenture or other debt ‎security or any credit agreement or indenture, (b) indebtedness of Persons other than the Subject Companies of the type referred to ‎in this definition which is directly or indirectly guaranteed by the Subject Companies, (c) accrued interest owed with respect to any indebtedness‎ referred to in this definition and (d) any costs to eliminate hedging or swap arrangements outstanding as of the Closing. For the avoidance of doubt, Indebtedness excludes all prepayment penalties, “put” or “change of control” payment obligations or premia or any other premia, consent fees, “break fees,” “make whole payments,” premia or any other ‎similar payments or contractual charges, including, in each case, any such amounts payable with respect to Indebtedness outstanding immediately prior to the Closing but payable as a result of the consummation of the transactions contemplated by this Agreement (which amounts shall be borne by the Sellers).

“Indemnified Apollo Parties” has the meaning set forth in Section 7.1(a).

“Indemnified Party” has the meaning set forth in Section 7.3(a).

“Indemnified RCS Party” has the meaning set forth in Section 7.1(a).

“Indemnifying Apollo Party” has the meaning set forth in Section 7.3(a).

“Indemnifying Party” has the meaning set forth in Section 7.3(a).

“Indemnifying RCS Party” has the meaning set forth in Section 7.3(a).

“Independent Third Party” means, with respect to any of the Sellers or Apollo, any Person who is not an Affiliate of the Sellers or Apollo, as applicable.

“Infringing” has the meaning set forth in Section 2.15(b).

“Intellectual Property” means, in any and all jurisdictions throughout the world, any (i) trademarks, service marks, trade names, trade dress, Internet domain names, social media usernames (e.g., Twitter handles), personalized subdomains or vanity URLs and other indicia or origin, and the goodwill associated with any and all of the foregoing and symbolized thereby (“Trademarks”), (ii) copyrights and rights in copyrightable subject matter in published and unpublished works of authorship, (iii) rights in Software, (iv) all registrations and applications to register or renew the registration of any of the foregoing, (v) patents and patent applications, including all reissues, divisions, renewals, reexaminations, extensions, provisionals, continuations and continuations-in-part thereof, (vi) rights in Trade Secrets and (vii) all other intellectual property rights.

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“Internal RCAP Commingled Contract” means any Contract pursuant to which a Person other than the Sellers or any of their Subsidiaries (other than the Subject Companies) provides assets, services, rights or benefits to any of the Subject Companies in respect of (i) the Business and (ii) one or more other businesses of the Sellers or any of their Subsidiaries (other than the Subject Companies), but expressly excluding any (i) Contracts to which one or more Subject Companies, but neither of the Sellers nor any of their Affiliates, is a party or (ii) Contracts to be assigned to a Subject Company pursuant to the Pre-Closing Restructuring Transactions.

“Information Technology” means hardware, Software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment.

“IRS” means the United States Internal Revenue Service.

“IT Systems” means the Information Technology owned, leased or licensed by or to the Sellers or their Affiliates (including the Subject Companies) and used in the Business.

“Knowledge of Apollo” or “Apollo’s Knowledge” means the actual knowledge of any of the following individuals identified in Section 10.2 of the Apollo Disclosure Letter.

“Knowledge of the Sellers” or the “Sellers’ Knowledge” means the actual knowledge of any of the individuals identified in Section 10.2 of the Seller Disclosure Letter.

“Leases” has the meaning set forth in Section 2.12(a).

“Lien” means any mortgage, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge or other restrictions or limitations of any nature whatsoever (whether absolute or contingent), including but not limited to such as may arise under any Contracts.

“Luxor” has the meaning set forth in the Recitals.

“Luxor Consent” has the meaning set forth in the Recitals.

“Malware” means any virus, Trojan horse, time bomb, key-lock, spyware, worm, malicious code or other software program designed to or able to, without the knowledge and authorization of the Sellers or the Subject Companies, disrupt, disable, harm, interfere with the operation of or install itself within or on any Software, computer data, network memory or hardware.

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“Marketing/Event Business” means the marketing and events services conducted by pursuant to the Services Agreement, dated as of June 10, 2013, by and between AR Capital, LLC and RCS Advisory Services, LLC (as amended).

“Material Adverse Effect” means any change, effect, event or occurrence that (a) is or would reasonably be expected to be, individually or in the aggregate, materially adverse to the assets, liabilities, results of operations or financial condition of the Business or the Subject Companies, in each case, taken as a whole, other than any such effect, change, event or occurrence to the extent resulting from (i) any change in the capital markets or securities markets after the date hereof, (ii) any change in general economic conditions or interest rates arising after the date hereof, (iii) any outbreak or substantial worsening of major hostilities in which the United States is involved or any act of terrorism within or involving the United States or its property or citizens arising after the date hereof, (iv) the failure of any Subject Company to achieve any financial projections or forecasts in and of itself (but not including the underlying reasons therefor unless otherwise excepted pursuant to the other subsections of this definition), (v) the entering into of this Agreement or public announcement or consummation of the transactions contemplated hereby, (vi) any change after the date of this Agreement in Applicable Law or accounting principles or interpretations thereof, (vii) any natural disaster, earthquake, flood, hurricane or any acts of God, (viii) any action required by this Agreement or the omission to take an action prohibited by this Agreement or (ix) any loss of registered representatives or employees (other than external wholesalers), except, in each case of clauses (i), (ii), (iii) or (vi) to the extent that such change, effect, event or occurrence has a materially disproportionate adverse effect on the Business or the Subject Companies, in each case, taken as a whole, relative to other participants in the industry generally; or (b) would reasonably be expected to prevent or materially delay the ability of the Sellers to complete the transaction contemplated by this Agreement or perform their obligations hereunder.

“Material Contract” means any Contract to which any Subject Company is a party, or under which it or the Business is otherwise subject, including any Contract to be assigned to a Subject Company pursuant to the Pre-Closing Restructuring Actions, but excluding any Contract that exclusively relates to the Excluded RCS Business and excluding (except as expressly provided below) any Employee Benefit Plan, that:

(i)          by its terms does not terminate or is otherwise not cancelable within one year without penalty, cost or liability in excess of $100,000 and requires aggregate payments by the Subject Companies in excess of $1,000,000 per year;

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(ii)         is a joint venture, partnership, limited liability company or other similar agreement material to any of the Subject Companies;

(iii)        grants any right of first refusal or right of first offer or similar right on any assets that are material to the Subject Companies, taken as a whole;

(iv)        provides for any payments that are conditioned, in whole or in part, on a change of control of a Subject Company or transactions of the type contemplated hereby;

(v)         is an employment (other than a Subject Company’s standard offer letter, which does not provide any severance pay benefits), consulting, severance, bonus (including fee sharing), compensation or collective bargaining Contract relating to or for the benefit of current (or, to the extent that any of RCAP or any of its Subsidiaries has continuing liabilities with respect thereto following the Closing, former) employees, directors or other service providers (but in each case, excluding any Employee Benefit Plan);

(vi)        contains (A) a “clawback” or similar undertaking requiring the reimbursement or refund of any material fees (whether performance based or otherwise) paid to a Subject Company or (B) a “most favored nation” clause or other term providing preferential pricing or treatment to a third party in any material Contract;

(vii)       contains provisions requiring future contingent or definitive “earnout” or similar payments to be made by a Subject Company in connection with acquisitions of assets or equity interests of a business or the hiring of any employees;

(viii)      is an agreement for the provision of investment advisory or sub-advisory services;

(ix)         any non-competition, non-solicitation or exclusive dealing agreement, or any other agreements that purports to limit or restrict in any material respect (A) the ability of any Subject Company to solicit customers or employees or investments or (B) the manner in which, or the localities in which, all or any portion of the business or operations of any of the Subject Companies or, following consummation of the transactions contemplated by this Agreement, the business or operations of Apollo or any of its Affiliates, is or would be conducted;

(x)          pertains to the solicitation or referral of customers and clients (including other broker-dealers) to the Subject Companies including, without limitation, consulting or brokerage arrangements;

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(xi)         any agreement relating to any interest rate, derivatives or hedging transaction;

(xii)        restricts or grants rights to use or practice Intellectual Property that is material to the Business, including licenses to use or practice Intellectual Property granted by (A) Seller or their Affiliates (including any of the Subject Companies) to a third Person or (B) a third Person to the Sellers or any of their Affiliates (including any of the Subject Companies);

(xiii)       is a distribution agreement with a financial intermediary pursuant to which (A) such financial intermediary makes available to its clients investment products for which any Subject Company serves as an investment adviser, manager, sponsor or distributor or (B) any Subject Company or Affiliate thereof makes available to its clients investment products for which any Subject Company serves as an investment adviser, manager, sponsor or distributor;

(xiv)      relates to Indebtedness of any Subject Company or the granting of any liens (other than Permitted Liens) or a security interest in the property of any Subject Company;

(xv)       is a lease of real property;

(xvi)      is an agreement pursuant to which any third Person creates, develops or customizes for or on behalf of the Sellers or any of their Affiliates (including the Subject Companies) any Intellectual Property that is material to the Business;

(xvii)     is an agreement with DST Services, Inc. or its Affiliates;

(xviii)    is a selling agreement or similar such agreement; and

(xix)       is an agreement pursuant to which any third Person provides support or maintenance for IT Systems or Software material to the Business (other than off-the-shelf Software) for aggregate annual or one-time fees in excess of $250,000.

“Material to a Reasonable Investor” means, with respect to any fact, circumstance, contingency, change, effect, event or occurrence, that a reasonable and prudent investor would deem such fact, circumstance, contingency, change, effect, event or occurrence to be material in making a decision to purchase the Acquired Companies.

“Net Working Capital” means (x) current assets minus (y) current liabilities, on a consolidated basis, determined in accordance with GAAP and the Accounting Principles and the sample calculation of Net Working Capital on Schedule A.

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“New Business Contract” has the meaning set forth in Section 4.14(e).

“New Contract” has the meaning set forth in Section 4.14(f).

“Newco” has the meaning set forth in the Recitals.

“Newco IT Systems” means the Information Technology owned, leased or licensed (or which shall, following the consummation of the transactions contemplated in the ARC Transaction Agreement, be owned, leased or licensed) by or to Newco or any of its Subsidiaries.

“Newco/RCAP Commingled Contract” means any Contract pursuant to which a person other than ARC, the Sellers, or any of their respective Affiliates provides assets, services, rights or benefits to ARC, the Sellers or any of their respective Affiliates in respect of (i) Retained Businesses and (ii) one or more businesses of Newco and its Subsidiaries.

“Notice of Intention” has the meaning set forth in Section 4.21(b)(i).

“Offer Notice” has the meaning set forth in Section 4.21(b)(ii).

“Operating Agreement” means an operating agreement among RCAP, StratCap and Apollo and certain other parties indicated on Exhibit A, on terms and conditions consistent with the terms and conditions set forth on Exhibit A, to be executed concurrently with the Closing.

“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, by-laws, articles of formation, certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, limited liability company agreement, certificate of designation and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of a Person, including any amendments thereto.

“Outside Date” has the meaning set forth in Section 6.1(f).

“Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by one or more of the Subject Companies or which shall, after giving effect to the transactions contemplated by this Agreement and the Ancillary Agreements, be owned by one or more of the Subject Companies.

“Permits” has the meaning set forth in Section 2.8(a).

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“Permitted Liens” means (i) Liens for Taxes, assessments or other governmental charges not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been reflected on the Financial Statements in accordance with GAAP, (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairman’s or other similar Liens arising in the ordinary course of business, (iii) easements, rights of way, building, zoning and other similar encumbrances or title defects arising in the ordinary course of business, (iv) Liens on assets securing debt incurred to finance the acquisition of such assets, (v) Liens on any of the assets of any Subject Company incurred in the ordinary course of business, and (vi) Liens on properties which do not materially impair business operations or the use of such properties in the ordinary course of business or materially affect the value of such properties.

“Person” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, governmental entity or other entity.

“Post-Closing Tax Period” means any Tax period beginning after the Closing Date and, with respect to a Tax period that begins on or before the Closing Date and ends thereafter, the portion of such Tax period beginning after the Closing Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and, with respect to a Tax period that begins on or before the Closing Date and ends thereafter, the portion of such Tax period ending on the Closing Date.

“Pre-Closing Restructuring Actions” has the meaning set forth in Section 4.13.

“Proceedings” has the meaning set forth in Section 2.7(a).

“Proposed Purchase Price” has the meaning set forth in Section 4.21(b)(ii).

“Prospective Sale” has the meaning set forth in Section 4.21(b)(i).

“Purchase Price” has the meaning set forth in the Recitals hereto.

“RCAP” has the meaning set forth in the introductory paragraph hereto.

“RCAP Credit Facilities” means the (i) First Lien Credit Agreement dated as of April 29, 2014, among RCAP, RCAP Holdings, RCS Management, the Lenders (having the meaning given in Article I thereof) and Barclays Bank PLC, as Issuing Bank and Swing Line Lender and Barclays Bank PLC, as administrative and collateral agent and (ii) the Second Lien Credit Agreement dated as of April 29, 2014, RCAP, RCAP Holdings, RCS Management, the Lenders (having the meaning given in Article I thereof) and Bank of America, N.A., as administrative and collateral agent.

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“RCAP Holdings” means RCAP Holdings, LLC, a Delaware limited liability company.

“RCAP-ARC-Newco Transition Services Agreement” means a transition services agreement among RCAP, ARC and Newco providing for the provision of transitional services among RCAP, ARC and Newco, to be executed concurrently with the Closing.

“RCS” has the meaning set forth in the Recitals hereto.

“RCS Holdings” has the meaning set forth in the introductory paragraph hereto.

“RCS Management” means RCS Capital Management, LLC, a Delaware limited liability company.

“Required Financial Statements” has the meaning set forth in Section 4.7(b).

“Retained Business” means the businesses or activities of the Sellers or any of their Subsidiaries (other than the Subject Companies), including the Excluded RCS Business.

“Retained Seller IT Systems” means the Information Technology owned, leased or licensed by or to the Sellers or any of their Affiliates other than the SC IT Systems.

“ROFR Notice” has the meaning set forth in Section 9.2(a).

“ROFR Notice Period” has the meaning set forth in Section 9.3(a).

“ROFR Offer Notice” has the meaning set forth in Section 9.3(a).

“SC Distributors” means SC Distributors, LLC.

“SC IT Systems” means the Information Technology owned, leased or licensed (or which shall, following the consummation of the transactions contemplated in this Agreement, be owned, leased or licensed) by or to the Subject Companies.

“SEC” means the Securities and Exchange Commission.

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder.

“Self-Regulatory Organization” means any Self-Regulatory Organization as defined in Section 3(a)(26) of the Exchange Act, including FINRA, and any other exchange, association or agency that is charged with the regulation or supervision of broker-dealer, investment adviser, commodity futures, derivatives or insurance activities of a Broker-Dealer Subsidiary.

“Seller Benefit Plans” means Employee Benefit Plans that are not Acquired Benefit Plans.

“Seller Disclosure Letter” means the disclosure letter delivered by ARC to Apollo at the time of execution hereof.

“Seller Marks” means the Trademarks owned by the Sellers or any of their Affiliates (other than the Subject Companies) and used in the Business, other than any Trademarks which shall, after giving effect to the transactions contemplated by this Agreement and the Ancillary Agreements, be owned by one or more of the Subject Companies.

“Sellers” has the meaning set forth in the introductory paragraph hereto.

“Sellers Licensed IP Rights” means, other than Trademarks, any and all Intellectual Property owned by the Sellers or any of their Affiliates (other than the Subject Companies) that was used or practiced in the Business in the twelve (12) months prior to the Closing.

“Separation Notice” means a written notice, in form and substance mutually agreed by the parties, stating that the Business is owned by Apollo and its Affiliates and is no longer affiliated with Seller and its Affiliates.

“Services Termination Agreement” has the meaning set forth in the Recitals.

“Software” means all computer software, including but not limited to application software, system software, firmware, middleware, mobile digital applications, assemblers, applets, compilers and binary libraries, including all source code and object code versions of any and all of the foregoing, in any and all forms and media, and all related documentation.

“Straddle Period” has the meaning set forth in Section 8.2.

“StratCap” has the meaning set forth in the Recitals hereto.

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“StratCap MIPA” has the meaning set forth in Section 1.5(d).

“StratCap Waiver” means the payment in full, settlement or termination of all earnout payments due under the StratCap MIPA and related documentation; the expiration, termination or waiver of all covenants limiting the operations of StratCap or its owners thereunder and the consent of parties to advisory contracts with StratCap to the pertinent change of control, and modifications of exclusivities to the extent required.

“Strategic Relationship Agreement” means a strategic relationship agreement among Cetera Financial Holding, LLC, its broker-dealer subsidiaries, and Apollo and certain of its Affiliates, on terms and conditions consistent with the terms and conditions set forth on Exhibit B, to be executed concurrently with the Closing.

“Subject Companies” means the Acquired Companies and each of their respective Subsidiaries.

“Subject Companies’ Licensed IP Rights” means, other than Trademarks, any and all Intellectual Property owned by the Subject Companies that was used or practiced by the Sellers or any of their Affiliates (other than the Subject Companies) in the Retained Business in the twelve (12) months prior to the Closing.

“Subsidiary” means, with respect to a Person, any other Person (whether or not incorporated) that the first Person, directly or indirectly, owns or has the power to vote or control more than 50% of any class or series of capital stock or other equity interests of such Person.

“Target Net Working Capital” means five million dollars ($5,000,000).

“Target Regulatory Capital” means the sum of (a) the greater of (i) five million dollars ($5,000,000) of “Net Capital” or (ii) one third (1/3rd) of the “Aggregate Indebtedness” of RCS and (b) the greater of (i) one million dollars ($1,000,000) of Net Capital or (ii) one third (1/3rd) of the “Aggregate Indebtedness” of SC Distributors. For purposes of determining Target Regulatory Capital, Net Capital and Aggregate Indebtedness shall be determined in accordance with the definitions and principles of the SEC Uniform Net Capital Rule 15c3-1.

“Tax” means any U.S. federal, state, local or foreign income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, environmental (including taxes under section 59A of the Code), real property, personal property, ad valorem, occupancy, license, occupation, employment, payroll, social security, disability, unemployment, workers’ compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto).

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“Tax Accountant” has the meaning set forth in Section 8.3(d).

“Tax Agreements” has the meaning set forth in Section 2.11(d).

“Tax Return” means any federal, state, local or foreign tax return, declaration, statement, report, schedule, form or information return or any amendment to any of the foregoing relating to Taxes.

“Third Party Claim” has the meaning set forth in Section 7.3(a).

“Third Party Consents” has the meaning set forth in Section 2.4(b).

“Trade Secrets” means all inventions, processes, designs, formulae, models, tools, algorithms, Software architectures, trade secrets, know-how, ideas, research and development, data and databases and confidential information.

“Volcker Rule” means Section 13 of the Bank Holding Company Act and the implementing regulations adopted thereunder.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

Apollo management holdings, l.p.
By: Apollo Management Holdings GP, LLC, its general partner
By:	/s/ John Suydam
	Name: John Suydam
	Title: Vice President
RCS CAPITAL CORPORATION
By:	/s/ Edward M. Weil, Jr.
	Name: Edward M. Weil, Jr.
	Title: Chief Executive Officer

EXHIBIT A

Term Sheet for Operating Agreement

See attached.

EXHIBIT A

CONFIDENTIAL

EXHIBIT A

Term Sheet For Operating Agreement

Parties:	RCS Capital Corporation (“RCAP”); Docupace Technologies, LLC (“Docupace”); Strategic Capital Management Holdings, LLC (“StratCap” and together with RCAP, Docupace, the “Providers”) and Realty Capital Securities, LLC or its affiliates including Apollo (“RC Securities”) will enter into a definitive agreement (the “Operating Agreement”) with respect to the provision by the Providers of services and capabilities to RC Securities in order to support and maintain the continued and planned operations of the wholesale broker-dealer and related businesses to be acquired pursuant to the Membership Interest Purchase Agreement, dated as of August 6, 2015, by and among RCAP, RCS Capital Holdings, LLC and Apollo Global Management or its Affiliate (“Apollo”)  (the “MIPA”).
	The Operating Agreement will be entered into as of the Closing of the transactions contemplated by the MIPA.  Capitalized terms used herein but not defined shall have the meanings assigned to such terms in the MIPA.
Docupace License and Exclusive Launch Period:	For the period of one year from the Closing (the “Roll-Out Period”), Docupace shall grant to RC Securities a worldwide, royalty-free, fully paid-up, exclusive license, effective as of the Closing, to use and practice all of the Intellectual Property (including Software and associated trademarks) relating to “AI Solution”, a Software tool which is presently under joint development between Docupace and RC Securities, together with any adaptations, modifications, additions, improvements, enhancements, updates, upgrades, patches, bug fixes, new versions, new releases, or revisions therein and thereto as of the Closing, and any and all Intellectual Property rights in and to all of the foregoing, in connection with the Business (the “Docupace License”), including the exclusive right to distribute such Software during the Roll-Out Period.

EXHIBIT A

CONFIDENTIAL

Docupace Non-Refusal:

For a period of ten years after the Roll-Out Period (the “DP Preferred Period”), Docupace shall not refuse to enter into an agreement with RC Securities to license the AI Solution on the “Preferred Pricing and Commerical Terms” described below.

Docupace Services:

In addition to the Docupace License, during the DP Preferred Period, Docupace shall, in collaboration with RC Securities, for the benefit of the Business and any natural and reasonably foreseeable expansions thereof, at RC Securities’ commercially reasonable expense (i) further develop, upgrade and improve AI Solution, (ii) support and maintain AI Solution, including by providing RC Securities with access to Docupace employees, during and after the Roll-Out Period and for the duration of the Docupace License, (iii) upon the request of RC Securities, provide RC Securities with data reporting that illustrates AI Solution utilization at the financial advisor, broker dealer and product-specific levels and other data reporting reasonably necessary to maintain, distribute and improve AI Solution; (iv) provide adequate transition and migration support if RC Securities elects to use a Software platform other than AI Solution ((i) – (iv) together, the “Docupace Services”); (v) present the ePACS AI Solution to target firms; (vi) manage projects and workstreams related to ePACS AI Solution integration with DTCC, ANST, DST, Pershing and other clearing firms; (vii) complete the SIGNiX e-signature functionality with the ePACS AI Solution; and (viii) develop and roll out the ePACS AI Solution for the RIA community. The parties will use commercially reasonable efforts to release ePACS AI Solution’s to customers (e.g., broker dealers, transfer agents, etc.) on or before September 30, 2015. For the avoidance of doubt, RC Securities shall not pay any of Docupace’s expenses that do not directly arise out of the foregoing services (including (a) overhead or general expenses not primarily for the benefit of the Business in connection with the foregoing services or (b) any development, upgrades, improvements, support or maintenance of AI Solution not undertaken primarily for the benefit of the Business).

2

EXHIBIT A

CONFIDENTIAL

Docupace Coordination Committee:	During the DP Preferred Period, Docupace and RC Securities will form a committee (the “Docupace Coordination Committee”) consisting of a mutually agreed number of senior management professionals from Docupace and RC Securities.
	During the DP Preferred Period, the Docupace Coordination Committee will meet regularly to discuss and coordinate on all matters relating to the operating relationship between Docupace and RC Securities, including the design and development of new products and platforms.
Preferred Pricing and Commercial Terms:	During the DP Preferred Period, Docupace shall provide the Docupace Services on preferred commercial terms with MFN pricing for current and subsequent generations of AI Solution or other Software that it develops to replace AI Solution.
StratCap Terms	If the StratCap Waiver is not obtained by Closing and RC Securities elects to close without acquiring the Equity Securities of StratCap, the following terms shall apply:
StratCap License:	StratCap shall grant to RC Securities a non-exclusive, worldwide, two-year, irrevocable, royalty-free, fully paid-up, non-transferable (except in connection with a merger or reorganization of, or sale of all or substantially all of the assets of, one or more businesses of RC Securities), sublicensable  license, effective as of the Closing, to use and practice all of the Intellectual Property relating to the SCORE Software application, together with any adaptations, modifications, additions, improvements, enhancements, updates, upgrades, patches, bug fixes, new versions, new releases, or revisions thereto as of the Closing, and any and all Intellectual Property rights in and to all of the foregoing (the “SCORE Technology”).
	StratCap shall grant to RC Securities a non-exclusive (except as set forth below), worldwide, two-year, irrevocable, royalty-free, fully paid-up, non-transferable (except in connection with a merger or reorganization of, or sale of all or substantially all of the assets of, one or more businesses of RC Securities), sublicensable license, effective as of the Closing, to use and practice all of the Intellectual Property relating to the Thematic Allocation tool that has been developed by the Business and StratCap, together with any adaptations, modifications, additions, improvements, enhancements, updates, upgrades, patches, bug fixes, new versions, new releases, or revisions thereto as of the Closing, and any and all Intellectual Property rights in and to all of the foregoing (“Thematic Allocation”).  RC Securities will be the exclusive provider and marketer of Thematic Allocation to advisors and firms.
	RC Securities shall have a right of first offer on the sale of the SCORE Technology or the Thematic Allocation.

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EXHIBIT A

CONFIDENTIAL

StratCap Services:

For a period of five years after the Closing (the “SC Preferred Period”), RCAP and StratCap shall, in collaboration with RC Securities, in each case for a negotiated arm’s length fee, (i) grant Apollo access to the SCORE Technology’s team of developers to further develop, upgrade and improve the SCORE Technology for sales force usage, (ii) grant Apollo access and a license to other functionality of the SCORE Technology that was not utilized by the Business as of the Closing, as reasonably requested by RC Securities, (iii) support the current version of the SCORE Technology (subject to Stratcap’s conditioned right to cease maintaining the SCORE Technology pursuant to RC Securities’ right of first purchase set forth below), (iv)  provide adequate transition and migration support if RC Securities elects to use a Software platform other than the SCORE Technology, and (v) collect, store, use, maintain and transmit proprietary or confidential data of Apollo and its Affiliates (including the Subject Companies) (“Apollo Data”) used in connection with the SCORE Technology, in each case, for the benefit of the Business and any natural or reasonably foreseeable expansions thereof.

Stratcap has no ongoing obligation to maintain or keep in existence the SCORE Technology, provided, however, that if Stratcap chooses not to maintain or keep in existence the SCORE Technology, RC Securities shall have a right of first purchase of the SCORE Technology for $100,000.  In the event RC Securities exercises such right, then in consideration of RC Securities’ payment to Stratcap of such $100,000 fee, Stratcap shall promptly deliver to RC Securities all components and code (including source code)  associated with the SCORE Technology and shall provide customary transitional services, including migration services, knowledge transfer, and technical training, as reasonably necessary  to enable RC Securities to make full use of the SCORE Technology without the involvement of Stratcap.

4

EXHIBIT A

CONFIDENTIAL

Confidentiality of Apollo Data:	RCAP and StratCap shall (i) use the Apollo Data solely in connection with the Business and any natural or reasonably foreseeable expansions thereof and not for any other purpose whatsoever, (ii) acknowledge that the Apollo Data (and the rights thereto) remain the proprietary property of Apollo or its Affiliates (as the case may be), and that the disclosure of any Apollo Data shall not be deemed to grant any right to (or interest in) such Apollo Data, except the right to use such Apollo Data pursuant thereto, and (iii) treat and safeguard as private and confidential all Apollo Data with at least the same degree of care used to protect their own proprietary information from unauthorized use or disclosure which in any event shall be at least a reasonable standard.
StratCap Product Distribution Rights:	StratCap shall provide RC Securities the opportunity to concurrently distribute StratCap’s current and future investment programs with no sub-sponsor agreements (i.e., on a non-promoted basis, as if StratCap itself were selling the product directly).  If RC Securities declines to distribute any StratCap product, StratCap may use another third-party to distribute the applicable product that RC Securities declined to distribute.
	For any StratCap product distributed by RC Securities after the Closing, RC Securities shall be eligible to review a negotiated portion of all asset management or acquisition fees actually received by StratCap under  the existing StratCap sharing arrangement whereby StratCap is entitled to a portion of the revenue generated by the StratCap funds.  In consideration of RC Securities distributing StratCap’s product, RC Securities shall share equally in StratCap’s revenue until 1/31/2017.
StratCap Coordination Committee:	During the SC Preferred Period, StratCap and RC Securities will form a committee (the “StratCap Coordination Committee”) consisting of a mutually agreed number of senior management professionals from StratCap and Apollo.
	During the SC Preferred Period, the StratCap Coordination Committee will meet regularly to discuss and coordinate on all matters relating to the agreements hereunder, including the design and development of new technology and platforms, market approach and segmentation and other operating matters.

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EXHIBIT A

CONFIDENTIAL

RIAA Cooperation:	RCAP will cause ICC and Advisor Direct (to the extent in existence and member firms with FINRA) to agree, that once Advisor Direct’s continuing membership application has been approved by FINRA, to (i) allow Advisor Direct to act as the broker of record for registered investment advisor (“RIA”) client subscriptions presented to it by RC Securities with market compensation payable to ICC and Advisor Direct, (ii) allow Charles Giorlando and Brandon Marrs, or other acceptable appointees, to be dual registered with RC Securities and Advisor Direct and act as Chief Compliance Officer and Principal, respectively, for Advisor Direct until acceptable replacement officers have been hired to oversee the RIA business for Advisor Direct and the transition of that role and training have been completed, and (iii) allow RC Securities after the above referenced transition has been completed to refer RIA business to Advisor Direct such that Advisor Direct will continue to act as broker of record for accepted subscriptions as long as its membership agreement allows it to do so. For avoidance of doubt, Apollo and its affiliates will have no obligation to conduct business with ICC.  All services under this paragraph shall be charged to RC Securities at cost for the first two years that services are rendered; thereafter, services shall be charged at market rates.
Term; Binding Effect:	The term of the Operating Agreement will be for a period of five years from the date thereof and shall inure to the benefit of and be binding upon the parties and their respective successors.
Governing Law:	The Operating Agreement will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any conflict of laws rules or principles that would require or permit the application of another jurisdiction’s laws.

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EXHIBIT B

Term Sheet for Strategic Relationship Agreement

See attached.

Execution Version

CONFIDENTIAL

Exhibit B

Terms of the Cetera Strategic Relationship Agreement

Parties:	Cetera Financial Holdings, LLC and all of its broker dealer subsidiaries (“Cetera”); and one or more affiliates of Apollo Global Management, LLC (“Apollo”) will enter into a definitive agreement (the “Strategic Relationship Agreement”) with respect to the strategic partnership of Cetera and Apollo, in each case subject and pursuant to Cetera’s then-existing internal diligence, distribution, and related policies and procedures (the “Strategic Partnership”).  All future broker dealer subsidiaries of Cetera shall execute appropriate joinders to the Strategic Relationship Agreement.
	The Strategic Relationship Agreement will be entered into as of the closing of the transactions contemplated by the Master Interest Purchase Agreement, dated as of August 6, 2015, by and among RCAP, RCS Capital Holdings, LLC and Apollo Management Holdings, L.P. (the “MIPA”).
Acknowledgment:	Apollo understands and acknowledges that Cetera is an “open architecture” organization and while the Apollo Products will have the opportunity to have access to the Retail Distribution Network (as defined below), Cetera will continue to have the ability to determine in its sole and absolute discretion (in accordance with its then-existing policies and procedures and applicable law and regulation) which products are approved for distribution on its platform (whether Apollo Products, major competitors’ products or otherwise).
	The Strategic Partnership will be a non-exclusive arrangement between the parties.
Apollo Products:	The Strategic Partnership will apply to investment products sponsored, advised or manufactured by Apollo or any affiliate of Apollo, including but not limited to credit products, alternative investment products, annuities, insurance-related products and other financial products (the “Apollo Products”).
Retail Distribution Network:	All Apollo Products approved for distribution will be distributed through Cetera’s retail broker dealer distribution network, including the use of all forms of distribution employed thereby (whether or not in existence or contemplated as of the date of the Strategic Relationship Agreement and whether or not presently used to distribute products) (the “Retail Distribution Network”).

CONFIDENTIAL

	Cetera will use commercially reasonable efforts to make approved Apollo Products available to investors on its platform on terms that are not materially less favorable than the terms afforded to other sponsors on the Retail Distribution Network, and Cetera will use commercially reasonable efforts to not take any actions designed to disadvantage sales of approved Apollo Products as compared to other similarly situated products of other similarly situated sponsors.
	Any sales made by the Cetera will depend on the recommendations of independent financial advisors doing business through the Retail Distribution Network and nothing herein shall be deemed to require Cetera to use any efforts to effect sales, other than those customarily used in promoting sales of other investment products or as specifically agreed in the Strategic Relationship Agreement. For the avoidance of doubt, the Strategic Relationship Agreement shall contain specific mutually agreed obligations of Cetera (e.g., with respect to training provided to its financial advisors about the Apollo Products) and those obligations shall not be limited by the reference to “customary efforts” to the extent they are not customary, provided such obligations shall be at Apollo’s expense to the extent of, and consistent with, the expenses charged to other similarly situated premier Strategic Relationship Partners.
Coordination Committee:	The parties will form a committee (the “Coordination Committee”) consisting of a mutually agreed number of (x) product development and senior management professionals from Cetera and (y) marketing and senior management professionals from Apollo.
	The Coordination Committee will meet regularly (at least once per quarter and more often, as reasonably requested by either party) to discuss and coordinate on all matters relating to the strategic relationship, including without limitation (i) the design and development of potential Apollo Products and Cetera’s product pipeline, (ii) the status of sales and marketing of Apollo Product, (iii) the retail alternative investment market generally, and (iv) trends and developments in the alternative investment landscape.

2

CONFIDENTIAL

Designated Representatives:	Each of Cetera and Apollo will designate one representative who is a member of such party’s senior management to serve as team leader and handle day-to-day relations with the other party with respect to the Strategic Partnership.
Product Approval:	The Strategic Relationship Agreement will include a schedule of initial Apollo Products that Cetera has approved pursuant to its then-current due diligence process.  This schedule will be developed by Cetera and Apollo during the period between the signing of the MIPA and the closing thereunder.  Apollo will provide documents and materials reasonably requested by Cetera as part of its due diligence review.
	At any time, Apollo may recommend to Cetera additional Apollo Products to be reviewed by Cetera pursuant to its then-current due diligence process.  Cetera shall conduct due diligence on such Apollo Products and will determine in accordance with its normal procedures in its sole and absolute discretion (in compliance with its then-existing policies and procedures and applicable law and regulation) whether to approve such Apollo Products.   In the event that Cetera does not approve an Apollo Product, Cetera shall provide to Apollo notification thereof, including the reasons for such denial.  Subject to the limitations set forth under the caption “Acknowledgment,” the parties thereafter shall cooperate to undertake reasonable efforts to have any such product become an approved Apollo Product.
	Cetera will not, unless required by applicable law or regulation, apply concentration limits or other rules or criteria that would reasonably be expected to result in (i) its determining not to approve an Apollo Product for distribution through its Retail Distribution Network, or (ii) disproportionately impact the sales or viability of an Apollo Product relative to similar investment products of third parties distributed through the Retail Distribution Network.  For avoidance of doubt, Cetera may apply standards it applies to other sponsors or similar investment products sold through its Retail Distribution Network.

3

CONFIDENTIAL

Distribution Terms:	In consideration of the Marketing Services (as defined below) Apollo agrees to pay Cetera (e.g., third party reallowance) at a rate that is the same as, or more favorable to Apollo than, (i) the expenses and payments for comparable Marketing Services provided with respect to the investment products of AR Capital that are distributed by Cetera, or (ii) the lowest expenses and payments for comparable Marketing Services provided (or that may in the future be provided) with respect to any other investment products distributed by Cetera, whichever of (i) and (ii) would be more favorable to Apollo at any given time.
	Cetera shall provide Apollo with the following services (the “Marketing Services”), in each case on a basis consistent with the full range of services provided by Cetera to other premier Strategic Relationship Partners and subject to such reasonable changes as may be mutually agreeable to the parties in the definitive Strategic Relationship Agreement:
	1.	Prompt notification to Apollo should an Apollo product be removed from Cetera’s approved product list.
	2.	Investment research access.
	3.	Strategic relationships team support – dedicated relationship manager.
	4.	Business consulting group and client solutions partner meetings.
	5.	Quarterly, or if more frequently available, qualified advisor list. Segmented for top producers.
	6.	Access to strategic partner’s website.
	7.	Participation in quarterly update calls.
	8.	Customize annual business planning and quarterly reviews.
	9.	Assignment of strategic partners advocate.
	10.	Access to portals/platforms including Connect2Clients and Pentameter.
	11.	Internet postings and exposure.
	12.	Enhanced reporting and metrics.
	13.	Focus firm – 30 day coordinated marketing initiative.
	14.	Invitation to host training and education meetings.
	15.	Invitation to participate in National Conferences, top producer meetings and regional and specialty meetings.
	16.	Other marketing opportunities as agreed to by the parties.
	17.	Access to advisor populated advisory councils
	18.	Cetera will contribute to product development at Apollo through employees and advisors as requested.

4

CONFIDENTIAL

Information Rights:	At the request of Apollo, and subject to compliance with applicable law and regulation as well as any then-current third party confidentiality obligations, Cetera will provide to Apollo data on product sales trends by type, advisor, customer behavior and other data and information that Apollo reasonably requests with respect to the retail alternative investment market, provided that this will not require Cetera to provide information which identifies or provides information that would identify particular products.  Cetera also will provide upon Apollo’s reasonable request data to verify Cetera’s compliance with the Strategic Relationship Agreement.
Term; Binding Effect:	The initial term of the Strategic Relationship Agreement will be eight and one-half  (8½) years from the date thereof and will automatically renew for additional subsequent two (2) year  terms, subject to customary prior notice termination provisions, and shall inure to the benefit of and be binding upon the parties and their respective successors. For the avoidance of doubt, the Strategic Relationship Agreement shall not terminate upon a change of control of any party.
Governing Law:	The Strategic Relationship Agreement will be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any conflict of laws rules or principles that would require or permit the application of another jurisdiction’s laws.

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EX-10.1

Exhibit 10.1

THIRD AMENDMENT TO
RCS CAPITAL CORPORATION
EQUITY PLAN

WHEREAS, RCS Capital Corporation (the “Company”) maintains the RCS Capital Corporation Equity Plan, as amended June 5, 2013 and December 29, 2014 (the “Plan”);

WHEREAS, pursuant to Section 9(d)(ii) of the Plan, the Board of Directors of the Company (the “Board”) may at any time and from time to time, amend or modify the Plan in whole or in part, subject to stockholder approval to the extent required to comply with any law, regulation or stock exchange requirement; and

WHEREAS, the Board considers it in the best interests of the Company and its stockholders and its employees and other service providers to adopt an amendment to the Plan to expand the class of eligible persons to whom Awards (with the meaning of the Plan) may be granted under the Plan.

NOW, THEREFORE, pursuant to Section 9(d)(ii) of the Plan, the Plan is hereby amended as follows:

Section 1.             Amendment.

(a)           Section 2 (Definitions) is hereby amended by adding the following new definitions in the appropriate alphabetical order or sub-section number, and, as applicable, reordering and renumbering the existing defined terms:

“Financial Advisor” means an individual who (i) is a registered principal or registered representative of a broker-dealer or a person associated or registered with an investment adviser, and (ii) provides services to the Company or its Affiliates through, the Company, an Affiliate of the Company or a Retail Advice Entity (including prospective Financial Advisors).

“Retail Advice Entity” means an entity engaged in the broker-dealer business or rendering investment advice as part of the Company’s retail advice business.”

(b)          The first and second sentences of Section 4 (Eligibility) are hereby amended and restated in their entirety as follows:

“Awards (other than Incentive Stock Options) may be granted, in the discretion of the Board, to (i) individuals who are, as of the date of grant, (a) non-executive directors, officers and other employees of the Company or its Affiliates, (b) Financial Advisors and (c) other advisors or consultants of the Company or any of its Affiliates that are providing services to the Company or the Affiliate pursuant to a written agreement, which are not in connection with the offer and sale of securities in a capital-raising transaction, and do not, directly or indirectly, promote or maintain a market for the Company’s or its Affiliates’ securities and (ii) subject to the Management Agreement remaining in effect on the date of grant, the Manager and individuals who are, as of the date of grant, employees, officers or directors of the Manager or one of its Affiliates (it being understood that references in the Plan to employment or service with “the Company” shall be deemed to refer to employment or service with the Company or an Affiliate, the Manager or its Affiliates or, with respect to a Financial Advisor or other eligible person that is an independent contractor, such Financial Advisor’s or independent contractor’s continuing to provide services in such capacity to the Company or its Affiliates, as the case may be). Incentive Stock Options may be granted, in the discretion of the Board, to individuals who are, as of the date of grant, employees of the Company and its Subsidiaries.”

Section 2.            Headings. The headings of the sections of this Amendment are inserted as a matter of convenience and for reference purposes only and in no respect define, limit or describe the scope of this Amendment or the Plan or any Award thereunder or the intent of any section of any of the foregoing.

Section 3.            Entire Agreement. Except as expressly amended hereby, the terms and conditions of the Plan shall continue in full force and effect.

Section 4.            Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Board has approved the amendment to the Plan as set forth herein and authorized the undersigned officer of the Company to execute this amendment and the undersigned has caused this amendment to be executed this 30^th day of June, 2015.

RCS CAPITAL CORPORATION
By:	/s/ Edward M. Weil, Jr.
	Name:	Edward M. Weil, Jr.
	Title:	Chief Executive Officer

2

EX-10.2

Exhibit 10.2

EXECUTION VERSION

Investment AGREEMENT

by and between

Apollo management holdings, l.p.,

and

rcs capital corporation

Dated as of August 6, 2015

TABLE OF CONTENTS

		Page
Article I Transaction		5
1.1	Issuance	5
1.2	Purchase	5
1.3	The Closing	5
1.4	Closing Deliveries	6
1.5	Reorganization	6
Article II Representations and Warranties pertaining to the business		6
2.1	Organization, Power	7
2.2	Authority	7
2.3	Non-Contravention	7
2.4	Consents	8
2.5	Capitalization	8
2.6	Company SEC Documents; Internal Controls	9
2.7	Litigation	11
2.8	Compliance with Laws; Permits and Licenses	12
2.9	Absence of Certain Changes; No Undisclosed Liabilities	13
2.10	Personnel and Employee Benefits Matters	14
2.11	Taxes	16
2.12	Properties and Assets	17
2.13	Material Agreements	18
2.14	Intellectual Property and IT Systems	18
2.15	Data Protection and Privacy	19
2.16	Broker-Dealer Matters	19
2.17	Municipal Advisor Matters	21
2.18	Investment Adviser Compliance Matters	22
2.19	Funds	25
2.20	Insurance	27
2.21	Affiliate Arrangements	27
2.22	Information Supplied	28
2.23	Brokers	28
2.24	Compliance with Environmental Law	28
2.25	No Other Representations and Warranties	28
Article III Representations and Warranties of THE INVESTORS		28
3.1	Organization	28
3.2	Authority	29
3.3	Non-Contravention	29

3.4	Consents, etc	29
3.5	Available Funds	30
3.6	Investment Intent	30
3.7	No Other Representations and Warranties	30
Article IV Covenants		30
4.1	Conduct of Business	30
4.2	Access; Confidentiality	31
4.3	Reasonable Best Efforts; Regulatory Approvals; Client Consents	32
4.4	Public Announcements; Confidentiality	32
4.5	Supplemental Disclosure	33
4.6	Listing Undertaking	33
4.7	Certificate of Designation	34
4.8	Board of Directors	34
4.9	NYSE Rules; Reservation of Shares of Common Stock	34
4.10	Investor Undertaking	34
4.11	Expenses; Transfer Taxes	34
4.12	Further Assurances	34
Article V Conditions to the Closing		35
5.1	Mutual Conditions	35
5.2	Additional Conditions to the Obligations of the Investors	35
5.3	Additional Conditions to the Obligations of the Company	36
Article VI Termination		37
6.1	Termination	37
6.2	Termination Right	38
6.3	Effect of Termination	38
Article VII Indemnification		39
7.1	Indemnification by the Company	39
7.2	Indemnification by the Investor	40
7.3	Indemnification Procedures	41
7.4	General	43
Article VIII General Provisions		44
8.1	Survival	44
8.2	Notices	45
8.3	Interpretation	46
8.4	Amendment and Modification; Waiver	46
8.5	Entire Agreement	47
8.6	Disclosure Letters	47
8.7	Third Party Beneficiaries	47
8.8	Specific Performance	47
8.9	Assignment; Binding Effect	48

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8.10	Governing Law	48
8.11	Jurisdiction; Waiver of Jury Trial	48
8.12	Severability	48
8.13	Counterparts	49
Article IX Definitions		49

EXHIBITS

Exhibit A – Form of Certificate of Designation

Exhibit B – Purchased Shares

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investment AGREEMENT

This investment AGREEMENT, dated as of August 6, 2015 (this “Agreement”), is made by and between Apollo Management Holdings, L.P., a Delaware limited partnership (the “Investor”), and RCS Capital Corporation, a Delaware corporation (the “Company”). Capitalized terms used and not otherwise defined in this Agreement have the meanings specified in Article IX.

RECITALS

A. The Company has (i) 300,000,000shares of authorized Class A common shares, $0.001 par value per share (the “Class A Common Stock”), of which, at the close of business on August 5, 2015, 77,151,089 shares of Class A Common Stock were issued and outstanding, and (ii) 100,000,000 shares of authorized Class B common shares, $0.001 par value per share (the “Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”), of which one (1) Class B share is issued and outstanding (the “Class B Share”) and owned, beneficially and of record, by RCAP Holdings, LLC, and (iii) 100,000,000 shares of authorized preferred stock, $0.001 par value per share (the “Preferred Stock”), of which, as of the date hereof, (x) 5,800,000 shares of Series B preferred stock (the “Series B Preferred Stock”) are authorized, issued and outstanding and 80% of which are owned, beneficially and of record, by Luxor Capital Group, LP (“Luxor”) and (y) 4,400,000 shares of Series C preferred stock (the “Series C Preferred Stock”) are authorized, issued and outstanding and owned, beneficially and of record, by Luxor.

B. The Company intends to issue and sell to the Investor, and the Investor intends to purchase from the Company, 1,000,000 shares of a newly created series of convertible preference stock having the designation, powers, preferences and rights set forth in a certificate of designation in the form attached as Exhibit A (the “Certificate of Designation” and such series of preferred stock, the “Series D-1 Preferred Stock”).

C. Concurrently with the execution of this Agreement, AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership (“AMH”) has entered into a Transaction Agreement with AR Capital, LLC, a Delaware limited liability company (“ARC”), and AR Global, LLC, a Delaware limited liability company (“Newco”), pursuant to which, and subject to the terms and conditions thereof, (i) ARC shall transfer to Newco all of the assets (including equity interests in Subsidiaries) used in the conduct of its business, other than certain excluded assets, and Newco shall assume certain liabilities relating to ARC’s business, in exchange for 100% of the equity units of Newco and (ii) ARC shall transfer to AMH 60% of the equity units of Newco in exchange for the consideration set forth therein (the “ARC Transaction Agreement”).

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D. Concurrently with the execution of this Agreement, the Company has entered into a Membership Interest Purchase Agreement, with RCS Capital Holdings, LLC (“RCS Holdings”) and Apollo Management Holdings, L.P. (the “Buyer”) pursuant to which, and subject to the terms and conditions thereof, the Company and RCS Holdings shall sell to the Buyer (i) 100% of the authorized, issued and outstanding equity securities of Realty Capital Securities, LLC, (ii) 100% of the authorized, issued and outstanding equity securities of American National Stock Transfer, LLC, and (iii) 100% of the authorized, issued and outstanding equity securities of Strategic Capital Management Holdings, LLC (the “MIPA”).

E. Concurrently with the execution of this Agreement, the Company has entered into an investment agreement with Luxor, pursuant to which Luxor shall purchase a specified number of series D-2 preferred stock (such series of preferred stock, the “Series D-2 Preferred Stock” and together with the Series D-1 Preferred Stock, the “Series D Preferred Stock”) from the Company (the “Luxor Transaction”).

F. Concurrently with the execution of this Agreement, the Company has received from Luxor, a consent relating to the transactions contemplated hereby and certain other related matters, a copy of which has been furnished to the parties hereto (the “Luxor Consent”).

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

Article I
Transaction

1.1           Issuance. Prior to the Closing, the Company shall create or cause to be created the Series D-1 Preferred Stock, which shall have the rights, powers and preferences set forth in the Certificate of Designation.

1.2           Purchase. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, at the Closing, the number of shares of Series D-1 Preferred Stock set forth opposite the Investor’s name on Exhibit B, at the Price Per Share. The shares of Series D-1 Preferred Stock to be purchased by the Investor pursuant to this Section 1.2 are herein called the “Purchased Shares”.

1.3           The Closing. The closing of the purchase of the Purchased Shares (the “Closing”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m. local time on the fifth Business Day following the Closing Condition Satisfaction Date (subject to the satisfaction or waiver of those conditions that by their terms are to be satisfied by actions taken at the Closing), provided that the parties may agree in writing on another time, date or place for the Closing. The date on which the Closing actually occurs is referred to hereinafter as the “Closing Date”.

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1.4           Closing Deliveries. At the Closing:

(a)          the Company shall issue to the Investor the number of Purchased Shares set forth opposite the Investor’s name on Exhibit B as evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as hereinafter provided for, registered in the register of shareholders of the Company in the Investor’s name.

(b)          the Investor shall pay to the Company by wire transfer of immediately available funds to the account of the Company designated by the Company to the Investor in writing at least three Business Days prior to the Closing Date an amount equal to the number of the Purchased Shares multiplied by the Per Share Price (the “Purchase Price”);

(c)          the Company shall have delivered to the Investor a statement, meeting the requirements of Section 1.897-2 of the Treasury Regulations, to the effect that the Company is not a “United States real property holding corporation” within the meaning of Section 897 of the Code and the Treasury Regulations thereunder; and

(d)          the Investor shall have received from Proskauer Rose LLP, (and/or Delaware counsel) to the Company, a legal opinion addressed to the Investor, dated as of the Closing Date, in a form reasonably acceptable to the Investor;

(e)          each party shall deliver, or shall cause to be delivered, to each other party, as applicable, a copy of the Ancillary Agreements, duly executed by such party or by its Subsidiaries or Affiliates who are party thereto.

1.5           Use of Proceeds. The Company shall use the proceeds from the sale of the Purchased Shares hereunder, the Luxor Transaction and cash on hand of the Company as the Board of Directors of the Company determines at a meeting to be held promptly following the issuance of the Purchased Shares.

Article II
Representations and Warranties of the company

Except as set forth in (i) the corresponding section of the Company Disclosure Letter and (ii) the Declarative Portions of the Company’s Recent SEC Filings, the Company represents and warrants to the Investor as follows:

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2.1           Organization, Power. The Company and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and, where applicable, is duly qualified or licensed as a foreign limited liability company, corporation or other business entity to do business and is in good standing in each jurisdiction in which the nature of its business or the character or location of the properties, assets and rights owned, leased or operated by it makes such qualification or license necessary, and the Company and each of its Subsidiaries has the requisite limited liability company, corporate or similar power and authority necessary to own all of its properties, assets and rights and to carry on its business as it is now being conducted, except where any failure to be so qualified, licensed or in good standing or to have such power or authority would not, individually or in the aggregate, be Material to a Reasonable Investor. Neither the Company nor any of its Subsidiaries is in material violation of any provision of its Organizational Documents.

2.2           Authority. The Company has the requisite power and authority to execute and deliver this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Company of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all necessary corporate or similar action of the Company and no other corporate or similar action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the Registration Rights Agreement, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby. This Agreement entered into as of the date hereof has been, and at the Closing the Registration Rights Agreement to which the Company is party will be, duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties thereto, constitute legal and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as (a) the enforceability hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

2.3           Non-Contravention. The execution and delivery by the Company of this Agreement and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby and the performance of its obligations hereunder and thereunder will not (with or without the giving of notice, the termination of any grace period or both): (a) violate, conflict with, or result in a breach or default under any provision of the Organizational Documents of the Company or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 2.4(a), have been obtained or made, (i) violate any Applicable Law, (ii) violate, result in a violation or breach by the Company of, or cause the termination, acceleration or cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, or conflict with or constitute a default (or give rise to a right of termination, acceleration, cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, any mortgage, indenture, lease, license, note, website terms of use, privacy policy or statement, contract or agreement (each, whether oral or written, a “Contract”) to which the Company is a party or by which the Company or any of its properties is bound, whether with the passage of time, giving of notice, or both or (iii) result in the creation of any Lien on any of the assets or properties of the Company, except, in the cases of clauses (i), (ii) and (iii), for any such violation, breach, termination, acceleration, conflict, default or Lien as would not, individually or in the aggregate, be Material to a Reasonable Investor.

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2.4           Consents.

(a)          Except as described in Section 2.4 of the Company Disclosure Letter, no consent, authorization, order or approval of, filing or registration with, or notice to, any Governmental Authority (collectively, “Governmental Approvals”) is required for the execution and delivery by the Company of this Agreement and the Registration Rights Agreement to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby, except in any such case for any such Governmental Approval which is required solely by reason of the specific regulatory status of the Investor or its respective Affiliates or the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          No consent, authorization, approval or waiver from any party (other than a Governmental Authority) to any Contract (collectively, “Third Party Consents”) is required for the execution and delivery by the Company of this Agreement or the Registration Rights Agreement, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby or thereby, except in any such case for any such Third Party Consent the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

2.5           Capitalization.

(a)          The Company. The authorized, issued and outstanding capital stock of the Company (but without giving effect to the issuance of shares of the Series D Preferred Stock and the shares of Class A Common Stock issuable upon conversion thereof) is as set forth in Recital A, and the ownership of the Class B Share, the shares of Series B Preferred Stock and the shares of Series C Preferred Stock is as set forth in Recital A. All of the outstanding shares of Common Stock and Preferred Stock are validly issued, fully paid and nonassessable, were issued in compliance with all Applicable Laws or exemptions therefrom and have not been issued in violation of any preemptive or similar rights. At the Closing, the Series D-1 Preferred Stock will have been duly authorized, and a sufficient number of shares of Class A Common Stock will have been duly authorized and validly reserved for issuance upon conversion of the shares of Preferred Stock (including the Series D-1 Preferred Stock) outstanding after giving effect to the Closing. The Purchased Shares (when issued and paid for at Closing) and the shares of Class A Common Stock issuable upon conversion of the Purchased Shares (when so converted) will have been validly issued, fully paid and nonassessable, will have been issued in compliance with all Applicable Laws or exemptions therefrom and will not have been issued in violation of any preemptive or similar rights. At Closing, the Investor will own the Purchased Shares, beneficially and of record, free and clear of any Lien (other than Liens arising as a result of this Agreement or under applicable securities laws). Except as set forth above, there are no outstanding securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any shares of capital stock or other equity interests of the Company or any rights to receive payments based on the value of, or payments in respect of, any shares of capital stock or other equity interests of the Company. The Company is not a party to any right of first refusal, right of first offer, proxy, voting agreement, voting trust, or shareholders agreement with respect to the sale or voting of any shares of capital stock or other equity interests of the Company or any securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company.

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(b)          Subsidiaries. All outstanding shares of capital stock or other equity interests of each of the Company’s Subsidiaries are validly issued, fully paid and nonassessable, were issued in compliance with all Applicable Laws or exemptions therefrom and have not been issued in violation of any preemptive or similar rights, and are owned, directly or indirectly, by the Company. There are no outstanding securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of any of the Company’s Subsidiaries, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any shares of capital stock or other equity interests of any of the Company’s Subsidiaries, or any rights to receive payments based on the value of, or payments in respect of, any shares of capital stock or other equity interests of any of the Company’s Subsidiaries. Neither the Company nor any of the Company’s Subsidiaries is a party to any right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement, limited liability company agreement or shareholders agreement with respect to the sale or voting of any shares of capital stock or other equity interests of the Company’s Subsidiaries, or any securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company’s Subsidiaries.

2.6           Company SEC Documents; Internal Controls.

(a)          Since January 1, 2014, the Company has timely filed or otherwise transmitted all material reports, registrations, documents, filings, statements and submissions, together with any amendments thereto, required to be filed or furnished by the Company with or to the SEC (the “Company SEC Documents”). As of their respective dates, or if amended prior to the date hereof, as of the date of the last such amendment, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and none of the Company SEC Documents at the time it was filed or furnished (or, if amended prior to the date hereof, as of the date of the last such amendment) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No Subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or is otherwise required to file any reports, registrations, documents, filings, statements or submissions with the SEC. There are no outstanding or unresolved comments in comment letters received from the SEC by the Company. To the Company’s knowledge, none of the Company SEC Documents is the subject of any ongoing SEC review, outstanding SEC comment or outstanding SEC investigation.

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(b)          The consolidated financial statements (including all related notes and schedules) of the Company included in the Company SEC Documents fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates thereof and their consolidated results of operations and consolidated cash flows for the respective periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments, none of which is material, individually or in the aggregate, and to the absence of notes therein) and have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and applicable accounting requirements and published rules and regulations of the SEC.

(c)          The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 (as amended, the “Sarbanes-Oxley Act”) and the listing application and other rules of the NYSE. Since January 1, 2014, neither the Company nor any of its Subsidiaries has made any prohibited loans to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any of its Subsidiaries. There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

(d)          The Company has established and maintains a system of disclosure controls and procedures (as such term is defined in paragraph (e) of Rule 13a-15 promulgated under the Exchange Act) as required by Rule 13a-15 promulgated under the Exchange Act. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

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(e)          Since January 1, 2014, the Company’s principal executive officer and its principal financial officer have disclosed, based on their evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)), to the Company’s auditors and the audit committee of the board of directors of the Company (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

(f)              The Company has provided to the Investor a copy of the most recent draft of its Quarterly Report on Form 10-Q (the “Draft 10-Q”) for the quarter ended June 30, 2015.

2.7           Litigation.

(a)          Section 2.7(a) of the Company Disclosure Letter contains a true, complete and correct list, since January 1, 2014 through the date of this Agreement, of all pending and, to the Company’s Knowledge, threatened legal, administrative, arbitral or other proceeding (including disciplinary proceedings), action, cease and desist letter, offer to license in lieu of further action, demand, claim, suit or governmental or regulatory investigation or inquiry of any nature (collectively, “Proceedings”) against or relating to the Company or any of its Subsidiaries or any of their properties, assets or businesses. As of the date hereof, there is no Proceeding pending or, to the Company’s Knowledge, threatened against or relating to the Company or any of its Subsidiaries or any of their respective properties, assets or businesses (including the Business) that would, individually or in the aggregate, be Material to a Reasonable Investor, or prohibit or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

(b)          Section 2.7(b) of the Company Disclosure Letter contains a true, complete and correct list of all material judgments, decrees, injunctions or orders of any Governmental Authority to which the Company or its Subsidiaries is or was subject or any of its properties is or was bound, in each case from January 1, 2014 through the date of this Agreement. As of the date hereof, there are no settlement agreements or similar written agreements with any Governmental Authority or outstanding judgments, decrees, injunctions or orders of any Governmental Authority to which the Company or any of its Subsidiaries is subject or any of their respective properties are bound that would, individually or in the aggregate, be reasonably expected to (x) be Material to a Reasonable Investor, or (y) prohibit or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder and thereunder on a timely basis. As of the date hereof, neither the Company nor any of its Subsidiaries is, or has been, subject to any felony, misdemeanor, decree, order, proceeding or examination that would cause the Company or any of its Subsidiaries, to be an ”ineligible issuer” as such term is defined in Rule 405 under the Securities Act of 1933, nor is there any Proceeding pending or, to the Knowledge of the Company, threatened by any Governmental Authority that would result in the Company or any of its Subsidiaries becoming an “ineligible issuer.”

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2.8           Compliance with Laws; Permits and Licenses.

(a)          The operations of the Company and its Subsidiaries are and since January 1, 2014 have been conducted in compliance in all material respects with all Applicable Laws. Neither the Company nor any of its Subsidiaries is in material default under any Applicable Law or, to the Knowledge of the Company, there is no investigation by any Governmental Authority with respect to any material violation of any Applicable Law. The Company and its Subsidiaries hold, and at all times as required by Applicable Law have held, all material permits, certificates, licenses, Governmental Approvals and other authorizations of any Governmental Authority (“Permits”) that are necessary for the operation of their business as presently conducted or the ownership, operation or use by the Company and its Subsidiaries of their properties, assets and rights, except where the failure to hold any such Permit would not, individually or in the aggregate, be Material to a Reasonable Investor. All Permits held by the Company and its Subsidiaries are in full force and effect and are not subject to any suspension, cancellation, modification or revocation or any Proceedings related thereto, and, to the Knowledge of the Company, no such suspension, cancellation, modification or revocation or Proceeding is threatened. The Company and its Subsidiaries are in compliance in all material respects with all the Permits held by them. As of the date hereof, the Company has not received any written notification from any Governmental Authority asserting that the Company or its Subsidiaries is not in compliance with any Applicable Law that such Governmental Authority enforces or that such Governmental Authority intends to revoke or suspend any Permit, except where such noncompliance, revocation or suspension would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          As of the date hereof, no Proceeding, examination, audit or review (other than routine examinations, audits and reviews in the ordinary course of business consistent with past practice) with respect to the Company or its Subsidiaries has been initiated or is ongoing, unresolved or, to the Knowledge of the Company, threatened by any applicable Governmental Authority. The Company has not received any notice or communication of any unresolved violation or exception from any applicable Governmental Authority with respect to any report or statement by any applicable Governmental Authority relating to any examination that would, individually or in the aggregate, be Material to a Reasonable Investor. Except to the extent restricted from doing so by Applicable Law, the Company has previously provided to or otherwise made available to Apollo true, complete and correct copies of all written correspondence relating to any investigation or examination provided to or by the Company by the SEC or any other Governmental Authority since January 1, 2014.

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(c)          No director or officer of the Company or any of its Subsidiaries, or to the Company’s Knowledge, no employee or agent of the Company or any of its Subsidiaries acting for or on behalf of the Company has, directly or indirectly (i) used any funds for contributions, gifts, gratuities, entertainment or other expenses related to political activity, in each case in violation of Applicable Law, (ii) made any payment in violation of Applicable Law or offered, promised or authorized the payment of anything of value, regardless of form, whether in money, property or services, to or for the benefit of any U.S. or non-U.S. government official or employee, any official or employee of a public international organization, or any political party or candidate for political office in each case in violation of Applicable Law and for the purpose of influencing any act or decision of such individual or of any Governmental Authority or public international organization, or securing any improper advantage, in order to obtain or retain business or direct business to any Person in violation of Applicable Law, (iii) made any other payment, regardless of form, whether in money, property or services which constitutes criminal bribery under Applicable Law, or (iv) violated any applicable export control, money laundering or anti-terrorism law or regulation, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery law or regulation, of any applicable jurisdiction, or any Applicable Law of similar effect.

2.9           Absence of Certain Changes; No Undisclosed Liabilities.

(a)          Since December 31, 2014, through the date of this Agreement, except as set forth in the Company SEC filings and the draft 10-Q or otherwise contemplated by this Agreement, (i) there has been no change, event or development that, individually or in the aggregate, is or would be Material to a Reasonable Investor, and (ii) the Company and its Subsidiaries have operated in the ordinary course of business consistent with past practice in all material respects.

(b)          Except as contemplated by this Agreement and except as (i) specifically reserved for or otherwise reflected in the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, (ii) incurred after December 31, 2014 in the ordinary course of business consistent with past practice liabilities, and (iii)  individually or in the aggregate, is not and would not reasonably be Material to a Reasonable Investor, the Company and its Subsidiaries do not have any liabilities or obligations, whether accrued, absolute, contingent or otherwise, and whether or not such liabilities or obligations would be required by GAAP to be reflected or reserved on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP.

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2.10         Personnel and Employee Benefits Matters.

(a)          No liability under Title IV or Sections 302, 303 or 304 of ERISA or Sections 412, 430 or 431 of the Code has been incurred by the Company or any of its Subsidiaries that has not been satisfied in full, and no condition exists that could present a material risk that the Company or any of its Subsidiaries could reasonably be expected to incur any such liability. No Employee Benefit Plan is subject to Title IV of ERISA, and neither the Company, its Subsidiaries nor any of their respective ERISA Affiliates has, at any time during the last six years, contributed to or been obligated to contribute to any plan that is (i) subject to Title IV or (ii) a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA. No nonexempt “prohibited transactions” as such term is defined in Section 406 of ERISA or Section 4975 of the Code have occurred with respect to any Employee Benefit Plan, and neither the Company or any of its Subsidiaries has any material Tax liability under Section 4975 of the Code. All contributions required to be made to any Employee Benefit Plan by Applicable Law or by any Employee Benefit Plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Employee Benefit Plan, in each case for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the in the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

(b)          Except as would not, individually or in the aggregate, be Material to a Reasonable Investor, (i) each Employee Benefit Plan has been operated and administered in all material respects in accordance with its terms and Applicable Law, including ERISA and the Code, and (ii) each Employee Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a determination letter from the Internal Revenue Service that it is so qualified and that any trust maintained thereunder is exempt from taxation under Section 501(a) of the Code, in each case which letter has not been revoked, and, to the Company’s Knowledge, there are no existing circumstances or events that have occurred which would reasonably be expect to adversely affect the qualified status of any such Employee Benefit Plan or related trust.

(c)          No Employee Benefit Plan provides, and neither the Company nor any of its Subsidiaries have committed to provide, benefits including death or medical benefits (whether or not insured), with respect to current or former employees of the Company or any of its Subsidiaries after retirement or other termination of service (other than coverage mandated by Section 4980B of the Code or Section 601 et seq. of ERISA or similar Applicable Law).

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(d)          There are no pending or, to the Company’s Knowledge, threatened or anticipated claims by or on behalf of any Employee Benefit Plan, by any employee or beneficiary under any such Employee Benefit Plan or otherwise involving any Employee Benefit Plan (other than routine claims for benefits) that, individually or in the aggregate, have resulted in, or would reasonably be expected to result in, material liability for the Company and its Subsidiaries, taken as a whole, and, to the Company’s Knowledge, no set of circumstances exists which would reasonably be expected to give rise to such a claim.

(e)          Except as would not, individually or in the aggregate, be Material to a Reasonable Investor, (i) each of the Company and its Subsidiaries is in compliance with all Applicable Laws respecting labor, employment, worker classification, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety and health requirements, wages and hours, withholding of taxes, employment discrimination, disability rights or benefits, equal opportunity, labor relations, employee leave issues and unemployment insurance and related matters, (ii) no claim with respect to payment of wages, salary, compensation or benefits pay is pending or, to Knowledge of the Company, threatened, by or before any Governmental Authority with respect to any current or former employees, officers, directors, managers or consultants of the Company or any of its Subsidiaries, (iii) the Company and each of its Subsidiaries has paid all of its current and former employees, directors, officers and consultants or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such Persons, and (iv) each individual who renders services to the Company or any of its Subsidiaries who is classified by any such entity as having the status of an independent contractor or other non-employee status or the status of an exempt employee or nonexempt employee for any purpose, including for purposes of participation in any Employee Benefit Plan, is properly so characterized under all Applicable Laws.

(f)          Except as set forth on Section 2.10(g) of the Company Disclosure Letter, the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of any of the transactions contemplated by this Agreement will not (alone or in combination with any other event), (i) entitle any current or former employee, director, officer or consultant of the Company or any of its Subsidiaries to severance pay or any other payment, (ii) result in any payment becoming due, accelerate the time of payment or vesting of benefits, or increase the amount of compensation due to any such employee, director, officer or consultant, (iii) result in any forgiveness of indebtedness, trigger any funding or payment obligation under any Employee Benefit Plan or impose any restrictions or limitations on the ability of the Company or any of its Subsidiaries right to administer, amend or terminate any Employee Benefit Plan or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation section 1.280G-1) that could reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in section 280G(b)(1) of the Code). No person is entitled to receive any additional payment (including any tax gross-up or other payment) from the Company or any of its Subsidiaries as a result of the imposition of the excise Taxes required by section 4999 of the Code or any Taxes required (alone or in combination with any other event) by section 409A of the Code as a result of the execution, delivery and performance of this Agreement and the consummation of any of the transactions contemplated by this Agreement.

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(g)          Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement.

2.11         Taxes.

(a)          Except as set forth on Section 2.11 of the Company Disclosure Letter, all material U.S. income and other material Tax Returns required to be filed by, on behalf of or with respect to the Company or any of its Subsidiaries have been duly and timely filed and all Tax Returns filed by, on behalf of, or with respect to the Company or any of its Subsidiaries are true, complete and correct in all material respects. All material Taxes (whether or not reflected on such Tax Returns) required to be paid by or with respect to, or that could give rise to a Lien on the assets of, the Company or any of its Subsidiaries have been duly and timely paid other than those Taxes not yet due. All material Taxes required to be withheld by the Company or any of its Subsidiaries have been duly and timely withheld, and such withheld Taxes have been either duly and timely paid to the proper Governmental Authority or properly set aside in accounts for such purpose. Except for Permitted Liens, there are no Liens for material Taxes on any of the assets of the Company or any of its Subsidiaries.

(b)          All accounting entries (including charges and accruals) for material Taxes with respect to the Company and its Subsidiaries reflected on the books of the Company and its Subsidiaries (excluding any provision for deferred income taxes reflecting either differences between the treatment of items for accounting and income tax purposes or carryforwards) are adequate to cover any material Tax liabilities accruing through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books.

(c)          No written agreement or other document waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any material Taxes with respect to the Company or any of its Subsidiaries, and no written power of attorney with respect to any such Taxes has been filed or entered into with any Governmental Authority. No material Taxes with respect to the Company or any of its Subsidiaries are currently under audit, examination or investigation by any Governmental Authority or the subject of any judicial or administrative proceeding. No Governmental Authority has asserted or threatened in writing to assert any deficiency, claim or issue with respect to any material Taxes or any adjustment to any material Taxes against the Company or any of its Subsidiaries with respect to any taxable period for which the period of assessment or collection remains open. No jurisdiction (whether within or without the United States) in which any of the Company or its Subsidiaries has not filed a particular type of Tax Return or paid a particular type of material Tax has asserted in writing that the Company or any of its Subsidiaries is required to file such Tax Return or pay such type of material Tax in such jurisdiction.

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(d)          Neither the Company nor any of its Subsidiaries (i) has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or any similar provision of state, local or foreign law), in either case that would be binding upon the Company or any of its Subsidiaries after the Closing Date, (ii) is or has been a member of any affiliated, consolidated, combined or unitary group for purposes of filing Tax Returns or paying Taxes, except for groups whose only members are two or more of the Company and its Subsidiaries or (iii) has any liability for the Taxes of any Person (other than the Company or another Subsidiary of the Company) (whether under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law, as a transferee or successor, pursuant to any Tax sharing or indemnity agreement or other contractual agreements (other than any customary tax sharing or allocation provisions in commercial contracts not primarily related to Taxes) (“Tax Agreements”), or otherwise).

(e)          Neither the Company nor any of its Subsidiaries has participated in a reportable transaction within the meaning of Treasury Regulations Section 1.6011-4(b).

(f)           The representations and warranties set forth in this Section 2.11 and in Section 2.10 are the exclusive representations and warranties of the Company with respect to Tax matters.

2.12         Properties and Assets.

(a)          The Company or one of its Subsidiaries has a valid and enforceable leasehold interest in each of the leased premises in which the Company or any of its Subsidiaries currently conducts its business, except as may be affected by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles and except for any failure to have leasehold that would not, individually or in the aggregate, be Material to a Reasonable Investor. Neither the Company nor any of its Subsidiaries owns any real property.

(b)          The Company and its Subsidiaries own and have good, valid and marketable title to or, in the case of leased property, good and valid leasehold interests in, or otherwise will have full or sufficient and legally enforceable rights to use, all of the tangible properties, assets and rights (tangible or intangible, and real, personal or mixed) used or held for use in connection with, necessary for the conduct of, or otherwise material to the operations of, the businesses of the Company and its Subsidiaries, in each case free and clear of any Lien other than Permitted Liens, except for any failure to have such titles, interests or rights that would not, individually or in the aggregate, be Material to a Reasonable Investor.

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2.13         Material Agreements. Section 2.13 of the Company Disclosure Letter lists each Material Contract to which the Company or any Subsidiary is a party or bound as of the date of this Agreement. Each such Material Contract is a legal, valid and binding obligation of the Company or its Subsidiary, as the case may be, and, to the Company’s Knowledge, each other party thereto, in each case in full force and effect and enforceable in accordance with its terms, except as may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles. Neither the Company nor any of its Subsidiaries has received any written or, to the Company’s Knowledge, oral notice of cancellation or termination under any option or right reserved to the other party to any Material Contract or any written or, to the Company’s Knowledge, oral notice of default under such Material Contract. As of the date hereof, no condition exists or event has occurred which (whether with or without notice or lapse of time or both) would constitute a breach or default by the Company or any of its Subsidiaries or, to the Company’s Knowledge, any other party thereto under, or result in a right in termination of, any such Material Contract, except as would not , individually or in the aggregate, be Material to a Reasonable Investor.

2.14         Intellectual Property and IT Systems.

(a)          The Owned Intellectual Property is subsisting, and, to the Company’s Knowledge, is valid and enforceable. Neither the Company nor any of its Subsidiaries has conducted its business in a manner that would reasonably be expected to result in (i) the cancellation or unenforceability of any issued, registered or applied for Owned Intellectual Property except as would not, individually or in the aggregate, be Material to a Reasonable Investor, or (ii) the unauthorized disclosure of any material confidential Intellectual Property used in its business. After giving effect to the transactions contemplated by this Agreement, the Company and its Subsidiaries (x) are the owners of all of the Owned Intellectual Property free and clear of any Liens other than Permitted Liens and (y) own, license or otherwise have the right to use all the Intellectual Property necessary and sufficient to conduct their businesses as currently conducted.

(b)          Since January 1, 2014, (i) the conduct of the Company’s and its Subsidiaries businesses has not been and, as currently conducted, is not infringing, misappropriating, diluting or otherwise violating (“Infringing”) in any material respects the rights of any Person in respect of any Intellectual Property and (ii) to the Company’s Knowledge, none of the material Owned Intellectual Property has been or is being Infringed by any Person.

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(c)          The IT Systems (i) are in reasonably good repair and operating condition, subject only to ordinary wear and tear, and are adequate and suitable (including with respect to working condition and capacity) for the purposes for which they are being used or held for use, and (ii) to the Company’s Knowledge, do not contain any Malware that would reasonably be expected to interfere with the ability of the Company or any of its Subsidiaries to conduct their businesses. The Company and its Subsidiaries (x) have implemented and maintain commercially reasonable security, business continuity, and backup and disaster recovery plans and procedures with respect to the IT Systems, (y) act in material compliance therewith, and (z) have taken commercially reasonable steps to test such plans and procedures on a periodic basis, and such plans and procedures have been proven effective upon such testing in all material respects. The Company and its Subsidiaries have implemented or are in the process of implementing in a timely manner all security patches or security upgrades that are generally available for the IT Systems that process data or non-public information that is sensitive in nature about their investors.

2.15         Data Protection and Privacy.

(a)          Since January 1, 2014, the Company and its Subsidiaries and the Sponsored Funds have been and are in compliance in all material respects with any and all Applicable Laws, contractual requirements, terms of use and privacy policies pertaining to data protection or information privacy, security, collection, use, disclosure, disposal, maintenance and transmission.

(b)          The Company and its Subsidiaries uses commercially reasonable industry standards to protect the secrecy of data and non-public information that it (or any third Person on behalf of it) collects, stores, uses, maintains or transmits and to prevent unauthorized access to, and use or disclosure of, such data or non-public information by any other Person. Since January 1, 2014, neither the Company nor any of its Subsidiaries, nor to the Company’s Knowledge, any third Person working on behalf of any of them, has had an incident of unauthorized (i) access, (ii) disclosure, (iii) use, (iv) destruction or (v) loss of any data or non-public information that Company or its Subsidiaries (or a third Person on behalf of any of them) collects, stores, uses, maintains or transmits

2.16         Broker-Dealer Matters.

(a)          Registration. Section 2.16(a) of the Company Disclosure Letter lists each Subsidiary that is registered as a broker-dealer with the SEC (collectively, the “Broker-Dealer Subsidiaries”). Each Broker-Dealer Subsidiary is, and at all times since January 1, 2014, has been, (i) duly registered under Section 15 of the Exchange Act with the SEC, (ii) in compliance with Applicable Laws governing their activities and (iii) current in all filings required by the SEC or any other Governmental Authority to which they are subject, except, in each case, as would not, individually or in the aggregate, be Material to a Reasonable Investor. Except as set forth in Section 2.18(a) of the Company Disclosure Letter, since January 1, 2014, none of the Broker-Dealer Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. The Broker-Dealer Subsidiaries are, and at all times since January 1, 2014, have been, (x) members in good standing of Financial Industry Regulatory Authority (“FINRA”) and any other Self-Regulatory Organizations in which their membership is required in order to conduct their business as conducted and (y) in compliance with all applicable rules and regulations of FINRA and any such other Self-Regulatory Organizations, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. As of the date hereof, no Subsidiary of the Company other than the Broker-Dealer Subsidiaries is registered or required to be registered as a broker or dealer with the SEC or any other Governmental Authority. 

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(b)          Disqualification. None of the Broker-Dealer Subsidiaries nor, to the Company’s Knowledge, any “associated person” (within the meaning of the Exchange Act) thereof, is ineligible pursuant to Section 15(b) of the Exchange Act to act as a broker or dealer or as an associated person of a registered broker-dealer as a result of a “statutory disqualification,” as such term is defined in Section 3(a)(39) the Exchange Act. As of the date of this Agreement, there are no Proceedings pending or, to the Company’s Knowledge, threatened that would reasonably be expected to result in a Broker-Dealer Subsidiary having its authorization to conduct business as a broker-dealer denied, suspended, revoked or restricted. Except as set forth in Section 2.18(b) of the Company Disclosure Letter, as of the date of this Agreement, there are no Proceedings pending or, to the Company’s Knowledge, threatened that would reasonably be expected to result in any director, officer or employee of a Broker-Dealer Subsidiary having his or her registration or license to conduct investment-related activities denied, suspended, revoked or restricted. Since January 1, 2014, each of the directors, officers, employees, contractors and agents employed, supervised or controlled by any Broker-Dealer Subsidiary who is required to be licensed or registered as a principal, registered representative, salesperson, investment advisory representative or insurance agent with any Governmental Authority in connection with his or her activities for or with a Subject Company has been duly licensed or registered, except as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(c)          Form BD. The Company has provided to the Investor, prior to the date of this Agreement, true, complete and correct copies of each of the Broker-Dealer Subsidiary’s Form BD as most recently filed with the SEC and all state registration forms, each as amended to date.  The information contained in each such form was true and complete at the time of filing and the Broker-Dealer Subsidiary has made all amendments to such form as it is required to make under any Applicable Law, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. No Broker-Dealer Subsidiary’s Form BD contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 

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(d)          Minimum Net Capital. Each of the Broker-Dealer Subsidiaries maintains its minimum net capital in compliance with the Applicable Laws of the SEC and any other applicable Governmental Authority and in an amount sufficient to ensure that it has not been required to file notice under Rule 17a-11 under the Exchange Act.

(e)          Compliance Policies. The Broker-Dealer Subsidiaries have, and at all times since January 1, 2014 have had, in place, to the extent required by Applicable Law, processes to establish, maintain, review, test and modify written compliance and supervisory policies and procedures reasonably designed to achieve compliance with all Applicable Laws, including the rules and regulations of the SEC and FINRA and other Governmental Authority.

2.17        Municipal Advisor Matters.

(a)          Section 2.17(a) of the Company Disclosure Letter lists each Subsidiary that is registered as a municipal advisor with the SEC (collectively, the “Municipal Advisor Subsidiaries”). The Municipal Advisor Subsidiaries are, and at all times since January 1, 2014, have been, (i) duly registered under Section 15B of the Exchange Act with the SEC, (ii) in compliance in all material respects with Applicable Laws governing their activities and (iii) current in all material filings required by the SEC or any other Governmental Authority. Since January 1, 2014, none of the Municipal Advisor Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. The Municipal Advisor Subsidiaries are, and at all times since January 1, 2014, have been, (x) members in good standing of MSRB and such other organizations in which their membership is required in order to conduct their business as conducted and (y) in compliance in all material respects with all applicable rules and regulations of MSRB and such other organizations. As of the date hereof, none of the Subsidiaries other than the Municipal Advisor Subsidiaries or, in connection with their service to such entities, any of their respective directors, officers, or employees, is registered or required to be registered as a municipal advisor or a municipal advisor representative or in any similar capacity with the SEC, MSRB, the securities commission of any state or foreign country or any other self-regulatory body. 

(b)          None of the Municipal Advisor Subsidiaries nor, to the Knowledge of the Company, any “associated person” (within the meaning of the Exchange Act) thereof, is ineligible pursuant to Applicable Law to act as a municipal advisor or as an associated person of a registered municipal or subject to any matter that would be a basis for censure, limitations on the activities, functions or operations of, or suspension or revocation of the registration of any of the Municipal Advisor Subsidiaries as a municipal advisor under Section 15B of the Exchange Act.  As of the date of this Agreement, there are no Proceedings pending or, to the Knowledge of the Company, threatened that would reasonably be expected to result in the Municipal Advisor Subsidiaries or any “associated person” (within the meaning of the Exchange Act) thereof becoming ineligible to act in such capacity.  Since January 1, 2014, each of the directors, officers, employees, contractors and agents employed, supervised or controlled by any Municipal Advisor Subsidiaries who is required to be registered as a municipal advisor or municipal advisor representative in connection with his, her or its activities for or with a Subsidiary with any Governmental Authority has been duly licensed or registered.

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(c)          The Company has provided or made available to the Investor, prior to the date of this Agreement, true, complete and correct copies of each of the Municipal Advisor Subsidiaries’ Form MA as most recently filed with the SEC and all state registration forms, each as amended to date.  The information contained in each such form was true and complete at the time of filing and the Municipal Advisor Subsidiary has made all amendments to such form as it is required to make under any Applicable Law. The Form MA is in compliance in all material respects with the applicable requirements of the Exchange Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 

(d)          The Municipal Advisor Subsidiaries have, and at all times since January 1, 2014 have had, in place, to the extent required by Applicable Law, processes to establish, maintain, review, test and modify written compliance and supervisory policies and procedures reasonably designed to achieve compliance with all Applicable Laws, including without limitation the rules and regulations of the SEC and MSRB and any other domestic or foreign securities regulator or self-regulatory organization of which such Municipal Advisor Subsidiaries are members. All such policies and procedures comply in all material respects with Applicable Law, and, since January 1, 2014, there have been no material violations or, to the Knowledge of the Company, allegations of material violations of such policies, by any employee or client of the Company, the Municipal Advisor Subsidiaries or any of their Affiliates or any Governmental Authority.

2.18        Investment Adviser Compliance Matters.

(a)          Section 2.18(a) of the Company Disclosure Letter lists each Subsidiary that is an investment adviser (collectively, the “IA Subsidiaries”), including a notation of whether the IA Subsidiary is registered with the SEC or a state or is an exempt reporting adviser. Each IA Subsidiary (i) is, and at all times required by Applicable Law since January 1, 2014 has been, registered as an investment adviser under the Advisers Act and (ii) is registered and licensed as an investment adviser or in any similar capacity under all other Applicable Laws or exempt therefrom, except, in the case of clause (ii), as would not, individually or in the aggregate, be Material to a Reasonable Investor. Since January 1, 2014, none of the IA Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. No Subsidiary of the Company other than the IA Subsidiaries is registered or required to be registered as an investment adviser or in any similar capacity with the SEC or the securities commission of any state.

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(b)          Neither the Company, any of its Subsidiaries, any Affiliated Party of the Company or its Subsidiaries, nor any of their directors, officers or employees is subject to any disqualification, ineligibility, denial, suspension or revocation (or subject to any criminal conviction, injunction, court order, administrative order or other disciplinary event that would be a basis for any such disqualification, ineligibility, denial, suspension or revocation) that would disqualify, make ineligible or restrict the Company, its Subsidiaries or any Affiliated Party from acting (or from receiving or making a payment to the Company, its Subsidiaries or any Affiliated Party for acting) as (i) an investment adviser, (ii) a solicitor for an investment adviser, (iii) an investment adviser, depositor or principal underwriter to an investment company registered under the Investment Company Act, or (iv) an investment manager, solicitor, promoter or in any other capacity (including beneficially owning 20% of the voting securities of an issuer relying on Rule 506 of Regulation D under the Securities Act) for an investment fund or other issuer offering its securities in reliance on Rule 506 of Regulation D under the Securities Act. There is no investigation pending or, to the Knowledge of the Company, threatened, whether formal or informal, that is likely to result in, such disqualification, ineligibility or restriction (or the basis for such disqualification, ineligibility or restriction).

(c)          As of the date hereof, neither the Company nor any of its Subsidiaries or, in connection with their service to any of the foregoing entities, any of their respective directors, officers, employees, contractors, or agents, is required to be registered, licensed or qualified as a (i) a bank, trust company, commodity trading advisor, commodity broker-dealer, futures commission merchant, transfer agent, introducing broker, municipal securities dealer, or insurance company or in any similar capacity with the SEC, the CFTC, the National Futures Association (“NFA”), FINRA, the securities commission or financial regulatory agency of any state or other jurisdiction or any self-regulatory body, except as would not, individually or in the aggregate, be Material to a Reasonable Investor, or (ii) subject to any liability or disability by reason of any failure to be so registered, licensed or qualified. Neither the Company nor any Subsidiary has received notice of, and, to the Knowledge of the Company, there is no basis to believe that there is any event that is reasonably likely to result in, any pending judicial, arbitral or administrative action, suit, proceeding or investigation concerning any failure to obtain any bank, trust company, commodity trading advisor, commodity broker-dealer, futures commission merchant, transfer agent, introducing broker, municipal advisor, municipal securities dealer, insurance company registration, license or qualification, except for as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(d)          The Company and each of its Subsidiaries has filed all material regulatory reports, schedules, forms, registrations, financial statements, sales literature, statements, notices, filings and other documents (“Governmental Reports”), together with any amendments, since January 1, 2014 that were required to be filed with any Governmental Authority, including (i) with respect to each IA Subsidiary, each Form ADV and Form PF that was required to be filed in compliance with Applicable Law and (ii) with respect to any investment adviser representative of an IA Subsidiary, each Form U4 that was required to be filed in compliance with Applicable Law. All Government Reports complied in all material respects with Applicable Law as in effect at the time they were filed and did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

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(e)          Each IA Subsidiary has in effect, and at all times, to the extent required by Applicable Law, has had in effect, all policies and procedures required by Rule 206(4)-7 under the Advisers Act (“Adviser Compliance Policies”), including the designation of a chief compliance officer to review the Adviser Compliance Policies. Such Adviser Compliance Policies comply in all material respects with Applicable Law and reflect, if applicable, modifications to such policies as requested in writing by any Governmental Authority. The IA Subsidiaries are in compliance in all material respects with the Adviser Compliance Policies and, since January 1, 2014, there have been no material violations of the Adviser Compliance Policies other than those disclosed in the annual reports pursuant to Rule 206(4)-7 under the Advisers Act and Rule 38a-1 under the Investment Company Act that have been provided to the Investor.

(f)          Since January 1, 2014, the Company, its Subsidiaries and the Funds, as applicable, have complied with all terms and conditions of each no-action letter and exemptive order issued by the SEC to them that remains applicable to its business as conducted on the date of this Agreement necessary to rely on the relief granted thereby.

(g)          Since January 1, 2014 each of the Company and its Subsidiaries conducted its activities with respect to Clients subject to ERISA and/or Section 4975 of the Code in accordance with in all material respects such law, rules and regulations, as the same may be in effect from time to time. To the extent that any Client to which Company, any of its Subsidiaries provides investment advice or investment management services (including sub-advisory services) is (i) an employee benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I of ERISA; (ii) a plan subject to Section 4975 of the Code; (iii) a benefit plan investor, as defined in Section 3(42) of ERISA and the regulations promulgated thereunder, or any entity whose assets include the assets of any such plan described in clause (i) or (ii) above or any such benefit plan investor within the meaning of ERISA and applicable regulations; or (iv) a Person acting on behalf of any such plan described in clause (i) or (ii) above, or a benefit plan investor or entity, then (A) the Company or its applicable Subsidiary has provided such advice or management or advisory services in compliance in all material respects with the applicable requirements of ERISA and any prohibited transaction exemption pursuant to which such service or advice is provided, and (B) neither the Company, any of its Subsidiaries nor any other Person has engaged in a non-exempt “Prohibited Transaction” within the meaning of Section 406 of ERISA or Section 4975(c) of the Code that has or could reasonably be expected to result in material liability to the Company and its Subsidiaries, taken as a whole. With respect to any Client whose assets are subject to the provisions of Part 4 of Title I of ERISA, the Company is a qualified professional asset manager (as such term is used in Prohibited Transaction Class Exemption 84-14, as amended).

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2.19        Funds.

(a)          Listing of Funds.

(i)          Neither the Company nor any of its Subsidiaries acts as sponsor, investment adviser, investment manager, depositor, principal underwriter, distributor or in any other capacity with respect to any entity (other than the Funds) that (i) is registered, or is required to be registered, as an investment company, or that has elected to be regulated as a BDC, under the Investment Company Act or in any other jurisdiction or (ii) has made, or intends to make, a public offering in the United States or in any other jurisdiction.

(ii)         Neither the Company nor any of its Subsidiaries acts as commodity pool operator, commodity trading advisor, investment adviser, investment sub-adviser, general partner, managing member, manager or sponsor to any commodity pool (as defined under the Commodity Exchange Act) or to any pooled investment vehicle (other than the Funds).

(b)          Funds: Compliance with Laws.

(i)          Each Sponsored Fund and, to the Knowledge of the Company, each Sub-Advised Fund is in compliance in all material respects with the applicable provisions of the Advisers Act, Investment Company Act, the Commodity Exchange Act, the Securities Act, the Exchange Act and all Applicable Law. Each Sponsored Registered Fund and, to the Knowledge of the Company, each Sub-Advised Registered Fund is, and at all times required under Applicable Law has been, duly registered with the SEC as an investment company under the Investment Company Act. Each Sponsored BDC and, to the Knowledge of the Company, each Sub-Advised BDC has at all times required under Applicable Law elected to be regulated, and been regulated, as a business development company pursuant to section 54 of the Investment Company Act.

(ii)         No Sponsored Fund and, to the Knowledge of the Company, no Sub-Advised Fund, nor any director, executive officer or any other officer thereof, is ineligible pursuant to Rule 506(d) of Regulation D under the Securities Act with respect an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act, nor is there any Proceeding pending or, to the Knowledge of the Company, threatened by any Governmental Authority that would result in the ineligibility of any Sponsored Fund, any Sub-Advised Fund or any director, executive officer or any other officer thereof with respect an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act.

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(iii)        As of the date hereof, no Proceeding (other than routine examinations, audits or reviews in the ordinary course of business consistent with past practice) with respect to any Sponsored Fund or, to the Knowledge of the Company, any Sub-Advised Fund has been initiated or is ongoing, unresolved or, to the Knowledge of the Company, threatened by any Governmental Authority. There is no injunction, order, judgment or decree imposed upon any Sponsored Fund or, to the Knowledge of the Company, any Sub-Advised Fund that would materially impair the ability of the Fund to continue to operate its business as currently conducted, except as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(iv)         Each Sponsored Regulated Fund has adopted and maintained, at all times, to the extent required by Applicable Law, all written compliance policies and procedures required by Applicable Law ( “Sponsored Regulated Fund Compliance Policies”). All such Sponsored Regulated Fund Compliance Policies have been reviewed annually as required by Rule 38a-1 under the Investment Company Act. The Sponsored Regulated Fund Compliance Policies are in compliance with Applicable Law in all material respects. Each Sponsored Regulated Fund is, and at all times required by Applicable Law since January 1, 2014 has been, in compliance in all material respects with such policies and procedures.

(v)         The board of directors or trustees or general partner, as applicable, of each Sponsored Regulated Fund and, to the Knowledge of the Company, each Sub-Advised Registered Fund has been established and operated in conformity with the requirements and restrictions of Sections 10, 16 and 55, as applicable, of the Investment Company Act and satisfies the fund governance standards as defined in Rule 0-1 under the Investment Company Act. Each of the Sponsored Regulated Funds and, to the Knowledge of the Company, each of the Sub-Advised Registered Funds will be governed by a board of trustees, general partner or board of directors (if any) at least 75% of whom are not “interested persons” (as defined in the Investment Company Act) of the investment adviser to such Regulated Fund. No director or trustee, as applicable, of the Sponsored Regulated Funds, who has been identified as an “independent” or “non-interested” trustee in such Sponsored Registered Fund’s most recent registration statement on Form N-1A or such Sponsored BDC’s most recent registration statement on Form N-2 is an “interested person” of such Sponsored Regulated Fund, as that term is defined in Section 2(a)(19) of the Investment Company Act, or has had at any time since January 1, 2014, a material business or professional relationship with such Sponsored Registered Fund’s or Sponsored BDC’s investment adviser or principal underwriter or with the principal executive officer or any controlling person of such investment adviser or principal underwriter other than as set forth in such Sponsored Registered Fund’s registration statement on Form N1-A or such Sponsored BDC’s registration on Form N-2.

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(vi)        No (A) director or trustee of a Sponsored Regulated Fund who is an “interested person” (as such term is defined in section 2(a)(9) of the Investment Company Act) (an “interested director or trustee”) or (B) to the Knowledge of the Company, director or trustee who is not an interested director or trustee (a “non-interested director or trustee”) of any Sponsored Regulated Fund is ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve as such. There is no Proceeding pending or, to the Knowledge of the Company, threatened which would reasonably be expected to result in the ineligibility of any such Person to serve in any such capacities. No (x) interested director or trustee; or, (z) to the Knowledge of the Company, non-interested director or trustee of any Sponsored Regulated Fund is, or at any time during the past three (3) years has been, (1) subject to any cease and desist, censure or other disciplinary or similar order issued by, (2) a party to any written agreement, consent agreement, memorandum of understanding or disciplinary agreement with, (3) a party to any commitment letter or similar undertaking to, (4) subject to any order or directive by or (5) a recipient of any supervisory letter from, any Governmental Authority, regardless of whether the Company any of its Subsidiaries expects or intends to provide investment advisory services to such Governmental Authority.

2.20         Insurance. Each of the Company and its Subsidiaries maintains such worker’s compensation, comprehensive property and casualty, liability, errors and omissions, directors’ and officers’, fidelity and other insurance as it may be required to maintain under all Applicable Laws. Each of the Company and its Subsidiaries has complied in all material respects with the terms and provisions of such policies and such insurance policies are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis). As of the date hereof, there is no material claim by the Company or any of its Subsidiaries pending under any such policy as to which coverage has been denied or disputed by the underwriters of such policy or in respect of which such underwriters have reserved their rights. Since January 1, 2014, the Company and its Subsidiaries have properly reported all material claims, acts, omissions, events, circumstances, occurrences and losses relating to its business, or to the properties, rights or assets of the Company and its subsidiaries, to the extent required under each such policy, except as would not reasonably be, individually or in the aggregate, Material to a Reasonable Investor

2.21         Affiliate Arrangements. Except as set forth on Section 2.22 of the Company Disclosure Letter, there are no Contracts between the Company and any of its Subsidiaries, on the one hand, and any of the Company’s Affiliates (other than its Subsidiaries), any stockholder or equity holder of the Company or any of its Affiliates (other than the Company or its Subsidiaries in their capacity as stockholders or equity holders of the Company’s Subsidiaries), or any director, officer or employee of the Company or any of the Company’s Affiliates, on the other hand (any such Contract, an “Affiliate Agreement”). Except as set forth in Section 2.22 of the Company Disclosure Letter, none of the Company’s Affiliates (other than its Subsidiaries), any stockholder or equity holder of the Company or any of its Affiliates (other than the Company or its Subsidiaries in their capacity as stockholders or equity holders of the Company’s Subsidiaries), or any director, officer or employee of the Company or any of the Company’s Affiliates owns any material asset or right (whether real or personal, tangible or intangible) used in the businesses of the Company and its Subsidiaries.

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2.22         Information Supplied. None of the information supplied or to be supplied by or on behalf of the Company expressly for inclusion or incorporation by reference in the Information Statement will, as of the date it is mailed to the stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

2.23         Brokers. No broker, investment banker, financial advisor or other Person, other than Centerview Partners LLC, the fees and expenses of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.

2.24         Compliance with Environmental Law. The Company and its Subsidiaries have complied in the past three years and are in compliance with all applicable Environmental Laws pertaining to any of their properties, assets or rights and the use and ownership thereof, except as would not, individually or in the aggregate be Material to a Reasonable Investor. No violation by the Company is being or has been alleged in writing or, to the Knowledge of the Company, orally of any applicable Environmental Law relating to any of its properties, assets or rights or the use or ownership thereof. There are no Proceedings pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiary under any Environmental Law.

2.25         No Other Representations and Warranties. Except for the representations and warranties contained in this Article II, the Company makes no express or implied representations or warranties, and the Company hereby disclaims any such representations or warranties with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

Article III
Representations and Warranties of the investor

The Investor represents and warrants to the Company as follows:

3.1           Organization. The Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation.

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3.2           Authority. The Investor has the requisite corporate power and authority to execute and deliver this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Investor of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and the consummation by the Investor of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or other organizational action, and no other corporate or other organizational action on the part of the Investor is necessary to authorize the execution and delivery by the Investor of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and the consummation by the Investor of the transactions contemplated hereby and thereby. This Agreement has been, and at the Closing, of the Registration Rights Agreement will be, duly and validly executed and delivered by the Investor and, assuming the due authorization, execution and delivery by the other parties thereto, constitute a legal and binding obligation of the Investor, enforceable against the Investor in accordance with their terms, except as (a) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

3.3           Non-Contravention. The execution and delivery by the Investor of this Agreement and the Registration Rights Agreement do not, and the consummation by the Investor of the transactions contemplated hereby and thereby and the performance by the Investor of its obligations hereunder and thereunder will not (with or without the giving of notice, the termination of any grace period or both): (a)  violate, conflict with, or result in a breach or default under any provision of its Organizational Documents or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 3.4(a) have been obtained or made, (i) violate any Applicable Law or (ii) violate, result in a violation or breach by the Investor of, or the termination or the acceleration of, or conflict with or constitute a default under, any Contract to which the Investor is a party or by which any of its property is bound, except, in the case of clauses (i) and (ii), for any such violation, breach, termination, acceleration, conflict or default as would not, individually or in the aggregate, reasonably be expected to prohibit or materially impair the ability of the Investor to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

3.4           Consents, etc. Except as set forth in the Investor Disclosure Letter, no Governmental Approval is required for the execution and delivery of this Agreement by the Investor, the performance of its obligations hereunder and its consummation of the transactions contemplated hereby, except in any such case for (x) any such Governmental Approval which is required solely by reason of the specific regulatory status of the Company or its Affiliates and (y) any such Governmental Approval the failure of which to be obtained or made would not reasonably be expected to prohibit or materially impair the ability of the Investor to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

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3.5           Available Funds. The Investor will have available all funds necessary to satisfy all of its obligations hereunder and in connection with the transactions contemplated hereby, and its ability to consummate such transactions is not dependent or conditional upon the receipt of financing (whether debt or equity) from any Third Party.

3.6           Investment Intent. The Investor is acquiring the Purchased Shares for its own account, for investment purposes only and not with a view to, or for resale in connection with, the distribution thereof, except pursuant to registration under the Securities Act or pursuant to an exemption from such registration available under the Securities Act.. The Investor understands that the Purchased Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act.

3.7            No Other Representations and Warranties. Except for the representations and warranties contained in this Article III, the Investor makes no express or implied representations or warranties, and the Investor hereby disclaims any such representations or warranties with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

Article IV
Covenants

4.1           Conduct of Business. During the period from the date hereof and continuing through the Closing, except to the extent required by Applicable Law, as may be consented in writing to by the Investor or as expressly required by this Agreement, the Company will, and will cause each of its Subsidiaries to, use its reasonable best efforts to (i) operate in the ordinary course consistent with past practice; (ii) keep available the present services of the Company’s and its Subsidiaries’ employees and other service providers; and (iii) preserve intact the Company’s and its Subsidiaries’ rights, franchises, goodwill and relations with Clients and others with whom the Company and its Subsidiaries conduct business. Without limiting the generality of the foregoing, except as (w) required by Applicable Law, (x) expressly permitted or required by this Agreement or any Ancillary Agreement, (y) set forth on Section 4.1 of the Company Disclosure Letter or (z) with the Investor’s prior written consent (not to be unreasonably withheld, conditioned or delayed), the Company will not:

(a)          amend its Organizational Documents;

(b)          declare or pay any dividend or distribution on the Common Stock;

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(c)          take any action that would require any anti-dilution adjustment to be made under the Certificates of Designation as if issued on the date of this Agreement;

(d)          take any other action that would require the affirmative vote of at least a majority of the shares of Series D-1 Preferred Stock under the Certificate of Designation as if such shares had been issued on the date of this Agreement; or

(e)          merge with or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other Person;

(f)          subject itself to any bankruptcy, receivership, insolvency or similar proceeding; and

(g)          authorize, resolve, commit or agree, whether in writing or otherwise, to take any action prohibited by clauses (a) through (f) above.

4.2           Access; Confidentiality.

(a)          The Company will provide the Investor and its respective employees, accountants, counsel and other authorized representatives, during the period from the date hereof until the Closing, with reasonable access to the premises, employees, books and records and properties of the Company and its Subsidiaries upon reasonable advance notice during normal business hours, provided that such access does not interfere with the normal operations of the Company and its Subsidiaries. The Company will, and will cause its Subsidiaries to, furnish the Investor with such financial, operational, regulatory and compliance data and other information with respect to its respective businesses, assets, rights, properties liabilities and obligations as the Investor may from time to time reasonably request. Any information concerning the Company and its Subsidiaries obtained by the Investor or its respective representatives pursuant to this Section 4.2 shall be subject to the terms of the Confidentiality Agreement, and such information shall be held by the Investor and its respective representatives in accordance with the terms of the Confidentiality Agreement.

(b)          Notwithstanding the obligations contained in this Section 4.2, the Company and its Subsidiaries will not be required to provide access to or to disclose information where such access or disclosure would result in the loss of any attorney-client privileges or protections or contravene any Applicable Law or binding agreement in effect; provided, that the parties hereto shall cooperate in seeking and use reasonable best efforts to find a way to allow disclosure of such information in a manner that does not result in any of the foregoing consequences. Notwithstanding anything to the contrary contained in this Agreement, neither the Investor’s review of any matters related to the transactions contemplated by this Agreement, including the review of the business or financial and other conditions of the Company and its Subsidiaries conducted by the officers, employees, accountants, counsel and other authorized representatives or agents of the Investor or its respective Affiliates, nor to the knowledge of the Investor with respect to any such matters, whether or not resulting from any such review, whether prior to or after the date hereof, shall affect (a) the representations and warranties made by the Company in or pursuant to this Agreement or (b) the remedies of the Investor for breaches of such representations and warranties.

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4.3           Reasonable Best Efforts; Regulatory Approvals .

(a)          The Investor and the Company will use their respective reasonable best efforts, as promptly as possible, to take or cause to be taken all action and do or cause to be done all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including the satisfaction on a timely basis of the conditions to the Closing within their respective control.

(b)          The Investor and the Company will (i) as soon as practicable after the date hereof, (A) file (on a confidential basis if reasonably requested by a party and permitted under Applicable Law) such applications, notices, registrations and requests as may be required or advisable to be filed by it with any Governmental Authority as set forth in Section 4.3 of the Company Disclosure Letter in order to consummate the transactions contemplated hereby, (B) use its reasonable best efforts to obtain all consents, authorizations, orders and approvals of all such Governmental Authorities referred to in the preceding clause (A) and (C) use its reasonable best efforts to satisfy all conditions, undertakings and requirements as may be necessary or appropriate to obtain all such consents, authorizations, orders and approvals or as may be set forth therein, (ii) subject to Applicable Law restricting the exchange of such information, furnish the other parties hereto with copies of all documents and correspondence (x) prepared by or on behalf of such party for submission to any Governmental Authority and (y) received by or on behalf of such party from any Governmental Authority, in each case, in connection with the transactions contemplated hereby and (iii) subject to Applicable Law, use its reasonable best efforts to consult with and keep the other parties hereto informed as to the status of such matters.

(c)          To the extent that any Third Party Consent is required under any Contract in connection with the consummation of the transactions contemplated by this Agreement, the Company and the Investor shall use their reasonable best efforts to obtain such Third Party Consent on or prior to the Closing Date.

4.4           Public Announcements; Confidentiality.

(a)          Prior to the Closing, neither the Company nor its Subsidiaries shall, without the prior written approval of the Investor, make any internal or external communication, statement or announcement (whether to their employees, clients, customers, business partners, equity holders or otherwise) regarding this Agreement or the transactions contemplated hereby, or otherwise disclose any of the contents of this Agreement, unless otherwise required by Applicable Law, in which case the Person making such disclosure shall give prior written notice to the Investor and consider in good faith the Investor’s suggestions with respect thereto.

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(b)          The parties to this Agreement agree to be bound by and comply with the provisions set forth in the Confidentiality Agreement, the provisions of which are hereby incorporated herein by reference.

4.5           Supplemental Disclosure. The Investor and the Company will, prior to the Closing, give prompt notice to the other party, to the extent it has Knowledge (i) of the occurrence, or failure to occur, of any event or existence of any condition that has caused or could reasonably be expected to cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time after the date of this Agreement such that the conditions to closing set forth in Sections 5.2 or 5.3, as applicable, would reasonably be expected not to be met; (ii) of the occurrence of any matter or event that would reasonably be, in the case of the Company and its Subsidiaries, Material to a Reasonable Investor, or, in the case of the Investor, that would reasonably be expected to prohibit or materially impair the ability of the Investor to consummate the transaction contemplated by this Agreement or perform its obligations hereunder; (iii) of any failure on its part to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; (iv) of any notice or other written communication from any Person alleging that the consent of such Person is or may be required in connection with the consummation of the transactions contemplated by this Agreement and (v) of any lawsuit, action or proceeding pending or, to the knowledge of the Investor or to the Knowledge of the Company (as applicable), threatened against the party or the parties relating to the transactions contemplated herein; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; provided, further, that any failure to comply with this Section 4.5 shall not constitute a breach or noncompliance of a covenant by such party for purposes of determining the satisfaction of the conditions set forth in Section 5.2(b) or Section 5.3(b). In addition, the Investor shall keep the special committee of the board of directors of the Company reasonably informed of any material developments relating to the closing of the transactions contemplated by the ARC Transaction Agreement and the MIPA.

4.6           Listing Undertaking. The Company undertakes to take all such actions as are necessary, to cause the shares of Common Stock to be issued upon the conversion of the Purchased Shares to be approved for listing on the NYSE, subject to official notice of issuance, promptly after Closing.

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4.7           Certificate of Designation. Prior to the Closing, the Company shall file the Certificate of Designation with the Secretary of State of the State of Delaware, in accordance with Applicable Law and the Organizational Documents of the Company.

4.8           Board of Directors. The Company shall take all corporate and other actions necessary to cause, effective upon the Closing, the appointment of Marc Rowan and Anthony Civale as directors of the Company designated by the holders of a majority of the outstanding Series D-1 Preferred Stock in accordance with the Certificate of Designation.

4.9           NYSE Rules; Reservation of Shares of Common Stock. The Company shall at all times maintain a reserve for issuance from its duly authorized shares of Common Stock in an amount equal to the number of shares of Common Stock issuable upon conversion of all shares of Preferred Stock (including Series D-1 Preferred Stock) then outstanding.

4.10         Investor Undertaking. The Investor hereby undertakes to vote all of its Series D-1 Preferred Stock to approve any amendments to the certificates of designation governing the rights of the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock as mutually agreed among the holders of such Preferred Stock and the Company.

4.11         Expenses; Transfer Taxes.

(a)          Except as expressly set forth herein, each party shall bear the fees, costs and expenses of it and its Subsidiaries incurred in connection with the negotiation and preparation of this Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated hereby (including legal, accounting and financial advisors).

(b)          All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any real property transfer tax and any similar Tax, and including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be borne equally by the parties, and the Company shall file all necessary Tax returns and other documentation with respect to all such Taxes and fees, and, if required by Applicable Law, the Investor shall, and shall cause its Affiliates to, join in the execution of any such Tax returns and other documentation.

4.12         Further Assurances. Each party shall cooperate with the others, and execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and transfer, and take all such other actions as such party may reasonably be requested to take by the other parties hereto from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the transactions contemplated hereby.

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Article V

Conditions to the Closing

5.1          Mutual Conditions. The respective obligations of the Investor and the Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the parties hereto) as of the Closing of the following condition:

(a)          No Injunction. There shall be no (i) injunction, restraining order or decree of any nature of any Governmental Authority of competent jurisdiction in effect that restrains or prohibits the consummation of the transactions contemplated hereby or (ii) pending action, suit or proceeding brought by any Governmental Authority which seeks to restrain the consummation of the transactions contemplated hereby.

5.2          Additional Conditions to the Obligations of the Investor. The obligations of the Investor to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the Investor) as of the Closing of each of the following additional conditions:

(a)          Representations and Warranties of the Company. The representations and warranties of the Company set forth in Sections 2.1, 2.2, 2.5 and 2.23 (such representations and warranties, the “Fundamental Representations”) shall be true and correct in all respects (with only such exceptions as are de minimus) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. The representation and warranty set forth in Section 2.7 shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date. Other than the Fundamental Representations and Section 2.7, the representations and warranties of the Company contained in Article II of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor” or similar qualification, except for references to “Material Contracts”) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except for such failures to be true and correct that individually or in the aggregate would not have a Material Adverse Effect.

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(b)          Performance of Company Covenants. The Company shall have performed and complied with in all material respects all covenants and conditions contained in this Agreement to be performed or complied with by it prior to or at the Closing.

(c)          Material Proceedings. Since the date hereof, there has been no (i) new Proceeding instituted by a Governmental Authority or claim filed in state or federal court by any Person against Company or any of its Subsidiaries, in each case alleging actions, occurrences or omissions, or (ii) new development in any Proceeding set forth in Section 2.7 of the Company Disclosure Letter, in each case for clause (i) and (ii), that would, individually or in the aggregate, be Material to a Reasonable Investor.

(d)          Company Certificate. The Investor shall have received a certificate, dated as of the Closing Date, executed by a senior officer of the Company on behalf of the Company, to the effect that the conditions specified in paragraphs (a), (b) and (c) have been fulfilled.

(e)          Registration Rights Agreement. The Company shall have delivered to the Investor an executed Registration Rights Agreement.

(f)          Certificate of Designation. The Certificate of Designation filed with the Secretary of State of the State of Delaware Designation shall have been declared effective.

(g)          Luxor Transaction. Closing under the Luxor Transaction shall occur simultaneously and the Company shall receive the proceeds of the equity investment from Luxor.

(h)          Luxor Consent. The Luxor Consent shall remain in full force and effect.

(i)           Board of Directors. Marc Rowan and Anthony Civale shall be appointed to the board of directors of the Company as the designated Series D-1 Preferred Stock holder directors in accordance with Section 4.9.

5.3          Additional Conditions to the Obligations of the Company. The obligations of the Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the Company) as of the Closing of each of the following additional conditions:

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(a)          Representations and Warranties. The representations and warranties of the Investor set forth in Sections 3.1 and 3.2 shall be true and correct in all respects (with only such exceptions as are de minimis) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. Other than the representations and warranties referred to in the immediately preceding sentence, the representations and warranties of Apollo contained in Article III of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality or similar qualification) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except, in each case, for such failures to be true and correct that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay the ability of the Investor to complete the transactions contemplated by this Agreement or to perform its obligations hereunder.

(b)          Performance of Covenants. The Investor shall have performed and complied with in all material respects all covenants and conditions contained in this Agreement to be performed or complied with by it prior to or at the Closing.

(c)          Certificate. The Company shall have received a certificate, dated as of the Closing Date, executed by the Investor, to the effect that the conditions specified in paragraphs (a) and (b) above have been fulfilled by the Investor.

Article VI

Termination

6.1          Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:

(a)          by mutual written consent of the Investor and the Company;

(b)          by the Company or the Investor upon written notice to the other parties in the event that any Governmental Authority (including any court of competent jurisdiction) shall have issued an order, decree or ruling or taken any other official action enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; provided that the right to terminate this Agreement pursuant to this Section 6.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been a material cause of, or resulted in, the occurrence of such order, decree, ruling or other action;

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(c)          by the Company, if there shall be a breach by the Investor of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.3(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to the applicable Investor of such breach; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 6.1(c) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.2 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied;

(d)          by the Investor, if there shall be a breach by the Company of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.2(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to the Company of such breach; provided that the Investor shall not have the right to terminate this Agreement pursuant to this Section 6.1(d) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.3 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied;

(e)          by the Company or the Investor upon written notice given to the other parties in the event that the Closing shall not have taken place on or before June 30, 2016 (the “Outside Date”), unless such party has breached any covenant or agreement hereunder and such breach has resulted in the failure of the Closing to occur on or prior to the Outside Date; or

(f)          by the Investor, if the investment agreement with respect to the Luxor Transaction shall have been terminated in accordance with its terms without any shares of Series D Preferred Stock having been purchased.

6.2          Termination Right. Notwithstanding anything contained to the contrary herein, to the extent that the Company Disclosure Letter contains any disclosure that (i) would be Material to a Reasonable Investor taking into account the availability and extent of indemnification under Article VII hereof and (ii) a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading this Agreement and the Declarative Portions of the Company’s Recent SEC Filings the Investor shall have the right to terminate this Agreement (“Termination Right”) by serving notice to the Company within 72 hours of receiving the Company Disclosure Letter.

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6.3          Effect of Termination. In the event of the termination of this Agreement as provided above, this Agreement (other than this Section 6.3) shall become void and of no further force and effect, and there shall be no duties, liabilities or obligations of any kind or nature whatsoever on the part of any party hereto to the other parties based either upon this Agreement or the transactions contemplated hereby, provided that (a) no such termination (nor any provision of this Agreement) shall relieve any party from liability for any damages for any actual and intentional fraud or any willful and material breach of any covenant hereunder prior to such termination and (b) the obligations of the parties referred to in the last sentence of Section 4.2(a) and Article VIII shall continue to apply following any such termination of this Agreement. For purposes of this Agreement, “willful and material breach” means a material breach of any covenant set forth in this Agreement that is a consequence of an act or failure to act by or on behalf of the breaching party with knowledge that the taking of such act or failure to take such act would, or would reasonably be expected to, result in a breach of this Agreement.

Article VII

Indemnification

7.1           Indemnification by the Company.

(a)          From and after the Closing, subject to the other provisions of this Article VII, the Company shall indemnify the Investor and its officers, directors, employees and Affiliates (collectively, the “Indemnified Investor Parties”), and hold each of them harmless from and against, any and all actions, suits, proceedings, demands, assessments, judgments, claims, liabilities, losses (including losses arising from the diminution of value), costs, damages, expenses, interest or penalties, and reasonable attorneys’ fees, expenses and disbursements, whether or not resulting from a Third Party Claim (collectively, “Damages”), suffered, paid or incurred by such Indemnified Investor Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties (read without giving effect to any qualifications regarding materiality, Material to a Reasonable Investor or similar qualifications other than with respect to the representations in Section 2.9(a)) made by the Company in Article II, or in any certificate or other document delivered in connection with this Agreement, as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates), (ii) any breach by the Company of any covenant or agreement of the Company contained in this Agreement, and (iii) any matter described in the Company Disclosure Letter that (x) would be Material to a Reasonable Investor and (y) a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading this Agreement and the Declarative Portions of the Company’s Recent SEC Filings and (iv) any material pre closing violation of law or any Proceeding alleging the same.

(b)          Notwithstanding anything to the contrary contained in this Section 7.1, except with respect to actual fraud or breaches of Fundamental Representations, as to which the limitations in this Section 7.1(b) shall not apply, the Indemnified Investor Parties shall be entitled to indemnification for breaches of representations and warranties pursuant to Section 7.1(a)(i):

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(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(i), exceed $750,000, whereupon (subject to the provisions of clause (ii) below) the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to the Company on or before the date that is eighteen (18) months after the Closing Date (other than claims for indemnification arising from a breach of any Fundamental Representation, which must be asserted by the Indemnified Investor Parties not later than sixty days following the expiration of the relevant statute of limitations).

In addition, the Company shall not be liable for indemnification pursuant to Section 7.1(a)(i) with respect to any Damages suffered, paid or incurred by an Indemnified Investor Party of less than $20,000 (a “De Minimis Damage”), and all De Minimis Damages shall be disregarded for purposes of the foregoing deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence).

(c)          Notwithstanding anything to the contrary contained in this Section 7.1, the Indemnified Investor Parties shall be entitled to indemnification pursuant to Section 7.1(a)(iii) only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(iii), exceed $1,000,000, whereupon the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $1,000,000.

(d)          Notwithstanding anything to the contrary contained in this Section 7.1, the Indemnified Investor Parties shall be entitled to indemnification pursuant to Section 7.1(a)(iv) only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(iv), exceed $750,000, whereupon the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000.

7.2           Indemnification by the Investor.

(a)          From and after the Closing Date, subject to the other provisions of this Article VII, the Investor shall indemnify the Company and their respective officers, directors, employees and Affiliates (collectively, the “Indemnified Company Parties”) and to hold each of them harmless from and against any and all Damages suffered, paid or incurred by such Indemnified Company Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties made by the Investor in Article III as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates); or (ii) any breach by the Investor of any covenant or agreement of the Investor contained in this Agreement.

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(b)         Notwithstanding anything to the contrary contained in this Section 7.2, except with respect to actual fraud or breaches of representations and warranties contained in Sections 3.1 and 3.2 as to which the limitations of this Section 7.2(b) shall not apply, the Indemnified Company Parties shall be entitled to indemnification pursuant to Section 7.2(a)(i):

(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified Company Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.2(a)(i), exceed $750,000, whereupon (subject to the provisions of clause (ii) below) the Investor shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to the Investor on or before the date that is eighteen (18) months after the Closing Date.

In addition, the Investor shall not be liable for indemnification pursuant to Section 7.2(a)(i) with respect to any De Minimis Damages suffered, paid or incurred by an Indemnified Company Party, and all De Minimis Damages shall be disregarded for purposes of the foregoing deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence).

7.3           Indemnification Procedures.

(a)          If an Indemnified Investor Party or an Indemnified Company Party (each, an “Indemnified Party”) believes that a claim, demand or other circumstance exists that has given or may reasonably be expected to give rise to a right of indemnification under this Article VII (whether or not the amount of Damages relating thereto is then quantifiable), such Indemnified Party shall assert its claim for indemnification by giving written notice thereof (a “Claim Notice”) to the Company (if indemnification is sought from the Company (an “Indemnifying Company Party”)) or to the Investor (if indemnification is sought from the Investor (an “Indemnifying Investor Party”)) (in either such case, the “Indemnifying Party”) (i) if the event or occurrence giving rise to such claim for indemnification is, or relates to, a claim, suit, action or proceeding brought by a Person not a party to this Agreement or affiliated with any such party (a “Third Party Claim”), promptly and in any event no later than thirty (30) days after it has received notice of such claim, suit, action or proceeding by such Indemnified Party, or (ii) if the event or occurrence giving rise to such claim for indemnification is not, or does not relate to, a Third Party Claim, promptly after the discovery by the Indemnified Party of the circumstances giving rise to such claim for indemnity; provided, however, that any failure or delay in providing such notice shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent the Indemnifying Party is actually prejudiced by such failure or delay. Each Claim Notice shall describe the claim in reasonable detail based on information available at the time.

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(b)          If any claim or demand by an Indemnified Party under this Article VII relates to a Third Party Claim, the Indemnifying Party may elect to assume, conduct and control the defense of the Indemnified Party against such Third Party Claim (including using counsel of the Indemnifying Party's choosing). The Indemnified Party may participate at its own expense, with counsel of its choosing, in the defense of such Third-Party Claim although such Third-Party Claim shall be controlled by the Indemnifying Party. Until the Indemnifying Party has assumed the defense of the Indemnified Party against such Third Party Claim, the Indemnified Party may defend such Third Party Claim but in no event shall the Indemnified Party negotiate a settlement or a compromise of such Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), and if such Indemnifying Party provides such prior written consent, any such settlement or compromise by the Indemnified Party and the Indemnified Party’s reasonable costs and expenses arising out of such defense, settlement or compromise of such Third Party Claim shall be Damages subject to indemnification hereunder to the extent provided herein. Except with the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed), the Indemnifying Party shall not settle or otherwise compromise or pay such Third Party Claim; provided that any such settlement or compromise shall be permitted hereunder without the written consent of the Indemnified Party if such settlement or compromise (w) involves only money damages paid by or on behalf of the Indemnifying Party, (x) does not encumber any of the assets of any Indemnified Party or its Affiliates or include any restriction or condition that would apply to or adversely affect any Indemnified Party or any of its Affiliates or the conduct of any Indemnified Party’s or its Affiliates’ business, (y) includes a complete release by such Third Party of such Indemnified Party and (z) does not include any admission of wrongdoing or misconduct by such Indemnified Party.

(c)          Each Indemnified Party shall make available to the Indemnifying Party all information and documents in its possession or reasonably available to such Indemnified Party relating to such action or claim which is not confidential or proprietary in nature or which is made available under the terms of a confidentiality agreement or is delivered or obtained under appropriate protective orders reasonably satisfactory to such party, together with all pertinent information regarding the amount of the Damages that it asserts it has sustained or incurred. In addition, the parties shall render to each other such assistance as may reasonably be requested in order to help ensure the proper and adequate defense of any such action or claim. The party in charge of the defense shall keep the other parties reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.

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(d)          Each Indemnifying Party shall, subject to Section 7.4(a), pay any Damages payable pursuant to the terms of this Article VII to the applicable Indemnified Party within twenty (20) Business Days after receiving notice from such Indemnified Party that such amounts are payable pursuant to the terms of this Article VII, unless the Indemnifying Party in good faith disputes the amount of the Damages and/or its obligation to provided indemnification hereunder. In the event of such a dispute, the Indemnifying Party shall pay the amount of Damages for which it is liable for within twenty (20) Business Days following the final determination of the amount of such Damages that the Indemnifying Party is liable hereunder. A “final determination” shall exist when (i) the parties agree in writing or (i) a court of competent jurisdiction shall have made such determination in a final and non-appealable judgment.

7.4         General.

(a)          The aggregate amount which the Company is or may be required to pay pursuant to Section 7.1(a)(i) and 7.1(a)(ii) shall not exceed fifty percent (50%) of the Purchase Price, the aggregate amount which the Company is or may be required to pay pursuant to Section 7.1(a)(iii) shall not exceed the Purchase Price and the aggregate amount which the Investor is or may be required to pay pursuant to Section 7.2(a)(i) and 7.2(a)(ii) shall not exceed fifty percent (50%) of the Purchase Price.

(b)          Notwithstanding anything herein to the contrary, no Indemnifying Party shall be liable for any Damages that are not reasonably foreseeable, that are speculative, that are based on reputational damage to the Investor or any of its Affiliates (including the Subject Companies), or that constitute punitive or other exemplary Damages, except to the extent that such Damages have been awarded to a Third Party against an Indemnified Party.

(c)          The amount which the Indemnifying Party is or may be required to pay to any Indemnified Party pursuant to this Article VII shall be reduced (retroactively, if necessary) by any insurance proceeds, indemnification from other sources or other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Damages, net of any deductibles or other similar expenses incurred in connection therewith, it being understood and agreed that an Indemnified Party shall use commercially reasonable efforts to seek recovery under any applicable insurance policies, other contracts or arrangements that provide for indemnification or from other sources that may provide recovery for such Damages. If an Indemnified Party shall have received payment from the Indemnifying Party in respect of Damages and shall subsequently receive insurance or indemnification proceeds or other amounts in respect of such Damages, then such Indemnified Party shall promptly repay to the Indemnifying Party a sum equal to the amount of such net insurance or indemnification proceeds or other net amounts actually received. The Indemnifying Party shall be subrogated to any right of action which the Indemnified Party may have against any other Person with respect to any matter giving rise to a claim for indemnification hereunder. Any Indemnified Party that becomes aware of Damages for which it seeks indemnification shall be required to use commercially reasonable efforts to mitigate the Damages.

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(d)          The amount of any Damages for which indemnification is provided under this Article VII shall be adjusted to take account of any net Tax benefit (or cost) actually realized by the Indemnified Party or any of its Affiliates in the year such Damages are incurred or paid arising from the incurrence or payment of any such Damages. In computing the amount of any such Tax benefit (or cost), the Indemnified Party (or its applicable Affiliate) shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Damages.

(e)          An Indemnified Party shall be entitled to indemnification pursuant to Sections 7.1(a)(ii) and 7.2(a)(ii) only if a notice asserting the right to indemnification has been given to the Indemnifying Party not later than the earlier of sixty days following the expiration of the relevant statute of limitations, if applicable.

(f)          The indemnification provided in this Article VII shall be the exclusive post-Closing remedy available to any party with respect to any breach of any representation, warranty, covenant or agreement in this Agreement, or otherwise in respect of the transactions contemplated by this Agreement, except in the case of actual fraud or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available.

Article VIII

General Provisions

8.1            Survival. Except for the Fundamental Representations and the representations contained in Section 2.11, in each case, which shall survive until the earlier of (i) sixty days following the expiration of the relevant statute of limitations and (ii) the fifth anniversary of the Closing Date, each of the representations and warranties of the parties hereunder shall survive the Closing until the date which is eighteen (18) months after the Closing Date, at which time they shall terminate and be of no further force or effect; provided, that any representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to this Section 8.1 if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

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8.2          Notices. All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail with postage prepaid and return receipt requested or sent by commercial overnight courier, courier fees prepaid (if available; otherwise, by the next best class of service available), to the parties at the following addresses:

(a)          if to the Investor, to it at:

Apollo Management Holdings, L.P.

9 West 57th Street, 43rd Floor

New York, New York 10019

Attn:	John J. Suydam
Email:	jsuydam@ApolloLP.com and

with a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, NY 10022

Attn:	Jeffery J. Rosen
	Gregory V. Gooding
Email:	jrosen@debevoise.com
	ggooding@debevoise.com

(b)          if to the Company, to it at:

RCS Capital Corporation

405 Park Ave

New York, NY 10022

Attention: James A. Tanaka (JTanaka@rcscapital.com)

Fax: 646-861-7743

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

11 Times Square

New York, NY 10036

Attn: Steven L. Lichtenfeld (SLichtenfeld@proskauer.com)

or to such other Person or address as any party shall specify by notice in writing to the other parties in accordance with this Section 8.2. All such notices or other communications shall be deemed to have been received on the date of the personal delivery, on the third Business Day after the mailing or dispatch thereof, or in the case of electronic mail or facsimile transmission, on the date received, subject to confirmation of receipt; provided that notice of change of address shall be effective only upon receipt.

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8.3           Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “party” or “parties” shall refer to parties to this Agreement. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. All Disclosure Letters referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Disclosure Letter but not otherwise defined therein shall have the meaning given to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including any such date. Any reference to “days” means calendar days unless Business Days are expressly specified. If any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter. All references to “$” or “dollars” set forth in this Agreement are to U.S. dollars.

8.4           Amendment and Modification; Waiver.

(a)          This Agreement may not be amended except by an instrument or instruments in writing signed and delivered on behalf of the Investor and the Company.

(b)          At any time prior to the Closing, any party that is entitled to the benefits hereof may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracy in the representations and warranties of any other party contained herein or in any Disclosure Letter or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements of any other party or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid if set forth in an instrument in writing signed and delivered on behalf of such party. Waivers shall operate to waive only the specific matter described in the writing and shall not impair the rights of the party granting the waiver in other respects or at other times. A party’s waiver of a breach of a provision of this Agreement, or failure (on one or more occasions) to enforce a provision of, or to exercise a right under, this Agreement, shall not constitute a waiver of a similar breach, or of such provision or right other than as explicitly waived.

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8.5           Entire Agreement. This Agreement (including the Disclosure Letters and the Ancillary Agreements) and the Confidentiality Agreement constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, of the parties with respect to the subject matter hereof.

8.6           Disclosure Letters. For purposes of the representations and warranties of the Company and the Investor in this Agreement, items disclosed in one section of a Disclosure Letter shall be considered to be made for purposes of all other sections of such Disclosure Letter to the extent that the relevance of any such disclosure to any other such section of such Disclosure Letter is reasonably apparent from the text of such disclosure. For purposes of the representations and warranties of the Company in this Agreement, items disclosed in the forms, statements and reports of the Company’s publicly available, filed with, or furnished (on a publicly available basis) to the SEC on or after January 1, 2014 and prior to the date of this Agreement shall be considered to be disclosed for purposes of the Company Disclosure Letter (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks or other matters included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to, or disclosure for purposes of, any representation or warranty set forth in Article II). The disclosure of any item or matter in any Disclosure Letter shall not be construed as an admission, representation or indication that such item or other matter is “material” or would be Material to a Reasonable Investor or that such item or other matter is required to be referred to or disclosed in such Disclosure Letter. The disclosure of any item or matter relating to any possible breach or violation of any law or contract shall not be construed as an admission or indication that any such breach or violation exists or has actually occurred.

8.7           Third Party Beneficiaries. Except with respect to Indemnified Parties in their capacity as such pursuant to Article VII, nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

8.8           Specific Performance. The parties agree that if any of the provisions of this Agreement were not performed by the parties in accordance with their specific terms or were otherwise breached thereby, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that each party hereto shall be entitled to specific performance to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it may be entitled at law or in equity.

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8.9           Assignment; Binding Effect. This Agreement may not be assigned by any party without the prior written consent of the other parties, provided that the Investor may assign this Agreement, including the Investor’s right to acquire the Series D-1 Preferred Stock and obligation to pay the Purchase Price, to any Affiliate of the Investor without consent of the Company, but any such assignment shall not relieve the Investor of its obligations hereunder to the extent the assignee fails to perform such obligations; provided, further, that notwithstanding any such assignment, the Investor shall continue to have the right to enforce this Agreement. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

8.10         Governing Law. This Agreement shall be governed in all respects (including as to validity, interpretation and effect) by the internal laws of the State of New York, without giving effect to any conflict of laws rules or principles that would require or permit the application of another jurisdiction’s laws.

8.11         Jurisdiction; Waiver of Jury Trial.

(a)          Each party hereby irrevocably agrees that any action or proceeding arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights or obligations shall be brought exclusively in the courts of the State of New York located in the Borough of Manhattan or the federal courts of the United States of America located in the Southern District of New York (and appellate courts thereof) and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail or by overnight courier service, postage prepaid, to its address set forth in Section 8.2.

(b)          Each party hereby waives all rights to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights and obligations. Each party (i) certifies that no representative, agent or attorney of any party has represented, expressly or otherwise, that such party would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the other parties have been induced to enter into this Agreement and the transactions contemplated hereby by, among other things, the waivers and certifications contained herein.

8.12         Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

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8.13         Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

Article IX
Definitions

The following terms when used in this Agreement shall have the following meanings:

“Acquisition Proposal” has the meaning set forth in Section 4.7.

“Adviser Compliance Policies” has the meaning set forth in Section 2.18(d).

“Advisers Act” means the Advisers Act of 1940 and the rules and regulations thereunder.

“Advisory Contract” means any written agreement pursuant to which a the Company or any of its Subsidiaries provides Investment Advisory Services (including sub-advisory services) to a Client.

“Affiliate” of a Person means a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the first Person. “Control” (and “controlled by” and “under common control with”) means possessing, directly or indirectly, the power to direct or cause the direction of a Person’s management or policies, through owning voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

“Affiliated Party” of an entity means any person “associated” (as defined under the Advisers Act) with such entity and any “affiliated person” (as defined in the Investment Company Act).

“Agreement” has the meaning set forth in the introductory paragraph hereof.

“AMH” has the meaning set forth in the recitals.

“Ancillary Agreements” means the Registration Rights Agreement, , the MIPA, the Certificate of Designation and all other agreements or instruments to be executed and delivered in connection with the transactions contemplated hereby.

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“Applicable Law” means any domestic or foreign federal, state or local statute, law (whether statutory or common law), ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, policy, guidelines or other requirement of any Governmental Authority applicable to the Company and its Subsidiaries and Clients, or any of their respective Affiliates, holders of equity securities, properties, assets, officers, directors, employees or agents, as the case may be.

“Apollo” has the meaning set forth in the introductory paragraph hereof.

“ARC” has the meaning set forth in the recitals.

“ARC Transaction Agreement” has the meaning set forth in the recitals.

“BDC” means any entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-54)” for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or as a sub-adviser.

“Broker-Dealer Subsidiaries” has the meaning set forth in Section 2.16(a).

“Business Day” means any day which is not a Saturday, Sunday or a day on which banks in New York, New York are authorized or obligated by law or executive order to be closed.

“Buyer” has the meaning set forth in the recitals.

“Cap” has the meaning set forth in Section 7.4(b).

“Certificate of Designation” has the meaning set forth in the recitals.

“CFTC” means the Commodity Futures Trading Commission.

“Claim Notice” has the meaning set forth in Section 7.3(a).

“Class A Common Stock” has the meaning set forth in the recitals.

“Class B Common Stock” has the meaning set forth in the recitals.

“Class B Share” has the meaning set forth in the recitals.

“Client” means any Fund to which the Company or any of its Subsidiaries provides Investment Advisory Services (including any sub-advisory services).

“Closing” has the meaning set forth in Section 1.3.

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“Closing Condition Satisfaction Date” means the date on which the conditions set forth in Article V have been satisfied or waived (other than those conditions that by their terms are to be satisfied by actions taken at the Closing, but subject to the satisfaction or waiver of those conditions at such time).

“Closing Date” has the meaning set forth in Section 1.3.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commodity Exchange Act” means the Commodity Exchange Act of 1936 and the rules and regulations thereunder.

“Common Stock” has the meaning set forth in the recitals.

“Company” has the meaning set forth in the introductory paragraph hereof.

“Company Disclosure Letter” means the disclosure letter delivered by the Company to the Investor within five Business Days of execution hereof.

“Company Fundamental Representations” has the meaning set forth in Section 5.2(a).

“Company SEC Documents” has the meaning set forth in Section 2.6(a).

“Confidentiality Agreement” means the confidentiality agreement between Apollo Management Holdings, L.P. and the Company, dated February 9, 2015, as amended.

“Consent” means any consent, approval, authorization, waiver, permit, license, grant, agreement, exemption or order of, or registration, declaration or filing with, any Person, including any Governmental Authority, that is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

“Contract” has the meaning set forth in Section 2.3.

“Damages” has the meaning set forth in Section 7.1(a).

“Declarative Portions of the Company’s Recent SEC Filings” means (i) the forms, statements, schedules, reports or other documents filed or furnished on or after January 1, 2014 by the Company with or to the SEC (to the extent available on the SEC’s EDGAR system not less than five (5) Business Days prior to the date hereof), (ii) the most recent draft of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, with respect to both (i) and (ii) above, other than (x) any disclosures contained under the captions “Risk Factors” or “Forward Looking Statements” and (y) any other disclosures that are non-specific, predictive, cautionary or forward looking in nature and (iii) the items set forth on Schedule 1.

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“Disclosure Letters” means the Company Disclosure Letter and the Investor Disclosure Letter.

“Employee Benefit Plan” means each employee benefit plan, scheme, program, policy, arrangement or contract, whether written or unwritten, including any “employee benefit plan”, as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and any bonus, deferred compensation, equity purchase, equity grant or other equity-based arrangement (including, to the extent applicable, under Organizational Documents of the Company and its Subsidiaries), and any employment, termination, retention, bonus, change in control or severance plan, program, policy, arrangement or contract for the benefit of any current or former officer, employee, partner, director or other service provider of the Company or any of its Subsidiaries or in which any of them participate as of the date hereof, which in any such case is maintained or contributed to by any of the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries could incur or has incurred liability under Applicable Law, including the Code or ERISA.

“Environmental Law” means any law, code, license, permit, authorization, approval, consent, common law, legal doctrine, requirement or agreement with any Governmental Authority relating to (i) the protection, preservation or restoration of the environment (including air, water, vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of hazardous substances.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code and the regulations promulgated thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.

“FINRA” has the meaning set forth in Section 2.16(b).

“Fund” means any Sponsored Fund or Sub-Advised Fund.

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“GAAP” means U.S. generally accepted accounting principles.

“Governmental Approvals” has the meaning set forth in Section 2.4(a).

“Governmental Authority” means any United States or foreign government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC, CFTC or any other authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any United States or foreign governmental or non-governmental self-regulatory organization, agency or authority, including FINRA and NFA.

“Governmental Reports” has the meaning set forth in Section 2.18(c).

“Holdings” has the meaning set forth in the recitals.

“IA Subsidiaries” has the meaning set forth in Section 2.18(a).

“Indebtedness” means, without duplication, all obligations of the Company or any of its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for (a) borrowed money, including all indebtedness evidenced by any note, bond, debenture or other debt ‎security or any credit agreement or indenture, (b) indebtedness of Persons other than the Company or any of its Subsidiaries of the type referred to ‎in this definition which is directly or indirectly guaranteed by the Company or any of its Subsidiaries, (c) accrued interest owed with respect to any indebtedness‎ referred to in this definition and (d) any costs to eliminate hedging or swap arrangements outstanding as of the Closing.

“Indemnified Company Parties” has the meaning set forth in Section 7.2(a).

“Indemnifying Company Party” has the meaning set forth in Section 7.3(a).

“Indemnified Investor Parties” has the meaning set forth in Section 7.1(a).

“Indemnifying Investor Party” has the meaning set forth in Section 7.3(a).

“Indemnified Party” has the meaning set forth in Section 7.3(a).

“Indemnifying Party” has the meaning set forth in Section 7.3(a).

“Information Statement” has the meaning set forth in Section 4.6(a).

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“Infringing” has the meaning set forth in Section 2.13(b).

“Intellectual Property” means, in any and all jurisdictions throughout the world, any (i) trademarks, service marks, trade names, trade dress, Internet domain names, social media usernames (e.g., Twitter handles), personalized subdomains or vanity URLs and other indicia or origin, and the goodwill associated with any and all of the foregoing and symbolized thereby, (ii) copyrights and rights in copyrightable subject matter in published and unpublished works of authorship, (iii) rights in Software, (iv) all registrations and applications to register or renew the registration of any of the foregoing, (v) patents and patent applications, including all reissues, divisions, renewals, reexaminations, extensions, provisionals, continuations and continuations-in-part thereof, (vi) rights in Trade Secrets and (vii) all other intellectual property rights.

“Investment Advisory Services” means the provision by the Company or any of its Subsidiaries of investment advisory services with respect to securities, real estate, real estate-related assets, or working and other interests in producing and non-producing oil and gas properties.

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.

“Investor” has the meaning set forth in the introductory paragraph hereof.

“Investor Disclosure Letter” means the disclosure letter delivered by the Investor to the Company at the time of execution hereof.

“Investor Fundamental Representations” has the meaning set forth in Section 5.3(a).

“IT Systems” means the hardware, Software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment, owned, leased or licensed by or to the Company or any of its Subsidiaries.

“IRS” means the United States Internal Revenue Service.

“Knowledge of the Company” or “the Company’s Knowledge” means the knowledge after due inquiry of any of the individuals identified in Section 9A of the Company Disclosure Letter.

“Knowledge of the Investor” or Investor’s Knowledge” means the actual knowledge of any of the individuals identified in Section 10 of the Apollo Disclosure Letter.

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“Lenders” has the meaning set forth in the recitals.

“Lien” means any mortgage, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge or other restrictions or limitations of any nature whatsoever (whether absolute or contingent), including such as may arise under any Contracts.

“Luxor” has the meaning set forth in the recitals.

“Luxor Consent” has the meaning set forth in the recitals.

“Luxor Transaction” has the meaning set forth in the recitals.

“Malware” means any virus, Trojan horse, time bomb, key-lock, spyware, worm, malicious code or other software program designed to or able to, without the knowledge and authorization of the Company or any of its Subsidiaries, disrupt, disable, harm, interfere with the operation of or install itself within or on any Software, computer data, network memory or hardware.

“Material to a Reasonable Investor” means, with respect to any fact, circumstance, contingency, change, effect, event or occurrence, that a reasonable and prudent investor would deem such fact, circumstance, contingency, change, effect, event or occurrence to be material in making a decision to invest in the Company’s securities.

“Material Adverse Effect” means any change, effect, event or occurrence that (a) is or would reasonably be expected to be, individually or in the aggregate, materially adverse to the assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, other than any such effect, change, event or occurrence to the extent resulting from (i) any change in the capital markets or securities markets after the date hereof, (ii) any change in general economic conditions or interest rates arising after the date hereof, (iii) any outbreak or substantial worsening of major hostilities in which the United States is involved or any act of terrorism within or involving the United States or its property or citizens arising after the date hereof, (iv) the failure of the Company to achieve any financial projections or forecasts in and of itself (but not including the underlying reasons therefor unless otherwise excepted pursuant to the other subsections of this definition), (v) the entering into of this Agreement or public announcement or consummation of the transactions contemplated hereby, (vi) any change after the date of this Agreement in Applicable Law or accounting principles or interpretations thereof, (vii) any natural disaster, earthquake, flood, hurricane or any acts of God, (viii) any action required by this Agreement or the omission to take an action prohibited by this Agreement, except, in each case of clauses (i), (ii), or (iii) to the extent that such change, effect, event or occurrence has a materially disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to other alternative investment firms generally; or (b) would reasonably be expected to prevent or materially delay the ability of the Company to complete the transaction contemplated by this Agreement or perform its obligations hereunder.

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“Material Contract” means (a) any “material contract” (as such term is defined in item 601(b)(10) of Regulation S-K promulgated under the Securities Act) or (b) any written or binding oral Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective properties, rights or assets are bound that:

(i)          is a voting agreement or a registration rights agreement;

(ii)         would restrict the payment of dividends upon, or the redemption or conversion of, shares of Series D-1 Preferred Stock or shares of Class A Common Stock issuable upon conversion thereof;

(iii)        is a joint venture, partnership, limited liability company or other similar agreement material to the Company or any of its Subsidiaries;

(iv)        grants any right of first refusal or right of first offer or similar right on any assets that are material to the Company and its Subsidiaries, taken as a whole;

(v)         provides for any payments that are conditioned, in whole or in part, on a change of control of the Company, any of its Subsidiaries or transactions of the type contemplated hereby;

(vi)        is an employment, consulting, severance, bonus (including fee sharing), compensation or collective bargaining Contract relating to or for the benefit of current or former employees, directors or other service providers;

(vii)       contains (A) a “clawback” or similar undertaking requiring the reimbursement or refund of any material fees (whether performance based or otherwise) paid to the Company or any of its Subsidiaries or (B) a “most favored nation” clause or other term providing preferential pricing or treatment to a third party in any material Contract;

(viii)      relates to the acquisition or disposition of any business, a material amount of equity interests or assets, or any material properties or assets, under which the Company or any of its Subsidiaries has continuing material obligations or contingent liabilities, including contingent “earnout” or similar payments or indemnification obligations;

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(ix)        is an Affiliate Agreement (including any Contract with Luxor);

(x)          any non-competition, non-solicitation or exclusive dealing agreement, or any other agreements that purports to limit or restrict in any material respect (A) the ability of the Company or any of its Subsidiaries to solicit customers or employees or investments or (B) the manner in which, or the localities in which, all or any portion of the business or operations of the Company or any of its Subsidiaries is or would be conducted;

(xi)         by its terms does not terminate or is otherwise not cancelable within ninety (90) days without penalty, cost or liability in excess of $1,000,000 and requires or would reasonably be expected to involve aggregate payments by the Company or its Subsidiaries in excess of $1,000,000 per fiscal year; or

(xii)        relates to Indebtedness of the Company or any of its Subsidiaries in excess of $1,000,000 in the aggregate, or the granting of any liens (other than Permitted Liens) or a security interest in any material property of the Company or any of its Subsidiaries.

“MIPA” has the meaning set forth in the recitals.

“Municipal Advisor Subsidiaries” has the meaning set forth in Section 2.17(a).

“Newco” has the meaning set forth in the recitals.

“NFA” has the meaning set forth in Section 2.15(c).

“Notice” has the meaning set forth in Section 4.3(e)(i).

“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, by-laws, articles of formation, certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, limited liability company agreement and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of a Person, including any amendments thereto.

“Outside Date” has the meaning set forth in Section 6.1(e).

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“Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by the Company or any of its Subsidiaries.

“Permits” has the meaning set forth in Section 2.15(b).

“Permitted Liens” means (i) Liens for Taxes, assessments or other governmental charges not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been reflected on the Financial Statements in accordance with GAAP, (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairman’s or other similar Liens arising in the ordinary course of business, (iii) easements, rights of way, building, zoning and other similar encumbrances or title defects arising in the ordinary course of business, (iv) Liens on assets securing debt incurred to finance the acquisition of such assets, (v) Liens on any Contributed Asset or on the assets of any Transferred Entity incurred in the ordinary course of business, and (vi) Liens on properties which do not materially impair business operations or the use of such properties in the ordinary course of business or materially affect the value of such properties.

“Person” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, governmental entity or other entity.

“Preferred Stock” has the meaning set forth in the recitals.

“Price Per Share” means $25.

“Private Fund” means any “private fund” (as such term is defined in Section 202(a)(29) of the Advisers Act) for which the Company or any of its Subsidiaries serves as an investment adviser, general partner, managing member or sponsor or as a sub-adviser.

“Proceedings” has the meaning set forth in Section 2.7.

“Purchase Price” has the meaning set forth in Section 1.4(b).

“Purchased Shares” has the meaning set forth in Section 1.2.

“RCS Holdings” has the meaning set forth in the recitals.

“Registered Fund” means an investment company registered under the Investment Company Act for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or as a sub-adviser.

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“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, between the Company and the Investor to be negotiated in good faith prior to the Closing in form and substance customary for transactions of the type being consummated hereunder.

“Regulated Fund” means any Registered Fund or BDC.

“Refinancing Payments” has the meaning set forth in Section 4.10(d).

“REIT” means any real estate investment trust for which the Company or any of its Subsidiaries provides Investment Advisory Services.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder.

“Series B Preferred Stock” has the meaning set forth in the recitals.

“Series C Preferred Stock” has the meaning set forth in the recitals.

“Series D Preferred Stock” has the meaning set forth in the recitals.

“Series D-1 Preferred Stock” has the meaning set forth in the recitals.

“Series D-2 Preferred Stock” has the meaning set forth in the recitals.

“Software” means all computer software, including application software, system software, firmware, middleware, mobile digital applications, assemblers, applets, compilers and binary libraries, including all source code and object code versions of any and all of the foregoing, in any and all forms and media, and all related documentation.

“Specified Liabilities” means the liabilities described on Section 9B of the Company Disclosure Letter.

“Sponsored BDC” means a BDC for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or otherwise sponsors.

“Sponsored Fund” means any Registered Fund, BDC or Unregulated Fund for which the Company or any of its Subsidiaries acts as sponsor or any wholly owned Subsidiaries thereof.

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“Sponsored Registered Fund” means a Registered Fund for which the Company or any of its Subsidiaries as an investment adviser, depositor, underwriter, principal underwriter or distributer or otherwise sponsors.

“Sponsored Regulated Fund” means any Sponsored Registered Fund or Sponsored BDC.

“Sponsored Regulated Fund Compliance Policies” has the meaning set forth in Section 2.20(b)(iv).

“Sub-Advised BDC” means any BDC for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as sub-adviser.

“Sub-Advised Fund” means any Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as sub-adviser.

“Sub-Advised Registered Fund” means any Registered Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as a sub-adviser.

“Sub-Advised Regulated Fund” means any Regulated Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as a sub-adviser.

“Subsidiary” means, with respect to a Person, any other Person (whether or not incorporated) that the first Person, directly or indirectly, owns or has the power to vote or control more than 50% of any class or series of capital stock or other equity interests of such Person; provided that the term “Subsidiary” shall not include any Fund or controlled Affiliate of any Fund in the case of the Company or any similar investment vehicle or controlled Affiliate thereof in the case of any other Person.

“Tax” means any U.S. federal, state, local or foreign income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, environmental (including taxes under section 59A of the Code), real property, personal property, ad valorem, occupancy, license, occupation, employment, payroll, social security, disability, unemployment, workers’ compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto).

“Tax Agreements” has the meaning set forth in Section 2.10(d).

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“Tax Return” means any federal, state, local or foreign tax return, declaration, statement, report, schedule, form or information return or any amendment to any of the foregoing relating to Taxes.

“Termination Right” has the meaning set forth in Section 6.2.

“Third Party Claim” has the meaning set forth in Section 7.3(a).

“Third Party Consents” has the meaning set forth in Section 2.4(b).

“Trade Secrets” means all inventions, processes, designs, formulae, models, tools, algorithms, Software architectures, trade secrets, know-how, ideas, research and development, data and databases and confidential information.

“Unregulated Fund” means any REIT or Private Fund.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

Apollo management holdings, l.p.
By: Apollo Management Holdings GP, LLC, its general partner
By:	/s/ John Suydam
	Name: John Suydam
	Title: Vice President
RCS CAPITAL CORPORATION
By:	/s/ Edward M. Weil, Jr.
	Name: Edward M. Weil, Jr.
	Title: Chief Executive Officer

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EXHIBIT A

Form of Certificate of Designation

See attached.

63

RCS CAPITAL CORPORATION

CERTIFICATE OF DESIGNATION

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

11% Series D-1 Convertible Preferred Stock

(Par Value $0.001 Per Share)

RCS Capital Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board of Directors”) by the Corrected Third Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with Section 8(j) hereof, the “Certificate of Incorporation”) which authorizes the issuance, by the Corporation, in one or more series of up to 100,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), and in accordance with the provisions of Section 151 of the General Corporation Law, the Board of Directors on August 5, 2015 duly adopted the following resolutions:

RESOLVED, that, pursuant to the authority expressly granted to and vested in the Board of Directors by the provisions of Section 4.03 of the Certificate of Incorporation and in accordance with the provisions of Sections 141(c) and 151 of the General Corporation Law, the Board of Directors, hereby authorizes, creates and provides for the issuance of a series of Preferred Stock, par value $0.001 per share, of the Corporation, herein designated as the 11% Series D-1 Convertible Preferred Stock (the “Series D-1 Preferred Stock”), which shall consist initially of 1,000,000 shares of Series D-1 Preferred Stock (subject to increase or decrease as set forth herein in accordance with Section 151(g) of the General Corporation Law), and the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation that are applicable to the Preferred Stock of all series) are hereby fixed as follows (certain terms used herein being defined in Section 2) hereof:

1. General.

(a)          The shares of such series shall be designated the 11% Series D-1 Convertible Preferred Stock, par value $0.001 per share (the “Series D-1 Preferred Shares”).

(b)          Each Series D-1 Preferred Share shall be identical in all respects with the other Series D-1 Preferred Shares.

(c)          The number of Series D-1 Preferred Shares shall initially be 1,000,000, which number may from time to time be increased (but not above the total number of authorized shares of Preferred Stock and subject to Section 8(j)(i)) or decreased (but not below the number of Series D-1 Preferred Shares then outstanding) by resolution of the Board of Directors. Whenever any Series D-1 Preferred Shares that have been issued are reacquired in any manner by the Corporation, including in connection with a conversion into Common Shares, the Corporation shall take all action as may be necessary to retire such shares and to cause such shares to resume the status of authorized but unissued Preferred Stock, undesignated as to class or series.

(d)          No fractional Series D-1 Preferred Shares shall be issued.

2.            Certain Definitions. As used herein, the following terms shall have the following meanings:

“24.9% Share Cap” shall have the meaning set forth in Section 7.

“accrued and unpaid dividends”, with respect to any share of any class or series, means an amount computed at the annual dividend rate for the class or series of which the particular share is a part, from and including the date on which dividends on such share became cumulative to and including the date to which such dividends are to be accrued, less the aggregate amount of all dividends theretofore paid thereon.

“Acquired Entity or Business” means a Person, business, property or asset acquired by the Corporation or any of its Subsidiaries.

“Acquired EBITDA” means, with respect to any Acquired Entity or Business (any of the foregoing a “Pro Forma Entity”), the Adjusted EBITDA of such Pro Forma Entity, and which, for the avoidance of doubt, shall include pro forma adjustment reflecting the amount of net cost savings and synergies projected by the Corporation in good faith to be realized as a result of actions taken or to be taken within 12 months after the date the acquisition of a Pro Forma Entity (which cost savings or synergies shall be calculated on a pro forma basis as though such cost savings or synergies had been realized on the first day of such period); provided that (A) such cost savings or synergies are reasonably identifiable and factually supportable, (B) no cost savings or synergies shall be added pursuant to this defined term to the extent duplicative of any expenses or charges otherwise added to LTM Adjusted EBITDA, whether through a pro forma adjustment or otherwise, for such period and (C) such actions have been taken or are to be taken within 12 months after the date of determination to take such action.

“Additional Shares” shall have the meaning set forth in Section 6(e).

“Adjusted EBITDA” shall have the meaning set forth in the definition of LTM Adjusted EBITDA.

“Adjustment Price” shall have the meaning set forth in Section 6(e)(iv).

“Affiliate” shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agreement Value” shall mean, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to any such Hedging Agreement, (i) for any date on or after the date such Hedging Agreement has been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (ii) for any date prior to the date referenced in clause (i), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreement.

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“Annual Dividend Rate” shall mean 11.00% per annum of the Liquidation Preference if paid in cash, per Series D-1 Preferred Share; provided, however that to the extent a dividend for a Dividend Period is not paid in cash on the applicable Dividend Payment Date (whether at the option of the Board of Directors or as otherwise required by this Certificate of Designation), then the Annual Dividend Rate for such Dividend Period with respect to dividends not paid in cash shall mean 12.50% per annum of the Liquidation Preference.

“Apollo Group” shall mean Apollo Management Holdings, L.P., together with any of its Affiliates that own Series D-1 Preferred Shares.

“Beneficial Owner” shall mean a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act).

“Board of Directors” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Business Day” shall mean any day other than Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.

“Capital Lease Obligations” of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Certificate of Incorporation” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Change of Control” shall be deemed to have occurred if any of the following occurs:

(a)          any “person” or “group” as defined in Rules 13d-3 and 13d-5 under the Exchange Act (other than (i) the current holder as of the date of the filing of this Certificate of Designation of Class B Common Stock or its Affiliates or (ii) the Apollo Group) is or becomes the Beneficial Owner, directly or indirectly, of the Corporation’s Common Shares, voting or otherwise, representing 50% or more of the total voting power or economic interests of all outstanding classes of the Corporation’s common stock, voting or otherwise; or

(b)          the Corporation consolidates with, or merges with or into, another person or the Corporation sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the Corporation’s assets, or any person consolidates with, or merges with or into, the Corporation, in any such event other than pursuant to a transaction in which the persons that Beneficially Owned, directly or indirectly, the Corporation’s voting stock immediately prior to such transaction Beneficially Own, directly or indirectly, shares of the voting stock representing at least a majority of the total voting power of all outstanding classes of voting stock of the Corporation or of the continuing, surviving or transferee person (or any parent thereof) immediately after giving effect to such transaction (all such terms having the meanings ascribed thereto in publicly-traded convertible securities of corporate issuers in the U.S. securities markets).

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“Class B Common Stock” shall mean the Class B Common Stock, par value $0.001 per share, of the Corporation.

“Closing Price” shall mean, for any date, the closing price per security for the securities in question for such date (or, if not a Trading Day, the nearest preceding date that is a Trading Day) on the primary Eligible Market or exchange or quotation system on which the securities in question are then listed or quoted.

“Common Shares” shall mean shares of any capital stock of any class or series of the Corporation (including, on the Issue Date, the Class A Common Stock, par value $0.001 per share, of the Corporation) which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, subject to the provisions of Section 6, shares issuable upon conversion of Series D-1 Preferred Shares shall include only shares of the class of capital stock of the Corporation designated as Class A Common Stock, par value $0.00l per share, of the Corporation on the Issue Date or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation.

“Common Share Events” shall have the meaning set forth in Section 6(e)(i).

“Constituent Person” shall have the meaning set forth in Section 6(f).

“Continuation Right” shall have the meaning set forth in Section 4(b).

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

“Conversion Price” shall mean the Initial Conversion Price, as adjusted from time to time in accordance with the terms hereof.

“Corporation” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Corporation Conversion Election Date” shall have the meaning set forth in Section 6(b)(ii).

“Corporation Conversion Election Notice” shall have the meaning set forth in Section 6(b)(ii).

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“Corporation Redemption Closing Date” shall have the meaning set forth in Section 5(a).

“Corporation Redemption Date” shall mean December 12, 2022, March 12, 2023, June 12, 2023, and September 12, 2023 and each successive anniversary of such dates.

“Corporation Redemption Notice” shall have the meaning set forth in Section 5(a).

“Current Market Price” shall mean, with respect to the Common Shares, on any date specified herein, the average of the Market Price during the period of the most recent ten (10) consecutive Trading Days ending on such date.

“Distributed Securities” shall mean rights, options or warrants to subscribe for or purchase any securities of the Corporation, other than those rights, options and warrants referred to in and treated under Section 6(e)(ii).

“Dividend Payment Date” shall mean, with respect to each Dividend Period, the eleventh (11^th) calendar day of each of January, April, July and October, commencing on October 11, 2015; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the first Business Day immediately following such Dividend Payment Date.

“Dividend Payment Record Date” shall have the meaning set forth in Section 3(a).

“Dividend Periods” shall mean quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on the Issue Date and end on and include September 30, 2015).

“Eligible Market” shall mean any of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board.

“Exchange Act” shall mean the Securities Exchange Act of 1934, and any statute successor thereto, in each case as amended from time to time.

“FINRA” shall mean Financial Industry Regulatory Authority, Inc.

“FINRA Approval” shall have the meaning set forth in Section 7.

“GAAP” shall mean generally accepted accounting principles (GAAP), as in effect from time to time; provided, however, that any lease that is recharacterized as a capital lease and any obligations that are recharacterized as Capital Lease Obligations, in each case due to a change in GAAP after the Issue Date shall not be treated as a capital lease or Capital Lease Obligation, as the case may be, but shall instead be treated as it would have been in accordance with GAAP in effect on the Issue Date.

5

“General Corporation Law” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Group Member” means any member of a “group” as such term is used in Regulation 13D under the Securities Act.

“Hedging Agreement” shall mean any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.

“holder” of Series D-1 Preferred Shares shall mean the stockholder in whose name such Series D-1 Preferred Shares are registered in the stock books of the Corporation.

“Holder Conversion Election Date” shall have the meaning set forth in Section 6(b)(i).

“Holder Conversion Election Notice” shall have the meaning set forth in Section 6(b)(i).

“Holder Redemption Closing Date” shall have the meaning set forth in Section 5(b).

“Holder Redemption Date” shall mean December 12, 2022, and each successive anniversary of such date.

“Holder Redemption Notice” shall have the meaning set forth in Section 5(b).

“Indebtedness” of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments representing extensions of credit, (c) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding (i) trade accounts payable and accrued obligations incurred in the ordinary course of business, (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) obligations resulting from take-or-pay contracts entered into in the ordinary course of business)); (d) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person (including all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person (excluding trade accounts payable and other accrued obligations, in each case incurred in the ordinary course of business)), whether or not the obligations secured thereby have been assumed, but limited to the lower of (i) the fair market value of such property and (ii) the amount of the Indebtedness so secured, (e) all guarantees by such Person of obligations of others of the type referred to in clauses (a), (b), (c) or (f) of this defined term, (f) all Capital Lease Obligations of such Person, (g) net obligations of such Person under any Hedging Agreements, valued at the Agreement Value thereof, (h) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends and (i) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances, in each case, if and to the extent that any of the foregoing indebtedness (other than under the Hedging Agreements) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer, to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness do not provide that such Person is liable therefor.

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“Initial Conversion Price” shall mean $5.00.

“Issue Date” shall mean the date on which any Series D-1 Preferred Shares are issued and sold.

“Junior Shares” shall have the meaning set forth in Section 9.

“Liquidation” shall mean (A) a dissolution or winding up of the Corporation, whether voluntary or involuntary, (B) a consolidation or merger of the Corporation with and into one or more entities which are not Affiliates of the Corporation which results in a Change of Control, or (C) a sale or transfer of all or substantially all of the Corporation’s assets other than to an Affiliate of the Corporation.

“Liquidation Preference” shall mean (A) Twenty-Five Dollars ($25.00) in cash per Series D-1 Preferred Share plus (B) all accrued and unpaid dividends added thereto in accordance with Section 3(a).

“LTM Adjusted EBITDA” shall mean net income on a consolidated basis for the Corporation and its Subsidiaries, plus interest expense, plus tax expense, plus depreciation and amortization expense, plus employee share-based compensation expense, plus acquisition and integration related expenses, and plus equity issuance and related offering costs, in each case, for the trailing 12 calendar months, (“Adjusted EBITDA”), and plus, without duplication, the Acquired EBITDA of any Pro Forma Entity acquired by the Corporation or a Subsidiary during such period to the extent not subsequently disposed by the Corporation, and calculated as if such acquisition occurred on the first day of such period with adjustments made through the date of acquisition.

“Mandatory Conversion” shall have the meaning set forth in Section 6(a)(ii).

“Mandatory Conversion Right” shall have the meaning set forth in Section 6(a)(ii).

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“Market Price” shall mean, with respect to the Common Shares on any date, the last reported sales price, regular way on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way on such day, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Shares are not listed or admitted for trading on NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted for trading or, if the Common Shares are not listed or admitted for trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if the Common Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker regularly making a market in the Common Shares selected for such purpose by the Board of Directors or, if there is no such professional market maker, such amount as an independent investment banking firm selected by the Board of Directors determines to be the value of a Common Share.

“Merger Liquidation” shall have the meaning set forth in Section 4(b).

“Minimum Ownership Date” shall mean the date after which the Apollo Group no longer collectively owns at least a majority of the then outstanding Series D-1 Preferred Shares or 25% of Series D-1 Shares issued hereunder are no longer outstanding as a result of a Mandatory Conversion, an Optional Conversion or otherwise.

“Non-Electing Share” shall have the meaning set forth in Section 6(f).

“NYSE” shall mean the New York Stock Exchange.

“Optional Conversion” shall have the meaning set forth in Section 6(a)(i).

“Optional Conversion Right” shall have the meaning set forth in Section 6(a)(i).

“Parity Shares” shall have the meaning set forth in Section 9.

“Person” shall mean any individual, firm, partnership, corporation, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Pro Forma Entity” shall have the meaning set forth in the definition of Acquired EBITDA.

“Redemption” shall mean any redemption of Series D-1 Preferred Shares pursuant to Section 5.

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“Redemption Price” shall mean the product of (a) the number of Series D-1 Preferred Shares held by a holder of Series D-1 Preferred Shares being redeemed at any applicable time and (b) the Liquidation Preference plus an amount equal to all accrued and unpaid dividends thereon from the date immediately following the immediately preceding Dividend Payment Date to the applicable redemption date.

“SEC” shall mean the U.S. Securities and Exchange Commission.

“Senior Shares” shall have the meaning set forth in Section 9.

“Series B Preferred Shares” shall mean shares of the Corporation’s 11% Series B Preferred Stock, par value $0.001 per share.

“Series C Preferred Shares” shall mean shares of the Corporation’s 7% Series C Convertible Preferred Stock, par value $0.001 per share.

“Series D-1 Director” shall have the meaning set forth in Section 8(b).

“Series D-1 Preferred Shares” shall have the meaning set forth in Section 1.

“Series D-1 Preferred Stock” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Series D-2 Preferred Shares” shall mean shares of the Corporation’s 11% Series D-2 Convertible Preferred Stock, par value $0.001 per share.

“set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of a dividend or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of shares of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Shares or any class or series of Parity Shares are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series D-1 Preferred Shares shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.

“Shares” shall mean the total number of shares of stock that the Corporation shall have authority to issue pursuant to Section 4.01 of the Certificate of Incorporation.

“Spin-Off” shall have the meaning set forth in Section 6(e)(iii).

“Subsidiary” or “subsidiary” of any Person shall mean and include (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through subsidiaries, and (b) any limited liability company, partnership, association, joint venture or other entity in which such Person directly or indirectly through subsidiaries has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Corporation.

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“Trading Day” shall mean any day on which the securities in question are traded on the NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted for trading.

“Trading Market” shall mean whichever of the NYSE, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the securities in question are listed or quoted for trading on the date in question.

“Transaction” shall have the meaning set forth in Section 6(f).

“VWAP” shall mean the dollar volume-weighted average price for the securities in question on its Trading Market during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Trading Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as the Trading Market publicly announces is the official close of trading), as reported by Bloomberg, L.P. through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Trading Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City Time (or such other time as the Trading Market publicly announces is the official close of trading), as reported by Bloomberg, L.P., or, if no dollar volume-weighted average price is reported for such security by Bloomberg, L.P. for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the VWAP cannot be calculated for the securities in question on a particular date on any of the foregoing bases, the VWAP of the securities in question shall be the fair market value of the securities in question on such date as determined by the Board of Directors in good faith.

3.             Dividends.

(a)          The holders of Series D-1 Preferred Shares shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends per Series D-1 Preferred Share payable in cash at the applicable Annual Dividend Rate; provided, however, that if any dividend payable on any Dividend Payment Date is not paid in full in cash on such Dividend Payment Date, the amount payable as dividends on such Dividend Payment Date that is not paid in cash on such Dividend Payment Date shall automatically, without any further action by the Corporation, be added to the Liquidation Preference on the relevant Dividend Payment Date at the Annual Dividend Rate applicable with respect to dividends not paid in cash. Each such dividend payable in cash shall be payable in arrears to the holders of record of the Series D-1 Preferred Shares, as they appear on the stock records of the Corporation at the close of business on each record date, which shall not be more than 30 days preceding the applicable Dividend Payment Date (the “Dividend Payment Record Date”), as shall be fixed by the Board of Directors. The amount of accrued and unpaid dividends on any Series D-1 Preferred Stock at any date shall be the amount of any dividends thereon, calculated at the applicable Annual Dividend Rate, to and including such date, whether or not earned or declared, which have not been paid; provided that an amount equal to any dividend that was not paid in cash on any applicable Dividend Payment Date shall be added to the Liquidation Preference in accordance with this Section 3(a) and such dividend not paid in cash and so added shall not be considered as an accrued and unpaid dividend for any purposes hereof.

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(b)          The amount of dividends payable based on the Annual Dividend Rate for each full Dividend Period for the Series D-1 Preferred Shares shall be computed by dividing the applicable Annual Dividend Rate by four (4). The amount of dividends payable for the initial Dividend Period, or any other period shorter or longer than a full Dividend Period, on the Series D-1 Preferred Shares shall be computed on the basis of four 90-day quarters and a 360-day year. Holders of Series D-1 Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of the dividends on the Series D-1 Preferred Shares as herein provided.

(c)          All dividends paid with respect to Series D-1 Preferred Shares shall be paid pro rata.

(d)          So long as any Series D-1 Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared and paid or set apart for payment on any series or class or classes of Parity Shares for any period unless full accrued and unpaid dividends have been or contemporaneously are authorized and declared and paid in cash or authorized and declared and a sum sufficient for the payment thereof set apart for such payment on the Series D-1 Preferred Shares for the immediately preceding Dividend Period and on the Parity Shares for the immediately preceding dividend period applicable to the Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, for the Dividend Period referred to in the immediately preceding sentence, then all dividends authorized and declared upon Series D-1 Preferred Shares and all dividends authorized and declared upon any other series or class or classes of Parity Shares shall be authorized and declared ratably in proportion to the respective amounts of dividends accrued and unpaid on the Series D-1 Preferred Shares and such class or classes or series of Parity Shares.

(e)          So long as any Series D-1 Preferred Shares are outstanding, no dividends shall be authorized and declared and paid or set apart for payment and no other distribution shall be authorized and declared and made upon Junior Shares (other than dividends or other distributions paid solely in Junior Shares, or options, warrants or rights to subscribe for or purchase Junior Shares), nor shall any Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys to be paid to or made available for a sinking fund for the redemption of any shares of such stock) by the Corporation, directly or indirectly (except by conversion or exercise into or exchange for Junior Shares), unless in each case the full accrued and unpaid dividends on all outstanding Series D-1 Preferred Shares shall have been paid in cash and on any other Parity Shares shall have been previously paid for the immediately preceding Dividend Period and the immediately preceding dividend period applicable to the Parity Shares.

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(f)          In any case where any Dividend Payment Date shall not be a Business Day, then (notwithstanding any other provision of this Certificate of Designation) payment of dividends need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Dividend Payment Date; provided, however, that no interest shall accrue on such amount of dividends for the period from and after such Dividend Payment Date.

4. Liquidation Preference.

(a)          In the event of any Liquidation, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of Series D-1 Preferred Shares shall be entitled (subject to the Continuation Right of such holders described below) to receive an amount equal to the greater of: (i) the Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of the final distribution to such holder; and (ii) an amount per Series D-1 Preferred Share equal to the amount or consideration which would have been payable had each Series D-1 Preferred Share been converted into Common Shares pursuant to Section 6 hereof immediately prior to such Liquidation. Until the holders of the Series D-1 Preferred Shares have been paid the amount specified in the first sentence of this Section 4(a) in full, no payment will be made to any holder of Junior Shares upon Liquidation. If, upon any such Liquidation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Series D-1 Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series D-1 Preferred Shares and such other Parity Shares ratably in accordance with the amounts that would be payable on such Series D-1 Preferred Shares and such other Parity Shares if all amounts payable thereon were paid in full.

(b)          In connection with a Merger Liquidation (as defined below), each holder of Series D-1 Preferred Shares shall have the right (a “Continuation Right”) to elect, by delivering written notice to the Corporation not less than five (5) Business Days prior to the Merger Liquidation, to require the Corporation to make provision for such holder’s Series D-1 Preferred Shares to be assumed by the surviving entity as described in Section 6(f); provided, however, notwithstanding the election by any of the holders of the Series D-1 Preferred Shares of the Continuation Right, the Corporation shall have the right, in connection with any Merger Liquidation, to elect, by delivering written notice to the holders of Series D-1 Preferred Shares at any time prior to the Merger Liquidation, to redeem any or all of the outstanding Series D-1 Preferred Shares for an amount per Series D-1 Preferred Share equal to the amount specified in the Section 4(a). A “Merger Liquidation” shall be a Liquidation which constitutes a consolidation or merger of the Corporation with one or more entities that are not Affiliates of the Corporation and as a result of which the Corporation is not the surviving entity. Upon a merger or consolidation of the Corporation with one or more entities that are Affiliates of the Corporation, the Corporation shall make provision for the Series D-1 Preferred Shares to be assumed by the surviving entity as described in Section 6(f).

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(c)          Notice of any Liquidation shall be given by mail, postage prepaid, not less than fifteen (15) days prior to the distribution or payment date stated therein, to each holder of record of Series D-1 Preferred Shares appearing on the stock books of the Corporation as of the date of such notice at the address of said holder shown therein. Such notice shall state a distribution or payment date, the amount to be paid pursuant to Section 4(a) and the place where such amount shall be distributable or payable.

(d)          After the payment in cash to the holders of Series D-1 Preferred Shares of the full amount specified in the Section 4(a) with respect to outstanding Series D-1 Preferred Shares, the holders of outstanding Series D-1 Preferred Shares shall have no right or claim, based on their ownership of Series D-1 Preferred Shares, to any of the remaining assets of the Corporation. Subject to the rights of the holders of any Parity Shares, upon any Liquidation of the Corporation, after payment shall have been made in full to the holders of Series D-1 Preferred Shares and any Parity Shares, as provided in this Section 4, any other series or class or classes of Junior Shares shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series D-1 Preferred Shares and any Parity Shares as such shall not be entitled to share therein.

5. Redemption.

(a)          Subject to Section 5(c), but not prior to December 12, 2022, the Corporation, at its option, shall have the right to redeem, on any Corporation Redemption Date, in whole or in part, Series D-1 Preferred Shares by providing, not less than 30 days prior to a Corporation Redemption Closing Date, written notice to each holder of its intent to redeem the Series D-1 Preferred Shares (each, a “Corporation Redemption Notice”) which will specify the number of Series D-1 Preferred Shares to be redeemed and the date set for such redemption, which date shall be no more than thirty (30) days after the Corporation Redemption Notice (the “Corporation Redemption Closing Date”); provided, however, that if such Redemption would result in the holders of Series D-1 Preferred Shares owning after such Corporation Redemption Closing Date Series D-1 Preferred Shares with an aggregate Liquidation Preference of less than $8,333,333.33 in the aggregate, then the Corporation shall be required to redeem all (and not less than all) of the Series D-1 Preferred Shares. Subject to Section 5(c), any such Redemption shall be paid in cash on the Corporation Redemption Closing Date, for the Series D-1 Preferred Shares specified in the Corporation Redemption Notice in an amount equal to the Redemption Price.

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(b)          Subject to Section 5(c), but not prior to December 12, 2022, each holder, at its option, shall have the right, in its sole discretion, to require the Corporation to redeem, on any Holder Redemption Date, in whole or in part, its Series D-1 Preferred Shares by providing written notice to the Corporation of its intent to cause the Corporation to redeem such holder’s Series D-1 Preferred Shares (each, a “Holder Redemption Notice”) which will specify (i) the name of the holder delivering such Holder Redemption Notice, (ii) the number of Series D-1 Preferred Shares to be redeemed, and (iii) that such holder is exercising its option, pursuant to this Section 5, to require the Corporation to redeem shares of Series D-1 Preferred Shares held by such holder. The Corporation shall, within fifteen (15) Business Days of receipt of such Holder Redemption Notice, deliver to the holder exercising its rights to require redemption of the Series D-1 Preferred Shares a notice specifying the date set for such redemption, which date shall be no more than ninety (90) days after the Holder Redemption Notice (the “Holder Redemption Closing Date”). Subject to Section 5(c), any such Redemption shall be paid in cash on the Holder Redemption Closing Date, for the Series D-1 Preferred Shares specified in the Holder Redemption Notice in an amount equal to the Redemption Price.

(c)          Any Redemption shall be paid only out of any cash or surplus available therefor under applicable Delaware law (including any cash or surplus made available as a result of any revaluation or otherwise in accordance with the terms of this Section 5(c)), and, if there is not a sufficient amount of cash or surplus available, then out of the remaining assets of the Corporation available therefor under applicable Delaware law (valued at the fair market value thereof on the date of payment, as determined by the Board of Directors). In connection with a Redemption, the Corporation shall take all actions required or permitted under Delaware law to permit the Redemption of the Series D-1 Preferred Shares, including, without limitation, through the revaluation of its assets in accordance with Delaware law, to make funds available under applicable Delaware law for such Redemption or to determine the existence of sufficient surplus, and the Corporation shall apply all of its assets to any such Redemption except to the extent prohibited by Delaware law governing dividends to stockholders and redemption or repurchase of capital stock.

(d)          In the case of any Redemption, the rights of the holders of such Series D-1 Preferred Shares subject to Redemption shall cease only upon the payment in full of the Redemption Price. Until the payment in full of the Redemption Price to such holder, the Series D-1 Preferred Shares of such holder shall be deemed to be outstanding and such holder shall retain all rights with respect thereto, including the conversion rights as set forth in Section 6 hereof.

(e)          Whenever any shares of Series D-1 Preferred Stock are redeemed by the Corporation pursuant to this Section 5, the Corporation shall take all action as may be necessary to retire such redeemed shares and to cause such redeemed shares to resume the status of authorized and unissued preferred stock, without designation as to series.

6. Conversion.

(a)          Subject to the terms and conditions contained in this Section 6, the Series D-1 Preferred Shares shall be convertible as follows:

(i)           from and after the Issue Date, the holders of Series D-1 Preferred Shares shall have the right, at their option (the “Optional Conversion Right”), to convert some or all of their Series D-1 Preferred Shares as set forth in the Holder Conversion Election Notice (as defined below) into the number of fully paid and non-assessable Common Shares obtained by dividing the aggregate Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of conversion of such specified Series D-1 Preferred Shares by the Conversion Price (each an “Optional Conversion”); and

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(ii)         at any time following the date that is twenty-four (24) months following the Issue Date, provided that for the previous 30 consecutive full Trading Days prior to the Corporation Conversion Election Date (A) both the one-day VWAP and the daily Closing Price of a Common Share are each in excess of $50.66 (as adjusted for Common Share Events) and (B) Common Shares with an aggregate value of at least $10,000,000 have been traded on the Trading Market on each of such 30 consecutive full Trading Days, the Corporation shall have the right, at its option (the “Mandatory Conversion Right”), to convert up to such number of the outstanding shares of Series D-1 Preferred Shares as otherwise permitted under Section 7 into the number of fully paid and non-assessable Common Shares obtained by dividing the aggregate Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of conversion of such Series D-1 Preferred Shares by the Conversion Price (the “Mandatory Conversion”); provided, however, such Mandatory Conversion Right may not be exercised by the Corporation more than two (2) times in any twelve (12) month period.

(b)          Any Optional Conversion or the Mandatory Conversion shall be subject to the following terms and conditions, as applicable:

(i)          In order to exercise the Optional Conversion Right, the holder of Series D-1 Preferred Shares shall send a written notice to the Corporation (the “Holder Conversion Election Notice”) stating that the holder thereof has elected to convert Series D-1 Preferred Shares. The Holder Conversion Election Notice shall also state the number of Series D-1 Preferred Shares such holder wishes to convert and the number of Common Shares to be issued by the Corporation to such holder pursuant to the Optional Conversion. The holder of Series D-1 Preferred Shares shall include with the Holder Conversion Election Notice the certificate or certificates representing the Series D-1 Preferred Shares to be converted duly endorsed or assigned to the Corporation or in blank. As promptly as practicable, but in no event later that fifteen (15) Business Days, following receipt of a Holder Conversion Election Notice and the certificate or certificates representing the Series D-1 Preferred Shares to be converted, the Corporation shall (or shall cause a transfer agent for the Common Shares to) issue and shall deliver a certificate or certificates for the number of full Common Shares issuable upon such Optional Conversion, together with payment in lieu of any fraction of a share, as provided in Section 6(d), to such holder. If fewer than all the Series D-1 Preferred Shares represented by a certificate delivered to the Corporation pursuant to this Section 6(b)(i) are to be converted pursuant to a Holder Conversion Election Notice, upon such conversion the Corporation shall (or shall cause a transfer agent for the Series D-1 Preferred Shares to) also issue and deliver to the holder of Series D-1 Preferred Shares a new certificate representing the Series D-1 Preferred Shares not so converted.

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(ii)         In order to exercise the Mandatory Conversion Right, the Corporation shall send a written notice to the holders of Series D-1 Preferred Shares (the “Corporation Conversion Election Notice”) that the Corporation has elected to exercise the Mandatory Conversion Right and convert such Series D-1 Preferred Shares (the date of such written notice, the “Corporation Conversion Election Date”) and which shall include the one-day VWAP, daily Closing Price and the trading volume of the Common Shares for the 30 full Trading Days preceding the date of the Corporation Conversion Election Notice, and the number of Common Shares to be issued in the Mandatory Conversion. Following the receipt of the Corporation Conversion Election Notice, the applicable holder of Series D-1 Preferred Shares shall surrender to the Corporation the certificate or certificates representing the Series D-1 Preferred Shares so converted, duly endorsed or assigned to the Corporation or in blank. As promptly as practicable, but in no event later than fifteen (15) Business Days, following receipt of the certificate or certificates representing the Series D-1 Preferred Shares converted in the Mandatory Conversion, the Corporation shall (or shall cause a transfer agent for the Common Shares to) issue and deliver, a certificate or certificates for the number of full shares of Common Shares issuable upon such Mandatory Conversion, together with payment in lieu of any fraction of a share, as provided in Section 6(d), to the holders entitled to receive the same. Notwithstanding anything in this Section 6(b)(ii) to the contrary but subject to the limitations set forth in Section 7, upon the close of business on the Corporation Conversion Election Date, the number Series D-1 Preferred Shares converted in the Mandatory Conversion shall automatically be deemed converted into Common Shares, which Common Shares shall be deemed to be outstanding of record, and all rights with respect to such Series D-1 Preferred Shares so converted, including any rights, if any, to receive notices and vote (other than as holders of Common Shares), will terminate, except for the right to receive the number of Common Shares into which such Series D-1 Preferred Shares have been converted.

(iii)        Unless the Common Shares issuable on an Optional Conversion or Mandatory Conversion are to be issued in the same name as the name in which such Series D-1 Preferred Shares are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or such holder’s duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).

(iv)        Holders of Series D-1 Preferred Shares at the close of business on any Dividend Payment Record Date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof (in addition to any accrued and unpaid dividends to the date of conversion) following such Dividend Payment Record Date and prior to such Dividend Payment Date. A holder of Series D-1 Preferred Shares on a Dividend Payment Record Date whose Series D-1 Preferred Shares are thereafter converted into Common Shares on or before such Dividend Payment Date will receive the dividend payable by the Corporation on such Series D-1 Preferred Shares on such Dividend Payment Date.

(c)           Each Optional Conversion shall be deemed to have been effected immediately prior to the close of business on the date the Corporation receives the Holder Conversion Election Notice and related stock certificates (the date of such receipt by the Corporation, the “Holder Conversion Election Date”) and the Person or Persons in whose name or names any Common Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the Common Shares represented thereby at such time on such date, and such conversion shall be on such date.

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(d)          No fractional shares or scrip representing fractions of Common Shares shall be issued upon conversion of the Series D-1 Preferred Shares. Instead of any fractional interest in a Common Share that would otherwise be deliverable upon the conversion of a Series D-1 Preferred Share, the Corporation shall pay to the holder of such Series D-1 Preferred Share an amount in cash based upon the Current Market Price of a Common Share on the Trading Day immediately preceding the Holder Conversion Election Date or Corporation Conversion Election Date, as applicable. If more than one Series D-1 Preferred Share shall be converted at one time by the same holder, the number of full Common Shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of Series D-1 Preferred Shares so converted.

(e)          The Conversion Price shall be adjusted from time to time as follows:

(i)          If, after the Issue Date, the Corporation (A) pays a dividend or makes a distribution on its shares of capital stock in Common Shares, (B) subdivides its outstanding Common Shares into a greater number of shares, (C) combines its outstanding Common Shares into a smaller number of shares or (D) issues any shares of capital stock by reclassification of its Common Shares (the events set forth in clauses (A), (B), (C) and (D) above being hereinafter referred to as the “Common Share Events”), the Conversion Price shall be adjusted so that the holder of any Series D-1 Preferred Share thereafter converted shall be entitled to receive the number of Common Shares that such holder would have owned or have been entitled to receive after the happening of any Common Share Event had such Series D-1 Preferred Share been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately upon the opening of business on the day next following the record date (subject to paragraph (f) below) in the case of a dividend or distribution and shall become effective immediately upon the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification.

(ii)         If, after the Issue Date, the Corporation issues rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within 45 days after the record date mentioned below in this subparagraph (ii)) to subscribe for or purchase Common Shares at a price per share less than the Current Market Price per Common Share on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Conversion Price shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect at such time by (B) a fraction, the numerator of which shall be the sum of (I) the number of Common Shares outstanding on the close of business on the date fixed for such determination and (II) the number of Common Shares that the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Common Shares would purchase at such Current Market Price, and the denominator of which shall be the sum of (I) the number of Common Shares outstanding on the close of business on the date fixed for such determination and (II) the number of additional Common Shares offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately upon the opening of business on the day next following such record date (subject to paragraph (f) below). In determining whether any rights, options or warrants entitle the holders of Common Shares to subscribe for or purchase Common Shares at less than such Current Market Price, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive, absent manifest error.

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(iii)        If the Corporation distributes to all holders of its Common Shares any shares of capital stock of the Corporation (other than Common Shares), cash, assets, evidence of its indebtedness, or Distributed Securities, then in each case the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (A) the Conversion Price in effect at such time by (B) a fraction, the numerator of which shall be the Current Market Price per Common Share on the date fixed for the determination of the stockholders entitled to receive such distribution less the then fair market value (as determined by the Board of Directors, or a committee thereof, whose determination shall be conclusive, absent manifest error and subject to the adjustment for Spin-Offs set forth herein) of the portion of such shares of capital stock, cash, assets or evidences of indebtedness or Distributed Securities applicable to one Common Share, and the denominator of which shall be the Current Market Price per Common Share on the record date mentioned below. Such adjustment shall become effective immediately upon the opening of business on the day next following (subject to paragraph (f) below) the record date for the determination of stockholders entitled to receive such distribution. For the purposes of this subparagraph (iii), the distribution of a Distributed Security, which is distributed not only to the holders of the Common Shares on the date fixed for the determination of stockholders entitled to such distribution of such Distributed Security, but also is required to be distributed with each Common Share delivered to a Person converting a Series D-1 Preferred Share after such determination date, shall not require an adjustment of the Conversion Price pursuant to this subparagraph (iii); provided that on the date, if any, on which a Person converting a Series D-1 Preferred Share would no longer be entitled to receive such Distributed Security with a Common Share (other than as a result of the termination of all such Distributed Securities), a distribution of such Distributed Securities shall be deemed to have occurred, and the Conversion Price shall be adjusted as provided in this subparagraph (iii) (and shall be adjusted as of the date fixed for the determination of the stockholders entitled to receive such distribution, with any subsequent adjustments being reapplied as appropriate).

With respect to an adjustment pursuant to this subparagraph (iii) where there has been a payment of a dividend or other distribution on the Common Shares of shares of capital stock of any class or series, or similar equity interest, of or relating to a subsidiary of the Corporation or other business unit of the Corporation (a “Spin-Off”), then if the VWAP of the capital stock or similar equity interest distributed to holders of Common Shares applicable to one Common Share over the 10 consecutive Trading Day period beginning on the fifth trading day after the effective date of the Spin-Off exceeds the fair market value as determined by the Board of Directors, then the Conversion Price shall be re-adjusted using such VWAP as the fair market value.

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The occurrence of a distribution or the occurrence of any other event as a result of which holders of Series D-1 Preferred Shares shall not be entitled to receive rights, including exchange rights (the “Rights”), pursuant to any stockholders protective rights agreement that may be adopted by the Corporation as if such holders had converted such shares into Common Shares immediately prior to the occurrence of such distribution or event shall not be deemed a distribution of Distributed Securities for the purposes of any Conversion Price adjustment pursuant to this subparagraph (iii) or otherwise give rise to any Conversion Price adjustment pursuant to this Section 6; provided, however, that in lieu of any adjustment to the Conversion Price as a result of any such distribution or occurrence, the Corporation shall make provision so that Rights, to the extent issuable at the time of conversion of any Series D-1 Preferred Shares into Common Shares, shall issue and attach to such Common Shares then issued upon conversion in the amount and manner and to the extent and as provided in such stockholders protective rights agreement.

(iv)        If, at any time or from time to time after the Issue Date, the Corporation issues or sells any Common Shares (other than in connection with any underwritten public offering and issuances to unaffiliated third parties for an acquisition on an arm’s-length basis) (“Additional Shares”) for a consideration per share that is less than the Current Market Price on the Business Day immediately preceding the earlier of the issuance or sale, or public announcement of the issuance or sale, of such Additional Shares, then the Conversion Price shall be reduced to an amount determined by multiplying the Conversion Price in effect at such time by a fraction of which (x) the numerator is the sum of (i) the product of (A) the number of Common Shares outstanding immediately prior to such issuance or sale multiplied by (B) the greater of (1) the Conversion Price in effect at such time and (2) the Closing Price on the date preceding the earlier of the issuance or sale or public announcement of the issuance or sale of such Additional Shares (the greater of (1) and (2) above hereinafter referred to as the “Adjustment Price”) and (ii) the aggregate consideration receivable by the Corporation for the total number of Common Shares so issued or sold, and (y) the denominatorequals the product of (i) the sum of (A) the total number of Common Shares outstanding immediately prior to such issuance or sale and (B) the numberof additional Common Shares issued or sold, multiplied by (ii) theAdjustment Price. An adjustment made pursuant to this subparagraph (iv) shall be made on the next Business Day following the date on which any such issuance or sale is made and shall be effective retroactively to the close of business on the date of such issuance or sale.

(v)         Other than adjustments for cash dividends paid on Common Shares pursuant to Section 6(e)(iii) above, no adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; provided, however, that any adjustments that by reason of this subparagraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided further, however that any adjustment shall be required and made in accordance with the provisions of this Section 6 (other than this subparagraph (v)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Common Shares. Notwithstanding any other provisions of this Section 6, the Corporation shall not be required to make any adjustment of the Conversion Price for (A) the issuance of any Common Shares pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in Common Shares under such plan, or (B) the issuance of any Common Shares or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation. All calculations under this Section 6 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (e) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such adjustments in the Conversion Price, in addition to those required by this paragraph (e), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights, options or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable.

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(f)          If the Corporation becomes party to any transaction (including without limitation a merger, consolidation, self-tender offer for all or substantially all Common Shares outstanding or recapitalization of the Common Shares but excluding any Common Share Events (each of the foregoing being referred to herein as a “Transaction”)), in each case as a result of which Common Shares shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each Series D-1 Preferred Share that is not redeemed or converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of Common Shares into which one Series D-1 Preferred Share was convertible immediately prior to such Transaction, assuming such holder of Common Shares (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be (a “Constituent Person”), or an Affiliate of a Constituent Person and (ii) failed to exercise his or her rights of the election, if any, as to the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each Common Share held immediately prior to such Transaction by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised (“Non-Electing Share”), then for the purpose of this paragraph (f) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (f), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Series D-1 Preferred Shares that will contain provisions enabling the holders of the Series D-1 Preferred Shares that remain outstanding after such Transaction to convert their Series D-1 Preferred Shares into the consideration received by holders of Common Shares at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (f) shall similarly apply to successive Transactions.

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(g)          If:

(i)          the Corporation pays a dividend on (or makes any other distribution on or repurchases) the Common Shares; or

(ii)         the Corporation grants to the holders of the Common Shares rights, options or warrants to subscribe for or purchase any shares of any class or any other rights, options or warrants (other than Rights to which the second paragraph of subparagraph (e)(iii) of this Section 6 applies); or

(iii)        there shall occur any reclassification of the Common Shares (other than an event to which subparagraph (e)(i) of this Section 6 applies) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a self-tender offer by the Corporation for all or substantially all of its outstanding Common Shares, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety and for which approval of any stockholders of the Corporation is required; or

(iv)        there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation,

then the Corporation shall cause to be prepared and delivered to the holders of the Series D-1 Preferred Shares at their addresses as shown on the stock records of the Corporation, as promptly as possible, but at least fifteen (15) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Shares of record to be entitled to such dividend, distribution or grant of rights, options or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, self-tender offer, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, self-tender offer, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 6.

(h)          Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly prepare and deliver to the holders of the Series D-1 Preferred Shares a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date of such adjustment and an officer’s certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. The Corporation shall mail such notice and such certificate to the holders of each Series D-1 Preferred Share at such holder’s last address as shown on the stock records of the Corporation.

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(i)          In any case in which paragraph (e) of this Section 6 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any Series D-1 Preferred Share converted after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event over and above the Common Shares issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (f) of this Section 6.

(j)          There shall be no adjustment of the Conversion Price in case of the issuance of any shares of capital stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 6. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 6, only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value.

(k)         If the Corporation takes any action affecting the Common Shares, other than action described in this Section 6, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of the Series D-1 Preferred Shares, the Conversion Price for the Series D-1 Preferred Shares may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors, in its sole discretion, may determine to be equitable in the circumstances.

(l)          The Corporation will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Shares, for the purpose of effecting conversion of the Series D-1 Preferred Shares, the full number of Common Shares deliverable upon the conversion of all outstanding Series D-1 Preferred Shares not theretofore converted. For purposes of this paragraph (l), the number of Common Shares that shall be deliverable upon the conversion of all outstanding shares of Series D-1 Preferred Shares shall be computed as if at the time of computation all such outstanding shares were held by a single holder.

(m)         The Common Shares issued by the Corporation in an Optional Conversion or Mandatory Conversion, as applicable shall, upon issuance to such holder, be freely transferrable whether pursuant to Rule 144 without any volume limitations or issued pursuant to an effective registration statement. Any Common Shares issued upon conversion of the Series D-1 Preferred Shares shall be validly issued, fully paid and non-assessable. Before taking any action that would cause an adjustment reducing the Conversion Price below the then-par value of the Common Shares deliverable upon conversion of the Series D-1 Preferred Shares, the Corporation shall take any corporate action that, in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable Common Shares at such adjusted Conversion Price. The Corporation shall endeavor to list the Common Shares required to be delivered upon conversion of the Series D-1 Preferred Shares, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding Common Shares are listed at the time of such delivery.

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(n)          The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Common Shares or other securities or property on conversion of the Series D-1 Preferred Shares pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of any Common Shares or other securities or property in a name other than that of the holder of the Series D-1 Preferred Shares to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid.

(o)          If the Conversion Price is adjusted from time to time in accordance with this Section 6 as the result of an event that alters the number of outstanding Common Shares (or an event in connection with which the Corporation issues any rights, options or warrants or other securities that, upon exercise or conversion (or otherwise), and such issuance would then alter the number of outstanding Common Shares), then the number of Common Shares issuable hereunder shall be adjusted by multiplying (A) the Common Shares issuable hereunder at such time by (B) a fraction, the numerator of which shall be the Conversion Price (prior to such adjustment) and the denominator of which shall be the Conversion Price (following such adjustment).

7. Ownership Limits

In no event will a holder of Series D-1 Preferred Shares be allowed to accept Common Shares issuable upon conversion of the Series D-1 Preferred Shares that would result in the ownership of an aggregate number of Common Shares, when taken together with any other Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, in excess of 24.9% of the Common Shares outstanding on the Trading Day immediately preceding the Holder Conversion Election Date (each as appropriately adjusted for share splits, share dividends, combinations, recapitalizations and the like and taking into account the number of Common Shares resulting from such conversion) (the “24.9% Share Cap”), unless such ownership of Common Shares in excess of the 24.9% Share Cap is duly approved in advance by FINRA (such approval, the “FINRA Approval”).

8. Voting; Directors; Covenants.

(a)          Except as otherwise set forth herein or in the Certificate of Incorporation or by law specifically provided, the holders of Series D-1 Preferred Shares shall have no voting rights whatsoever. As to matters upon which holders of Series D-1 Preferred Shares are entitled to vote, the holder thereof shall be entitled to one (1) vote per Series D-1 Preferred Share, except in respect of the voting rights set forth in Section 8(b) hereof.

(b)          The holders of the Series D-1 Preferred Shares:

(i)          shall be entitled to vote with the holders of the Common Shares on all matters submitted for a vote of holders of Common Shares (whether at a meeting of such holders or by written consent), voting together with the holders of Common Shares (and not as a separate class or series),

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(ii)         shall be entitled to a number of votes equal to the number of votes to which Common Shares issuable upon conversion of the Series D-1 Preferred Shares would have been entitled if such Common Shares had been issued and outstanding at the time of the applicable record date, and

(iii)        shall be entitled to notice of any shareholders meeting in accordance with the Bylaws of the Corporation.

provided that until the FINRA Approval has been obtained, in no event will a holder of Series D-1 Preferred Shares have a number of votes on any matter submitted for a vote of holders of Common Shares that, when taken together with the votes of any other Preferred Shares and Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, exceeds 24.9% of total number of votes entitled to be voted on such matter.

(c)          From and after the Issue Date and prior to the Minimum Ownership Date, the holders of a majority of the outstanding Series D-1 Preferred Shares shall be entitled to elect two (2) directors (each, a “Series D-1 Director”) to the Corporation’s Board of Directors. Upon the occurrence of the Minimum Ownership Date, the right of the holders of a majority of the outstanding Series D-1 Preferred Shares to elect the Series D-1 Directors shall cease.

(d)          Whenever the voting rights of the holders of a majority of the outstanding Series D-1 Preferred Shares set forth in Sections 8(c) shall have vested, such rights may be exercised initially either at a special meeting of the holders of the Series D-1 Preferred Shares having such voting rights, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, or by the written consent pursuant to Section 228 of the General Corporation Law of the holders of the Series D-1 Preferred Shares entitled to vote thereon.

(e)          At any time when such voting rights provided in Section 8(c) shall have vested in the holders of a majority of the outstanding Series D-1 Preferred Shares, and if such rights shall not already have been initially exercised, a proper officer of the Corporation, upon the written request of the holders of record of 10% of the Series D-1 Preferred Shares outstanding, addressed to the Secretary of the Corporation, shall call a special meeting of the holders of the Series D-1 Preferred Shares for the purpose of electing the directors contemplated by Section 8(c). Such meeting shall be held at the earliest practicable date after giving of the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Secretary of the Corporation. If such meeting shall not be called by a proper officer of the Corporation within 20 days after the personal service of such written request upon the Secretary of the Corporation, or within 20 days after mailing the same within the United States of America, by registered mail addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the holders of record of at least 10% in number of Series D-1 Preferred Shares then outstanding which would be entitled to vote at such meeting may designate in writing one of their number to call such meeting at the expense of the Corporation, and such Person so designated may call a special meeting of the holders of the Series D-1 Preferred Shares. Such meeting shall be held after giving the notice required for annual meetings of stockholders at the same place as is elsewhere provided in this Section 8(e). Any holder of the Series D-1 Preferred Shares which would be entitled to vote at such meeting shall have access to the stock books of the Corporation relating to the Series D-1 Preferred Shares for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section 8(e).

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(f)          At any meeting held for the purpose of electing directors at which the holders of a majority of the outstanding Series D-1 Preferred Shares shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of a majority of the then outstanding Series D-1 Preferred Shares shall be required and be sufficient to constitute a quorum of such class for the election of directors by such class. At any such meeting or adjournment thereof: (A) (i) the absence of a quorum of the holders of the Series D-1 Preferred Shares shall not prevent the election of directors by other stockholders of the Corporation and (ii) the absence of a quorum or quorums of such other stockholders shall not prevent the election of directors to be elected by the holders of the Series D-1 Preferred Shares, and (B) in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice as to time and place other than announcement at the meeting except as otherwise provided by law, until a quorum shall be present.

(g)          Any vacancy occurring in the office of a Series D-1 Director elected by the holders of a majority of the outstanding Series D-1 Preferred Shares may be filled by the holders of a majority of the outstanding Series D-1 Preferred Shares.

(h)          The term of office of a Series D-1 Director in office at any time when such voting right is vested in the holders of a majority of the outstanding Series D-1 Preferred Shares shall terminate upon the election of their successor by the holders of a majority of the outstanding Series D-1 Preferred Shares at any meeting of stockholders for the purpose of electing directors.

(i)           Notwithstanding the foregoing, when taken together with all the other rights to appoint directors to the Board of Directors, the holders of the Series D-1 Preferred Shares shall not at any time be entitled to appoint a number of members of the Board of Directors which would constitute 50% or more of the total number of members of the Board of Directors and, if at any time the members of the Board of Directors appointed by the holders of a majority of the outstanding Series D-1 Preferred Shares constitute 50% or more of the total number of members of the Board of Directors, then the term of office of the last elected Series D-1 Director shall thereafter automatically terminate.

(j)           So long as any Series D-1 Preferred Shares remain outstanding, in addition to any other vote or consent of stockholders required by law or the Certificate of Incorporation, the Corporation shall not, directly or indirectly (including through merger or consolidation with any other corporation) and shall not permit any of its Subsidiaries to, without the affirmative vote at a meeting or the written consent without a meeting of the holders of at least a majority of Series D-1 Preferred Shares and Series D-2 Preferred Shares, voting as a single class (other than Section 8(j)(ii) below, which shall only require the affirmative vote of the holders of at least a majority of the Series D-1 Preferred Shares):

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(i)          authorize or approve the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for, shares of, Preferred Stock or any other capital stock of the Corporation, which shares rank senior to or on a parity with Series D-1 Preferred Shares (other than (A) the Series B Preferred Shares, the Series C Preferred Shares or the Series D-2 Preferred Shares, or (B) any prior or parity shares that are not redeemable, except for a Change of Control, delisting event, or similar event, by the holder or, with respect to Senior Shares, are not convertible and are not equity linked) in the payment of dividends or in the distribution of assets upon liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation (other than the issuance of any Additional Shares pursuant to Section 6(e))), or authorize or create, or increase the authorized number of, any class or series of capital stock of the Corporation the shares of which rank senior to or on a parity with Series D-1 Preferred Shares (other than (A) the Series B Preferred Shares, the Series C Preferred Shares or the Series D-2 Preferred Shares, or (B) any senior or parity shares that are not redeemable, except for a Change of Control, delisting event, or similar event, by the holder or, with respect to Senior Shares, are not convertible and are not equity linked) in the payment of dividends or in the distribution of assets upon liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation or any security convertible into, or convertible or exchangeable for, shares of any such class or series (other than any increase in the authorized number of Series D-1 Preferred Shares);

(ii)         amend, alter or repeal any of the provisions of the Certificate of Designation designating the 11% Series D-1 Convertible Preferred Stock as a series of Preferred Stock, the Certificate of Incorporation or the Bylaws of the Corporation so as to materially and adversely affect the powers, designations, preferences and rights of the Series D-1 Preferred Shares or increase the size of the Board of Directors; provided, however, that the amendment of the Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any Junior Shares shall not be deemed to affect adversely the powers, designations, preferences and rights of the Series D-1 Preferred Shares or the holders thereof;

(iii)        enter into any transaction or series of related transactions with any Affiliate of the Corporation or any of its subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to the Corporation or such subsidiary as would reasonably be obtained by the Corporation or such subsidiary at that time in a comparable arm’s-length transaction with a Person other than an Affiliate; or

(iv)        contract, create, incur, or assume any Indebtedness or guarantee any Indebtedness if, at the time of or after giving effect to such contract, creation, incurrence, assumption or guarantee, the aggregate outstanding amount of all Indebtedness on a consolidated basis of the Corporation and its Subsidiaries equals or exceeds or would equal or exceed 4.0 times LTM Adjusted EBITDA.

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9. Rank.

The Series D-1 Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation, (i) senior to all Common Shares, and senior to all other equity securities of the Corporation other than equity securities referred to in clauses (ii) and (iii) of this sentence (“Junior Shares”); (ii) to the extent authorized under Section 8(j)(i) of this Certificate of Designation, on a parity with the Series B Preferred Shares, Series C Preferred Shares and Series D-2 Preferred Shares and all other equity securities of the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series D-1 Preferred Shares with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation (“Parity Shares”); and (iii) to the extent authorized under Section 8(j)(i) of this Certificate of Designation, junior to all equity securities of the Corporation the terms of which specifically provide that such equity securities rank senior to the Series D-1 Preferred Shares with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation (“Senior Shares”). The term “equity securities” does not include convertible debt securities (the issuance of which, for the avoidance of doubt, shall be subject to Section 8(j)(iv)).

10. Record Holders.

The Corporation may deem and treat the record holder of any Series D-1 Preferred Shares as the true and lawful owner thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary.

11. Reports to Holders.

So long as any Series D-1 Preferred Shares remain outstanding, if the Corporation is not required to file information, documents or reports pursuant to either of Section 13 or Section 15(d) of the Exchange Act, and is required by any debt financing agreement to provide quarterly reports, the Corporation shall cause quarterly reports (containing unaudited financial statements) for the first three quarters of each fiscal year and annual reports (containing audited financial statements and an opinion thereon by the Corporation’s independent certified public accountants) which the Corporation would be required to file under Section 13 of the Exchange Act if it had a class of securities listed on a national securities exchange to be mailed to each holder of record of Series D-1 Preferred Shares appearing on the stock books of the Corporation as of the date of such mailing at the address of said holder shown therein within fifteen (15) days after the date when such report would have been required to be filed under Section 13 of the Exchange Act. If the Corporation is no longer a party to any debt financing agreement which requires the preparation of quarterly reports, the Corporation shall cause the annual reports of each of its broker-dealer subsidiaries (containing audited statements) that the Corporation must provide to FINRA, to be mailed to each holder of record of Series D-1 Preferred Shares appearing on the stock books of the Corporation as of the date of such mailing at the address of said holder shown therein within fifteen (15) days after the date when such reports are required to be filed with FINRA.

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12. Preemptive Rights.

No holder of Series D-1 Preferred Shares shall be entitled to any preemptive rights to subscribe for or acquire any unissued Shares (whether now or hereafter authorized) or securities of the Corporation convertible into, or carrying a right to subscribe to or acquire, Shares.

13. No Other Rights.

The Series D-1 Preferred Shares shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Incorporation or as may be provided by law.

14. Waiver.

Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series D-1 Preferred Shares granted hereunder may be waived as to all Series D-1 Preferred Shares (and the holders thereof) upon the approval of the Board of Directors (or an authorized committee thereof) and the holders of a majority of the Series D-1 Preferred Shares then outstanding.

[Signature Page Follows.]

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IN WITNESS WHEREOF, RCS Capital Corporation has caused this Certificate to be duly executed in its name and on its behalf by its _____________ this ____th day of _____, 2015.

RCS CAPITAL CORPORATION
By:
	Name:
	Title:

EXHIBIT B

Purchased Shares

Investor	Purchased Shares
Apollo Management Holdings, L.P.	1,000,000 Shares of Series D-1 Preferred Stock

64

EX-10.3

Exhibit 10.3

EXECUTION VERSION

INVESTMENT AGREEMENT

by and between

EACH INVESTOR IDENTIFIED ON THE SIGNATURE PAGES HERETO (THE

“INVESTOR”),

AND

rcs capital corporation

Dated as of August 6, 2015

TABLE OF CONTENTS

		Page
ARTICLE I TRANSACTION		5
1.1	Issuance	5
1.2	Purchase	5
1.3	The Closing	5
1.4	Closing Deliveries	5
1.5	Reorganization	6
ARTICLE II REPRESENTATIONS AND WARRANTIES PERTAINING TO THE BUSINESS		6
2.1	Organization, Power	6
2.2	Authority	7
2.3	Non-Contravention	7
2.4	Consents	8
2.5	Capitalization	8
2.6	Company SEC Documents; Internal Controls	9
2.7	Litigation	11
2.8	Compliance with Laws; Permits and Licenses	12
2.9	Absence of Certain Changes; No Undisclosed Liabilities	13
2.10	Personnel and Employee Benefits Matters	14
2.11	Taxes	16
2.12	Properties and Assets	17
2.13	Material Agreements	18
2.14	Intellectual Property and IT Systems	18
2.15	Data Protection and Privacy	19
2.16	Broker-Dealer Matters	19
2.17	Municipal Advisor Matters	21
2.18	Investment Adviser Compliance Matters	22
2.19	Funds	25
2.20	Insurance	27
2.21	Affiliate Arrangements	27
2.22	Information Supplied	28
2.23	Brokers	28
2.24	Compliance with Environmental Law	28
2.25	No Other Representations and Warranties	28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTORS		28
3.1	Organization	28
3.2	Authority	29
3.3	Non-Contravention	29

3.4	Consents, etc	29
3.5	Available Funds	30
3.6	Investment Intent	30
3.7	No Other Representations and Warranties	30
Article IV Covenants		30
4.1	Conduct of Business	30
4.2	Access; Confidentiality	31
4.3	Reasonable Best Efforts; Regulatory Approvals; Client Consents	32
4.4	Public Announcements; Confidentiality	32
4.5	Supplemental Disclosure	33
4.6	Listing Undertaking	33
4.7	Certificate of Designation	35
4.8	Board of Directors	35
4.9	NYSE Rules; Reservation of Shares of Common Stock	35
4.10	Investor Undertaking	35
4.12	Expenses; Transfer Taxes	35
4.13	Further Assurances	35
Article V Conditions to the Closing		36
5.1	Mutual Conditions	36
5.2	Additional Conditions to the Obligations of the Investors	36
5.3	Additional Conditions to the Obligations of the Company	37
Article VI Termination		38
6.1	Termination	38
6.2	Termination Right	39
6.3	Effect of Termination	40
Article VII Indemnification		40
7.1	Indemnification by the Company	40
7.2	Indemnification by the Investor	41
7.3	Indemnification Procedures	43
7.4	General	44
Article VIII General Provisions		45
8.1	Survival	45
8.2	Notices	46
8.3	Interpretation	47
8.4	Amendment and Modification; Waiver	47
8.5	Entire Agreement	48
8.6	Disclosure Letters	48
8.7	Third Party Beneficiaries	48
8.8	Specific Performance	48
8.9	Assignment; Binding Effect	49

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8.10	Governing Law	49
8.11	Jurisdiction; Waiver of Jury Trial	49
8.12	Severability	49
8.13	Counterparts	50
ARTICLE IX DEFINITIONS		50

EXHIBITS

Exhibit A – Form of Certificate of Designation

Exhibit B – Purchased Shares

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INVESTMENT AGREEMENT

This INVESTMENT AGREEMENT, dated as of August 6, 2015 (this “Agreement”), is made by and between each investor identified on the signature pages hereto (the “Investor”), and RCS Capital Corporation, a Delaware corporation (the “Company”). Capitalized terms used and not otherwise defined in this Agreement have the meanings specified in Article IX.

RECITALS

A. The Company has (i) 300,000,000shares of authorized Class A common shares, $0.001 par value per share (the “Class A Common Stock”), of which, at the close of business on August 5, 2015, 77,151,089 shares of Class A Common Stock were issued and outstanding, and (ii) 100,000,000 shares of authorized Class B common shares, $0.001 par value per share (the “Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”), of which one (1) Class B share is issued and outstanding (the “Class B Share”) and owned, beneficially and of record, by RCAP Holdings, LLC, and (iii) 100,000,000 shares of authorized preferred stock, $0.001 par value per share (the “Preferred Stock”), of which, as of the date hereof, (x) 5,800,000 shares of Series B preferred stock (the “Series B Preferred Stock”) are authorized, issued and outstanding and 80% of which are owned, beneficially and of record, by Luxor Capital Group, LP together with its affiliates and its subsidiaries (“Luxor”) and (y) 4,400,000 shares of Series C preferred stock (the “Series C Preferred Stock”) are authorized, issued and outstanding and owned, beneficially and of record, by Luxor.

B. The Company intends to issue and sell to Investors, and Investors intend to purchase from the Company, 500,000 shares of a newly created series of convertible preference stock having the designation, powers, preferences and rights set forth in a certificate of designation in the form attached as Exhibit A (the “Certificate of Designation” and such series of preferred stock, the “Series D-2 Preferred Stock”).

C. Concurrently with the execution of this Agreement, AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership (“AMH”) has entered into a Transaction Agreement with AR Capital, LLC, a Delaware limited liability company (“ARC”), and AR Global, LLC, a Delaware limited liability company (“Newco”), pursuant to which, and subject to the terms and conditions thereof, (i) ARC shall transfer to Newco all of the assets (including equity interests in Subsidiaries) used in the conduct of its business, other than certain excluded assets, and Newco shall assume certain liabilities relating to ARC’s business, in exchange for 100% of the equity units of Newco and (ii) ARC shall transfer to AMH 60% of the equity units of Newco in exchange for the consideration set forth therein (the “ARC Transaction Agreement”).

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D. Concurrently with the execution of this Agreement, the Company has entered into a Membership Interest Purchase Agreement, with RCS Capital Holdings, LLC (“RCS Holdings”) and Apollo Management Holdings, L.P. (“AMH”) pursuant to which, and subject to the terms and conditions thereof, the Company and RCS Holdings shall sell to AMH (i) 100% of the authorized, issued and outstanding equity securities of Realty Capital Securities, LLC, (ii) 100% of the authorized, issued and outstanding equity securities of American National Stock Transfer, LLC, and (iii) 100% of the authorized, issued and outstanding equity securities of Strategic Capital Management Holdings, LLC (the “MIPA”).

E. Concurrently with the execution of this Agreement, the Company has entered into an investment agreement with Apollo, pursuant to which Apollo shall purchase a specified number of series D-1 preferred stock (such series of preferred stock, the “Series D-1 Preferred Stock” and together with the Series D-2 Preferred Stock, the “Series D Preferred Stock”) from the Company (the “Apollo Transaction”).

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

ARTICLE I

TRANSACTION

1.1           Issuance. Prior to the Closing, the Company shall create or cause to be created the Series D-2 Preferred Stock, which shall have the rights, powers and preferences set forth in the Certificate of Designation.

1.2           Purchase. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell to each Investor, and each Investor agrees to purchase severally not jointly from the Company, at the Closing, the number of shares of Series D-2 Preferred Stock set forth opposite Investor’s name on Exhibit B, at the Price Per Share. The shares of Series D-2 Preferred Stock to be purchased by each Investor pursuant to this Section 1.2 are herein called the “Purchased Shares”.

1.3           The Closing. The closing of the purchase of the Purchased Shares (the “Closing”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m. local time on the fifth Business Day following the Closing Condition Satisfaction Date (subject to the satisfaction or waiver of those conditions that by their terms are to be satisfied by actions taken at the Closing), provided that the parties may agree in writing on another time, date or place for the Closing. The date on which the Closing actually occurs is referred to hereinafter as the “Closing Date”.

1.4           Closing Deliveries. At the Closing:

(a)          the Company shall issue to each Investor the number of Purchased Shares set forth opposite such Investor’s name on Exhibit B as evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as hereinafter provided for, registered in the register of shareholders of the Company in each Investor’s name.

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(b)          each Investor shall severally and not jointly pay to the Company by wire transfer of immediately available funds to the account of the Company designated by the Company to each Investor in writing at least three Business Days prior to the Closing Date an amount equal to the number of the Purchased Shares multiplied by the Per Share Price (the “Purchase Price”);

(c)          the Company shall have delivered to each Investor a statement, meeting the requirements of Section 1.897-2 of the Treasury Regulations, to the effect that the Company is not a “United States real property holding corporation” within the meaning of Section 897 of the Code and the Treasury Regulations thereunder; and

(d)          Investor shall have received from Proskauer Rose LLP, (and/or Delaware counsel) to the Company, a legal opinion addressed to each Investor, dated as of the Closing Date, in a form reasonably acceptable to each Investor;

(e)          each party shall deliver, or shall cause to be delivered, to each other party, as applicable, a copy of the Ancillary Agreements, duly executed by such party or by its Subsidiaries or Affiliates who are party thereto.

1.5           Use of Proceeds. The Company shall use the proceeds from the sale of the Purchased Shares hereunder, the Apollo Transaction and cash on hand of the Company as the Board of Directors of the Company determines at a meeting to be held promptly following the issuance of the Purchased Shares.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in (i) the corresponding section of the Company Disclosure Letter and (ii) the Declarative Portions of the Company’s Recent SEC Filings, the Company represents and warrants to each Investor as follows:

2.1           Organization, Power. The Company and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and, where applicable, is duly qualified or licensed as a foreign limited liability company, corporation or other business entity to do business and is in good standing in each jurisdiction in which the nature of its business or the character or location of the properties, assets and rights owned, leased or operated by it makes such qualification or license necessary, and the Company and each of its Subsidiaries has the requisite limited liability company, corporate or similar power and authority necessary to own all of its properties, assets and rights and to carry on its business as it is now being conducted, except where any failure to be so qualified, licensed or in good standing or to have such power or authority would not, individually or in the aggregate, be Material to a Reasonable Investor. Neither the Company nor any of its Subsidiaries is in material violation of any provision of its Organizational Documents.

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2.2           Authority. The Company has the requisite power and authority to execute and deliver this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Company of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all necessary corporate or similar action of the Company and no other corporate or similar action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the Registration Rights Agreement, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby. This Agreement entered into as of the date hereof has been, and at the Closing the Registration Rights Agreement to which the Company is party will be, duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties thereto, constitute legal and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as (a) the enforceability hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

2.3           Non-Contravention. The execution and delivery by the Company of this Agreement and the Registration Rights Agreement do not, and the consummation of the transactions contemplated hereby and thereby and the performance of its obligations hereunder and thereunder will not (with or without the giving of notice, the termination of any grace period or both): (a) violate, conflict with, or result in a breach or default under any provision of the Organizational Documents of the Company or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 2.4(a), have been obtained or made, (i) violate any Applicable Law, (ii) violate, result in a violation or breach by the Company of, or cause the termination, acceleration or cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, or conflict with or constitute a default (or give rise to a right of termination, acceleration, cancellation or the loss, impairment or alteration of any right or benefit (including with respect to Intellectual Property) under, any mortgage, indenture, lease, license, note, website terms of use, privacy policy or statement, contract or agreement (each, whether oral or written, a “Contract”) to which the Company is a party or by which the Company or any of its properties is bound, whether with the passage of time, giving of notice, or both or (iii) result in the creation of any Lien on any of the assets or properties of the Company, except, in the cases of clauses (i), (ii) and (iii), for any such violation, breach, termination, acceleration, conflict, default or Lien as would not, individually or in the aggregate, be Material to a Reasonable Investor.

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2.4           Consents.

(a)          Except as described in Section 2.4 of the Company Disclosure Letter, no consent, authorization, order or approval of, filing or registration with, or notice to, any Governmental Authority (collectively, “Governmental Approvals”) is required for the execution and delivery by the Company of this Agreement and the Registration Rights Agreement to which it is a party, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby and thereby, except in any such case for any such Governmental Approval which is required solely by reason of the specific regulatory status of each Investor or its respective Affiliates or the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          No consent, authorization, approval or waiver from any party (other than a Governmental Authority) to any Contract (collectively, “Third Party Consents”) is required for the execution and delivery by the Company of this Agreement or the Registration Rights Agreement, the performance by it of its obligations hereunder and thereunder and its consummation of the transactions contemplated hereby or thereby, except in any such case for any such Third Party Consent the failure of which to be obtained or made would not, individually or in the aggregate, be Material to a Reasonable Investor.

2.5           Capitalization.

(a)          The Company. The authorized, issued and outstanding capital stock of the Company (but without giving effect to the issuance of shares of the Series D Preferred Stock and the shares of Class A Common Stock issuable upon conversion thereof) is as set forth in Recital A, and the ownership of the Class B Share, the shares of Series B Preferred Stock and the shares of Series C Preferred Stock is as set forth in Recital A. All of the outstanding shares of Common Stock and Preferred Stock are validly issued, fully paid and nonassessable, were issued in compliance with all Applicable Laws or exemptions therefrom and have not been issued in violation of any preemptive or similar rights. At the Closing, the Series D-2 Preferred Stock will have been duly authorized, and a sufficient number of shares of Class A Common Stock will have been duly authorized and validly reserved for issuance upon conversion of the shares of Preferred Stock (including the Series D-2 Preferred Stock) outstanding after giving effect to the Closing. The Purchased Shares (when issued and paid for at Closing) and the shares of Class A Common Stock issuable upon conversion of the Purchased Shares (when so converted) will have been validly issued, fully paid and nonassessable, will have been issued in compliance with all Applicable Laws or exemptions therefrom and will not have been issued in violation of any preemptive or similar rights. At Closing, each Investor will own the Purchased Shares, beneficially and of record, free and clear of any Lien (other than Liens arising as a result of this Agreement or under applicable securities laws). Except as set forth above, there are no outstanding securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any shares of capital stock or other equity interests of the Company or any rights to receive payments based on the value of, or payments in respect of, any shares of capital stock or other equity interests of the Company. The Company is not a party to any right of first refusal, right of first offer, proxy, voting agreement, voting trust, or shareholders agreement with respect to the sale or voting of any shares of capital stock or other equity interests of the Company or any securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company.

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(b)          Subsidiaries. All outstanding shares of capital stock or other equity interests of each of the Company’s Subsidiaries are validly issued, fully paid and nonassessable, were issued in compliance with all Applicable Laws or exemptions therefrom and have not been issued in violation of any preemptive or similar rights, and are owned, directly or indirectly, by the Company. There are no outstanding securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of any of the Company’s Subsidiaries, any rights to subscribe for or to purchase, or any agreements providing for the issuance (contingent or otherwise) of any shares of capital stock or other equity interests of any of the Company’s Subsidiaries, or any rights to receive payments based on the value of, or payments in respect of, any shares of capital stock or other equity interests of any of the Company’s Subsidiaries. Neither the Company nor any of the Company’s Subsidiaries is a party to any right of first refusal, right of first offer, proxy, voting agreement, voting trust, registration rights agreement, limited liability company agreement or shareholders agreement with respect to the sale or voting of any shares of capital stock or other equity interests of the Company’s Subsidiaries, or any securities convertible into or exchangeable or exercisable for any shares of capital stock or other equity interests of the Company’s Subsidiaries.

2.6           Company SEC Documents; Internal Controls.

(a)          Since January 1, 2014, the Company has timely filed or otherwise transmitted all material reports, registrations, documents, filings, statements and submissions, together with any amendments thereto, required to be filed or furnished by the Company with or to the SEC (the “Company SEC Documents”). As of their respective dates, or if amended prior to the date hereof, as of the date of the last such amendment, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and none of the Company SEC Documents at the time it was filed or furnished (or, if amended prior to the date hereof, as of the date of the last such amendment) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No Subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or is otherwise required to file any reports, registrations, documents, filings, statements or submissions with the SEC. There are no outstanding or unresolved comments in comment letters received from the SEC by the Company. To the Company’s knowledge, none of the Company SEC Documents is the subject of any ongoing SEC review, outstanding SEC comment or outstanding SEC investigation.

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(b)          The consolidated financial statements (including all related notes and schedules) of the Company included in the Company SEC Documents fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates thereof and their consolidated results of operations and consolidated cash flows for the respective periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments, none of which is material, individually or in the aggregate, and to the absence of notes therein) and have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and applicable accounting requirements and published rules and regulations of the SEC.

(c)          The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 (as amended, the “Sarbanes-Oxley Act”) and the listing application and other rules of the NYSE. Since January 1, 2014, neither the Company nor any of its Subsidiaries has made any prohibited loans to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any of its Subsidiaries. There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

(d)          The Company has established and maintains a system of disclosure controls and procedures (as such term is defined in paragraph (e) of Rule 13a-15 promulgated under the Exchange Act) as required by Rule 13a-15 promulgated under the Exchange Act. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

(e)          Since January 1, 2014, the Company’s principal executive officer and its principal financial officer have disclosed, based on their evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)), to the Company’s auditors and the audit committee of the board of directors of the Company (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

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(f)           The Company has provided to each Investor a copy of the most recent draft of its Quarterly Report on Form 10-Q (the “Draft 10-Q”) for the quarter ended June 30, 2015.

2.7           Litigation.

(a)          Section 2.7(a) of the Company Disclosure Letter contains a true, complete and correct list, since January 1, 2014 through the date of this Agreement, of all pending and, to the Company’s Knowledge, threatened legal, administrative, arbitral or other proceeding (including disciplinary proceedings), action, cease and desist letter, offer to license in lieu of further action, demand, claim, suit or governmental or regulatory investigation or inquiry of any nature (collectively, “Proceedings”) against or relating to the Company or any of its Subsidiaries or any of their properties, assets or businesses. As of the date hereof, there is no Proceeding pending or, to the Company’s Knowledge, threatened against or relating to the Company or any of its Subsidiaries or any of their respective properties, assets or businesses (including the Business) that would, individually or in the aggregate, be Material to a Reasonable Investor, or prohibit or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

(b)          Section 2.7(b) of the Company Disclosure Letter contains a true, complete and correct list of all material judgments, decrees, injunctions or orders of any Governmental Authority to which the Company or its Subsidiaries is or was subject or any of its properties is or was bound, in each case from January 1, 2014 through the date of this Agreement. As of the date hereof, there are no settlement agreements or similar written agreements with any Governmental Authority or outstanding judgments, decrees, injunctions or orders of any Governmental Authority to which the Company or any of its Subsidiaries is subject or any of their respective properties are bound that would, individually or in the aggregate, be reasonably expected to (x) be Material to a Reasonable Investor, or (y) prohibit or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder and thereunder on a timely basis. As of the date hereof, neither the Company nor any of its Subsidiaries is, or has been, subject to any felony, misdemeanor, decree, order, proceeding or examination that would cause the Company or any of its Subsidiaries, to be an ”ineligible issuer” as such term is defined in Rule 405 under the Securities Act of 1933, nor is there any Proceeding pending or, to the Knowledge of the Company, threatened by any Governmental Authority that would result in the Company or any of its Subsidiaries becoming an “ineligible issuer.”

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2.8           Compliance with Laws; Permits and Licenses.

(a)          The operations of the Company and its Subsidiaries are and since January 1, 2014 have been conducted in compliance in all material respects with all Applicable Laws. Neither the Company nor any of its Subsidiaries is in material default under any Applicable Law or, to the Knowledge of the Company, there is no investigation by any Governmental Authority with respect to any material violation of any Applicable Law. The Company and its Subsidiaries hold, and at all times as required by Applicable Law have held, all material permits, certificates, licenses, Governmental Approvals and other authorizations of any Governmental Authority (“Permits”) that are necessary for the operation of their business as presently conducted or the ownership, operation or use by the Company and its Subsidiaries of their properties, assets and rights, except where the failure to hold any such Permit would not, individually or in the aggregate, be Material to a Reasonable Investor. All Permits held by the Company and its Subsidiaries are in full force and effect and are not subject to any suspension, cancellation, modification or revocation or any Proceedings related thereto, and, to the Knowledge of the Company, no such suspension, cancellation, modification or revocation or Proceeding is threatened. The Company and its Subsidiaries are in compliance in all material respects with all the Permits held by them. As of the date hereof, the Company has not received any written notification from any Governmental Authority asserting that the Company or its Subsidiaries is not in compliance with any Applicable Law that such Governmental Authority enforces or that such Governmental Authority intends to revoke or suspend any Permit, except where such noncompliance, revocation or suspension would not, individually or in the aggregate, be Material to a Reasonable Investor.

(b)          As of the date hereof, no Proceeding, examination, audit or review (other than routine examinations, audits and reviews in the ordinary course of business consistent with past practice) with respect to the Company or its Subsidiaries has been initiated or is ongoing, unresolved or, to the Knowledge of the Company, threatened by any applicable Governmental Authority. The Company has not received any notice or communication of any unresolved violation or exception from any applicable Governmental Authority with respect to any report or statement by any applicable Governmental Authority relating to any examination that would, individually or in the aggregate, be Material to a Reasonable Investor. Except to the extent restricted from doing so by Applicable Law, the Company has previously provided to or otherwise made available to Luxor true, complete and correct copies of all written correspondence relating to any investigation or examination provided to or by the Company by the SEC or any other Governmental Authority since January 1, 2014.

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(c)          No director or officer of the Company or any of its Subsidiaries, or to the Company’s Knowledge, no employee or agent of the Company or any of its Subsidiaries acting for or on behalf of the Company has, directly or indirectly (i) used any funds for contributions, gifts, gratuities, entertainment or other expenses related to political activity, in each case in violation of Applicable Law, (ii) made any payment in violation of Applicable Law or offered, promised or authorized the payment of anything of value, regardless of form, whether in money, property or services, to or for the benefit of any U.S. or non-U.S. government official or employee, any official or employee of a public international organization, or any political party or candidate for political office in each case in violation of Applicable Law and for the purpose of influencing any act or decision of such individual or of any Governmental Authority or public international organization, or securing any improper advantage, in order to obtain or retain business or direct business to any Person in violation of Applicable Law, (iii) made any other payment, regardless of form, whether in money, property or services which constitutes criminal bribery under Applicable Law, or (iv) violated any applicable export control, money laundering or anti-terrorism law or regulation, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other applicable anti-bribery law or regulation, of any applicable jurisdiction, or any Applicable Law of similar effect.

2.9           Absence of Certain Changes; No Undisclosed Liabilities.

(a)          Since December 31, 2014, through the date of this Agreement, except as set forth in the Company SEC filings and the draft 10-Q or otherwise contemplated by this Agreement, (i) there has been no change, event or development that, individually or in the aggregate, is or would be Material to a Reasonable Investor, and (ii) the Company and its Subsidiaries have operated in the ordinary course of business consistent with past practice in all material respects.

(b)          Except as contemplated by this Agreement and except as (i) specifically reserved for or otherwise reflected in the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, (ii) incurred after December 31, 2014 in the ordinary course of business consistent with past practice liabilities, and (iii)  individually or in the aggregate, is not and would not reasonably be Material to a Reasonable Investor, the Company and its Subsidiaries do not have any liabilities or obligations, whether accrued, absolute, contingent or otherwise, and whether or not such liabilities or obligations would be required by GAAP to be reflected or reserved on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP.

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2.10         Personnel and Employee Benefits Matters.

(a)          No liability under Title IV or Sections 302, 303 or 304 of ERISA or Sections 412, 430 or 431 of the Code has been incurred by the Company or any of its Subsidiaries that has not been satisfied in full, and no condition exists that could present a material risk that the Company or any of its Subsidiaries could reasonably be expected to incur any such liability. No Employee Benefit Plan is subject to Title IV of ERISA, and neither the Company, its Subsidiaries nor any of their respective ERISA Affiliates has, at any time during the last six years, contributed to or been obligated to contribute to any plan that is (i) subject to Title IV or (ii) a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA. No nonexempt “prohibited transactions” as such term is defined in Section 406 of ERISA or Section 4975 of the Code have occurred with respect to any Employee Benefit Plan, and neither the Company or any of its Subsidiaries has any material Tax liability under Section 4975 of the Code. All contributions required to be made to any Employee Benefit Plan by Applicable Law or by any Employee Benefit Plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Employee Benefit Plan, in each case for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the in the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

(b)          Except as would not, individually or in the aggregate, be Material to a Reasonable Investor, (i) each Employee Benefit Plan has been operated and administered in all material respects in accordance with its terms and Applicable Law, including ERISA and the Code, and (ii) each Employee Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a determination letter from the Internal Revenue Service that it is so qualified and that any trust maintained thereunder is exempt from taxation under Section 501(a) of the Code, in each case which letter has not been revoked, and, to the Company’s Knowledge, there are no existing circumstances or events that have occurred which would reasonably be expect to adversely affect the qualified status of any such Employee Benefit Plan or related trust.

(c)          No Employee Benefit Plan provides, and neither the Company nor any of its Subsidiaries have committed to provide, benefits including death or medical benefits (whether or not insured), with respect to current or former employees of the Company or any of its Subsidiaries after retirement or other termination of service (other than coverage mandated by Section 4980B of the Code or Section 601 et seq. of ERISA or similar Applicable Law).

(d)          There are no pending or, to the Company’s Knowledge, threatened or anticipated claims by or on behalf of any Employee Benefit Plan, by any employee or beneficiary under any such Employee Benefit Plan or otherwise involving any Employee Benefit Plan (other than routine claims for benefits) that, individually or in the aggregate, have resulted in, or would reasonably be expected to result in, material liability for the Company and its Subsidiaries, taken as a whole, and, to the Company’s Knowledge, no set of circumstances exists which would reasonably be expected to give rise to such a claim.

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(e)          Except as would not, individually or in the aggregate, be Material to a Reasonable Investor, (i) each of the Company and its Subsidiaries is in compliance with all Applicable Laws respecting labor, employment, worker classification, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety and health requirements, wages and hours, withholding of taxes, employment discrimination, disability rights or benefits, equal opportunity, labor relations, employee leave issues and unemployment insurance and related matters, (ii) no claim with respect to payment of wages, salary, compensation or benefits pay is pending or, to Knowledge of the Company, threatened, by or before any Governmental Authority with respect to any current or former employees, officers, directors, managers or consultants of the Company or any of its Subsidiaries, (iii) the Company and each of its Subsidiaries has paid all of its current and former employees, directors, officers and consultants or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such Persons, and (iv) each individual who renders services to the Company or any of its Subsidiaries who is classified by any such entity as having the status of an independent contractor or other non-employee status or the status of an exempt employee or nonexempt employee for any purpose, including for purposes of participation in any Employee Benefit Plan, is properly so characterized under all Applicable Laws.

(f)          Except as set forth on Section 2.10(g) of the Company Disclosure Letter, the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of any of the transactions contemplated by this Agreement will not (alone or in combination with any other event), (i) entitle any current or former employee, director, officer or consultant of the Company or any of its Subsidiaries to severance pay or any other payment, (ii) result in any payment becoming due, accelerate the time of payment or vesting of benefits, or increase the amount of compensation due to any such employee, director, officer or consultant, (iii) result in any forgiveness of indebtedness, trigger any funding or payment obligation under any Employee Benefit Plan or impose any restrictions or limitations on the ability of the Company or any of its Subsidiaries right to administer, amend or terminate any Employee Benefit Plan or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation section 1.280G-1) that could reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in section 280G(b)(1) of the Code). No person is entitled to receive any additional payment (including any tax gross-up or other payment) from the Company or any of its Subsidiaries as a result of the imposition of the excise Taxes required by section 4999 of the Code or any Taxes required (alone or in combination with any other event) by section 409A of the Code as a result of the execution, delivery and performance of this Agreement and the consummation of any of the transactions contemplated by this Agreement.

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(g)          Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement.

2.11         Taxes.

(a)          Except as set forth on Section 2.11 of the Company Disclosure Letter, all material U.S. income and other material Tax Returns required to be filed by, on behalf of or with respect to the Company or any of its Subsidiaries have been duly and timely filed and all Tax Returns filed by, on behalf of, or with respect to the Company or any of its Subsidiaries are true, complete and correct in all material respects. All material Taxes (whether or not reflected on such Tax Returns) required to be paid by or with respect to, or that could give rise to a Lien on the assets of, the Company or any of its Subsidiaries have been duly and timely paid other than those Taxes not yet due. All material Taxes required to be withheld by the Company or any of its Subsidiaries have been duly and timely withheld, and such withheld Taxes have been either duly and timely paid to the proper Governmental Authority or properly set aside in accounts for such purpose. Except for Permitted Liens, there are no Liens for material Taxes on any of the assets of the Company or any of its Subsidiaries.

(b)          All accounting entries (including charges and accruals) for material Taxes with respect to the Company and its Subsidiaries reflected on the books of the Company and its Subsidiaries (excluding any provision for deferred income taxes reflecting either differences between the treatment of items for accounting and income tax purposes or carryforwards) are adequate to cover any material Tax liabilities accruing through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books.

(c)          No written agreement or other document waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any material Taxes with respect to the Company or any of its Subsidiaries, and no written power of attorney with respect to any such Taxes has been filed or entered into with any Governmental Authority. No material Taxes with respect to the Company or any of its Subsidiaries are currently under audit, examination or investigation by any Governmental Authority or the subject of any judicial or administrative proceeding. No Governmental Authority has asserted or threatened in writing to assert any deficiency, claim or issue with respect to any material Taxes or any adjustment to any material Taxes against the Company or any of its Subsidiaries with respect to any taxable period for which the period of assessment or collection remains open. No jurisdiction (whether within or without the United States) in which any of the Company or its Subsidiaries has not filed a particular type of Tax Return or paid a particular type of material Tax has asserted in writing that the Company or any of its Subsidiaries is required to file such Tax Return or pay such type of material Tax in such jurisdiction.

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(d)          Neither the Company nor any of its Subsidiaries (i) has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or any similar provision of state, local or foreign law), in either case that would be binding upon the Company or any of its Subsidiaries after the Closing Date, (ii) is or has been a member of any affiliated, consolidated, combined or unitary group for purposes of filing Tax Returns or paying Taxes, except for groups whose only members are two or more of the Company and its Subsidiaries or (iii) has any liability for the Taxes of any Person (other than the Company or another Subsidiary of the Company) (whether under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law, as a transferee or successor, pursuant to any Tax sharing or indemnity agreement or other contractual agreements (other than any customary tax sharing or allocation provisions in commercial contracts not primarily related to Taxes) (“Tax Agreements”), or otherwise).

(e)          Neither the Company nor any of its Subsidiaries has participated in a reportable transaction within the meaning of Treasury Regulations Section 1.6011-4(b).

(f)           The representations and warranties set forth in this Section 2.11 and in Section 2.10 are the exclusive representations and warranties of the Company with respect to Tax matters.

2.12         Properties and Assets.

(a)          The Company or one of its Subsidiaries has a valid and enforceable leasehold interest in each of the leased premises in which the Company or any of its Subsidiaries currently conducts its business, except as may be affected by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles and except for any failure to have leasehold that would not, individually or in the aggregate, be Material to a Reasonable Investor. Neither the Company nor any of its Subsidiaries owns any real property.

(b)          The Company and its Subsidiaries own and have good, valid and marketable title to or, in the case of leased property, good and valid leasehold interests in, or otherwise will have full or sufficient and legally enforceable rights to use, all of the tangible properties, assets and rights (tangible or intangible, and real, personal or mixed) used or held for use in connection with, necessary for the conduct of, or otherwise material to the operations of, the businesses of the Company and its Subsidiaries, in each case free and clear of any Lien other than Permitted Liens, except for any failure to have such titles, interests or rights that would not, individually or in the aggregate, be Material to a Reasonable Investor.

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2.13         Material Agreements. Section 2.13 of the Company Disclosure Letter lists each Material Contract to which the Company or any Subsidiary is a party or bound as of the date of this Agreement. Each such Material Contract is a legal, valid and binding obligation of the Company or its Subsidiary, as the case may be, and, to the Company’s Knowledge, each other party thereto, in each case in full force and effect and enforceable in accordance with its terms, except as may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or general equitable principles. Neither the Company nor any of its Subsidiaries has received any written or, to the Company’s Knowledge, oral notice of cancellation or termination under any option or right reserved to the other party to any Material Contract or any written or, to the Company’s Knowledge, oral notice of default under such Material Contract. As of the date hereof, no condition exists or event has occurred which (whether with or without notice or lapse of time or both) would constitute a breach or default by the Company or any of its Subsidiaries or, to the Company’s Knowledge, any other party thereto under, or result in a right in termination of, any such Material Contract, except as would not , individually or in the aggregate, be Material to a Reasonable Investor.

2.14         Intellectual Property and IT Systems.

(a)          The Owned Intellectual Property is subsisting, and, to the Company’s Knowledge, is valid and enforceable. Neither the Company nor any of its Subsidiaries has conducted its business in a manner that would reasonably be expected to result in (i) the cancellation or unenforceability of any issued, registered or applied for Owned Intellectual Property except as would not, individually or in the aggregate, be Material to a Reasonable Investor, or (ii) the unauthorized disclosure of any material confidential Intellectual Property used in its business. After giving effect to the transactions contemplated by this Agreement, the Company and its Subsidiaries (x) are the owners of all of the Owned Intellectual Property free and clear of any Liens other than Permitted Liens and (y) own, license or otherwise have the right to use all the Intellectual Property necessary and sufficient to conduct their businesses as currently conducted.

(b)          Since January 1, 2014, (i) the conduct of the Company’s and its Subsidiaries businesses has not been and, as currently conducted, is not infringing, misappropriating, diluting or otherwise violating (“Infringing”) in any material respects the rights of any Person in respect of any Intellectual Property and (ii) to the Company’s Knowledge, none of the material Owned Intellectual Property has been or is being Infringed by any Person.

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(c)          The IT Systems (i) are in reasonably good repair and operating condition, subject only to ordinary wear and tear, and are adequate and suitable (including with respect to working condition and capacity) for the purposes for which they are being used or held for use, and (ii) to the Company’s Knowledge, do not contain any Malware that would reasonably be expected to interfere with the ability of the Company or any of its Subsidiaries to conduct their businesses. The Company and its Subsidiaries (x) have implemented and maintain commercially reasonable security, business continuity, and backup and disaster recovery plans and procedures with respect to the IT Systems, (y) act in material compliance therewith, and (z) have taken commercially reasonable steps to test such plans and procedures on a periodic basis, and such plans and procedures have been proven effective upon such testing in all material respects. The Company and its Subsidiaries have implemented or are in the process of implementing in a timely manner all security patches or security upgrades that are generally available for the IT Systems that process data or non-public information that is sensitive in nature about their investors.

2.15         Data Protection and Privacy.

(a)          Since January 1, 2014, the Company and its Subsidiaries and the Sponsored Funds have been and are in compliance in all material respects with any and all Applicable Laws, contractual requirements, terms of use and privacy policies pertaining to data protection or information privacy, security, collection, use, disclosure, disposal, maintenance and transmission.

(b)          The Company and its Subsidiaries uses commercially reasonable industry standards to protect the secrecy of data and non-public information that it (or any third Person on behalf of it) collects, stores, uses, maintains or transmits and to prevent unauthorized access to, and use or disclosure of, such data or non-public information by any other Person. Since January 1, 2014, neither the Company nor any of its Subsidiaries, nor to the Company’s Knowledge, any third Person working on behalf of any of them, has had an incident of unauthorized (i) access, (ii) disclosure, (iii) use, (iv) destruction or (v) loss of any data or non-public information that Company or its Subsidiaries (or a third Person on behalf of any of them) collects, stores, uses, maintains or transmits

2.16         Broker-Dealer Matters.

(a)          Registration. Section 2.16(a) of the Company Disclosure Letter lists each Subsidiary that is registered as a broker-dealer with the SEC (collectively, the “Broker-Dealer Subsidiaries”). Each Broker-Dealer Subsidiary is, and at all times since January 1, 2014, has been, (i) duly registered under Section 15 of the Exchange Act with the SEC, (ii) in compliance with Applicable Laws governing their activities and (iii) current in all filings required by the SEC or any other Governmental Authority to which they are subject, except, in each case, as would not, individually or in the aggregate, be Material to a Reasonable Investor. Except as set forth in Section 2.18(a) of the Company Disclosure Letter, since January 1, 2014, none of the Broker-Dealer Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. The Broker-Dealer Subsidiaries are, and at all times since January 1, 2014, have been, (x) members in good standing of Financial Industry Regulatory Authority (“FINRA”) and any other Self-Regulatory Organizations in which their membership is required in order to conduct their business as conducted and (y) in compliance with all applicable rules and regulations of FINRA and any such other Self-Regulatory Organizations, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. As of the date hereof, no Subsidiary of the Company other than the Broker-Dealer Subsidiaries is registered or required to be registered as a broker or dealer with the SEC or any other Governmental Authority. 

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(b)          Disqualification. None of the Broker-Dealer Subsidiaries nor, to the Company’s Knowledge, any “associated person” (within the meaning of the Exchange Act) thereof, is ineligible pursuant to Section 15(b) of the Exchange Act to act as a broker or dealer or as an associated person of a registered broker-dealer as a result of a “statutory disqualification,” as such term is defined in Section 3(a)(39) the Exchange Act. As of the date of this Agreement, there are no Proceedings pending or, to the Company’s Knowledge, threatened that would reasonably be expected to result in a Broker-Dealer Subsidiary having its authorization to conduct business as a broker-dealer denied, suspended, revoked or restricted. Except as set forth in Section 2.18(b) of the Company Disclosure Letter, as of the date of this Agreement, there are no Proceedings pending or, to the Company’s Knowledge, threatened that would reasonably be expected to result in any director, officer or employee of a Broker-Dealer Subsidiary having his or her registration or license to conduct investment-related activities denied, suspended, revoked or restricted. Since January 1, 2014, each of the directors, officers, employees, contractors and agents employed, supervised or controlled by any Broker-Dealer Subsidiary who is required to be licensed or registered as a principal, registered representative, salesperson, investment advisory representative or insurance agent with any Governmental Authority in connection with his or her activities for or with a Subject Company has been duly licensed or registered, except as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(c)          Form BD. The Company has provided to each Investor, prior to the date of this Agreement, true, complete and correct copies of each of the Broker-Dealer Subsidiary’s Form BD as most recently filed with the SEC and all state registration forms, each as amended to date.  The information contained in each such form was true and complete at the time of filing and the Broker-Dealer Subsidiary has made all amendments to such form as it is required to make under any Applicable Law, except as would not, individually or in the aggregate, be Material to a Reasonable Investor. No Broker-Dealer Subsidiary’s Form BD contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 

(d)          Minimum Net Capital. Each of the Broker-Dealer Subsidiaries maintains its minimum net capital in compliance with the Applicable Laws of the SEC and any other applicable Governmental Authority and in an amount sufficient to ensure that it has not been required to file notice under Rule 17a-11 under the Exchange Act.

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(e)          Compliance Policies. The Broker-Dealer Subsidiaries have, and at all times since January 1, 2014 have had, in place, to the extent required by Applicable Law, processes to establish, maintain, review, test and modify written compliance and supervisory policies and procedures reasonably designed to achieve compliance with all Applicable Laws, including the rules and regulations of the SEC and FINRA and other Governmental Authority.

2.17         Municipal Advisor Matters.

(a)          Section 2.17(a) of the Company Disclosure Letter lists each Subsidiary that is registered as a municipal advisor with the SEC (collectively, the “Municipal Advisor Subsidiaries”). The Municipal Advisor Subsidiaries are, and at all times since January 1, 2014, have been, (i) duly registered under Section 15B of the Exchange Act with the SEC, (ii) in compliance in all material respects with Applicable Laws governing their activities and (iii) current in all material filings required by the SEC or any other Governmental Authority. Since January 1, 2014, none of the Municipal Advisor Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. The Municipal Advisor Subsidiaries are, and at all times since January 1, 2014, have been, (x) members in good standing of MSRB and such other organizations in which their membership is required in order to conduct their business as conducted and (y) in compliance in all material respects with all applicable rules and regulations of MSRB and such other organizations. As of the date hereof, none of the Subsidiaries other than the Municipal Advisor Subsidiaries or, in connection with their service to such entities, any of their respective directors, officers, or employees, is registered or required to be registered as a municipal advisor or a municipal advisor representative or in any similar capacity with the SEC, MSRB, the securities commission of any state or foreign country or any other self-regulatory body. 

(b)          None of the Municipal Advisor Subsidiaries nor, to the Knowledge of the Company, any “associated person” (within the meaning of the Exchange Act) thereof, is ineligible pursuant to Applicable Law to act as a municipal advisor or as an associated person of a registered municipal or subject to any matter that would be a basis for censure, limitations on the activities, functions or operations of, or suspension or revocation of the registration of any of the Municipal Advisor Subsidiaries as a municipal advisor under Section 15B of the Exchange Act.  As of the date of this Agreement, there are no Proceedings pending or, to the Knowledge of the Company, threatened that would reasonably be expected to result in the Municipal Advisor Subsidiaries or any “associated person” (within the meaning of the Exchange Act) thereof becoming ineligible to act in such capacity.  Since January 1, 2014, each of the directors, officers, employees, contractors and agents employed, supervised or controlled by any Municipal Advisor Subsidiaries who is required to be registered as a municipal advisor or municipal advisor representative in connection with his, her or its activities for or with a Subsidiary with any Governmental Authority has been duly licensed or registered.

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(c)          The Company has provided or made available to each Investor, prior to the date of this Agreement, true, complete and correct copies of each of the Municipal Advisor Subsidiaries’ Form MA as most recently filed with the SEC and all state registration forms, each as amended to date.  The information contained in each such form was true and complete at the time of filing and the Municipal Advisor Subsidiary has made all amendments to such form as it is required to make under any Applicable Law. The Form MA is in compliance in all material respects with the applicable requirements of the Exchange Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 

(d)          The Municipal Advisor Subsidiaries have, and at all times since January 1, 2014 have had, in place, to the extent required by Applicable Law, processes to establish, maintain, review, test and modify written compliance and supervisory policies and procedures reasonably designed to achieve compliance with all Applicable Laws, including without limitation the rules and regulations of the SEC and MSRB and any other domestic or foreign securities regulator or self-regulatory organization of which such Municipal Advisor Subsidiaries are members. All such policies and procedures comply in all material respects with Applicable Law, and, since January 1, 2014, there have been no material violations or, to the Knowledge of the Company, allegations of material violations of such policies, by any employee or client of the Company, the Municipal Advisor Subsidiaries or any of their Affiliates or any Governmental Authority.

2.18         Investment Adviser Compliance Matters.

(a)          Section 2.18(a) of the Company Disclosure Letter lists each Subsidiary that is an investment adviser (collectively, the “IA Subsidiaries”), including a notation of whether the IA Subsidiary is registered with the SEC or a state or is an exempt reporting adviser. Each IA Subsidiary (i) is, and at all times required by Applicable Law since January 1, 2014 has been, registered as an investment adviser under the Advisers Act and (ii) is registered and licensed as an investment adviser or in any similar capacity under all other Applicable Laws or exempt therefrom, except, in the case of clause (ii), as would not, individually or in the aggregate, be Material to a Reasonable Investor. Since January 1, 2014, none of the IA Subsidiaries has received notice of any material violation of any Applicable Laws governing their activities. No Subsidiary of the Company other than the IA Subsidiaries is registered or required to be registered as an investment adviser or in any similar capacity with the SEC or the securities commission of any state.

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(b)          Neither the Company, any of its Subsidiaries, any Affiliated Party of the Company or its Subsidiaries, nor any of their directors, officers or employees is subject to any disqualification, ineligibility, denial, suspension or revocation (or subject to any criminal conviction, injunction, court order, administrative order or other disciplinary event that would be a basis for any such disqualification, ineligibility, denial, suspension or revocation) that would disqualify, make ineligible or restrict the Company, its Subsidiaries or any Affiliated Party from acting (or from receiving or making a payment to the Company, its Subsidiaries or any Affiliated Party for acting) as (i) an investment adviser, (ii) a solicitor for an investment adviser, (iii) an investment adviser, depositor or principal underwriter to an investment company registered under the Investment Company Act, or (iv) an investment manager, solicitor, promoter or in any other capacity (including beneficially owning 20% of the voting securities of an issuer relying on Rule 506 of Regulation D under the Securities Act) for an investment fund or other issuer offering its securities in reliance on Rule 506 of Regulation D under the Securities Act. There is no investigation pending or, to the Knowledge of the Company, threatened, whether formal or informal, that is likely to result in, such disqualification, ineligibility or restriction (or the basis for such disqualification, ineligibility or restriction).

(c)          As of the date hereof, neither the Company nor any of its Subsidiaries or, in connection with their service to any of the foregoing entities, any of their respective directors, officers, employees, contractors, or agents, is required to be registered, licensed or qualified as a (i) a bank, trust company, commodity trading advisor, commodity broker-dealer, futures commission merchant, transfer agent, introducing broker, municipal securities dealer, or insurance company or in any similar capacity with the SEC, the CFTC, the National Futures Association (“NFA”), FINRA, the securities commission or financial regulatory agency of any state or other jurisdiction or any self-regulatory body, except as would not, individually or in the aggregate, be Material to a Reasonable Investor, or (ii) subject to any liability or disability by reason of any failure to be so registered, licensed or qualified. Neither the Company nor any Subsidiary has received notice of, and, to the Knowledge of the Company, there is no basis to believe that there is any event that is reasonably likely to result in, any pending judicial, arbitral or administrative action, suit, proceeding or investigation concerning any failure to obtain any bank, trust company, commodity trading advisor, commodity broker-dealer, futures commission merchant, transfer agent, introducing broker, municipal advisor, municipal securities dealer, insurance company registration, license or qualification, except for as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(d)          The Company and each of its Subsidiaries has filed all material regulatory reports, schedules, forms, registrations, financial statements, sales literature, statements, notices, filings and other documents (“Governmental Reports”), together with any amendments, since January 1, 2014 that were required to be filed with any Governmental Authority, including (i) with respect to each IA Subsidiary, each Form ADV and Form PF that was required to be filed in compliance with Applicable Law and (ii) with respect to any investment adviser representative of an IA Subsidiary, each Form U4 that was required to be filed in compliance with Applicable Law. All Government Reports complied in all material respects with Applicable Law as in effect at the time they were filed and did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

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(e)          Each IA Subsidiary has in effect, and at all times, to the extent required by Applicable Law, has had in effect, all policies and procedures required by Rule 206(4)-7 under the Advisers Act (“Adviser Compliance Policies”), including the designation of a chief compliance officer to review the Adviser Compliance Policies. Such Adviser Compliance Policies comply in all material respects with Applicable Law and reflect, if applicable, modifications to such policies as requested in writing by any Governmental Authority. The IA Subsidiaries are in compliance in all material respects with the Adviser Compliance Policies and, since January 1, 2014, there have been no material violations of the Adviser Compliance Policies other than those disclosed in the annual reports pursuant to Rule 206(4)-7 under the Advisers Act and Rule 38a-1 under the Investment Company Act that have been provided to each Investor.

(f)          Since January 1, 2014, the Company, its Subsidiaries and the Funds, as applicable, have complied with all terms and conditions of each no-action letter and exemptive order issued by the SEC to them that remains applicable to its business as conducted on the date of this Agreement necessary to rely on the relief granted thereby.

(g)          Since January 1, 2014 each of the Company and its Subsidiaries conducted its activities with respect to Clients subject to ERISA and/or Section 4975 of the Code in accordance with in all material respects such law, rules and regulations, as the same may be in effect from time to time. To the extent that any Client to which Company, any of its Subsidiaries provides investment advice or investment management services (including sub-advisory services) is (i) an employee benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I of ERISA; (ii) a plan subject to Section 4975 of the Code; (iii) a benefit plan investor, as defined in Section 3(42) of ERISA and the regulations promulgated thereunder, or any entity whose assets include the assets of any such plan described in clause (i) or (ii) above or any such benefit plan investor within the meaning of ERISA and applicable regulations; or (iv) a Person acting on behalf of any such plan described in clause (i) or (ii) above, or a benefit plan investor or entity, then (A) the Company or its applicable Subsidiary has provided such advice or management or advisory services in compliance in all material respects with the applicable requirements of ERISA and any prohibited transaction exemption pursuant to which such service or advice is provided, and (B) neither the Company, any of its Subsidiaries nor any other Person has engaged in a non-exempt “Prohibited Transaction” within the meaning of Section 406 of ERISA or Section 4975(c) of the Code that has or could reasonably be expected to result in material liability to the Company and its Subsidiaries, taken as a whole. With respect to any Client whose assets are subject to the provisions of Part 4 of Title I of ERISA, the Company is a qualified professional asset manager (as such term is used in Prohibited Transaction Class Exemption 84-14, as amended).

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2.19         Funds.

(a)          Listing of Funds.

(i)          Neither the Company nor any of its Subsidiaries acts as sponsor, investment adviser, investment manager, depositor, principal underwriter, distributor or in any other capacity with respect to any entity (other than the Funds) that (i) is registered, or is required to be registered, as an investment company, or that has elected to be regulated as a BDC, under the Investment Company Act or in any other jurisdiction or (ii) has made, or intends to make, a public offering in the United States or in any other jurisdiction.

(ii)         Neither the Company nor any of its Subsidiaries acts as commodity pool operator, commodity trading advisor, investment adviser, investment sub-adviser, general partner, managing member, manager or sponsor to any commodity pool (as defined under the Commodity Exchange Act) or to any pooled investment vehicle (other than the Funds).

(b)          Funds: Compliance with Laws.

(i)          Each Sponsored Fund and, to the Knowledge of the Company, each Sub-Advised Fund is in compliance in all material respects with the applicable provisions of the Advisers Act, Investment Company Act, the Commodity Exchange Act, the Securities Act, the Exchange Act and all Applicable Law. Each Sponsored Registered Fund and, to the Knowledge of the Company, each Sub-Advised Registered Fund is, and at all times required under Applicable Law has been, duly registered with the SEC as an investment company under the Investment Company Act. Each Sponsored BDC and, to the Knowledge of the Company, each Sub-Advised BDC has at all times required under Applicable Law elected to be regulated, and been regulated, as a business development company pursuant to section 54 of the Investment Company Act.

(ii)         No Sponsored Fund and, to the Knowledge of the Company, no Sub-Advised Fund, nor any director, executive officer or any other officer thereof, is ineligible pursuant to Rule 506(d) of Regulation D under the Securities Act with respect an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act, nor is there any Proceeding pending or, to the Knowledge of the Company, threatened by any Governmental Authority that would result in the ineligibility of any Sponsored Fund, any Sub-Advised Fund or any director, executive officer or any other officer thereof with respect an offering of securities in reliance on Rule 506 of Regulation D under the Securities Act.

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(iii)        As of the date hereof, no Proceeding (other than routine examinations, audits or reviews in the ordinary course of business consistent with past practice) with respect to any Sponsored Fund or, to the Knowledge of the Company, any Sub-Advised Fund has been initiated or is ongoing, unresolved or, to the Knowledge of the Company, threatened by any Governmental Authority. There is no injunction, order, judgment or decree imposed upon any Sponsored Fund or, to the Knowledge of the Company, any Sub-Advised Fund that would materially impair the ability of the Fund to continue to operate its business as currently conducted, except as would not, individually or in the aggregate, be Material to a Reasonable Investor.

(iv)       Each Sponsored Regulated Fund has adopted and maintained, at all times, to the extent required by Applicable Law, all written compliance policies and procedures required by Applicable Law ( “Sponsored Regulated Fund Compliance Policies”). All such Sponsored Regulated Fund Compliance Policies have been reviewed annually as required by Rule 38a-1 under the Investment Company Act. The Sponsored Regulated Fund Compliance Policies are in compliance with Applicable Law in all material respects. Each Sponsored Regulated Fund is, and at all times required by Applicable Law since January 1, 2014 has been, in compliance in all material respects with such policies and procedures.

(v)         The board of directors or trustees or general partner, as applicable, of each Sponsored Regulated Fund and, to the Knowledge of the Company, each Sub-Advised Registered Fund has been established and operated in conformity with the requirements and restrictions of Sections 10, 16 and 55, as applicable, of the Investment Company Act and satisfies the fund governance standards as defined in Rule 0-1 under the Investment Company Act. Each of the Sponsored Regulated Funds and, to the Knowledge of the Company, each of the Sub-Advised Registered Funds will be governed by a board of trustees, general partner or board of directors (if any) at least 75% of whom are not “interested persons” (as defined in the Investment Company Act) of the investment adviser to such Regulated Fund. No director or trustee, as applicable, of the Sponsored Regulated Funds, who has been identified as an “independent” or “non-interested” trustee in such Sponsored Registered Fund’s most recent registration statement on Form N-1A or such Sponsored BDC’s most recent registration statement on Form N-2 is an “interested person” of such Sponsored Regulated Fund, as that term is defined in Section 2(a)(19) of the Investment Company Act, or has had at any time since January 1, 2014, a material business or professional relationship with such Sponsored Registered Fund’s or Sponsored BDC’s investment adviser or principal underwriter or with the principal executive officer or any controlling person of such investment adviser or principal underwriter other than as set forth in such Sponsored Registered Fund’s registration statement on Form N1-A or such Sponsored BDC’s registration on Form N-2.

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(vi)         No (A) director or trustee of a Sponsored Regulated Fund who is an “interested person” (as such term is defined in section 2(a)(9) of the Investment Company Act) (an “interested director or trustee”) or (B) to the Knowledge of the Company, director or trustee who is not an interested director or trustee (a “non-interested director or trustee”) of any Sponsored Regulated Fund is ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve as such. There is no Proceeding pending or, to the Knowledge of the Company, threatened which would reasonably be expected to result in the ineligibility of any such Person to serve in any such capacities. No (x) interested director or trustee; or, (z) to the Knowledge of the Company, non-interested director or trustee of any Sponsored Regulated Fund is, or at any time during the past three (3) years has been, (1) subject to any cease and desist, censure or other disciplinary or similar order issued by, (2) a party to any written agreement, consent agreement, memorandum of understanding or disciplinary agreement with, (3) a party to any commitment letter or similar undertaking to, (4) subject to any order or directive by or (5) a recipient of any supervisory letter from, any Governmental Authority, regardless of whether the Company any of its Subsidiaries expects or intends to provide investment advisory services to such Governmental Authority.

2.20         Insurance. Each of the Company and its Subsidiaries maintains such worker’s compensation, comprehensive property and casualty, liability, errors and omissions, directors’ and officers’, fidelity and other insurance as it may be required to maintain under all Applicable Laws. Each of the Company and its Subsidiaries has complied in all material respects with the terms and provisions of such policies and such insurance policies are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis). As of the date hereof, there is no material claim by the Company or any of its Subsidiaries pending under any such policy as to which coverage has been denied or disputed by the underwriters of such policy or in respect of which such underwriters have reserved their rights. Since January 1, 2014, the Company and its Subsidiaries have properly reported all material claims, acts, omissions, events, circumstances, occurrences and losses relating to its business, or to the properties, rights or assets of the Company and its subsidiaries, to the extent required under each such policy, except as would not reasonably be, individually or in the aggregate, Material to a Reasonable Investor

2.21         Affiliate Arrangements. Except as set forth on Section 2.22 of the Company Disclosure Letter, there are no Contracts between the Company and any of its Subsidiaries, on the one hand, and any of the Company’s Affiliates (other than its Subsidiaries), any stockholder or equity holder of the Company or any of its Affiliates (other than the Company or its Subsidiaries in their capacity as stockholders or equity holders of the Company’s Subsidiaries), or any director, officer or employee of the Company or any of the Company’s Affiliates, on the other hand (any such Contract, an “Affiliate Agreement”). Except as set forth in Section 2.22 of the Company Disclosure Letter, none of the Company’s Affiliates (other than its Subsidiaries), any stockholder or equity holder of the Company or any of its Affiliates (other than the Company or its Subsidiaries in their capacity as stockholders or equity holders of the Company’s Subsidiaries), or any director, officer or employee of the Company or any of the Company’s Affiliates owns any material asset or right (whether real or personal, tangible or intangible) used in the businesses of the Company and its Subsidiaries.

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2.22         Information Supplied. None of the information supplied or to be supplied by or on behalf of the Company expressly for inclusion or incorporation by reference in the Information Statement will, as of the date it is mailed to the stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

2.23         Brokers. No broker, investment banker, financial advisor or other Person, other than Centerview Partners LLC, the fees and expenses of which will be paid by the Company, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.

2.24         Compliance with Environmental Law. The Company and its Subsidiaries have complied in the past three years and are in compliance with all applicable Environmental Laws pertaining to any of their properties, assets or rights and the use and ownership thereof, except as would not, individually or in the aggregate be Material to a Reasonable Investor. No violation by the Company is being or has been alleged in writing or, to the Knowledge of the Company, orally of any applicable Environmental Law relating to any of its properties, assets or rights or the use or ownership thereof. There are no Proceedings pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiary under any Environmental Law.

2.25         No Other Representations and Warranties. Except for the representations and warranties contained in this Article II, the Company makes no express or implied representations or warranties, and the Company hereby disclaims any such representations or warranties with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR

Each Investor represents and warrants to the Company as to itself as follows:

3.1           Organization. Each Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation.

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3.2           Authority. Each Investor has the requisite corporate power and authority to execute and deliver this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Investor of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and the consummation by each Investor of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or other organizational action, and no other corporate or other organizational action on the part of each Investor is necessary to authorize the execution and delivery by Investor of this Agreement and the Registration Rights Agreement, the performance of its obligations hereunder and thereunder and the consummation by Investor of the transactions contemplated hereby and thereby. This Agreement has been, and at the Closing, of the Registration Rights Agreement will be, duly and validly executed and delivered by each Investor and, assuming the due authorization, execution and delivery by the other parties thereto, constitute a legal and binding obligation of each Investor, enforceable against each Investor in accordance with their terms, except as (a) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

3.3           Non-Contravention. The execution and delivery by each Investor of this Agreement and the Registration Rights Agreement do not, and the consummation by Investor of the transactions contemplated hereby and thereby and the performance by each Investor of its obligations hereunder and thereunder will not (with or without the giving of notice, the termination of any grace period or both): (a)  violate, conflict with, or result in a breach or default under any provision of its Organizational Documents or (b) assuming that all consents, authorizations, orders or approvals of, filings or registrations with, and notices to, each Governmental Authority referred to in Section 3.4(a) have been obtained or made, (i) violate any Applicable Law or (ii) violate, result in a violation or breach by each Investor of, or the termination or the acceleration of, or conflict with or constitute a default under, any Contract to which each Investor is a party or by which any of its property is bound, except, in the case of clauses (i) and (ii), for any such violation, breach, termination, acceleration, conflict or default as would not, individually or in the aggregate, reasonably be expected to prohibit or materially impair the ability of each Investor to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

3.4           Consents, etc. Except as set forth in the Investor Disclosure Letter, no Governmental Approval is required for the execution and delivery of this Agreement by each Investor, the performance of its obligations hereunder and its consummation of the transactions contemplated hereby, except in any such case for (x) any such Governmental Approval which is required solely by reason of the specific regulatory status of the Company or its Affiliates and (y) any such Governmental Approval the failure of which to be obtained or made would not reasonably be expected to prohibit or materially impair the ability of each Investor to consummate the transactions contemplated by this Agreement or any Ancillary Agreement or perform its obligations hereunder or thereunder on a timely basis.

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3.5           Available Funds. Each Investor will have available all funds necessary to satisfy all of its obligations hereunder and in connection with the transactions contemplated hereby, and its ability to consummate such transactions is not dependent or conditional upon the receipt of financing (whether debt or equity) from any Third Party.

3.6           Investment Intent. Each Investor is acquiring the Purchased Shares for its own account, for investment purposes only and not with a view to, or for resale in connection with, the distribution thereof, except pursuant to registration under the Securities Act or pursuant to an exemption from such registration available under the Securities Act. Each Investor understands that the Purchased Shares may not be sold, transferred or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act.

3.7            No Other Representations and Warranties. Except for the representations and warranties contained in this Article III, each Investor makes no express or implied representations or warranties, and each Investor hereby disclaims any such representations or warranties with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

ARTICLE IV
COVENANTS

4.1           Conduct of Business. During the period from the date hereof and continuing through the Closing, except to the extent required by Applicable Law, as may be consented in writing to by each Investor or as expressly required by this Agreement, the Company will, and will cause each of its Subsidiaries to, use its reasonable best efforts to (i) operate in the ordinary course consistent with past practice; (ii) keep available the present services of the Company’s and its Subsidiaries’ employees and other service providers; and (iii) preserve intact the Company’s and its Subsidiaries’ rights, franchises, goodwill and relations with Clients and others with whom the Company and its Subsidiaries conduct business. Without limiting the generality of the foregoing, except as (w) required by Applicable Law, (x) expressly permitted or required by this Agreement or any Ancillary Agreement, (y) set forth on Section 4.1 of the Company Disclosure Letter or (z) with each Investor’s prior written consent (not to be unreasonably withheld, conditioned or delayed), the Company will not:

(a)           amend its Organizational Documents;

(b)           declare or pay any dividend or distribution on the Common Stock;

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(c)            take any action that would require any anti-dilution adjustment to be made under the Certificates of Designation as if issued on the date of this Agreement;

(d)            take any other action that would require the affirmative vote of at least a majority of the shares of Series D-2 Preferred Stock under the Certificate of Designation as if such shares had been issued on the date of this Agreement; or

(e)            merge with or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other Person;

(f)            subject itself to any bankruptcy, receivership, insolvency or similar proceeding; and

(g)           authorize, resolve, commit or agree, whether in writing or otherwise, to take any action prohibited by clauses (a) through (f) above.

4.2           Access; Confidentiality.

(a)          The Company will provide each Investor and its respective employees, accountants, counsel and other authorized representatives, during the period from the date hereof until the Closing, with reasonable access to the premises, employees, books and records and properties of the Company and its Subsidiaries upon reasonable advance notice during normal business hours, provided that such access does not interfere with the normal operations of the Company and its Subsidiaries. The Company will, and will cause its Subsidiaries to, furnish each Investor with such financial, operational, regulatory and compliance data and other information with respect to its respective businesses, assets, rights, properties liabilities and obligations as Investor may from time to time reasonably request. Any information concerning the Company and its Subsidiaries obtained by each Investor or its respective representatives pursuant to this Section 4.2 shall be subject to the terms of the Confidentiality Agreement, and such information shall be held by each Investor and its respective representatives in accordance with the terms of the Confidentiality Agreement.

(b)          Notwithstanding the obligations contained in this Section 4.2, the Company and its Subsidiaries will not be required to provide access to or to disclose information where such access or disclosure would result in the loss of any attorney-client privileges or protections or contravene any Applicable Law or binding agreement in effect; provided, that the parties hereto shall cooperate in seeking and use reasonable best efforts to find a way to allow disclosure of such information in a manner that does not result in any of the foregoing consequences. Notwithstanding anything to the contrary contained in this Agreement, neither Investor’s review of any matters related to the transactions contemplated by this Agreement, including the review of the business or financial and other conditions of the Company and its Subsidiaries conducted by the officers, employees, accountants, counsel and other authorized representatives or agents of each Investor or its respective Affiliates, nor to the knowledge of each Investor with respect to any such matters, whether or not resulting from any such review, whether prior to or after the date hereof, shall affect (a) the representations and warranties made by the Company in or pursuant to this Agreement or (b) the remedies of Investor for breaches of such representations and warranties.

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4.3           Reasonable Best Efforts; Regulatory Approvals .

(a)          Each Investor and the Company will use their respective reasonable best efforts, as promptly as possible, to take or cause to be taken all action and do or cause to be done all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including the satisfaction on a timely basis of the conditions to the Closing within their respective control.

(b)          Each Investor and the Company will (i) as soon as practicable after the date hereof, (A) file (on a confidential basis if reasonably requested by a party and permitted under Applicable Law) such applications, notices, registrations and requests as may be required or advisable to be filed by it with any Governmental Authority as set forth in Section 4.3 of the Company Disclosure Letter in order to consummate the transactions contemplated hereby, (B) use its reasonable best efforts to obtain all consents, authorizations, orders and approvals of all such Governmental Authorities referred to in the preceding clause (A) and (C) use its reasonable best efforts to satisfy all conditions, undertakings and requirements as may be necessary or appropriate to obtain all such consents, authorizations, orders and approvals or as may be set forth therein, (ii) subject to Applicable Law restricting the exchange of such information, furnish the other parties hereto with copies of all documents and correspondence (x) prepared by or on behalf of such party for submission to any Governmental Authority and (y) received by or on behalf of such party from any Governmental Authority, in each case, in connection with the transactions contemplated hereby and (iii) subject to Applicable Law, use its reasonable best efforts to consult with and keep the other parties hereto informed as to the status of such matters.

(c)          To the extent that any Third Party Consent is required under any Contract in connection with the consummation of the transactions contemplated by this Agreement, the Company and each Investor shall use their reasonable best efforts to obtain such Third Party Consent on or prior to the Closing Date.

4.4           Public Announcements; Confidentiality.

(a)          Prior to the Closing, neither the Company nor its Subsidiaries shall, without the prior written approval of each Investor, make any internal or external communication, statement or announcement (whether to their employees, clients, customers, business partners, equity holders or otherwise) regarding this Agreement or the transactions contemplated hereby, or otherwise disclose any of the contents of this Agreement, unless otherwise required by Applicable Law, in which case the Person making such disclosure shall give prior written notice to each Investor and consider in good faith each Investor’s suggestions with respect thereto.

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(b)          The parties to this Agreement agree to be bound by and comply with the provisions set forth in the Confidentiality Agreement, the provisions of which are hereby incorporated herein by reference.

4.5           Supplemental Disclosure. Each Investor and the Company will, prior to the Closing, give prompt notice to the other party, to the extent it has Knowledge (i) of the occurrence, or failure to occur, of any event or existence of any condition that has caused or could reasonably be expected to cause any of its representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect at any time after the date of this Agreement such that the conditions to closing set forth in Sections 5.2 or 5.3, as applicable, would reasonably be expected not to be met; (ii) of the occurrence of any matter or event that would reasonably be, in the case of the Company and its Subsidiaries, Material to a Reasonable Investor, or, in the case of each Investor, that would reasonably be expected to prohibit or materially impair the ability of each Investor to consummate the transaction contemplated by this Agreement or perform its obligations hereunder; (iii) of any failure on its part to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; (iv) of any notice or other written communication from any Person alleging that the consent of such Person is or may be required in connection with the consummation of the transactions contemplated by this Agreement and (v) of any lawsuit, action or proceeding pending or, to the knowledge of each Investor or to the Knowledge of the Company (as applicable), threatened against the party or the parties relating to the transactions contemplated herein; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; provided, further, that any failure to comply with this Section 4.5 shall not constitute a breach or noncompliance of a covenant by such party for purposes of determining the satisfaction of the conditions set forth in Section 5.2(b) or Section 5.3(b). In addition, each Investor shall keep the special committee of the board of directors of the Company reasonably informed of any material developments relating to the closing of the transactions contemplated by the ARC Transaction Agreement and the MIPA.

4.6           Information Statement.

(a)          As soon as reasonably practicable after the date of this Agreement, the Company will file with the SEC an information statement in preliminary form of the type contemplated by Rule 14c-2 promulgated under the Exchange Act, prepared by the Company with the assistance and subject to the approval (not to be unreasonably withheld, delayed or conditioned) of each Investor, related to this Agreement and the stockholder approval of the transactions contemplated hereby (as amended or supplemented from time to time, the “Information Statement”). In connection with the Information Statement, the Company shall take all actions necessary to comply, and will comply in all material respects, with the Exchange Act, including Regulation 14C and Schedule 14C promulgated thereunder, as applicable.

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(b)          The Company shall use its reasonable best efforts, and each Investor shall reasonably cooperate with the Company, to have the Information Statement cleared by the SEC as promptly as practicable after such filing (including by responding to comments of the SEC). Each Investor and the Company will furnish all information as may be reasonably requested by the other in connection with the preparation, filing, clearance and distribution of the Information Statement. As promptly as practicable after the Information Statement shall have been cleared by the SEC (or after ten (10) calendar days have passed since the filing of the preliminary Information Statement with the SEC without notice from the SEC of its intent to review the Information Statement or such other date as required by applicable Law), the Company shall cause the Information Statement to be mailed to its stockholders and to be filed in definitive form with the SEC as required. No filing of, or amendment or supplement to, the Information Statement will be made by the Company without the approval (not to be unreasonably withheld, delayed or conditioned) of each Investor. If, at any time prior to the Closing, any information relating to the Company, each Investor or any of its respective Affiliates, directors or officers is discovered by the Company or each Investor which information is required to be set forth in an amendment or supplement to the Information Statement so that the Information Statement would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such information will promptly notify the other parties hereto and an appropriate amendment or supplement describing such information will be promptly filed with the SEC and, to the extent required by Applicable Law, disseminated to the stockholders of the Company. The Company will notify each Investor promptly of the time when the Information Statement shall have been cleared by the SEC or of the receipt of any comments or other communications, whether written or oral, from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the Information Statement, or for additional information, and will provide each Investor and their respective counsel with a reasonable opportunity to participate in, provide comments on and approve (such approval not to be unreasonably withheld, delayed or conditioned) the Company’s response to such comments and other communications, and to participate in any discussions or meetings with the SEC relating to the Information Statement or any other matters that are the subject of this Agreement. The parties will supply each other with copies of all correspondence between any of it or its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Information Statement or this Agreement or the transactions contemplated hereby.

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4.7           Listing Undertaking. The Company undertakes to take all such actions as are necessary, to cause the shares of Common Stock to be issued upon the conversion of the Purchased Shares to be approved for listing on the NYSE, subject to official notice of issuance, promptly after Closing.

4.8           Certificate of Designation. Prior to the Closing, the Company shall file the Certificate of Designation with the Secretary of State of the State of Delaware, in accordance with Applicable Law and the Organizational Documents of the Company.

4.9           [Intentionally omitted].

4.10         NYSE Rules; Reservation of Shares of Common Stock. The Company shall at all times maintain a reserve for issuance from its duly authorized shares of Common Stock in an amount equal to the number of shares of Common Stock issuable upon conversion of all shares of Preferred Stock (including Series D-2 Preferred Stock) then outstanding.

4.11         Investor Undertaking.Each Investor hereby undertakes to vote all of its Series D-2 Preferred Stock to approve any amendments to the certificates of designation governing the rights of the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock as mutually agreed among the holders of such Preferred Stock and the Company.

4.12         Expenses; Transfer Taxes.

(a)          Except as expressly set forth herein, each party shall bear the fees, costs and expenses of it and its Subsidiaries incurred in connection with the negotiation and preparation of this Agreement and the Ancillary Agreements, and the consummation of the transactions contemplated hereby (including legal, accounting and financial advisors).

(b)          All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any real property transfer tax and any similar Tax, and including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be borne equally by the parties, and the Company shall file all necessary Tax returns and other documentation with respect to all such Taxes and fees, and, if required by Applicable Law, each Investor shall, and shall cause its Affiliates to, join in the execution of any such Tax returns and other documentation.

4.13         Further Assurances. Each party shall cooperate with the others, and execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and transfer, and take all such other actions as such party may reasonably be requested to take by the other parties hereto from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the transactions contemplated hereby.

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ARTICLE V
CONDITIONS TO THE CLOSING

5.1           Mutual Conditions. The respective obligations of each Investor and the Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the parties hereto) as of the Closing of the following condition:

(a)          No Injunction. There shall be no (i) injunction, restraining order or decree of any nature of any Governmental Authority of competent jurisdiction in effect that restrains or prohibits the consummation of the transactions contemplated hereby or (ii) pending action, suit or proceeding brought by any Governmental Authority which seeks to restrain the consummation of the transactions contemplated hereby.

5.2           Additional Conditions to the Obligations of each Investor. The obligations of each Investor to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by each Investor) as of the Closing of each of the following additional conditions:

(a)          Representations and Warranties of the Company. The representations and warranties of the Company set forth in Sections 2.1, 2.2, 2.5 and 2.23 (such representations and warranties, the “Fundamental Representations”) shall be true and correct in all respects (with only such exceptions as are de minimus) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. The representation and warranty set forth in Section 2.7 shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date. Other than the Fundamental Representations and Section 2.7, the representations and warranties of the Company contained in Article II of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality, “Material to a Reasonable Investor” or similar qualification, except for references to “Material Contracts”) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except for such failures to be true and correct that individually or in the aggregate would not have a Material Adverse Effect.

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(b)          Performance of Company Covenants. The Company shall have performed and complied with in all material respects all covenants and conditions contained in this Agreement to be performed or complied with by it prior to or at the Closing.

(c)          Material Proceedings. Since the date hereof, there has been no (i) new Proceeding instituted by a Governmental Authority or claim filed in state or federal court by any Person against Company or any of its Subsidiaries, in each case alleging actions, occurrences or omissions, or (ii) new development in any Proceeding set forth in Section 2.7 of the Company Disclosure Letter, in each case for clause (i) and (ii), that would, individually or in the aggregate, be Material to a Reasonable Investor.

(d)          Company Certificate. Each Investor shall have received a certificate, dated as of the Closing Date, executed by a senior officer of the Company on behalf of the Company, to the effect that the conditions specified in paragraphs (a), (b) and (c) have been fulfilled.

(e)          Registration Rights Agreement. The Company shall have delivered to each Investor an executed Registration Rights Agreement.

(f)          Certificate of Designation. The Certificate of Designation filed with the Secretary of State of the State of Delaware Designation shall have been declared effective.

(g)          Apollo Transaction. Closing under the Apollo Transaction shall occur simultaneously and the Company shall receive the proceeds of the equity investment from Luxor.

(h)          [Intentionally omitted].

5.3           Additional Conditions to the Obligations of the Company. The obligations of the Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver in writing by the Company) as of the Closing of each of the following additional conditions:

(a)          Representations and Warranties. The representations and warranties of each Investor set forth in Sections 3.1 and 3.2 shall be true and correct in all respects (with only such exceptions as are de minimis) as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct in all respects (with only such exceptions as are de minimis) as of such specified date. Other than the representations and warranties referred to in the immediately preceding sentence, the representations and warranties of Luxor contained in Article III of this Agreement (read without giving effect to any qualifications or exceptions contained therein regarding materiality or similar qualification) shall be true and correct as of the Closing Date as though made at and as of the Closing Date, except to the extent that any representation and warranty is made as of a specified date other than the Closing Date, in which case such representation and warranty shall be true and correct as of such specified date and except, in each case, for such failures to be true and correct that, individually or in the aggregate, would not reasonably be expected to prevent or materially delay the ability of each Investor to complete the transactions contemplated by this Agreement or to perform its obligations hereunder.

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(b)          Performance of Covenants. Each Investor shall have performed and complied with in all material respects all covenants and conditions contained in this Agreement to be performed or complied with by it prior to or at the Closing.

(c)          Certificate. The Company shall have received a certificate, dated as of the Closing Date, executed by each Investor, to the effect that the conditions specified in paragraphs (a) and (b) above have been fulfilled by each Investor.

ARTICLE VI
TERMINATION

6.1           Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:

(a)          by mutual written consent of each Investor and the Company;

(b)          by the Company or each Investor upon written notice to the other parties in the event that any Governmental Authority (including any court of competent jurisdiction) shall have issued an order, decree or ruling or taken any other official action enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; provided that the right to terminate this Agreement pursuant to this Section 6.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been a material cause of, or resulted in, the occurrence of such order, decree, ruling or other action;

(c)          by the Company, if there shall be a breach by each Investor of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.3(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to the applicable Investor of such breach; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 6.1(c) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.2 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied;

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(d)          by each Investor, if there shall be a breach by the Company of any representation or warranty or any covenant or agreement contained in this Agreement which would result in a failure of a condition set forth in Section 5.2(a) or (b) and which breach cannot be cured or has not been cured within 30 calendar days after the giving of written notice to the Company of such breach; provided that each Investor shall not have the right to terminate this Agreement pursuant to this Section 6.1(d) if it is then in breach of any of its covenants set forth in this Agreement that would result in the closing conditions set forth in Section 5.3 (other than those conditions which by their terms cannot be satisfied until the Closing) not being satisfied;

(e)          by the Company or each Investor upon written notice given to the other parties in the event that the Closing shall not have taken place on or before June 30, 2016 (the “Outside Date”), unless such party has breached any covenant or agreement hereunder and such breach has resulted in the failure of the Closing to occur on or prior to the Outside Date; or

(f)          by each Investor, if the investment agreement with respect to the Apollo Transaction shall have been terminated in accordance with its terms without any shares of Series D Preferred Stock having been purchased.

For purposes of this Section 6.1, termination of this Agreement by an Investor shall not affect the rights and obligations of any other Investor under this Agreement.

6.2           Termination Right. Notwithstanding anything contained to the contrary herein, to the extent that the Company Disclosure Letter contains any disclosure that (i) would be Material to a Reasonable Investor taking into account the availability and extent of indemnification under Article VII hereof and (ii) a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading this Agreement and the Declarative Portions of the Company’s Recent SEC Filings Investor shall have the right to terminate this Agreement (“Termination Right”) by serving notice to the Company within 72 hours of receiving the Company Disclosure Letter.

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6.3           Effect of Termination. In the event of the termination of this Agreement as provided above, this Agreement (other than this Section 6.3) shall become void and of no further force and effect, and there shall be no duties, liabilities or obligations of any kind or nature whatsoever on the part of any party hereto to the other parties based either upon this Agreement or the transactions contemplated hereby, provided that (a) no such termination (nor any provision of this Agreement) shall relieve any party from liability for any damages for any actual and intentional fraud or any willful and material breach of any covenant hereunder prior to such termination and (b) the obligations of the parties referred to in the last sentence of Section 4.2(a) and Article VIII shall continue to apply following any such termination of this Agreement. For purposes of this Agreement, “willful and material breach” means a material breach of any covenant set forth in this Agreement that is a consequence of an act or failure to act by or on behalf of the breaching party with knowledge that the taking of such act or failure to take such act would, or would reasonably be expected to, result in a breach of this Agreement.

ARTICLE VII
INDEMNIFICATION

7.1           Indemnification by the Company.

(a)          From and after the Closing, subject to the other provisions of this Article VII, the Company shall indemnify each Investor and its officers, directors, employees and Affiliates (collectively, the “Indemnified Investor Parties”), and hold each of them harmless from and against, any and all actions, suits, proceedings, demands, assessments, judgments, claims, liabilities, losses (including losses arising from the diminution of value), costs, damages, expenses, interest or penalties, and reasonable attorneys’ fees, expenses and disbursements, whether or not resulting from a Third Party Claim (collectively, “Damages”), suffered, paid or incurred by such Indemnified Investor Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties (read without giving effect to any qualifications regarding materiality, Material to a Reasonable Investor or similar qualifications other than with respect to the representations in Section 2.9(a)) made by the Company in Article II, or in any certificate or other document delivered in connection with this Agreement, as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates), (ii) any breach by the Company of any covenant or agreement of the Company contained in this Agreement, and (iii) any matter described in the Company Disclosure Letter that (x) would be Material to a Reasonable Investor and (y) a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading this Agreement and the Declarative Portions of the Company’s Recent SEC Filings and (iv) any material pre closing violation of law or any Proceeding alleging the same.

(b)          Notwithstanding anything to the contrary contained in this Section 7.1, except with respect to actual fraud or breaches of Fundamental Representations, as to which the limitations in this Section 7.1(b) shall not apply, the Indemnified Investor Parties shall be entitled to indemnification for breaches of representations and warranties pursuant to Section 7.1(a)(i):

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(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(i), exceed $750,000, whereupon (subject to the provisions of clause (ii) below) the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to the Company on or before the date that is eighteen (18) months after the Closing Date (other than claims for indemnification arising from a breach of any Fundamental Representation, which must be asserted by the Indemnified Investor Parties not later than sixty days following the expiration of the relevant statute of limitations).

In addition, the Company shall not be liable for indemnification pursuant to Section 7.1(a)(i) with respect to any Damages suffered, paid or incurred by an Indemnified Investor Party of less than $20,000 (a “De Minimis Damage”), and all De Minimis Damages shall be disregarded for purposes of the foregoing deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence).

(c)          Notwithstanding anything to the contrary contained in this Section 7.1, the Indemnified Investor Parties shall be entitled to indemnification pursuant to Section 7.1(a)(iii) only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(iii), exceed $1,000,000, whereupon the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $1,000,000.

(d)          Notwithstanding anything to the contrary contained in this Section 7.1, the Indemnified Investor Parties shall be entitled to indemnification pursuant to Section 7.1(a)(iv) only if, and then only to the extent that, the aggregate Damages to all Indemnified Investor Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.1(a)(iv), exceed $750,000, whereupon the Company shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000.

7.2           Indemnification by each Investor.

(a)          From and after the Closing Date, subject to the other provisions of this Article VII, each Investor shall indemnify the Company and their respective officers, directors, employees and Affiliates (collectively, the “Indemnified Company Parties”) and to hold each of them harmless from and against any and all Damages suffered, paid or incurred by such Indemnified Company Party arising out of, resulting from or caused by: (i) any breach of any of the representations and warranties made by each Investor in Article III as if such representation or warranty was made as of the Closing (except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case as of such date or dates); or (ii) any breach by each Investor of any covenant or agreement of each Investor contained in this Agreement.

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(b)          Notwithstanding anything to the contrary contained in this Section 7.2, except with respect to actual fraud or breaches of representations and warranties contained in Sections 3.1 and 3.2 as to which the limitations of this Section 7.2(b) shall not apply, the Indemnified Company Parties shall be entitled to indemnification pursuant to Section 7.2(a)(i):

(i)          only if, and then only to the extent that, the aggregate Damages to all Indemnified Company Parties (without duplication), with respect to all claims for indemnification pursuant to Section 7.2(a)(i), exceed $750,000, whereupon (subject to the provisions of clause (ii) below) Investor shall be obligated to pay in full all such amounts but only to the extent such aggregate Damages are in excess of $750,000; and

(ii)         only with respect to claims for indemnification in respect of which notice of the inaccuracy or breach giving rise to such claim shall have been given to each Investor on or before the date that is eighteen (18) months after the Closing Date.

In addition, each Investor shall not be liable for indemnification pursuant to Section 7.2(a)(i) with respect to any De Minimis Damages suffered, paid or incurred by an Indemnified Company Party, and all De Minimis Damages shall be disregarded for purposes of the foregoing deductible (it being understood and agreed that in the event any Damage is greater than the threshold for a De Minimis Loss, no portion of such Damage shall be disregarded pursuant to this sentence). Further, no Investor shall be responsible for indemnification pursuant to Section 7.2(a)(i) for any breach set forth in Section 7.2(a) of any other Investor.

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7.3           Indemnification Procedures.

(a)          If an Indemnified Investor Party or an Indemnified Company Party (each, an “Indemnified Party”) believes that a claim, demand or other circumstance exists that has given or may reasonably be expected to give rise to a right of indemnification under this Article VII (whether or not the amount of Damages relating thereto is then quantifiable), such Indemnified Party shall assert its claim for indemnification by giving written notice thereof (a “Claim Notice”) to the Company (if indemnification is sought from the Company (an “Indemnifying Company Party”)) or to each Investor (if indemnification is sought from each Investor (an “Indemnifying Investor Party”)) (in either such case, the “Indemnifying Party”) (i) if the event or occurrence giving rise to such claim for indemnification is, or relates to, a claim, suit, action or proceeding brought by a Person not a party to this Agreement or affiliated with any such party (a “Third Party Claim”), promptly and in any event no later than thirty (30) days after it has received notice of such claim, suit, action or proceeding by such Indemnified Party, or (ii) if the event or occurrence giving rise to such claim for indemnification is not, or does not relate to, a Third Party Claim, promptly after the discovery by the Indemnified Party of the circumstances giving rise to such claim for indemnity; provided, however, that any failure or delay in providing such notice shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent the Indemnifying Party is actually prejudiced by such failure or delay. Each Claim Notice shall describe the claim in reasonable detail based on information available at the time.

(b)          If any claim or demand by an Indemnified Party under this Article VII relates to a Third Party Claim, the Indemnifying Party may elect to assume, conduct and control the defense of the Indemnified Party against such Third Party Claim (including using counsel of the Indemnifying Party's choosing). The Indemnified Party may participate at its own expense, with counsel of its choosing, in the defense of such Third-Party Claim although such Third-Party Claim shall be controlled by the Indemnifying Party. Until the Indemnifying Party has assumed the defense of the Indemnified Party against such Third Party Claim, the Indemnified Party may defend such Third Party Claim but in no event shall the Indemnified Party negotiate a settlement or a compromise of such Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), and if such Indemnifying Party provides such prior written consent, any such settlement or compromise by the Indemnified Party and the Indemnified Party’s reasonable costs and expenses arising out of such defense, settlement or compromise of such Third Party Claim shall be Damages subject to indemnification hereunder to the extent provided herein. Except with the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed), the Indemnifying Party shall not settle or otherwise compromise or pay such Third Party Claim; provided that any such settlement or compromise shall be permitted hereunder without the written consent of the Indemnified Party if such settlement or compromise (w) involves only money damages paid by or on behalf of the Indemnifying Party, (x) does not encumber any of the assets of any Indemnified Party or its Affiliates or include any restriction or condition that would apply to or adversely affect any Indemnified Party or any of its Affiliates or the conduct of any Indemnified Party’s or its Affiliates’ business, (y) includes a complete release by such Third Party of such Indemnified Party and (z) does not include any admission of wrongdoing or misconduct by such Indemnified Party.

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(c)          Each Indemnified Party shall make available to the Indemnifying Party all information and documents in its possession or reasonably available to such Indemnified Party relating to such action or claim which is not confidential or proprietary in nature or which is made available under the terms of a confidentiality agreement or is delivered or obtained under appropriate protective orders reasonably satisfactory to such party, together with all pertinent information regarding the amount of the Damages that it asserts it has sustained or incurred. In addition, the parties shall render to each other such assistance as may reasonably be requested in order to help ensure the proper and adequate defense of any such action or claim. The party in charge of the defense shall keep the other parties reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.

(d)          Each Indemnifying Party shall, subject to Section 7.4(a), pay any Damages payable pursuant to the terms of this Article VII to the applicable Indemnified Party within twenty (20) Business Days after receiving notice from such Indemnified Party that such amounts are payable pursuant to the terms of this Article VII, unless the Indemnifying Party in good faith disputes the amount of the Damages and/or its obligation to provided indemnification hereunder. In the event of such a dispute, the Indemnifying Party shall pay the amount of Damages for which it is liable for within twenty (20) Business Days following the final determination of the amount of such Damages that the Indemnifying Party is liable hereunder. A “final determination” shall exist when (i) the parties agree in writing or (i) a court of competent jurisdiction shall have made such determination in a final and non-appealable judgment.

7.4        General.

(a)          The aggregate amount which the Company is or may be required to pay pursuant to Section 7.1(a)(i) and 7.1(a)(ii) shall not exceed fifty percent (50%) of the Purchase Price, the aggregate amount which the Company is or may be required to pay pursuant to Section 7.1(a)(iii) shall not exceed the Purchase Price and the aggregate amount which Investor is or may be required to pay pursuant to Section 7.2(a)(i) and 7.2(a)(ii) shall not exceed fifty percent (50%) of the Purchase Price.

(b)          Notwithstanding anything herein to the contrary, no Indemnifying Party shall be liable for any Damages that are not reasonably foreseeable, that are speculative, that are based on reputational damage to each Investor or any of its Affiliates (including the Subject Companies), or that constitute punitive or other exemplary Damages, except to the extent that such Damages have been awarded to a Third Party against an Indemnified Party.

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(c)          The amount which the Indemnifying Party is or may be required to pay to any Indemnified Party pursuant to this Article VII shall be reduced (retroactively, if necessary) by any insurance proceeds, indemnification from other sources or other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Damages, net of any deductibles or other similar expenses incurred in connection therewith, it being understood and agreed that an Indemnified Party shall use commercially reasonable efforts to seek recovery under any applicable insurance policies, other contracts or arrangements that provide for indemnification or from other sources that may provide recovery for such Damages. If an Indemnified Party shall have received payment from the Indemnifying Party in respect of Damages and shall subsequently receive insurance or indemnification proceeds or other amounts in respect of such Damages, then such Indemnified Party shall promptly repay to the Indemnifying Party a sum equal to the amount of such net insurance or indemnification proceeds or other net amounts actually received. The Indemnifying Party shall be subrogated to any right of action which the Indemnified Party may have against any other Person with respect to any matter giving rise to a claim for indemnification hereunder. Any Indemnified Party that becomes aware of Damages for which it seeks indemnification shall be required to use commercially reasonable efforts to mitigate the Damages.

(d)          The amount of any Damages for which indemnification is provided under this Article VII shall be adjusted to take account of any net Tax benefit (or cost) actually realized by the Indemnified Party or any of its Affiliates in the year such Damages are incurred or paid arising from the incurrence or payment of any such Damages. In computing the amount of any such Tax benefit (or cost), the Indemnified Party (or its applicable Affiliate) shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Damages.

(e)          An Indemnified Party shall be entitled to indemnification pursuant to Sections 7.1(a)(ii) and 7.2(a)(ii) only if a notice asserting the right to indemnification has been given to the Indemnifying Party not later than the earlier of sixty days following the expiration of the relevant statute of limitations, if applicable.

(f)          The indemnification provided in this Article VII shall be the exclusive post-Closing remedy available to any party with respect to any breach of any representation, warranty, covenant or agreement in this Agreement, or otherwise in respect of the transactions contemplated by this Agreement, except in the case of actual fraud or with respect to matters for which the remedy of specific performance, injunctive relief or other non-monetary equitable remedies are available.

ARTICLE VIII
GENERAL PROVISIONS

8.1           Survival. Except for the Fundamental Representations and the representations contained in Section 2.11, in each case, which shall survive until the earlier of (i) sixty days following the expiration of the relevant statute of limitations and (ii) the fifth anniversary of the Closing Date, each of the representations and warranties of the parties hereunder shall survive the Closing until the date which is eighteen (18) months after the Closing Date, at which time they shall terminate and be of no further force or effect; provided, that any representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to this Section 8.1 if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

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8.2           Notices. All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed given if delivered personally, mailed by registered or certified mail with postage prepaid and return receipt requested or sent by commercial overnight courier, courier fees prepaid (if available; otherwise, by the next best class of service available), to the parties at the following addresses:

(a) if to any Investor, to it at:

c/o Luxor Capital Partners, LP

1114 Avenue of the Americas 29th Floor

New York NY 10036

Attention: Norris Nissim, Esq., General Counsel

Facsimile: (212) 763-8001

with a copy (which shall not constitute notice) to:

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, NY 10036

Phone: 212.715.9100

Fax: 212.715.8000

Abbe Dienstag (adienstag@kramerlevin.com)

(b) if to the Company, to it at:

RCS Capital Corporation

405 Park Ave

New York, NY 10022

Attention: James A. Tanaka (JTanaka@rcscapital.com)

Fax: 646-861-7743

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

11 Times Square

New York, NY 10036

Attn: Steven L. Lichtenfeld (SLichtenfeld@proskauer.com)

or to such other Person or address as any party shall specify by notice in writing to the other parties in accordance with this Section 8.2. All such notices or other communications shall be deemed to have been received on the date of the personal delivery, on the third Business Day after the mailing or dispatch thereof, or in the case of electronic mail or facsimile transmission, on the date received, subject to confirmation of receipt; provided that notice of change of address shall be effective only upon receipt.

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8.3           Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “party” or “parties” shall refer to parties to this Agreement. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. All Disclosure Letters referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Disclosure Letter but not otherwise defined therein shall have the meaning given to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including any such date. Any reference to “days” means calendar days unless Business Days are expressly specified. If any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter. All references to “$” or “dollars” set forth in this Agreement are to U.S. dollars.

8.4           Amendment and Modification; Waiver.

(a)          This Agreement may not be amended except by an instrument or instruments in writing signed and delivered on behalf of each Investor and the Company.

(b)          At any time prior to the Closing, any party that is entitled to the benefits hereof may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracy in the representations and warranties of any other party contained herein or in any Disclosure Letter or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements of any other party or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid if set forth in an instrument in writing signed and delivered on behalf of such party. Waivers shall operate to waive only the specific matter described in the writing and shall not impair the rights of the party granting the waiver in other respects or at other times. A party’s waiver of a breach of a provision of this Agreement, or failure (on one or more occasions) to enforce a provision of, or to exercise a right under, this Agreement, shall not constitute a waiver of a similar breach, or of such provision or right other than as explicitly waived.

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8.5           Entire Agreement. This Agreement (including the Disclosure Letters and the Ancillary Agreements) and the Confidentiality Agreement constitute the entire agreement and supersede all other prior agreements and understandings, both written and oral, of the parties with respect to the subject matter hereof.

8.6           Disclosure Letters. For purposes of the representations and warranties of the Company and each Investor in this Agreement, items disclosed in one section of a Disclosure Letter shall be considered to be made for purposes of all other sections of such Disclosure Letter to the extent that the relevance of any such disclosure to any other such section of such Disclosure Letter is reasonably apparent from the text of such disclosure. For purposes of the representations and warranties of the Company in this Agreement, items disclosed in the forms, statements and reports of the Company’s publicly available, filed with, or furnished (on a publicly available basis) to the SEC on or after January 1, 2014 and prior to the date of this Agreement shall be considered to be disclosed for purposes of the Company Disclosure Letter (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks or other matters included in any “forward-looking statements” disclaimer or other statements that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to, or disclosure for purposes of, any representation or warranty set forth in Article II). The disclosure of any item or matter in any Disclosure Letter shall not be construed as an admission, representation or indication that such item or other matter is “material” or would be Material to a Reasonable Investor or that such item or other matter is required to be referred to or disclosed in such Disclosure Letter. The disclosure of any item or matter relating to any possible breach or violation of any law or contract shall not be construed as an admission or indication that any such breach or violation exists or has actually occurred.

8.7           Third Party Beneficiaries. Except with respect to Indemnified Parties in their capacity as such pursuant to Article VII, nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement.

8.8           Specific Performance. The parties agree that if any of the provisions of this Agreement were not performed by the parties in accordance with their specific terms or were otherwise breached thereby, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that each party hereto shall be entitled to specific performance to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it may be entitled at law or in equity.

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8.9           Assignment; Binding Effect. This Agreement may not be assigned by any party without the prior written consent of the other parties, provided that each Investor may assign this Agreement, including each Investor’s right to acquire the Series D-2 Preferred Stock and obligation to pay the Purchase Price, to any Affiliate of each Investor without consent of the Company, but any such assignment shall not relieve each Investor of its obligations hereunder to the extent the assignee fails to perform such obligations; provided, further, that notwithstanding any such assignment, each Investor shall continue to have the right to enforce this Agreement. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

8.10         Governing Law. This Agreement shall be governed in all respects (including as to validity, interpretation and effect) by the internal laws of the State of New York, without giving effect to any conflict of laws rules or principles that would require or permit the application of another jurisdiction’s laws.

8.11         Jurisdiction; Waiver of Jury Trial.

(a)          Each party hereby irrevocably agrees that any action or proceeding arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights or obligations shall be brought exclusively in the courts of the State of New York located in the Borough of Manhattan or the federal courts of the United States of America located in the Southern District of New York (and appellate courts thereof) and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail or by overnight courier service, postage prepaid, to its address set forth in Section 8.2.

(b)          Each party hereby waives all rights to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance of such rights and obligations. Each party (i) certifies that no representative, agent or attorney of any party has represented, expressly or otherwise, that such party would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the other parties have been induced to enter into this Agreement and the transactions contemplated hereby by, among other things, the waivers and certifications contained herein.

8.12         Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

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8.13         Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

ARTICLE IX
DEFINITIONS

The following terms when used in this Agreement shall have the following meanings:

“Acquisition Proposal” has the meaning set forth in Section 4.7.

“Adviser Compliance Policies” has the meaning set forth in Section 2.18(d).

“Advisers Act” means the Advisers Act of 1940 and the rules and regulations thereunder.

“Advisory Contract” means any written agreement pursuant to which a the Company or any of its Subsidiaries provides Investment Advisory Services (including sub-advisory services) to a Client.

“Affiliate” of a Person means a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the first Person. “Control” (and “controlled by” and “under common control with”) means possessing, directly or indirectly, the power to direct or cause the direction of a Person’s management or policies, through owning voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

“Affiliated Party” of an entity means any person “associated” (as defined under the Advisers Act) with such entity and any “affiliated person” (as defined in the Investment Company Act).

“Agreement” has the meaning set forth in the introductory paragraph hereof.

“AMH” has the meaning set forth in the recitals.

“Ancillary Agreements” means the Registration Rights Agreement, , the MIPA, the Certificate of Designation and all other agreements or instruments to be executed and delivered in connection with the transactions contemplated hereby.

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“Applicable Law” means any domestic or foreign federal, state or local statute, law (whether statutory or common law), ordinance, rule, administrative interpretation, regulation, order, writ, injunction, directive, judgment, decree, policy, guidelines or other requirement of any Governmental Authority applicable to the Company and its Subsidiaries and Clients, or any of their respective Affiliates, holders of equity securities, properties, assets, officers, directors, employees or agents, as the case may be.

“Apollo” means Apollo Management Holdings, L.P.

“Apollo Transaction” has the meaning set forth in the recitals.

“ARC” has the meaning set forth in the recitals.

“ARC Transaction Agreement” has the meaning set forth in the recitals.

“BDC” means any entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-54)” for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or as a sub-adviser.

“Broker-Dealer Subsidiaries” has the meaning set forth in Section 2.16(a).

“Business Day” means any day which is not a Saturday, Sunday or a day on which banks in New York, New York are authorized or obligated by law or executive order to be closed.

“Cap” has the meaning set forth in Section 7.4(b).

“Certificate of Designation” has the meaning set forth in the recitals.

“CFTC” means the Commodity Futures Trading Commission.

“Claim Notice” has the meaning set forth in Section 7.3(a).

“Class A Common Stock” has the meaning set forth in the recitals.

“Class B Common Stock” has the meaning set forth in the recitals.

“Class B Share” has the meaning set forth in the recitals.

“Client” means any Fund to which the Company or any of its Subsidiaries provides Investment Advisory Services (including any sub-advisory services).

“Closing” has the meaning set forth in Section 1.3.

51 

“Closing Condition Satisfaction Date” means the date on which the conditions set forth in Article V have been satisfied or waived (other than those conditions that by their terms are to be satisfied by actions taken at the Closing, but subject to the satisfaction or waiver of those conditions at such time).

“Closing Date” has the meaning set forth in Section 1.3.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commodity Exchange Act” means the Commodity Exchange Act of 1936 and the rules and regulations thereunder.

“Common Stock” has the meaning set forth in the recitals.

“Company” has the meaning set forth in the introductory paragraph hereof.

“Company Disclosure Letter” means the disclosure letter delivered by the Company to each Investor within five Business Days of execution hereof.

“Company Fundamental Representations” has the meaning set forth in Section 5.2(a).

“Company SEC Documents” has the meaning set forth in Section 2.6(a).

“Confidentiality Agreement” means the confidentiality agreement between Luxor and the Company, dated May 13, 2015, as amended.

“Consent” means any consent, approval, authorization, waiver, permit, license, grant, agreement, exemption or order of, or registration, declaration or filing with, any Person, including any Governmental Authority, that is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

“Contract” has the meaning set forth in Section 2.3.

“Damages” has the meaning set forth in Section 7.1(a).

“Declarative Portions of the Company’s Recent SEC Filings” means (i) the forms, statements, schedules, reports or other documents filed or furnished on or after January 1, 2014 by the Company with or to the SEC (to the extent available on the SEC’s EDGAR system not less than five (5) Business Days prior to the date hereof), (ii) the most recent draft of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, with respect to both (i) and (ii) above, other than (x) any disclosures contained under the captions “Risk Factors” or “Forward Looking Statements” and (y) any other disclosures that are non-specific, predictive, cautionary or forward looking in nature and (iii) the items set forth on Schedule 1.

52 

“Disclosure Letters” means the Company Disclosure Letter and each Investor Disclosure Letter.

“Employee Benefit Plan” means each employee benefit plan, scheme, program, policy, arrangement or contract, whether written or unwritten, including any “employee benefit plan”, as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and any bonus, deferred compensation, equity purchase, equity grant or other equity-based arrangement (including, to the extent applicable, under Organizational Documents of the Company and its Subsidiaries), and any employment, termination, retention, bonus, change in control or severance plan, program, policy, arrangement or contract for the benefit of any current or former officer, employee, partner, director or other service provider of the Company or any of its Subsidiaries or in which any of them participate as of the date hereof, which in any such case is maintained or contributed to by any of the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries could incur or has incurred liability under Applicable Law, including the Code or ERISA.

“Environmental Law” means any law, code, license, permit, authorization, approval, consent, common law, legal doctrine, requirement or agreement with any Governmental Authority relating to (i) the protection, preservation or restoration of the environment (including air, water, vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of hazardous substances.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code and the regulations promulgated thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder.

“FINRA” has the meaning set forth in Section 2.16(b).

“Fund” means any Sponsored Fund or Sub-Advised Fund.

53 

“GAAP” means U.S. generally accepted accounting principles.

“Governmental Approvals” has the meaning set forth in Section 2.4(a).

“Governmental Authority” means any United States or foreign government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC, CFTC or any other authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof or any foreign jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any United States or foreign governmental or non-governmental self-regulatory organization, agency or authority, including FINRA and NFA.

“Governmental Reports” has the meaning set forth in Section 2.18(c).

“Holdings” has the meaning set forth in the recitals.

“IA Subsidiaries” has the meaning set forth in Section 2.18(a).

“Indebtedness” means, without duplication, all obligations of the Company or any of its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for (a) borrowed money, including all indebtedness evidenced by any note, bond, debenture or other debt ‎security or any credit agreement or indenture, (b) indebtedness of Persons other than the Company or any of its Subsidiaries of the type referred to ‎in this definition which is directly or indirectly guaranteed by the Company or any of its Subsidiaries, (c) accrued interest owed with respect to any indebtedness‎ referred to in this definition and (d) any costs to eliminate hedging or swap arrangements outstanding as of the Closing.

“Indemnified Company Parties” has the meaning set forth in Section 7.2(a).

“Indemnifying Company Party” has the meaning set forth in Section 7.3(a).

“Indemnified Investor Parties” has the meaning set forth in Section 7.1(a).

“Indemnifying Investor Party” has the meaning set forth in Section 7.3(a).

“Indemnified Party” has the meaning set forth in Section 7.3(a).

“Indemnifying Party” has the meaning set forth in Section 7.3(a).

“Information Statement” has the meaning set forth in Section 4.6(a).

54 

“Infringing” has the meaning set forth in Section 2.13(b).

“Intellectual Property” means, in any and all jurisdictions throughout the world, any (i) trademarks, service marks, trade names, trade dress, Internet domain names, social media usernames (e.g., Twitter handles), personalized subdomains or vanity URLs and other indicia or origin, and the goodwill associated with any and all of the foregoing and symbolized thereby, (ii) copyrights and rights in copyrightable subject matter in published and unpublished works of authorship, (iii) rights in Software, (iv) all registrations and applications to register or renew the registration of any of the foregoing, (v) patents and patent applications, including all reissues, divisions, renewals, reexaminations, extensions, provisionals, continuations and continuations-in-part thereof, (vi) rights in Trade Secrets and (vii) all other intellectual property rights.

“Investment Advisory Services” means the provision by the Company or any of its Subsidiaries of investment advisory services with respect to securities, real estate, real estate-related assets, or working and other interests in producing and non-producing oil and gas properties.

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.

“Investor” has the meaning set forth in the introductory paragraph hereof.

“Investor Disclosure Letter” means the disclosure letter delivered by each Investor to the Company at the time of execution hereof.

“Investor Fundamental Representations” has the meaning set forth in Section 5.3(a).

“IT Systems” means the hardware, Software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment, owned, leased or licensed by or to the Company or any of its Subsidiaries.

“IRS” means the United States Internal Revenue Service.

“Knowledge of the Company” or “the Company’s Knowledge” means the knowledge after due inquiry of any of the individuals identified in Section 9A of the Company Disclosure Letter.

“Knowledge of each Investor” or Investor’s Knowledge” means the actual knowledge of any of the individuals identified in Section 10 of the Luxor Disclosure Letter.

55 

“Lenders” has the meaning set forth in the recitals.

“Lien” means any mortgage, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge or other restrictions or limitations of any nature whatsoever (whether absolute or contingent), including such as may arise under any Contracts.

“Luxor” has the meaning set forth in the recitals.

“Luxor Consent” has the meaning set forth in the recitals.

“Malware” means any virus, Trojan horse, time bomb, key-lock, spyware, worm, malicious code or other software program designed to or able to, without the knowledge and authorization of the Company or any of its Subsidiaries, disrupt, disable, harm, interfere with the operation of or install itself within or on any Software, computer data, network memory or hardware.

“Material to a Reasonable Investor” means, with respect to any fact, circumstance, contingency, change, effect, event or occurrence, that a reasonable and prudent investor would deem such fact, circumstance, contingency, change, effect, event or occurrence to be material in making a decision to invest in the Company’s securities.

“Material Adverse Effect” means any change, effect, event or occurrence that (a) is or would reasonably be expected to be, individually or in the aggregate, materially adverse to the assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, other than any such effect, change, event or occurrence to the extent resulting from (i) any change in the capital markets or securities markets after the date hereof, (ii) any change in general economic conditions or interest rates arising after the date hereof, (iii) any outbreak or substantial worsening of major hostilities in which the United States is involved or any act of terrorism within or involving the United States or its property or citizens arising after the date hereof, (iv) the failure of the Company to achieve any financial projections or forecasts in and of itself (but not including the underlying reasons therefor unless otherwise excepted pursuant to the other subsections of this definition), (v) the entering into of this Agreement or public announcement or consummation of the transactions contemplated hereby, (vi) any change after the date of this Agreement in Applicable Law or accounting principles or interpretations thereof, (vii) any natural disaster, earthquake, flood, hurricane or any acts of God, (viii) any action required by this Agreement or the omission to take an action prohibited by this Agreement, except, in each case of clauses (i), (ii), or (iii) to the extent that such change, effect, event or occurrence has a materially disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to other alternative investment firms generally; or (b) would reasonably be expected to prevent or materially delay the ability of the Company to complete the transaction contemplated by this Agreement or perform its obligations hereunder.

56 

“Material Contract” means (a) any “material contract” (as such term is defined in item 601(b)(10) of Regulation S-K promulgated under the Securities Act) or (b) any written or binding oral Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective properties, rights or assets are bound that:

(i)          is a voting agreement or a registration rights agreement;

(ii)         would restrict the payment of dividends upon, or the redemption or conversion of, shares of Series D-2 Preferred Stock or shares of Class A Common Stock issuable upon conversion thereof;

(iii)        is a joint venture, partnership, limited liability company or other similar agreement material to the Company or any of its Subsidiaries;

(iv)       grants any right of first refusal or right of first offer or similar right on any assets that are material to the Company and its Subsidiaries, taken as a whole;

(v)        provides for any payments that are conditioned, in whole or in part, on a change of control of the Company, any of its Subsidiaries or transactions of the type contemplated hereby;

(vi)       is an employment, consulting, severance, bonus (including fee sharing), compensation or collective bargaining Contract relating to or for the benefit of current or former employees, directors or other service providers;

(vii)      contains (A) a “clawback” or similar undertaking requiring the reimbursement or refund of any material fees (whether performance based or otherwise) paid to the Company or any of its Subsidiaries or (B) a “most favored nation” clause or other term providing preferential pricing or treatment to a third party in any material Contract;

(viii)     relates to the acquisition or disposition of any business, a material amount of equity interests or assets, or any material properties or assets, under which the Company or any of its Subsidiaries has continuing material obligations or contingent liabilities, including contingent “earnout” or similar payments or indemnification obligations;

57 

(ix)        is an Affiliate Agreement (including any Contract with Luxor);

(x)         any non-competition, non-solicitation or exclusive dealing agreement, or any other agreements that purports to limit or restrict in any material respect (A) the ability of the Company or any of its Subsidiaries to solicit customers or employees or investments or (B) the manner in which, or the localities in which, all or any portion of the business or operations of the Company or any of its Subsidiaries is or would be conducted;

(xi)        by its terms does not terminate or is otherwise not cancelable within ninety (90) days without penalty, cost or liability in excess of $1,000,000 and requires or would reasonably be expected to involve aggregate payments by the Company or its Subsidiaries in excess of $1,000,000 per fiscal year; or

(xii)       relates to Indebtedness of the Company or any of its Subsidiaries in excess of $1,000,000 in the aggregate, or the granting of any liens (other than Permitted Liens) or a security interest in any material property of the Company or any of its Subsidiaries.

“MIPA” has the meaning set forth in the recitals.

“Municipal Advisor Subsidiaries” has the meaning set forth in Section 2.17(a).

“Newco” has the meaning set forth in the recitals.

“NFA” has the meaning set forth in Section 2.15(c).

“Notice” has the meaning set forth in Section 4.3(e)(i).

“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, by-laws, articles of formation, certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, limited liability company agreement and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of a Person, including any amendments thereto.

“Outside Date” has the meaning set forth in Section 6.1(e).

“Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by the Company or any of its Subsidiaries.

58 

“Permits” has the meaning set forth in Section 2.15(b).

“Permitted Liens” means (i) Liens for Taxes, assessments or other governmental charges not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been reflected on the Financial Statements in accordance with GAAP, (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairman’s or other similar Liens arising in the ordinary course of business, (iii) easements, rights of way, building, zoning and other similar encumbrances or title defects arising in the ordinary course of business, (iv) Liens on assets securing debt incurred to finance the acquisition of such assets, (v) Liens on any Contributed Asset or on the assets of any Transferred Entity incurred in the ordinary course of business, and (vi) Liens on properties which do not materially impair business operations or the use of such properties in the ordinary course of business or materially affect the value of such properties.

“Person” means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, governmental entity or other entity.

“Preferred Stock” has the meaning set forth in the recitals.

“Price Per Share” means $25.

“Private Fund” means any “private fund” (as such term is defined in Section 202(a)(29) of the Advisers Act) for which the Company or any of its Subsidiaries serves as an investment adviser, general partner, managing member or sponsor or as a sub-adviser.

“Proceedings” has the meaning set forth in Section 2.7.

“Purchase Price” has the meaning set forth in Section 1.4(b).

“Purchased Shares” has the meaning set forth in Section 1.2.

“RCS Holdings” has the meaning set forth in the recitals.

“Registered Fund” means an investment company registered under the Investment Company Act for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or as a sub-adviser.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the Closing Date, between the Company and each Investor to be negotiated in good faith prior to the Closing in form and substance customary for transactions of the type being consummated hereunder.

59 

“Regulated Fund” means any Registered Fund or BDC.

“Refinancing Payments” has the meaning set forth in Section 4.10(d).

“REIT” means any real estate investment trust for which the Company or any of its Subsidiaries provides Investment Advisory Services.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder.

“Series B Preferred Stock” has the meaning set forth in the recitals.

“Series C Preferred Stock” has the meaning set forth in the recitals.

“Series D Preferred Stock” has the meaning set forth in the recitals.

“Series D-1 Preferred Stock” has the meaning set forth in the recitals.

“Series D-2 Preferred Stock” has the meaning set forth in the recitals.

“Software” means all computer software, including application software, system software, firmware, middleware, mobile digital applications, assemblers, applets, compilers and binary libraries, including all source code and object code versions of any and all of the foregoing, in any and all forms and media, and all related documentation.

“Specified Liabilities” means the liabilities described on Section 9B of the Company Disclosure Letter.

“Sponsored BDC” means a BDC for which the Company or any of its Subsidiaries serves as an investment adviser, depositor, underwriter, principal underwriter or distributer or otherwise sponsors.

“Sponsored Fund” means any Registered Fund, BDC or Unregulated Fund for which the Company or any of its Subsidiaries acts as sponsor or any wholly owned Subsidiaries thereof.

“Sponsored Registered Fund” means a Registered Fund for which the Company or any of its Subsidiaries as an investment adviser, depositor, underwriter, principal underwriter or distributer or otherwise sponsors.

60 

“Sponsored Regulated Fund” means any Sponsored Registered Fund or Sponsored BDC.

“Sponsored Regulated Fund Compliance Policies” has the meaning set forth in Section 2.20(b)(iv).

“Sub-Advised BDC” means any BDC for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as sub-adviser.

“Sub-Advised Fund” means any Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as sub-adviser.

“Sub-Advised Registered Fund” means any Registered Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as a sub-adviser.

“Sub-Advised Regulated Fund” means any Regulated Fund for which the Company or any of its Subsidiaries provides Investment Advisory Services acting solely as a sub-adviser.

“Subsidiary” means, with respect to a Person, any other Person (whether or not incorporated) that the first Person, directly or indirectly, owns or has the power to vote or control more than 50% of any class or series of capital stock or other equity interests of such Person; provided that the term “Subsidiary” shall not include any Fund or controlled Affiliate of any Fund in the case of the Company or any similar investment vehicle or controlled Affiliate thereof in the case of any other Person.

“Tax” means any U.S. federal, state, local or foreign income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, environmental (including taxes under section 59A of the Code), real property, personal property, ad valorem, occupancy, license, occupation, employment, payroll, social security, disability, unemployment, workers’ compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto).

“Tax Agreements” has the meaning set forth in Section 2.10(d).

“Tax Return” means any federal, state, local or foreign tax return, declaration, statement, report, schedule, form or information return or any amendment to any of the foregoing relating to Taxes.

61 

“Termination Right” has the meaning set forth in Section 6.2.

“Third Party Claim” has the meaning set forth in Section 7.3(a).

“Third Party Consents” has the meaning set forth in Section 2.4(b).

“Trade Secrets” means all inventions, processes, designs, formulae, models, tools, algorithms, Software architectures, trade secrets, know-how, ideas, research and development, data and databases and confidential information.

“Unregulated Fund” means any REIT or Private Fund.

[Remainder of Page Intentionally Left Blank]

62 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

LUXOR CAPITAL PARTNERS, LP
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager
LUXOR CAPITAL PARTNERS OFFSHORE MASTER FUND, LP
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager
LUXOR SPECTRUM OFFSHORE MASTER FUND, LP
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager
LUXOR WAVEFRONT, LP
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager

63 

OC 19 MASTER FUND, L.P.-LCG
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager

64 

RCS CAPITAL CORPORATION
By:	/s/ Edward M. Weil, Jr.
Name:	Edward M. Weil, Jr.
Title:	Chief Executive Officer

65 

EXHIBIT A

Form of Certificate of Designation

See attached.

66 

RCS CAPITAL CORPORATION

CERTIFICATE OF DESIGNATION

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

11% Series D-2 Convertible Preferred Stock

(Par Value $0.001 Per Share)

RCS Capital Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), hereby certifies that, pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board of Directors”) by the Third Amended and Restated Certificate of Incorporation of the Corporation (as amended from time to time in accordance with Section 8(c) hereof, the “Certificate of Incorporation”) which authorizes the issuance, by the Corporation, in one or more series of up to 100,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”), and in accordance with the provisions of Section 151 of the General Corporation Law, the Board of Directors on August 5, 2015 duly adopted the following resolutions:

RESOLVED, that, pursuant to the authority expressly granted to and vested in the Board of Directors by the provisions of Section 4.03 of the Certificate of Incorporation and in accordance with the provisions of Sections 141(c) and 151 of the General Corporation Law, the Board of Directors, hereby authorizes, creates and provides for the issuance of a series of Preferred Stock, par value $0.001 per share, of the Corporation, herein designated as the 11% Series D-2 Convertible Preferred Stock (the “Series D-2 Preferred Stock”), which shall consist initially of 500,000 shares of Series D-2 Preferred Stock (subject to increase or decrease as set forth herein in accordance with Section 151(g) of the General Corporation Law), and the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the shares of such series (in addition to the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, set forth in the Certificate of Incorporation that are applicable to the Preferred Stock of all series) are hereby fixed as follows (certain terms used herein being defined in Section 2) hereof:

1. General.

(a)          The shares of such series shall be designated the 11% Series D-2 Convertible Preferred Stock, par value $0.001 per share (the “Series D-2 Preferred Shares”).

(b)          Each Series D-2 Preferred Share shall be identical in all respects with the other Series D-2 Preferred Shares.

(c)          The number of Series D-2 Preferred Shares shall initially be 500,000, which number may from time to time be increased (but not above the total number of authorized shares of Preferred Stock and subject to Section 8(c)(i)) or decreased (but not below the number of Series D-2 Preferred Shares then outstanding) by resolution of the Board of Directors. Whenever any Series D-2 Preferred Shares that have been issued are reacquired in any manner by the Corporation, including in connection with a conversion into Common Shares, the Corporation shall take all action as may be necessary to retire such shares and to cause such shares to resume the status of authorized but unissued Preferred Stock, undesignated as to class or series.

(d)          No fractional Series D-2 Preferred Shares shall be issued.

2. Certain Definitions. As used herein, the following terms shall have the following meanings:

“4.9% Share Cap” shall have the meaning set forth in Section 7(b).

“9.9% Share Cap” shall have the meaning set forth in Section 7(a).

“24.9% Share Cap” shall have the meaning set forth in Section 7(c).

“accrued and unpaid dividends”, with respect to any share of any class or series, means an amount computed at the annual dividend rate for the class or series of which the particular share is a part, from and including the date on which dividends on such share became cumulative to and including the date to which such dividends are to be accrued, less the aggregate amount of all dividends theretofore paid thereon.

“Acquired Entity or Business” means a Person, business, property or asset acquired by the Corporation or any of its Subsidiaries.

“Acquired EBITDA” means, with respect to any Acquired Entity or Business (any of the foregoing a “Pro Forma Entity”), the Adjusted EBITDA of such Pro Forma Entity, and which, for the avoidance of doubt, shall include pro forma adjustment reflecting the amount of net cost savings and synergies projected by the Corporation in good faith to be realized as a result of actions taken or to be taken within 12 months after the date the acquisition of a Pro Forma Entity (which cost savings or synergies shall be calculated on a pro forma basis as though such cost savings or synergies had been realized on the first day of such period); provided that (A) such cost savings or synergies are reasonably identifiable and factually supportable, (B) no cost savings or synergies shall be added pursuant to this defined term to the extent duplicative of any expenses or charges otherwise added to LTM Adjusted EBITDA, whether through a pro forma adjustment or otherwise, for such period and (C) such actions have been taken or are to be taken within 12 months after the date of determination to take such action.

“Additional Shares” shall have the meaning set forth in Section 6(e).

“Adjusted EBITDA” shall have the meaning set forth in the definition of LTM Adjusted EBITDA.

“Adjustment Price” shall have the meaning set forth in Section 6(e)(iv).

“Affiliate” shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agreement Value” shall mean, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to any such Hedging Agreement, (i) for any date on or after the date such Hedging Agreement has been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (ii) for any date prior to the date referenced in clause (i), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreement.

2

“Annual Dividend Rate” shall mean 11.00% per annum of the Liquidation Preference if paid in cash, per Series D-2 Preferred Share; provided, however that to the extent a dividend for a Dividend Period is not paid in cash on the applicable Dividend Payment Date (whether at the option of the Board of Directors or as otherwise required by this Certificate of Designation), then the Annual Dividend Rate for such Dividend Period with respect to dividends not paid in cash shall mean 12.50% per annum of the Liquidation Preference.

“Beneficial Owner” shall mean a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act).

“Board of Directors” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Business Day” shall mean any day other than Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.

“Capital Lease Obligations” of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Certificate of Incorporation” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Change of Control” shall be deemed to have occurred if any of the following occurs:

(a)          any “person” or “group” as defined in Rules 13d-3 and 13d-5 under the Exchange Act (other than (i) the current holder as of the date of the filing of this Certificate of Designation of Class B Common Stock or its Affiliates or (ii) the Luxor Group) is or becomes the Beneficial Owner, directly or indirectly, of the Corporation’s Common Shares, voting or otherwise, representing 50% or more of the total voting power or economic interests of all outstanding classes of the Corporation’s common stock, voting or otherwise; or

(b)          the Corporation consolidates with, or merges with or into, another person or the Corporation sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the Corporation’s assets, or any person consolidates with, or merges with or into, the Corporation, in any such event other than pursuant to a transaction in which the persons that Beneficially Owned, directly or indirectly, the Corporation’s voting stock immediately prior to such transaction Beneficially Own, directly or indirectly, shares of the voting stock representing at least a majority of the total voting power of all outstanding classes of voting stock of the Corporation or of the continuing, surviving or transferee person (or any parent thereof) immediately after giving effect to such transaction (all such terms having the meanings ascribed thereto in publicly-traded convertible securities of corporate issuers in the U.S. securities markets).

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“Class B Common Stock” shall mean the Class B Common Stock, par value $0.001 per share, of the Corporation.

“Closing Price” shall mean, for any date, the closing price per security for the securities in question for such date (or, if not a Trading Day, the nearest preceding date that is a Trading Day) on the primary Eligible Market or exchange or quotation system on which the securities in question are then listed or quoted.

“Common Shares” shall mean shares of any capital stock of any class or series of the Corporation (including, on the Issue Date, the Class A Common Stock, par value $0.001 per share, of the Corporation) which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, subject to the provisions of Section 6, shares issuable upon conversion of Series D-2 Preferred Shares shall include only shares of the class of capital stock of the Corporation designated as Class A Common Stock, par value $0.00l per share, of the Corporation on the Issue Date or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation.

“Common Share Events” shall have the meaning set forth in Section 6(e)(i).

“Constituent Person” shall have the meaning set forth in Section 6(f).

“Continuation Right” shall have the meaning set forth in Section 4(b).

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

“Conversion Price” shall mean the Initial Conversion Price, as adjusted from time to time in accordance with the terms hereof.

“Corporation” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Corporation Conversion Election Date” shall have the meaning set forth in Section 6(b)(ii).

“Corporation Conversion Election Notice” shall have the meaning set forth in Section 6(b)(ii).

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“Corporation Redemption Closing Date” shall have the meaning set forth in Section 5(a).

“Corporation Redemption Date” shall mean December 12, 2022, March 12, 2023, June 12, 2023, and September 12, 2023 and each successive anniversary of such dates.

“Corporation Redemption Notice” shall have the meaning set forth in Section 5(a).

“Current Market Price” shall mean, with respect to the Common Shares, on any date specified herein, the average of the Market Price during the period of the most recent ten (10) consecutive Trading Days ending on such date.

“Distributed Securities” shall mean rights, options or warrants to subscribe for or purchase any securities of the Corporation, other than those rights, options and warrants referred to in and treated under Section 6(e)(ii).

“Dividend Payment Date” shall mean, with respect to each Dividend Period, the eleventh (11^th) calendar day of each of January, April, July and October, commencing on October 11, 2015; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the first Business Day immediately following such Dividend Payment Date.

“Dividend Payment Record Date” shall have the meaning set forth in Section 3(a).

“Dividend Periods” shall mean quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on the Issue Date and end on and include September 30, 2015).

“Eligible Market” shall mean any of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board.

“Exchange Act” shall mean the Securities Exchange Act of 1934, and any statute successor thereto, in each case as amended from time to time.

“FINRA” shall mean Financial Industry Regulatory Authority, Inc.

“FINRA Approval” shall have the meaning set forth in Section 7.

“GAAP” shall mean generally accepted accounting principles (GAAP), as in effect from time to time; provided, however, that any lease that is recharacterized as a capital lease and any obligations that are recharacterized as Capital Lease Obligations, in each case due to a change in GAAP after the Issue Date shall not be treated as a capital lease or Capital Lease Obligation, as the case may be, but shall instead be treated as it would have been in accordance with GAAP in effect on the Issue Date.

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“General Corporation Law” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Group Member” means any member of a “group” as such term is used in Regulation 13D under the Securities Act.

“Hedging Agreement” shall mean any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.

“holder” of Series D-2 Preferred Shares shall mean the stockholder in whose name such Series D-2 Preferred Shares are registered in the stock books of the Corporation.

“Holder Conversion Election Date” shall have the meaning set forth in Section 6(b)(i).

“Holder Conversion Election Notice” shall have the meaning set forth in Section 6(b)(i).

“Holder Redemption Closing Date” shall have the meaning set forth in Section 5(b).

“Holder Redemption Date” shall mean December 12, 2022, and each successive anniversary of such date.

“Holder Redemption Notice” shall have the meaning set forth in Section 5(b).

“Indebtedness” of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments representing extensions of credit, (c) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding (i) trade accounts payable and accrued obligations incurred in the ordinary course of business, (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (iii) obligations resulting from take-or-pay contracts entered into in the ordinary course of business)); (d) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person (including all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person (excluding trade accounts payable and other accrued obligations, in each case incurred in the ordinary course of business)), whether or not the obligations secured thereby have been assumed, but limited to the lower of (i) the fair market value of such property and (ii) the amount of the Indebtedness so secured, (e) all guarantees by such Person of obligations of others of the type referred to in clauses (a), (b), (c) or (f) of this defined term, (f) all Capital Lease Obligations of such Person, (g) net obligations of such Person under any Hedging Agreements, valued at the Agreement Value thereof, (h) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, and (i) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances, in each case, if and to the extent that any of the foregoing indebtedness (other than under the Hedging Agreements) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer, to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness do not provide that such Person is liable therefor.

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“Initial Conversion Price” shall mean $5.00.

“Issue Date” shall mean the date on which any Series D-2 Preferred Shares are issued and sold.

“Junior Shares” shall have the meaning set forth in Section 9.

“Liquidation” shall mean (A) a dissolution or winding up of the Corporation, whether voluntary or involuntary, (B) a consolidation or merger of the Corporation with and into one or more entities which are not Affiliates of the Corporation which results in a Change of Control, or (C) a sale or transfer of all or substantially all of the Corporation’s assets other than to an Affiliate of the Corporation.

“Liquidation Preference” shall mean (A) Twenty-Five Dollars ($25.00) in cash per Series D-2 Preferred Share plus (B) all accrued and unpaid dividends added thereto in accordance with Section 3(a).

“LTM Adjusted EBITDA” shall mean net income on a consolidated basis for the Corporation and its Subsidiaries, plus interest expense, plus tax expense, plus depreciation and amortization expense, plus employee share-based compensation expense, plus acquisition and integration related expenses, and plus equity issuance and related offering costs, in each case, for the trailing 12 calendar months (“Adjusted EBITDA”), and plus, without duplication, the Acquired EBITDA of any Pro Forma Entity acquired by the Corporation or a Subsidiary during such period to the extent not subsequently disposed by the Corporation, and calculated as if such acquisition occurred on the first day of such period with adjustments made through the date of acquisition.

“Luxor” shall mean Luxor Capital Group LP.

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“Luxor Group” shall mean Luxor together with any of its Affiliates that own Series D-2 Preferred Shares.

“Mandatory Conversion” shall have the meaning set forth in Section 6(a)(ii).

“Mandatory Conversion Right” shall have the meaning set forth in Section 6(a)(ii).

“Market Price” shall mean, with respect to the Common Shares on any date, the last reported sales price, regular way on such day, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way on such day, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Common Shares are not listed or admitted for trading on NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted for trading or, if the Common Shares are not listed or admitted for trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if the Common Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker regularly making a market in the Common Shares selected for such purpose by the Board of Directors or, if there is no such professional market maker, such amount as an independent investment banking firm selected by the Board of Directors determines to be the value of a Common Share.

“Merger Liquidation” shall have the meaning set forth in Section 4(b).

“Non-Electing Share” shall have the meaning set forth in Section 6(f).

“NYSE” shall mean the New York Stock Exchange.

“Optional Conversion” shall have the meaning set forth in Section 6(a)(i).

“Optional Conversion Right” shall have the meaning set forth in Section 6(a)(i).

“Parity Shares” shall have the meaning set forth in Section 9.

“Person” shall mean any individual, firm, partnership, corporation, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Stock” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“Pro Forma Entity” shall have the meaning set forth in the definition of Acquired EBITDA.

“Redemption” shall mean any redemption of Series D-2 Preferred Shares pursuant to Section 5.

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“Redemption Price” shall mean the product of (a) the number of Series D-2 Preferred Shares held by a holder of Series D-2 Preferred Shares being redeemed at any applicable time and (b) the Liquidation Preference plus an amount equal to all accrued and unpaid dividends thereon from the date immediately following the immediately preceding Dividend Payment Date to the applicable redemption date.

“SEC” shall mean the U.S. Securities and Exchange Commission.

“Senior Shares” shall have the meaning set forth in Section 9.

“Series B Preferred Shares” shall mean shares of the Corporation’s 11% Series B Preferred Stock, par value $0.001 per share.

“Series C Preferred Shares” shall mean shares of the Corporation’s 7% Series C Convertible Preferred Stock, par value $0.001 per share.

“Series D-1 Preferred Shares” shall mean shares of the Corporation’s 11% Series D-1 Preferred Stock, par value $0.001 per share.

“Series D-2 Preferred Shares” shall have the meaning set forth in Section 1.

“Series D-2 Preferred Stock” shall have the meaning set forth in the introductory paragraph of this Certificate of Designation.

“set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of a dividend or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of shares of capital stock of the Corporation; provided, however, that if any funds for any class or series of Junior Shares or any class or series of Parity Shares are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Series D-2 Preferred Shares shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.

“Shares” shall mean the total number of shares of stock that the Corporation shall have authority to issue pursuant to Section 4.01 of the Certificate of Incorporation.

“Spin-Off” shall have the meaning set forth in Section 6(e)(iii).

“Subsidiary” or “subsidiary” of any Person shall mean and include (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through subsidiaries, and (b) any limited liability company, partnership, association, joint venture or other entity in which such Person directly or indirectly through subsidiaries has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Corporation.

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“Trading Day” shall mean any day on which the securities in question are traded on the NYSE or, if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted for trading.

“Trading Market” shall mean whichever of the NYSE, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the securities in question are listed or quoted for trading on the date in question.

“Transaction” shall have the meaning set forth in Section 6(f).

“VWAP” shall mean the dollar volume-weighted average price for the securities in question on its Trading Market during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Trading Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as the Trading Market publicly announces is the official close of trading), as reported by Bloomberg, L.P. through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Trading Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City Time (or such other time as the Trading Market publicly announces is the official close of trading), as reported by Bloomberg, L.P., or, if no dollar volume-weighted average price is reported for such security by Bloomberg, L.P. for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the VWAP cannot be calculated for the securities in question on a particular date on any of the foregoing bases, the VWAP of the securities in question shall be the fair market value of the securities in question on such date as determined by the Board of Directors in good faith.

3. Dividends.

(a)          The holders of Series D-2 Preferred Shares shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends per Series D-2 Preferred Share payable in cash at the applicable Annual Dividend Rate; provided, however, that if any dividend payable on any Dividend Payment Date is not paid in full in cash on such Dividend Payment Date, the amount payable as dividends on such Dividend Payment Date that is not paid in cash on such Dividend Payment Date shall automatically, without any further action by the Corporation, be added to the Liquidation Preference on the relevant Dividend Payment Date at the Annual Dividend Rate applicable with respect to dividends not paid in cash. Each such dividend payable in cash shall be payable in arrears to the holders of record of the Series D-2 Preferred Shares, as they appear on the stock records of the Corporation at the close of business on each record date, which shall not be more than 30 days preceding the applicable Dividend Payment Date (the “Dividend Payment Record Date”), as shall be fixed by the Board of Directors. The amount of accrued and unpaid dividends on any Series D-2 Preferred Stock at any date shall be the amount of any dividends thereon, calculated at the applicable Annual Dividend Rate, to and including such date, whether or not earned or declared, which have not been paid; provided that an amount equal to any dividend that was not paid in cash on any applicable Dividend Payment Date shall be added to the Liquidation Preference in accordance with this Section 3(a) and such dividend not paid in cash and so added shall not be considered as an accrued and unpaid dividend for any purposes hereof.

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(b)          The amount of dividends payable based on the Annual Dividend Rate for each full Dividend Period for the Series D-2 Preferred Shares shall be computed by dividing the applicable Annual Dividend Rate by four (4). The amount of dividends payable for the initial Dividend Period, or any other period shorter or longer than a full Dividend Period, on the Series D-2 Preferred Shares shall be computed on the basis of four 90-day quarters and a 360-day year. Holders of Series D-2 Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of the dividends on the Series D-2 Preferred Shares as herein provided.

(c)          All dividends paid with respect to Series D-2 Preferred Shares shall be paid pro rata.

(d)          So long as any Series D-2 Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared and paid or set apart for payment on any series or class or classes of Parity Shares for any period unless full accrued and unpaid dividends have been or contemporaneously are authorized and declared and paid in cash or authorized and declared and a sum sufficient for the payment thereof set apart for such payment on the Series D-2 Preferred Shares for the immediately preceding Dividend Period and on the Parity Shares for the immediately preceding dividend period applicable to the Parity Shares. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, for the Dividend Period referred to in the immediately preceding sentence, then all dividends authorized and declared upon Series D-2 Preferred Shares and all dividends authorized and declared upon any other series or class or classes of Parity Shares shall be authorized and declared ratably in proportion to the respective amounts of dividends accrued and unpaid on the Series D-2 Preferred Shares and such class or classes or series of Parity Shares.

(e)          So long as any Series D-2 Preferred Shares are outstanding, no dividends shall be authorized and declared and paid or set apart for payment and no other distribution shall be authorized and declared and made upon Junior Shares (other than dividends or other distributions paid solely in Junior Shares, or options, warrants or rights to subscribe for or purchase Junior Shares), nor shall any Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys to be paid to or made available for a sinking fund for the redemption of any shares of such stock) by the Corporation, directly or indirectly (except by conversion or exercise into or exchange for Junior Shares), unless in each case the full accrued and unpaid dividends on all outstanding Series D-2 Preferred Shares shall have been paid in cash and on any other Parity Shares shall have been previously paid for the immediately preceding Dividend Period and the immediately preceding dividend period applicable to the Parity Shares.

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(f)          In any case where any Dividend Payment Date shall not be a Business Day, then (notwithstanding any other provision of this Certificate of Designation) payment of dividends need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Dividend Payment Date; provided, however, that no interest shall accrue on such amount of dividends for the period from and after such Dividend Payment Date.

4. Liquidation Preference.

(a)          In the event of any Liquidation, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares, the holders of Series D-2 Preferred Shares shall be entitled (subject to the Continuation Right of such holders described below) to receive an amount equal to the greater of: (i) the Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of the final distribution to such holder; and (ii) an amount per Series D-2 Preferred Share equal to the amount or consideration which would have been payable had each Series D-2 Preferred Share been converted into Common Shares pursuant to Section 6 hereof immediately prior to such Liquidation. Until the holders of the Series D-2 Preferred Shares have been paid the amount specified in the first sentence of this Section 4(a) in full, no payment will be made to any holder of Junior Shares upon Liquidation. If, upon any such Liquidation, the assets of the Corporation, or proceeds thereof, distributable among the holders of Series D-2 Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series D-2 Preferred Shares and such other Parity Shares ratably in accordance with the amounts that would be payable on such Series D-2 Preferred Shares and such other Parity Shares if all amounts payable thereon were paid in full.

(b)          In connection with a Merger Liquidation (as defined below), each holder of Series D-2 Preferred Shares shall have the right (a “Continuation Right”) to elect, by delivering written notice to the Corporation not less than five (5) Business Days prior to the Merger Liquidation, to require the Corporation to make provision for such holder’s Series D-2 Preferred Shares to be assumed by the surviving entity as described in Section 6(f); provided, however, notwithstanding the election by any of the holders of the Series D-2 Preferred Shares of the Continuation Right, the Corporation shall have the right, in connection with any Merger Liquidation, to elect, by delivering written notice to the holders of Series D-2 Preferred Shares at any time prior to the Merger Liquidation, to redeem any or all of the outstanding Series D-2 Preferred Shares for an amount per Series D-2 Preferred Share equal to the amount specified in the Section 4(a). A “Merger Liquidation” shall be a Liquidation which constitutes a consolidation or merger of the Corporation with one or more entities that are not Affiliates of the Corporation and as a result of which the Corporation is not the surviving entity. Upon a merger or consolidation of the Corporation with one or more entities that are Affiliates of the Corporation, the Corporation shall make provision for the Series D-2 Preferred Shares to be assumed by the surviving entity as described in Section 6(f).

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(c)          Notice of any Liquidation shall be given by mail, postage prepaid, not less than fifteen (15) days prior to the distribution or payment date stated therein, to each holder of record of Series D-2 Preferred Shares appearing on the stock books of the Corporation as of the date of such notice at the address of said holder shown therein. Such notice shall state a distribution or payment date, the amount to be paid pursuant to Section 4(a) and the place where such amount shall be distributable or payable.

(d)          After the payment in cash to the holders of Series D-2 Preferred Shares of the full amount specified in the Section 4(a) with respect to outstanding Series D-2 Preferred Shares, the holders of outstanding Series D-2 Preferred Shares shall have no right or claim, based on their ownership of Series D-2 Preferred Shares, to any of the remaining assets of the Corporation. Subject to the rights of the holders of any Parity Shares, upon any Liquidation of the Corporation, after payment shall have been made in full to the holders of Series D-2 Preferred Shares and any Parity Shares, as provided in this Section 4, any other series or class or classes of Junior Shares shall, subject to the respective terms thereof, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series D-2 Preferred Shares and any Parity Shares as such shall not be entitled to share therein.

5. Redemption.

(a)          Subject to Section 5(c), but not prior to December 12, 2022, the Corporation, at its option, shall have the right to redeem, on any Corporation Redemption Date, in whole or in part, Series D-2 Preferred Shares by providing, not less than 30 days prior to a Corporation Redemption Closing Date, written notice to each holder of its intent to redeem the Series D-2 Preferred Shares (each, a “Corporation Redemption Notice”) which will specify the number of Series D-2 Preferred Shares to be redeemed and the date set for such redemption, which date shall be no more than thirty (30) days after the Corporation Redemption Notice (the “Corporation Redemption Closing Date”); provided, however, that if such Redemption would result in the holders of Series D-2 Preferred Shares owning after such Corporation Redemption Closing Date Series D-2 Preferred Shares with an aggregate Liquidation Preference of less than $4,166,666.67 in the aggregate, then the Corporation shall be required to redeem all (and not less than all) of the Series D-2 Preferred Shares. Subject to Section 5(c), any such Redemption shall be paid in cash on the Corporation Redemption Closing Date, for the Series D-2 Preferred Shares specified in the Corporation Redemption Notice in an amount equal to the Redemption Price.

(b)          Subject to Section 5(c), but not prior to December 12, 2022, each holder, at its option, shall have the right, in its sole discretion, to require the Corporation to redeem, on any Holder Redemption Date, in whole or in part, its Series D-2 Preferred Shares by providing written notice to the Corporation of its intent to cause the Corporation to redeem such holder’s Series D-2 Preferred Shares (each, a “Holder Redemption Notice”) which will specify (i) the name of the holder delivering such Holder Redemption Notice, (ii) the number of Series D-2 Preferred Shares to be redeemed, and (iii) that such holder is exercising its option, pursuant to this Section 5, to require the Corporation to redeem shares of Series D-2 Preferred Shares held by such holder. The Corporation shall, within fifteen (15) Business Days of receipt of such Holder Redemption Notice, deliver to the holder exercising its rights to require redemption of the Series D-2 Preferred Shares a notice specifying the date set for such redemption, which date shall be no more than ninety (90) days after the Holder Redemption Notice (the “Holder Redemption Closing Date”). Subject to Section 5(c), any such Redemption shall be paid in cash on the Holder Redemption Closing Date, for the Series D-2 Preferred Shares specified in the Holder Redemption Notice in an amount equal to the Redemption Price.

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(c)          Any Redemption shall be paid only out of any cash or surplus available therefor under applicable Delaware law (including any cash or surplus made available as a result of any revaluation or otherwise in accordance with the terms of this Section 5(c)), and, if there is not a sufficient amount of cash or surplus available, then out of the remaining assets of the Corporation available therefor under applicable Delaware law (valued at the fair market value thereof on the date of payment, as determined by the Board of Directors). In connection with a Redemption, the Corporation shall take all actions required or permitted under Delaware law to permit the Redemption of the Series D-2 Preferred Shares, including, without limitation, through the revaluation of its assets in accordance with Delaware law, to make funds available under applicable Delaware law for such Redemption or to determine the existence of sufficient surplus, and the Corporation shall apply all of its assets to any such Redemption except to the extent prohibited by Delaware law governing dividends to stockholders and redemption or repurchase of capital stock.

(d)          In the case of any Redemption, the rights of the holders of such Series D-2 Preferred Shares subject to Redemption shall cease only upon the payment in full of the Redemption Price. Until the payment in full of the Redemption Price to such holder, the Series D-2 Preferred Shares of such holder shall be deemed to be outstanding and such holder shall retain all rights with respect thereto, including the conversion rights as set forth in Section 6 hereof.

(e)          Whenever any shares of Series D-2 Preferred Stock are redeemed by the Corporation pursuant to this Section 5, the Corporation shall take all action as may be necessary to retire such redeemed shares and to cause such redeemed shares to resume the status of authorized and unissued preferred stock, without designation as to series.

6. Conversion.

(a)          Subject to the terms and conditions contained in this Section 6, the Series D-2 Preferred Shares shall be convertible as follows:

(i)           from and after the Issue Date, the holders of Series D-2 Preferred Shares shall have the right, at their option (the “Optional Conversion Right”), to convert some or all of their Series D-2 Preferred Shares as set forth in the Holder Conversion Election Notice (as defined below) into the number of fully paid and non-assessable Common Shares obtained by dividing the aggregate Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of conversion of such specified Series D-2 Preferred Shares by the Conversion Price (each an “Optional Conversion”); and

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(ii)         at any time following the date that is twenty-four (24) months following the Issue Date, provided that for the previous 30 consecutive full Trading Days prior to the Corporation Conversion Election Date (A) both the one-day VWAP and the daily Closing Price of a Common Share are each in excess of $50.66 (as adjusted for Common Share Events) and (B) Common Shares with an aggregate value of at least $10,000,000 have been traded on the Trading Market on each of such 30 consecutive full Trading Days, the Corporation shall have the right, at its option (the “Mandatory Conversion Right”), to convert up to such number of the outstanding shares of Series D-2 Preferred Shares as otherwise permitted under Section 7 into the number of fully paid and non-assessable Common Shares obtained by dividing the aggregate Liquidation Preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding Dividend Payment Date to the date of conversion of such Series D-2 Preferred Shares by the Conversion Price (the “Mandatory Conversion”); provided, however, such Mandatory Conversion Right may not be exercised by the Corporation more than two (2) times in any twelve (12) month period.

(b)          Any Optional Conversion or the Mandatory Conversion shall be subject to the following terms and conditions, as applicable:

(i)          In order to exercise the Optional Conversion Right, the holder of Series D-2 Preferred Shares shall send a written notice to the Corporation (the “Holder Conversion Election Notice”) stating that the holder thereof has elected to convert Series D-2 Preferred Shares. The Holder Conversion Election Notice shall also state the number of Series D-2 Preferred Shares such holder wishes to convert and the number of Common Shares to be issued by the Corporation to such holder pursuant to the Optional Conversion. The holder of Series D-2 Preferred Shares shall include with the Holder Conversion Election Notice the certificate or certificates representing the Series D-2 Preferred Shares to be converted duly endorsed or assigned to the Corporation or in blank. As promptly as practicable, but in no event later that fifteen (15) Business Days, following receipt of a Holder Conversion Election Notice and the certificate or certificates representing the Series D-2 Preferred Shares to be converted, the Corporation shall (or shall cause a transfer agent for the Common Shares to) issue and shall deliver a certificate or certificates for the number of full Common Shares issuable upon such Optional Conversion, together with payment in lieu of any fraction of a share, as provided in Section 6(d), to such holder. If fewer than all the Series D-2 Preferred Shares represented by a certificate delivered to the Corporation pursuant to this Section 6(b)(i) are to be converted pursuant to a Holder Conversion Election Notice, upon such conversion the Corporation shall (or shall cause a transfer agent for the Series D-2 Preferred Shares to) also issue and deliver to the holder of Series D-2 Preferred Shares a new certificate representing the Series D-2 Preferred Shares not so converted.

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(ii)         In order to exercise the Mandatory Conversion Right, the Corporation shall send a written notice to the holders of Series D-2 Preferred Shares (the “Corporation Conversion Election Notice”) that the Corporation has elected to exercise the Mandatory Conversion Right and convert such Series D-2 Preferred Shares (the date of such written notice, the “Corporation Conversion Election Date”) and which shall include the one-day VWAP, daily Closing Price and the trading volume of the Common Shares for the 30 full Trading Days preceding the date of the Corporation Conversion Election Notice, and the number of Common Shares to be issued in the Mandatory Conversion. Following the receipt of the Corporation Conversion Election Notice, the applicable holder of Series D-2 Preferred Shares shall surrender to the Corporation the certificate or certificates representing the Series D-2 Preferred Shares so converted, duly endorsed or assigned to the Corporation or in blank. As promptly as practicable, but in no event later than fifteen (15) Business Days, following receipt of the certificate or certificates representing the Series D-2 Preferred Shares converted in the Mandatory Conversion, the Corporation shall (or shall cause a transfer agent for the Common Shares to) issue and deliver, a certificate or certificates for the number of full shares of Common Shares issuable upon such Mandatory Conversion, together with payment in lieu of any fraction of a share, as provided in Section 6(d), to the holders entitled to receive the same. Notwithstanding anything in this Section 6(b)(ii) to the contrary but subject to the limitations set forth in Section 7, upon the close of business on the Corporation Conversion Election Date, the number Series D-2 Preferred Shares converted in the Mandatory Conversion shall automatically be deemed converted into Common Shares, which Common Shares shall be deemed to be outstanding of record, and all rights with respect to such Series D-2 Preferred Shares so converted, including any rights, if any, to receive notices and vote (other than as holders of Common Shares), will terminate, except for the right to receive the number of Common Shares into which such Series D-2 Preferred Shares have been converted.

(iii)        Unless the Common Shares issuable on an Optional Conversion or Mandatory Conversion are to be issued in the same name as the name in which such Series D-2 Preferred Shares are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or such holder’s duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).

(iv)        Holders of Series D-2 Preferred Shares at the close of business on any Dividend Payment Record Date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof (in addition to any accrued and unpaid dividends to the date of conversion) following such Dividend Payment Record Date and prior to such Dividend Payment Date. A holder of Series D-2 Preferred Shares on a Dividend Payment Record Date whose Series D-2 Preferred Shares are thereafter converted into Common Shares on or before such Dividend Payment Date will receive the dividend payable by the Corporation on such Series D-2 Preferred Shares on such Dividend Payment Date.

(c)          Each Optional Conversion shall be deemed to have been effected immediately prior to the close of business on the date the Corporation receives the Holder Conversion Election Notice and related stock certificates (the date of such receipt by the Corporation, the “Holder Conversion Election Date”) and the Person or Persons in whose name or names any Common Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the Common Shares represented thereby at such time on such date, and such conversion shall be on such date.

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(d)          No fractional shares or scrip representing fractions of Common Shares shall be issued upon conversion of the Series D-2 Preferred Shares. Instead of any fractional interest in a Common Share that would otherwise be deliverable upon the conversion of a Series D-2 Preferred Share, the Corporation shall pay to the holder of such Series D-2 Preferred Share an amount in cash based upon the Current Market Price of a Common Share on the Trading Day immediately preceding the Holder Conversion Election Date or Corporation Conversion Election Date, as applicable. If more than one Series D-2 Preferred Share shall be converted at one time by the same holder, the number of full Common Shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of Series D-2 Preferred Shares so converted.

(e)          The Conversion Price shall be adjusted from time to time as follows:

(i)          If, after the Issue Date, the Corporation (A) pays a dividend or makes a distribution on its shares of capital stock in Common Shares, (B) subdivides its outstanding Common Shares into a greater number of shares, (C) combines its outstanding Common Shares into a smaller number of shares or (D) issues any shares of capital stock by reclassification of its Common Shares (the events set forth in clauses (A), (B), (C) and (D) above being hereinafter referred to as the “Common Share Events”), the Conversion Price shall be adjusted so that the holder of any Series D-2 Preferred Share thereafter converted shall be entitled to receive the number of Common Shares that such holder would have owned or have been entitled to receive after the happening of any Common Share Event had such Series D-2 Preferred Share been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately upon the opening of business on the day next following the record date (subject to paragraph (f) below) in the case of a dividend or distribution and shall become effective immediately upon the opening of business on the day next following the effective date in the case of a subdivision, combination or reclassification.

(ii)         If, after the Issue Date, the Corporation issues rights, options or warrants to all holders of Common Shares entitling them (for a period expiring within 45 days after the record date mentioned below in this subparagraph (ii)) to subscribe for or purchase Common Shares at a price per share less than the Current Market Price per Common Share on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Conversion Price shall be adjusted to equal the price determined by multiplying (A) the Conversion Price in effect at such time by (B) a fraction, the numerator of which shall be the sum of (I) the number of Common Shares outstanding on the close of business on the date fixed for such determination and (II) the number of Common Shares that the aggregate proceeds to the Corporation from the exercise of such rights, options or warrants for Common Shares would purchase at such Current Market Price, and the denominator of which shall be the sum of (I) the number of Common Shares outstanding on the close of business on the date fixed for such determination and (II) the number of additional Common Shares offered for subscription or purchase pursuant to such rights, options or warrants. Such adjustment shall become effective immediately upon the opening of business on the day next following such record date (subject to paragraph (f) below). In determining whether any rights, options or warrants entitle the holders of Common Shares to subscribe for or purchase Common Shares at less than such Current Market Price, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined by the Board of Directors, whose determination shall be conclusive, absent manifest error.

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(iii)        If the Corporation distributes to all holders of its Common Shares any shares of capital stock of the Corporation (other than Common Shares), cash, assets, evidence of its indebtedness, or Distributed Securities, then in each case the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (A) the Conversion Price in effect at such time by (B) a fraction, the numerator of which shall be the Current Market Price per Common Share on the date fixed for the determination of the stockholders entitled to receive such distribution less the then fair market value (as determined by the Board of Directors, or a committee thereof, whose determination shall be conclusive, absent manifest error and subject to the adjustment for Spin-Offs set forth herein) of the portion of such shares of capital stock, cash, assets or evidences of indebtedness or Distributed Securities applicable to one Common Share, and the denominator of which shall be the Current Market Price per Common Share on the record date mentioned below. Such adjustment shall become effective immediately upon the opening of business on the day next following (subject to paragraph (f) below) the record date for the determination of stockholders entitled to receive such distribution. For the purposes of this subparagraph (iii), the distribution of a Distributed Security, which is distributed not only to the holders of the Common Shares on the date fixed for the determination of stockholders entitled to such distribution of such Distributed Security, but also is required to be distributed with each Common Share delivered to a Person converting a Series D-2 Preferred Share after such determination date, shall not require an adjustment of the Conversion Price pursuant to this subparagraph (iii); provided that on the date, if any, on which a Person converting a Series D-2 Preferred Share would no longer be entitled to receive such Distributed Security with a Common Share (other than as a result of the termination of all such Distributed Securities), a distribution of such Distributed Securities shall be deemed to have occurred, and the Conversion Price shall be adjusted as provided in this subparagraph (iii) (and shall be adjusted as of the date fixed for the determination of the stockholders entitled to receive such distribution, with any subsequent adjustments being reapplied as appropriate).

With respect to an adjustment pursuant to this subparagraph (iii) where there has been a payment of a dividend or other distribution on the Common Shares of shares of capital stock of any class or series, or similar equity interest, of or relating to a subsidiary of the Corporation or other business unit of the Corporation (a “Spin-Off”), then if the VWAP of the capital stock or similar equity interest distributed to holders of Common Shares applicable to one Common Share over the 10 consecutive Trading Day period beginning on the fifth trading day after the effective date of the Spin-Off exceeds the fair market value as determined by the Board of Directors, then the Conversion Price shall be re-adjusted using such VWAP as the fair market value.

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The occurrence of a distribution or the occurrence of any other event as a result of which holders of Series D-2 Preferred Shares shall not be entitled to receive rights, including exchange rights (the “Rights”), pursuant to any stockholders protective rights agreement that may be adopted by the Corporation as if such holders had converted such shares into Common Shares immediately prior to the occurrence of such distribution or event shall not be deemed a distribution of Distributed Securities for the purposes of any Conversion Price adjustment pursuant to this subparagraph (iii) or otherwise give rise to any Conversion Price adjustment pursuant to this Section 6; provided, however, that in lieu of any adjustment to the Conversion Price as a result of any such distribution or occurrence, the Corporation shall make provision so that Rights, to the extent issuable at the time of conversion of any Series D-2 Preferred Shares into Common Shares, shall issue and attach to such Common Shares then issued upon conversion in the amount and manner and to the extent and as provided in such stockholders protective rights agreement.

(iv)        If, at any time or from time to time after the Issue Date, the Corporation issues or sells any Common Shares (other than in connection with any underwritten public offering and issuances to unaffiliated third parties for an acquisition on an arm’s-length basis) (“Additional Shares”) for a consideration per share that is less than the Current Market Price on the Business Day immediately preceding the earlier of the issuance or sale, or public announcement of the issuance or sale, of such Additional Shares, then the Conversion Price shall be reduced to an amount determined by multiplying the Conversion Price in effect at such time by a fraction of which (x) the numerator is the sum of (i) the product of (A) the number of Common Shares outstanding immediately prior to such issuance or sale multiplied by (B) the greater of (1) the Conversion Price in effect at such time and (2) the Closing Price on the date preceding the earlier of the issuance or sale or public announcement of the issuance or sale of such Additional Shares (the greater of (1) and (2) above hereinafter referred to as the “Adjustment Price”) and (ii) the aggregate consideration receivable by the Corporation for the total number of Common Shares so issued or sold, and (y) the denominatorequals the product of (i) the sum of (A) the total number of Common Shares outstanding immediately prior to such issuance or sale and (B) the numberof additional Common Shares issued or sold, multiplied by (ii) theAdjustment Price. An adjustment made pursuant to this subparagraph (iv) shall be made on the next Business Day following the date on which any such issuance or sale is made and shall be effective retroactively to the close of business on the date of such issuance or sale.

(v)         Other than adjustments for cash dividends paid on Common Shares pursuant to Section 6(e)(iii) above, no adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; provided, however, that any adjustments that by reason of this subparagraph (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided further, however that any adjustment shall be required and made in accordance with the provisions of this Section 6 (other than this subparagraph (v)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of Common Shares. Notwithstanding any other provisions of this Section 6, the Corporation shall not be required to make any adjustment of the Conversion Price for (A) the issuance of any Common Shares pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in Common Shares under such plan, or (B) the issuance of any Common Shares or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation. All calculations under this Section 6 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (e) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such adjustments in the Conversion Price, in addition to those required by this paragraph (e), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights, options or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable.

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(f)          If the Corporation becomes party to any transaction (including without limitation a merger, consolidation, self-tender offer for all or substantially all Common Shares outstanding or recapitalization of the Common Shares but excluding any Common Share Events (each of the foregoing being referred to herein as a “Transaction”)), in each case as a result of which Common Shares shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each Series D-2 Preferred Share that is not redeemed or converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of Common Shares into which one Series D-2 Preferred Share was convertible immediately prior to such Transaction, assuming such holder of Common Shares (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be (a “Constituent Person”), or an Affiliate of a Constituent Person and (ii) failed to exercise his or her rights of the election, if any, as to the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each Common Share held immediately prior to such Transaction by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised (“Non-Electing Share”), then for the purpose of this paragraph (f) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (f), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Series D-2 Preferred Shares that will contain provisions enabling the holders of the Series D-2 Preferred Shares that remain outstanding after such Transaction to convert their Series D-2 Preferred Shares into the consideration received by holders of Common Shares at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (f) shall similarly apply to successive Transactions.

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(g)          If:

(i)          the Corporation pays a dividend on (or makes any other distribution on or repurchases) the Common Shares; or

(ii)         the Corporation grants to the holders of the Common Shares rights, options or warrants to subscribe for or purchase any shares of any class or any other rights, options or warrants (other than Rights to which the second paragraph of subparagraph (e)(iii) of this Section 6 applies); or

(iii)        there shall occur any reclassification of the Common Shares (other than an event to which subparagraph (e)(i) of this Section 6 applies) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a self-tender offer by the Corporation for all or substantially all of its outstanding Common Shares, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety and for which approval of any stockholders of the Corporation is required; or

(iv)        there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation,

then the Corporation shall cause to be prepared and delivered to the holders of the Series D-2 Preferred Shares at their addresses as shown on the stock records of the Corporation, as promptly as possible, but at least fifteen (15) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Shares of record to be entitled to such dividend, distribution or grant of rights, options or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, self-tender offer, sale, transfer, liquidation, dissolution or winding up is expected to become effective, and the date as of which it is expected that holders of Common Shares of record shall be entitled to exchange their Common Shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, self-tender offer, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 6.

(h)          Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly prepare and deliver to the holders of the Series D-2 Preferred Shares a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date of such adjustment and an officer’s certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. The Corporation shall mail such notice and such certificate to the holders of each Series D-2 Preferred Share at such holder’s last address as shown on the stock records of the Corporation.

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(i)          In any case in which paragraph (e) of this Section 6 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any Series D-2 Preferred Share converted after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event over and above the Common Shares issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (f) of this Section 6.

(j)          There shall be no adjustment of the Conversion Price in case of the issuance of any shares of capital stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 6. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 6, only one adjustment shall be made, and such adjustment shall be the amount of adjustment that has the highest absolute value.

(k)          If the Corporation takes any action affecting the Common Shares, other than action described in this Section 6, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of the Series D-2 Preferred Shares, the Conversion Price for the Series D-2 Preferred Shares may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors, in its sole discretion, may determine to be equitable in the circumstances.

(l)          The Corporation will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Shares, for the purpose of effecting conversion of the Series D-2 Preferred Shares, the full number of Common Shares deliverable upon the conversion of all outstanding Series D-2 Preferred Shares not theretofore converted. For purposes of this paragraph (l), the number of Common Shares that shall be deliverable upon the conversion of all outstanding shares of Series D-2 Preferred Shares shall be computed as if at the time of computation all such outstanding shares were held by a single holder.

(m)          The Common Shares issued by the Corporation in an Optional Conversion or Mandatory Conversion, as applicable shall, upon issuance to such holder, be freely transferrable whether pursuant to Rule 144 without any volume limitations or issued pursuant to an effective registration statement. Any Common Shares issued upon conversion of the Series D-2 Preferred Shares shall be validly issued, fully paid and non-assessable. Before taking any action that would cause an adjustment reducing the Conversion Price below the then-par value of the Common Shares deliverable upon conversion of the Series D-2 Preferred Shares, the Corporation shall take any corporate action that, in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable Common Shares at such adjusted Conversion Price. The Corporation shall endeavor to list the Common Shares required to be delivered upon conversion of the Series D-2 Preferred Shares, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding Common Shares are listed at the time of such delivery.

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(n)          The Corporation shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Common Shares or other securities or property on conversion of the Series D-2 Preferred Shares pursuant hereto; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of any Common Shares or other securities or property in a name other than that of the holder of the Series D-2 Preferred Shares to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid.

(o)          If the Conversion Price is adjusted from time to time in accordance with this Section 6 as the result of an event that alters the number of outstanding Common Shares (or an event in connection with which the Corporation issues any rights, options or warrants or other securities that, upon exercise or conversion (or otherwise), and such issuance would then alter the number of outstanding Common Shares), then the number of Common Shares issuable hereunder shall be adjusted by multiplying (A) the Common Shares issuable hereunder at such time by (B) a fraction, the numerator of which shall be the Conversion Price (prior to such adjustment) and the denominator of which shall be the Conversion Price (following such adjustment).

7. Ownership Limits

(a)          At any time when a holder of Series D-2 Preferred Shares that is a member of the Luxor Group then Beneficially Owns 9.9% or less, but greater than 4.9%, of the Common Shares outstanding and notwithstanding any other provision contained herein or in the Certificate of Incorporation, in no event will such holder of Series D-2 Preferred Shares be allowed to accept Common Shares issuable upon conversion of the Series D-2 Preferred Shares (taking into account Common Shares owned by any Person deemed to be, with respect to such shares, a Beneficial Owner and Common Shares issuable upon conversion of the Series D-2 Preferred Shares or otherwise) that, when taken together with the Common Shares otherwise held, collectively exceeds 9.9% of the Common Shares outstanding on the Trading Day immediately preceding the Holder Conversion Election Date or Corporation Conversion Election Date, as applicable (each as appropriately adjusted for share splits, share dividends, combinations, recapitalizations and the like and taking into account the number of Common Shares resulting from such conversion) (the “9.9% Cap”). Each holder of Series D-2 Preferred Shares that is a member of the Luxor Group, on the one hand, and the Corporation, on the other hand, agrees that this provision is for the benefit of such holder and can be waived by such holder of Series D-2 Preferred Shares on 65 days prior written notice to the Corporation.

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(b)          At any time when a holder of Series D-2 Preferred Shares that is a member of the Luxor Group then Beneficially Owns 4.9% or less of the Common Shares outstanding and notwithstanding any other provision contained herein or in the Certificate of Incorporation, in no event will such holder of Series C Preferred Shares be allowed to accept Common Shares issuable upon conversion of the Series D-2 Preferred Shares (taking into account Common Shares owned by any Person deemed to be, with respect to such shares, a Beneficial Owner or Group Member, and Common Shares issuable upon conversion of the Series D-2 Preferred Shares or otherwise) that, when taken together with the Common Shares otherwise held, collectively exceeds 4.9% of the Common Shares outstanding on the Trading Day immediately preceding the Holder Conversion Election Date or Corporation Conversion Election Date, as applicable (each as appropriately adjusted for share splits, share dividends, combinations, recapitalizations and the like and taking into account the number of Common Shares resulting from such conversion) (the “4.9% Cap”). Each holder of Series D-2 Preferred Shares that is a member of the Luxor Group, on the one hand, and the Corporation, on the other hand, agrees that this provision is for the benefit of such holder and can be waived by such holder of Series D-2 Preferred Shares on 65 days prior written notice to the Corporation.

(c)          In no event will a holder of Series D-2 Preferred Shares be allowed to accept Common Shares issuable upon conversion of the Series D-2 Preferred Shares that would result in the ownership of an aggregate number of Common Shares, when taken together with any other Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, in excess of 24.9% of the Common Shares outstanding on the Trading Day immediately preceding the Holder Conversion Election Date (each as appropriately adjusted for share splits, share dividends, combinations, recapitalizations and the like and taking into account the number of Common Shares resulting from such conversion) (the “24.9% Share Cap”), unless such ownership of Common Shares in excess of the 24.9% Share Cap is duly approved in advance by FINRA (such approval, the “FINRA Approval”).

(d) In no event will a holder of Series D-2 Preferred Shares be allowed to accept Common Shares issuable upon conversion of the Series D-2 Preferred Shares until shareholder consent is obtained in accordance with New York Stock Exchange (“NYSE”) rules. ..

8. Voting; Directors; Covenants.

(a)          Except as otherwise set forth herein or in the Certificate of Incorporation or by law specifically provided, the holders of Series D-2 Preferred Shares shall have no voting rights whatsoever. As to matters upon which holders of Series D-2 Preferred Shares are entitled to vote, the holder thereof shall be entitled to one (1) vote per Series D-2 Preferred Share, except in respect of the voting rights set forth in Section 8(b) hereof.

(b)          The holders of the Series D-2 Preferred Shares:

(i)          shall be entitled to vote with the holders of the Common Shares on all matters submitted for a vote of holders of Common Shares (whether at a meeting of such holders or by written consent), voting together with the holders of Common Shares (and not as a separate class or series),

(ii)         shall be entitled to a number of votes equal to the number of votes to which Common Shares issuable upon conversion of the Series D-2 Preferred Shares would have been entitled if such Common Shares had been issued and outstanding at the time of the applicable record date, and

(iii)        shall be entitled to notice of any shareholders meeting in accordance with the Bylaws of the Corporation.

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provided that until the FINRA Approval has been obtained, in no event will a holder of Series D-2 Preferred Shares have a number of votes on any matter submitted for a vote of holders of Common Shares that, when taken together with the votes of any other Preferred Shares and Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, exceeds 24.9% of total number of votes entitled to be voted on such matter; and provided further that until shareholder consent is obtained in accordance with NYSE rules, in no event will a holder of Series D-2 Preferred Shares be entitled to vote the Series D-2 Shares on any matter submitted for a vote of holders of Common Shares

(c)          So long as any Series D-2 Preferred Shares remain outstanding, in addition to any other vote or consent of stockholders required by law or the Certificate of Incorporation, the Corporation shall not, directly or indirectly (including through merger or consolidation with any other corporation) and shall not permit any of its Subsidiaries to, without the affirmative vote at a meeting or the written consent without a meeting of the holders of at least a majority of Series D-1 Preferred Shares and Series D-2 Preferred Shares, voting as a single class (other than Section 8(j)(ii) below, which shall only require the affirmative vote of the holders of at least a majority of the Series D-1 Preferred Shares):

(i)          authorize or approve the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for, shares of, Preferred Stock or any other capital stock of the Corporation, which shares rank senior to or on a parity with Series D-2 Preferred Shares (other than (A) the Series B Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares or the Series D-1 Preferred Shares, or (B) any prior or parity shares that are not redeemable, except for a Change of Control, delisting event, or similar event, by the holder or, with respect to Senior Shares, are not convertible and are not equity linked) in the payment of dividends or in the distribution of assets upon liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation (other than the issuance of any Additional Shares pursuant to Section 6(e)), or authorize or create, or increase the authorized number of, any class or series of capital stock of the Corporation the shares of which rank senior to or on a parity with Series D-2 Preferred Shares (other than (A) the Series B Preferred Shares, the Series C Preferred Shares or the Series D-1 Preferred Shares, or (B) any senior or parity shares that are not redeemable, except for a Change of Control, delisting event, or similar event, by the holder or, with respect to Senior Shares, are not convertible and are not equity linked) in the payment of dividends or in the distribution of assets upon liquidation (complete or partial), dissolution or winding up of the affairs of the Corporation or any security convertible into, or convertible or exchangeable for, shares of any such class or series (other than any increase in the authorized number of Series D-2 Preferred Shares);

(ii)         amend, alter or repeal any of the provisions of the Certificate of Designation designating the 11% Series D-2 Convertible Preferred Stock as a series of Preferred Stock, the Certificate of Incorporation or the Bylaws of the Corporation so as to materially and adversely affect the powers, designations, preferences and rights of the Series D-2 Preferred Shares or change the size of the Board of Directors; provided, however, that the amendment of the Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any Junior Shares shall not be deemed to affect adversely the powers, designations, preferences and rights of the Series D-2 Preferred Shares or the holders thereof;

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(iii)        enter into any transaction or series of related transactions with any Affiliate of the Corporation or any of its subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to the Corporation or such subsidiary as would reasonably be obtained by the Corporation or such subsidiary at that time in a comparable arm’s-length transaction with a Person other than an Affiliate; or

(iv)        contract, create, incur, or assume any Indebtedness or guarantee any Indebtedness if, at the time of or after giving effect to such contract, creation, incurrence, assumption or guarantee, the aggregate outstanding amount of all Indebtedness on a consolidated basis of the Corporation and its Subsidiaries equals or exceeds or would equal or exceed 4.0 times LTM Adjusted EBITDA.

9. Rank.

The Series D-2 Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation, (i) senior to all Common Shares, and senior to all other equity securities of the Corporation other than equity securities referred to in clauses (ii) and (iii) of this sentence (“Junior Shares”); (ii) to the extent authorized under Section 8(c)(i) of this Certificate of Designation, on a parity with the Series B Preferred Shares, Series C Preferred Shares and Series D-1 Preferred Shares and all other equity securities of the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series D-2 Preferred Shares with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation (“Parity Shares”); and (iii) to the extent authorized under Section 8(c)(i) of this Certificate of Designation, junior to all equity securities of the Corporation the terms of which specifically provide that such equity securities rank senior to the Series D-2 Preferred Shares with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation (“Senior Shares”). The term “equity securities” does not include convertible debt securities (the issuance of which, for the avoidance of doubt, shall be subject to Section 8(c)(iii)).

10.         Record Holders.

The Corporation may deem and treat the record holder of any Series D-2 Preferred Shares as the true and lawful owner thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary.

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11.         Reports to Holders.

So long as any Series D-2 Preferred Shares remain outstanding, if the Corporation is not required to file information, documents or reports pursuant to either of Section 13 or Section 15(d) of the Exchange Act, and is required by any debt financing agreement to provide quarterly reports, the Corporation shall cause quarterly reports (containing unaudited financial statements) for the first three quarters of each fiscal year and annual reports (containing audited financial statements and an opinion thereon by the Corporation’s independent certified public accountants) which the Corporation would be required to file under Section 13 of the Exchange Act if it had a class of securities listed on a national securities exchange to be mailed to each holder of record of Series D-2 Preferred Shares appearing on the stock books of the Corporation as of the date of such mailing at the address of said holder shown therein within fifteen (15) days after the date when such report would have been required to be filed under Section 13 of the Exchange Act. If the Corporation is no longer a party to any debt financing agreement which requires the preparation of quarterly reports, the Corporation shall cause the annual reports of each of its broker-dealer subsidiaries (containing audited statements) that the Corporation must provide to FINRA, to be mailed to each holder of record of Series D-2 Preferred Shares appearing on the stock books of the Corporation as of the date of such mailing at the address of said holder shown therein within fifteen (15) days after the date when such reports are required to be filed with FINRA.

12.         Preemptive Rights.

No holder of Series D-2 Preferred Shares shall be entitled to any preemptive rights to subscribe for or acquire any unissued Shares (whether now or hereafter authorized) or securities of the Corporation convertible into, or carrying a right to subscribe to or acquire, Shares.

13.         No Other Rights.

The Series D-2 Preferred Shares shall not have any powers, designations, preferences or relative, participating, optional, or other special rights, nor shall there be any qualifications, limitations or restrictions or any powers, designations, preferences or rights of such shares, other than as set forth herein or in the Certificate of Incorporation or as may be provided by law.

14.         Waiver.

Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the holders of Series D-2 Preferred Shares granted hereunder may be waived as to all Series D-2 Preferred Shares (and the holders thereof) upon the approval of the Board of Directors (or an authorized committee thereof) and the holders of a majority of the Series D-2 Preferred Shares then outstanding.

[Signature Page Follows.]

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IN WITNESS WHEREOF, RCS Capital Corporation has caused this Certificate to be duly executed in its name and on its behalf by its _____________ this __th day of ______, 2015.

RCS CAPITAL CORPORATION
By:
	Name:
	Title:

EXHIBIT B

Purchased Shares

Investor	Purchased Shares
Luxor Capital Partners, LP	297,280 Shares of Series D-2 Preferred Stock
Luxor Capital Partners Offshore Master Fund, LP	123,600 Shares of Series D-2 Preferred Stock
Luxor Wavefront, LP	55,960 Shares of Series D-2 Preferred Stock
Thebes Offshore Master Fund, LP	23,160 Shares of Series D-2 Preferred Stock

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EX-10.4

Exhibit 10.4

TERMINATION AGREEMENT

This TERMINATION AGREEMENT (this “Agreement”), dated as of August 6, 2015, is by and among RCS Capital Corporation, a Delaware corporation (the “Company”), RCS Capital Holdings, LLC, a Delaware limited liability company (“Holdings”), RCS Capital Management, LLC, a Delaware limited liability company (“ManagementCo”), the original members (the “Original Members”) of ManagementCo as set forth on Schedule 1 hereto and Luxor Capital Partners, LP, Blue Sands LLC, Blue Sands B Inc., Blue Sands C Inc. and Blue Sands D Inc. (collectively, “Luxor” and together with the Company, Holdings, ManagementCo and the Original Members, the “Parties”).

WITNESSETH:

WHEREAS, each of the Company, Holdings and ManagementCo is also a party to that certain amended and restated services agreement, dated as of February 11, 2014 (the “Services Agreement”), pursuant to which ManagementCo provides certain services to the Company on the terms set forth therein;

WHEREAS, as of the date hereof, the Original Members and Luxor (the “Members”) collectively own one-hundred percent (100%) of the membership interests of ManagementCo;

WHEREAS, each of Luxor, the Company, the Original Members and ManagementCo is also a party to that certain put and call agreement, dated as of April 29, 2014, as amended by Amendment No. 1, dated December 19, 2014 (the “Put & Call Agreement”), pursuant to which Luxor has a right to put, and the Company and the Original Members have a right to call, Luxor’s interest in ManagementCo on the terms, and subject to the conditions, set forth in the Put & Call Agreement;

WHEREAS, the Parties wish to terminate the Services Agreement and the Put & Call Agreement on the terms, and subject to the conditions, set forth in this Agreement;

WHEREAS, the Company and Apollo Management Holdings, L.P. (“Apollo”) are parties to that certain membership interest purchase agreement (the “Purchase Agreement”), dated as of August 6, 2015, pursuant to which Apollo will purchase the Acquired Interests (as defined in the Purchase Agreement) of the Company on the terms, and subject to the conditions, set forth in the Purchase Agreement;

WHEREAS, Apollo and the Company are parties to that certain investment agreement (the “Apollo Investment Agreement”), dated as of August 6, 2015, pursuant to which Apollo will acquire Series D-1 Preferred Stock on the terms, and subject to the conditions, set forth in the Investment Agreements;

WHEREAS, Luxor and the Company are parties to that certain investment agreement (the “Luxor Investment Agreement” and, together with the “Apollo Investment Agreement, the “Investment Agreements”), dated as of August 6, 2015, pursuant to which Luxor will acquire Series D-2 Preferred Stock on the terms, and subject to the conditions, set forth in the Luxor Investment Agreement;

WHEREAS, Holdings has executed the Stockholder Consent (as hereafter defined and a voting agreement, dated the date hereof, pursuant to which Holdings has similarly agreed to vote or provide its consent with respect to its Class B Common Stock);

WHEREAS, as a condition to the willingness of the Company to enter into the Purchase Agreement and the Investment Agreements and as a material inducement and in consideration therefor, the Parties are entering into this Agreement and agreeing to the covenants set forth herein.

NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

Article I
DEFINITIONS

1.1           Definitions. The following terms used in this Agreement shall have the meanings set forth below, and any other capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Purchase Agreement.

“Class A Common Stock” shall mean the Class A common stock, par value $0.001 per share, of the Company.

“Contract” shall mean any contract, agreement, arrangement, understanding or other legally binding instrument, including any note, indenture, commitment or undertaking, in each case whether written or oral.

“Stockholder Consent” shall mean the written consent of Holdings (with respect to the Class B Common Stock that it holds), dated the date hereof, approving the issuance by the Company of Class A Common Stock in the amounts set forth in Section 2.1(b) hereof, in accordance with applicable law (including the NYSE Listed Company Manual and Section 312.03 thereunder).

“Second Issuance Date” shall mean the fifth (5^th) Business Day following the earliest date on which corporate action may be taken by the Company to issue Class A Common Stock, in the amounts set forth in Section 2.1(b) hereof, as approved on behalf of the stockholders pursuant to the Stockholder Consent dated the date hereof, and the delivery to the stockholders of an Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 (as amended), including pursuant to Rule 14c-2(b) and the waiting period contained therein.

“Share Adjustment” shall mean appropriate and customary adjustment in the event that between the date hereof and until the respective issuance date, the Company shall split, combine, subdivide or reclassify or repurchase, redeem or otherwise acquire, or modify or amend any of the terms of, directly or indirectly, any shares of the Class A Common Stock.

Article II
COVENANTS

2.1           Termination Payments.

(a)      The Parties hereby agree that, on or prior to the fifth (5^th) Business Day following the date hereof (the “First Issuance Date”):

(i)          in respect of termination of the Services Agreement, the Company shall issue to the Members Class A Common Stock (subject to the Share Adjustment) in the applicable amounts set forth in the second column of the table in Schedule 2 hereof (as such amounts may be amended by the Company (acting reasonably) to comply with applicable law, including the NYSE Listed Company Manual and Section 312.03 thereunder); and

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(ii)         in respect of termination of the Put & Call Agreement, the Company shall issue to Luxor Class A Common Stock (subject to the Share Adjustment) in the applicable amounts set forth in the second column of the table in Schedule 3 hereof.

(b)      The Parties hereby agree that, on the Second Issuance Date:

(i)          in respect of termination of the Services Agreement, the Company shall issue to the Members Class A Common Stock (subject to the Share Adjustment) in the applicable amounts set forth in the third column of the table in Schedule 2 hereof (as such amounts may be amended by the Company (acting reasonably) to comply with applicable law, including the NYSE Listed Company Manual and Section 312.03 thereunder); and

(ii)         in respect of termination of the Put & Call Agreement, the Company shall issue to Luxor Class A Common Stock (subject to the Share Adjustment) in the applicable amounts set forth in the third column of the table in Schedule 3 hereof.

2.2           Termination of the Services Agreement and the Put & Call Agreement.

(a)      The Parties hereby agree and acknowledge that as of the First Issuance Date, the Services Agreement will be terminated with immediate effect (requiring no further action on the part of the Parties), and that each party to the Services Agreement shall have no further liability or obligation thereunder to any other party to the Services Agreement, regardless of when any such liability or obligation arose.

(b)      Luxor, the Company, the Original Members and ManagementCo hereby agree and acknowledge that as of the First Issuance Date, the Put & Call Agreement will be terminated with immediate effect (requiring no further action on the part of Luxor, the Company, the Original Members and ManagementCo), and that each party to the Put & Call Agreement will have no further liability or obligation thereunder to any other party to the Put & Call Agreement, regardless of when any such liability or obligation arose.

(c)      Following and in connection with the transactions contemplated in this Agreement, ManagementCo will liquidate.

2.3           Mutual Release of Claims. As of the Second Issuance Date (requiring no further action on the part of the Parties), the Company, Holdings, ManagementCo, Luxor, the Original Members (in their individual capacities, and in their capacities as officers and directors of any of the foregoing) (collectively, the “Released Parties”) and each of their successors and assigns fully and forever waive, release, acquit and discharge each of the other Released Parties and each of their successors and assigns, to the full extent permitted under Delaware law, from any and all claims, suits, judgments, demands, debts, rights, obligations, liabilities, losses, costs, expenses, fees, causes of action and liabilities whatsoever (including claims for any and all losses, damages, unjust enrichment, attorney’s fees, disgorgement of fees, litigation costs, injunctive or declaratory relief, contribution, indemnification, or any other type of legal or equitable relief), in each case, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, asserted or unasserted, known or unknown, foreseen or unforeseen, existing as of the Second Issuance Date or arising thereafter, in law, equity, or otherwise brought by way of demand, complaint, cross-claim, counterclaim, third-party claim or otherwise, in each case that are based in whole or part on any act, omission, transaction, event, or other occurrence in connection with, arising from or under or related to the Services Agreement or the Put & Call Agreement; provided, however, that such waiver, release, acquittal, and discharge shall not include any obligation of any Party under, or any damages, liabilities, claims or causes of action in connection with, arising from or related to the breach by any Party of the terms and conditions contained in, this Agreement.

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2.4           Information Statement. The Company shall use commercially reasonable best efforts to prepare and file an Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 (as amended), as promptly as practicable following the date hereof, in respect of the transactions contemplated hereby, and shall otherwise use commercially reasonable best efforts to cause the Second Issuance Date to occur as promptly as practicable following the date hereof.

2.5           Registration Rights. The Company agrees that, promptly after the First Issuance Date, the Company shall provide registration rights on customary terms to the Original Members and to Luxor and within customary timeframes.

Article III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

3.1           Representations and Warranties of the Company. The Company hereby represents and warrants to the other Parties as follows:

(a)      Authority to Execute and Perform Agreements. The Company has the full legal right and power and all authority required to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder. The execution and delivery of this Agreement by the Company has been duly authorized by all requisite organizational action, if any, on the part of the Company. This Agreement has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect generally affecting creditors’ rights or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(b)      No Conflicts; Consents.

(i)          The execution and delivery by the Company of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under (A) any Contract to which the Company is a party or (B) any judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator applicable to the Company.

(ii)         No consents, approvals or authorizations of, or notices or filings with, any Person are required to be obtained or made by the Company in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby.

(c)      Class A Common Stock. All shares of Class A Common Stock issued pursuant to Section 2.1 will upon such issuance be duly authorized, validly issued, fully paid, and nonassessable, and free and clear of any liens, encumbrances or transfer restrictions (other than transfer restrictions under applicable securities laws).

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(d)      Capitalization. The capitalization representation with respect to the Company contained in Section 2.5(a) of the Investment Agreements is hereby incorporated by reference.

Article IV
REPRESENTATIONS AND WARRANTIES
OF HOLDINGS

4.1           Representations and Warranties of Holdings. Holdings hereby represents and warrants to the other Parties as follows:

(a)      Authority to Execute and Perform Agreements. Holdings has the full legal right and power and all authority required to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder. The execution and delivery of this Agreement by Holdings has been duly authorized by all requisite organizational action, if any, on the part of Holdings. This Agreement has been duly executed and delivered and constitutes the legal, valid and binding obligation of Holdings enforceable against Holdings in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect generally affecting creditors’ rights or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(b)      No Conflicts; Consents.

(i)          The execution and delivery by Holdings of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under (A) any Contract to which Holdings is a party or (B) any judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator applicable to Holdings.

(ii)         No consents, approvals or authorizations of, or notices or filings with, any Person are required to be obtained or made by the Holdings in connection with the execution and delivery by Holdings of this Agreement and the consummation of the transactions contemplated hereby.

Article V
REPRESENTATIONS AND WARRANTIES OF
MANAGEMENTCO

5.1           Representations and Warranties of ManagementCo. ManagementCo hereby represents and warrants to the other Parties as follows:

(a)      Authority to Execute and Perform Agreements. ManagementCo has the full legal right and power and all authority required to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder. The execution and delivery of this Agreement by ManagementCo has been duly authorized by all requisite organizational action, if any, on the part of ManagementCo. This Agreement has been duly executed and delivered and constitutes the legal, valid and binding obligation of ManagementCo enforceable against ManagementCo in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect generally affecting creditors’ rights or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

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(b)      No Conflicts; Consents.

(i)          The execution and delivery by ManagementCo of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under (A) any Contract to which ManagementCo is a party or (B) any judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator applicable to ManagementCo.

(ii)         No consents, approvals or authorizations of, or notices or filings with, any Person are required to be obtained or made by ManagementCo in connection with the execution and delivery by ManagementCo of this Agreement and the consummation of the transactions contemplated hereby.

Article VI
REPRESENTATIONS AND WARRANTIES OF
THE ORIGINAL MEMBERS

6.1           Representations and Warranties of the Original Members. Each Original Member hereby represents and warrants as to himself or herself to the other Parties as follows:

(a)      Authority to Execute and Perform Agreements. The Original Member has the full legal right and power and all authority required to enter into, execute and deliver this Agreement and to perform fully his or her obligations hereunder. This Agreement has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Original Member enforceable against the Original Member in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect generally affecting creditors’ rights or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(b)      No Conflicts; Consents.

(i)          The execution and delivery by the Original Member of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under (A) any Contract to which the Original Member is a party or (B) any judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator applicable to the Original Member.

(ii)         No consents, approvals or authorizations of, or notices or filings with, any Person are required to be obtained or made by the Original Member in connection with the execution and delivery by the Original Member of this Agreement and the consummation of the transactions contemplated hereby.

(c)      Sophisticated Investor. The Original Member is knowledgeable, sophisticated and experienced in business and financial matters, is an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended), is capable of evaluating the merits and risks of an acquisition of Class A Common Stock and has previously invested in securities similar to the Class A Common Stock. The Original Member is able to bear the economic risk of the Class A Common Stock and is able to afford the complete loss of such acquisition. In making his or her decision to enter into this Agreement, the Original Member has relied upon independent investigations made by himself or herself and his or her representatives, including his or her professional, financial, tax, legal and other advisors, if any. The Original Members and his or her representatives have been given the opportunity to request and to examine all documents of, and to ask questions of, and to receive answers from, the Company and his or her representatives concerning the terms and conditions of an acquisition of the Class A Common Stock and to obtain any additional information which the Original Member or his or her representatives have reasonably requested. The Original Member acknowledges that the Company is entering into this Agreement in reliance upon the Original Member’s representations and warranties set forth herein.

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Article VII
REPRESENTATIONS AND WARRANTIES OF
LUXOR

7.1           Representations and Warranties of Luxor. Luxor hereby represents and warrants to the other Parties as follows:

(a)      Authority to Execute and Perform Agreements. Luxor has the full legal right and power and all authority required to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder. The execution and delivery of this Agreement by Luxor has been duly authorized by all requisite organizational action, if any, on the part of Luxor. This Agreement has been duly executed and delivered and constitutes the legal, valid and binding obligation of Luxor enforceable against Luxor in accordance with its terms, except as the enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws now or hereafter in effect generally affecting creditors’ rights or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

(b)      No Conflicts; Consents.

(i)          The execution and delivery by Luxor of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under (A) any Contract to which Luxor is a party or (B) any judgment, order, writ, injunction or decree of any court, governmental body, administrative agency or arbitrator applicable to Luxor.

(ii)         No consents, approvals or authorizations of, or notices or filings with, any Person are required to be obtained or made by Luxor in connection with the execution and delivery by Luxor of this Agreement and the consummation of the transactions contemplated hereby.

(c)      Sophisticated Investor. Luxor is knowledgeable, sophisticated and experienced in business and financial matters, is an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended), is capable of evaluating the merits and risks of an acquisition of Class A Common Stock and has previously invested in securities similar to the Class A Common Stock. Luxor is able to bear the economic risk of the Class A Common Stock and is able to afford the complete loss of such acquisition. In making its decision to enter into this Agreement, Luxor has relied upon independent investigations made by it and its representatives, including its professional, financial, tax, legal and other advisors, if any. Luxor and its representatives have been given the opportunity to request and to examine all documents of, and to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of an acquisition of the Class A Common Stock and to obtain any additional information which Luxor or its representatives have reasonably requested. Luxor acknowledges that the Company is entering into this Agreement in reliance upon Luxor’s representations and warranties set forth herein.

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Article VIII
MISCELLANEOUS

8.1           Amendment. This Agreement may be amended only by a written instrument executed by the Parties, or their respective successors or assigns.

8.2           Notices. In the event a notice or other document is required to be sent hereunder to the Parties (or their respective legal representatives), such notice or other document shall be made in writing by hand-delivery, registered or certified first-class mail, electronic transmission (including e-mail transmissions) or air courier guaranteeing overnight delivery to such Party at the following addresses (or at such other address as shall be given in writing by any Party to the others):

If to ManagementCo, to:

RCS Capital Corporation
405 Park Avenue
15th Floor
New York, New York 10022
Attention: James A. Tanaka; Mason Allen
Telephone: (212) 415-6592; (646) 861-7717
Email: jtanaka@rcscapital.com; mallen@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP
11 Times Square
New York, NY 10022
Attention: Steven L. Lichtenfeld
Telephone: (212) 969-3735
Email: slichtenfeld@proskauer.com

If to the Company or Holdings, to:

RCS Capital Corporation
405 Park Avenue
15th Floor
New York, New York 10022
Attention: James A. Tanaka; Mason Allen
Telephone: (212) 415-6592; (646) 861-7717
Email: jtanaka@rcscapital.com; mallen@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP
11 Times Square
New York, NY 10022
Attention: Steven L. Lichtenfeld
Telephone: (212) 969-3735
Email: slichtenfeld@proskauer.com 

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If to the Members, then in accordance with the contact information provided in Schedule 2 hereto.

All such notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; when confirmed or replied to, if sent by electronic transmission; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

8.3           Counterparts. This Agreement may be executed in counterparts (including by facsimile or other electronic transmission), each one of which shall be deemed an original and all of which together shall constitute one and the same Agreement.

8.4           Governing Law; Venue. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto, and their negotiation, execution, performance or nonperformance, interpretation, termination, construction and all matters based upon, arising out of or related to any of the foregoing, whether arising in law or equity, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the United States District Court for the District of Delaware or any other competent court of the State of Delaware, and each Party irrevocably accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of such courts in any legal action or proceeding with respect to this Agreement. Each Party irrevocably waives any objection which it may have to the laying of venue of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in this paragraph and further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Each Party agrees that service of process upon such Party in any action shall be effective if notice is given in accordance with Section 8.2.

8.5           WAIVER OF JURY TRIAL. EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING (INCLUDING COUNTERCLAIMS) RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS OR RELATIONSHIPS HEREBY CONTEMPLATED OR OTHERWISE IN CONNECTION WITH THE ENFORCEMENT OF ANY RIGHTS OR OBLIGATIONS HEREUNDER.

8.6           Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

8.7           Further Assurances. The Parties shall execute and deliver such additional documents as may be reasonably requested to consummate the transactions contemplated by this Agreement.

8.8           Parties in Interest; Assignment. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person not a party to this Agreement. Neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by any of the Parties without the prior written consent of the other Parties. Any assignment not in accordance with this Section 8.8 shall be null and void ab initio.

9

8.9           Entire Agreement. This Agreement constitutes the entire agreement and understanding among the Parties in respect of the subject matter hereof and thereof and supersedes all prior and contemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets, presentations or otherwise among the Parties, or between any of them, with respect to the subject matter hereof and thereof.

8.10         Specific Performance; Cumulative Remedies. The Parties acknowledge that money damages may not be an adequate remedy for violations of this Agreement and that any party, in addition to any other rights and remedies which the Parties may have hereunder or at law or in equity, may, in his or its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each Party waives any objection to the imposition of such relief. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any Party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such Party.

8.11         Headings; References. The headings and captions herein are inserted for convenience of reference only and are not intended to govern, limit or aid in the construction of any term or provision hereof. All references herein to “Sections” shall be deemed to be references to Articles or Sections hereof unless otherwise indicated.

[Remainder of page intentionally left blank]

10

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

RCAP  HOLDINGS, LLC
By:	/s/ William M. Kahane
Name: William M. Kahane
Title: Managing Member
RCS CAPITAL MANAGEMENT, LLC
By:	/s/ Nicholas S. Schorsch
Name: Nicholas S. Schorsch
Title: Managing Member
ORIGINAL MEMBERS
/s/ Nicholas S. Schorsch
Name: Nicholas S. Schorsch
/s/ Shelley D. Schorsch
Name: Shelley D. Schorsch
/s/ William M. Kahane
Name: William M. Kahane
/s/ Peter M. Budko
Name: Peter M. Budko
/s/ Edward M. Weil Jr.
Name: Edward M. Weil Jr.

11

/s/ Brian S. Block
Name: Brian S. Block
LUXOR
LUXOR CAPITAL PARTNERS, LP
By:	/s/Norris Nissim
Name: Norris Nissim
Title: General Counsel
Luxor Capital Group, LP, Investment Manager
BLUE SANDS LLC
By:	/s/Norris Nissim
Name: Norris Nissim
Title: Authorized Signatory
BLUE SANDS B INC.
By:	/s/Norris Nissim
Name: Norris Nissim
Title: Authorized Signatory
BLUE SANDS C INC.
By:	/s/Norris Nissim
Name: Norris Nissim
Title: Authorized Signatory
BLUE SANDS D INC.
By:	/s/Norris Nissim
Name: Norris Nissim
Title: Authorized Signatory

12

Schedule 1

Original Members

Nicholas S. Schorsch

Shelley D. Schorsch

William M. Kahane

Peter M. Budko

Edward M. Weil, Jr.

Brian S. Block

13

Schedule 2

Services Agreement Termination Shares

Member	Number of Shares of Class A Common Stock (issued on the First Issuance Date)1	Number of Shares of Class A Common Stock (issued on the Second Issuance Date)	Notice Information
Nicholas S. Schorsch	760,000	898,372	AR Capital, LLC 405 Park Avenue New York, NY 10022 Attention: Jesse Galloway, Esq., General Counsel
Shelley D. Schorsch
William M. Kahane	352,728	-
Peter M. Budko	427,873	-
Edward M. Weil, Jr.	91,340	-
Brian S. Block	78,384	-
Luxor Capital Partners, LP	232,237	-	Luxor Capital Group, LP 1114 Avenue of the Americas, 29th Floor New York, NY 10036 Attention: Norris Nissim, Esq., General Counsel
Blue Sands LLC	291,511	-
Blue Sands B Inc.	21,701	-
Blue Sands C Inc.	61,541	-
Blue Sands D Inc.	23,321	-

¹ Rounded to the nearest whole share of Class A Common Stock. Amount of shares for 1) Nicholas S. Schorsch and Shelley D. Schorsch; 2) William M. Kahane; 3) Peter M. Budko; 4) Edward M. Weil, Jr.; 5) Brian S. Block; and 6) collectively, Luxor Capital Partners, LP, Blue Sands LLC, Blue Sands B Inc., Blue Sands C Inc. Blue Sands D Inc.; in each case, not to exceed 0.99% of the number of shares of Class A Common Stock outstanding, or 0.99% of the voting power outstanding, before this issuance. 

14

Schedule 3

Put & Call Termination Shares

Member	Number of Shares of Class A Common Stock (issued on the First Issuance Date)2	Number of Shares of Class A Common Stock (issued on the Second Issuance Date)	Notice Information
Luxor Capital Partners, LP	47,784 59,979 4,465 12,662 4,799	825,324 1,035,971 77,122 218,705 82,878	Luxor Capital Group, LP 1114 Avenue of the Americas, 29th Floor New York, NY 10036 Attention: Norris Nissim, Esq., General Counsel
Blue Sands LLC
Blue Sands B Inc.
Blue Sands C Inc.
Blue Sands D Inc.

² See previous footnote.

15

Termination of the Restrictive Covenants Agreement

Reference is made to the Restrictive Covenants Agreement, dated January 16th, 2014 (the “RCA”), by and between the Company, ManagementCo, Nicholas S. Schorsch, William M. Kahane, Brian S. Block, Peter M. Budko, RCAP Holdings, LLC and Luxor Capital Group, LP (collectively, the “RCA Parties”).

The undersigned, being all of the RCA Parties, hereby agree and acknowledge that, as of the First Issuance Date, the RCA will be terminated with immediate effect (requiring no further action on the part of the RCA Parties), and that each RCA Party shall have no further liability or obligation thereunder to any other RCA Party, Affiliate of the Company or Affiliate of Luxor Capital Group, LP, regardless of when any such liability or obligation arose.

RCS Capital Corporation
By:	/s/ Edward M. Weil, Jr.
Name:	Edward M. Weil, Jr.
Title:	Chief Executive Officer
RCAP Holdings, LLC
By:	/s/ William M. Kahane
Name:	William M. Kahane
Title:	Managing Member
RCS Capital Management, LLC
By:	/s/ Nicholas S. Schorsch
Name:	Nicholas S. Schorsch
Title:	Managing Member
Original Members
/s/ Nicholas S. Schorsch
Name:	Norris Nissim
/s/ William M. Kahane
Name:	William M. Kahane
/s/ Brian S. Block
Name:	Brian S. Block
/s/ Edward M. Weil, Jr.
Name:	Edward M. Weil, Jr.
/s/ Peter M. Budko
Name:	Peter M. Budko

LUXOR CAPITAL GROUP, LP
By:	/s/ Norris Nissim
Name:	Norris Nissim
Title:	General Counsel
	Luxor Capital Group, LP, Investment Manager

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Edward M. Weil, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RCS Capital Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a 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 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 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 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.

Dated this 11th day of August, 2015	/s/ EDWARD M. WEIL, JR.
	Edward M. Weil, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Brian D. Jones, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RCS Capital Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a 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 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 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 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.

Dated this 11th day of August, 2015	/s/ BRIAN D. JONES
	Brian D. Jones
	Chief Financial Officer and Assistant Secretary
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Act of 1934, as amended.

The undersigned, who are the Chief Executive Officer and Chief Financial Officer of RCS Capital Corporation (the “Company”), each hereby certify as follows:

The quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated this 11th day of August, 2015	/s/ EDWARD M. WEIL, JR.
	Edward M. Weil, Jr.
	Chief Executive Officer
	(Principal Executive Officer)
Dated this 11th day of August, 2015	/s/ BRIAN D. JONES
	Brian D. Jones
	Chief Financial Officer and Assistant Secretary
	(Principal Financial and Accounting Officer)

XML

Equity-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Nonvested Restricted Stock Shares Activity

The following table details the restricted shares activity related to restricted stock awards of an entity that was previously a related party granted to RCAP employees during the six months ended June 30, 2015:

	Shares of Restricted Common Stock of a Related Party	Weighted-Average Fair Value Per Share		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	368,625	$	9.05	$	3,335	2.83
Granted	—	—		—		—
Less: vested	85,992	8.13		699		N/A
Less: forfeited	5,000	8.13		41		N/A
Nonvested, June 30, 2015	277,633	$	8.13	$	2,257	2.13

The following table details the restricted shares activity during the six months ended June 30, 2015:

	Shares of Restricted Common Stock	Weighted-Average Issue Price		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	2,276,713	$	34.86	$	79,375	3.09
Granted	1,652,082	11.61		19,181		4.24
Less: vested	428,095	31.01		13,275		N/A
Less: forfeited	183,036	38.49		7,045		N/A
Less: retired	232,556	32.13		7,472		N/A
Nonvested, June 30, 2015	3,085,108	$	22.93	$	70,764	3.16

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Recent Acquisitions (Trupoly) (Details) - Trupoly acquisition - USD ($) $ in Millions	Jul. 17, 2015	Jun. 30, 2015
Business Acquisition [Line Items]
Expected tax deductible amount		$ 0.7
Subsequent Event
Business Acquisition [Line Items]
Percentage of deferred consideration	50.00%

XML

Recent Acquisitions (Summit) (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jun. 11, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Goodwill		$ 530,949,000		$ 530,949,000		$ 519,361,000
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					$ 1,577,900,000
Acquisition-related costs		5,200,000	$ 6,546,000	7,656,000	13,263,000
Summit Financial Services Group
Business Acquisition [Line Items]
Pro rata share of tax refunds	$ 2,500,000
Excluding cash distributed in shareholders	38,600,000
Cash paid by the Company	46,727,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents	13,353,000
Receivables	3,147,000
Property and equipment	362,000
Prepaid expenses	1,531,000
Notes receivable	1,092,000
Other assets	2,366,000
Accounts payable	(9,973,000)
Accrued expenses	(3,100,000)
Total fair value excluding goodwill and intangible assets	8,778,000
Goodwill	23,891,000
Intangible assets	31,240,000
Deferred tax liability	(6,751,000)
Total consideration	57,158,000
Expected tax deductible amount		$ 100,000		$ 100,000
Business Combination, Consideration Transferred [Abstract]
Cash paid by the Company	46,727,000
Stock issued by the Company	10,431,000
Total consideration	57,158,000
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					48,800,000
Income (loss) before taxes					(700,000)
Acquisition-related costs					$ 4,700,000
Summit Financial Services Group | Common Class A
Business Acquisition [Line Items]
Right to receive merger consideration rights	$ 1.5879
Business acquisition, equity interest issued (in shares)	498,884			498,884
Summit Financial Services Group | Common Stock
Business Acquisition [Line Items]
Acquisition share price (in dollars per share)	$ 0.06

XML

Goodwill and Intangible Assets (Goodwill Rollforward) (Details) - Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total
Goodwill [Roll Forward]
Beginning balance		$ 519,361
Ending balance	$ 530,949	530,949
Docupace Adjustment
Goodwill [Roll Forward]
Goodwill, acquired during period		86
VSR Acquisition
Goodwill [Roll Forward]
Goodwill, acquired during period		30,282
Girard Acquisition
Goodwill [Roll Forward]
Goodwill, acquired during period		15,767
Cetera Acquisition
Goodwill [Roll Forward]
Goodwill, acquired during period		1,903
StratCap Acquisition
Goodwill [Roll Forward]
Goodwill, adjustment		7,700
Goodwill, impairment	(30,600)	(30,571)
JP Turner Acquisition
Goodwill [Roll Forward]
Goodwill, impairment	$ (13,600)	$ (13,579)

XML

Recent Acquisitions (Docupace) (Details) - Docupace - USD ($) $ in Millions	Jul. 10, 2015	Mar. 01, 2015	Dec. 31, 2014	Nov. 21, 2014	Dec. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Nov. 22, 2014
Business Acquisition [Line Items]
Total consideration				$ 35.1
Accrued expenses				0.3
Contractual purchase price				$ 18.8
Voting interests acquired				51.00%			52.043%	53.525%
Purchase price adjustment		$ 16.3	$ 4.0
Contractual clawback				$ 2.4
Fair value of assets acquired				68.8
Fair value of noncontrolling interest				$ 33.7
Expected tax deductible amount							$ 23.6
Scenario, Forecast
Business Acquisition [Line Items]
Potential capital contribution year one						$ 28.0
Potential capital contribution year two					$ 20.0
Subsequent Event
Business Acquisition [Line Items]
Voting interests acquired	52.981%
Purchase price adjustment	$ 1.5

XML

Long-Term Debt (Contractual Maturities) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Short-term portion of the original issue discount	$ (6,836)
Less: Current portion of borrowings	62,405	$ 43,891
September 30, 2015
Debt Instrument [Line Items]
Less: Current portion of borrowings	14,678
December 31, 2015
Debt Instrument [Line Items]
Less: Current portion of borrowings	14,968
March 31, 2016
Debt Instrument [Line Items]
Less: Current portion of borrowings	24,627
June 30, 2016
Debt Instrument [Line Items]
Less: Current portion of borrowings	$ 14,968

XML

Recent Acquisitions (Impairment Charges) (Details) - Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total
Business Acquisition [Line Items]
Impairments of intangible assets		$ 112,651
Sponsor relationships
Business Acquisition [Line Items]
Impairments of intangible assets		100,000
StratCap
Business Acquisition [Line Items]
Goodwill impairment loss	$ 30,600	30,571
StratCap | Sponsor relationships
Business Acquisition [Line Items]
Impairments of intangible assets	100,000	100,000
JP Turner & Company, LLC
Business Acquisition [Line Items]
Goodwill impairment loss	13,600	13,579
Impairments of intangible assets	$ 12,600	$ 12,600

XML

Available-for-Sale Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Disclosure of RCS Advisory's Investments

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2015:

			For the Six Months Ended June 30, 2015
($ in thousands)	Fair value at December 31, 2014		Purchases(1)		Sales			Realized Gains/ (Losses)(2)			Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2015		Cost
Mutual funds	$	11,473	$	26	$	(8,780	)	$	(369	)	$	351	$	2,701	$	2,561

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Unrealized losses for the three months ended June 30, 2015 were $0.1 million. There were no realized gains or losses for the three months ended June 30, 2015.

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2014:

			For the Six Months Ended June 30, 2014
($ in thousands)	Fair value at December 31, 2013		Purchases(1)		Sales			Realized Gains/ (Losses)(2)		Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2014		Cost
Mutual funds	$	8,528	$	215	$	(9,013	)	$	171	$	544	$	445	$	410

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Realized gains and unrealized losses for the three months ended June 30, 2014 were $0.3 million and $0.2 million, respectively.

XML

Derivative Contracts (Summary of Fair Values of Derivative Contracts) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 39,647	$ 81,032
Embedded Derivative Financial Instruments | Convertible Notes Payable
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	6,868	21,876
Embedded Derivative Financial Instruments | Series B Preferred Stock
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	0	0
Embedded Derivative Financial Instruments | Series C Preferred Stock
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	31,264	69,409
Luxor Capital Group, LP | Put Option
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	8,383	11,623
Luxor Capital Group, LP | Call Option
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 0	$ 0

XML

Goodwill and Intangible Assets (Summary of Amortization Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 26,905	$ 13,765	$ 54,108	$ 15,532

XML

Earnings Per Share (Basic and Diluted Calculation) (Details) - USD ($) $ / shares in Units, $ in Thousands					3 Months Ended		6 Months Ended
	Feb. 23, 2015	Jun. 30, 2014	Jun. 10, 2014	Apr. 29, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share, Basic [Abstract]
Net income (loss) attributable to common stock					$ (72,148)	$ (149,861)	$ (92,904)	$ (146,576)
Allocation of earnings to participating securities					0	(384)	0	(711)
Net income (loss) attributable to common stock					$ (72,148)	$ (150,245)	$ (92,904)	$ (147,287)
Total weighted average basic shares outstanding (in shares)					74,006,580	43,030,018	72,576,193	34,975,636
Net income (loss) per share (in dollars per share)					$ (0.97)	$ (3.49)	$ (1.28)	$ (4.21)
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
Add: Series C Preferred Stock, convertible notes, Luxor's put option					$ (26,235)	$ (23,213)	$ (45,582)	$ (23,213)
Net loss attributable to common stock					$ (98,383)	$ (173,458)	$ (138,486)	$ (170,500)
Add: Series C Preferred Stock, convertible notes, Luxor's put option (in shares)					14,599,367	5,265,251	14,599,367	2,647,170
Total weighted average diluted shares outstanding (in shares)					88,605,947	48,295,269	87,175,560	37,622,806
Net loss per share (in dollars per share)					$ (1.11)	$ (3.59)	$ (1.59)	$ (4.53)
Deemed dividend						$ 194,800		$ 194,800
Series A Preferred Stock
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
Deemed dividend				$ 194,800
Issuance of common stock (in shares)	2,042,022
Common Class A
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
Issuance of common stock (in shares)			19,000,000
First Allied acquisition | Common Class A
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract]
Issuance of common stock (in shares)		11,264,929

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Recent Acquisitions (Girard) (Details) - Girard Acquisition - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Jul. 24, 2015	Mar. 18, 2015	Jun. 30, 2015
Business Acquisition [Line Items]
Total consideration		$ 27,800
Equity interests value assigned		1,600
Contractual purchase price		14,500
Contingent and deferred consideration		$ 5,400
Deferred consideration payout percentage		60.00%
Common Class A
Business Acquisition [Line Items]
Business acquisition, equity interest issued (in shares)		549,529	549,529
Equity interests value assigned		$ 6,300
Acquisition share price (in dollars per share)		$ 11.549
Deferred consideration payout percentage		40.00%
Subsequent Event
Business Acquisition [Line Items]
Contractual purchase price	$ 200
Purchase price adjustment	$ 300
Subsequent Event | Common Class A
Business Acquisition [Line Items]
Business acquisition, equity interest issued (in shares)	6,563
Equity interests value assigned	$ 80

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Long-Term Debt (Narrative) (Details)				6 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 04, 2014 USD ($)	Apr. 29, 2014 USD ($) $ / shares	Jun. 30, 2015 USD ($)	Jan. 09, 2015 USD ($)	Dec. 31, 2014	Jul. 21, 2014 USD ($)	Jul. 11, 2014 USD ($)
Line of Credit Facility [Line Items]
Variable rate				1.25 to 1.00
Convertible notes payable			$ 1,000
Debt term			2 years
Payment in year two	$ 97,820,000			$ 97,820,000
Payment in year three	88,591,000			88,591,000
Common Class A
Line of Credit Facility [Line Items]
Conversion price (in dollars per share) | $ / shares			$ 21.18
Senior Secured First Lien Term Loan
Line of Credit Facility [Line Items]
Long-term line of credit	23,000,000			$ 23,000,000
First lien leverage ratio				1.25
Senior Secured First Lien Revolving Credit Facility
Line of Credit Facility [Line Items]
Secured debt, commitment			$ 25,000,000
Repayments of senior debt				$ 21,600,000
Letter of Credit
Line of Credit Facility [Line Items]
Long-term line of credit					$ 100,000
Senior Secured First Lien Term Loan | Maximum
Line of Credit Facility [Line Items]
Interest rate				6.50%
Senior Secured First Lien Term Loan | London Interbank Offered Rate (LIBOR)
Line of Credit Facility [Line Items]
Interest rate, contractual minimum				1.00%
Senior Secured First Lien Term Loan | London Interbank Offered Rate (LIBOR) | Minimum
Line of Credit Facility [Line Items]
Interest rate				6.25%
Amendments to First and Second Lien Credit Agreement
Line of Credit Facility [Line Items]
Increase in interest rate				1.00%
Payment of customary consent and arrangement fees to lenders	$ 12,300,000
Letter of Credit | Backstop Letter of Credit
Line of Credit Facility [Line Items]
Long-term line of credit							$ 1,100,000
Convertible Debt
Line of Credit Facility [Line Items]
Interest rate	5.00%			5.00%		5.00%
Promissory note (legal settlement) | ARCP
Line of Credit Facility [Line Items]
Convertible notes, face value		$ 15,300,000
Debt term		2 years
Interest rate		8.00%
Payment in year one	$ 7,700,000			$ 7,700,000
Payment in year two	3,800,000			3,800,000
Payment in year three	$ 3,800,000			$ 3,800,000
Subordinated Debt
Line of Credit Facility [Line Items]
Interest rate	8.25%			8.25%		8.25%
Cetera Financial Group | Convertible Debt
Line of Credit Facility [Line Items]
Convertible notes, face value			120,000,000
Cetera Financial Group | Barclays Bank PLC and Bank of America | Secured Debt | Senior Secured First Lien Term Loan
Line of Credit Facility [Line Items]
Convertible notes, face value			575,000,000
Cetera Financial Group | Barclays Bank PLC and Bank of America | Secured Debt | Senior Secured Second Lien Term Loan
Line of Credit Facility [Line Items]
Convertible notes, face value			$ 150,000,000
Investors Capital Holdings
Line of Credit Facility [Line Items]
Debt acquired								$ 2,918,000
Investors Capital Holdings | Subordinated Debt
Line of Credit Facility [Line Items]
Debt acquired	$ 2,000,000			$ 2,000,000

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Equity-Based Compensation (Restricted Share Activity) (Details) - Restricted Stock - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance, restricted shares, nonvested, number (in shares)	2,276,713
Restricted shares, grants in period (in shares)	1,652,082
Restricted shares, vested in period (in shares)	428,095
Restricted shares, forfeited in period (in shares)	183,036
Restricted shares, retired in period (in shares)	232,556
Ending balance, restricted shares, nonvested, number (in shares)	3,085,108	2,276,713
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instrument Other than Options, Nonvested, Weighted-Average Issue Price [Roll Forward]
Beginning balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 34.86
Restricted shares, grants in period, weighted-average issue price (in dollars per share)	11.61
Restricted shares, vested in period, weighted-average issue price (in dollars per share)	31.01
Restricted shares, forfeited in period, weighted-average issue price (in dollars per share)	38.49
Restricted shares, retired in period, weighted-average issue price (in dollars per share)	32.13
Ending balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 22.93	$ 34.86
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]
Beginning balance, restricted shares, aggregate intrinsic value, nonvested	$ 79,375
Restricted shares, aggregate intrinsic value, granted	19,181
Restricted shares, aggregate intrinsic value, vested	13,275
Restricted shares, aggregate intrinsic value, forfeited	7,045
Restricted shares, aggregate intrinsic value, retired	7,472
Ending balance, restricted shares, aggregate intrinsic value, nonvested	$ 70,764	$ 79,375
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	3 years 6 months 15 days	3 years 1 month 2 days
Restricted shares, grants in period, weighted average vesting period	4 years 2 months 27 days
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	3 years 6 months 15 days	3 years 1 month 2 days

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Derivative Contracts (Narrative) (Details)	Apr. 29, 2014
Derivative [Line Items]
Interest rate	15.00%
Luxor Capital Group, LP
Derivative [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	19.46%

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Equity-Based Compensation (Restricted Share Activity Granted to RCAP1) (Details) - Restricted Stock - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance, restricted shares, nonvested, number (in shares)	2,276,713
Restricted shares, grants in period (in shares)	1,652,082
Restricted shares, vested in period (in shares)	428,095
Restricted shares, forfeited in period (in shares)	183,036
Ending balance, restricted shares, nonvested, number (in shares)	3,085,108	2,276,713
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instrument Other than Options, Nonvested, Weighted-Average Issue Price [Roll Forward]
Beginning balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 34.86
Restricted shares, grants in period, weighted-average issue price (in dollars per share)	11.61
Restricted shares, vested in period, weighted-average issue price (in dollars per share)	31.01
Restricted shares, forfeited in period, weighted-average issue price (in dollars per share)	38.49
Ending balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 22.93	$ 34.86
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]
Beginning balance, restricted shares, aggregate intrinsic value, nonvested	$ 79,375
Restricted shares, aggregate intrinsic value, granted	19,181
Restricted shares, aggregate intrinsic value, vested	13,275
Restricted shares, aggregate intrinsic value, forfeited	7,045
Ending balance, restricted shares, aggregate intrinsic value, nonvested	$ 70,764	$ 79,375
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	3 years 6 months 15 days	3 years 1 month 2 days
Restricted shares, grants in period, weighted average vesting period	4 years 2 months 27 days
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	3 years 6 months 15 days	3 years 1 month 2 days
RCAP Holdings, LLC
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Beginning balance, restricted shares, nonvested, number (in shares)	368,625
Restricted shares, grants in period (in shares)	0
Restricted shares, vested in period (in shares)	85,992
Restricted shares, forfeited in period (in shares)	5,000
Ending balance, restricted shares, nonvested, number (in shares)	277,633	368,625
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instrument Other than Options, Nonvested, Weighted-Average Issue Price [Roll Forward]
Beginning balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 9.05
Restricted shares, grants in period, weighted-average issue price (in dollars per share)	0.00
Restricted shares, vested in period, weighted-average issue price (in dollars per share)	8.13
Restricted shares, forfeited in period, weighted-average issue price (in dollars per share)	8.13
Ending balance, restricted shares, nonvested, weighted-average issue price (in dollars per share)	$ 8.13	$ 9.05
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value [Abstract]
Beginning balance, restricted shares, aggregate intrinsic value, nonvested	$ 3,335
Restricted shares, aggregate intrinsic value, granted	0
Restricted shares, aggregate intrinsic value, vested	699
Restricted shares, aggregate intrinsic value, forfeited	41
Ending balance, restricted shares, aggregate intrinsic value, nonvested	$ 2,257	$ 3,335
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	2 years 6 months 29 days	2 years 9 months 29 days
Restricted shares, grants in period, weighted average vesting period
ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingWeightedAverageRemainingContractualTerms	2 years 6 months 29 days	2 years 9 months 29 days

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Long-Term Debt (Maturities of Long-term Debt) (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Debt Disclosure [Abstract]
2017	$ 97,820
2018	88,591
2019	332,475
2020	1,585
Thereafter	270,000
Long-term portion of the original issue discount	(55,459)
Fair value of embedded derivative	6,868
Total long-term debt, net of current portion	$ 741,880

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Goodwill and Intangible Assets (Finite-lived Intangible Assets) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	$ 1,357,834	$ 1,311,631
Impairments		112,651
Gross Carrying Value, June 30, 2015	1,245,183	1,245,183	$ 1,311,631
Accumulated Amortization	122,214	122,214	68,106
Finite-lived intangible assets, net	1,122,969	$ 1,122,969	$ 1,243,525
Financial advisor relationships
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		13 years	13 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	1,062,065	$ 1,019,353
Impairments		12,530
Gross Carrying Value, June 30, 2015	1,049,535	1,049,535	$ 1,019,353
Accumulated Amortization	90,331	90,331	52,070
Finite-lived intangible assets, net	959,204	$ 959,204	$ 967,283
Sponsor relationships
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		8 years	9 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	113,000	$ 113,000
Impairments		100,000
Gross Carrying Value, June 30, 2015	13,000	13,000	$ 113,000
Accumulated Amortization	10,464	10,464	4,186
Finite-lived intangible assets, net	2,536	$ 2,536	$ 108,814
Trade names
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		27 years	29 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	67,857	$ 65,192
Impairments		46
Gross Carrying Value, June 30, 2015	67,811	67,811	$ 65,192
Accumulated Amortization	3,081	3,081	1,638
Finite-lived intangible assets, net	64,730	$ 64,730	$ 63,554
Investment management agreements
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		12 years	12 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	47,390	$ 47,390
Impairments		0
Gross Carrying Value, June 30, 2015	47,390	47,390	$ 47,390
Accumulated Amortization	3,933	3,933	1,966
Finite-lived intangible assets, net	43,457	$ 43,457	$ 45,424
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		11 years	11 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	20,686	$ 20,686
Impairments		0
Gross Carrying Value, June 30, 2015	20,686	20,686	$ 20,686
Accumulated Amortization	2,427	2,427	1,473
Finite-lived intangible assets, net	18,259	$ 18,259	$ 19,213
Intellectual property and internally developed software
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		6 years	7 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	22,541	$ 22,510
Impairments		0
Gross Carrying Value, June 30, 2015	22,541	22,541	$ 22,510
Accumulated Amortization	2,543	2,543	779
Finite-lived intangible assets, net	19,998	$ 19,998	$ 21,731
Intellectual property
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		8 years	9 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	10,642	$ 10,642
Impairments		0
Gross Carrying Value, June 30, 2015	10,642	10,642	$ 10,642
Accumulated Amortization	1,437	1,437	849
Finite-lived intangible assets, net	9,205	$ 9,205	$ 9,793
Non-competition agreements
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		3 years	2 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	10,443	$ 9,648
Impairments		75
Gross Carrying Value, June 30, 2015	10,368	10,368	$ 9,648
Accumulated Amortization	7,928	7,928	5,136
Finite-lived intangible assets, net	2,440	$ 2,440	$ 4,512
Distribution networks
Finite-Lived Intangible Assets [Line Items]
Weighted-Average Life Remaining (in years)		39 years	40 years
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	3,210	$ 3,210
Impairments		0
Gross Carrying Value, June 30, 2015	3,210	3,210	$ 3,210
Accumulated Amortization	70	70	9
Finite-lived intangible assets, net	$ 3,140	$ 3,140	$ 3,201

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Net Capital Requirements

6 Months Ended

Jun. 30, 2015

Regulatory Capital Requirements [Abstract]

Net Capital Requirements

Net Capital Requirements

The Company’s broker-dealers are each subject to the SEC Uniform Net Capital Rule 15c3-1. SEC Uniform Net Capital Rule 15c3-1 requires the maintenance of the greater of the minimum dollar amount of net capital required, which is based on the nature of each broker-dealer’s business, or 1/15^th of the aggregate indebtedness, as defined, and requires that the ratio of aggregate indebtedness to net capital, both as defined, not exceed 15 to 1. Certain of the Company’s broker-dealers have elected to use the alternative method of computing net capital which requires the maintenance of minimum net capital of the greater of $250,000 or 2% of aggregate debit items. While the net capital requirement is specific to each broker-dealer, the table below provides the aggregated net capital requirements by segment of the Company’s broker-dealers as of June 30, 2015 and December 31, 2014.

($ in thousands)	June 30, 2015		December 31, 2014
Independent retail advice(1):
Net capital	$	57,832	$	63,871
Required net capital	3,064		2,640
Net capital in excess of required net capital	$	54,768	$	61,231
Wholesale distribution:
Net capital	$	11,393	$	20,774
Required net capital	1,155		1,424
Net capital in excess of required net capital	$	10,238	$	19,350
Investment management:
Net capital	$	2,034	$	2,145
Required net capital	5		5
Net capital in excess of required net capital	$	2,029	$	2,140

___________________

(1) VSR Financial Services, Inc. and Girard Securities, Inc. were not under the control of the Company as of December 31, 2014. Therefore, they were not included in the net capital calculation as of December 31, 2014.

As of and during the six months ended June 30, 2015 all of the Company’s subsidiaries were in compliance with their net capital requirements except J.P. Turner & Company LLC and VSR Financial Services, Inc. J.P. Turner & Company LLC received a capital contribution of $4.0 million from the Company on April 17, 2015 to correct a net capital deficiency from March 20, 2015 through April 16, 2015. J.P. Turner & Company LLC was in compliance with minimum net capital requirements as of June 30, 2015. VSR Financial Services, Inc. received a capital contribution of $4.0 million from the Company on May 6, 2015, to correct a net capital deficiency from April 1, 2015 through May 5, 2015. VSR Financial Services, Inc. was in compliance with minimum net capital requirements as of June 30, 2015.

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Recent Acquisitions (Hatteras) (Details) - Subsequent Event Type [Domain] - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Goodwill		$ 530,949		$ 530,949		$ 519,361
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					$ 1,577,900
Acquisition-related costs		5,200	$ 6,546	7,656	13,263
Hatteras Funds Group
Business Acquisition [Line Items]
Initial accounting incomplete adjustment	$ 40,000
Estimated contingent consideration amount		30,500		30,500
Deferred consideration	9,430
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents	805		805		805
Receivables	7,747		7,747		7,747
Property and equipment	192		192		192
Prepaid expenses	326		326		326
Other assets	120		120		120
Accounts payable	(3,721)		(3,721)		(3,721)
Accrued expenses	(5,277)		(5,277)		(5,277)
Total fair value excluding goodwill and intangible assets	192		192		192
Goodwill	15,348		15,348		15,348
Intangible assets	48,770		48,770		48,770
Total consideration	64,310		$ 64,310		64,310
Business Combination, Consideration Transferred [Abstract]
Contractual purchase price	30,000
Contingent consideration	24,880
Total consideration	$ 64,310
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					29,700
Income (loss) before taxes					3,100
Acquisition-related costs					$ 600
Closing Date | Hatteras Funds Group
Business Acquisition [Line Items]
Payments to acquire business	75.00%
First Anniversary of the Closing Date | Hatteras Funds Group
Business Acquisition [Line Items]
Payments to acquire business	7.50%
Second Anniversary of the Closing Date | Hatteras Funds Group
Business Acquisition [Line Items]
Payments to acquire business	7.50%
Third Anniversary of the Closing Date | Hatteras Funds Group
Business Acquisition [Line Items]
Payments to acquire business	10.00%
Minimum
Business Acquisition [Line Items]
Estimated contingent consideration amount		12,300		12,300
Maximum
Business Acquisition [Line Items]
Estimated contingent consideration amount		$ 84,740		$ 84,740

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

The following table shows the future annual minimum rental payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	11,567
2017	10,638
2018	9,123
2019	7,557
2020	7,045
Thereafter	21,961
Total	$	67,891

Contractual Obligation, Fiscal Year Maturity Schedule

The following table shows the future annual minimum payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	10,204
2017	8,574
2018	6,567
2019	6,567
2020	6,567
Thereafter	694
Total	$	39,173

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Long-Term Debt (Long-term Borrowings and Contractual Interest Rates) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term debt	$ 804,285	$ 804,411
Total borrowings	804,285	804,411
Less: Current portion of borrowings	62,405	43,891
Total long-term debt, net of current portion	741,880	760,520
Fair value of embedded derivative	6,868
Convertible Preferred Stock | Call Option | Convertible Notes Payable
Debt Instrument [Line Items]
Fair value of embedded derivative	6,900	21,900
Credit facility | Senior Secured First Lien Term Loan
Debt Instrument [Line Items]
Long-term debt	$ 534,756	$ 555,700
Interest rate	7.50%	6.50%
Credit facility | Senior Secured Second Lien Term Loan
Debt Instrument [Line Items]
Long-term debt	$ 148,024	$ 147,903
Interest rate	11.50%	10.50%
Credit facility | First lien revolving facility
Debt Instrument [Line Items]
Long-term debt	$ 23,000	$ 0
Interest rate	7.50%	0.00%
Convertible Debt
Debt Instrument [Line Items]
Long-term debt	$ 70,859	$ 83,508
Interest rate	5.00%	5.00%
Promissory note | Promissory note (legal settlement)
Debt Instrument [Line Items]
Long-term debt	$ 15,300	$ 15,300
Interest rate	8.00%	8.00%
Capital lease obligations
Debt Instrument [Line Items]
Interest rate	5.94%	0.00%
Capital lease obligations	$ 10,346	$ 0
Subordinated Debt
Debt Instrument [Line Items]
Long-term debt	$ 2,000	$ 2,000
Interest rate	8.25%	8.25%

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Segment Reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) segment	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment			6
Revenues	$ 678,366	$ 645,019	$ 1,303,950	$ 918,387
Expenses	796,588	585,707	1,444,592	844,023
Income (loss) before taxes	(118,222)	59,312	(140,642)	74,364
Assets	2,357,306		2,357,306		$ 2,466,628
Goodwill and intangible assets impairment charge	156,801	0	156,801	0
JP Turner & Company, LLC
Segment Reporting Information [Line Items]
Goodwill and intangible assets impairment charge	126,200		26,200
StratCap
Segment Reporting Information [Line Items]
Goodwill and intangible assets impairment charge			130,600
Operating Segments
Segment Reporting Information [Line Items]
Revenues	704,725	673,001	1,353,837	953,413
Income (loss) before taxes	(118,222)	59,312	(140,642)	74,364
Assets	2,386,647		2,386,647		2,494,320
Operating Segments | Independent retail advice
Segment Reporting Information [Line Items]
Revenues	528,980	324,153	1,032,539	416,911
Expenses	567,667	329,364	1,071,141	422,970
Income (loss) before taxes	(38,687)	(5,211)	(38,602)	(6,059)
Assets	2,073,393		2,073,393		1,980,614
Operating Segments | Wholesale distribution
Segment Reporting Information [Line Items]
Revenues	107,249	250,586	196,394	389,696
Expenses	252,196	246,101	358,042	388,736
Income (loss) before taxes	(144,947)	4,485	(161,648)	960
Operating Segments | Investment banking, capital markets and transaction management services
Segment Reporting Information [Line Items]
Revenues	21,815	39,101	40,627	87,645
Expenses	12,510	16,860	27,315	39,086
Income (loss) before taxes	9,305	22,241	13,312	48,559
Operating Segments | Investment management
Segment Reporting Information [Line Items]
Revenues	12,281	0	25,661	0
Expenses	12,540	0	25,698	0
Income (loss) before taxes	(259)	0	(37)	0
Operating Segments | Investment research
Segment Reporting Information [Line Items]
Revenues	1,397	691	2,580	691
Expenses	4,375	3,857	7,522	4,301
Income (loss) before taxes	(2,978)	(3,166)	(4,942)	(3,610)
Assets	12,819		12,819		12,291
Operating Segments | Corporate and other
Segment Reporting Information [Line Items]
Revenues	33,003	58,470	56,036	58,470
Expenses	(26,341)	17,507	4,761	23,956
Income (loss) before taxes	59,344	40,963	51,275	34,514
Assets	70,021		70,021		112,423
Operating Segments | Wholesale distribution
Segment Reporting Information [Line Items]
Assets	55,176		55,176		192,669
Operating Segments | Investment banking, capital markets and transaction management services
Segment Reporting Information [Line Items]
Assets	103,079		103,079		116,980
Operating Segments | Investment management
Segment Reporting Information [Line Items]
Assets	72,159		72,159		79,343
Intersegment Eliminations
Segment Reporting Information [Line Items]
Revenues	26,359	27,982	49,887	35,026
Related product receivables	2,357,306		2,357,306		2,466,628
Segment Reconciling Items
Segment Reporting Information [Line Items]
Income (loss) before taxes	0	$ 0	0	$ 0
Other assets and intercompany investments and receivables	$ 29,341		$ 29,341		$ 27,692

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Derivative Contracts (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table sets forth the fair value of the Company’s derivative contracts as of June 30, 2015 and December 31, 2014 as follows:

($ in thousands)	June 30, 2015		December 31, 2014
Luxor Put	$	8,383	$	11,623
Luxor Call	—		—
Embedded derivative related to the Series B preferred stock	—		—
Embedded derivative related to the Series C preferred stock	31,264		69,409
Total derivative contracts	$	39,647	$	81,032
Embedded derivative related to the convertible notes (included in long-term debt)	$	6,868	$	21,876

Derivative Instruments, Gain (Loss)

The following table sets forth the change in fair value of the Company’s derivative contracts which was recorded in other revenues in the consolidated statement of operations for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended				Six Months Ended
($ in thousands)	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
Luxor Put	$	2,946	$	8,466	$	3,241	$	8,466
Luxor Call	—		—		—		—
Embedded derivative related to the Series A preferred stock	—		35,239		—		35,239
Embedded derivative related to the Series B preferred stock	—		—		—		—
Embedded derivative related to the Series C preferred stock	21,767		—		38,143		—
Embedded derivative related to the convertible notes (included in long-term debt)	8,252		14,747		15,009		14,747
Total change in fair value	$	32,965	$	58,452	$	56,393	$	58,452

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Recent Acquisitions (ICH) (Details) - USD ($) $ in Thousands		6 Months Ended
	Jul. 11, 2014	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2014
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Goodwill			$ 530,949	$ 519,361
Business Acquisition, Pro Forma Information [Abstract]
Total revenues		$ 1,577,900
Investors Capital Holdings
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Cash and cash equivalents	$ 6,881
Short term investments and securities owned	499
Receivables	7,500
Property and equipment	275
Notes receivable	1,875
Deferred compensation plan investments	2,250
Deferred tax asset	2,613
Other assets	1,055
Accounts payable	(1,945)
Other liabilities	(7,593)
Notes payable and long-term debt	(2,918)
Non-qualified deferred compensation	(2,611)
Total fair value excluding goodwill and intangible assets	7,881
Goodwill	26,680
Intangible assets	30,100
Deferred tax liability	(12,152)
Total consideration	52,509
Business Combination, Consideration Transferred [Abstract]
Contractual purchase price	8,412
Contingent consideration	44,097
Total consideration	$ 52,509
Business Acquisition, Pro Forma Information [Abstract]
Total revenues		46,400
Loss before taxes		$ (1,500)
Investors Capital Holdings | Common Class A
Business Acquisition [Line Items]
Shares issued (in shares)	2,027,966
Business acquisition, equity interest issued (in shares)	2,029,261
Shares canceled (in shares)	1,295

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Accounts and Notes Receivable (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Financing Receivable [Roll Forward]
Beginning balance			$ 68,989
Ending balance	$ 75,039		75,039		$ 68,989
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance			914
Ending balance	1,086		1,086		914
Financial Advisors
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance			914	$ 424	424
Provision for bad debt			461		1,062
Charge off - net of recoveries			(289)		(572)
Total change			172		490
Ending balance	1,086		1,086		914
Forgivable loans | Financial Advisors
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance			511	368	368
Provision for bad debt			(379)		327
Charge off - net of recoveries			(51)		(184)
Total change			(430)		143
Ending balance	81		81		511
Payback loans | Financial Advisors
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Beginning balance			403	56	56
Provision for bad debt			840		735
Charge off - net of recoveries			(238)		(388)
Total change			602		347
Ending balance	1,005		1,005		403
Notes Receivable
Financing Receivable [Roll Forward]
Beginning balance			68,989	13,270	13,270
Originated loans			14,537		68,947
Collections			(6,099)		(10,477)
Forgiveness/amortization			(4,124)		(8,031)
Accretion			1,908		5,770
Allowance			(172)		(490)
Ending balance	75,039		75,039		68,989
Notes Receivable | Financial Advisors
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Total change	192	$ 315	172	315
Notes Receivable | Forgivable loans
Financing Receivable [Roll Forward]
Beginning balance			23,075	11,104	11,104
Originated loans			2,400		16,747
Collections			(917)		(1,672)
Forgiveness/amortization			(4,124)		(8,329)
Accretion			1,791		5,368
Allowance			430		(143)
Ending balance	22,655		22,655		23,075
Notes Receivable | Payback loans
Financing Receivable [Roll Forward]
Beginning balance			45,914	$ 2,166	2,166
Originated loans			12,137		52,200
Collections			(5,182)		(8,805)
Forgiveness/amortization			0		298
Accretion			117		402
Allowance			(602)		(347)
Ending balance	$ 52,384		$ 52,384		$ 45,914

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Fair Value Disclosures (Realized and Unrealized Gains and Losses Level 3) (Details) - Fair Value, Measurements, Recurring - Level 3 - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 210,186	$ 2,180
Net realized and unrealized gains and (losses)	(106,180)	(58,289)
Purchases	0	12,868
Issuances and accretions	13,081	191,994
Sales	0
Settlements	(9,937)	(13,173)
Ending balance	107,150	135,580
Trading securities- other
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	470	0
Net realized and unrealized gains and (losses)	0	0
Purchases	0	120
Issuances and accretions	0	0
Sales	0
Settlements	0	0
Ending balance	470	120
Prepaid expenses and other assets - oil and gas interests
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	151
Net realized and unrealized gains and (losses)	(12)
Purchases	0
Issuances and accretions	0
Sales	(10)
Settlements	0
Ending balance	129
Trading securities- other
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	621	0
Net realized and unrealized gains and (losses)	(77)	0
Purchases	4,522	120
Issuances and accretions	0	0
Sales	(153)
Settlements	0	0
Ending balance	4,913	120
Prepaid expenses and other assets - REIT and other illiquid investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	0
Net realized and unrealized gains and (losses)	(65)
Purchases	4,522
Issuances and accretions	0
Sales	(143)
Settlements	0
Ending balance	4,314
Derivative contracts
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	102,908	0
Net realized and unrealized gains and (losses)	(56,393)	(58,452)
Purchases	0	0
Issuances and accretions	0	162,614
Sales	0
Settlements	0	0
Ending balance	46,515	104,162
Contingent consideration
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	107,278	2,180
Net realized and unrealized gains and (losses)	(49,787)	163
Purchases	0	12,868
Issuances and accretions	13,081	29,380
Sales	0
Settlements	(9,937)	(13,173)
Ending balance	$ 60,635	$ 31,418

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Recent Acquisitions (Cetera) (Details) - USD ($)		3 Months Ended		6 Months Ended
	Apr. 29, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Business Acquisition [Line Items]
Net proceeds from issuance of Series A convertible preferred stock (including embedded derivative)				$ 0	$ 197,504,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and segregated securities		$ 19,073,000		19,073,000		$ 19,030,000
Goodwill		530,949,000		530,949,000		$ 519,361,000
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					1,577,900,000
Acquisition-related costs		5,200,000	$ 6,546,000	7,656,000	13,263,000
Cetera Financial Group
Business Acquisition [Line Items]
Net proceeds from issuance of Series A convertible preferred stock (including embedded derivative)	$ 270,000,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents	241,641,000
Cash and segregated securities	7,999,000
Trading securities	741,000
Receivables	49,443,000
Property and equipment	17,735,000
Prepaid expenses	15,083,000
Deferred compensation plan investments	76,010,000
Notes receivable	38,805,000
Other assets	37,096,000
Accounts payable	(94,074,000)
Accrued expenses	(32,421,000)
Other liabilities	(112,977,000)
Deferred compensation plan accrued liabilities	(75,294,000)
Total fair value excluding goodwill and intangible assets	169,787,000
Goodwill	292,165,000
Intangible assets	944,542,000
Deferred tax liability	(273,752,000)
Total consideration	1,132,742,000
Expected tax deductible amount		$ 7,900,000		$ 7,900,000
Business Combination, Consideration Transferred [Abstract]
Contractual purchase price	1,150,000,000
Purchase price adjustments	17,258,000
Total consideration	1,132,742,000
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					600,500,000
Loss before taxes					(37,000,000)
Acquisition-related costs					$ 15,600,000
Convertible Debt
Business Acquisition [Line Items]
Interest rate		5.00%		5.00%		5.00%
Convertible Debt | Cetera Financial Group
Business Acquisition [Line Items]
Convertible notes, face value	120,000,000
Senior Secured Second Lien Term Loan | Secured Debt | Barclays Bank PLC and Bank of America | Cetera Financial Group
Business Acquisition [Line Items]
Convertible notes, face value	150,000,000
Senior Secured First Lien Term Loan | Secured Debt | Barclays Bank PLC and Bank of America | Cetera Financial Group
Business Acquisition [Line Items]
Convertible notes, face value	575,000,000
Senior Secured First Lien Revolving Credit Facility
Business Acquisition [Line Items]
Secured debt, commitment	$ 25,000,000
Series C Preferred Stock
Business Acquisition [Line Items]
Convertible preferred, par value (in dollars per share)		$ 0.001		$ 0.001		$ 0.001
Series C Preferred Stock | Convertible Debt
Business Acquisition [Line Items]
Interest rate	5.00%
Series A Preferred Stock
Business Acquisition [Line Items]
Convertible preferred, par value (in dollars per share)	$ 0.001
Series A Preferred Stock | Convertible Debt
Business Acquisition [Line Items]
Interest rate	7.00%

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Organization and Description of the Company

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of the Company

Organization and Description of the Company

Formation. RCS Capital Corporation (“we”, “us”, “our company” or the “Company”) is a holding company incorporated under the laws of the State of Delaware on December 27, 2012, originally named 405 Holding Corporation. On February 19, 2013, 405 Holding Corporation changed its name to RCS Capital Corporation. The Company was initially formed to hold Realty Capital Securities, LLC (“Realty Capital Securities”), RCS Advisory Services, LLC (“RCS Advisory”) and American National Stock Transfer, LLC (“ANST” and together with Realty Capital Securities and RCS Advisory, the “Original Operating Subsidiaries”) and to grow business lines under the Original Operating Subsidiaries.

During the year ended December 31, 2014, the Company entered into a series of restructuring transactions beginning in February and ending in December (the “2014 Restructuring Transactions”) designed to help simplify the Company’s capital structure. As a result of the completion of the 2014 Restructuring Transactions, the non-controlling interests in the Original Operating Subsidiaries and RCS Capital Holdings, LLC (“RCS Holdings”), an intermediate holding company formed to own the Original Operating Subsidiaries in connection with the 2014 Restructuring Transactions, were eliminated. Pursuant to the 2014 Restructuring Transactions, (i) the Company formed RCS Holdings, (ii) all of the Class B Units in each of the Original Operating Subsidiaries (each, an “Original Operating Subsidiaries Unit”), which had been held by RCAP Holdings, LLC (“RCAP Holdings”) were exchanged for shares of Class A common stock of the Company, par value $0.001 per share (“Class A common stock”), or canceled, (iii) all but one share of the Class B common stock of the Company, par value $0.001 per share (“Class B common stock”), was canceled, (iv) RCS Capital Management, LLC (“RCS Capital Management”), the Company’s external services provider, contributed to RCS Holdings all of its LTIP Units in the Original Operating Subsidiaries in exchange for LTIP Units in RCS Holdings, (v) a portion of the LTIP Units in RCS Holdings, all of which were held by the individual members (the “Members”) of RCS Capital Management, who were also members of RCAP Holdings, were determined by the board of directors to be earned in April 2014 and the balance of the LTIP Units in RCS Holdings not earned at that date were terminated, and (vi) all of the Class C Units in RCS Holdings held by the Members, which were received upon automatic conversion of the LTIP Units in RCS Holdings due to their early vesting on December 31, 2014, were exchanged for shares of Class A common stock.

During the year ended December 31, 2014, the Company also completed a public offering and a concurrent private offering of Class A common stock and issued long-term debt and preferred stock. This allowed the Company to undertake a series of acquisitions, which are described in Note 2, aimed at diversifying the Company’s revenue stream. The Company is now engaged in the Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management and Investment Research businesses.

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Fair Value Disclosures (Level 3 Valuation) (Details) - Fair Value by Liability Class [Domain] - USD ($)		6 Months Ended	12 Months Ended
	Apr. 29, 2014	Jun. 30, 2015	Dec. 31, 2014
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		$ 39,647,000	$ 81,032,000
Debt term	2 years
Derivative contracts | Fair Value, Measurements, Recurring
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		46,515,000	102,908,000
Derivative contracts | Fair Value, Measurements, Recurring | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		46,515,000	102,908,000
Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		$ 46,515,000	$ 102,908,000
Volatility		30.00%	30.00%
Risk free rate of interest		2.10%	2.10%
Convertible Notes Payable | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Debt term		6 years 7 months 6 days	6 years 9 months 18 days
Volatility		30.00%	30.00%
Risk free rate of interest		1.95%	1.95%
Discount rate		19.00%	12.95%
Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Risk free rate of interest		2.10%	2.10%
Put Option | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Volatility		30.00%
Risk free rate of interest		2.75%
JP Turner & Company, LLC | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts			$ 6,200,000
JP Turner & Company, LLC | Minimum | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Present value factor			0.71%
Probability exceeding percentage threshold			99.70%
Time until payments			4 months 24 days
JP Turner & Company, LLC | Maximum | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Present value factor			0.95%
Probability exceeding percentage threshold			100.00%
Time until payments			2 years 4 months 24 days
Hatteras Funds Group | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		$ 30,460,000	$ 28,310,000
Hatteras Funds Group | Minimum | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Projected earnings		10,500,000	$ 11,000,000
Projected earnout		$ 11,400,000
Discounted rates based on estimated average cost of capital		5.00%	5.00%
Hatteras Funds Group | Maximum | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Projected earnings		$ 23,000,000	$ 17,300,000
Projected earnout		$ 18,100,000
Discounted rates based on estimated average cost of capital		7.00%	7.00%
StratCap | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		$ 24,400,000	$ 68,200,000
First Allied acquisition | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		394,000	$ 4,568,000
First Allied And Centaras | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discounted rates based on estimated average cost of capital			20.00%
Girard Acquisition | Derivative contracts | Fair Value, Measurements, Recurring | Discounted Cash Flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Derivative contracts		$ 5,381,000
Retained advisory fee if less than threshold		5.00%
Retained advisory fee if more than threshold		0.00%
Gross dealer commissions threshold for advisory fee		$ 36,400,000.0
Recruiting payments fee		5.00%
Trading Securities | Fair Value, Measurements, Recurring | Net asset value (NAV) | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepaid expenses and other assets - oil and gas interests		$ 113,000	$ 113,000
Real Estate Funds | Fair Value, Measurements, Recurring | Net asset value (NAV) | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepaid expenses and other assets - oil and gas interests		357,000	357,000
Prepaid expenses and other assets - oil and gas interests | Fair Value, Measurements, Recurring | Net asset value (NAV) | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepaid expenses and other assets - oil and gas interests		$ 129,000	$ 151,000
Discount rate		10.00%	1000.00%
Prepaid expenses and other assets - REIT and other illiquid investments | Fair Value, Measurements, Recurring | Net asset value (NAV) | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Prepaid expenses and other assets - oil and gas interests		$ 4,314,000
Low Case | StratCap | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Present value factor		0.80%	0.65%
Probability Adjustment		25.00%	25.00%
Case Base | StratCap | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Present value factor		0.90%	0.787%
Probability Adjustment		50.00%	50.00%
High Case | StratCap | Fair Value, Measurements, Recurring | Discounted cash flow | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Probability Adjustment		25.00%	25.00%
Series B Preferred Stock | Convertible Notes Payable | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Debt term		7 years 6 months	8 years
Series B Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate		21.10%	15.10%
Series C Preferred Stock | Convertible Notes Payable | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Debt term		7 years 6 months	8 years
Series C Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Discount rate		21.10%	15.10%
Period One | Series B Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Dividend Assumptions		12.50%	12.50%
Period One | Series C Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Dividend Assumptions		8.00%	8.00%
Period Two | Series B Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Dividend Assumptions		11.00%	11.00%
Period Two | Series C Preferred Stock | Convertible Preferred Stock | Derivative contracts | Fair Value, Measurements, Recurring | Monte Carlo | Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Dividend Assumptions		7.00%	7.00%

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Net Capital Requirements (Tables)

6 Months Ended

Jun. 30, 2015

Regulatory Capital Requirements [Abstract]

Computation of Net Capital under Securities and Exchange Commission Regulation

the table below provides the aggregated net capital requirements by segment of the Company’s broker-dealers as of June 30, 2015 and December 31, 2014.

($ in thousands)	June 30, 2015		December 31, 2014
Independent retail advice(1):
Net capital	$	57,832	$	63,871
Required net capital	3,064		2,640
Net capital in excess of required net capital	$	54,768	$	61,231
Wholesale distribution:
Net capital	$	11,393	$	20,774
Required net capital	1,155		1,424
Net capital in excess of required net capital	$	10,238	$	19,350
Investment management:
Net capital	$	2,034	$	2,145
Required net capital	5		5
Net capital in excess of required net capital	$	2,029	$	2,140

___________________

(1) VSR Financial Services, Inc. and Girard Securities, Inc. were not under the control of the Company as of December 31, 2014. Therefore, they were not included in the net capital calculation as of December 31, 2014.

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Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Sale of Wholesale Business

On August 6, 2015, the Company and RCS Holdings entered into a Membership Interest Purchase Agreement (the “MIPA”) with Apollo Management Holdings, L.P. (“APH”) pursuant to which the Company and RCS Holdings agreed to sell their wholesale distribution business, consisting of Realty Capital Securities and StratCap, and certain other assets, including the Company and RCS Holdings’ transfer agent, ANST, to APH or an affiliate of APH, for an aggregate purchase price of $25.0 million, payable in cash and subject to adjustment. RCS Capital, the investment banking and capital markets division of Realty Capital Securities, is excluded from the transaction and will be transferred from Realty Capital Securities to another broker-dealer subsidiary of the Company and RCS Holdings prior to closing. The Company and RCS Holdings intend on using the net proceeds from the sale to make principal payments under its senior secured credit facilities, as required under the senior credit facilities.

The purchase price is subject to a downward adjustment equal to the greater of (A) the amount (if any) by which the target net working capital of $5.0 million exceeds the Company and RCS Holdings’ closing net working capital at closing, and (B) the amount (if any) by which the target regulatory capital exceeds the closing regulatory capital at closing (which is the net capital required to be maintained under the rules of the SEC), as such terms are defined in the MIPA. However, if (X) the Company and RCS Holdings’ closing net working capital exceeds the target net working capital, or (Y) the closing regulatory capital exceeds the target regulatory capital, the Company and RCS Holdings may cause its subsidiaries to distribute the lesser of such excess capital amounts to the Company and RCS Holdings prior to the closing, subject to the FINRA not objecting or imposing a restriction or burdensome condition on such distribution.

The Company and RCS Holdings have agreed to use commercially reasonable efforts to obtain the payment in full, settlement or termination of earn-out payments payable to the StratCap sellers under the agreements pursuant to which the Company and RCS Holdings acquired StratCap, the termination or waiver of all covenants limiting the operations of StratCap or its owners thereunder, and the consent of parties to advisory contracts with StratCap to the pertinent change of control and modifications of exclusivities terms therein (the “StratCap Waiver”). If the StratCap Waiver is not obtained prior to closing, APH has the right not to acquire StratCap, in which event APH would remain obligated to purchase Realty Capital Securities and ANST and the aggregate purchase price would be reduced by $5.0 million. In such case, the Company and RCS Holdings have agreed to certain agreements with APH that, until the earlier of the date the StratCap Waiver is obtained or otherwise satisfied or December 31, 2017, it will operate StratCap in the manner prescribed in the MIPA, including providing that Realty Capital Securities receive compensation (including dealer manager fees, advisory fees and other compensation) for sales of StratCap products equivalent to that received by StratCap. If the StratCap Waiver is received after closing and prior to December 31, 2017, APH will be obligated to acquire StratCap for a purchase price equal to $5.0 million, subject to a working capital adjustment, representations, warranties and indemnities, and other terms substantially as set forth in the MIPA (to the extent relevant to a purchase of StratCap).

In addition, the MIPA provides that the Company and RCS Holdings will deliver to Apollo an updated seller disclosure letter to the MIPA on or before August 13, 2015 and APH has a right to terminate the MIPA within 3 business days of receipt of the updated disclosure letter if the representations or warranties, but for the disclosures contained in such updated seller disclosure letter, would have been untrue (subject to certain materiality standards contained in the MIPA) as of the date of the MIPA.

The MIPA contains certain representations and warranties and covenants. The MIPA also includes customary indemnities and a special indemnity for legal and governmental proceedings, as more particularly set forth in the MIPA. The closing of the transaction pursuant to the MIPA is subject to certain conditions, including (i) the accuracy of the other party’s representations and warranties (subject to specified qualifications), (ii) the other party’s material compliance with its covenants and agreements contained in the MIPA, (iii) absence of certain changes with respect to legal proceedings, and (iv) no material adverse effect. In addition, APH’s obligation to consummate the transactions contemplated by the MIPA is subject to (a) the receipt of certain requisite consents from third parties (other than the StratCap Waiver), (b) approval from the FINRA of the proposed change of control of the broker-dealer subsidiaries, not subject to any FINRA Burdensome Condition (as defined in the MIPA), or the waiver of this condition by APH if at least 35 days have passed since the filing was submitted to FINRA and FINRA has not denied the application for approval or advised that the parties are prohibited from consummating the closing, (c) closing of the “AR Capital Transaction Agreement” (as defined below) and (d) Realty Capital Securities continuing to employ a stated number of external wholesalers. The obligations of the Company and RCS Holdings to consummate the transactions contemplated by the MIPA is conditioned on certain conditions, including receipt of proceeds from the sale of the Series D Preferred Stock (as described below). The closing of the transactions contemplated by the MIPA is expected to be consummated in 2015.

The MIPA includes certain post-closing agreements, including a non-competition agreement that restricts the Company and RCS Holdings from engaging for 5 years in the wholesale brokerage business and raising or sponsoring public or private, traded or non-traded investment companies. In addition, pursuant to the MIPA, the Company and RCS Holdings and APH will enter into an Operating Agreement and a Strategic Relationship Agreement on the terms set forth in term sheets which are exhibits to the MIPA. The Operating Agreement term sheet addresses the provision by the Company and RCS Holdings, Docupace, LLC (a joint venture in which the Company and RCS Holdings holds the controlling interest) and StratCap of services and capabilities to Realty Capital Securities and its affiliates, including APH, in order to support and maintain the operations of the wholesale broker-dealer and related businesses acquired pursuant to the MIPA, and includes agreements to license certain technology of StratCap and Docupace, LLC. The Operating Agreement term sheet also provides that the Company and RCS Holdings will agree that, in the event APH does not acquire StratCap, Realty Capital Securities will be provided the opportunity to concurrently distribute StratCap’s investment programs and will receive one-half of StratCap’s revenues. The Strategic Relationship Agreement provides for agreements relating to APH and its affiliates’ products being distributed through the Company and RCS Holdings’ retail advice platform on terms specified in the Strategic Relationship Agreement term sheet.

On August 6, 2015, AR Capital LLC (“AR Capital”), entered into a Transaction Agreement (the “AR Capital Transaction Agreement”) with AMH Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership and an affiliate of APH (“AMH”) and a newly formed entity, AR Global, LLC (“AR Global”). The AR Capital Transaction Agreement provides that AR Capital will transfer to AR Global substantially all of the assets of its ongoing asset management business to AR Global. Following the consummation of the transactions contemplated by the AR Capital Transaction Agreement, AMH will hold a 60% % interest in AR Global and AR Capital will hold a 40% interest in AR Global. The business and affairs of AR Global will be overseen by a board of managers comprised of ten members, six of which will be appointed by AMH and four of which will be appointed by AR Capital. AR Capital is currently under common control with RCAP Holdings, LLC, the Company’s controlling shareholder, and the Company’s Chief Executive Officer, who is also a director and one other of the Company’s directors are members of AR Capital. The closing of the AR Capital Transaction is conditioned on, among other things, the closing of the transactions under the MIPA.

Investment Agreements

On August 6, 2015, the Company and each of APH and Luxor entered into separate Investment Agreements (the “Investment Agreements”) under which APH agreed to purchase 1,000,000 shares of Series D-1 Preferred Stock (the “Series D-1 Preferred Stock”) for a purchase price of $25.0 million and Luxor agreed to acquire 500,000 shares of Series D-2 preferred stock (the “Series D-2 Preferred Stock” and collectively with the Series D-1 Preferred Stock, the “Series D Preferred Stock”) for a purchase price of $12.5 million. The proceeds from the sale of the Series D Preferred Stock will be used for general corporate and working capital purposes.

The Investment Agreements contains certain representations and warranties and covenants. In addition, closing of each of the Investment Agreements is subject to various conditions, including (i) the accuracy of the other party’s representations and warranties (subject to specified qualifications), (ii) the other party’s material compliance with its covenants and conditions contained in the Investment Agreements, (iii) absence of certain changes with respect to legal proceedings, (iv) no material adverse effect; (v) the Company entering into a customary registration rights agreement and (vi) the closing of the other Investment Agreement. In addition, each of AMH and Luxor can terminate the Investment Agreements if the Company’s disclosure letter to that Investment Agreement (which is required to be delivered on or before August 13, 2015) discloses information which would be material to a reasonable investor and a reasonable person would not have recognized would have been disclosed against the pertinent representation and warranty after reading the Investment Agreement and the Company’s SEC filings (excluding any disclosures contained under the captions “Risk Factors” or “Forward Looking Statements”, any non-specific, predictive, cautionary or forward looking disclosures).

The Series D-1 Preferred Stock and Series D-2 Preferred Stock will have identical rights except for the right of the Series D-1 Preferred Stock to elect two directors, as described below. The following summarizes the material terms of the Series D Preferred Stock Certificates of Designation (collectively referred to as the “Series D COD”) and does not purport to be complete.

Dividends

If paid in cash, dividends on shares of Series D Preferred Stock will accrue quarterly at 11.0% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue quarterly at 12.5% per annum of the liquidation preference.

Liquidation Preference

The initial liquidation preference of shares of Series D Preferred Stock is $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

Conversion Rights

The holders of shares of Series D Preferred Stock have the right, at their option at any time and from time to time, to convert some or all of their shares of Series D Preferred Stock into the number of shares of the Company’s Class A common stock, obtained by dividing the aggregate liquidation preference of such shares plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of conversion by an initial conversion price of $5.00, which will be adjustable upon the occurrence of certain events and transactions to prevent dilution.

However, the Series D-2 Preferred Stock will not be convertible until stockholder approval has been obtained in accordance with the rules of the NYSE to the issuance of Series D-2 Preferred Stock and the Common Stock issuable on conversion thereof. The Company has agreed to as soon as reasonably practicable to file an information statement on Schedule 14-C with the SEC and use its commercially reasonable efforts to have the information statement cleared with the SEC and RCAP Holdings, LLC, the holder of Class B share, has executed a written consented to the issuance and the stockholder approval will be effective on the 20^th calendar day after the information statement is sent to stockholders.

Redemption Rights

Starting on December 12, 2022, the Company will have a right to redeem, and holders of Series D Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares Series D Preferred Stock for cash at the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption.

Rank

The Series D Preferred Stock ranks pari passu with each other and the Series B and Series C Preferred Stock with respect to rights to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding up of the Company.

Board of Director Rights

For so long as APH and its affiliates own at least a majority of the then outstanding shares of Series D-1 Preferred Stock or at least 25% of the Series D-1 Preferred Stock originally issued to them, the holders of a majority of the outstanding share of Series D-1 Preferred Stock will be entitled to elect two directors. 

Voting Rights

Series D Preferred Stock generally has the right to vote on an as converted basis with the holders of the Class A common stock. However, the Series D-2 Preferred Stock will not have such voting rights until stockholder approval has been obtained in accordance with the rules of the NYSE, as discussed above.

In addition, the affirmative vote of at least a majority of shares of Series D Preferred Stock, voting as a single class, is required for the Company to: (i) authorize or approve the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for, shares of, preferred stock or any other capital stock of the Company, which shares rank senior to or on a parity with Series D Preferred Stock, subject to limited exceptions; (ii) enter into any transaction or series of related transactions with any affiliate of the Company other than in the ordinary course of business and on terms and conditions substantially as favorable as a comparable arm’s-length transaction with a non-affiliate; or (iii) contract, create, incur, or assume any Indebtedness (as defined in the Series D COD or guarantee any Indebtedness if, at the time of or after giving effect to such contract, creation, incurrence, assumption or guarantee, the aggregate outstanding amount of all Indebtedness on a consolidated basis of the Company equals or exceeds or would equal or exceed 4.0 times LTM Adjusted EBITDA (as such term is defined in the Series D COD).

In addition, the affirmative vote of the holders of at least a majority of shares of the Series D-1 Preferred Stock and Series D-2 Preferred Stock voting separately is required to amend, alter or repeal any of the provisions of the Series D-1 COD and Series D-2 COD, as applicable, the Certificate of Incorporation of the Company or the Bylaws of the Company so as to materially and adversely affect the powers, designations, preferences and rights of the Series D-1 Preferred Stock and Series D-2 Preferred Stock, as applicable.

Limitation

In no event will a holder of Series D Preferred Stock be allowed to accept Class A Common issuable upon conversion of the Series D Preferred Stock or have voting rights with respect to the Series D Preferred Stock that would result in the ownership of an aggregate number of Common Stock, when taken together with any other Common Shares then held by such holder and persons aggregated with such holder under FINRA rules, in excess of 24.9% of the outstanding Class A common stock or in excess of 24.9% of the voting power, unless such ownership of Common Shares or voting in excess of the 24.9% Share Cap is duly approved in advance by FINRA.

Luxor’s Interest in the Company

In addition to shares of Series A Preferred Stock, Luxor owns shares of Class A common stock (which were either purchased on the open market or purchased directly from the Company and RCS Holdings in a private placement),$120.0 million principal amount of Convertible Notes (representing all the issued and outstanding Convertible Notes as of December 17, 2014) and $152.5 million liquidation of preference of Series B Preferred Stock and $114.1 million liquidation preference of Series C Preferred Stock. As of August 7, 2015, without giving effect to the issuance of any of the transactions described herein, Luxor held 8,495,402 shares of Class A common stock in the aggregate held by Luxor representing 10.99% of the shares of Class A common stock outstanding and 5.50% of the combined voting power of the Company and RCS Holdings and RCS Holdings. As of August 7, 2015, and assuming on the conversion of the Series C Preferred Stock and the Convertible Notes, Luxor would be the beneficial owner of 25,594,768 shares of Class A common stock.

Termination of Amended and Restated Services Agreement

The Company and RCS Holdings have entered into an agreement (the “Termination Agreement”) with RCS Capital Management, LLC (“RCM”), each of the members of RCM, who are also members of RCAP Holdings, LLC, and Luxor pursuant to which RCM and its members have agreed to terminate the Services Agreement, pursuant to which RCM serves as service provider to the Company and RCS Holdings, within five business days. Pursuant to the Termination Agreement, the members of RCAP Holdings, LLC will receive 2,608,697 shares of Class A common stock as consideration for the termination of the Services Agreement. Luxor will receive 3,000,000 shares of Class A common stock as consideration for the termination of the Services Agreement and its rights under the Put & Call Agreement. Under the Put & Call Agreement, Luxor has the right to put its interest in RCM to the Company and RCS Holdings for a number of shares (or an equivalent cash payment) equal to Luxor’s membership interest in RCM (which is equal to 19.46%) multiplied by the outstanding shares of Class A common stock (assuming conversion of convertible securities issued to Luxor) multiplied by 0.15. The issuance of more than 0.99% of the outstanding Class A common stock to Luxor and to certain other members who are related parties of the Company is subject to stockholder approval in accordance with the rules of the NYSE, as discussed above. A second closing will take place following receipt of such approval, at which the balance of the Class A common stock will be issued. The issuance will be included in the information statement described above. Following and in connection with these transactions, RCM will liquidate.

The Termination Agreement includes mutual releases by the Company and RCS Holdings and the members of RCM in connection with matters arising from or related to the Services Agreement and the Put & Call Agreement.

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Segment Reporting

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company operates through its operating subsidiaries in six principal segments: Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management; Investment Research; and Corporate and Other.

The Independent Retail Advice segment offers financial advice and investment solutions to investors through the broad network of financial advisors. Cetera, Summit, J.P. Turner, First Allied, ICH, VSR and Girard operate as independent subsidiaries under their own brand and management. During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate broker-dealer subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who have not been invited to join Summit will be terminated.

The Wholesale Distribution segment includes the Company’s alternative investment program activities and Realty Capital Securities’ operations as the distributor or dealer manager consisting of nine public, non-traded REITs, two public, non-traded BDCs and an oil and gas program. Proprietary programs are sponsored directly or indirectly by AR Capital, LLC, an affiliate. Realty Capital Securities distributes these securities through selling groups comprised of FINRA member broker-dealers located throughout the United States. The Wholesale Distribution segment also includes StratCap, which through its broker-dealer subsidiary, distributes a platform of offerings consisting of two non-traded REITS, a non-traded BDC and two public, non-traded limited liability companies through a selling group comprised of FINRA member broker-dealers and RIAs.

The Investment Banking, Capital Markets and Transaction Management Services segment provides comprehensive strategic advisory, transaction management and transfer agency services focused on direct investment programs, particularly non-traded REITs through RCS Advisory, ANST and the investment banking division of Realty Capital Securities. These strategic advisory services include mergers and acquisitions advisory, capital markets activities, registration management, and other transaction support services. This segment also includes the results from the Company’s majority interest in Docupace, a provider of integrated, electronic processing technologies and systems for financial institutions and wealth management firms.

The Investment Management segment provides investment advisory, distribution and other services to the Hatteras family of mutual funds and other registered investment products.

The Investment Research segment provides focused research, consulting, training and education, and due diligence on traditional and non-traditional investment products through SK Research.

Corporate and Other primarily includes interest expense on the Company’s long-term debt, share-based compensation related to the Company’s board of directors and certain employees, expenses related to the OPP, changes in the fair value of the Company’s derivative contracts, certain acquisition-related expenses, changes in the fair value of contingent consideration, certain public company expenses and the results of operations for the Company’s crowdfunding platform and Trupoly (which has been rebranded under the name DirectVest).

The reportable business segment information is prepared using the following methodologies:

• Net revenues and expenses directly associated with each reportable business segment are included in determining earnings before taxes.

• Net revenues and expenses not directly associated with specific reportable business segments are allocated based on the most relevant measures applicable, including each reportable business segment’s net revenues, time spent and other factors.

• Reportable business segment assets include an allocation of indirect corporate assets that have been fully allocated to the Company’s reportable business segments, generally based on each reportable business segment’s capital utilization.

The following table presents the Company’s net revenues, expenses and income before taxes by segment for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2015			2014			2015			2014
Independent retail advice(1):
Revenues	$	528,980		$	324,153		$	1,032,539		$	416,911
Expenses	567,667			329,364			1,071,141			422,970
Loss	$	(38,687	)	$	(5,211	)	$	(38,602	)	$	(6,059	)
Wholesale distribution(2):
Revenues	$	107,249		$	250,586		$	196,394		$	389,696
Expenses	252,196			246,101			358,042			388,736
Income (loss)	$	(144,947	)	$	4,485		$	(161,648	)	$	960
Investment banking, capital markets and transaction management services:
Revenues	$	21,815		$	39,101		$	40,627		$	87,645
Expenses	12,510			16,860			27,315			39,086
Income	$	9,305		$	22,241		$	13,312		$	48,559
Investment management(3):
Revenues	$	12,281		$	—		$	25,661		$	—
Expenses	12,540			—			25,698			—
Loss	$	(259	)	$	—		$	(37	)	$	—
Investment research:
Revenues	$	1,397		$	691		$	2,580		$	691
Expenses	4,375			3,857			7,522			4,301
Loss	$	(2,978	)	$	(3,166	)	$	(4,942	)	$	(3,610	)
Corporate and other:
Revenues	$	33,003		$	58,470		$	56,036		$	58,470
Expenses	(26,341		)	17,507			4,761			23,956
Income	$	59,344		$	40,963		$	51,275		$	34,514
Revenue reconciliation
Total revenues for reportable segments	$	704,725		$	673,001		$	1,353,837		$	953,413
Less: intercompany revenues	26,359			27,982			49,887			35,026
Total revenues	$	678,366		$	645,019		$	1,303,950		$	918,387
Income reconciliation
Total income (Loss) before taxes for reportable segments	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364
Reconciling items	—			—			—			—
Income (loss) before income taxes	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364

_____________________

(1) Includes First Allied’s operating results from September 25, 2013, the date First Allied was acquired by RCAP Holdings. Also, includes a goodwill and intangible assets impairment charge of $26.2 million for the three and six months ended June 30, 2015 related to the J.P. Turner acquisition. See Note 2 for more details.

(2) Includes a goodwill and intangible asset impairment charge of $130.6 million for the three and six months ended June 30, 2015 related to the StratCap acquisition. See Note 2 for more details.

(3) Did not begin operations until the acquisition of Hatteras on June 30, 2014.

The following table presents the Company’s total assets by segment as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Segment assets:
Independent retail advice	$	2,073,393	$	1,980,614
Wholesale distribution	55,176		192,669
Investment banking, capital markets and transaction management services	103,079		116,980
Investment management	72,159		79,343
Investment research	12,819		12,291
Corporate and other(1)	70,021		112,423
Total assets for reportable segments	$	2,386,647	$	2,494,320
Assets reconciliation:
Total assets for reportable segments	$	2,386,647	$	2,494,320
Less: intercompany eliminations	29,341		27,692
Total consolidated assets	$	2,357,306	$	2,466,628

_____________________

(1) Excludes amounts related to investment in subsidiaries.

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Recent Acquisitions (VSR) (Details) - VSR Acquisition - USD ($) $ / shares in Units, $ in Millions		6 Months Ended
	Mar. 11, 2015	Jun. 30, 2015
Business Acquisition [Line Items]
Total consideration	$ 68.1
Contractual purchase price	26.8
Contingent and deferred consideration	9.4
Deferred consideration year two	$ 5.1
Deferred consideration payout percentage	50.00%
Indemnification asset	$ 1.7
Common Class A
Business Acquisition [Line Items]
Business acquisition, equity interest issued (in shares)	2,436,429	2,436,429
Equity interests value assigned	$ 26.8
Acquisition share price (in dollars per share)	$ 10.989
Deferred consideration payout percentage	50.00%

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Schedule of Revenue, Expenses, and Assets by Segment

The following table presents the Company’s net revenues, expenses and income before taxes by segment for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in thousands)	2015			2014			2015			2014
Independent retail advice(1):
Revenues	$	528,980		$	324,153		$	1,032,539		$	416,911
Expenses	567,667			329,364			1,071,141			422,970
Loss	$	(38,687	)	$	(5,211	)	$	(38,602	)	$	(6,059	)
Wholesale distribution(2):
Revenues	$	107,249		$	250,586		$	196,394		$	389,696
Expenses	252,196			246,101			358,042			388,736
Income (loss)	$	(144,947	)	$	4,485		$	(161,648	)	$	960
Investment banking, capital markets and transaction management services:
Revenues	$	21,815		$	39,101		$	40,627		$	87,645
Expenses	12,510			16,860			27,315			39,086
Income	$	9,305		$	22,241		$	13,312		$	48,559
Investment management(3):
Revenues	$	12,281		$	—		$	25,661		$	—
Expenses	12,540			—			25,698			—
Loss	$	(259	)	$	—		$	(37	)	$	—
Investment research:
Revenues	$	1,397		$	691		$	2,580		$	691
Expenses	4,375			3,857			7,522			4,301
Loss	$	(2,978	)	$	(3,166	)	$	(4,942	)	$	(3,610	)
Corporate and other:
Revenues	$	33,003		$	58,470		$	56,036		$	58,470
Expenses	(26,341		)	17,507			4,761			23,956
Income	$	59,344		$	40,963		$	51,275		$	34,514
Revenue reconciliation
Total revenues for reportable segments	$	704,725		$	673,001		$	1,353,837		$	953,413
Less: intercompany revenues	26,359			27,982			49,887			35,026
Total revenues	$	678,366		$	645,019		$	1,303,950		$	918,387
Income reconciliation
Total income (Loss) before taxes for reportable segments	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364
Reconciling items	—			—			—			—
Income (loss) before income taxes	$	(118,222	)	$	59,312		$	(140,642	)	$	74,364

_____________________

(1) Includes First Allied’s operating results from September 25, 2013, the date First Allied was acquired by RCAP Holdings. Also, includes a goodwill and intangible assets impairment charge of $26.2 million for the three and six months ended June 30, 2015 related to the J.P. Turner acquisition. See Note 2 for more details.

(2) Includes a goodwill and intangible asset impairment charge of $130.6 million for the three and six months ended June 30, 2015 related to the StratCap acquisition. See Note 2 for more details.

(3) Did not begin operations until the acquisition of Hatteras on June 30, 2014.

The following table presents the Company’s total assets by segment as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Segment assets:
Independent retail advice	$	2,073,393	$	1,980,614
Wholesale distribution	55,176		192,669
Investment banking, capital markets and transaction management services	103,079		116,980
Investment management	72,159		79,343
Investment research	12,819		12,291
Corporate and other(1)	70,021		112,423
Total assets for reportable segments	$	2,386,647	$	2,494,320
Assets reconciliation:
Total assets for reportable segments	$	2,386,647	$	2,494,320
Less: intercompany eliminations	29,341		27,692
Total consolidated assets	$	2,357,306	$	2,466,628

_____________________

(1) Excludes amounts related to investment in subsidiaries.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Basis of presentation

Basis of Presentation

The consolidated financial statements include the accounts of the Company, Realty Capital Securities, RCS Advisory, ANST, SK Research, LLC (“SK Research”), Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard for the periods since acquisition and of First Allied for the periods since it was under the control of RCAP Holdings. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Regulation S-X. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results.

The consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2014. The statement of financial condition as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings. The acquisition of First Allied by RCAP Holdings was accounted for by RCAP Holdings using the purchase method of accounting; therefore, the purchase price was allocated to First Allied’s assets and liabilities at fair value and any excess purchase price was then attributed to intangible assets and goodwill. When the Company acquired First Allied from RCAP Holdings, no additional intangible assets or goodwill was recorded.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior period financial statement presentation to conform to the current period presentation primarily as a result of the need to harmonize the financial statements of the Company with those of the entities acquired during 2014.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and these differences could be material.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) to clarify the principles for recognizing revenue and to develop common revenue accounting guidance for U.S. GAAP and International Financial Reporting Standards. For public entities, the amendments were to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB deferred the effective date of ASU 2014-09 and the guidance will be effective for public entities for annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is still evaluating the impact of ASU 2014-09.

In November 2014, the FASB issued Accounting Standards Update 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”), which requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract, when evaluating whether the host contract is more akin to debt or equity. The amendments in ASU 2014-16 did not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required but rather clarified how U.S. GAAP should be interpreted in concluding on the nature of the host contract. The Company adopted ASU 2014-16 during the fourth quarter of 2014. The adoption of ASU 2014-16 did not have an impact on the Company’s previously reported financial condition or results of operations.

In February 2015, the FASB issued Accounting Standards Update 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new guidance applies to entities in all industries and amends the current consolidation guidance. The amendments are effective for fiscal years beginning after December 15, 2016 and for interim periods within fiscal periods beginning after December 15, 2017. Early application is permitted. The Company is still evaluating the impact of ASU 2015-02 but does not expect the adoption to have a material impact to its financial condition or results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The key provisions of ASU 2015-03 are a) that debt issuance costs be reported on the statement of financial condition as a reduction in the liability for long-term debt rather than as an asset and b) that the amortization of debt issuance costs be reported as interest expense. For public companies, ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity will apply ASU 2015-03 retrospectively to all prior periods. The Company intends to adopt ASU 2015-03 beginning with the financial statements as of and for the year ended December 31, 2015. The adoption of ASU 2015-03 is expected to have an impact on the Company’s statement of financial condition as the deferred financing fees will be reported net against the long-term debt. The adoption of ASU 2015-03 is not expected to have an impact on the Company’s statement of operations.

In May 2015, the FASB issued Accounting Standards Update 2015-07, “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize investments within the fair value hierarchy for which their fair value is measured at net asset value using the practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value practical expedient. Instead, those disclosures would be limited to investments for which the entity has elected to estimate the fair value using that practical expedient. For public companies, the final consensus will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. A reporting entity will apply the final consensus retrospectively. While the Company is still evaluating the impact of ASU 2015-07, it will not have an impact on the Company’s financial condition, results of operations or cash flows because the update only affects disclosure requirements. ASU 2015-07 is not expected to have a significant impact on the Company’s fair value disclosures as the Company currently has few investments for which their fair values are determined using net asset value.

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Recent Acquisitions (Table)

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

The assignment of the total consideration for the Cetera acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	241,641
Cash and segregated securities	7,999
Trading securities	741
Receivables	49,443
Property and equipment	17,735
Prepaid expenses	15,083
Deferred compensation plan investments	76,010
Notes receivable	38,805
Other assets	37,096
Accounts payable	(94,074		)
Accrued expenses	(32,421		)
Other liabilities	(112,977		)
Deferred compensation plan accrued liabilities	(75,294		)
Total fair value excluding goodwill and intangible assets	169,787
Goodwill	292,165
Intangible assets	944,542
Deferred tax liability	(273,752		)
Total consideration	$	1,132,742

The assignment of the total consideration for the ICH acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	6,881
Short term investments and securities owned	499
Receivables	7,500
Property and equipment	275
Notes receivable	1,875
Deferred compensation	2,250
Deferred tax asset	2,613
Other assets	1,055
Accounts payable and accrued expenses	(1,945		)
Other liabilities	(7,593		)
Notes payable and long-term debt	(2,918		)
Non-qualified deferred compensation	(2,611		)
Total fair value excluding goodwill, intangible assets, and deferred tax liability	7,881
Goodwill	26,680
Intangible assets	30,100
Deferred tax liability	(12,152		)
Total consideration	$	52,509

The contingent and deferred consideration in the table above represents the fair value at the acquisition date which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	30,110	$	36,790

The total ICH consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	8,412
Stock issued by the Company	44,097
Total consideration	$	52,509

The contingent and deferred consideration in the table above represents the fair value at the date of acquisition which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	12,300	$	84,740

The total Cetera consideration consisted of the following:

($ in thousands)
Contractual purchase price	$	1,150,000
Purchase price adjustments	17,258
Total consideration	$	1,132,742

The total Hatteras consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	30,000
Contingent consideration	24,880
Deferred consideration	9,430
Total consideration	$	64,310

The total Summit consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	46,727
Stock issued by the Company	10,431
Total consideration	$	57,158

The total StratCap consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	67,510
Stock issued by the Company	10,000
Contingent consideration	75,000
Deferred consideration	9,970
Total consideration	$	162,480

The assignment of the total consideration for the StratCap acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	4,522
Short term investments and securities owned	2,239
Receivables	4,858
Property and equipment	96
Prepaid expenses and other assets	629
Accounts payable	(706		)
Accrued expenses	(201		)
Other liabilities	(908		)
Total fair value excluding goodwill and intangible assets	10,529
Goodwill	30,571
Intangible assets	121,380
Total consideration	$	162,480

The assignment of the total consideration for the J.P. Turner acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	10,171
Receivables	712
Property and equipment	232
Prepaid expenses	892
Notes receivable	1,660
Other assets	2,171
Accounts payable	(1,710		)
Accrued expenses	(8,543		)
Other liabilities	(656		)
Total fair value excluding goodwill and intangible assets	4,929
Goodwill	13,579
Intangible assets	14,200
Total consideration	$	32,708

The assignment of the total consideration for the Hatteras acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	805
Receivables	7,747
Property and equipment	192
Prepaid expenses	326
Other assets	120
Accounts payable	(3,721		)
Accrued expenses	(5,277		)
Total fair value excluding goodwill and intangible assets	192
Goodwill	15,348
Intangible assets	48,770
Total consideration	$	64,310

The assignment of the total consideration for the Summit acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	13,353
Receivables	3,147
Property and equipment	362
Prepaid expenses	1,531
Notes receivable	1,092
Other assets	2,366
Accounts payable	(9,973		)
Accrued expenses	(3,100		)
Total fair value excluding goodwill and intangible assets	8,778
Goodwill	23,891
Intangible assets	31,240
Deferred tax liability	(6,751		)
Total consideration	$	57,158

The total J.P. Turner consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	12,786
Stock issued by the Company	4,860
Contingent consideration	4,500
Deferred consideration	10,562
Total consideration	$	32,708

Business Acquisition, Pro Forma Information

The Company’s supplemental pro forma results of operations for StratCap for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	113.2
Loss before taxes	(0.2		)

The Company’s supplemental pro forma results of operations for Hatteras for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.7
Income before taxes	3.1

The Company’s supplemental pro forma results of operations, which include the Original Operating Subsidiaries, Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap for the six months ended June 30, 2014, are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	1,577.9
Income before taxes	34.9
Provision for income taxes(1)	14.0
Net income	20.9
Less: income attributable to non-controlling interest	9.1
Less: preferred dividends and deemed dividend(2)	204.3
Net loss attributable to Class A common stockholders	$	(192.5	)

________________________

(1) Reflects pro forma adjustment to record the income tax provision based on the assumed 40% tax rate.

(2) Includes deemed dividend of $194.8 million representing the difference between redemption value of the Series A Preferred Stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

The Company’s supplemental pro forma results of operations with J.P. Turner for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.6
Income before taxes	2.0

The Company’s supplemental pro forma results of operations for ICH for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	46.4
Loss before taxes	(1.5		)

The Company’s supplemental pro forma results of operations for Summit for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	48.8
Loss before taxes	(0.7		)

The Company’s supplemental pro forma results of operations for Cetera for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	600.5
Loss before taxes	(37.0		)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net income	$ (81,530)	$ 60,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4,394	2,014
Amortization	54,108	15,532
Goodwill and intangible assets impairment charge	156,801	0
Equity-based compensation	9,168	18,683
Deferred income taxes	(62,040)	3,668
Loss/(gain) on the sale of available-for-sale securities	369	(171)
Change in contingent and deferred consideration	(50,367)	163
Gain on derivative contracts	(56,393)	(58,452)
Deferred compensation plan investments, net	(864)	135
Forgiveness of notes receivable	4,124	2,507
Change in fair value of trading securities	576	(908)
Deferred financing fees amortization	6,178	1,280
Other	(213)	(36)
Increase (decrease) resulting from changes in:
Cash and securities segregated under federal and other regulations	(43)	2,000
Trading securities	5,190	(301)
Fees and commissions receivable:
Due from related parties	11,855	31,018
Due from non-related parties	(13,792)	(32,521)
Prepaid expenses	5,902	(2,372)
Notes receivable	(10,294)	(7,160)
Payable to customers	8,932	(6,588)
Commissions payable	11,261	36,117
Accrued expenses and accounts payable:
Due to related parties	(632)	(2,629)
Due to non-related parties	17,544	(16,048)
Other liabilities	4,380	(77,161)
Payment of contingent consideration in excess of acquisition date fair value	(2,680)	(18)
Net cash (used) provided by operating activities	21,934	(30,627)
Cash flows from investing activities:
Change in restricted cash	0	(26,000)
Purchases of available-for-sale securities	(26)	(215)
Proceeds from the sale of available-for-sale securities	8,780	9,013
Purchase of property and equipment	(7,286)	(2,221)
Proceeds from the written put option	0	21,216
Net cash used in investing activities	(26,743)	(964,584)
Cash flows from financing activities:
Proceeds from the issuance of first lien revolving facility and term loans, respectively	23,000	685,633
Payments on long-term debt	(21,831)	(1,352)
Payment of contingent and deferred consideration	(7,877)	(13,154)
Net proceeds from the issuance of convertible notes (including embedded derivative)	0	83,551
Net proceeds from issuance of Series A convertible preferred stock (including embedded derivative)	0	197,504
Net proceeds from issuance of common stock	0	421,598
Dividends paid	0	(5,515)
Payment of consent and arrangement fees	(12,266)	0
Net cash (used) provided by financing activities	(18,974)	1,368,265
Net (decrease) increase in cash	(23,783)	373,054
Cash and cash equivalents, beginning of period	199,435	70,059
Cash and cash equivalents, end of period	175,652	443,113
Cetera Financial Group
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(891,101)
Summit Financial Services Group
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(33,374)
Hatteras Funds Group
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(29,195)
JP Turner & Company, LLC
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and intangible assets impairment charge	26,200
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(2,615)
SK Research
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(10,092)
VSR Acquisition
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	(19,104)	0
Girard Acquisition
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	$ (9,107)	$ 0

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Fair Value Disclosures Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of December 31, 2014 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	82,973	$	—	$	—		$	82,973
Available-for-sale securities:
Mutual funds	11,473		—		—			11,473
Total available-for-sale	11,473		—		—			11,473
Trading securities:
Equity securities	262		—		—			262
Mutual funds	9,457		—		—			9,457
U.S. government bonds	2		10		—			12
Other	41		—		470			511
Total trading securities	9,762		10		470			10,242
Deferred compensation plan investments:
Money market fund	6,246		—		—			6,246
International global funds	17,722		—		—			17,722
U.S. equity funds	46,999		—		—			46,999
U.S. fixed-income funds	9,787		—		—			9,787
Mutual funds	—		2,702		—			2,702
Total deferred compensation plan investments	80,754		2,702		—			83,456
Prepaid expenses and other assets - oil and gas interests	—		—		151			151
Total	$	184,962	$	2,712	$	621		$	188,295
Liabilities:
Derivative contracts	$	—	$	—	$	102,908	(1)	$	102,908
Other liabilities:
Equity securities	161		—		—			161
Mutual funds and unit investment trusts	4		—		—			4
State and municipal government obligations	222		—		—			222
Contingent consideration	—		—		107,278		(2)	107,278
Total	$	387	$	—	$	210,186		$	210,573

_______________

(1) Includes $21.9 million of derivatives classified in long-term debt.

(2) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of June 30, 2015 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	64,067	$	—	$	—		$	64,067
Available-for-sale securities:
Mutual funds	2,701		—		—			2,701
Total available-for-sale	2,701		—		—			2,701
Trading securities:
Equity securities	163		—		—			163
Mutual funds	9,592		—		—			9,592
Certificate of deposits	—		429		—			429
U.S. government bonds	2		9		—			11
State and municipal bonds	1		—		—			1
Corporate bonds	—		72		—			72
Other	39		—		470			509
Total trading securities	9,797		510		470			10,777
Deferred compensation plan investments:
Money market fund	4,470		—		—			4,470
International global funds	19,126		—		—			19,126
U.S. equity funds	49,035		—		—			49,035
U.S. fixed-income funds	10,937		—		—			10,937
Mutual funds	—		3,086		—			3,086
Total deferred compensation plan investments	83,568		3,086		—			86,654
Prepaid expenses and other assets(1)	—		1,365		4,443			5,808
Total	$	160,133	$	4,961	$	4,913		$	170,007
Liabilities:
Derivative contracts	$	—	$	—	$	46,515	(2)	$	46,515
Other liabilities:
Equity securities	43		—		—			43
Mutual funds and unit investment trusts	158		—		—			158
State and municipal government obligations	130		202		—			332
Certificate of deposit	—		—		—			—
Contingent consideration	—		—		60,635		(3)	60,635
Total	$	331	$	202	$	107,150		$	107,683

_____________________

(1) Primarily represents investments in REITs, oil and gas interests and other illiquid investments.

(2) Includes $6.9 million of derivatives classified in long-term debt.

(3) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents changes during the six months ended June 30, 2014 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2014:

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized gains/(losses)		Purchases		Issuances		Settlements		Fair value as of June 30, 2014
Assets:
Trading securities- other	$	—	$	—	$	120	$	—	$	—	$	120
Total	$	—	$	—	$	120	$	—	$	—	$	120

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized (gains)/losses			Purchases		Issuances		Settlements			Fair value as of June 30, 2014
Liabilities:
Derivative contracts	$	—	$	(58,452	)	$	—	$	162,614	$	—		$	104,162
Contingent consideration	2,180		163			12,868		29,380		(13,173		)	31,418
Total	$	2,180	$	(58,289	)	$	12,868	$	191,994	$	(13,173	)	$	135,580

The following table presents changes during the six months ended June 30, 2015 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2015:

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized gains/(losses)			Purchases		Issuances		Sales			Settlements		Fair value as of June 30, 2015
Assets:
Trading securities- other	$	470	$	—		$	—	$	—	$	—		$	—	$	470
Prepaid expenses and other assets - oil and gas interests	151		(12		)	—		—		(10		)	—		129
Prepaid expenses and other assets - REIT and other illiquid investments	—		(65		)	4,522		—		(143		)	—		4,314
Total	$	621	$	(77	)	$	4,522	$	—	$	(153	)	$	—	$	4,913

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized (gains)/losses			Purchases		Issuances		Sales		Settlements			Fair value as of June 30, 2015
Liabilities:
Derivative contracts	$	102,908	$	(56,393	)	$	—	$	—	$	—	$	—		$	46,515
Contingent consideration	107,278		(49,787		)	—		13,081		—		(9,937		)	60,635
Total	$	210,186	$	(106,180	)	$	—	$	13,081	$	—	$	(9,937	)	$	107,150

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of June 30, 2015:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	129	Discounted cash flows	10% discount rate
Prepaid expenses and other assets - REITs and other illiquid investments	$	4,314	Sponsorship valuation	Third party valuation from sponsors
Liabilities:
Derivative contracts	$	46,515	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.3 years, 7.5 years, 7.5 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 18.95%, 21.1%, 21.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.75%
Contingent consideration - Hatteras	$	30,460	Discounted cash flow	• Projected earnings: $6.4 million to $27.8 million, December 31, 2016 and 2018, respectively. • Projected earn-out: $7.3 million to $23.1 million, December 31, 2016 and 2018, respectively. • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.6 to 0.8
Contingent consideration - StratCap	$	24,400	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.8 to 0.9 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	394	Discounted cash flow	• Revenue achievement • WACC 20%
Contingent consideration - Girard	$	5,381	Discounted cash flow	• Projected gross dealer concessions (GDC): - Retention payments: 5.0% of retained advisors' GDC (0.0%, if GDC is less than $36.4 million); payable on the first and second anniversary of the closing date - Recruiting payments: 5.0% of new advisors' GDC less forgivable loans and other payouts; payable on the second anniversary and third anniversary of the closing date

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of December 31, 2014:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	151	Discounted cash flows	10% discount rate
Liabilities:
Derivative contracts	$	102,908	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.8 years, 8.0 years, 8.0 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 12.95%, 15.1%, 15.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.4%
Contingent consideration - J.P. Turner	$	6,200	Discounted cash flow	• Probability exceeding percentage threshold: 99.7% to 100.0% • Present value factor: 0.71 to 0.95 • Time until payments: 0.4 years to 2.4 years
Contingent consideration - Hatteras	$	28,310	Discounted cash flow	• Projected earnings: $11.0 million to $17.3 million, December 31, 2016 and 2018, respectively • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.50 to 0.70
Contingent consideration - StratCap	$	68,200	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.65 to 0.79 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	4,568	Discounted cash flow	• Revenue achievement • WACC 20%

Fair Value, Investments, Entities that Calculate Net Asset Value Per Share

The following table presents information related to the Company’s investments that calculate NAV per share as of June 30, 2015. For these investments, which are measured at fair value on a recurring basis, the Company used the NAV per share as a practical expedient to measure fair value:

($ in thousands)	Investment Category Includes	Fair Value Using NAV Per Share		Unfunded Commitments
Trading securities- other- private equity fund	Investments in private equity funds	$	113	$	7
Trading securities- other- REIT	Investment in a REIT	357		—

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments

The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of June 30, 2015:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	63,991	$	—	$	—	$	60,220
Series B Preferred Stock	152,458		—		—		93,066
Series C Preferred Stock	114,145		—		—		83,166
First lien term facility	534,756		—		—		529,408
Second lien term facility	148,024		—		—		146,544
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
First lien revolving facility	23,000		—		—		23,000
Capital lease obligations	10,346		—		10,346		—
Total	$	1,064,020	$	—	$	25,646	$	937,404

The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of December 31, 2014:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	61,632	$	—	$	—	$	78,005
Series B Preferred Stock	146,700		—		—		117,367
Series C Preferred Stock	111,288		—		—		136,242
First lien term facility	555,700		—		—		530,491
Second lien term facility	147,903		—		—		142,500
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
Total	$	1,040,523	$	—	$	15,300	$	1,006,605

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Preferred Stock (Change in Liquidation Preference) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Dec. 31, 2014	Mar. 31, 2015	Jun. 30, 2015	Dec. 12, 2014
Series B Preferred Stock
Increase (Decrease) in Liquidation Preference of Temporary Equity [Roll Forward]
Dividend paid-in-kind increase	$ 352	$ 553
Dividends payable	797	4,056	$ 4,200	$ 1,700
Series C Preferred Stock
Increase (Decrease) in Liquidation Preference of Temporary Equity [Roll Forward]
Dividend paid-in-kind increase	239	279
Dividends payable	$ 385	$ 1,954	$ 2,000	$ 1,288

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Summary of Deferred Tax Liability

The following table presents the net deferred tax liability primarily related to intangible assets acquired as a result of the recent acquisitions:

($ in thousands)	June 30, 2015		December 31, 2014
Net deferred tax liability	$	220,639	$	266,202

Schedule of Effective Income Tax Rate

The following table presents the Company’s effective tax rate:

	Six Months Ended June 30,
	2015		2014
Effective tax rate	42.03	%	18.48	%

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Recent Acquisitions (Validus/Strategic Capital Partners) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Aug. 29, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Business Acquisition [Line Items]
Acquisition-related costs		$ 5,200	$ 6,546	$ 7,656	$ 13,263
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Goodwill		530,949		530,949		$ 519,361
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					1,577,900
StratCap
Business Acquisition [Line Items]
Considered transferred, less contingent consideration	$ 77,500
Contingent and deferred consideration		24,400		24,400
Increase in goodwill				7,700
Contractual purchase price	$ 67,510
Business acquisition, equity interest issued (in shares)	464,317
Acquisition-related costs					100
Goodwill impairment loss		30,600		30,571
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract]
Cash and cash equivalents	$ 4,522
Short term investments and securities owned	2,239
Receivables	4,858
Property and equipment	96
Other assets	629
Accounts payable	(706)
Accrued expenses	(201)
Other liabilities	(908)
Total fair value excluding goodwill and intangible assets	10,529
Goodwill	30,571
Intangible assets	121,380
Total consideration	162,480
Business Combination, Consideration Transferred [Abstract]
Stock issued by the Company	10,000
Contingent consideration	75,000
Deferred consideration	9,970
Total consideration	$ 162,480
Business Acquisition, Pro Forma Information [Abstract]
Total revenues					113,200
Loss before taxes					$ (200)
Minimum
Business Acquisition [Line Items]
Contingent and deferred consideration		12,300		12,300
Minimum | StratCap
Business Acquisition [Line Items]
Contingent and deferred consideration		30,110		30,110
Maximum
Business Acquisition [Line Items]
Contingent and deferred consideration		84,740		84,740
Maximum | StratCap
Business Acquisition [Line Items]
Contingent and deferred consideration		36,790		36,790
Other Expense | StratCap
Business Acquisition [Line Items]
Prior period adjustment		$ 2,800		$ 3,000

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Goodwill and Intangible Assets (Intangible Assets by Segment) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	$ 1,357,834	$ 1,311,631
Impairments		112,651
Gross Carrying Value, June 30, 2015	1,245,183	1,245,183
Accumulated Amortization	122,214	122,214	$ 68,106
Finite-lived intangible assets, net	1,122,969	1,122,969	1,243,525
Operating Segments
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	1,357,834	1,311,631
Impairments		112,651
Gross Carrying Value, June 30, 2015	1,245,183	1,245,183
Accumulated Amortization	122,214	122,214	68,106
Finite-lived intangible assets, net	1,122,969	1,122,969	1,243,525
Operating Segments | Independent retail advice
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	1,151,151	1,104,979
Impairments		12,651
Gross Carrying Value, June 30, 2015	1,138,500	1,138,500
Accumulated Amortization	102,982	102,982	60,113
Finite-lived intangible assets, net	1,035,518	1,035,518	1,044,866
Operating Segments | Wholesale distribution
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	121,380	121,380
Impairments		100,000
Gross Carrying Value, June 30, 2015	21,380	21,380
Accumulated Amortization	11,595	11,595	4,617
Finite-lived intangible assets, net	9,785	9,785	116,763
Operating Segments | Investment Management
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	48,770	48,770
Impairments		0
Gross Carrying Value, June 30, 2015	48,770	48,770
Accumulated Amortization	4,018	4,018	2,009
Finite-lived intangible assets, net	44,752	44,752	46,761
Operating Segments | Investment Banking and Capital Markets
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	23,761	23,730
Impairments		0
Gross Carrying Value, June 30, 2015	23,761	23,761
Accumulated Amortization	1,745	1,745	313
Finite-lived intangible assets, net	22,016	22,016	23,417
Operating Segments | Investment research
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	10,642	10,642
Impairments		0
Gross Carrying Value, June 30, 2015	10,642	10,642
Accumulated Amortization	1,437	1,437	849
Finite-lived intangible assets, net	9,205	9,205	9,793
Operating Segments | Corporate and other
Finite-lived Intangible Assets [Roll Forward]
Beginning Gross Carrying Value	2,130	2,130
Impairments		0
Gross Carrying Value, June 30, 2015	2,130	2,130
Accumulated Amortization	437	437	205
Finite-lived intangible assets, net	$ 1,693	$ 1,693	$ 1,925

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Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and cash equivalents	$ 175,652	$ 199,435
Cash and securities segregated under federal and other regulations	19,073	19,030
Available-for-sale securities	2,701	11,473
Trading securities	10,777	10,242
Accounts Receivable, Net [Abstract]
Due from related parties	19,725	31,580
Due from non-related parties	155,598	141,309
Prepaid expenses and other assets	81,900	85,674
Property and equipment (net of accumulated depreciation of $9,527 and $5,488, respectively)	39,276	24,746
Deferred compensation plan investments	86,654	83,456
Notes receivable (net of allowance of $1,086 and $914, respectively)	75,039	68,989
Deferred financing fees	36,993	27,808
Intangible assets (net of accumulated amortization of $122,214 and $68,106, respectively)	1,122,969	1,243,525
Goodwill	530,949	519,361
Total assets	2,357,306	2,466,628
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to customers	22,764	13,832
Commissions payable	113,556	102,056
Accrued expenses
Due to related parties	1,847	2,479
Due to non-related parties	111,551	93,898
Derivative contracts	39,647	81,032
Other liabilities	51,147	37,036
Deferred compensation plan accrued liabilities	87,297	84,963
Net deferred tax liability	220,639	266,202
Contingent and deferred consideration	109,298	145,430
Long-term debt	804,285	804,411
Total liabilities	1,562,031	1,631,339
Commitments and contingencies — See Note 16 for more information.	0	0
Additional paid-in capital	755,808	723,113
Accumulated other comprehensive loss	80	(120)
Retained earnings	(259,106)	(179,804)
Total stockholders’ equity	496,859	543,260
Non-controlling interest	31,813	34,041
Total liabilities, mezzanine and stockholders’ equity	2,357,306	2,466,628
Series B Preferred Stock
Accrued expenses
Mezzanine equity	152,458	146,700
Series C Preferred Stock
Accrued expenses
Mezzanine equity	114,145	111,288
Common Class A
Accrued expenses
Common stock	77	71
Common Class B
Accrued expenses
Common stock	$ 0	$ 0

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Organization and Description of the Company (Details) - $ / shares	Jun. 30, 2015	Dec. 31, 2014	Jun. 10, 2014
Common Class A
Class of Stock [Line Items]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001	$ 20.25
Common Class B
Class of Stock [Line Items]
Common stock, par value (in dollars per share)	0.001	$ 0.001
IPO | Common Class A
Class of Stock [Line Items]
Common stock, par value (in dollars per share)	0.001
IPO | Common Class B
Class of Stock [Line Items]
Common stock, par value (in dollars per share)	$ 0.001

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Employee Benefits (Details) - Other Postretirement Benefit Plan - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Internal Commissions, Payroll and Benefits | 401K and Health and Welfare Benefit Plan for Employees
Defined Contribution Plan Disclosure [Line Items]
Internal commissions and payroll benefits	$ 4,800,000	$ 2,000,000	$ 9,500,000	$ 3,800,000
Internal Commissions, Payroll and Benefits | Deferred Compensation Plans for Financial Advisors
Defined Contribution Plan Disclosure [Line Items]
Deferred compensation costs	100,000	2,700,000	1,800,000	2,700,000
Internal Commissions, Payroll and Benefits | Rabbi Trust Agreement
Defined Contribution Plan Disclosure [Line Items]
Deferred compensation costs	200,000	0	500,000	0
Other Revenue | Deferred Compensation Plans for Financial Advisors
Defined Contribution Plan Disclosure [Line Items]
Gain on hedge	$ 100,000	$ 2,700,000	$ 1,800,000	$ 2,700,000

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands		Total	Additional Paid-in Capital		Retained Deficit	Accumulated Other Comprehensive Income	Parent	Noncontrolling Interest	Common Class A	Common Class A Common Stock	Common Class A Additional Paid-in Capital	Common Class A Retained Deficit	Common Class A Parent	Common Class B Common Stock	Restricted Stock Units (RSUs)	Restricted Stock Units (RSUs) Common Stock	Restricted Stock Units (RSUs) Additional Paid-in Capital	Restricted Stock Units (RSUs) Retained Deficit	Restricted Stock Units (RSUs) Parent	LTIP Units	LTIP Units Noncontrolling Interest	Summit Financial Services Group	Summit Financial Services Group Additional Paid-in Capital	Summit Financial Services Group Parent	Summit Financial Services Group Common Class A Common Stock	Stock Purchase Program Additional Paid-in Capital	Stock Purchase Program Common Class A Common Stock	IPO	IPO Additional Paid-in Capital	IPO Parent	IPO Common Class A Common Stock	JP Turner & Company, LLC	JP Turner & Company, LLC Additional Paid-in Capital	JP Turner & Company, LLC Parent	JP Turner & Company, LLC Common Class A Common Stock	Private Placement	Private Placement Additional Paid-in Capital	Private Placement Parent	Private Placement Common Class A Common Stock	First Allied acquisition Restricted Stock Units (RSUs)	First Allied acquisition Restricted Stock Units (RSUs) Common Stock	First Allied acquisition Restricted Stock Units (RSUs) Additional Paid-in Capital	First Allied acquisition Restricted Stock Units (RSUs) Retained Deficit	First Allied acquisition Restricted Stock Units (RSUs) Parent	JP Turner & Company, LLC	JP Turner & Company, LLC Additional Paid-in Capital	JP Turner & Company, LLC Parent	JP Turner & Company, LLC Common Class A Common Stock	VSR Acquisition	VSR Acquisition Additional Paid-in Capital	VSR Acquisition Parent	VSR Acquisition Common Class A Common Stock	Girard Acquisition	Girard Acquisition Additional Paid-in Capital	Girard Acquisition Parent	Girard Acquisition Common Class A Common Stock
Beginning Balance (in shares) at Dec. 31, 2013										13,764,929				24,000,000
Beginning Balance at Dec. 31, 2013		$ 216,354	$ 180,528		$ 1,164	$ (46)	$ 181,684	$ 34,670		$ 14				$ 24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		9,757			917		917	8,840
Equity-based compensation (OPP)		210						210
Unrealized loss on available-for-sale securities, net of tax		502				47	47	455
Ending Balance (in shares) at Feb. 10, 2014										13,764,929				24,000,000
Ending Balance at Feb. 10, 2014		226,823	180,528		2,081	1	182,648	44,175		$ 14				$ 24
Beginning Balance (in shares) at Dec. 31, 2013										13,764,929				24,000,000
Beginning Balance at Dec. 31, 2013		216,354	180,528		1,164	(46)	181,684	34,670		$ 14				$ 24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized loss on available-for-sale securities, net of tax		508
Ending Balance (in shares) at Jun. 30, 2014										63,209,261				1
Ending Balance at Jun. 30, 2014		519,462	509,191		0	7	509,261	10,201		$ 63				$ 0
Beginning Balance (in shares) at Feb. 10, 2014										13,764,929				24,000,000
Beginning Balance at Feb. 10, 2014		226,823	180,528		2,081	1	182,648	44,175		$ 14				$ 24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss		(147,213)	(161,997)		14,504		(147,493)	280
Issuance of common stock (in shares)										23,999,999				(23,999,999)		2,366,703									498,884						19,870,248				239,362				2,469,136
Issuance of common stock		1,203	44,676	[1]			44,676	(43,473)		$ 24				$ (24)	$ 8,974	$ 3	$ 14,214	$ (5,243)	$ 8,974			$ 10,431	$ 10,431	$ 10,431				$ 373,871	$ 373,851	$ 373,871	$ 20	$ 4,860	$ 4,860	$ 4,860		$ 47,727	$ 47,725	$ 47,727	$ 2
Equity-based compensation (OPP)		9,499						9,499
Unrealized loss on available-for-sale securities, net of tax		6				6	6	0
Distributions to non-controlling interests																				$ (280)	$ (280)
Less: Dividend equivalents on Restricted Stock									$ (15,728)		$ (4,770)	$ (10,958)	$ (15,728)		(711)		(327)	(384)	(711)
Ending Balance (in shares) at Jun. 30, 2014										63,209,261				1
Ending Balance at Jun. 30, 2014		519,462	509,191		0	7	509,261	10,201		$ 63				$ 0
Beginning Balance (in shares) at Dec. 31, 2014										70,571,540				1
Beginning Balance at Dec. 31, 2014		577,301	723,113		(179,804)	(120)	543,260	34,041		$ 71				$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Retirement of shares (in shares)																											(161)
Preferred stock conversion (in shares)	[2]																										2,042,022
Preferred stock conversion	[2]																									$ (2)	$ 2
Net loss		(95,132)	(13,602)		(79,302)		(92,904)	(2,228)
Issuance of common stock (in shares)																1,236,490																									69,427							245,813				2,436,429				549,529
Issuance of common stock															$ 9,169	$ 1	$ 9,168	$ 0	$ 9,169																					$ 1,283	$ 0	$ 1,283	$ 0	$ 1,283	$ 2,730	$ 2,730	$ 2,730	$ 0	$ 26,774	$ 26,772	$ 26,774	$ 2	$ 6,347	$ 6,346	$ 6,347	$ 1
Unrealized loss on available-for-sale securities, net of tax		200				200	200
Ending Balance (in shares) at Jun. 30, 2015										77,151,089				1
Ending Balance at Jun. 30, 2015		$ 528,672	$ 755,808		$ (259,106)	$ 80	$ 496,859	$ 31,813		$ 77				$ 0

[1] Includes deferred tax impact of $1.2 million due to the exchange of Class B units in the Company’s operating subsidiaries for shares of Class A common stock.

[2] Represents shares of Class A common stock issued on February 23, 2015 on account of shares of Series A preferred stock submitted for conversion on December 12, 2014.

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Net Capital Requirements (Summary of Net Capital Requirements) (Details) - Operating Segments - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Independent retail advice
Net Capital Requirement [Line Items]
Net capital	$ 57,832	$ 63,871
Required net capital	3,064	2,640
Net capital in excess of required net capital	54,768	61,231
Wholesale distribution
Net Capital Requirement [Line Items]
Net capital	11,393	20,774
Required net capital	1,155	1,424
Net capital in excess of required net capital	10,238	19,350
Investment management
Net Capital Requirement [Line Items]
Net capital	2,034	2,145
Required net capital	5	5
Net capital in excess of required net capital	$ 2,029	$ 2,140

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Fair Value Disclosures (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Jun. 10, 2014
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unrealized gain	$ 105,700	$ 58,300
Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchases	0	$ 12,868
State and municipal bonds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 1 to level 2 transfers	200
Prepaid expenses and other assets - REIT and other illiquid investments | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchases	$ 4,522
Series B Preferred Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate	11.00%		11.00%
Common Class A
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001	$ 20.25
Series C Preferred Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate	7.00%		7.00%
Common Class B
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001
IPO | Common Class A
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock, par value (in dollars per share)	0.001
IPO | Common Class B
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock, par value (in dollars per share)	$ 0.001

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

Goodwill. Goodwill associated with each acquisition is allocated to the segments, based on how the Company manages its segments. The following table presents the goodwill by segment:

	Goodwill as of
($ in thousands)	June 30, 2015		December 31, 2014
Independent Retail Advice	$	468,771	$	434,398
Wholesale Distribution	—		22,871
Investment Management	15,348		15,348
Investment Banking and Capital Markets	46,075		45,989
Corporate and Other	755		755
Total goodwill	$	530,949	$	519,361

Schedule of Goodwill

The following table presents changes in the carrying amount of goodwill for the six months ended June 30, 2015:

($ in thousands)
Total goodwill, as of December 31, 2014	$	519,361
Changes during the period from:
Docupace adjustment (preliminary)	86
VSR acquisition (preliminary)	30,282
Girard acquisition (preliminary)	15,767
Other (see Note 2 - Cetera acquisition)	1,903
StratCap adjustment	7,700
J.P. Turner impairment	(13,579		)
StratCap impairment	(30,571		)
Total goodwill, as of June 30, 2015	$	530,949

Schedule of Finite-Lived Intangible Assets

Intangible Assets. The components of intangible assets as of June 30, 2015 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,062,065	$	12,530	$	1,049,535	$	90,331	$	959,204
Sponsor relationships	8	113,000		100,000		13,000		10,464		2,536
Trade names	27	67,857		46		67,811		3,081		64,730
Investment management agreements	12	47,390		—		47,390		3,933		43,457
Customer relationships	11	20,686		—		20,686		2,427		18,259
Internally developed software and technologies	6	22,541		—		22,541		2,543		19,998
Intellectual property	8	10,642		—		10,642		1,437		9,205
Non-competition agreements	3	10,443		75		10,368		7,928		2,440
Distribution networks	39	3,210		—		3,210		70		3,140
Total finite-lived intangible assets		$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

The intangible assets for each reportable segment as of June 30, 2015 are as follows:

($ in thousands)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,151,151	$	12,651	$	1,138,500	$	102,982	$	1,035,518
Wholesale Distribution	121,380		100,000		21,380		11,595		9,785
Investment Management	48,770		—		48,770		4,018		44,752
Investment Banking and Capital Markets	23,761		—		23,761		1,745		22,016
Investment Research	10,642		—		10,642		1,437		9,205
Corporate and Other	2,130		—		2,130		437		1,693
Total finite-lived intangible assets	$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

During the three and six months ended June 30, 2015, the Company wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of the intangible assets from the J.P. Turner acquisition. These impairments were all recorded in goodwill and intangible assets impairment charge in the statements of operations. See Note 2 for more information.

The components of intangible assets as of December 31, 2014 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,019,353	$	52,070	$	967,283
Sponsor relationships	9	113,000		4,186		108,814
Trade names	29	65,192		1,638		63,554
Investment management agreements	12	47,390		1,966		45,424
Customer relationships	11	20,686		1,473		19,213
Internally developed software and technologies	7	22,510		779		21,731
Intellectual property	9	10,642		849		9,793
Non-competition agreements	2	9,648		5,136		4,512
Distribution networks	40	3,210		9		3,201
Total finite-lived intangible assets		$	1,311,631	$	68,106	$	1,243,525

The intangible assets for each reportable segment as of December 31, 2014 are as follows:

($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,104,979	$	60,113	$	1,044,866
Wholesale Distribution	121,380		4,617		116,763
Investment Management	48,770		2,009		46,761
Investment Banking and Capital Markets	23,730		313		23,417
Investment Research	10,642		849		9,793
Corporate and Other	2,130		205		1,925
Total finite-lived intangible assets	$	1,311,631	$	68,106	$	1,243,525

The following tables present amortization expense for the three and six months ended June 30, 2015 and June 30, 2014 and the estimated future amortization for intangible assets:

Amortization Expense	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Amortization expense	$	26,905	$	13,765	$	54,108	$	15,532

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Estimated Future Amortization Expense ($ in thousands)	Twelve Months Ended June 30,
2016	$	92,320
2017	90,473
2018	90,317
2019	89,901
2020	88,281
Thereafter	671,677
Total	$	1,122,969

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Available-for-Sale Securities (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Available-for-Sale Securities [Roll Forward]
Beginning balance			$ 11,473,000
Ending balance	$ 2,701,000		2,701,000
Equity securities
Available-for-Sale Securities [Roll Forward]
Beginning balance			11,473,000	$ 8,528,000
Purchases			26,000	215,000
Sales			(8,780,000)	(9,013,000)
Realized Gains/ (Losses)	0	$ 300,000	(369,000)	171,000
Unrealized Gains/ (Losses)	351,000	544,000	351,000	544,000
Ending balance	2,701,000	445,000	2,701,000	445,000
Cost	2,561,000	410,000	$ 2,561,000	$ 410,000
Unrealized gain (loss)	$ (100,000)	$ (200,000)

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Earnings Per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

For a discussion of the computation of basic and diluted earnings per share, see Note 15 of the Company’s 2014 Annual Report on Form 10-K/A.

The following tables present the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands, except share and per share data)	2015			2014			2015			2014
Basic earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Net loss attributable to Class A common stockholders	(72,148		)	(150,245		)	(92,904		)	(147,287		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Net loss per share	$	(0.97	)	$	(3.49	)	$	(1.28	)	$	(4.21	)
Diluted earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	(26,235		)	(23,213		)	(45,582		)	(23,213		)
Net loss attributable to Class A common stockholders	(98,383		)	(173,458		)	(138,486		)	(170,500		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	14,599,367			5,265,251			14,599,367			2,647,170
Total weighted average diluted shares outstanding	88,605,947			48,295,269			87,175,560			37,622,806
Net loss per share	$	(1.11	)	$	(3.59	)	$	(1.59	)	$	(4.53	)

_____________________

(1) Included in net loss attributable to Class A common stockholders for the three and six months ended June 30, 2014 is a deemed dividend of $194.8 million. This deemed dividend represents the difference between redemption value of the convertible preferred stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative and was recognized in the period in which the preferred stock was issued. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

(2) Weighted average shares outstanding for the three and six months ended June 30, 2015 were calculated assuming that the 2,042,022 shares of Class A common stock issued on February 23, 2015 pursuant to the submission for conversion of Series A preferred stock on December 12, 2014 were outstanding for the entire period.

(3) Weighted average shares outstanding for the three and six months ended June 30, 2014 were calculated assuming that the 11,264,929 shares of Class A common stock issued on June 30, 2014 in connection with the closing of the First Allied acquisition were outstanding for the entire period.

(4) The following items were excluded from the calculation of earnings per share as the effect was antidilutive:

• Shares issuable under the terms of Luxor’s put option, incremental restricted shares, shares issuable under the second and third tranches of the FA RSU plan, shares of Class A common stock contingently issuable as consideration for certain recent acquisitions and outstanding warrants issued under the 2014 Stock Purchase Program for the three and six months ended June 30, 2015.

• LTIP Units, incremental restricted shares, shares issuable under the terms of the Series A Preferred Stock, shares issuable under the FA RSU plan and shares of Class A common stock contingently issuable as consideration for certain recent acquisitions for the three and six months ended June 30, 2014. Additionally, shares issuable under the terms of the Series C Preferred Stock were excluded for the three and six months ended June 30, 2014 as the Series C Preferred Stock was not issued until December 19, 2014.

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The following table presents the Company’s long-term borrowings as of June 30, 2015 and December 31, 2014 and their contractual interest rates, net of unamortized original issue discounts:

	June 30, 2015			December 31, 2014
($ in thousands)	Balance		Interest Rate	Balance		Interest Rate
First lien term facility	$	534,756	7.50%	$	555,700	6.50%
Second lien term facility	148,024		11.50%	147,903		10.50%
Convertible notes(1)	70,859		5.00%	83,508		5.00%
First lien revolving facility	23,000		7.50%	—		—%
Promissory note	15,300		8.00%	15,300		8.00%
Capital lease obligations	10,346		5.94%	—		—%
Subordinated borrowings	2,000		8.25%	2,000		8.25%
Total borrowings	804,285			804,411
Less: Current portion of borrowings	62,405			43,891
Total long-term debt, net of current portion	$	741,880		$	760,520

_____________________

(1) The Company’s convertible notes balance includes the fair value of the compound derivative of $6.9 million and $21.9 million as of June 30, 2015 and December 31, 2014, respectively.

Schedule of Maturities of Long-term Debt

The following table presents the contractual maturities of long-term debt, net of the current portion as of June 30, 2015:

($ in thousands)	Twelve Months Ended June 30,
2017	$	97,820
2018	88,591
2019	332,475
2020	1,585
Thereafter	270,000
Long-term portion of the original issue discount	(55,459		)
Fair value of embedded derivative	6,868
Total long-term debt, net of current portion	$	741,880

Schedule of Short-term Debt

The following table presents the scheduled contractual maturities of the current portion of long-term debt as of June 30, 2015:

($ in thousands)	Three Months Ended,
September 30, 2015	$	14,678
December 31, 2015	14,968
March 31, 2016	24,627
June 30, 2016	14,968
Short-term portion of the original issue discount	(6,836		)
Total current portion of long-term debt	$	62,405

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Subsequent Events (Narrative) (Details) - USD ($)					5 Months Ended	6 Months Ended	12 Months Ended
	Aug. 10, 2015	Aug. 06, 2015	Dec. 19, 2014	Jun. 10, 2014	Jun. 30, 2014	Jun. 30, 2015	Dec. 31, 2014	Aug. 07, 2015
Subsequent Event [Line Items]
Issuance of stock					$ 1,203,000
Subsequent Event
Subsequent Event [Line Items]
Days to terminate agreement		3 days
Ownership interest in ARC Global		40.00%
Required adjusted EBITDA ratio		4
Percent of new issuance of common stock to beneficial interest holders requiring stockholder approval	0.99%
Wholesale distribution | Subsequent Event
Subsequent Event [Line Items]
Purchase price		$ 25,000,000
Target net working capital		5,000,000
Wholesale Distribution excluding StratCap | Subsequent Event
Subsequent Event [Line Items]
Purchase price		$ 5,000,000
AMH Holdings | Subsequent Event
Subsequent Event [Line Items]
Ownership interest in ARC Global		60.00%
Series D Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Interest rate		11.00%
Dividend rate		12.50%
Liquidation preference (in dollars per share)		$ 25
Initial conversion price (in dollars per share)		$ 5
Ownership threshold required to elect directors		25.00%
Preferred Stock, Threshold of Ownership on Common Stock								24.90%
Series D-1 Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Issuance of stock (in shares)		1,000,000
Issuance of stock		$ 25,000,000
Series D-2 Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Issuance of stock (in shares)		500,000
Issuance of stock		$ 12,500,000
Series B Preferred Stock
Subsequent Event [Line Items]
Issuance of stock (in shares)			5,800,000
Interest rate						11.00%	11.00%
Dividend rate			12.50%
Liquidation preference (in dollars per share)			$ 25
Series C Preferred Stock
Subsequent Event [Line Items]
Interest rate						7.00%	7.00%
Liquidation preference (in dollars per share)			$ 25
Common Class A
Subsequent Event [Line Items]
Issuance of stock (in shares)				19,000,000
Common Class A | Subsequent Event
Subsequent Event [Line Items]
Shares issued in agreement (in shares)	2,608,697
Luxor Capital Group, LP | Subsequent Event
Subsequent Event [Line Items]
Membership interest in RCS Capital Management	19.46%
Luxor Capital Group, LP | Series B Preferred Stock
Subsequent Event [Line Items]
Liquidation preference						$ 152,500,000
Luxor Capital Group, LP | Series C Preferred Stock
Subsequent Event [Line Items]
Liquidation preference						114,100,000
Luxor Capital Group, LP | Common Class A | Subsequent Event
Subsequent Event [Line Items]
Common stock owned by Luxor (in shares)								8,495,402
Ownership interest based on common stock								10.99%
Voting power in Company								5.50%
Common stock owned by Luxor if securities are converted (in shares)								25,594,768
Shares issued in agreement (in shares)	3,000,000
Convertible Notes Payable | Luxor Capital Group, LP
Subsequent Event [Line Items]
Convertible notes, face value						$ 120,000,000
Put and Call Options | Luxor Capital Group, LP | Subsequent Event
Subsequent Event [Line Items]
Multiplier on call and put options	0.15

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases. The Company leases certain facilities and equipment under various operating leases. These leases are generally subject to scheduled base rent and maintenance cost increases, which are recognized on a straight-line basis over the period of the leases. Total rent expense for all operating leases was approximately $3.4 million and $6.6 million for the three and six months ended June 30, 2015, respectively, and $1.9 million and $2.9 million for the three and six months ended June 30, 2014, respectively. The following table shows the future annual minimum rental payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	11,567
2017	10,638
2018	9,123
2019	7,557
2020	7,045
Thereafter	21,961
Total	$	67,891

Service contracts. The Company has contracted with third parties to perform back-office processing services. The following table shows the future annual minimum payments due:

($ in thousands)	Twelve Months Ended June 30,
2016	$	10,204
2017	8,574
2018	6,567
2019	6,567
2020	6,567
Thereafter	694
Total	$	39,173

Lines of credit. As of June 30, 2015, the Company had three lines of credit. The first line of credit pursuant to the Bank Facilities is for $25.0 million, and as of June 30, 2015, $23.0 million was outstanding. The second line of credit is related to Cetera’s clearing business, which was acquired in the Cetera acquisition, is for $50.0 million with no maturity date and as of June 30, 2015, no amount was outstanding. The third line of credit, which was acquired in the ICH acquisition, is for $1.0 million with no maturity date and as of June 30, 2015, no amount was outstanding. See Note 8 for more information.

Revolving line of credit commitment. On April 16, 2015, the Company entered into an agreement to provide a fund manager with a $4.0 million revolving line of credit and as of June 30, 2015, $0.3 million was outstanding.

Private equity commitment. As of June 30, 2015, the Company had a commitment to invest up to $0.01 million in private equity funds.

Legal proceedings

Legal proceedings related to business operations. In addition to the matters described below, the Company and its subsidiaries are involved in judicial, regulatory and arbitration proceedings arising out of their business operations. Many of these proceedings are in their early stages, and many seek an indeterminate amount of damages.

The Company recognizes a liability with regard to a legal proceeding when it believes it is probable a liability has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount, however, the Company accrues the minimum amount in the range. The Company maintains insurance coverage, including general liability, directors and officers, errors and omissions, excess entity errors and omissions and fidelity bond insurance. The Company records legal reserves and related insurance recoveries on a gross basis. As of June 30, 2015, the Company recorded legal reserves related to several matters of $14.1 million in other liabilities in the consolidated statement of financial condition.

Defense costs with regard to legal proceedings are expensed as incurred and classified as professional services within the consolidated statements of operations. When there is indemnification or insurance, the Company may engage in defense or settlement and subsequently seek reimbursement for such matters.

There are several matters that are “reasonably possible” but for which we are unable to determine at this time a reasonable estimate. These generally are arbitrations or other matters brought against various broker-dealers now owned by the Company.

ARCP Litigation

On September 30, 2014, the Company entered into a definitive agreement to acquire Cole Capital Partners LLC and Cole Capital Advisors, Inc. (“Cole Capital “) from ARC Properties Operating Partnership, L.P. (“ARCP OP”), a subsidiary and the operating partnership of ARCP for $700.0 million plus contingent consideration. Cole Capital is the private capital management business of ARCP, which includes a broker-dealer, wholesale distribution, and a non-traded REIT sponsor and advisory businesses.

The definitive agreement provided that the acquisition of Cole Capital would be consummated in two closings.

At the first closing (the “First Closing”) on October 22, 2014, subsidiaries of the Company entered into interim sub-advisory arrangements with the current advisors (which are subsidiaries of ARCP) of the five non-traded REITs sponsored and advised by Cole Capital.

In addition, Realty Capital Securities entered into wholesaling agreements whereby a subsidiary of Cole Capital engaged Realty Capital Securities as its distribution agent for the three non-traded REITs for which it then served as “dealer-manager.” Realty Capital Securities was entitled to receive a sourcing fee on sales through dealers it sourced.

The Company paid a portion of the purchase price equal to $10.0 million at the First Closing. The balance of the consideration would have been paid and Cole Capital would have been acquired by the Company at a second closing, which did not occur.

On October 29, 2014, ARCP announced that its audit committee had concluded that the previously issued financial statements and other financial information contained in certain public filings should no longer be relied upon. ARCP reported that this conclusion was based on the preliminary findings of an investigation conducted by ARCP’s audit committee which concluded that certain accounting errors were made by ARCP personnel that were not corrected after being discovered, resulting in an overstatement of adjusted funds from operations and an understatement of ARCP’s net loss for the three and six months ended June 30, 2014. ARCP also announced the resignation of its chief accounting officer and its chief financial officer, who is a member of RCAP Holdings and AR Capital, LLC, and served as the Company’s chief financial officer until December 2013. This individual also served as a member of the board of directors of the Company until July 2014 and had also served as an executive and director of non-traded REITs sponsored by AR Capital, LLC. This individual does not have a role in the management of the Company’s business. Although ARCP was previously sponsored by an entity under common control with RCAP Holdings and was advised by a subsidiary of such entity until January 2014, ARCP is a separate company that is no longer sponsored or advised by an entity under common control with RCAP Holdings.

On November 3, 2014, the Company announced that it had terminated the previously disclosed definitive agreement to acquire Cole Capital from ARCP OP. Also on November 3, 2014, ARCP issued a press release asserting that, in its view, the Company had no basis to terminate the agreement and that the Company’s termination of the agreement was itself a breach of the agreement. On November 11, 2014, ARCP filed suit for specific performance, injunctive relief and other relief against the Company in the Court of Chancery of the State of Delaware, (the “ARCP Action”) and, on November 12, 2014, ARCP issued a press release asserting that the Company’s termination of the agreement constituted a breach of contract.

On December 4, 2014, the Company entered into a binding term sheet with ARCP to settle the ARCP Action. Pursuant to the terms of the settlement, the Company paid ARCP a negotiated break-up fee consisting of a cash payment of $32.7 million and a $15.3 million, two-year promissory note bearing interest at a rate of 8% per annum, and ARCP dismissed with prejudice its lawsuit against the Company and, accordingly, the acquisition of Cole Capital did not proceed. The promissory note is recorded in long-term debt on the consolidated statements of financial condition, and the principal amount of the promissory note is due in three payments of $7.7 million, $3.8 million and $3.8 million on March 31, 2016, September 30, 2016 and March 31, 2017, respectively. The Company and ARCP also agreed, among other things, that ARCP would keep the $10.0 million payment delivered by the Company in connection with the First Closing and the Company would release ARCP from its obligation to pay $2.0 million in respect of structuring services provided by Realty Capital Securities in connection with ARCP’s May 2014 equity offering. As part of the binding term sheet, we agreed with ARCP to work together in good faith to terminate any remaining agreements between ARCP and the Company, and this process is ongoing.

American Realty Capital Healthcare Trust Litigation

In connection with the proposed acquisition by Ventas, Inc. (“Ventas”) of all the outstanding stock of American Realty Capital Healthcare Trust, Inc. (“ARCH”), purported shareholders of ARCH have filed multiple class action lawsuits in the Circuit Court for Baltimore City, Maryland and other jurisdictions. Two of these actions named Realty Capital Securities among others, as a defendant. The actions are: Shine v. American Realty Capital Healthcare Trust, Inc. et al filed June 13, 2014 and Abbassi, et al. v. American Realty Capital Healthcare Trust, Inc. et al. filed July 9, 2014. The actions also assert derivative claims on behalf of ARCH against Realty Capital Securities. On October 10, 2014, lead plaintiffs in the Maryland state court action filed a “Consolidated Amended Derivative and Direct Class Action Complaint,” asserting direct and derivative claims of aiding and abetting a breach of fiduciary duty against multiple defendants, including Realty Capital Securities, arising from their roles providing services to ARCH in connection with the proposed acquisition of ARCH by Ventas and seek (i) to enjoin the proposed acquisition and (ii) recover damages if the proposed acquisition is completed. A similar shareholder action, Rosenzweig v. American Realty Capital Healthcare Trust, Inc. et al, 1:14-cv-02019-GLR, was filed in federal court for the District of Maryland.

On January 2, 2015 and January 5, 2015, the parties to the consolidated state court action and the Rosenzweig action executed separate memoranda of understanding regarding settlement of all claims asserted on behalf of each alleged class of ARCH stockholders in each case. In connection with the settlement contemplated by each memoranda of understanding, each action and all claims asserted therein will be dismissed, subject to approval by each applicable court. Pursuant to the executed memoranda of understanding, ARCH made certain additional disclosures related to the Ventas transaction. The memoranda of understanding further contemplate that the parties will enter into a stipulation of settlement, which will be subject to customary conditions, upon the conclusion of confirmatory discovery and court approval following notice to ARCH’s stockholders. If the parties enter into a stipulation of settlement, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the applicable court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding.

The Company believes that such lawsuits are without merit, but the ultimate outcome of the matter cannot be predicted with certainty. Neither the outcome of the lawsuits nor an estimate of a probable loss or any reasonable possible losses is determinable at this time. No provisions for any losses related to the lawsuits have been recorded in the accompanying consolidated financial as of June 30, 2015. An adverse judgment for monetary damages could have a material adverse effect on the operations and liquidity of the Company. All defendants have stated in court filings that they believe that the claims are without merit and are defending against them vigorously.

RCAP Shareholder Class Action Litigation

On or about December 29, 2014, a securities law class action lawsuit was filed in federal court in the Southern District of New York (Weston v. RCS Capital Corporation et al, 14 CV 10136) against the Company and certain former or current officers and directors of the Company. The lawsuit asserts the Company and the individual defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false and misleading public statements pertaining to the Company’s financial position and future business and acquisition prospects. Specifically, plaintiffs allege that defendants made false and/or misleading statements and/or failed to disclose that: (i) the financial statements of ARCP were material false and misleading as a result of accounting errors that were disclosed by ARCP on October 29, 2014; (ii) the Company’s announced acquisition of Cole Capital Partners LLC and Cole Capital Advisors was at serious risk due to the accounting issues at ARCP; and (iii) the Company’s revenue stream from its relationship with ARCP was in jeopardy as a result of the accounting issues at ARCP announced on October 29, 2014.

A newly-appointed lead plaintiff filed an amended complaint on June 1, 2015, naming the Company, RCAP Holdings LLC, RCAP Equity LLC, and certain former and current officers and directors of the Company as defendants. The amended complaint alleges that the Company’s public statements in 2014 discussing the strength and success of the Company’s wholesale and investment banking businesses, as well its public statements regarding the benefits of the announced acquisition of Cole Capital, were materially false and misleading because they failed to provide an accurate portrait of the true strength and specific risks to the Company and its wholesale brokerage and investment banking businesses. Such statements allegedly misrepresented and/or failed to disclose that certain Company executives, who also held roles with ARCP, were engaged in a fraudulent scheme to misstate the financial results of ARCP. The amended complaint alleges defendants (except RCAP Equity LLC, a holding company under common ownership with RCAP Holdings with no ongoing operations, assets or liabilities) violated Sections 11, 12 and 15 of the 1933 Securities Act in in connection with the Company’s June 2014 secondary stock offering. It further alleges that the Company and certain defendants violated Section 10(b) and 20(a) of the Securities Exchange Act of 1934.

The Company believes the Weston amended complaint is without merit and intends to vigorously defend itself against its allegations.

ARCP Shareholder Class Action Litigation

The Company was named as a defendant in a consolidated federal securities law class action (Teachers Insurance and Annuity Association of America, et al. v. American Realty Capital Properties, Inc. et al, Civ. A. 15-cv-00421) filed in federal court in New York on January 21, 2015 brought on behalf of all persons who purchased or otherwise acquired securities of ARCP between May 6, 2013 and October 29, 2014, including ARCP common stock, preferred stock and debt securities. The lawsuit’s claims, premised on Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 14(a), 10(b) and 20(a) of the Securities Exchange Act of 1934, allege generally that defendants issued or assisted in the issuance of false and misleading statements to the investing public, including in registration statements, prospectuses, proxies and other public statements and press releases, concerning ARCP’s financial results as part of a scheme to artificially inflate the value of ARCP’s securities.

More specifically, the complaint alleges that the Company is a “control person” of ARCP under the securities laws and thus plaintiffs seek to hold the Company responsible for the alleged misstatements of ARCP and its officers and directors. The Company is also alleged to be a “structuring advisor” to ARCP. Realty Capital Securities is named as a defendant based on its role as a co-manager of ARCP’s July 2013 convertible notes offering.

On April 17, 2015, plaintiffs filed an amended complaint, which, like the original complaint, alleges that the Company is a “control person” of ARCP under the securities laws. The amended complaint also names Realty Capital Securities as a defendant based on its role as a co-manager of ARCP’s July 2013 convertible notes offering.

The Company believes the amendedcomplaint is without merit and intends to vigorously defend itself against the allegations contained in the complaint. The Company has filed a motion to dismiss all of the claims against it and Realty Capital Securities.

Massachusetts Securities Division Subpoenas

On November 7, 2014 and December 19, 2014, Realty Capital Securities received subpoenas from the Massachusetts Secretary of the Commonwealth, Securities Division (the “Division”), requiring the production of certain documents and other materials, dated from January 1, 2014 to the present, relating to sales by Realty Capital Securities of certain non-traded REITs and similar products sponsored, co-sponsored or advised by AR Capital, LLC and the organizational structure of Realty Capital Securities. Realty Capital Securities has complied with the subpoenas.

On December 19, 2014, the Company received a subpoena from the Division, requiring the production of certain documents and other materials, dated from January 1, 2014 to the present, relating the Company’s organizational structure. The Company has complied with the subpoena.

On March 2, 2015 Realty Capital Securities received a subpoena from the Division seeking minor additional information concerning certain former employees. Realty Capital Securities has complied with the subpoena.

Other matters

Since the disclosure of accounting issues at ARCP in October 2014, the Company and certain of its subsidiaries, including Realty Capital Securities, have received requests for information and subpoenas from various state and federal agencies as well as self-regulatory organizations, including the SEC, Massachusetts Securities Division and FINRA. The Company and its subsidiaries have responded to all of the regulatory inquiries and produced documents and information in response to formal and informal requests.

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Goodwill and Intangible Assets (Narrative) (Details) - Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total
Finite-Lived Intangible Assets [Line Items]
Impairments of intangible assets		$ 112,651
Sponsor relationships
Finite-Lived Intangible Assets [Line Items]
Impairments of intangible assets		100,000
StratCap
Finite-Lived Intangible Assets [Line Items]
Goodwill impairment loss	$ 30,600	30,571
StratCap | Sponsor relationships
Finite-Lived Intangible Assets [Line Items]
Impairments of intangible assets	100,000	100,000
JP Turner & Company, LLC
Finite-Lived Intangible Assets [Line Items]
Goodwill impairment loss	13,600	13,579
Impairments of intangible assets	$ 12,600	$ 12,600

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) $ in Millions	Feb. 10, 2014 USD ($)
Exchange Transaction | Additional Paid-in Capital
Deferred tax impact	$ 1.2

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Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Property and equipment, accumulated depreciation	$ 9,527	$ 5,488
Notes receivable, allowance for credit losses	1,086	914
Intangible assets, accumulated amortization	$ 122,214	$ 68,106
Series B Preferred Stock
Interest rate	11.00%	11.00%
Convertible preferred, par value	$ 0.001	$ 0.001
Convertible preferred, shares authorized	100,000,000	100,000,000
Convertible preferred, shares issued	5,800,000	5,800,000
Convertible preferred, shares outstanding	5,800,000	5,800,000
Series C Preferred Stock
Interest rate	7.00%	7.00%
Convertible preferred, par value	$ 0.001	$ 0.001
Convertible preferred, shares authorized	100,000,000	100,000,000
Convertible preferred, shares issued	4,400,000	4,400,000
Convertible preferred, shares outstanding	4,400,000	4,400,000
Common Class A
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	77,151,089	70,571,540
Common stock, shares outstanding	77,151,089	70,571,540
Common Class B
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	1	1
Common stock, shares outstanding	1	1

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Derivative Contracts

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Contracts

Derivative Contracts

During the second quarter of 2014, the Company entered into a series of contemporaneous transactions that qualify as derivative contracts or include derivative contracts. These derivative contracts include a put/call agreement, which is a free-standing derivative contract, and embedded derivative contracts related to the Company’s issuance of convertible notes and Series A Preferred Stock (“hybrid instruments”).

The embedded derivative contracts’ features require separate accounting as derivative instruments; therefore, the issuance proceeds for the convertible note and Series A Preferred Stock were first allocated to the fair value of the put/call agreement and then, on a relative fair value basis, to the hybrid instruments. The proceeds allocated to each hybrid instrument were then attributed between the host contract and the embedded derivative contracts. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

On November 18, 2014 and December 12, 2014, a portion of the Series A Preferred Stock was submitted for conversion, and on December 10, 2014, December 19, 2014 and February 23, 2015, shares of Class A common stock were issued on account of such conversions. Accordingly, the bifurcated derivatives associated with the converted Series A Preferred Stock were adjusted to their fair value on the date of each submission for conversion, with the changes in fair value reflected in other revenues in the consolidated statements of operations. The bifurcated derivatives associated with the converted Series A Preferred Stock were then written off against additional paid-in capital.

On December 19, 2014, the remaining Series A Preferred Stock was exchanged for Series B Preferred Stock and Series C Preferred Stock. Accordingly, the bifurcated derivatives associated with the remaining Series A Preferred Stock were adjusted to their fair value as measured on the date of the exchange, with the change in fair value reflected in other revenues in the consolidated statements of operations. The remaining bifurcated derivatives associated with the Series A Preferred Stock, which were exchanged, were written off against additional paid-in capital.

The Series B Preferred Stock and Series C Preferred Stock also have embedded derivative contracts features that require separate accounting as derivative instruments. These derivative contracts are carried at their fair value with changes in fair value reflected in other revenues in the consolidated statements of operations.

The following table sets forth the fair value of the Company’s derivative contracts as of June 30, 2015 and December 31, 2014 as follows:

($ in thousands)	June 30, 2015		December 31, 2014
Luxor Put	$	8,383	$	11,623
Luxor Call	—		—
Embedded derivative related to the Series B preferred stock	—		—
Embedded derivative related to the Series C preferred stock	31,264		69,409
Total derivative contracts	$	39,647	$	81,032
Embedded derivative related to the convertible notes (included in long-term debt)	$	6,868	$	21,876

The following table sets forth the change in fair value of the Company’s derivative contracts which was recorded in other revenues in the consolidated statement of operations for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended				Six Months Ended
($ in thousands)	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
Luxor Put	$	2,946	$	8,466	$	3,241	$	8,466
Luxor Call	—		—		—		—
Embedded derivative related to the Series A preferred stock	—		35,239		—		35,239
Embedded derivative related to the Series B preferred stock	—		—		—		—
Embedded derivative related to the Series C preferred stock	21,767		—		38,143		—
Embedded derivative related to the convertible notes (included in long-term debt)	8,252		14,747		15,009		14,747
Total change in fair value	$	32,965	$	58,452	$	56,393	$	58,452

Put/Call. On April 29, 2014, the Company entered into a put/call agreement with affiliates of Luxor Capital Group LP (collectively with its affiliates, “Luxor”), which was amended on December 19, 2014 in connection with the exchange of Series A Preferred Stock for Series B Preferred Stock and Series C Preferred Stock. Under this agreement, subject to certain conditions, (i) the Company has the right to repurchase Luxor’s interest in RCS Capital Management, which is currently 19.46% (the “Luxor percentage interest”) from Luxor in exchange for its fair market value (as determined by the Company and Luxor pursuant to the agreement) in shares of Class A common stock (or, at the Company’s option, a cash equivalent); and (ii) Luxor has the right to require the Company to purchase the Luxor percentage interest in exchange for a number of shares of Class A common stock (or, at the Company’s option, a cash equivalent) that is equal to 15.00% multiplied by the Luxor percentage interest multiplied by the then outstanding number of shares of Class A common stock (assuming the conversion immediately prior thereto of the then outstanding convertible notes and Series C Preferred Stock).

The put/call agreement also provides that the Members may elect to purchase all the Luxor percentage interest offered to the Company for an amount equal to the value of the Class A common stock required to be delivered by the Company for cash, shares of Class A common stock or a combination thereof. If the Company is prohibited by the Bank Facilities from purchasing the Luxor percentage interest, the Members will be required to purchase the Luxor percentage interest under the same terms.

Embedded derivatives related to the preferred stock and convertible notes. The Series B Preferred Stock is not convertible but includes an option for the Company to call the instrument in connection with a consolidation or merger of our company with one or more entities that are not its affiliates which results in a Change of Control (as defined in the Series B COD) and as a result of which the Company is not the surviving entity that is considered an embedded derivative that is not clearly and closely related to the host instrument. As a result, this feature must be bifurcated and accounted for as a separate compound derivative.

The Series C Preferred Stock is convertible, at the option of the holder, into shares of Class A common stock. The convertible features and other features are considered embedded derivatives that are not clearly and closely related to the host instrument. As a result, these features must be bifurcated and accounted for as a separate compound derivative. The Company adjusts the carrying value of the compound derivative to fair value at each reporting date, or the date of conversion, and recognizes the change in fair value in the consolidated statements of operations.

The Company’s convertible notes are convertible, at the option of the holders of the Company’s convertible notes, into shares of Class A common stock. The convertible feature and other features are considered embedded derivatives that are not clearly and closely related to the host instrument. As a result, these features must be bifurcated and accounted for as a separate compound derivative. The Company adjusts the carrying value of the compound derivative to fair value at each reporting date, or the date of conversion, and recognizes the change in fair value in the statements of operations.

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Net Capital Requirements (Narrative) (Details) - USD ($)	May. 06, 2015	Apr. 17, 2015	Jun. 30, 2015
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Minimum ratio of aggregate indebtedness to net capital			15
Minimum net capital as a percent of aggregate indebtedness			2.00%
JP Turner & Company, LLC
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Contributions		$ 4,000,000
VSR Financial Services, Inc.
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Contributions	$ 4,000,000
Event One
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Minimum net capital required for entity			$ 250,000

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Commitments and Contingencies (Leases) (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2016	$ 11,567
2017	10,638
2019	9,123
2020	7,557
2019	7,045
Thereafter	21,961
Total	$ 67,891

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 10, 2015
Document Information [Line Items]
Entity Registrant Name	RCS Capital Corp
Entity Central Index Key	0001568832
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Common Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		77,296,297
Common Class B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		1

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Preferred Stock

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Preferred Stock

Preferred Stock

Series A Preferred Stock. On April 29, 2014, the Company issued 14,657,980 shares of Series A Preferred Stock to affiliates of Luxor in a private placement. The shares of Series A Preferred Stock were entitled to a dividend of 7% of the liquidation preference in cash and a dividend of 8% of the liquidation preference if a quarterly dividend was not paid in cash on the dividend payment date. The shares of Series A Preferred Stock were convertible, at the option of the holders of the Series A Preferred Stock, into shares of Class A common stock, at the lower of (i) a 2% discount to VWAP of Class A common stock for the ten trading days prior to the date of the holder’s election to convert; (ii) a 2% discount to the closing price of Class A common stock on the date of the holder’s election to convert; and (iii) $20.26, the fixed conversion price. If both the one-day VWAP and the daily closing price of Class A common stock for the prior 30 consecutive trading days exceeded 2.5 times the fixed conversion price, or $50.65, and at least $10.0 million of Class A common stock was traded each day for 30 consecutive days at any time after the first two years from the issuance date of the Series A Preferred Stock, then the Company may have required the holders to convert the Series A Preferred Stock into shares of Class A common stock at the same price as set forth above. Accrued and unpaid dividends on the Series A Preferred Stock were also entitled to the same liquidation preference and were convertible into additional shares of Class A common stock on the same terms as actual shares of Series A Preferred Stock.

During the period April 29, 2014 through June 30, 2014, the Company accrued $3.3 million in dividends and recognized a deemed dividend of $194.8 million on its Series A Preferred Stock. See Note 14 for more information.

Exchange and Conversion of Outstanding Series A Preferred Stock. During the period April 29, 2014 through December 19, 2014, Luxor elected to convert 3,073,553 shares of Series A Preferred Stock into 5,405,601 shares of Class A common stock. On December 19, 2014 the Company exchanged the remaining 11,584,427 shares of Series A Preferred Stock for 5,800,000 shares of Series B Preferred Stock and 4,400,000 shares of Series C Preferred Stock. $3.0 million of accrued and unpaid dividends on Series A Preferred Stock through December 12, 2014, the date of submission for conversion, were proportionately added to the amount of dividends due on the Series B Preferred Stock and the Series C Preferred Stock on January 12, 2015, the first dividend payment date.

Series B Preferred Stock. On December 19, 2014, the Company issued 5,800,000 of Series B Preferred Stock to affiliates of Luxor. If paid in cash, dividends on shares of Series B Preferred Stock accrue quarterly at 11.00% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue at 12.50% per annum of the liquidation preference.

The initial liquidation preference of shares of Series B Preferred Stock was $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

The holders of Series B Preferred Stock have no conversion rights.

At any time prior to June 12, 2016, the Company has the right to redeem all (and not less than all) of the outstanding shares of Series B Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption.

Starting on December 12, 2022, the Company will have a right to redeem, and holders of shares of Series B Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares of Series B Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption. If any redemption by the Company would result in less than $35.0 million in aggregate liquidation preference of Series B Preferred Stock remaining outstanding, then the Company will be required to redeem all (and not less than all) of the outstanding shares of Series B Preferred Stock.

The shares of Series B Preferred Stock are also redeemable in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which the Company is not the surviving entity.

The Series B Preferred Stock ranks pari passu with the Series C Preferred Stock.

In the event of (A) a dissolution or winding up of the Company, whether voluntary or involuntary, (B) a consolidation or merger of the Company with and into one or more entities which are not our affiliates which results in a change of control, or (C) a sale or transfer of all or substantially all of the Company’s assets other than to an affiliate of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of equity securities junior to the Series B Preferred Stock, the holders of shares of Series B Preferred Stock are entitled (subject to the redemption rights of such holders in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which our company is not the surviving entity) to receive an amount equal to the liquidation preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of the final distribution to such holder.

The terms of the Series B Preferred Stock set forth in the related certificate of designation include voting rights relating to the issuance of additional preferred securities, amending the provisions of the related certificate of designation, affiliate transactions and the incurrence of indebtedness.

Series C Preferred Stock. On December 19, 2014, the Company issued 4,400,000 of Series C Preferred Stock to affiliates of Luxor. If paid in cash, dividends on shares of Series C Preferred Stock accrue quarterly at 7.00% per annum of the liquidation preference. To the extent a quarterly dividend is not paid in cash on the applicable dividend payment date, then such dividend not paid in cash for such period will accrue at 8.00% per annum of the liquidation preference.

The initial liquidation preference of shares of Series C Preferred Stock was $25.00 per share. Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date.

The shares of Series C Preferred Stock are convertible, at the option of the holders of the Series C Preferred Stock, into shares of Class A common stock, at $13.00, which conversion price is subject to anti-dilution adjustments upon the occurrence of certain events and transactions. If both the one-day VWAP and the daily closing price of Class A common stock for the prior 30 consecutive trading days exceeds $50.66 and at least $10.0 million of Class A common stock is traded each day for 30 consecutive days at any time after the first two years from the issuance date of the Series C Preferred Stock, then the Company may require the holders to convert the Series C Preferred Stock into shares of Class A common stock at the same price as set forth above.

The following limitations on the ownership of Class A common stock are contained in the certificate of designation related to the Series C Preferred Stock.

At any time when a holder of Series C Preferred Stock then beneficially owns 9.9% or less, but greater than 4.9%, of the shares of Class A common stock outstanding, in no event will such holder be allowed to accept shares of Class A common stock issuable upon conversion of Series C Preferred Stock that, when taken together with the shares of Class A common stock otherwise beneficially owned, collectively exceeds 9.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock. This ownership limitation can be waived by any holder of Series C Preferred Stock on 65 days prior written notice to the Company.

At any time when a holder of Series C Preferred Stock then beneficially owns 4.9% or less of the shares of Class A common stock outstanding, in no event will such holder be allowed to accept shares of Class A common stock obtained upon conversion of Series C Preferred Stock that, when taken together with the shares of Class A common stock otherwise held, collectively exceeds 4.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock. This ownership limitation can be waived by any holder of Series C Preferred Stock on 65 days prior written notice to the Company.

In no event will a holder of Series C Preferred Stock be allowed to accept shares of Class A common stock issuable upon conversion of Series C Preferred Stock that would result in that holder owning an aggregate number of shares of Class A common stock, when taken together with any other shares of Class A common stock then held by such holder and persons aggregated with such holder under the rules of the FINRA, in excess of 24.9% of the shares of Class A common stock outstanding on the trading day immediately preceding the election to convert such Series C Preferred Stock, unless such ownership of shares of Class A common stock in excess of 24.9% is duly approved in advance by FINRA.

The ownership limitations described above are identical to the limitations contained in the indenture governing the convertible notes and the put/call agreement governing Luxor’s right to exchange its membership interest in RCS Capital Management for shares of Class A common stock.

Starting on December 12, 2022, the Company will have a right to redeem, and holders of shares of Series C Preferred Stock will have a right to cause the Company to redeem, all or a part of the outstanding shares of Series C Preferred Stock for cash at a redemption price equal to the aggregate liquidation preference plus accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of redemption. If any redemption by the Company would result in less than $35.0 million in aggregate liquidation preference of Series C Preferred Stock remaining outstanding, then the Company will be required to redeem all (and not less than all) of the outstanding shares of Series C Preferred Stock.

The shares of Series C Preferred Stock are also redeemable in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which the Company is not the surviving entity.

The Series C Preferred Stock ranks pari passu with the Series B Preferred Stock.

In the event of (A) a dissolution or winding up of the Company, whether voluntary or involuntary, (B) a consolidation or merger of the Company with and into one or more entities which are not our affiliates which results in a change of control, or (C) a sale or transfer of all or substantially all the Company’s assets other than to an affiliate of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of equity securities junior to the Series C Preferred Stock, the holders of shares of Series C Preferred Stock are entitled (subject to the redemption rights of such holders in connection with a consolidation or merger of the Company with one or more entities that are not its affiliates which results in a change of control and as a result of which our company is not the surviving entity) to receive an amount equal to the greater of: (i) the liquidation preference plus an amount equal to all accrued and unpaid dividends from the date immediately following the immediately preceding dividend payment date to the date of the final distribution to such holder; and (ii) an amount per share of Series C Preferred Stock equal to the amount or consideration which would have been payable had each share of Series C Preferred Stock been converted into shares of Class A common stock.

The terms of the Series C Preferred Stock set forth in the related certificate of designation include voting rights relating to the issuance of additional preferred securities, amending the provisions of the related certificate of designation, affiliate transactions and the incurrence of indebtedness.

Preferred Stock Dividends. As of June 30, 2015 and December 31, 2014, the Company accrued $4.2 million and $0.8 million, respectively, of preferred stock dividends on the Series B Preferred Stock and $2.0 million and $0.4 million, respectively, of preferred stock dividends on the Series C Preferred Stock. The Series B Preferred Stock and Series C Preferred Stock dividend accruals are included in other liabilities in the consolidated statements of financial condition.

Any dividends that are not paid in cash on an applicable dividend payment date are automatically added to the aggregate liquidation preference on such applicable dividend payment date. The following table presents the liquidation preferences for the Series B Preferred Stock and the Series C Preferred Stock:

($ in thousands)	Series B Preferred Stock		Series C Preferred Stock
Beginning liquidation preference, December 12, 2014	$	145,000	$	110,000
Allocation of Series A Preferred Stock accrued and unpaid dividends	1,700		1,288
2014 4th quarter dividend accrual	797		385
2014 4th quarter dividend paid-in-kind increase	352		239
2015 1st quarter dividend accrual	4,056		1,954
2015 1st quarter dividend paid-in-kind increase	553		279
Ending liquidation preference, June 30, 2015	$	152,458	$	114,145

On July 13, 2015, the liquidation preferences of the Series B Preferred Stock and Series C Preferred Stock increased by $4.7 million and $2.3 million, respectively, to reflect the accrued and unpaid dividends.

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Derivative Contracts (Summary of Changes in Fair Value) (Details) - Other Revenue - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	$ 32,965	$ 58,452	$ 56,393
Embedded Derivative Financial Instruments | Convertible Notes Payable
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	8,252	14,747	15,009
Embedded Derivative Financial Instruments | Series A Preferred Stock
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	0	35,239	0
Embedded Derivative Financial Instruments | Series B Preferred Stock
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	0	0	0
Embedded Derivative Financial Instruments | Series C Preferred Stock
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	21,767	0	38,143
Luxor Capital Group, LP | Put Option
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	2,946	8,466	3,241
Luxor Capital Group, LP | Call Option
Derivative Instruments, Gain (Loss) [Line Items]
Total change in fair value	$ 0	$ 0	$ 0

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Commitments and Contingencies (Narrative) (Details)				3 Months Ended		6 Months Ended
	Dec. 04, 2014 USD ($)	Sep. 30, 2014 USD ($)	Apr. 29, 2014	Jun. 30, 2015 USD ($) line	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) line	Jun. 30, 2014 USD ($)	Apr. 16, 2015 USD ($)
Line of Credit Facility [Line Items]
Rental expense				$ 3,400,000	$ 1,900,000	$ 6,600,000	$ 2,900,000
Number of business lines | line				3		3
Private equity commitment				$ 7,000		$ 7,000
Accrued litigation				14,100,000		14,100,000
Debt term			2 years
Payment in year two				97,820,000		97,820,000
Payment in year three				88,591,000		88,591,000
ARCP
Line of Credit Facility [Line Items]
Settlement amount	$ 32,700,000
Closing costs retained from litigation settlement	10,000,000
Amount released from contract	2,000,000
Promissory note (legal settlement) | ARCP
Line of Credit Facility [Line Items]
Convertible notes, face value	$ 15,300,000
Debt term	2 years
Interest rate	8.00%
Payment in year one				7,700,000		7,700,000
Payment in year two				3,800,000		3,800,000
Payment in year three				3,800,000		3,800,000
ICH acquisition
Line of Credit Facility [Line Items]
Long-term line of credit				1,000,000		1,000,000
Long-term line of credit				0		0
Cole Capital
Line of Credit Facility [Line Items]
Total consideration		$ 700,000,000
Partial payment		$ 10,000,000
First Line of Credit
Line of Credit Facility [Line Items]
Long-term line of credit				25,000,000		25,000,000
Long-term line of credit				23,000,000		23,000,000
Second Line of Credit
Line of Credit Facility [Line Items]
Long-term line of credit				50,000,000		50,000,000
Long-term line of credit				0		0
Revolving Credit Facility
Line of Credit Facility [Line Items]
Long-term line of credit								$ 4,000,000
Long-term line of credit				$ 300,000		$ 300,000

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues:
Retail commissions	$ 283,426	$ 175,229	$ 561,494	$ 223,118
Selling commissions:
Related party products	55,588	169,591	100,071	262,011
Non-related party products	15,124	2	28,417	159
Dealer manager fees:
Related party products	26,322	78,632	47,262	123,070
Non-related party products	6,802	0	12,782	72
Related party products	6,489	17,677	11,903	49,409
Non-related party products	0	3,375	0	3,375
Advisory and asset-based fees (non-related party)	176,901	98,822	334,167	130,533
Transfer agency revenue (related party products)	4,745	5,638	9,011	9,024
Services revenue:
Related party products	8,511	12,066	15,274	20,166
Non-related party products	3,165	101	6,037	182
Reimbursable expenses:
Related party products	465	1,803	799	7,836
Non-related party products	0	33	154	63
Investment fee revenue	10,927	0	23,093	0
Transaction fees	44,807	23,015	92,794	29,596
Other	35,094	59,035	60,692	59,773
Total revenues	678,366	645,019	1,303,950	918,387
Expenses:
Retail commissions and advisory	409,101	253,132	794,978	321,602
Wholesale commissions:
Related party products	36,730	147,148	64,873	234,144
Non-related party products	14,118	2	26,802	159
Wholesale reallowance:
Related party products	5,839	22,794	10,318	35,615
Non-related party products	2,370	0	4,560	29
Investment fee expense	6,387	0	13,273	0
Internal commissions, payroll and benefits	84,147	73,385	166,423	116,744
Conferences and seminars	12,325	11,015	21,195	18,011
Travel	4,377	2,925	8,420	5,417
Marketing and advertising	4,047	3,056	8,213	6,130
Professional fees	16,207	9,933	28,290	14,533
Data processing	11,085	8,772	21,531	12,549
Quarterly fee (related party)	0	248	0	2,030
Acquisition-related costs	5,200	6,546	7,656	13,263
Interest expense	18,603	12,699	37,045	12,930
Occupancy	8,438	5,792	16,182	8,831
Depreciation and amortization	29,152	15,529	58,502	17,546
Goodwill and intangible assets impairment charge	156,801	0	156,801	0
Clearing and exchange fees	10,803	5,118	20,981	7,106
Outperformance bonus (related party)	0	2,559	0	9,709
Change in fair value of contingent and deferred consideration	(54,023)	156	(50,367)	163
Other expenses	14,881	4,898	28,916	7,512
Total expenses	796,588	585,707	1,444,592	844,023
Income (loss) before taxes	(118,222)	59,312	(140,642)	74,364
Provision (benefit) for (from) income taxes	(52,073)	10,840	(59,112)	13,743
Net (loss) income	(66,149)	48,472	(81,530)	60,621
Less: net income attributable to non-controlling interests	(1,002)	256	(2,228)	9,120
Less: preferred dividends and deemed dividend	7,001	198,077	13,602	198,077
Net (loss) income attributable to Class A common stockholders	$ (72,148)	$ (149,861)	$ (92,904)	$ (146,576)
Per Share Data
Basic (in dollars per share)	$ (0.97)	$ (3.49)	$ (1.28)	$ (4.21)
Diluted (in dollars per share)	$ (1.11)	$ (3.59)	$ (1.59)	$ (4.53)
Weighted average number of shares outstanding, basic (in shares)	74,006,580	43,030,018	72,576,193	34,975,636
Weighted average number of shares outstanding, diluted (in shares)	88,605,947	48,295,269	87,175,560	37,622,806
Cash dividend declared per common share (in dollars per share)	$ 0	$ 0.18	$ 0	$ 0.36

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Fair Value Disclosures

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

Fair Value of Instruments by Level. The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the data inputs that market participants would use in the pricing of the asset or liability and are consequently not based on market activity

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is the most significant to the fair value measurement in its entirety.

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. The Company assumes all transfers occur at the beginning of the quarterly reporting period in which they occur. For the six months ended June 30, 2015 and for the year ended December 31, 2014 there were no transfers in or out of Level 3.

Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Mutual funds, substantially all deferred compensation plan investments and publicly traded securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets. Accordingly, these securities are primarily classified within Level 1. Government bonds, U.S. Treasury securities, corporate bonds, certificates of deposit and mutual funds are fair valued by management using references to prices for similar instruments, quoted prices or recent transactions in less active markets and these securities are primarily classified within Level 2. The Company’s free-standing and embedded derivative contracts are not traded on an exchange. Consequently, the fair value was determined by a third-party valuation company and reviewed by the Company. A binomial lattice model was used to derive the fair value for the embedded derivatives related to the Series C preferred stock while the embedded derivatives related to the Series A preferred stock, convertible notes and the put/call were based on a Monte Carlo simulation that incorporates assumptions including duration, probability of redemption, the volatility of the market price of Class A common stock, the risk free rate of interest and the discount rate. The derivative contracts are classified as Level 3 in the Company’s fair value hierarchy.

The fair value of the Company’s investments in private equity funds is based on the net asset value (“NAV”) as a practical expedient since there is no readily available market. Adjustments to the NAV would be considered if it was probable that the private equity funds would be sold at a value materially different than the reported NAV. The private equity funds do not have notice periods, or restrictions on redemptions. The private equity funds primarily invest in nonpublic companies and other private equity funds, and distributions from will be received as the underlying investments of the funds are liquidated. The Company also holds an investment in a REIT whose fair value is based on NAV. Given the use of unobservable inputs used in the valuation, investments in private equity funds and the REIT are classified as Level 3 in the Company’s fair value hierarchy.

Pursuant to the terms of the related purchase agreements, the Company is obligated to pay contingent consideration to the sellers of Hatteras, StratCap and Girard and contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013. During the three months ended March 31, 2015, the Company settled the contingent consideration related to the J.P. Turner acquisition and substantially all of the contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013.

The Company estimated the fair value of the contingent consideration at the close of the transactions using discounted cash flows. The fair value of the contingent consideration was based on financial forecasts determined by management that included assumptions about growth in assets under administration, assets under management, earnings, financial advisor retention and discount rates. The financial targets are sensitive to financial advisor retention, market fluctuations and the ability of financial advisors to grow their businesses. The Company evaluates the actual progress toward achieving the financial targets quarterly and adjusts the estimated fair value of the contingent consideration based on the probability of achievement, with any changes in fair value recognized in earnings. Given the significant unobservable inputs used in the valuation the contingent consideration is classified as Level 3 in the Company’s fair value hierarchy.

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of June 30, 2015 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	64,067	$	—	$	—		$	64,067
Available-for-sale securities:
Mutual funds	2,701		—		—			2,701
Total available-for-sale	2,701		—		—			2,701
Trading securities:
Equity securities	163		—		—			163
Mutual funds	9,592		—		—			9,592
Certificate of deposits	—		429		—			429
U.S. government bonds	2		9		—			11
State and municipal bonds	1		—		—			1
Corporate bonds	—		72		—			72
Other	39		—		470			509
Total trading securities	9,797		510		470			10,777
Deferred compensation plan investments:
Money market fund	4,470		—		—			4,470
International global funds	19,126		—		—			19,126
U.S. equity funds	49,035		—		—			49,035
U.S. fixed-income funds	10,937		—		—			10,937
Mutual funds	—		3,086		—			3,086
Total deferred compensation plan investments	83,568		3,086		—			86,654
Prepaid expenses and other assets(1)	—		1,365		4,443			5,808
Total	$	160,133	$	4,961	$	4,913		$	170,007
Liabilities:
Derivative contracts	$	—	$	—	$	46,515	(2)	$	46,515
Other liabilities:
Equity securities	43		—		—			43
Mutual funds and unit investment trusts	158		—		—			158
State and municipal government obligations	130		202		—			332
Certificate of deposit	—		—		—			—
Contingent consideration	—		—		60,635		(3)	60,635
Total	$	331	$	202	$	107,150		$	107,683

_____________________

(1) Primarily represents investments in REITs, oil and gas interests and other illiquid investments.

(2) Includes $6.9 million of derivatives classified in long-term debt.

(3) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of December 31, 2014 are as follows:

($ in thousands)	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents - money market funds	$	82,973	$	—	$	—		$	82,973
Available-for-sale securities:
Mutual funds	11,473		—		—			11,473
Total available-for-sale	11,473		—		—			11,473
Trading securities:
Equity securities	262		—		—			262
Mutual funds	9,457		—		—			9,457
U.S. government bonds	2		10		—			12
Other	41		—		470			511
Total trading securities	9,762		10		470			10,242
Deferred compensation plan investments:
Money market fund	6,246		—		—			6,246
International global funds	17,722		—		—			17,722
U.S. equity funds	46,999		—		—			46,999
U.S. fixed-income funds	9,787		—		—			9,787
Mutual funds	—		2,702		—			2,702
Total deferred compensation plan investments	80,754		2,702		—			83,456
Prepaid expenses and other assets - oil and gas interests	—		—		151			151
Total	$	184,962	$	2,712	$	621		$	188,295
Liabilities:
Derivative contracts	$	—	$	—	$	102,908	(1)	$	102,908
Other liabilities:
Equity securities	161		—		—			161
Mutual funds and unit investment trusts	4		—		—			4
State and municipal government obligations	222		—		—			222
Contingent consideration	—		—		107,278		(2)	107,278
Total	$	387	$	—	$	210,186		$	210,573

_______________

(1) Includes $21.9 million of derivatives classified in long-term debt.

(2) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

Transfers Between Levels of the Fair Value Hierarchy.During the six months ended June 30, 2015, the Company transferred $0.2 million of municipal government bonds out of Level 1 to Level 2 of the fair value hierarchy due to pricing inputs becoming less observable. There were no transfers in the fair value hierarchy during the six months ended June 30, 2014.

Level 3 Rollforward.The following table presents changes during the six months ended June 30, 2015 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2015:

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized gains/(losses)			Purchases		Issuances		Sales			Settlements		Fair value as of June 30, 2015
Assets:
Trading securities- other	$	470	$	—		$	—	$	—	$	—		$	—	$	470
Prepaid expenses and other assets - oil and gas interests	151		(12		)	—		—		(10		)	—		129
Prepaid expenses and other assets - REIT and other illiquid investments	—		(65		)	4,522		—		(143		)	—		4,314
Total	$	621	$	(77	)	$	4,522	$	—	$	(153	)	$	—	$	4,913

($ in thousands)	Fair value as of December 31, 2014		Net realized and unrealized (gains)/losses			Purchases		Issuances		Sales		Settlements			Fair value as of June 30, 2015
Liabilities:
Derivative contracts	$	102,908	$	(56,393	)	$	—	$	—	$	—	$	—		$	46,515
Contingent consideration	107,278		(49,787		)	—		13,081		—		(9,937		)	60,635
Total	$	210,186	$	(106,180	)	$	—	$	13,081	$	—	$	(9,937	)	$	107,150

On March 11, 2015, the Company acquired approximately $4.5 million of financial instruments as part of the VSR transaction, which the Company classified as Level 3 in the fair value hierarchy due to a lack of an active market and infrequent observable inputs.

The following table presents changes during the six months ended June 30, 2014 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains and losses related to the Level 3 assets and liabilities for the six months ended June 30, 2014:

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized gains/(losses)		Purchases		Issuances		Settlements		Fair value as of June 30, 2014
Assets:
Trading securities- other	$	—	$	—	$	120	$	—	$	—	$	120
Total	$	—	$	—	$	120	$	—	$	—	$	120

($ in thousands)	Fair value as of December 31, 2013		Net realized and unrealized (gains)/losses			Purchases		Issuances		Settlements			Fair value as of June 30, 2014
Liabilities:
Derivative contracts	$	—	$	(58,452	)	$	—	$	162,614	$	—		$	104,162
Contingent consideration	2,180		163			12,868		29,380		(13,173		)	31,418
Total	$	2,180	$	(58,289	)	$	12,868	$	191,994	$	(13,173	)	$	135,580

The realized and unrealized gains and losses on derivative contracts and contingent consideration are included in other revenues and other expenses, respectively, in the consolidated statements of operations.

The change in unrealized gain relating to Level 3 assets and liabilities held as of June 30, 2015 was $105.7 million. The change in unrealized gain relating to Level 3 assets and liabilities held as of June 30, 2014 was $58.3 million.

Significant Unobservable Inputs. The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of June 30, 2015:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	129	Discounted cash flows	10% discount rate
Prepaid expenses and other assets - REITs and other illiquid investments	$	4,314	Sponsorship valuation	Third party valuation from sponsors
Liabilities:
Derivative contracts	$	46,515	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.3 years, 7.5 years, 7.5 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 18.95%, 21.1%, 21.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.75%
Contingent consideration - Hatteras	$	30,460	Discounted cash flow	• Projected earnings: $6.4 million to $27.8 million, December 31, 2016 and 2018, respectively. • Projected earn-out: $7.3 million to $23.1 million, December 31, 2016 and 2018, respectively. • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.6 to 0.8
Contingent consideration - StratCap	$	24,400	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.8 to 0.9 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	394	Discounted cash flow	• Revenue achievement • WACC 20%
Contingent consideration - Girard	$	5,381	Discounted cash flow	• Projected gross dealer concessions (GDC): - Retention payments: 5.0% of retained advisors' GDC (0.0%, if GDC is less than $36.4 million); payable on the first and second anniversary of the closing date - Recruiting payments: 5.0% of new advisors' GDC less forgivable loans and other payouts; payable on the second anniversary and third anniversary of the closing date

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 instruments as of December 31, 2014:

($ in thousands)	Fair value		Valuation technique	Unobservable inputs
Assets:
Trading securities- other- private equity fund	$	113	Net asset value (NAV)	Net asset value (NAV)
Trading securities- other- REIT	$	357	Net asset value (NAV)	Net asset value (NAV)
Prepaid expenses and other assets - oil and gas interests	$	151	Discounted cash flows	10% discount rate
Liabilities:
Derivative contracts	$	102,908	Monte Carlo & binomial lattice (Series C)	Inputs for convertible notes, Series B and Series C preferred stock respectively: • Duration: 6.8 years, 8.0 years, 8.0 years • Volatility: 30.0%, N/A, 30.0% • Risk free rate of interest: 1.95%, 2.1%, 2.1% • Discount rate: 12.95%, 15.1%, 15.1% • Dividend assumptions: N/A, 12.5% (through June 30, 2016; subsequently reverts to 11%), 8.0% (through June 30, 2016; subsequently reverts to 7%) Inputs for the put option: • Volatility: 30.0% • Exercise date: June 10, 2033 • Risk free rate: 2.4%
Contingent consideration - J.P. Turner	$	6,200	Discounted cash flow	• Probability exceeding percentage threshold: 99.7% to 100.0% • Present value factor: 0.71 to 0.95 • Time until payments: 0.4 years to 2.4 years
Contingent consideration - Hatteras	$	28,310	Discounted cash flow	• Projected earnings: $11.0 million to $17.3 million, December 31, 2016 and 2018, respectively • Discounted rates based on the estimated weighted average cost of capital (WACC): 0.50 to 0.70
Contingent consideration - StratCap	$	68,200	Discounted cash flow	• Projected earn-out payments: EBITDA multiples for 2015 and 2016. • Present value factor: 0.65 to 0.79 • Probability adjustments: 25.0%, 50.0% and 25.0% for Low Case, Base Case and High Case, respectively.
Contingent consideration - First Allied and Cetera	$	4,568	Discounted cash flow	• Revenue achievement • WACC 20%

Investments in Funds That Are Calculated Using NAV Per Share. The following table presents information related to the Company’s investments that calculate NAV per share as of June 30, 2015. For these investments, which are measured at fair value on a recurring basis, the Company used the NAV per share as a practical expedient to measure fair value:

($ in thousands)	Investment Category Includes	Fair Value Using NAV Per Share		Unfunded Commitments
Trading securities- other- private equity fund	Investments in private equity funds	$	113	$	7
Trading securities- other- REIT	Investment in a REIT	357		—

Fair Value of Financial Instruments Carried at Amortized Cost. The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of June 30, 2015:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	63,991	$	—	$	—	$	60,220
Series B Preferred Stock	152,458		—		—		93,066
Series C Preferred Stock	114,145		—		—		83,166
First lien term facility	534,756		—		—		529,408
Second lien term facility	148,024		—		—		146,544
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
First lien revolving facility	23,000		—		—		23,000
Capital lease obligations	10,346		—		10,346		—
Total	$	1,064,020	$	—	$	25,646	$	937,404

The following table presents information about the carrying values and fair values by fair value hierarchy for financial instruments that are not measured at fair value on a recurring basis where the ending balance was carried at amortized cost as of December 31, 2014:

			Fair Value
($ in thousands)	Carrying value		Level 1		Level 2		Level 3
Convertible notes	$	61,632	$	—	$	—	$	78,005
Series B Preferred Stock	146,700		—		—		117,367
Series C Preferred Stock	111,288		—		—		136,242
First lien term facility	555,700		—		—		530,491
Second lien term facility	147,903		—		—		142,500
Promissory note (legal settlement)	15,300		—		15,300		—
Subordinated borrowings	2,000		—		—		2,000
Total	$	1,040,523	$	—	$	15,300	$	1,006,605

The fair value of the convertible notes, the Company’s 11% Series B Preferred Stock, $0.001 par value per share (“Series B Preferred Stock”) and the Company’s 7% Series C Convertible Preferred Stock, $0.001 par value per share (“Series C Preferred Stock”) were determined by an independent valuation company and reviewed by the Company. The fair value of the convertible notes, the Series B Preferred Stock and the Series C Preferred Stock as of June 30, 2015 was determined using inputs such as conversion price, conversion period, equity volatility, risk-free rate, credit spread, and discount rate. The convertible notes, the Series B Preferred Stock and the Series C Preferred Stock are classified as Level 3 in the Company’s fair value hierarchy. The fair value of the Company’s first and second lien term debt facilities were determined based upon indicative market data obtained from a third party that makes markets in these financial instruments. As of June 30, 2015, the first and second lien term debt facilities and the senior secured first lien revolving credit facility were classified as Level 3 of the fair value hierarchy due to a lack of adequate observable market activity related to these financial instruments. The promissory note, which was entered into in the fourth quarter of 2014 between the Company and ARCP has been classified as Level 2 in the Company’s fair value hierarchy because it lacks observable market data to be classified in Level 1.

The carrying value of accounts receivable and notes receivable approximates the fair value as they have limited credit risk and short-term maturities. Therefore, customer and notes receivables are classified as Level 2 in the non-recurring fair value hierarchy.

Goodwill and intangible assets established upon each acquisition were fair valued and were classified as Level 3 in the non-recurring fair value hierarchy. See Note 7 for more information.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company, Realty Capital Securities, RCS Advisory, ANST, SK Research, LLC (“SK Research”), Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard for the periods since acquisition and of First Allied for the periods since it was under the control of RCAP Holdings. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Regulation S-X. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results.

The consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2014. The statement of financial condition as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings. The acquisition of First Allied by RCAP Holdings was accounted for by RCAP Holdings using the purchase method of accounting; therefore, the purchase price was allocated to First Allied’s assets and liabilities at fair value and any excess purchase price was then attributed to intangible assets and goodwill. When the Company acquired First Allied from RCAP Holdings, no additional intangible assets or goodwill was recorded.

Reclassifications

Certain reclassifications have been made to the prior period financial statement presentation to conform to the current period presentation primarily as a result of the need to harmonize the financial statements of the Company with those of the entities acquired during 2014.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and these differences could be material.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) to clarify the principles for recognizing revenue and to develop common revenue accounting guidance for U.S. GAAP and International Financial Reporting Standards. For public entities, the amendments were to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB deferred the effective date of ASU 2014-09 and the guidance will be effective for public entities for annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is still evaluating the impact of ASU 2014-09.

In November 2014, the FASB issued Accounting Standards Update 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”), which requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract, when evaluating whether the host contract is more akin to debt or equity. The amendments in ASU 2014-16 did not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required but rather clarified how U.S. GAAP should be interpreted in concluding on the nature of the host contract. The Company adopted ASU 2014-16 during the fourth quarter of 2014. The adoption of ASU 2014-16 did not have an impact on the Company’s previously reported financial condition or results of operations.

In February 2015, the FASB issued Accounting Standards Update 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new guidance applies to entities in all industries and amends the current consolidation guidance. The amendments are effective for fiscal years beginning after December 15, 2016 and for interim periods within fiscal periods beginning after December 15, 2017. Early application is permitted. The Company is still evaluating the impact of ASU 2015-02 but does not expect the adoption to have a material impact to its financial condition or results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The key provisions of ASU 2015-03 are a) that debt issuance costs be reported on the statement of financial condition as a reduction in the liability for long-term debt rather than as an asset and b) that the amortization of debt issuance costs be reported as interest expense. For public companies, ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity will apply ASU 2015-03 retrospectively to all prior periods. The Company intends to adopt ASU 2015-03 beginning with the financial statements as of and for the year ended December 31, 2015. The adoption of ASU 2015-03 is expected to have an impact on the Company’s statement of financial condition as the deferred financing fees will be reported net against the long-term debt. The adoption of ASU 2015-03 is not expected to have an impact on the Company’s statement of operations.

In May 2015, the FASB issued Accounting Standards Update 2015-07, “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize investments within the fair value hierarchy for which their fair value is measured at net asset value using the practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value practical expedient. Instead, those disclosures would be limited to investments for which the entity has elected to estimate the fair value using that practical expedient. For public companies, the final consensus will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. A reporting entity will apply the final consensus retrospectively. While the Company is still evaluating the impact of ASU 2015-07, it will not have an impact on the Company’s financial condition, results of operations or cash flows because the update only affects disclosure requirements. ASU 2015-07 is not expected to have a significant impact on the Company’s fair value disclosures as the Company currently has few investments for which their fair values are determined using net asset value.

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Off-Balance Sheet Risk and Concentrations

6 Months Ended

Jun. 30, 2015

Risks and Uncertainties [Abstract]

Off-Balance Sheet Risk and Concentrations

Off-Balance Sheet Risk and Concentrations

The Company is engaged in various trading, brokerage activities and capital raising with counterparties primarily including broker-dealers, banks, direct investment programs and other financial institutions. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. It is the Company’s policy to review, as necessary, the credit standing of each counterparty.

The Company’s customer activities involve the execution, settlement, and financing of various securities transactions. These activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to the customer, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customer’s account. In connection with these activities, the Company executes and clears customer transactions involving the sale of securities not yet purchased and the writing of options contracts. Such transactions may expose the Company to off-balance sheet risk in the event that margin requirements are not sufficient to fully cover losses that customers incur or counterparties are unable to meet the terms of the contracted obligations. In the event counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Company’s policy to review, as necessary, the credit standing of each counterparty with which it conducts business.

In the event a customer or broker fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices in order to fulfill the customer’s obligations. The Company seeks to control the risk associated with its customer activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. The Company monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or reduce positions, when necessary.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and temporary cash investments in bank deposit and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by maintaining the Company’s banking and brokerage relationships with high credit quality financial institutions.

The Company holds securities that can potentially subject the Company to market risk. The amount of potential gain or loss depends on the securities performance and overall market activity. The Company monitors its securities positions on a monthly basis to evaluate its positions, and, if applicable, may elect to sell all or a portion to limit the loss.

As of June 30, 2015 and December 31, 2014, the Company had no significant accounts receivable concentrations with any of its counterparties.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

As of June 30, 2015, the Company had the following classes of common stock and non-controlling interests:

Class A common stock. Class A common stock entitles holders to one vote per share and economic rights (including rights to dividends, if any, and distributions upon liquidation). Holders of Class A common stock hold a portion of the voting rights of the Company.

On February 11, 2014, as part of the 2014 Restructuring Transactions and pursuant to an existing exchange agreement, RCAP Holdings exchanged 23,999,999 Original Operating Subsidiaries Units for 23,999,999 shares of Class A common stock.

On June 10, 2014, the Company issued 19,000,000 shares of Class A common stock in a public offering at a price of $20.25 per share. In connection with the public offering, the Company granted the underwriters the option to purchase up to 3,600,000 additional shares of Class A common stock to cover over-allotments, if any, for a period of 30 days. On June 18, 2014, the underwriters purchased an additional 870,248 shares pursuant to the over-allotment option at the public offering price of $20.25 per share.

On June 10, 2014, the Company issued 2,469,136 shares of Class A common stock at the public offering price of $20.25 per share to Luxor in a private offering.

During the six months ended June 30, 2015 and June 30, 2014, the Company granted 1,305,917 and 2,366,703 shares, net of forfeited and retired grants, of its Class A common stock in the form of restricted stock awards under the RCAP Equity Plan (as defined below) and FA RSU Plan (as defined below). See Note 12 for more information.

On February 23, 2015, the Company issued 2,042,022 shares of its Class A common stock pursuant to the conversion of a portion of the Company’s outstanding Series A Preferred Stock. See Note 10 for more information.

During the six months ended June 30, 2014, the Class A common stock issued as consideration in connection with the acquisitions of Summit, J.P. Turner, and First Allied was 498,884 shares, 239,362 shares and 11,264,929 shares, respectively. In March 2015, the Company amended its agreement with J.P. Turner to settle the remaining contingent and deferred consideration for the J.P. Turner acquisition and issued 245,813 shares of Class A common stock. During the six months ended June 30, 2015, the Class A common stock issued as consideration in connection with the acquisitions of VSR and Girard was 2,436,429 shares and 549,529 shares, respectively. See Note 2 for more information.

On March 20, 2014, the Company’s board of directors authorized, and the Company declared, a cash dividend for the first quarter of 2014 for its Class A common stock. The cash dividend was paid on April 10, 2014 to record holders of Class A common stock at the close of business on March 31, 2014 in an amount equal to $0.18 per share.

On June 17, 2014, the Company’s Board of Directors authorized and the Company declared a cash dividend for the quarter ended June 30, 2014 for its Class A common stock. The cash dividend was paid on July 10, 2014 to record holders of Class A common stock at the close of business on June 30, 2014 in an amount equal to $0.18 per share.

Class B common stock. As of June 30, 2015, RCAP Holdings owns the sole outstanding share of Class B common stock, which entitles it to one vote more than 50% of the voting rights of the Company, and thereby controls the Company. Holders of Class B common stock have no economic rights (including no rights to dividends and distributions upon liquidation).

Docupace non-controlling interest. The non-controlling shareholder of Docupace participates with the Company in the economic benefits of the post combination entity. Accordingly, the Company included the appropriate portion of Docupace’s net assets and operating loss that it does not own in non-controlling interests on the consolidated statement of financial condition and the consolidated statements of operations, respectively. See Note 2 for more information.

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Stockholders' Equity (Details)											3 Months Ended		5 Months Ended	6 Months Ended
	Mar. 18, 2015 shares	Mar. 11, 2015 shares	Mar. 04, 2015 shares	Feb. 23, 2015 shares	Jun. 30, 2014 shares	Jun. 17, 2014 $ / shares	Jun. 12, 2014 shares	Jun. 11, 2014 shares	Jun. 10, 2014 $ / shares shares	Mar. 20, 2014 $ / shares	Jun. 30, 2015 vote $ / shares shares	Jun. 30, 2014 $ / shares	Jun. 30, 2014 shares	Jun. 30, 2015 vote $ / shares shares	Jun. 30, 2014 $ / shares shares	Dec. 31, 2014 $ / shares shares	Jun. 18, 2014 $ / shares shares	Feb. 11, 2014 shares
Class of Stock [Line Items]
Cash dividend declared per common share (in dollars per share) | $ / shares											$ 0	$ 0.18		$ 0	$ 0.36
Period in force									30 days
Restricted Stock
Class of Stock [Line Items]
Restricted shares, grants in period (in shares)														1,652,082
RCAP Holdings, LLC
Class of Stock [Line Items]
Operating subsidiary units exchanged under the exchange agreement (in units)																		23,999,999
Class A shares common stock (in shares)																		23,999,999
RCAP Holdings, LLC | Restricted Stock
Class of Stock [Line Items]
Restricted shares, grants in period (in shares)														0
Series A Preferred Stock
Class of Stock [Line Items]
Issuance of common stock (in shares)				2,042,022
Common Class A
Class of Stock [Line Items]
Issuance of common stock (in shares)									19,000,000
Cash dividend declared per common share (in dollars per share) | $ / shares						$ 0.18				$ 0.18
Common stock, par value (in dollars per share) | $ / shares									$ 20.25		$ 0.001			$ 0.001		$ 0.001
Common stock, shares issued											77,151,089			77,151,089		70,571,540
Common Class A | Summit Financial Services Group
Class of Stock [Line Items]
Business acquisition, equity interest issued (in shares)								498,884						498,884
Common Class A | JP Turner & Company, LLC
Class of Stock [Line Items]
Business acquisition, equity interest issued (in shares)			245,813				239,362							239,362
Common Class A | First Allied acquisition
Class of Stock [Line Items]
Issuance of common stock (in shares)					11,264,929
Common Class A | VSR Acquisition
Class of Stock [Line Items]
Business acquisition, equity interest issued (in shares)		2,436,429												2,436,429
Common Class A | Girard Acquisition
Class of Stock [Line Items]
Business acquisition, equity interest issued (in shares)	549,529													549,529
Common Class A | RCAP Holdings, LLC | First Allied acquisition
Class of Stock [Line Items]
Business acquisition, equity interest issued (in shares)					11,264,929									11,264,929
Common Class B
Class of Stock [Line Items]
Common stock, par value (in dollars per share) | $ / shares											$ 0.001			$ 0.001		$ 0.001
Common stock, shares issued											1			1		1
Common Class B | Majority Shareholder
Class of Stock [Line Items]
Number of votes | vote											1			1
RCAP Equity Plan | Common Class A | Restricted Stock
Class of Stock [Line Items]
Restricted shares, grants in period (in shares)														1,305,917	2,366,703
Over-Allotment Option | Common Class A
Class of Stock [Line Items]
Shares granted in period (in shares)									3,600,000
Common stock, shares issued																	870,248
Private Placement | Common Class A
Class of Stock [Line Items]
Share price (in dollars per share) | $ / shares									$ 20.25								$ 20.25
Common Stock | Common Class A
Class of Stock [Line Items]
Issuance of common stock (in shares)													23,999,999
Common Stock | Common Class A | JP Turner & Company, LLC
Class of Stock [Line Items]
Issuance of common stock (in shares)														245,813
Common Stock | Common Class A | VSR Acquisition
Class of Stock [Line Items]
Issuance of common stock (in shares)														2,436,429
Common Stock | Common Class A | Girard Acquisition
Class of Stock [Line Items]
Issuance of common stock (in shares)														549,529
Common Stock | Common Class B
Class of Stock [Line Items]
Issuance of common stock (in shares)													(23,999,999)
Common Stock | Private Placement | Common Class A
Class of Stock [Line Items]
Issuance of common stock (in shares)									2,469,136				2,469,136

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill. Goodwill associated with each acquisition is allocated to the segments, based on how the Company manages its segments. The following table presents the goodwill by segment:

	Goodwill as of
($ in thousands)	June 30, 2015		December 31, 2014
Independent Retail Advice	$	468,771	$	434,398
Wholesale Distribution	—		22,871
Investment Management	15,348		15,348
Investment Banking and Capital Markets	46,075		45,989
Corporate and Other	755		755
Total goodwill	$	530,949	$	519,361

The following table presents changes in the carrying amount of goodwill for the six months ended June 30, 2015:

($ in thousands)
Total goodwill, as of December 31, 2014	$	519,361
Changes during the period from:
Docupace adjustment (preliminary)	86
VSR acquisition (preliminary)	30,282
Girard acquisition (preliminary)	15,767
Other (see Note 2 - Cetera acquisition)	1,903
StratCap adjustment	7,700
J.P. Turner impairment	(13,579		)
StratCap impairment	(30,571		)
Total goodwill, as of June 30, 2015	$	530,949

During the quarter-end close as of and for the three and six months ended June 30, 2015, the Company became aware that the calculation of the contingent consideration related to StratCap incorrectly included the results of operations for StratCap’s broker-dealer. The merger agreement requires the results of StratCap’s broker-dealer be excluded from the calculation. This would have increased the goodwill and the liability for contingent consideration recorded as of the acquisition date. See Note 2 for more information.

During the three and six months ended June 30, 2015, the Company recorded $30.6 million and $13.6 million in goodwill impairment in the statements of operations which represented all of the goodwill previously recognized related to the acquisitions of StratCap and J.P. Turner, respectively. See Note 2 for more information.

Intangible Assets. The components of intangible assets as of June 30, 2015 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,062,065	$	12,530	$	1,049,535	$	90,331	$	959,204
Sponsor relationships	8	113,000		100,000		13,000		10,464		2,536
Trade names	27	67,857		46		67,811		3,081		64,730
Investment management agreements	12	47,390		—		47,390		3,933		43,457
Customer relationships	11	20,686		—		20,686		2,427		18,259
Internally developed software and technologies	6	22,541		—		22,541		2,543		19,998
Intellectual property	8	10,642		—		10,642		1,437		9,205
Non-competition agreements	3	10,443		75		10,368		7,928		2,440
Distribution networks	39	3,210		—		3,210		70		3,140
Total finite-lived intangible assets		$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

The intangible assets for each reportable segment as of June 30, 2015 are as follows:

($ in thousands)	Beginning Gross Carrying Value		Impairments		Gross Carrying Value, June 30, 2015		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,151,151	$	12,651	$	1,138,500	$	102,982	$	1,035,518
Wholesale Distribution	121,380		100,000		21,380		11,595		9,785
Investment Management	48,770		—		48,770		4,018		44,752
Investment Banking and Capital Markets	23,761		—		23,761		1,745		22,016
Investment Research	10,642		—		10,642		1,437		9,205
Corporate and Other	2,130		—		2,130		437		1,693
Total finite-lived intangible assets	$	1,357,834	$	112,651	$	1,245,183	$	122,214	$	1,122,969

During the three and six months ended June 30, 2015, the Company wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of the intangible assets from the J.P. Turner acquisition. These impairments were all recorded in goodwill and intangible assets impairment charge in the statements of operations. See Note 2 for more information.

The components of intangible assets as of December 31, 2014 are as follows:

($ in thousands)	Weighted-Average Life Remaining (in years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Finite-lived intangible assets:
Financial advisor relationships	13	$	1,019,353	$	52,070	$	967,283
Sponsor relationships	9	113,000		4,186		108,814
Trade names	29	65,192		1,638		63,554
Investment management agreements	12	47,390		1,966		45,424
Customer relationships	11	20,686		1,473		19,213
Internally developed software and technologies	7	22,510		779		21,731
Intellectual property	9	10,642		849		9,793
Non-competition agreements	2	9,648		5,136		4,512
Distribution networks	40	3,210		9		3,201
Total finite-lived intangible assets		$	1,311,631	$	68,106	$	1,243,525

The intangible assets for each reportable segment as of December 31, 2014 are as follows:

($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Independent Retail Advice	$	1,104,979	$	60,113	$	1,044,866
Wholesale Distribution	121,380		4,617		116,763
Investment Management	48,770		2,009		46,761
Investment Banking and Capital Markets	23,730		313		23,417
Investment Research	10,642		849		9,793
Corporate and Other	2,130		205		1,925
Total finite-lived intangible assets	$	1,311,631	$	68,106	$	1,243,525

The following tables present amortization expense for the three and six months ended June 30, 2015 and June 30, 2014 and the estimated future amortization for intangible assets:

Amortization Expense	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Amortization expense	$	26,905	$	13,765	$	54,108	$	15,532

Estimated Future Amortization Expense ($ in thousands)	Twelve Months Ended June 30,
2016	$	92,320
2017	90,473
2018	90,317
2019	89,901
2020	88,281
Thereafter	671,677
Total	$	1,122,969

Goodwill and Intangible Assets — Fair Value. Goodwill and intangible assets established upon each acquisition were fair valued and were classified as Level 3 in the non-recurring fair value hierarchy. As a result of the Company’s determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in the Company’s expectations of future growth and profitability for certain reporting units and the decline in the Company’s market capitalization the Company determined that it would be appropriate to test its goodwill and intangible assets for impairment as of June 30, 2015 for all of its significant reporting units. Upon completion of the impairment tests, the goodwill from both of the acquisitions of StratCap and J.P. Turner was determined to be impaired as of June 30, 2015.

As a result of the impairment tests the Company wrote-off $30.6 million and $13.6 million during the three and six months ended June 30, 2015, which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

During the three and six months ended June 30, 2015, the Company also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the financial advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. These impairments were all recorded in goodwill and intangible assets impairment charge in the statements of operations. For more information see Note 2.

Based on the impairment testing, the carrying value of the remaining goodwill and intangible assets as of June 30, 2015 closely approximates fair value. Unobservable inputs considered in determining fair value at the acquisition date include discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies. The decision to impair the StratCap intangible assets reflects, in part, the more transparent market price of the intangible assets in connection with the valuation of the StratCap reporting unit in the strategic transactions entered into on August 6, 2015. See Note 21 for more information.

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Fair Value Disclosures (Fair Value Hierarchy) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	$ 2,701	$ 11,473
Trading securities	10,777	10,242
Derivative contracts	39,647	81,032
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	2,701	11,473
Trading securities	10,777	10,242
Deferred compensation plan investments:	86,654	83,456
Total	170,007	188,295
Other liabilities:	60,635
Total		210,573
Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	2,701	11,473
Trading securities	9,797	9,762
Deferred compensation plan investments:	83,568	80,754
Total	160,133	184,962
Other liabilities:	0	0
Total		387
Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	0	0
Trading securities	510	10
Deferred compensation plan investments:	3,086	2,702
Total	4,961	2,712
Other liabilities:	0	0
Total		0
Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	0	0
Trading securities	470	470
Deferred compensation plan investments:	0	0
Total	4,913	621
Other liabilities:	60,635	107,278
Total		210,186
Money market fund | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents - money market funds	64,067	82,973
Deferred compensation plan investments:	4,470	6,246
Money market fund | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents - money market funds	64,067	82,973
Deferred compensation plan investments:	4,470	6,246
Money market fund | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents - money market funds	0	0
Deferred compensation plan investments:	0	0
Money market fund | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents - money market funds	0	0
Deferred compensation plan investments:	0	0
U.S. treasury securities | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	332	222
U.S. treasury securities | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	130	222
U.S. treasury securities | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	202	0
U.S. treasury securities | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	0	0
Mutual funds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	2,701	11,473
Trading securities	9,592	9,457
Deferred compensation plan investments:	3,086	2,702
Mutual funds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	2,701	11,473
Trading securities	9,592	9,457
Deferred compensation plan investments:	0	0
Mutual funds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	0	0
Trading securities	0	0
Deferred compensation plan investments:	3,086	2,702
Mutual funds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	0	0
Trading securities	0	0
Deferred compensation plan investments:	0	0
Equity securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale securities	2,701	11,473	$ 445	$ 8,528
Equity securities | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	163	262
Other liabilities:	43	161
Equity securities | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	163	262
Other liabilities:	43	161
Equity securities | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
Other liabilities:	0	0
Equity securities | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
Other liabilities:	0	0
Certificate of deposits | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	429
Total	107,683
Certificate of deposits | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Total	331
Certificate of deposits | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	429
Total	202
Certificate of deposits | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Total	107,150
U.S. government bonds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	11	12
U.S. government bonds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2	2
U.S. government bonds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	9	10
U.S. government bonds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
State and municipal bonds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	1
Other liabilities:	0	107,278
State and municipal bonds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	1
Other liabilities:	0
State and municipal bonds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Other liabilities:	0
State and municipal bonds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Other liabilities:	0
Corporate bonds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	72
Corporate bonds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Corporate bonds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	72
Corporate bonds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Other | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	509	511
Other | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	39	41
Other | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
Other | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	470	470
International global funds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	19,126	17,722
International global funds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	19,126	17,722
International global funds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
International global funds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
U.S. equity funds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	49,035	46,999
U.S. equity funds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	49,035	46,999
U.S. equity funds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
U.S. equity funds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
U.S. fixed-income funds | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	10,937	9,787
U.S. fixed-income funds | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	10,937	9,787
U.S. fixed-income funds | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
U.S. fixed-income funds | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments:	0	0
Prepaid expenses and other assets - oil and gas interests | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepaid expenses and other assets - oil and gas interests	5,808	151
Prepaid expenses and other assets - oil and gas interests | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepaid expenses and other assets - oil and gas interests	0	0
Prepaid expenses and other assets - oil and gas interests | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepaid expenses and other assets - oil and gas interests	1,365	0
Prepaid expenses and other assets - oil and gas interests | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Prepaid expenses and other assets - oil and gas interests	4,443	151
Derivative contracts | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative contracts	46,515	102,908
Derivative contracts | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative contracts	0	0
Derivative contracts | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative contracts	0	0
Derivative contracts | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative contracts	46,515	102,908
Mutual funds and unit investment trusts | Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	158	4
Mutual funds and unit investment trusts | Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	158	4
Mutual funds and unit investment trusts | Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	0	0
Mutual funds and unit investment trusts | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other liabilities:	0	0
Long-term Debt | Derivative contracts | Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative contracts	$ 6,900	$ 21,900

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Available-for-Sale Securities

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Available-for-Sale Securities

Available-for-Sale Securities

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2015:

			For the Six Months Ended June 30, 2015
($ in thousands)	Fair value at December 31, 2014		Purchases(1)		Sales			Realized Gains/ (Losses)(2)			Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2015		Cost
Mutual funds	$	11,473	$	26	$	(8,780	)	$	(369	)	$	351	$	2,701	$	2,561

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Unrealized losses for the three months ended June 30, 2015 were $0.1 million. There were no realized gains or losses for the three months ended June 30, 2015.

The following table presents information about the Company’s available-for-sale securities for the six months ended June 30, 2014:

			For the Six Months Ended June 30, 2014
($ in thousands)	Fair value at December 31, 2013		Purchases(1)		Sales			Realized Gains/ (Losses)(2)		Unrealized Gains/ (Losses)(2)		Fair value at June 30, 2014		Cost
Mutual funds	$	8,528	$	215	$	(9,013	)	$	171	$	544	$	445	$	410

_____________________

(1) Purchases under dividend reinvestment programs.

(2) Realized gains and unrealized losses for the three months ended June 30, 2014 were $0.3 million and $0.2 million, respectively.

The Company’s basis on which the cost of security sold or the amount reclassified out of accumulated other comprehensive income into earnings is determined using specific identification. The Company did not recognize any other-than-temporary impairments for the three and six months ended June 30, 2015 and June 30, 2014.

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Accounts and Notes Receivable

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Accounts and Notes Receivable

Accounts and Notes Receivable

Accounts Receivable. The Company’s accounts receivable consist of the following as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Fees and commissions receivable	$	95,101	$	86,193
Reimbursable expenses receivable	19,549		20,922
Receivable from customers	14,315		17,224
Investment banking fees receivable	1,749		12,430
Receivables from brokers, dealers, clearing organizations and other	41,218		33,865
Due from RCAP Holdings and other related parties	3,391		2,255
Total	$	175,323	$	172,889

Notes Receivable. The Company loans money to certain of its financial advisors under two types of promissory note agreements, which bear interest at various rates and have various maturities. Such agreements include forgivable notes and payback notes. Management establishes an allowance that it believes is sufficient to cover any probable losses. When establishing this allowance, management considers a number of factors, including its ability to collect from the financial advisor and the Company’s historical experience in collecting on such transactions.

The forgivable notes contain provisions for forgiveness of principal and accrued interest if the financial advisor meets specified revenue production levels or length of service. The forgiveness determination is made at specified intervals that coincide with scheduled principal and interest payments. The Company amortizes the principal balance of the forgivable notes along with accrued interest as commission expense ratably over the contractual term of the notes. In the event the financial advisor does not meet the specified production level, the scheduled principal and interest are due. The Company intends to hold the notes for the term of the agreements.

Payback notes are promissory notes extended primarily to financial advisors with the obligation to pay back the principal and accrued interest.

The Company monitors its outstanding notes on a monthly basis to identify potential credit loss and impairment. Notes receivable are considered impaired when, based upon current information and events, management estimates it is probable that the Company will be unable to collect amounts due according to the terms of the promissory note. Criteria used to determine if impairment exists include, but are not limited to: historical payment and collection experience of the individual loan, historical production levels, the probability of default on the loan, status of the representative’s affiliation agreement with the Company, and, or any regulatory or legal action related to the representative.

The Company’s notes receivable, net of allowance, for the six months ended June 30, 2015 and the year ended December 31, 2014, were as follows:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	23,075		$	45,914		$	68,989		$	11,104		$	2,166		$	13,270
Originated/acquired loans	2,400			12,137			14,537			16,747			52,200			68,947
Collections	(917		)	(5,182		)	(6,099		)	(1,672		)	(8,805		)	(10,477		)
Forgiveness	(4,124		)	—			(4,124		)	(8,329		)	298			(8,031		)
Accretion	1,791			117			1,908			5,368			402			5,770
Allowance	430			(602		)	(172		)	(143		)	(347		)	(490		)
Ending balance	$	22,655		$	52,384		$	75,039		$	23,075		$	45,914		$	68,989

The following table presents the Company’s allowance for uncollectible amounts due from financial advisors for the six months ended June 30, 2015 and the year ended December 31, 2014:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	511		$	403		$	914		$	368		$	56		$	424
Provision for bad debt	(379		)	840			461			327			735			1,062
Charge off - net of recoveries	(51		)	(238		)	(289		)	(184		)	(388		)	(572		)
Total change	(430		)	602			172			143			347			490
Ending balance	$	81		$	1,005		$	1,086		$	511		$	403		$	914

The following table presents the Company’s change in the allowance for uncollectable amounts due from financial advisors for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Change in allowance for uncollectable amounts - notes receivable	$	192	$	315	$	172	$	315

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Long-Term Debt

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

The following table presents the Company’s long-term borrowings as of June 30, 2015 and December 31, 2014 and their contractual interest rates, net of unamortized original issue discounts:

	June 30, 2015			December 31, 2014
($ in thousands)	Balance		Interest Rate	Balance		Interest Rate
First lien term facility	$	534,756	7.50%	$	555,700	6.50%
Second lien term facility	148,024		11.50%	147,903		10.50%
Convertible notes(1)	70,859		5.00%	83,508		5.00%
First lien revolving facility	23,000		7.50%	—		—%
Promissory note	15,300		8.00%	15,300		8.00%
Capital lease obligations	10,346		5.94%	—		—%
Subordinated borrowings	2,000		8.25%	2,000		8.25%
Total borrowings	804,285			804,411
Less: Current portion of borrowings	62,405			43,891
Total long-term debt, net of current portion	$	741,880		$	760,520

_____________________

(1) The Company’s convertible notes balance includes the fair value of the compound derivative of $6.9 million and $21.9 million as of June 30, 2015 and December 31, 2014, respectively.

First Lien Term Facility, Second Lien Term Facility and First Lien Revolving Facility. Concurrently with the closing of the Cetera acquisition on April 29, 2014, the Company entered into the Bank Facilities: a $575.0 million senior secured first lien term loan facility, a $150.0 million senior secured second lien term loan facility and a $25.0 million senior secured first lien revolving credit facility. During the six months ended June 30, 2015, the Company repaid $21.6 million of the senior secured first lien term loan facility as regularly scheduled principal repayments.

The proceeds of the term facilities were used by the Company to pay a portion of the consideration paid in the Cetera acquisition, to refinance certain existing indebtedness and to pay related fees and expenses. The proceeds of the senior secured first lien revolving credit facility are expected to be used for permitted capital expenditures, to provide for the ongoing working capital requirements and for general corporate purposes.

On June 30, 2015, the Company entered into Amendment No. 1 to the First Lien Credit Agreement and Amendment No. 1 to the Second Lien Credit Agreement (together, the “Amendments”). The Amendments increased the interest rates for the Bank Facilities by 1.00% per annum and decreased the restrictions pertaining to the required Secured Leverage Ratios (Secured Net Debt to Consolidated EBITDA, as defined and more particularly set forth in the Bank Facilities) until December 31, 2016. In connection with the Amendments, the Company paid $12.3 million of consent and arrangement fees to the lenders which are included in deferred financing fees in the consolidated statements of financial condition.

As of June 30, 2015, $23.0 million was outstanding under the senior secured first lien revolving credit facility (not including a backstop letter of credit). This senior secured first lien revolving credit facility has an interest rate equal to LIBOR plus 6.50% per annum, which may be reduced to 6.25% if the First Lien Leverage Ratio (as defined in the Bank Facilities) is less than or equal to 1.25 to 1.00. LIBOR can be no less than 1.00% per annum. On July 21, 2014, the Company utilized $1.1 million from the senior secured first lien revolving credit facility in the form of a backstop letter of credit. As of December 31, 2014, no amounts were outstanding under the senior secured first lien revolving facility (other than the backstop letter of credit).

Convertible Notes. On April 29, 2014, the Company also issued $120.0 million aggregate principal amount of convertible notes in a private placement. The convertible notes are senior unsecured obligations that are effectively subordinate to the Bank Facilities, which are secured facilities, and any refinancing thereof. The convertible notes are convertible in $1,000 increments at the option of the holder, to the extent permitted by the Bank Facilities, into shares of Class A common stock, at a conversion price equal to $21.18 per share of Class A common stock, which conversion price is subject to anti-dilution adjustments upon the occurrence of certain events and transactions.

Promissory Note. On December 4, 2014, the Company issued a $15.3 milliontwo-year promissory note bearing interest at a rate of 8% per annum pursuant to the terms of a litigation settlement. The principal amount of the promissory note is due in three payments of $7.7 million, $3.8 million and $3.8 million on March 31, 2016, September 30, 2016 and March 31, 2017, respectively. See Note 16 for more information.

Capital Lease Obligations. As of June 30, 2015, the Company had assets recorded in property and equipment in the consolidated statements of financial condition leased under the terms of capital leases.

Subordinated Borrowings. The Company assumed $2.0 million in subordinated debt when it acquired ICH. The subordinated borrowings are covered by an agreement with ICH’s clearing firm approved by the Financial Industry Regulatory Authority (“FINRA”) on March 8, 2013 and are thus available for computing net capital under the SEC’s uniform net capital rule. To the extent that such borrowings are required for ICH’s continued compliance with minimum net capital requirements, they may not be repaid. The subordinated borrowings mature on March 8, 2016.

The following table presents the contractual maturities of long-term debt, net of the current portion as of June 30, 2015:

($ in thousands)	Twelve Months Ended June 30,
2017	$	97,820
2018	88,591
2019	332,475
2020	1,585
Thereafter	270,000
Long-term portion of the original issue discount	(55,459		)
Fair value of embedded derivative	6,868
Total long-term debt, net of current portion	$	741,880

The following table presents the scheduled contractual maturities of the current portion of long-term debt as of June 30, 2015:

($ in thousands)	Three Months Ended,
September 30, 2015	$	14,678
December 31, 2015	14,968
March 31, 2016	24,627
June 30, 2016	14,968
Short-term portion of the original issue discount	(6,836		)
Total current portion of long-term debt	$	62,405

The tables above present the maturities for the borrowings that are repayable prior to their maturity at the option of the Company at their contractual maturity dates.

On January 9, 2015, the Company issued a letter of credit in the amount of $0.1 million on behalf of First Allied. The letter of credit was issued to the lessor on a lease entered into by First Allied.

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Fair Value Disclosures (Debt instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	$ 1,064,020	$ 1,040,523
Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	25,646	15,300
Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	937,404	1,006,605
Convertible Debt | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	63,991	61,632
Convertible Debt | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Convertible Debt | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Convertible Debt | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	60,220	78,005
First lien term facility | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	534,756	555,700
First lien term facility | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
First lien term facility | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
First lien term facility | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	529,408	530,491
Second lien term facility | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	148,024	147,903
Second lien term facility | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Second lien term facility | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Second lien term facility | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	146,544	142,500
Promissory note (legal settlement) | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	15,300	15,300
Promissory note (legal settlement) | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Promissory note (legal settlement) | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	15,300	15,300
Promissory note (legal settlement) | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Subordinated borrowings | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	2,000	2,000
Subordinated borrowings | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Subordinated borrowings | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Subordinated borrowings | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	2,000	2,000
First lien revolving facility | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	23,000
First lien revolving facility | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0
First lien revolving facility | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0
First lien revolving facility | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	23,000
Capital lease obligations | Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Capital lease obligations, fair value	10,346
Capital lease obligations | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Capital lease obligations, fair value	0
Capital lease obligations | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Capital lease obligations, fair value	10,346
Capital lease obligations | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Capital lease obligations, fair value	0
Series B Preferred Stock | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	152,458	146,700
Series B Preferred Stock | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Series B Preferred Stock | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Series B Preferred Stock | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	93,066	117,367
Series C Preferred Stock | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	114,145	111,288
Series C Preferred Stock | Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Series C Preferred Stock | Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	0	0
Series C Preferred Stock | Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt, fair value	$ 83,166	$ 136,242

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Equity-Based Compensation (Narrative) (Details) - Class of Stock [Domain] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation	$ (100,000)	$ 200,000	$ 300,000	$ 2,500,000
Nonvested shares (in shares)	3,085,108		3,085,108		2,276,713
Restricted Stock | RCAP Holdings, LLC
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation	$ 7,200,000	5,800,000	$ 11,200,000	6,500,000
Nonvested shares (in shares)	277,633		277,633		368,625
FA RSU Plan | Restricted Stock Units (RSUs) | RCAP Holdings, LLC
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of common stock (in shares)			69,427
Nonvested shares (in shares)	155,785		155,785
Internal Commissions, Payroll and Benefits | FA RSU Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation	$ (400,000)	700,000	$ 100,000	1,500,000
Internal Commissions, Payroll and Benefits | 2014 Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation		$ 0		$ 0

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Accounts and Notes Receivable (Accounts Receivable) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Receivables [Abstract]
Fees and commissions receivable	$ 95,101	$ 86,193
Reimbursable expenses receivable	19,549	20,922
Receivable from customers	14,315	17,224
Investment banking fees receivable	1,749	12,430
Receivables from brokers, dealers, clearing organizations and other	41,218	33,865
Due from RCAP Holdings and other related parties	3,391	2,255
Total	$ 175,323	$ 172,889

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Fair Value Disclosures (Net Asset Value Per Share) (Details) - Fair Value, Measurements, Recurring - Level 3	Jun. 30, 2015 USD ($)
Prepaid expenses and other assets - oil and gas interests
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Prepaid expenses and other assets - oil and gas interests	$ 113,000
Unfunded Commitments	7,000
Real Estate Funds
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items]
Prepaid expenses and other assets - oil and gas interests	357,000
Unfunded Commitments	$ 0

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Commitments and Contingencies (Service Contract) (Details) $ in Thousands	Jun. 30, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2016	$ 10,204
2017	8,574
2018	6,567
2019	6,567
2020	6,567
Thereafter	694
Total	$ 39,173

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Accounts and Notes Receivable (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

The Company’s notes receivable, net of allowance, for the six months ended June 30, 2015 and the year ended December 31, 2014, were as follows:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	23,075		$	45,914		$	68,989		$	11,104		$	2,166		$	13,270
Originated/acquired loans	2,400			12,137			14,537			16,747			52,200			68,947
Collections	(917		)	(5,182		)	(6,099		)	(1,672		)	(8,805		)	(10,477		)
Forgiveness	(4,124		)	—			(4,124		)	(8,329		)	298			(8,031		)
Accretion	1,791			117			1,908			5,368			402			5,770
Allowance	430			(602		)	(172		)	(143		)	(347		)	(490		)
Ending balance	$	22,655		$	52,384		$	75,039		$	23,075		$	45,914		$	68,989

The Company’s accounts receivable consist of the following as of June 30, 2015 and December 31, 2014:

($ in thousands)	June 30, 2015		December 31, 2014
Fees and commissions receivable	$	95,101	$	86,193
Reimbursable expenses receivable	19,549		20,922
Receivable from customers	14,315		17,224
Investment banking fees receivable	1,749		12,430
Receivables from brokers, dealers, clearing organizations and other	41,218		33,865
Due from RCAP Holdings and other related parties	3,391		2,255
Total	$	175,323	$	172,889

Allowance for Credit Losses on Financing Receivables

The following table presents the Company’s allowance for uncollectible amounts due from financial advisors for the six months ended June 30, 2015 and the year ended December 31, 2014:

	June 30, 2015									December 31, 2014
($ in thousands)	Forgivable loans			Payback loans			Total			Forgivable loans			Payback loans			Total
Beginning balance	$	511		$	403		$	914		$	368		$	56		$	424
Provision for bad debt	(379		)	840			461			327			735			1,062
Charge off - net of recoveries	(51		)	(238		)	(289		)	(184		)	(388		)	(572		)
Total change	(430		)	602			172			143			347			490
Ending balance	$	81		$	1,005		$	1,086		$	511		$	403		$	914

The following table presents the Company’s change in the allowance for uncollectable amounts due from financial advisors for the three and six months ended June 30, 2015 and June 30, 2014:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2015		2014		2015		2014
Change in allowance for uncollectable amounts - notes receivable	$	192	$	315	$	172	$	315

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Recent Acquisitions (First Allied) (Details) - USD ($)				5 Months Ended	6 Months Ended
	Jun. 30, 2014	Jan. 15, 2014	Sep. 25, 2013	Jun. 30, 2014	Jun. 30, 2015
Business Acquisition [Line Items]
Issuance of common stock				$ 1,203,000
First Allied acquisition
Business Acquisition [Line Items]
Issuance of common stock	$ 239,200,000
Expected tax deductible amount					$ 7,100,000
First Allied acquisition | Common Class A
Business Acquisition [Line Items]
Acquisition share price (in dollars per share)	$ 21.23			$ 21.23
RCAP Holdings, LLC | First Allied acquisition
Business Acquisition [Line Items]
Cost of acquired entities throughout period		$ 177,000,000	$ 177,000,000
Total consideration	$ 271,200,000	145,000,000	145,000,000
Convertible notes, face value			94,200,000
Debt acquired			7,000,000
Debt carrying amount acquired			37,500,000
Equity interests value assigned		$ 207,500,000
Total fair value excluding goodwill and intangible assets			137,200,000
RCAP Holdings, LLC | First Allied acquisition | Common Class A
Business Acquisition [Line Items]
Business acquisition, equity interest issued (in shares)	11,264,929				11,264,929
Secured Debt | RCAP Holdings, LLC | First Allied acquisition
Business Acquisition [Line Items]
Convertible notes, face value			26,000,000
First Allied notes | Secured Debt | RCAP Holdings, LLC | First Allied acquisition
Business Acquisition [Line Items]
Convertible notes, face value	$ 32,000,000		$ 32,000,000	$ 32,000,000

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents the net deferred tax liability primarily related to intangible assets acquired as a result of the recent acquisitions:

($ in thousands)	June 30, 2015		December 31, 2014
Net deferred tax liability	$	220,639	$	266,202

The following table presents the Company’s effective tax rate:

	Six Months Ended June 30,
	2015		2014
Effective tax rate	42.03	%	18.48	%

For the six months ended June 30, 2015, state income taxes had a significant impact on the difference between our statutory U.S. federal income tax rate and our effective tax rate. In addition the difference between our U.S. statutory rate and our effective rate is the result of permanent items such as travel and entertainment and transaction costs as well as discrete items such as changes in the fair value of our contingent consideration and derivative liabilities.

The Company believes that, as of June 30, 2015, it had no material uncertain tax positions. Interest and penalties relating to unrecognized tax expenses are recognized in income tax expense, when applicable. There was no liability for interest or penalties accrued as of June 30, 2015.

The Company files tax returns in the U.S. federal and various state jurisdictions. The Company will be open to audit under the statute of limitations by the Internal Revenue Service for its 2011 to 2014 tax years. The Company or its subsidiaries’ state income tax returns will be open to audit under the statute of limitations for 2010 to 2014.

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Related Party Transactions

6 Months Ended

Jun. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

A significant portion of the Company’s revenues relate to fees earned from transactions with or on behalf of AR Capital, LLC and its affiliates or related parties as well as certain transactions that are co-sponsored by an affiliate or related party of ARC Capital LLC, including investment banking fees, services fees, transfer agent fees and wholesale broker-dealer commissions and concessions, in the ordinary course of its trade or business. During the three and six months ended June 30, 2015, the Company earned revenues of $102.1 million and $184.3 million, respectively, from related party transactions. During the three and six months ended June 30, 2014, the Company earned revenues of $285.4 million and $471.5 million, respectively, from related party transactions. As of June 30, 2015 and December 31, 2014, the receivables for such revenues were $19.7 million and $31.6 million, respectively.

Pursuant to a shared services agreement, beginning on January 1, 2013, AR Capital, LLC charges the Company for the services of information technology, human resources, accounting services and office services and facilities. For these services, the Company incurred expenses of $2.1 million and $3.2 million for the three and six months ended June 30, 2015, respectively, and $1.4 million and $2.8 million for the three and six months ended June 30, 2014, respectively. As of June 30, 2015 and December 31, 2014, the payables for such expenses were $0.6 million and $0.5 million, respectively.

The Company incurs expenses directly for certain services. The Company either allocates certain of these expenses to its operating subsidiaries or causes RCAP Holdings to pay its portion based on RCAP Holdings’ ownership interest. Expenses that are directly attributable to a specific subsidiary are fully allocated to the appropriate subsidiary. Expenses that are not specific to a subsidiary are allocated on a reasonable basis, as determined by the Company its sole discretion. Interest expense on the Company’s long-term debt, share-based compensation related to the Company’s board of directors, expenses related to the 2013 Manager Multi-Year Outperformance Agreement entered into between the Company and RCS Capital Management (the “OPP”), changes in the fair value of the Company’s derivative contracts and acquisition-related expenses are not allocated to the subsidiaries. The intercompany receivables and payables for the allocated expenses are eliminated in consolidation and are settled quarterly. During the three and six months ended June 30, 2015, the Company’s operating subsidiaries incurred $3.6 million and $7.3 million, respectively, related to such expenses. During the three and six months ended June 30, 2014, the Company’s operating subsidiaries incurred $4.9 million and $6.8 million, respectively, related to such expenses. There were no expenses payable by RCAP Holdings as of June 30, 2015 and December 31, 2014.

As of June 30, 2015 and December 31, 2014, the Members owned 39.64% and 43.34%, respectively, of Class A common stock outstanding primarily obtained as a result of the 2014 Restructuring Transactions and the contribution of First Allied. From time to time, RCAP Holdings, or the Members, may purchase shares of Class A common stock in the secondary market.

In March 2014, Realty Capital Securities leased a lodging facility in Newport, Rhode Island from a related party, ARC HTNEWRI001, LLC. Realty Capital Securities also entered into an agreement with another affiliate, Crestline Hotels and Resorts, LLC (“Crestline”) to manage and operate the lodging facility. Crestline remits the lodging facility’s revenue to the Company, net of the fees from Crestline. During the three and six months ended June 30, 2015, the Company incurred $0.03 million and $0.1 million, respectively, in rent expense in connection with this lease. During the three and six months ended June 30, 2014, the Company incurred $0.1 million in rent expense in connection with this lease. The Company did not earn any revenue from the Crestline agreement during the three and six months ended June 30, 2015 and 2014.

Services Agreement (formerly the Management Agreement).The Company pays RCS Capital Management a quarterly fee in an amount equal to 10% of its aggregate pre-tax U.S. GAAP net income, not including the quarterly fee, calculated and payable quarterly in arrears, subject to its aggregate U.S. GAAP net income being positive for the current and three preceding calendar quarters. The Company also pays RCS Capital Management an incentive fee, calculated and payable quarterly in arrears, that is based on the Company’s earnings and stock price. In connection with the agreement with Apollo and Luxor on August 6, 2015 to purchase a newly issued series of preferred shares, the Company and RCS Capital Management, LLC have agreed that the Services Agreement will be terminated within five business days of the date of the agreement. See Note 21 for more information.

The Company did not incur a quarterly fee for the three and six months ended June 30, 2015. The quarterly fee earned by RCS Capital Management for the three and six months ended June 30, 2014 was $0.2 million and $2.0 million, respectively, which is the expense recorded by the Company. The Company did not have a payable related to the quarterly fee as of June 30, 2015 or December 31, 2014.

The Company did not incur an incentive fee for the three and six months ended June 30, 2015 or June 30, 2014. The Company did not have a payable related to the incentive fee as of June 30, 2015 or December 31, 2014.

Amended and Restated 2013 Manager Multi-Year Outperformance Agreement.The Company entered into the OPP, as of June 10, 2013, with the Original Operating Subsidiaries and RCS Capital Management. The OPP provided a performance-based bonus award to RCS Capital Management intended to further align RCS Capital Management’s interests with those of the Company and its stockholders.

In April 2014, the OPP was amended to provide that the first valuation date would be April 28, 2014 and that any LTIP Units in RCS Holdings not earned as of such date were forfeited without payment of any compensation. The Company’s board of directors determined that as of such valuation date, 310,947 LTIP Units in RCS Holdings were earned (the “Earned LTIP Units”) and 1,014,053 LTIP Units in RCS Holdings were forfeited. Following this amendment, no additional LTIP Units could be earned under the OPP.

On December 31, 2014, the Company, RCS Capital Management, and RCS Holdings, entered into another amendment to the OPP, which provided for the early vesting of the Earned LTIP Units such that all the Earned LTIP Units became fully vested on December 31, 2014.

For the three and six months ended and June 30, 2014, the Company recognized $2.6 million and $9.7 million, respectively, for the award under the OPP. Prior to December 31, 2014, the award under the OPP was included in the consolidated statements of operations, with an offset recorded to non-controlling interest.

Mutual Funds. As of June 30, 2015 and December 31, 2014, the Company had investments in mutual funds of $10.1 million and $19.0 million, respectively, that are advised by related parties. During the three and six months ended June 30, 2015, the Company recognized losses of $0.4 million and $0.5 million, respectively, relating to these investments which are recorded in other revenue in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recognized gains of $0.7 million and $1.4 million, respectively, relating to these investments which are recorded in other revenue in the consolidated statements of operations.

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Related Party Transactions (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Apr. 28, 2014
Related Party Transaction [Line Items]
Expenses allocated to the operating subsidiaries from the company	$ 3,600,000	$ 4,900,000	$ 7,300,000	$ 6,800,000
Due from related parties, current	1,847,000		$ 1,847,000		$ 2,479,000
Management fee			10.00%
Quarterly fee (related party)	0	248,000	$ 0	2,030,000
Outperformance bonus	0	2,559,000	0	9,709,000
LTIP Units
Related Party Transaction [Line Items]
LTIP Units earned (in shares)						310,947
LTIP Units forfeited (in shares)						1,014,053
RCAP Holdings, LLC
Related Party Transaction [Line Items]
Due from related parties, current	0		0		$ 0
RCAP Holdings, LLC | Common Class A
Related Party Transaction [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners					43.34%
American Realty Capital
Related Party Transaction [Line Items]
Revenue from related parties	102,100,000	285,400,000	184,300,000	471,500,000
Related product receivables	19,700,000		19,700,000		$ 31,600,000
Parent
Related Party Transaction [Line Items]
Allocated operating expenses		1,400,000		2,800,000
Crestline Hotels and Resorts, LLC
Related Party Transaction [Line Items]
Rent expense	30,000	100,000	100,000	100,000
ARC Advisory Services, LLC
Related Party Transaction [Line Items]
Allocated operating expenses	2,100,000		3,200,000
Allocated operating expenses payable	$ 600,000		$ 600,000		500,000
RCAP Holdings, LLC | RCAP Holdings, LLC | Economic rights | Common Class A
Related Party Transaction [Line Items]
Noncontrolling interest, ownership percentage by noncontrolling owners	39.64%		39.64%
Affiliated Entity
Related Party Transaction [Line Items]
Investments in mutual funds	$ 10,100,000		$ 10,100,000		$ 19,000,000
Realized investment gains (losses)	$ (400,000)	$ 700,000	$ (500,000)	$ 1,400,000

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Recent Acquisitions (J.P. Turner) (Details) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Mar. 04, 2015	Jun. 12, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Goodwill			$ 530,949		$ 519,361
Business Acquisition, Pro Forma Information [Abstract]
Total revenues				$ 1,577,900
JP Turner & Company, LLC
Business Acquisition [Line Items]
Contingent and deferred consideration		$ 7,600
Minimum performance hurdle		8.00%
Performance Annual Dollar Cap		$ 2,500
Earn-out contingency based on acquiree's future revenues		50.00%
Deferred consideration payout percentage	50.00%
Indemnification asset	$ 1,800
Gain on acquisition			1,200
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents		$ 10,171
Receivables		712
Property and equipment		232
Prepaid expenses		892
Notes receivable		1,660
Other assets		2,171
Accounts payable		(1,710)
Accrued expenses		(8,543)
Other liabilities		(656)
Total fair value excluding goodwill and intangible assets		4,929
Goodwill		13,579
Intangible assets		14,200
Total consideration		32,708
Expected tax deductible amount			$ 4,000
Business Combination, Consideration Transferred [Abstract]
Contractual purchase price	6,400	12,786
Stock issued by the Company		4,860
Contingent consideration		4,500
Deferred consideration	4,800	10,562
Total consideration	$ 9,100	$ 32,708
Business Acquisition, Pro Forma Information [Abstract]
Total revenues				29,600
Loss before taxes				$ 2,000
JP Turner & Company, LLC | Common Class A
Business Acquisition [Line Items]
Business acquisition, equity interest issued (in shares)	245,813	239,362	239,362
Contingent and deferred consideration		$ 3,200
Earn-out contingency based on acquiree's future revenues		50.00%
Deferred consideration payout percentage	50.00%
Equity interests value assigned	$ 2,700
Acquisition share price (in dollars per share)	$ 11.106

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method

The following tables present the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands, except share and per share data)	2015			2014			2015			2014
Basic earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Net loss attributable to Class A common stockholders	(72,148		)	(150,245		)	(92,904		)	(147,287		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Net loss per share	$	(0.97	)	$	(3.49	)	$	(1.28	)	$	(4.21	)
Diluted earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	(26,235		)	(23,213		)	(45,582		)	(23,213		)
Net loss attributable to Class A common stockholders	(98,383		)	(173,458		)	(138,486		)	(170,500		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	14,599,367			5,265,251			14,599,367			2,647,170
Total weighted average diluted shares outstanding	88,605,947			48,295,269			87,175,560			37,622,806
Net loss per share	$	(1.11	)	$	(3.59	)	$	(1.59	)	$	(4.53	)

_____________________

(1) Included in net loss attributable to Class A common stockholders for the three and six months ended June 30, 2014 is a deemed dividend of $194.8 million. This deemed dividend represents the difference between redemption value of the convertible preferred stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative and was recognized in the period in which the preferred stock was issued. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

(2) Weighted average shares outstanding for the three and six months ended June 30, 2015 were calculated assuming that the 2,042,022 shares of Class A common stock issued on February 23, 2015 pursuant to the submission for conversion of Series A preferred stock on December 12, 2014 were outstanding for the entire period.

(3) Weighted average shares outstanding for the three and six months ended June 30, 2014 were calculated assuming that the 11,264,929 shares of Class A common stock issued on June 30, 2014 in connection with the closing of the First Allied acquisition were outstanding for the entire period.

(4) The following items were excluded from the calculation of earnings per share as the effect was antidilutive:

• Shares issuable under the terms of Luxor’s put option, incremental restricted shares, shares issuable under the second and third tranches of the FA RSU plan, shares of Class A common stock contingently issuable as consideration for certain recent acquisitions and outstanding warrants issued under the 2014 Stock Purchase Program for the three and six months ended June 30, 2015.

• LTIP Units, incremental restricted shares, shares issuable under the terms of the Series A Preferred Stock, shares issuable under the FA RSU plan and shares of Class A common stock contingently issuable as consideration for certain recent acquisitions for the three and six months ended June 30, 2014. Additionally, shares issuable under the terms of the Series C Preferred Stock were excluded for the three and six months ended June 30, 2014 as the Series C Preferred Stock was not issued until December 19, 2014.

Schedule of Earnings Per Share, Diluted, by Common Class, Including Two Class Method

The following tables present the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands, except share and per share data)	2015			2014			2015			2014
Basic earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Net loss attributable to Class A common stockholders	(72,148		)	(150,245		)	(92,904		)	(147,287		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Net loss per share	$	(0.97	)	$	(3.49	)	$	(1.28	)	$	(4.21	)
Diluted earnings per share
Net loss attributable to Class A common stockholders(1)	$	(72,148	)	$	(149,861	)	$	(92,904	)	$	(146,576	)
Allocation of earnings to participating securities	—			(384		)	—			(711		)
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	(26,235		)	(23,213		)	(45,582		)	(23,213		)
Net loss attributable to Class A common stockholders	(98,383		)	(173,458		)	(138,486		)	(170,500		)
Total weighted average basic shares outstanding(2)(3)	74,006,580			43,030,018			72,576,193			34,975,636
Add: Series C Preferred Stock, convertible notes, Luxor’s put option(4)	14,599,367			5,265,251			14,599,367			2,647,170
Total weighted average diluted shares outstanding	88,605,947			48,295,269			87,175,560			37,622,806
Net loss per share	$	(1.11	)	$	(3.59	)	$	(1.59	)	$	(4.53	)

_____________________

(1) Included in net loss attributable to Class A common stockholders for the three and six months ended June 30, 2014 is a deemed dividend of $194.8 million. This deemed dividend represents the difference between redemption value of the convertible preferred stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative and was recognized in the period in which the preferred stock was issued. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

(2) Weighted average shares outstanding for the three and six months ended June 30, 2015 were calculated assuming that the 2,042,022 shares of Class A common stock issued on February 23, 2015 pursuant to the submission for conversion of Series A preferred stock on December 12, 2014 were outstanding for the entire period.

(3) Weighted average shares outstanding for the three and six months ended June 30, 2014 were calculated assuming that the 11,264,929 shares of Class A common stock issued on June 30, 2014 in connection with the closing of the First Allied acquisition were outstanding for the entire period.

(4) The following items were excluded from the calculation of earnings per share as the effect was antidilutive:

• Shares issuable under the terms of Luxor’s put option, incremental restricted shares, shares issuable under the second and third tranches of the FA RSU plan, shares of Class A common stock contingently issuable as consideration for certain recent acquisitions and outstanding warrants issued under the 2014 Stock Purchase Program for the three and six months ended June 30, 2015.

• LTIP Units, incremental restricted shares, shares issuable under the terms of the Series A Preferred Stock, shares issuable under the FA RSU plan and shares of Class A common stock contingently issuable as consideration for certain recent acquisitions for the three and six months ended June 30, 2014. Additionally, shares issuable under the terms of the Series C Preferred Stock were excluded for the three and six months ended June 30, 2014 as the Series C Preferred Stock was not issued until December 19, 2014.

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ (66,149)	$ 48,472	$ (81,530)	$ 60,621
Other comprehensive income, net of tax:
Available-for-sale securities	(52)	92	200	508
Total other comprehensive income, net of tax	(52)	92	200	508
Total comprehensive income (loss)	(66,201)	48,564	(81,330)	61,129
Less: net comprehensive income (loss) attributable to non-controlling interests	(1,002)	256	(2,228)	9,575
Less: preferred dividends and deemed dividends	7,001	198,077	13,602	198,077
Net comprehensive income (loss) attributable to stockholders	$ (72,200)	$ (149,769)	$ (92,704)	$ (146,523)

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Income Taxes (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Net deferred tax liability	$ 220,639		$ 266,202
Effective tax rate	42.03%	18.48%

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Recent Acquisitions

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Recent Acquisitions

Recent Acquisitions

During the year ended December 31, 2014, the Company completed the acquisitions of Cetera Financial Holdings, Inc. (“Cetera”), Summit Financial Services Group, Inc. (“Summit”), J.P. Turner & Company, LLC and J.P. Turner & Company Capital Management, LLC (together, “J.P. Turner”), Hatteras Funds Group (“Hatteras”), First Allied Holdings Inc. (“First Allied”), Investors Capital Holdings, Ltd. (“ICH”), Validus/Strategic Capital Partners, LLC (“StratCap”), Trupoly, LLC (“Trupoly”) and a controlling interest in Docupace Technologies, LLC (“Docupace”) and during the six months ended June 30, 2015, the Company completed the acquisitions of VSR Group, Inc. (“VSR”) and Girard Securities, Inc. (“Girard”) (collectively, the “recent acquisitions”). The recent acquisitions were made in order for the Company to diversify its revenue stream. The resulting goodwill associated with the recent acquisitions is made up of synergies related to higher strategic partner revenues as well as expense synergies associated with back office management, technology efficiencies, savings from the renegotiation of the Company’s clearing contracts, the elimination of duplicative public company expenses and other factors. All of the recent acquisitions have been accounted for using the purchase method of accounting except for the First Allied acquisition.

The First Allied acquisition, which closed on June 30, 2014, was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements as of and for the three and six months ended June 30, 2014 have been prepared to reflect the financial position and results of operations of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings.

Following the announcement concerning certain accounting errors by VEREIT, Inc., formally known as American Realty Capital Properties, Inc. (“ARCP”), the market price of the Company’s Class A Common stock as well as its market capitalization declined.

During the second quarter of 2015, as a result of our determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in our expectations of future growth and profitability for certain reporting units and the sustained decline in our market capitalization, the Company determined that it would be appropriate to test its goodwill and intangible assets for impairment as of June 30, 2015 for its most significant reporting units. For purposes of goodwill and intangible asset testing the Company’s reporting units are based on how management reviews its operating results at one level below our reportable segment. Therefore individual impairment testing was performed for each of Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap.

The Company tested goodwill for impairment at the reporting unit level using income and market-based approaches with the exception of the goodwill related to J.P. Turner and StratCap, where a net asset approach was used.

The Company also tested its intangible assets for impairment using the income approach with the exception of the intangible assets related to J.P. Turner and StratCap, where a net asset approach was used.

The Company believes the income and market-based methods selected are the most reliable indicators of the fair values of the reporting units within the independent retail, wholesale distribution and investment management businesses acquired except for J.P. Turner and StratCap where a net-asset methodology is a more reliable indicator, given that during the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015, at which time any advisors who have not been invited to join Summit will be terminated, and therefore, the operations of J.P. Turner are effectively considered to be in a run-off mode. As a result, J.P. Turner’s advisor relationships were not expected to generate future cash flows sufficient enough to justify the intangible assets, despite the fact that certain financial advisors will be retained.

Because Step 1 of the quantitative goodwill impairment test indicated that the carrying value of each of StratCap, which is part of the Wholesale Distribution segment, and J.P. Turner, which is part of the Independent Retail Advice segment, exceeded its estimated fair value, a second phase of the quantitative goodwill impairment test (“Step 2”) was performed specific to StratCap and J.P. Turner. Under Step 2, the fair value of all of the assets and liabilities of StratCap and J.P. Turner were estimated, including tangible assets, advisor relationships and sponsor relationships for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill was then compared to the carrying value of the goodwill to determine the amount of the impairment. Assumptions used in measuring the fair value of these assets and liabilities included the discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins, control premiums as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies.

As a result of the Step 2 analysis, during the three and six months ended June 30, 2015, the Company wrote-off $30.6 million and $13.6 million in goodwill which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.

The impairments were the result of these acquired companies experiencing slower growth in 2015 and the Company’s expectations of future growth and profitability are now lower than previous estimates and in the case of J.P. Turner, the decisions with respect to terminating the ongoing business operations, except for a limited number of financial advisors.

In addition, as a result of our assessment of the fair value of the StratCap and J.P. Turner intangible assets, during the three and six months ended June 30, 2015, the Company also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. The decision to impair the StratCap intangible assets reflects, in part, the more transparent market price of the intangible assets in connection with the valuation of the StratCap reporting unit in the strategic transactions entered into on August 6, 2015. See Note 21 for more information. These impairments were all recorded in goodwill and intangible assets impairment in the statements of operations. For more information on the Company’s goodwill and intangible assets see Note 7.

The Company’s results of operations only include the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard beginning on the date of each respective acquisition.

Details of each recent acquisition are as follows:

Cetera Financial Holdings. On April 29, 2014, the Company completed the acquisition of Cetera. The purchase price was $1.15 billion (subject to certain adjustments), and the Company paid $1.13 billion in cash after adjustments. Cetera is a financial services holding company formed in 2010 that provides independent broker-dealer services and investment advisory services through four distinct independent broker-dealer platforms: Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC and Cetera Financial Specialists LLC. The acquisition, including related costs, was financed with a $575.0 million senior secured first lien term loan, a $150.0 million senior secured second lien term loan (together, with a $25.0 million senior secured first lien revolving credit facility, the “Bank Facilities”), the issuance of $120.0 million (aggregate principal amount) of 5.0% Senior Convertible Notes due 2021 (the “convertible notes”) and $270.0 million (aggregate stated liquidation value) of 7.0% Series A Convertible Preferred Stock, $0.001 par value per share (“Series A Preferred Stock”), as described in further detail in Notes 8 and 10, and cash on hand.

The assignment of the total consideration for the Cetera acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	241,641
Cash and segregated securities	7,999
Trading securities	741
Receivables	49,443
Property and equipment	17,735
Prepaid expenses	15,083
Deferred compensation plan investments	76,010
Notes receivable	38,805
Other assets	37,096
Accounts payable	(94,074		)
Accrued expenses	(32,421		)
Other liabilities	(112,977		)
Deferred compensation plan accrued liabilities	(75,294		)
Total fair value excluding goodwill and intangible assets	169,787
Goodwill	292,165
Intangible assets	944,542
Deferred tax liability	(273,752		)
Total consideration	$	1,132,742

As of June 30, 2015, approximately $7.9 million of the goodwill from Cetera’s historic pre-acquisition goodwill is deductible for income tax purposes.

The total Cetera consideration consisted of the following:

($ in thousands)
Contractual purchase price	$	1,150,000
Purchase price adjustments	17,258
Total consideration	$	1,132,742

The Company’s supplemental pro forma results of operations for Cetera for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	600.5
Loss before taxes	(37.0		)

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets in connection with the closing of the acquisition on April 29, 2014. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $15.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

Summit Financial Services Group. On June 11, 2014, the Company completed the acquisition of Summit. Summit was a publicly traded company that had financial advisors providing securities brokerage and investment retail advice in the United States with its common stock listed on the OTC Markets Group, Inc. under the symbol “SFNS.”

Pursuant to the merger agreement, each share of Summit common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive $1.588 in merger consideration, which consisted of cash and Class A common stock. Summit shareholders who received merger consideration were also entitled to receive the pro rata portion of certain tax refunds generated after the closing of the merger as a result of certain net operating losses incurred by Summit in 2014 and which were not acquired by the Company pursuant to the merger agreement. The aggregate amount of these refunds was $2.5 million, or approximately $0.06 per share of Summit common stock, which was paid (without interest) on June 29, 2015.

As consideration in the merger, the Company issued 498,884 shares of Class A common stock pursuant to a registration statement on Form S-4 and paid consideration in cash of $38.6 million, which does not include cash distributed by Summit to its shareholders. The aggregate cash consideration paid was $46.7 million which is inclusive of the cash distributed by Summit.

The assignment of the total consideration for the Summit acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	13,353
Receivables	3,147
Property and equipment	362
Prepaid expenses	1,531
Notes receivable	1,092
Other assets	2,366
Accounts payable	(9,973		)
Accrued expenses	(3,100		)
Total fair value excluding goodwill and intangible assets	8,778
Goodwill	23,891
Intangible assets	31,240
Deferred tax liability	(6,751		)
Total consideration	$	57,158

As of June 30, 2015, approximately $0.1 million of the goodwill from Summit’s historic pre-acquisition goodwill is deductible for income tax purposes.

The total Summit consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	46,727
Stock issued by the Company	10,431
Total consideration	$	57,158

The Company’s supplemental pro forma results of operations for Summit for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	48.8
Loss before taxes	(0.7		)

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $4.7 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

J.P. Turner & Company. On June 12, 2014, the Company completed the acquisition of J.P. Turner for cash in the aggregate amount of $12.8 million, subject to post-closing adjustments, plus 239,362 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). J.P. Turner is a retail broker-dealer and investment adviser which also offers a variety of other services, including investment banking.

Pursuant to the purchase agreement, on June 12, 2015 (the one-year anniversary of the closing date of the J.P. Turner acquisition), the Company agreed to an additional aggregate cash payment of $7.6 million to the sellers and issue to the sellers an aggregate number of shares of Class A common stock equal to (i) $3.2 million divided by (ii) the average of the per share closing price of Class A common stock for the five trading days ending on the trading day immediately prior to June 12, 2015.

Pursuant to the purchase agreement, the Company also agreed to make earn-out payments to the sellers with respect to each of the fiscal years ending December 31, 2014, December 31, 2015 and December 31, 2016, based on the achievement of certain agreed-upon revenue or earnings before interest, taxes and depreciation and amortization (“EBITDA”) performance targets in those years (subject to an annual combined minimum performance hurdle of 8.0% and an annual dollar cap of $2.5 million). Each earn-out payment, if any, was to be made by the Company 50% in cash and 50% in the form of Class A common stock (unless the sellers elect to receive a greater amount of Class A common stock). On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $4.5 million and $10.6 million, respectively.

On March 4, 2015, the Company amended its agreement with the sellers of J.P. Turner to settle the remaining consideration. As part of the amendment, the Company paid aggregate consideration of $9.1 million, which consisted of $6.4 million in cash and 245,813 shares of Class A common stock, or an aggregate value of $2.7 million based on $11.106 per share, the average of the per share closing price of Class A common stock for the five trading days prior to March 4, 2015. In addition, the Company recorded new deferred consideration of $4.8 million payable six months from the settlement date which will be paid 50% in cash and 50% in shares of Class A common stock. The Company also settled its receivable in respect of an indemnification claim of $1.8 million as part of the amendment which resulted in a gain of $1.2 million for the six months ended June 30, 2015 which was reflected as a reduction in other expenses in the statement of operations.

During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate broker-dealer subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who have not been invited to join Summit will be terminated.

During the three and six months ended June 30, 2015, the Company wrote-off $13.6 million in goodwill and $12.6 million in intangible assets, which represented all of the goodwill and remaining intangible assets related to the acquisition of J.P. Turner.

The assignment of the total consideration for the J.P. Turner acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	10,171
Receivables	712
Property and equipment	232
Prepaid expenses	892
Notes receivable	1,660
Other assets	2,171
Accounts payable	(1,710		)
Accrued expenses	(8,543		)
Other liabilities	(656		)
Total fair value excluding goodwill and intangible assets	4,929
Goodwill	13,579
Intangible assets	14,200
Total consideration	$	32,708

As of June 30, 2015, approximately $4.0 million of the goodwill from the J.P. Turner acquisition is deductible for income tax purposes.

The total J.P. Turner consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	12,786
Stock issued by the Company	4,860
Contingent consideration	4,500
Deferred consideration	10,562
Total consideration	$	32,708

The Company’s supplemental pro forma results of operations with J.P. Turner for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.6
Income before taxes	2.0

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.

Hatteras Funds Group. On June 30, 2014, the Company completed the purchase of substantially all the assets related to the business and operations of Hatteras and assumed certain liabilities of Hatteras. Hatteras was a private company, and it is the sponsor of, investment advisor to and distributor for the Hatteras Funds complex, a family of alternative investment funds registered as investment companies with the SEC.

Pursuant to the purchase agreement, the aggregate initial purchase price was $40.0 million (subject to certain adjustments for net working capital, net assets under management and consolidated pre-tax net income) payable as follows: (A) 75.0% was paid on the closing date of the Hatteras acquisition; (B) 7.5% was payable on June 30, 2015, the first anniversary of the closing date of the Hatteras acquisition. The payment due on June 30, 2015 has not been made and is accruing interest in accordance with the purchase agreement. (C) 7.5% will be payable on June 30, 2016, the second anniversary of the closing date of the Hatteras acquisition; and (D) 10.0% will be payable on June 30, 2017, the third anniversary of the closing date of the Hatteras acquisition. Additionally, pursuant to the purchase agreement, the Company will pay additional consideration calculated and payable based on the consolidated pre-tax net operating income generated by the businesses of Hatteras in the fiscal years ending December 31, 2016 and December 31, 2018. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $24.9 million and $9.4 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $30.5 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statement of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.

The assignment of the total consideration for the Hatteras acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	805
Receivables	7,747
Property and equipment	192
Prepaid expenses	326
Other assets	120
Accounts payable	(3,721		)
Accrued expenses	(5,277		)
Total fair value excluding goodwill and intangible assets	192
Goodwill	15,348
Intangible assets	48,770
Total consideration	$	64,310

As of June 30, 2015, the goodwill from the Hatteras acquisition is not deductible for income tax purposes.

The total Hatteras consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	30,000
Contingent consideration	24,880
Deferred consideration	9,430
Total consideration	$	64,310

The contingent and deferred consideration in the table above represents the fair value at the date of acquisition which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	12,300	$	84,740

The Company’s supplemental pro forma results of operations for Hatteras for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	29.7
Income before taxes	3.1

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

First Allied Holdings. On June 30, 2014, RCAP Holdings contributed all its equity interests in First Allied to the Company. As consideration for the contribution, 11,264,929 shares of Class A common stock were issued to RCAP Holdings in a private placement offering exempt from registration under the Securities Act. First Allied is an independent broker-dealer with financial advisors in branch offices across the United States. First Allied was acquired by RCAP Holdings through a merger transaction on September 25, 2013 for an effective cost of $177.0 million, consisting of $145.0 million in merger consideration (including exchangeable notes issued by RCAP Holdings in the initial aggregate principal amount of $26.0 million (the “First Allied notes”)) paid to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger.

The number of shares issued as consideration was determined based on a value of $207.5 million for the equity of First Allied and the one-day volume weighted average price (“VWAP”) of Class A common stock on January 15, 2014, the day prior to the announcement of the signing of the Cetera merger agreement. The value of $207.5 million for the equity of First Allied established by the Company’s board of directors in January 2014 was determined as the effective cost to RCAP Holdings for First Allied of $177.0 million (consisting of $145.0 million in merger consideration (including First Allied notes) paid by RCAP Holdings to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger), minus indebtedness (net of cash) of First Allied of $7.0 million plus a carrying cost of $37.5 million. The value of the shares of Class A common stock issued by the Company as consideration in the First Allied acquisition was $239.2 million, based on the closing price for Class A common stock of $21.23 per share on June 30, 2014, the date of the consummation of the contribution. Accordingly, the effective cost to the Company for the First Allied acquisition was $271.2 million (including $32.0 million of First Allied indebtedness), which is $94.2 million more than the effective cost to RCAP Holdings for First Allied on September 25, 2013 under the terms of the original First Allied merger agreement. As of September 25, 2013, the date of common control, the Company recorded $137.2 million of net assets related to First Allied as a result of the contribution.

In addition, following consummation of the contribution, $32.0 million of First Allied indebtedness was outstanding. On July 28, 2014, the First Allied outstanding indebtedness was repaid by the Company as required by the terms of the Bank Facilities, which the Company entered into in connection with the acquisition of Cetera on April 29, 2014.

The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings immediately following the acquisition of First Allied by RCAP Holdings on September 25, 2013. See Note 3 for additional detail.

As of June 30, 2015, approximately $7.1 million of the goodwill from First Allied’s historic pre-acquisition goodwill was deductible for income tax purposes.

Investors Capital Holdings. On July 11, 2014, the Company completed the acquisition of ICH. ICH was a publicly traded company with its common stock listed on the NYSE MKT under the symbol “ICH”. ICH provides broker-dealer services to investors in support of trading and investment in securities, alternative investments and variable life insurance as well as investment advisory and asset management services.

The aggregate consideration was $52.5 million. The Company issued 2,027,966 shares of Class A common stock (2,029,261 shares issued on July 11, 2014, of which 1,295 shares were subsequently canceled on October 6, 2014 as an adjustment to the final consideration) pursuant to a registration statement on Form S-4 and paid aggregate consideration in cash of $8.4 million.

The assignment of the total consideration for the ICH acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	6,881
Short term investments and securities owned	499
Receivables	7,500
Property and equipment	275
Notes receivable	1,875
Deferred compensation	2,250
Deferred tax asset	2,613
Other assets	1,055
Accounts payable and accrued expenses	(1,945		)
Other liabilities	(7,593		)
Notes payable and long-term debt	(2,918		)
Non-qualified deferred compensation	(2,611		)
Total fair value excluding goodwill, intangible assets, and deferred tax liability	7,881
Goodwill	26,680
Intangible assets	30,100
Deferred tax liability	(12,152		)
Total consideration	$	52,509

As of June 30, 2015, the goodwill from the ICH acquisition is not deductible for income tax purposes.

The total ICH consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	8,412
Stock issued by the Company	44,097
Total consideration	$	52,509

The Company’s supplemental pro forma results of operations for ICH for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	46.4
Loss before taxes	(1.5		)

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.

Validus/Strategic Capital Partners. On August 29, 2014, the Company completed the acquisition of StratCap. StratCap, through its subsidiaries, is a wholesale distributor of alternative investment programs. StratCap’s subsidiaries distribute a platform of offerings consisting of two non-traded REITs, a non-traded business development company (“BDC”) and two public, non-traded limited liability companies. StratCap holds minority interests in four of the investment programs that it distributes, and is a joint venture partner along with the sponsor to the fifth investment program.

The aggregate consideration paid on the date of the acquisition was $77.5 million. The Company issued 464,317 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and $67.5 million paid in cash. Additionally, the Company paid $10.0 million in cash on December 1, 2014 and will pay earn-out payments in 2016 and 2017 based on the achievement of certain agreed-upon EBITDA performance targets. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $75.0 million and $10.0 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $24.4 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statements of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.

During the quarter-end close as of and for the three and six months ended June 30, 2015, the Company became aware that previous calculations of the contingent consideration were incorrectly calculated.  This miscalculation had an impact on the Goodwill and the Contingent consideration recorded in the Statement of Financial Condition and presented in the tables below as of the acquisition date.  The tables have been updated to reflect an increase in goodwill of $7.7 million with a corresponding increase in the contingent consideration. As a result of this error, the results of operations as of and for the three and nine months ended September 31, 2014, as of and for the year ended December 31, 2014 and as of and for the three months ended March 31, 2015 were misstated by an immaterial amount.  The current period three and six months ended June 30, 2015 consolidated statement of operations includes an out of period adjustment of $2.8 million and $3.0 million, respectfully, as an increase to Other expenses.  The Company has evaluated this error and determined that it was not material to the previously issued audited and unaudited financial statements as well as the current unaudited financial statements.

As mentioned above, during the three and six months ended June 30, 2015, the Company completed an analysis of all of its goodwill and intangible assets as of June 30, 2015, and determined that all of the goodwill associated with StratCap was impaired and the intangible assets were also impaired. During the three and six months ended June 30, 2015, the Company therefore wrote-off $30.6 million in goodwill and $100.0 million in intangible assets related to the acquisition of StratCap.

In addition, as discussed in “Management’s Discussion and Analysis - Results of Operations”, the Company recorded a substantial decrease in the fair value of the contingent consideration liability reflecting a decline in expected future revenues from StratCap.

The assignment of the total consideration for the StratCap acquisition as of the date of the acquisition was as follows:

($ in thousands)
Cash and cash equivalents	$	4,522
Short term investments and securities owned	2,239
Receivables	4,858
Property and equipment	96
Prepaid expenses and other assets	629
Accounts payable	(706		)
Accrued expenses	(201		)
Other liabilities	(908		)
Total fair value excluding goodwill and intangible assets	10,529
Goodwill	30,571
Intangible assets	121,380
Total consideration	$	162,480

As of June 30, 2015, the goodwill from the StratCap acquisition is not deductible for income tax purposes.

The total StratCap consideration consisted of the following:

($ in thousands)
Cash paid by the Company	$	67,510
Stock issued by the Company	10,000
Contingent consideration	75,000
Deferred consideration	9,970
Total consideration	$	162,480

The contingent and deferred consideration in the table above represents the fair value at the acquisition date which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:

($ in thousands)	Low Case		High Case
Estimated contingent consideration amount	$	30,110	$	36,790

The Company’s supplemental pro forma results of operations for StratCap for the six months ended June 30, 2014 are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	113.2
Loss before taxes	(0.2		)

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.1 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

Trupoly. On July 21, 2014, the Company announced that it is establishing a crowdfunding investment platform which it has rebranded under the name, “DirectVest.” In connection with this initiative, the Company acquired substantially all the assets of New York based Trupoly, a white-label investor relationship management portal, which will be integrated into the Company’s new crowdfunding investment platform. The assets of Trupoly primarily consist of intangible assets related to existing technology and a non-compete agreement.

On the closing date of the Trupoly acquisition, the Company issued shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and paid the remaining consideration in cash. The Company paid 50.0% of the deferred consideration in shares of Class A common stock and 50.0% in cash on July 17, 2015.

As of June 30, 2015, approximately $0.7 million of the goodwill from the Trupoly acquisition is deductible for income tax purposes.

Docupace. On November 21, 2014, the Company completed the acquisition of a controlling financial interest in Docupace, a provider of integrated, electronic processing technologies and systems for financial institutions and wealth management firms.

The aggregate consideration on the date of the acquisition was $35.1 million, excluding $0.3 million of accrued interest on the deferred payment. On the closing date, the Company paid cash consideration of $18.8 million to the seller of Docupace and acquired a 51.0% ownership interest.

In addition, the Company made a $4.0 million capital contribution on the date of the acquisition, which increased its total ownership interest to 53.525%. Subject to certain covenants in the operating agreement, and if needed to achieve the strategic goals of Docupace’s business as determined by the board of managers, the Company may be required by Docupace’s management to make additional capital contributions of $28.0 million and $20.0 million in cash during the years ended December 31, 2015 and 2016, respectively.

The post-closing consideration under the agreement between the Company and Docupace is to be adjusted, if necessary, in accordance with Docupace’s 2014 revenues. The Company has determined that the appropriate clawback amount is $2.4 million, which if implemented would reduce the Company’s ownership in Docupace to 52.043%. The Company expects to pay net post-closing consideration equal to $16.3 million, excluding the accrued interest, in cash, Class A common stock or a combination thereof, contingent upon resolution of certain matters under discussion.

The total preliminary fair value of Docupace on the date of the acquisition prior to the capital contribution was $68.8 million. The fair value of the non-controlling interest as of the date of the acquisition prior to the capital contribution was $33.7 million. The fair value of the non-controlling interest was determined based on the fair value of the controlling interest held by the Company grossed-up to 100% value in order to derive a per-share price to be applied to the non-controlling shares. This method assumes that the non-controlling shareholder will participate equally with the controlling shareholder in the economic benefits of the post combination entity.

On July 10, 2015, the Company made a $1.5 million capital contribution to Docupace, which increased its total ownership interest to 52.981%.

Based on the preliminary purchase price allocations, approximately $23.6 million of the goodwill from the Docupace acquisition is deductible for income tax purposes as of June 30, 2015.

VSR. On March 11, 2015, the Company completed the acquisition of VSR.

The aggregate consideration was $68.1 million (subject to certain adjustments detailed below). At the closing, the Company issued 2,436,429 shares of Class A common stock in a private placement with an aggregate value of $26.8 million, based on $10.989 per share, the VWAP of Class A common stock for the ten trading days ending March 9, 2015, and paid aggregate consideration in cash of $26.8 million. In addition, the Company will pay deferred consideration of $9.4 million, which will increase or decrease by the amount by which total revenue, adjusted EBITDA, group capital, net capital, indebtedness and certain transaction expenses, each as measured at the closing date (the “Adjustment Amounts”) is greater than or less than their respective target amounts. The deferred consideration will be paid upon resolution of a final settlement statement specifying the Adjustment Amounts initially delivered by the Company to the sellers no later than 120 days after the closing date, at which time the sellers will have 30 days to review the Adjustment Amounts. The sellers have a right to contest the Adjustment Amounts within 30 days of the initial receipt of Adjustment Amounts. Subsequently, the buyer and the seller have 30 days to resolve any of the seller’s objections. Also, the Company will pay deferred consideration, at fair value, of $5.1 million (payable 50% in cash and 50% in shares of Class A common stock) no later than 20 days after the second anniversary of the closing date, subject to reduction for amounts paid by the Company in connection with certain claims for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. Additionally, pursuant to the purchase agreement, the Company has established a preliminary $1.7 million indemnification asset since legal expenses incurred by the Company for matters indemnified under the purchase agreement are required to be reimbursed by the sellers. The indemnification asset is included in other assets on the Company’s statement of financial condition.

As of June 30, 2015, the goodwill from the VSR acquisition is not deductible for income tax purposes.

Girard. On March 18, 2015 (the “Girard Closing Date”), the Company completed the acquisition of Girard.

The aggregate consideration on acquisition day was $27.8 million (subject to certain adjustments below), which is inclusive of the preliminary estimate of amounts payable on the first, second and third anniversaries of the Girard Closing Date pursuant to an advisor recruiting plan (the “Girard Recruiting and Retention Payments”) and the deferred consideration. The Company issued 549,529 shares of Class A common stock in a private placement with an aggregate value of $6.3 million, based on $11.549 per share, the VWAP of Class A common stock for the ten trading days ending March 17, 2015 (such price, the “Girard Closing Date VWAP”), and paid aggregate consideration in cash of $14.5 million. In addition, pursuant to the purchase agreement, within 20 days after the 15th-month anniversary of the Girard Closing Date, the Company will issue the number of shares of Class A common stock equivalent to $1.6 million divided by the Girard Closing Day VWAP, subject to reduction for amounts paid by the Company in connection with certain losses for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. The preliminary fair value as of the Girard Closing Date of the Girard Recruiting and Retention Payment is $5.4 million and it is payable 60% in cash and 40% in shares of Class A common stock. The Girard Recruiting and Retention payments will increase or decrease based on the amount of gross dealer concessions generated by Girard’s financial advisors for the twelve-month period prior to each anniversary.

On July 24, 2015, the Company paid a $0.3 million post-closing adjustment pursuant to the purchase agreement. The Company issued 6,563 shares of Class A common stock in a private placement with an aggregate value of $0.08 million, based on the Girard Closing Date VWAP, and paid aggregate consideration in cash of $0.2 million.

As of June 30, 2015, the goodwill from the Girard acquisition is not deductible for income tax purposes.

Consolidated pro forma results. The Company’s supplemental pro forma results of operations, which include the Original Operating Subsidiaries, Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap for the six months ended June 30, 2014, are as follows:

	Six Months Ended June 30,
($ in millions)	2014
Total revenues	$	1,577.9
Income before taxes	34.9
Provision for income taxes(1)	14.0
Net income	20.9
Less: income attributable to non-controlling interest	9.1
Less: preferred dividends and deemed dividend(2)	204.3
Net loss attributable to Class A common stockholders	$	(192.5	)

________________________

(1) Reflects pro forma adjustment to record the income tax provision based on the assumed 40% tax rate.

(2) Includes deemed dividend of $194.8 million representing the difference between redemption value of the Series A Preferred Stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.

The consolidated supplemental pro forma results of operations do not include pro forma results for Trupoly, Docupace, VSR and Girard as they would have had an immaterial impact. The consolidated supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets and interest expense. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $32.0 million based on the assumption that these transactions were completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree or the Company to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.

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Recent Acquisitions (Consolidated Pro Forma Results) (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Business Combinations [Abstract]
Total revenues			$ 1,577.9
Loss before taxes			34.9
Provision for income taxes (40%)			14.0
Net loss			20.9
Less: income attributable to non-controlling interest			9.1
Less: preferred dividends and deemed dividend			204.3
Net loss attributable to Class A common stockholders			(192.5)
Pro forma statutory tax rate		40.00%
Deemed dividend	$ 194.8		194.8
Proforma acquisition related costs			$ 32.0

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Preferred Stock (Details)						2 Months Ended	3 Months Ended	6 Months Ended		8 Months Ended
	Jul. 13, 2015 USD ($)	Feb. 23, 2015 shares	Dec. 19, 2014 USD ($) $ / shares shares	Jun. 10, 2014 shares	Apr. 29, 2014 USD ($) $ / shares shares	Jun. 30, 2014 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 19, 2014 USD ($) $ / shares shares	Mar. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 12, 2014 USD ($)
Class of Stock [Line Items]
Shares issued upon conversion (in shares) | shares					14,657,980
Threshold consecutive trading days			30 days
Conversion price ratio					2.5
Debt term					2 years
Deemed dividend							$ 194,800,000		$ 194,800,000
Maximum percent of convertible preferred stock as a percent of shares outstanding preceding a trading day								9.90%
Written notice period for ownership limitation								65 days
Conversion Price One
Class of Stock [Line Items]
Conversion price (in dollars per share) | $ / shares					$ 20.26
Conversion Price Two
Class of Stock [Line Items]
Conversion price (in dollars per share) | $ / shares					$ 50.65
Threshold shares traded			$ 10,000,000							$ 10,000,000
Stock trigger price (in dollars per share) | $ / shares			$ 50.66
Convertible Preferred Stock
Class of Stock [Line Items]
Dividend rate cash					7.00%
Dividend rate			8.00%		8.00%					8.00%
Preferred stock, cash dividends						$ 3,300,000
Common Class A
Class of Stock [Line Items]
Discount on shares					2.00%
Threshold consecutive trading days					10 days
Conversion price (in dollars per share) | $ / shares					$ 21.18
Issuance of common stock (in shares) | shares				19,000,000
Minimum percent of convertible preferred stock as a percent of shares outstanding preceding a trading day								4.90%
Preferred stock ownership percentage minimum								24.90%
Series A Preferred Stock
Class of Stock [Line Items]
Shares issued upon conversion (in shares) | shares			5,405,601							5,405,601
Deemed dividend					$ 194,800,000
Conversion of shares (in shares) | shares			11,584,427							3,073,553
Issuance of common stock (in shares) | shares		2,042,022
Dividends payable			$ 3,000,000							$ 3,000,000
Series B Preferred Stock
Class of Stock [Line Items]
Dividend rate cash			11.00%							11.00%
Dividend rate			12.50%							12.50%
Issuance of common stock (in shares) | shares			5,800,000
Dividends payable								$ 4,200,000			$ 4,056,000	$ 797,000	$ 1,700,000
Liquidation preference (in dollars per share) | $ / shares			$ 25							$ 25
Aggregate liquidation minimum amount								35,000,000
Series C Preferred Stock
Class of Stock [Line Items]
Dividend rate cash			7.00%							7.00%
Conversion price (in dollars per share) | $ / shares			$ 13							$ 13
Shares issued (in shares) | shares			4,400,000
Dividends payable								2,000,000			$ 1,954,000	$ 385,000	$ 1,288,000
Liquidation preference (in dollars per share) | $ / shares			$ 25							$ 25
Aggregate liquidation minimum amount								$ 35,000,000
Subsequent Event | Series B Preferred Stock
Class of Stock [Line Items]
Increase in liquidation preference	$ 4,700,000
Subsequent Event | Series C Preferred Stock
Class of Stock [Line Items]
Increase in liquidation preference	$ 2,300,000

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Goodwill and Intangible Assets (Goodwill by Segment) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Goodwill [Line Items]
Goodwill	$ 530,949	$ 519,361
Independent Retail Advice
Goodwill [Line Items]
Goodwill	468,771	434,398
Wholesale distribution
Goodwill [Line Items]
Goodwill	0	22,871
Investment Management
Goodwill [Line Items]
Goodwill	15,348	15,348
Investment Banking and Capital Markets
Goodwill [Line Items]
Goodwill	46,075	45,989
Corporate and other
Goodwill [Line Items]
Goodwill	$ 755	$ 755

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Employee Benefits

6 Months Ended

Jun. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Employee Benefits

Employee Benefits

401(k) and Health and Welfare Benefit Plan for Employees. The Company has several 401(k) and health and welfare defined contribution plans which have various eligibility standards, vesting requirements, and guidelines for matching. For the three and six months ended June 30, 2015, the Company recorded expenses of $4.8 million and $9.5 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014, the Company recorded expenses of $2.0 million and $3.8 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits.

Deferred Compensation Plans for Financial Advisors. The Company offers a plan to certain of its financial advisors which allows them to defer a portion of their compensation which earns a rate of return based on the financial advisor’s selection of investments. In order to economically hedge this exposure, the Company invests in money market, international, U.S. equity and U.S. fixed income funds. The liability to the financial advisor is recorded in deferred compensation plan accrued liabilities and the related economic hedges are recorded in deferred compensation plan investments in the consolidated statement of financial condition.

For the three and six months ended June 30, 2015 the Company recorded expenses of $0.1 million and $1.8 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014 the Company recorded expenses of $2.7 million, respectively, in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2015, the Company recorded revenue of $0.1 million and $1.8 million from the economic hedges in the consolidated statements of operations in other revenue. For the three and six months ended June 30, 2014, the Company recorded revenue of $2.7 million from the economic hedges in the consolidated statements of operations in other revenue.

Additionally, the Company offers a deferred compensation plan in connection with a Rabbi Trust Agreement to certain of its financial advisors. For this plan, the Company recorded expenses of $0.2 million and $0.5 million for the three and six months, respectively, ended June 30, 2015 in the consolidated statements of operations in internal commissions, payroll and benefits. For the three and six months ended June 30, 2014, the Company did not record any revenues or expenses related to this deferred compensation plan because the plan relates to one of the recent acquisitions and, therefore, those results are not included in the Company’s results prior to the acquisition date.

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Goodwill and Intangible Assets (Future Amortization) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
2016	$ 92,320
2017	90,473
2018	90,317
2019	89,901
2020	88,281
Thereafter	671,677
Finite-lived intangible assets, net	$ 1,122,969	$ 1,243,525

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Label	Element	Value
Series B Preferred Stock [Member]
Temporary Equity, Liquidation Preference	us-gaap_TemporaryEquityLiquidationPreference	$ 145,000
Temporary Equity, Liquidation Preference	us-gaap_TemporaryEquityLiquidationPreference	152,458
Series C Preferred Stock [Member]
Temporary Equity, Liquidation Preference	us-gaap_TemporaryEquityLiquidationPreference	110,000
Temporary Equity, Liquidation Preference	us-gaap_TemporaryEquityLiquidationPreference	$ 114,145

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Preferred Stock (Tables)

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Schedule of Liquidation Preference on Preferred Stock

The following table presents the liquidation preferences for the Series B Preferred Stock and the Series C Preferred Stock:

($ in thousands)	Series B Preferred Stock		Series C Preferred Stock
Beginning liquidation preference, December 12, 2014	$	145,000	$	110,000
Allocation of Series A Preferred Stock accrued and unpaid dividends	1,700		1,288
2014 4th quarter dividend accrual	797		385
2014 4th quarter dividend paid-in-kind increase	352		239
2015 1st quarter dividend accrual	4,056		1,954
2015 1st quarter dividend paid-in-kind increase	553		279
Ending liquidation preference, June 30, 2015	$	152,458	$	114,145

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Equity-Based Compensation

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity-Based Compensation

Equity-Based Compensation

RCAP Equity Plan

The RCAP Equity Plan provides for the grant of stock options, stock appreciation rights, restricted shares of Class A common stock, restricted stock units, dividend equivalent rights and other stock-based awards (which may include grants of shares of Class A common stock in payment of the amounts due under a plan or arrangement sponsored or maintained by the Company or an affiliate) to individuals who are, as of the date of grant, non-executive directors, officers and other employees of the Company or its affiliates, to certain advisors or consultants of the Company or any of its affiliates who are providing services to the Company or the affiliate, or, subject the Services Agreement (as defined below) remaining in effect on the date of grant, to RCS Capital Management, an entity under common control with RCAP Holdings, and individuals who are, as of the date of grant, employees, officers or directors of RCS Capital Management or one of its affiliates.

The following table details the restricted shares activity during the six months ended June 30, 2015:

	Shares of Restricted Common Stock	Weighted-Average Issue Price		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	2,276,713	$	34.86	$	79,375	3.09
Granted	1,652,082	11.61		19,181		4.24
Less: vested	428,095	31.01		13,275		N/A
Less: forfeited	183,036	38.49		7,045		N/A
Less: retired	232,556	32.13		7,472		N/A
Nonvested, June 30, 2015	3,085,108	$	22.93	$	70,764	3.16

During the three and six months ended June 30, 2015, the Company recorded $7.2 million and $11.2 million, respectively, of stock-based compensation expenses pursuant to the RCAP Equity Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $5.8 million and $6.5 million, respectively, of stock-based compensation expenses pursuant to the RCAP Equity Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations.

Restricted Stock Awards Granted by an Entity that was Previously a Related Party

An entity that was previously a related party also granted restricted stock awards (of the related party’s stock) to certain employees of the Company for services provided by Company employees on behalf of such related party. During the three and six months ended June 30, 2015, the Company recorded contra-expenses of $0.1 million and expenses of $0.3 million, respectively, of stock-based compensation derived from these grants which are included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $0.2 million and $2.5 million, respectively, of stock-based compensation expenses derived from these grants which are included in internal commissions, payroll and benefits expense in the consolidated statements of operations.

The following table details the restricted shares activity related to restricted stock awards of an entity that was previously a related party granted to RCAP employees during the six months ended June 30, 2015:

	Shares of Restricted Common Stock of a Related Party	Weighted-Average Fair Value Per Share		Aggregate Value (in thousands)		Weighted-Average Vesting Period Remaining (years)
Nonvested, December 31, 2014	368,625	$	9.05	$	3,335	2.83
Granted	—	—		—		—
Less: vested	85,992	8.13		699		N/A
Less: forfeited	5,000	8.13		41		N/A
Nonvested, June 30, 2015	277,633	$	8.13	$	2,257	2.13

FA RSU Plan

Restricted units were issued to certain employees under the First Allied Holdings 2013 Restricted Unit Plan (the “FA RSU Plan”) to provide for the grant of phantom stock in connection with the acquisition of First Allied by RCAP Holdings. During the six months ended June 30, 2015, the company issued 69,427 shares to settle a portion of the restricted units issued under the FA RSU Plan. During the three and six months ended June 30, 2015, the Company recorded contra-expenses $0.4 million and expenses of $0.1 million, respectively, of stock-based compensation pursuant to the FA RSU Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recorded $0.7 million and $1.5 million, respectively, of stock-based compensation pursuant to the FA RSU Plan which is included in internal commissions, payroll and benefits expense in the consolidated statements of operations. As of June 30, 2015, 155,785 nonvested restricted units were outstanding under the FA RSU Plan.

2014 Stock Purchase Program

Select employees, financial advisors and executive officers of the Company and its affiliates and of certain subsidiaries of the Company were eligible to participate in the 2014 Stock Purchase Program pursuant to which participants purchased shares of Class A common stock and were automatically granted one warrant to purchase one share of Class A common stock for each three shares purchased, at an exercise price equal to the purchase price per share purchased.

For the three and six months ended June 30, 2015, the Company recorded to an immaterial amount of expenses to internal commissions, payroll and benefits in the consolidated statements of operations for expenses derived from the 2014 Stock Purchase Program. The Company did not incur expenses pursuant to the 2014 Stock Purchase Program during the three and six months ended June 30, 2014.