10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-32878
(Commission File Number)

PENSON WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware	6211	75-2896356
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1700 Pacific Avenue, Suite 1400

Dallas, Texas 75201

(214) 765-1100

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark whether the registrant (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 þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

Large accelerated filer o Accelerated filer þ 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 þ

The aggregate market value of the registrant’s common stock held by non-affiliates as of June 30, 2009 (the last business day of the registrants’ most recently completed second fiscal quarter) was $134,373,367.

The number of outstanding shares of the registrant’s Common Stock, $0.01 par value, as of March 1, 2010 was 25,599,761.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of registrant’s Definitive Proxy Statement relating to its 2010 annual meeting of stockholders are incorporated by reference into Part III.

PENSON WORLDWIDE, INC.
Form 10-K
For the Fiscal Year Ended December 31, 2009

TABLE OF CONTENTS

Basis of Presentation			1
Special Note Regarding Forward-Looking Statements			1
PART I			5
	Item 1.	Business	5
	Item 1A.	Risk Factors	24
	Item 1B.	Unresolved Staff Comments	39
	Item 2.	Properties	39
	Item 3.	Legal Proceedings	39
	Item 4.	Reserved	41
PART II			41
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	41
	Item 6.	Selected Financial Data	44
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
	Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	61
	Item 8.	Financial Statements and Supplementary Data	63
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	63
	Item 9A.	Controls and Procedures	63
	Item 9B.	Other Information	64
PART III			64
	Item 10.	Directors, Executive Officers of the Registrant and Corporate Governance	64
	Item 11.	Executive Compensation	64
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	65
	Item 14.	Principal Accounting Fees and Services	65
PART IV			65
	Item 15.	Exhibits and Financial Statement Schedules	65
Signatures			67
EX-2.4
EX-10.34
EX-10.35
EX-10.36
EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

“Penson” and the Penson logo are our trademarks. Other service marks, trademarks and trade names referred to in this annual report are the property of their respective owners.

Basis of Presentation

In this Annual Report on Form 10-K, the term “Penson” refers to Penson Worldwide Inc., a Delaware corporation and its subsidiaries on a consolidated basis. Unless otherwise indicated, all references in this report to the “Company,” “Penson,” “we,” “us” and “our” refer to Penson Worldwide, Inc. and our subsidiaries.

Penson Worldwide, Inc. (“PWI”) is a holding company incorporated in Delaware. The Company conducts business through its wholly owned subsidiary SAI Holdings, Inc. (“SAI”). SAI conducts business through its principal direct and indirect operating subsidiaries, Penson Financial Services, Inc. (“PFSI”), Penson Financial Services Canada Inc. (“PFSC”), Penson Financial Services Ltd. (“PFSL”), Nexa Technologies, Inc. (“Nexa”), Penson GHCO (“Penson GHCO”), Penson Asia Limited (“Penson Asia”) and Penson Financial Services Australia Pty Ltd (“PFSA”). Through these operating subsidiaries, the Company provides securities and futures clearing services including integrated trade execution, foreign exchange trading, custody services, trade settlement, technology services, risk management services, customer account processing and customized data processing services. The Company also participates in margin lending and securities lending and borrowing transactions, primarily to facilitate clearing and financing activities.

PFSI is a broker-dealer registered with the Securities and Exchange Commission (“SEC”), a member of the New York Stock Exchange (“NYSE”) and a member of the Financial Industry Regulatory Authority (“FINRA”), and is licensed to do business in all fifty states of the United States of America and certain territories. PFSC is an investment dealer and is subject to the rules and regulations of the Investment Industry Regulatory Organization of Canada (“IIROC”). PFSL provides settlement services to the London financial community and is regulated by the Financial Services Authority (“FSA”) and is a member of the London Stock Exchange. Penson GHCO is a registered Futures Commission Merchant (“FCM”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”), various futures exchanges and is regulated in the United Kingdom by the FSA. PFSA holds an Australian Financial Services License and is a market participant of the Australian Securities Exchange (“ASE”) and a clearing participant of the Australian Clearing House.

As of the date of this Annual Report, Penson has one class of common stock and one class of convertible preferred stock. The common stock is currently held by public shareholders and certain directors, officers and employees of the Company. None of the preferred stock is issued and outstanding. As used in this Annual Report, the term “common stock” means the common stock, and the term “preferred stock” means the convertible preferred stock, in each case unless otherwise specified.

Special Note Regarding Forward-Looking Statements

This Annual Report and the information contained herein include forward-looking statements that involve both risk and uncertainty and that may not be based on current or historical fact. Although we believe our expectations to be accurate, forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause or contribute to such differences include but are not limited to:

•  interest rate fluctuations;

•  general economic conditions and the effect of economic conditions on consumer confidence;

•  reduced margin loan balances maintained by our customers;

•  fluctuations in overall market trading volume;

•  our ability to successfully implement new product offerings;

•  our ability to obtain future credit on favorable terms;

•  reductions in per transaction clearing fees;

•  legislative and regulatory changes;

•  monetary and fiscal policy changes and other actions by the Board of Governors of the Federal Reserve System (“Federal Reserve”);

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•  our ability to attract and retain customers and key personnel; and

•  those risks detailed from time to time in our press releases and periodic filings with the SEC.

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “hopes,” “may,” “will,” “plans,” “intends,” “estimates,” “could,” “should,” “would,” “continue,” “seeks,” “pro forma,” or “anticipates” or other similar words (including their use in the negative), or by discussions of future matters such as the development of new technology, integration of acquisitions, possible changes in our regulatory environment and other statements that are not historical. Additional important factors that may cause our actual results to differ from our projections are detailed later in this report under the section entitled “Risk Factors.” You should not place undue reliance on any forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement.

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Glossary of selected terms

“Algorithmic traders” means firms or individuals that engage in “algorithmic trading,” defined below.

“Algorithmic trading” means the automatic generation of size and timing of orders based on preset parameters, occurs largely as a result of complex computational models and is often highly if not totally automated (i.e., trading does not necessarily require the intervention of a live trader but is generated by computers). Such trading is at times referred to as “black box” trading.

“ASP” refers to “Application Service Provider,” which means a licensor of software products that hosts such products on its own proprietary or leased hardware and offers customer service relating to such products to the licensee.

“Back-end trading software” means software programs that interface between the clearing firm, exchange or ECN, and the trader using front-end trading software.

“CFD” or “Contract for Difference” means a contract between two parties, stipulating that the selling party will pay to the buying party the difference between the current value of any asset and its value at the time the contract terminates. If the difference is negative, then the buying party instead makes payment to the selling party.

“Clearing” means the verification of information between two counterparties (e.g. brokers) in a securities transaction and the subsequent settlement of that transaction, either as a book-entry transfer or through physical delivery of certificates, in exchange for payment. Clearing is the procedure by which an organization acts as an intermediary and assumes the role of buyer and seller for transactions in order to reconcile orders between transacting parties. Clearing enables the matching of buy and sell orders in a market and, typically, provides for more efficient markets as parties can make transfers to a clearing agent rather than to each individual party with whom they have transacted.

“Clearing firm” means the firm that provides clearing, custody, settlement and/or other services to correspondents and, at times, to customers. Clearing firms may or may not provide technology products and services such as front-end trading software and data.

“Client” means both correspondents and other customers who may not utilize our clearing, futures or securities products and services but which may, for example, use solely technology products and services.

“Correspondent” means entities (e.g., broker-dealers) that use our clearing firms’ respective regulated securities and/or futures record keeping, custody and/or settlement services as opposed to only using technology products and services. Our typical correspondent is a firm that introduces its customers to our clearing firms for clearing, custody and/or settlement services.

“Custody” means when a party has taken legal responsibility to hold another party’s assets such as physical securities. Custody services are the safe-keeping and managing of another party’s assets, as well as customer account maintenance and customized data processing services.

“Customers” means the customers of our Correspondents. Customers of our correspondents may be individuals or entities and may have an institutional or retail focus.

“Direct access” or “Direct market access” means when a front-end trading application permits the trader to select the market destination on which execution is desired and the order is transmitted completely electronically without human intervention.

“Electronic Communications Network” or “ECN” means an electronic system that matches buy and sell orders typically via computerized systems.

“Execution routing” means the sending of securities orders to exchanges and other market destinations such as market makers through the use of telecommunications infrastructure combined with proprietary or third party trading software.

“FCM” means futures commission merchant (which is similar to a broker-dealer but operates in the futures arena).

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“Front-end trading software” means software programs used by traders to access trading information and execute trades, and that interface with back-end software systems that communicate with the clearing firm, exchange or ECN. Level II trading software (see definition below) is a form of front-end trading software.

“Level I market information” means the most basic information available about a stock consisting principally of the bid and ask price and last trade data.

“Level I trading software” means a front-end trading software system designed to provide access to Level I market information for use in online trading.

“Level II market information” means information from multiple exchanges and other markets for the same security type.

“Level II trading software” means a front-end trading software system designed to provide access to Level II market information for use in active online trading and which enables a trader to select a specific exchange or market across various markets.

“Online trading” means trading via electronic means (typically via the Internet). Direct access trading, for example, is often viewed as a subset or a type of online trading.

“Settlement” means the conclusion of a securities transaction in which a broker-dealer pays for securities bought for a customer or delivers securities sold and receives payment from the buyer’s broker-dealer.

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PART I

Item 1.   Business

Overview

We are a leading provider of a broad range of critical securities and futures processing infrastructure products and services to the global financial services industry. Our products and services include securities and futures clearing and execution, financing and cash management technology and other related offerings, and we provide tools and services to support trading in multiple markets, asset classes and currencies. Unlike most other major clearing providers, we are not affiliated with a large financial institution and we generally do not compete with our clients in other lines of business. We believe that our position as the leading independent provider in our markets is a significant differentiating factor relative to our competitors. We supply a flexible offering of infrastructure and related products and services to our clients, available both on an unbundled basis and as a fully-integrated platform encompassing all of our products and services. We believe our ability to integrate our technology offerings into our products and services is a key advantage in our effort to expand our sales and attract new clients.

Clearing is the verification of information between two parties in a securities or futures transaction and the subsequent settlement of that transaction, either as a book-entry transfer or through physical delivery of certificates, in exchange for payment. Custody services are the safe-keeping and managing of another party’s assets, such as physical securities, as well as customer account maintenance and customized data processing services. Clients for whom we provide securities clearing and custody services are generally referred to as our “correspondents.”

Since starting our business in 1995 with three correspondents, we have grown to be a leading provider of clearing services. Based on the number of correspondents as of December 31, 2009, we are the largest independent clearing broker in the U.S., and among the top three clearing brokers overall in the U.S., the largest independent clearing broker in Canada and the second largest in the U.K. We have grown both organically and through acquisitions. As of December 31, 2009, we had 290 active correspondents worldwide, compared to 302 correspondents as of December 31, 2008. As of December 31, 2009, our pipeline of new correspondents under contract was 27, the majority of which we expect to begin clearing with us by June 30, 2010.

With operations based in the U.S., Canada, the U.K., Asia and Australia, we have established a worldwide presence primarily focused on the global markets for equities, options, futures, fixed income and foreign exchange products. We believe that international markets offer an important target market as certain characteristics of the U.S. market, including significant increases in retail, self-directed and online trading, and increased trading volumes and executions, continue to expand globally. We are organized into operating segments based on geographic regions (See Note 22 to our consolidated financial statements).

Our non-interest revenues include: fees from our correspondents for transaction processing and clearing; fees for providing technology solutions; and fees for providing other non-trading activities and services, including execution services, trade aggregation, prime brokerage, foreign exchange and fixed income. Clearing and commission fees are based principally on the number of trades we process. We also earn licensing and development fees from clients for their use of our technology solutions.

Our interest revenues are generated from customer-related balances and from our stock borrowing transactions. Interest revenues from customers are generated from margin lending, securities lending and the reinvestment of customer funds. We also derive net interest revenue from our stock conduit borrowing activities, which consist of borrowing securities from one broker-dealer and lending the same securities to another broker-dealer on a matched book basis.

For the year ended December 31, 2009, we generated net revenues of $289.9 million. Clearing and commission fees, net interest income, technology revenues and other revenues comprised 50%, 23%, 8% and 19% of our net revenues, respectively. Approximately 30% of our securities correspondents generate both clearing and technology revenue. In addition, some of our customers generate revenue from both securities and futures trading, and trade in multiple global markets. We estimate that direct market access broker-dealers accounted for 14.1% of these revenues and represented 15.7% of our total correspondents, traditional retail broker-dealers accounted for 9.7% of these revenues and represented 30.2% of our total correspondents, online broker-dealers accounted for 19.0% of

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these revenues and represented 10.2% of our total correspondents and institutional clients represented 14.1% of these revenues and were 27.6% of our total correspondents. The remainder of these revenues was provided primarily by broker-dealers trading on a proprietary basis, broker-dealers specializing in option trading, futures trading, hedge funds, algorithmic traders and financial technology firms. See also Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for more information.

As an integral part of our securities clearing relationships, we maintain a significant margin lending business with our correspondents and their customers. Under these margin lending arrangements, we extend credit to our correspondents and their customers so that they may purchase securities on margin. As is typical in margin lending arrangements, we extend credit for a portion of the purchase price of the securities, which is collateralized by existing securities and cash in the accounts of our correspondents and their customers. We also earn interest income from both our securities and futures operations by investing customers’ cash and we engage in securities lending activities as a means of financing our business and generating additional interest income. Over the past year, our net interest revenues decreased from $75.1 million in 2008 to $65.9 million in 2009, representing approximately 26% and 23% of our net revenues, respectively.

Clients

Currently, our principal clients are online, direct access and traditional retail brokers. We are increasingly adding large banks, institutional brokers, financial technology companies and securities exchanges as clients. Online broker-dealers principally enable investors to perform trades through the broker via the Internet through browser-based technology. Direct access broker-dealers principally provide investors with dedicated software which executes orders through direct exchange interfaces and provides real-time high speed Level II market information. Traditional retail brokers usually engage in agency trades for their customers, which may or may not be online. Institutional brokers and hedge funds typically engage in algorithmic trading or other proprietary trading strategies for their own account or, at times, agency trades for others. Our bank clients typically are non-U.S. entities making purchases for their brokerage operations. The type of financial technology client that would most likely use our products and services is a financial data content or trading software firm that purchases our data or combines its offerings with our trading software. Through our acquisitions of Goldenberg Hehmeyer and Co. (“GHCO”) and First Capitol Group LLC (“FCG”) in 2007, we have added a number of futures related clients, including introducing brokers, non-clearing FCMs, commercial customers, customers who engage in hedging and risk management activities and other customers who trade futures and other instruments.

We have made significant investments in our U.S. and international data and execution infrastructure, as well as various types of multi-currency and multi-lingual trading software. We provide what we believe to be a flexible offering of infrastructure products and services to our clients, available both on an unbundled basis and as a fully-integrated solution. Our technology offerings are typically private-labeled to emphasize the client’s branding. We seek to put our clients’ interests first and we believe our position as the leading independent provider of U.S. securities clearing services is a significant differentiating factor. We believe we are well-positioned to take advantage of our significant investments in technology infrastructure to expand sales of our products and services to these and many other clients worldwide.

Industry trends

We believe that the market for securities and futures processing products and services is influenced by several significant industry trends creating continuing opportunities for us to expand our business, including:

Shift to outsourced solutions.  Broker-dealers are continuing to outsource their clearing functions. In addition, firms in the global securities and investment industry are expanding their use of third-party technology to manage their securities trading infrastructure.

Increase in trading in multiple markets.  Investors increasingly seek to trade in multiple markets, asset classes and currencies at once. The technological challenges associated with clearing, settlement, and custody in multiple geographies, currencies, and asset classes are prompting correspondents to seek the most comprehensive and sophisticated service providers. We have sought to capitalize on this trend by expanding our product offering into high growth areas such as the futures market, where we have significantly expanded

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since early 2007. Net revenues from our futures product offering comprised approximately 11% of total net revenues in both 2009 and 2008.

Industry consolidation.  Although the significant effort and potential business disruption associated with conversion to a new clearing firm may discourage some correspondents from switching service providers, consolidation among clearing service providers has led to forced conversions. These conversions result in opportunities for correspondents to seek competing offers and, thus, for service providers to solicit new correspondents’ business without having to overcome the threshold issue of converting from an incumbent. We believe we have benefited from industry consolidation by attracting correspondents as a result of the acquisitions of major competitors by larger financial institutions and acquiring other firms.

Demand for increased reporting capabilities and integrated technology solutions.  Clients are increasingly demanding products that seamlessly integrate front, middle and back-office systems and allow for near real-time updating of account status and margin balances. Our ability to meet these demands makes us a preferred processing firm for correspondents in the growing algorithmic trading and hedge fund sectors.

Opportunities in the Canadian, European, Asian and Australian markets.  The securities and investments industries outside of the U.S., including those in Canada, Europe and Asia, have followed many of the same trends as the U.S. market. Many industry participants are now requiring the same complex and sophisticated clearing and execution services that are common in the U.S. In addition, clearing firms in these markets are less likely to own trading applications, creating opportunities for the sale of Nexa’s products. We opened our first Asian office in Hong Kong in the first quarter of 2007 and an office in Tokyo during 2008 in order to expand our Asian operations. Our Asian operations are currently focused on marketing our technology products. We launched our Australian office in the second quarter of 2009, and began clearing operations there in December, 2009. We have two Australian correspondents currently in our pipeline and expect significant growth opportunities in Australian markets in 2010.

Our product offering

Clearing and related services

As a securities and futures processing infrastructure provider, Penson’s services include securities and futures clearing and settlement, custody, account maintenance, data processing services, and technology services. Clearing is the verification of information and matching between two parties in a securities or futures transaction which is followed by the subsequent settlement of that transaction in exchange for payment or margin deposit. Custody services are the safe-keeping and managing of another party’s assets, such as securities, as well as customer account maintenance and customized data processing services. Clients for whom we provide securities clearing and custody services are generally referred to as our “correspondents” or “introducing brokers.” We also provide commodity risk management and other services to certain of our futures customers.

We have made substantial investments in the development of customized data processing systems that we use to provide these “back-office” services to our correspondents on an integrated, efficient and cost-effective basis, allowing us to process a high volume of transactions without sacrificing stability and reliability. In 2009, we processed an average of 1.2 million equity transactions, 1.4 million equity options contracts and 428,000 futures contracts per day. Our products and services reduce the need for our correspondents to make significant capital investments in a clearing infrastructure and allow them to focus on their core business competencies. These systems also enable our correspondents to provide customized, timely transaction and account information to their customers, and to monitor the risk level of their customers on a real-time basis. We have found that our comprehensive suite of advanced technology solutions is often an important factor in winning new correspondents.

As an integral part of our securities clearing relationships, we maintain a significant margin lending business with most of our correspondents and their customers. Under these margin lending arrangements, we extend credit to our correspondents and their customers so that they may purchase securities on margin. As is typical in margin lending arrangements, we extend credit for a portion of the purchase price of the securities, which is collateralized by existing securities and cash in the accounts of our correspondents and their customers. We also earn interest

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income from both our securities and futures operations by investing customers’ cash and we engage in securities lending activities as a means of financing our business and generating additional interest income.

Technology and data products

An important component of our business strategy is to identify and deploy technologies relevant to our target markets. Our technology and data product offerings, which are principally developed and marketed through our Nexa subsidiary, include customizable front-end trading platforms, a comprehensive database of real-time and historical U.S. and international equities, options and futures trade data, and order-management services. This technology embedded in our securities and futures processing infrastructure has enhanced our capacity to handle an increasing volume of transactions without a corresponding increase in personnel. We use our proprietary technology and technology licensed from third parties to provide customized, detailed account information to our clients. Our technology is critical to our vision of providing a flexible and comprehensive offering of products and services to our clients. Our technology revenues generally include revenues from software development and customization of products and features, but our technology products are designed to generate substantial subscription-based revenues. The majority of our technology revenues is recurring in nature and is generated by correspondents under contracts that generally have initial terms of two years.

Our competitive strengths

Established market position as the largest independent provider of correspondent clearing services in our primary markets.

We have grown organically and through acquisitions to become the leading global independent provider of securities clearing services in our primary markets with 290 active correspondents in the U.S., Canadian, Australian and U.K. markets, which includes 49 futures correspondents as of December 31, 2009. As of December 31, 2009 (based on the number of correspondents), we were the largest independent clearing broker-dealer in both the U.S. and Canada, as well as the second largest clearing broker in the U.K. Furthermore, as of December 31, 2009 (based on the number of correspondents), we are also the third largest clearing broker in the U.S. overall. Unlike most other major clearing service providers, we are not affiliated with a large financial institution and we generally do not compete with our clients in other lines of business. We believe our position as the leading independent provider of securities clearing services in our primary markets is a significant differentiating factor.

Fully-integrated securities-processing and technology solutions.

We are a leading provider of infrastructure to financial intermediaries, offering integrated solutions with the ability to address all major securities-processing needs. Through the integration of our own technology across all of our products and services, we have been able to expand our client base and increase our revenue from existing clients. Our products and services facilitate trading in multiple markets, asset classes and currencies, with integrated execution, clearing and settlement solutions. It is our belief that, while some clients are willing to obtain these products from multiple vendors, many will determine that it is easier to obtain solutions with lower integration costs and risks from one provider that can also address the regulatory requirements of their business.

Flexible services and infrastructure.

We provide a broad offering of infrastructure, technology and data products and services to our clients, available both on an unbundled basis and as a fully-integrated solution. We work closely with each of our clients to tailor the set of products and services appropriate for their individual needs.

Highly attractive and diversified client base.

Our client base comprises the following categories: online, direct market access, institutional, retail and algorithmic, options, futures, foreign exchange and other. For the year ended December 31, 2009, no single category of correspondent represented more than 19.0% of total net revenues. In addition, no single correspondent represented more than 5.9% of net revenue, with our top ten correspondents constituting 28.5% of our net revenues. Additionally, we have diversified our client base internationally through our operations in Canada, the

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U.K., Australia and Asia, and by asset class through expanding our operations into the futures business and foreign exchange businesses.

Scalable, recurring revenue model.

Our business benefits from a highly scalable platform that is capable of processing significant additional volume with limited incremental increases in our expenses. We receive a recurring stream of revenues based on the trading volumes of each of our correspondents with a low marginal cost to process transactions. We typically maintain two- to three-year exclusive contracts with our correspondents. Furthermore, there are typically high switching costs as the transition from one provider of clearing services to another is disruptive to a correspondent’s business. In addition, a significant portion of our technology revenues are based on ASP arrangements with clients, linked to transactions and users. Thus, we become even more indispensable to our clients by not only licensing them our software but by also providing them with hardware to run our products along with related support services.

Proven and highly motivated management team.

With an average of 35 years of industry experience and holding a substantial equity interest in Penson, our three-member Executive Committee has the proven ability to manage our business through all stages of the business cycle. Roger J. Engemoen, Jr., Philip A. Pendergraft and Daniel P. Son, our Chairman, Chief Executive Officer and President, respectively, founded our business in 1995 and have built it to its current position.

Business strategies

Leverage existing platform to expand our product offerings and client base.

We believe our infrastructure provides a leading fully-integrated securities clearing and technology product package to our core market, and additional products can be offered and new clients can be added with minimal marginal cost. Using this infrastructure, we intend to expand our client base by:

•  Focusing on high-volume direct access and online broker-dealers and the futures trading industry.  We will continue to target our clearing services to the growing futures trading, direct access and online broker-dealer markets and on margin lending as a core complementary service.

•  Further expanding our client base in the institutional and retail brokerage markets.  We are expanding our focus on the traditional institutional and retail brokerage industry. Many institutional and retail brokers in the U.S. have outsourced their clearing functions, and we believe this trend is now increasing internationally, which creates opportunities for us globally. We are also targeting these firms for our technology products and services, which may increase if we are able to successfully consummate the Broadridge transaction. See “Business — Strategic Acquisitions” for a description of the Broadridge acquisition.

•  Expanding our client base in the quantitative trading sector.  Our technology products enable us to increasingly market our services to the rapidly growing quantitative trading sector. This sector is among the most significant drivers of growth in the overall securities markets and we intend to increase our focus on these clients.

•  Expanding our futures business.  Our purchase of GHCO in February, 2007 was a significant step in expanding our futures clearing operations and our purchase of FCG in November, 2007 gives us the ability to expand our futures offering to clients that need risk management and other services.

•  Expand offering of portfolio margining.  Portfolio margining allows us to extend margin lending to cover a higher percentage of the purchase price of securities than the percentage required under Regulation T based on a risk calculation model approved by the SEC. We approve our correspondents internally for portfolio margining based on several factors including account size, net capital, regulatory background and margin experience. At December 31, 2009, we had 613 portfolio margining accounts with a weighted average balance of approximately $110.0 million in the fourth quarter of 2009.

•  Expand offering of foreign exchange products.  In 2009, we launched our foreign exchange product, which provides our customers a focused traditional and technology-based center of competency in both deliverable

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and non-deliverable foreign exchange. Our foreign exchange product is traditionally used by correspondents to facilitate international transactions in equities and bonds. These services can be accessed through direct contact with our foreign exchange department or through our electronic trading platform.

Expanding our operations internationally.

We believe our ability to service clients internationally will become more important as investors increasingly trade on a global basis. In addition, we intend to expand our margin lending business internationally. Our presence in the non-U.S. markets gives us several opportunities to pursue additional revenues across our product and service offerings. It allows us to better serve our correspondents who are U.S.-based by helping facilitate their growth and providing them with greater access to international markets. It also gives us greater access to the potential customer base in those local markets. We opened our first Asian office in Hong Kong in the first quarter of 2007 and an office in Tokyo in 2008. We expanded our offering of technology products in Asian markets in 2009 and intend to continue expansion into the Asian markets in 2010. We launched PFSA in the second quarter of 2009, and began clearing operations there in December, 2009. We expect significant growth opportunities in the Australian markets in 2010.

Enhance revenue potential of each client relationship.

Our growth model includes selling additional products to our existing clients. Many of our correspondents currently only utilize our clearing services, but we maintain a broad product suite across geographies that provides us with a significant opportunity to cross-sell our execution services to our current base of correspondents. We believe we have a significant opportunity to offer the full spectrum of clearing and execution services to many of Nexa’s clients, as well as offering technology services to our clearing and execution clients. For example, thinkorswim, Inc. started as a correspondent in the U.S. predominantly utilizing our options clearing service. After the acquisition of GHCO, we were able to convert them to our futures platform and subsequently we were able to capture their Canadian business.

Capitalize on industry trends.

We are positioned to benefit from several broad industry trends, including internationalization of trading activity, consolidation among service providers, and increased demand for trading infrastructure that supports multiple products on the same computer terminal, including equities, options, futures and foreign exchange as well as increased outsourcing of securities-processing.

Pursue accretive acquisitions.

Through our past acquisitions, we have grown internationally, expanded our product base and added correspondents. As of December 31, 2009, we had successfully integrated our acquisitions of the clearing operations of Schonfeld Securities LLC, GHCO and FCG. On November 2, 2009, PWI, together with PFSI, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Broadridge Financial Solutions, Inc. (“Broadridge”) and its wholly owned subsidiary Ridge Clearing & Outsourcing Solutions, Inc. (“Ridge”) to acquire substantially all of Ridge’s contracts with its securities clearing clients. See “Business — Strategic Acquisitions” for a description of the proposed Broadridge transaction. We currently expect to close our acquisition of the Ridge clearing contracts in the second quarter of 2010. We anticipate a substantial increase in securities clearing clients and asset balances and significant cost savings should we close the Broadridge acquisition as expected. While we will continue to invest in developing and enhancing our existing business solutions, we also intend to continue to pursue accretive acquisitions that will expand our technology product offerings, our clearing service capability and our client base.

Securities processing

Our securities and futures processing infrastructure products and services are principally marketed under the “Penson” brand name. Penson Worldwide, Inc. is the ultimate parent company for the businesses that provide these products and services in each geographic market we serve.

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Clearing and related operations

United States

We generally provide securities clearing services to our correspondents in the U.S. on a fully-disclosed basis. In a fully-disclosed clearing transaction, the identity of the correspondent’s customer is known to us, and we are known to them, and we maintain the customer’s account and perform a variety of services as agent for the correspondent.

Our U.S. securities clearing broker is PFSI, which is registered with the SEC and is a member of the following: New York Stock Exchange, NYSE Alternext, Chicago Board Options Exchange, Chicago Stock Exchange, International Securities Exchange, NASDAQ, NYSE ARCA Equities Exchange, NYSE ARCA Options Exchange, Philadelphia Stock Exchange, OneChicago, DTC, Euroclear, ICMA, MSRB, FINRA, NSCC, Options Clearing Corp., and Securities Investor Protection Corporation (“SIPC”) and is a participant in the Boston Options Exchange (“BOX”).

With respect to futures transactions, Penson GHCO provides our clearing and execution services for futures and FCG, which now operates as a division of Penson GHCO, provides risk management and consultation services for some of our futures clients. Penson GHCO is regulated by the CFTC, the NFA and the FSA and is a member of the Chicago Board of Trade, the Chicago Mercantile Exchange, the Kansas City Board of Trade, London International Financial Futures Exchange, the Minneapolis Grain Exchange, the Clearing Corporation, and the London Clearinghouse.

Canada

PFSC provides clearing services in accordance with the rules of the IIROC. Canada has four types of approved clearing models and our Canadian operation is approved for all of these. We concentrate primarily on providing services to Type 2 and Type 3 correspondent brokers. As a Type 2 or 3 carrying broker, our key responsibilities may include the trading of securities for customers’ accounts and for the correspondent’s principal business, making deliveries and settlements of cash and securities in connection with such trades, holding securities and/or cash of customers and of the correspondent and preparing and delivering directly to customers documents as required by applicable law and regulatory requirements with respect to the trades cleared by us, including confirmation of trades, monthly statements summarizing transactions for the preceding month and, for inactive accounts, quarterly statements of securities and money balances held by us for customers.

PFSC is our Canadian clearing broker and provides fully-disclosed and omnibus clearing services to the Canadian markets. In an omnibus relationship, the identity of the end customer is not always known to us. PFSC is a participating organization of the Toronto Stock Exchange, an approved participant with the Montreal Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems. PFSC is a member of the Canadian Investor Protection Fund and is regulated by the IIROC and the securities regulatory authorities of each province and territory in Canada.

United Kingdom

In the U.K. we offer a broad range of securities clearing services through PFSL, our U.K. clearing broker, including: Model A and Model B clearing and settlement, Euroclear, global custody, customized data processing, regulatory reporting, execution, and portfolio management and modeling systems. In Model A clearing, we provide a purely administrative back-office service and act as agent for our correspondents’ customers, and supply these customers with the information needed to settle their transactions. Model B clearing provides the authority to process transactions under a fully-disclosed clearing model similar to the U.S. Under Model B clearing, we assume the positions and therefore full liability for the clearing and settlement of the trades. All of our correspondents in the U.K. are categorized as Professional Clients under FSA Rules. PFSL is a member of the London Stock Exchange and is authorized and regulated by the FSA.

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Asia

We opened Penson Asia, our first Asian office, in Hong Kong in the first quarter of 2007 and an office in Tokyo in 2008. We entered into a number of technology services agreements with correspondents primarily related to North American and U.K. securities through our Penson Asia office in 2008 and 2009, and expect to further expand our Asian business in 2010.

Australia

We launched PFSA, our clearing broker in Australia in the second quarter of 2009, and began clearing operations there in December, 2009. PFSA provides clearing and settlement services to broker dealers, Australian Securities Exchange members and Australian Financial Service License holders. Clearing arrangements are made on a fully disclosed basis, are generally three to five years in term and are typically exclusive. PFSA holds an Australian Financial Services License and is a market participant of the ASE and a clearing participant of the Australian Clearing House.

Internet account portfolio information services

We have created customized software solutions to enable our correspondents and their customers to review their account portfolio information through the Internet. Through the use of our internally developed technology, combined with technology licensed from third parties, we are able to update the account portfolios of our correspondents’ customers as securities transactions are executed and cleared. A customer is able to access detailed and personalized information about his account, including current buying power, trading history and account balances. Further, our solution allows a customer to download brokerage account information into Quicken, a personal financial management software program, and other financial and spreadsheet applications so that all financial data can be integrated.

Holding and safeguarding securities and cash deposits

We hold and safeguard securities and cash deposits of our correspondents’ customers, which require us to take legal responsibility for those assets. Many of our correspondents do not have the ability to hold securities and cash deposits due to regulatory requirements that require that the holder must comply with the net capital rules of the SEC and other regulators with respect to these activities.

Securities borrowing and lending

We lend securities that we hold for our correspondents and their customers to other broker-dealers as a means of financing our business and facilitating transactions. We also engage in conduit activities where we borrow securities from one broker-dealer and lend the same securities to another broker-dealer. This lending is permitted under and governed by SEC rules. See “Government regulation” and “Regulation of securities lending and borrowing.” All of our securities borrowing and lending activities are performed under a standard form of securities lending agreement, which governs each party’s rights to mark securities to market.

Proprietary trading

Certain of our subsidiaries engage in limited forms of proprietary trading. This trading includes computerized trading and non-automated trading strategies involving taking short-term proprietary positions in equities, options, fixed income and other securities, derivatives and foreign currencies. In general, these strategies involve relatively short-term exposure to the markets and are usually undertaken in conjunction with hedging strategies and the use of derivatives contracts designed to mitigate the risk associated with these proprietary positions. These activities in the aggregate are insignificant to revenues and pretax income.

Futures products

In addition to the futures clearing services provided by Penson GHCO, the FCG division of Penson GHCO provides retail, risk management and consultation services for certain of our futures clients.

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Technology and data products

An important component of our business strategy is to identify and to deploy technologies relevant to our target markets. The technology embedded in our securities and futures processing infrastructure has enhanced our capacity to handle an increasing volume of transactions without a corresponding increase in personnel. We use our proprietary technology and technology licensed from third parties to provide customized, detailed account information to our clients. To increase our processing capacity, we moved our U.S. securities clearing operations to a dedicated processing platform provided by SunGard in the first quarter of 2009. Our technology is critical to our vision of providing a flexible and comprehensive offering of products and services to our clients.

Our technology and data product offerings include customizable front-end trading platforms, a comprehensive database of historic U.S. and international equities, options and futures trade data, and order-management services. Our approach to the development and acquisition of technology has allowed us to create an evolving suite of products that provides specific solutions to meet our clients’ individual requirements. We also provide risk management and consultation services to our futures customers through the FCG division of our Penson GHCO subsidiary.

Nexa provides our clients with innovative trading management technology with a global perspective. Nexa specializes in direct access trading technology and provides complete online brokerage solutions, including direct access trading applications, browser-based trading interfaces, back-office order management systems, market data feeds, historical data, and execution technology services, generally on a license-fee basis. Nexa’s FastPath product provides a full suite of Financial Information Exchange (“FIX”) gateway solutions for clients who require global connectivity, high throughput and reliability. FIX execution solutions allow clients to automatically transmit, receive or cancel advanced-order types, execution reports, order status, positions, liquidity flags and account balances. Clients can connect using their own front-end or back-office applications or utilize applications available from Nexa. We generally provide our solutions to our clients on a private-labeled basis to emphasize the client’s branding.

Nexa’s products, such as Omni Pro, Axis Pro, and Meridian, are designed to accommodate various market segments by providing different trading platforms and functionality to users. All of our front-end products benefit from several important features such as the ability to trade equities, options and futures and to have unified risk management for trading across multiple asset classes.

Although there is a significant market for front-end trading platforms that is independent of the market for clearing services, we have found that our ability to integrate our technology-related products with our clearing services provides clients with another compelling reason to use Penson for their clearing needs. We believe this broader, integrated offering is a significant factor in our conversion of client prospects into actual clients.

Our technology revenues generally include revenues from software development, customization of products and features and licensing fees, but our technology products are designed to generate substantial subscription-based revenue over time. Our technology revenues have increased over the last year from $22.2 million in 2008 to $23.8 million in 2009.

Institutional and active retail front-end trading software

Nexa has developed and is continuing to expand various front-end trading software products. We offer several products that are oriented towards different market segments. Omni Pro is a Level II trading platform oriented to professional traders and provides broker-dealer administrative modules. Level II software enables the trader, among other things, to view prices for the same security across various markets and to select the desired market for order execution. Axis Pro is a multi-currency Level II trading platform focused on active retail traders. Meridian is a Level I trading platform for less intensive applications for the active retail trader. Both Axis Pro and Meridian are offered with broker-dealer administrative modules that allow broker-dealers to monitor customer buying power and other regulatory compliance tasks, and to provide a repository for customer information.

All of our front-end products benefit from a number of compelling features such as the ability to trade equities, options and futures and have unified risk management for trading across these products. Many of our clearing competitors do not have similar systems that effect trades in all such instruments with similar risk mitigation

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capabilities. There is a dynamic market for front-end trading platforms that is independent of the market for our clearing services. However, we have found that our ability to offer these products provides our clients with another compelling reason to use our clearing and other products and services and is at times important in our conversion of client prospects into actual clients.

Global execution infrastructure

Nexa has built significant proprietary software and licensed certain software and telecommunications services to enable our clients to use our technology infrastructure to send orders for securities to all major North American exchanges, ECNs and market destinations. Our clients can choose to use our execution infrastructure, independent of our other services, or to opt for a bundled solution combining technology products together with clearing and settlement. This allows us to access a differentiated market segment for clients that clear with another firm or are self-clearing, but which do not have a similar infrastructure capability. In particular, because our network has been designed to maximize speed of execution, our offerings are very attractive to algorithmic traders for whom speed is essential to successful implementation of their trading strategies. Our infrastructure required significant time and investment to build and very few of our clearing competitors offer anything that is directly comparable.

Global data products

We believe it is critical to provide our clients with global trade data solutions. Nexa provides research-quality, historical intraday time series data plus real-time data feeds for the commodity and equity markets. Our suite of data products was significantly enhanced by our acquisition of the Tick Data assets in January 2005. Its database of historical intraday equities, options and futures data from exchanges in North America, Europe and Asia is presented tick-by-tick and is delivered in a compressed, proprietary format. The database of historical cash index data contains the most widely followed equity indices. Nexa also offers TickStream, a fully customized, low latency, real-time market data feed. Data is delivered through a simple-to-use application program interface (“API”) and powered by advanced ticker plants that have multiple direct connections to global exchanges. While these products do not currently generate material revenues, we provide data to over 3,000 clients, which we believe provides significant opportunities for cross-selling our other products and services.

Nexa has also built its own data ticker plant to access data from most U.S. and many foreign exchanges and market centers. We have also licensed certain foreign data from other sources. The result is a very comprehensive offering of real-time, delayed and historical data that we can market to our clients. As with the international execution hub, our clients can use our data solutions together with, or independent of, our other products and services. This enables us to compete with major securities data providers to offer comprehensive data solutions. Furthermore, historical data offerings are not offered by most data services providers or clearing firm competitors and enable us to serve new client segments such as algorithmic traders and hedge funds to which we have had relatively less historical exposure through our clearing operations.

Key licensed technology and proprietary customization

We license a software program called Phase3 from SunGard. Phase3 is an online, real-time data processing system for securities transactions. Phase3 performs the core settlement functions with industry clearing and depository organizations. To increase our processing capacity, we moved our U.S. securities clearing operations to a dedicated processing platform provided by SunGard in the first quarter of 2009. We have built a significant amount of proprietary software around Phase3 which allows us to customize Phase3 to meet each of our client’s unique needs. This customization increases the reliability and efficiency of our data processing model and permits us to process trades more quickly than if we relied on Phase3 alone. This customization also offers our clients more flexible access to information regarding their accounts, including the ability to:

•  see critical information in real-time on a continuously updated basis;

•  manage their buying power across different accounts containing diverse instruments such as equities, options and futures, and;

•  receive highly customized reports relating to their activity.

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The above-noted products are principally used by our U.S. securities clearing subsidiary but, in many cases, enable our non-U.S. customers, both through our non-U.S. affiliates and directly, to access leading-edge products and services when trading in the U.S. markets. We offer third party software that we have licensed that we believe offers an increased variety of settlement and clearing applications, to certain of our Canadian correspondents who trade futures products. If we are able to close the Broadridge transaction, our product offering to our client base in the U.S., U.K. and Canada will further expand to include, among other things, the outsourcing of certain of our correspondents’ operations. See “Business — Strategic Acquisitions” for a description of the proposed Broadridge transaction.

Sales and marketing

We focus our sales and marketing efforts in the U.S. primarily on the direct access and online sectors, but also focus on the algorithmic trading and hedge fund sectors of the global securities and investment industry. We are aggressively marketing execution-only services to the global financial services market. In addition, we believe that a significant opportunity exists in foreign markets as the adoption of online trading expands in other countries. We have capitalized on this opportunity by implementing cross-border and multi-currency trade processing capabilities.

Following the completion of our IPO in May 2006, we increased our sales and marketing staff to take advantage of the additional financial resources which allowed us to expand our correspondent base. We launched PFSA in the second quarter of 2009, and have begun marketing our products and winning clients there. We participate in industry conferences and trade shows and seek to differentiate our company from our competitors based on our reputation as an independent provider of a technology-focused integrated execution, clearing and settlement solution and based on our ability to support trading in multiple markets, multiple investment products and multiple currencies.

We generally enter into standard clearing agreements with our securities correspondents for an initial term of two years, during which we provide clearing services based on a schedule of fees determined by the nature of the financial instrument traded and the volume of the securities cleared. In some cases our standard contract will also include minimum monthly clearing charge requirements. Subsequent to the initial term, these contracts typically allow the correspondent to cancel our services upon providing us with 45 days written notice. Futures clearing contracts between us and our correspondents are generally terminable on 30 days notice. Futures clearing contracts directly between us and our customers are generally terminable at will.

As of December 31, 2009, we had 290 active correspondents worldwide, consisting of 241 active securities clearing correspondents and 49 active futures clearing correspondents. Of the 241 active securities clearing correspondents, 188 are located in the U.S., while our U.K. and Canadian clearing operations provide services to 18 correspondents and 34 correspondents, respectively. We had one Australian correspondent as of December 31, 2009. Before conducting business with a correspondent, we review a variety of factors relating to the prospective correspondent, including the correspondent’s experience in the securities industry, its financial condition and the personal backgrounds of the key principals of the firm. We seek to establish relationships with correspondents whose management teams and operations we believe will be successful in the long-term, so that we may benefit from increased clearing volume and margin lending activity as the businesses of our correspondents grow.

Strategic acquisitions

We have engaged in a number of acquisitions that have facilitated our ability to expand our client base and provide leading-edge technology infrastructure as well as to open international markets, positioning us to pursue a strategy of combining our increasingly global securities offerings with enhanced technology offerings on a multi-instrument, multi-currency, international platform. To date, none of our acquisitions have exceeded the defined significant subsidiary thresholds pursuant to Section 1-02(w) of SEC Regulation S-X.

On November 2, 2009, PWI, together with PFSI, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Broadridge Financial Solutions, Inc. (“Broadridge”) and its wholly owned subsidiary Ridge Clearing & Outsourcing Solutions, Inc. (“Ridge”) to acquire substantially all of Ridge’s contracts with its securities clearing clients. Under the terms of the Asset Purchase Agreement, management estimates the Company

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will pay between $45 million and $54 million in total consideration (the “Purchase Price”)to Broadridge consisting of (a) the Seller Note payable by PWI bearing interest at an annual rate equal to 90-day LIBOR plus 5.5%, and (b) PWI Common Stock equal to the lesser of (i) the number of shares of PWI Common Stock equal to the quotient of one third of the Purchase Price divided by the volume weighted-average selling price of PWI Common Stock over the 10 trading day period immediately prior to the closing, (ii) the number of shares of PWI Common Stock equal to 9.9% of the issued and outstanding shares of PWI as of the close of business on the business day immediately prior to the closing, or (iii) 2,517,451 shares of PWI Common Stock. The specific amount of such consideration will be determined immediately prior to closing pursuant to an agreed formula based upon the revenues attributable to the contracts being purchased by PFSI. The allocation of the consideration between the Seller Note and the PWI Common Stock will also be determined prior to the closing of the transaction. The Purchase Price will be subject to certain adjustments post-closing upon the occurrence of agreed upon events.

Concurrent with entering into the Asset Purchase Agreement, PWI and Broadridge entered into a ten-year master services agreement (the “Outsourcing Agreement”). Under the Outsourcing Agreement, Ridge will provide certain securities processing and back-office services to PFSI. This agreement will include selective processing services for the existing securities processing operations and back-office functions for PFSI, PFSC and PFSL, as well as selective processing services related to the clearing client contracts acquired by PFSI from Ridge. The provision of services under the Outsourcing Agreement is conditioned upon finalization of certain service level agreements, receipt of regulatory approvals and the closing of the transaction under the Asset Purchase Agreement. Additionally, during the term of the Outsourcing Agreement and for one year thereafter, Broadridge has agreed not to compete with the Company with respect to the Company’s correspondent clearing services, except in limited cases.

Concurrent with the closing of the transaction, the parties will enter into a number of ancillary agreements, including a Joint Selling Agreement and a Stockholder’s and Registration Rights Agreement.

The Joint Selling Agreement will be entered into by Broadridge, Ridge, PWI and PFSI and will have a term concurrent with the term of the Outsourcing Agreement. Under the Joint Selling Agreement, the parties will engage in activities to offer, in the case of PFSI, Ridge’s self-clearing and securities processing solutions, and in the case of Ridge, PFSI and its affiliates’ correspondent clearing solutions, and will mutually agree to fee arrangements with respect to activities contemplated by the Joint Selling Agreement.

The Stockholder’s and Registration Rights Agreement will restrict the transfer of the PWI Common Stock to be received as a portion of the consideration for a period of one year from the closing of the transaction. Thereafter, Broadridge will be entitled to one demand registration right and piggy back registration rights, subject to customary terms and conditions. In addition, following expiration of the one-year restricted period, Broadridge will be entitled to sell the PWI Common Stock as permitted under SEC Rule 144. In the event PWI redeems or repurchases any of its Common Stock, if necessary, it will repurchase the PWI Common Stock on a pro rata basis on the same terms and conditions so that Broadridge’s beneficial ownership of PWI Common Stock will not exceed 9.9% of PWI’s issued and outstanding Common Stock following any such repurchases or redemptions.

In addition, the Asset Purchase Agreement contemplates PWI raising $50 million in additional regulatory capital with respect to its operations pertaining to the correspondent clearing contracts to be acquired. In the event PWI does not have more attractive resources available to provide these funds, Broadridge has agreed to lend, under certain circumstances, this amount to PWI pursuant to an eighteen-month subordinated note (the “Backstop Note”) payable by PWI and bearing interest at an annual rate equal to 90-day LIBOR plus 14%.

The Seller Note and, if utilized, the Backstop Note, will be subordinated to PWI bank debt and be subject to customary subordination provisions. Therefore, among other things, in the event there is a payment default, or other event of default that would permit acceleration of PWI bank debt, payment on the Seller Note and, if utilized, the Backstop Note, will be blocked for up to 270 days in any twelve-month period.

In November 2007, our subsidiary Penson GHCO acquired all of the assets of FCG, an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and paid approximately $9.4 million in cash, subject to a reconciliation to reported actual net income for the period ended November 30,

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2008, as defined in the purchase agreement and approximately 150,000 shares of common stock valued at $2.2 million to the previous owners of FCG. In addition, the Company agreed to pay an annual earnout in cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. The Company paid approximately $8.7 million related to the first year of the earnout period. The Company did not make an earnout payment related to the second year of the earnout period. The Company finalized the acquisition valuation during the third quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. The financial results of FCG have been included in the Company’s consolidated financial statements since the November 30, 2007 acquisition closing date. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

In November 2006, the Company entered into a definitive agreement to acquire the partnership interests of Chicago-based GHCO, a leading international futures clearing and execution firm. The Company closed the transaction on February 16, 2007 and paid $27.9 million, including cash and approximately 139,000 shares of common stock valued at $3.9 million to the previous owners of GHCO. In addition, the Company agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase agreement executed with the previous owners of GHCO. The Company did not make an earnout payment related to the first and second years of the integrated Penson GHCO business. Goodwill of approximately $2.8 million and intangibles of approximately $1.0 million were recorded in connection with the acquisition. The assets and liabilities acquired as well as the financial results of Penson GHCO have been included in the Company’s consolidated financial statements since the February 16, 2007 acquisition closing date.

In November 2006, the Company acquired the clearing business of Schonfeld Securities LLC (“Schonfeld”), a New York based securities firm. The Company closed the transaction in November 2006 and in January 2007, the Company issued approximately 1.1 million shares of common stock valued at $28.3 million to the previous owners of Schonfeld as partial consideration for the assets acquired of which approximately $14.8 million was recorded as goodwill and $13.5 million as intangibles. In addition, the Company agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the asset purchase agreement, for the acquired business. The Company successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007. A payment of approximately $26.6 million was paid in connection with the first year earnout that ended May 31, 2008 and approximately $25.5 million was paid in connection with the second year of the year earnout that ended May 31, 2009. At December 31, 2009, a liability of approximately $8.5 million was accrued as a result of the third year of the earnout ending May 31, 2010. This balance is included in other liabilities in the condensed consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets.

Competition

The market for securities clearing and margin lending services is highly competitive. We expect competition to continue and intensify in the future. We encounter direct competition from firms that offer services to direct access and online brokers. Some of these competitors include Goldman Sachs Execution & Clearing, L.P.; Pershing LLC, a member of BNY Securities Group; National Financial Services LLC, a Fidelity Investments company; Merrill Lynch & Co., Inc., a subsidiary of Bank of America; MF Global Ltd. (formerly Man Financial) and RJ O’Brien & Associates LLC. We also encounter competition from other clearing firms that provide clearing and execution services to the securities industry. Most of our competitors are affiliated with large financial institutions.

We believe that the principal competitive factors affecting the market for our clearing and margin lending services are breadth of services, technology, financial strength, client service and price. Based on management’s experience, we believe that we presently compete effectively with respect to most of these factors.

Some of our competitors have significantly greater financial, technical, marketing and other resources than we have. Some of our competitors offer a wider range of services and products than we offer and have greater name recognition and more extensive client bases. These competitors may be able to respond more quickly to new or

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evolving opportunities, technologies and client requirements than we can and may be able to undertake more extensive promotional activities and offer more attractive terms to clients. Recent advancements in computing and communications technology are substantially changing the means by which securities transactions are effected and processed, including more access online to a wide variety of services and information, and have created a demand for more sophisticated levels of client service. The provision of these services may entail considerable cost without an offsetting increase in revenues. Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties or may consolidate to enhance their services and products. New competitors or alliances among competitors may emerge and they may acquire significant market share. Additionally, large firms that currently perform their own clearing functions may decide to start marketing their clearing services to other firms.

In addition to companies that provide clearing services to our target markets, we are subject to the risk that one or more of our correspondents may elect to perform their clearing functions themselves. The option to convert to self-clearing operations may be attractive due to the fact that as the transaction volume of the correspondent increases, the cost of implementing the necessary infrastructure for self-clearing may eventually be offset by the elimination of per-transaction processing fees that would otherwise be paid to a clearing firm. Additionally, performing their own clearing services allows self-clearing firms to retain customer free credit balances and securities for use in margin lending activities. In order to make a clearing arrangement with us more attractive to these high-volume broker-dealers, we may offer such firms transaction volume discounts or other incentives.

Intellectual property and other proprietary rights

Despite the precautions we take to protect our intellectual property rights, it is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe upon our proprietary rights. It is also possible that third parties may independently develop technologies similar to ours. It may be difficult for us to police unauthorized use of our intellectual property. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.

We have not incurred significant liabilities related to the use of our intellectual property in the past, however, we cannot assure you that claims of infringement of other parties’ proprietary rights or invalidity (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us in the future. Any such claims, with or without merit, could be time consuming to defend, result in costly litigation, divert management’s attention and resources or require us to enter into royalty or licensing agreements.

Government regulation

The securities and financial services industries generally are subject to extensive regulation in the U.S. and elsewhere. As a matter of public policy, regulatory bodies in the U.S. and the rest of the world are charged with, among other things, safeguarding the integrity of the securities and other financial markets and with protecting the interests of customers participating in those markets, not with protecting the interests of creditors or the shareholders of regulated entities (such as Penson).

In the U.S., the securities and futures industry is subject to regulation under both federal and state laws. At the federal level, the SEC regulates the securities industry, while the CFTC regulates the futures industry. These federal agencies along with NYSE, FINRA, NFA, the various stock and futures exchanges and other self regulatory organizations (“SROs”) require strict compliance with their rules and regulations. Companies that operate in these industries are subject to regulation concerning many aspects of their business, including trade practices, capital structure, record retention, money-laundering prevention, and the supervision of the conduct of directors, officers and employees. Failure to comply with any of these laws, rules or regulations could result in censure, fines, the issuance of cease-and-desist orders, the suspension or termination the operations of the Company or the suspension or disqualification of our directors, officers or employees. In the ordinary course of our operations, we and some of our officers and other employees have been subject to claims arising from the violation of such laws, rules and regulations.

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As a registered broker-dealer, PFSI is required by law to belong to the Securities Investor Protection Corporation (“SIPC”). In the event of a member’s insolvency, the SIPC Fund provides protection for customer accounts up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances.

In addition, we have subsidiaries in the U.K., Australia and Canada that are involved in the securities and financial services industries and may expand our business into other countries in the future. To expand our services internationally, we will have to comply with the regulatory controls of each country in which we conduct business.

The securities and financial services industry in many foreign countries is heavily regulated. The varying compliance requirements of these different regulatory jurisdictions and other factors may limit our ability to expand internationally. Due to its focus on technology products, which are generally not subject to the regulatory regimes applicable to securities trading, Penson Asia is not subject to many of the same restrictions that apply to our U.K., Australia and Canada subsidiaries.

The regulatory environment in which we operate is subject to change. Additional regulation, changes in existing laws and rules, or changes in interpretations or enforcement of existing laws and rules often directly affect the method of operation and profitability of securities firms.

Regulation of clearing activities

We provide clearing services in the U.S., Canada, Australia and Europe through our subsidiaries. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than brokers that rely on others to perform those functions. Errors in performing clearing functions, including clerical, technological and other errors related to the handling of funds and securities held by us on behalf of customers and broker-dealers, could lead to censures, fines or other sanctions imposed by applicable regulatory authorities as well as losses and liability in related lawsuits and proceedings brought by our clients, the customers of our clients and others. Due to our provision of futures in addition to securities clearing services, we are also subject to additional CFTC, NFA and futures exchange regulations. As a result, we must comply with an increased amount of regulatory requirements and face additional liabilities if we are not able to comply with the regulatory environment.

Regulation of securities lending and borrowing

We engage in securities lending and borrowing services with other broker-dealers by lending the securities that we hold for our correspondents and their customers to other broker-dealers, by borrowing securities from other broker-dealers to facilitate our customer transaction activity, or by borrowing securities from one broker-dealer and lending the same securities to another broker-dealer. Within the U.S., these types of securities lending and borrowing arrangements are governed by the SEC and the rules of the Federal Reserve. The following is what we believe to be a descriptive summary of some important SEC and Federal Reserve rules that govern these types of activities, but it is not intended to be an exhaustive list of the regulations that govern these types of activities.

Our securities lending and borrowing activities are primarily, although not exclusively, transacted through our U.S. broker-dealer subsidiary, which is subject to the SEC’s net capital rule and customer protection rule. The net capital rule, which specifies minimum net capital requirements for registered broker-dealers, is designed to ensure that broker-dealers will have adequate resources, including a percentage of liquid assets, to fund expenses of a self or court supervised liquidation. See “Business — Government regulation” and “Regulatory capital requirements.” While the net capital rule is designed to ensure that the broker-dealer has adequate resources to pay liquidation expenses, the objective of the SEC’s customer protection rule is to ensure that investment property of the firm’s customers will be available to be distributed to customers in liquidation. The customer protection rule operates to protect both customer funds and customer securities. To protect customer securities, the customer protection rule requires that broker-dealers promptly obtain possession or control of customers’ fully-paid securities free of any lien. However, broker-dealers may lend or borrow customers’ securities purchased on margin or customers’ fully paid securities, if the broker-dealer provides collateral exceeding the market value of the securities it borrowed and makes certain other disclosures to the customer. With respect to customer funds, the customer protection rule requires broker-dealers to make deposits into an account held only for the benefit of customers (“reserve account”) based on its computation of the reserve formula. The reserve formula requires that broker-dealers compare the amount of funds it has received from customers or through the use of their securities (“credits”) to the amount of

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funds the firm has used to finance customer activities (“debits”). In this manner, the customer protection rule ensures that the broker-dealer’s securities lending and borrowing activities do not impact the amount of funds available to customers in the event of liquidation.

SEC Rules 8c-1 and 15c2-1 under the Exchange Act (the “hypothecation rules”) set forth requirements relating to the borrowing or lending of customers securities. The hypothecation rules prohibit us from borrowing or lending customers securities in situations where (1) the securities of one customer will be held together with securities of another customer, without first obtaining the written consent of each customer; (2) the securities of a customer will be held together with securities owned by a person or entity that is not a customer; or (3) the securities of a customer will be subject to a lien for an amount in excess of the aggregate indebtedness of all customers’ securities.

Regulation T was issued by the Federal Reserve pursuant to the Exchange Act in part to regulate the borrowing and lending of securities by brokers-dealers, as well as to regulate the extension of credit by broker-dealers. With respect to securities borrowing and lending, Regulation T requires that a borrowing or lending of securities by a broker-dealer be for a “proper purpose,” i.e. for the purpose of making delivery of the securities in the case of short sales, failure to receive securities required to be delivered, or other similar situations. If a broker-dealer reasonably anticipates a short sale or fail transaction, a borrowing may be made by the broker-dealer up to one settlement cycle in advance of trade date.

Regulation T also regulates payment requirements for transactions in customer cash accounts and the level of credit extended in customer margin accounts. A broker-dealer may extend credit to a customer in a margin account only against collateral consisting of cash or margin-eligible securities, as defined in the Exchange Act or “margin securities,” as defined in Regulation T. Under Regulation T, the current required initial margin for a long position in a margin equity security is 50 percent of the current market value of the security. The required margin for a short position is 150 percent of the current market value of the security. Maintenance margin requirements are set in accordance with the rules of the SROs. However, we may require the deposit of a higher percentage of the value of equity securities purchased on margin. Securities borrowed transactions are extensions of credit in that the securities lender generally receives cash collateral that exceeds the market value of the securities that were lent. In the National Securities Markets Improvements Act of 1996, the U.S. Congress amended section 7(c) of the Exchange Act to exempt certain broker-dealers from the Federal Reserve’s credit regulations. Recently, the SEC and other SROs have approved new rules permitting portfolio margining that have the effect of permitting increased margin on securities and other assets held in portfolio margin accounts relative to non-portfolio accounts. We began offering portfolio margining to our clients in the second quarter of 2007 and have 613 portfolio margining accounts as of December 31, 2009.

With respect to such securities borrowing and lending, Regulation SHO issued under the Exchange Act generally prohibits, among other things, a broker-dealer from accepting a short sale order unless either the broker-dealer has already borrowed the security, has entered into a bona-fide arrangement to borrow the security or has “reasonable grounds” to believe that the security can be borrowed so that it can be delivered on the date delivery is due and has documented compliance with this requirement. Rule 204 under the Exchange Act requires broker-dealers and clients to make delivery on short sales effected in the U.S. no later than T+3. Under Rule 204, a clearing broker-dealer that does not purchase or borrow securities to cover any fail position as of the opening of trading on T+4 is subject to a borrowing penalty for each security that the clearing-broker fails to deliver (subject to the allocation provision noted below). The borrowing penalty will apply until the clearing broker-dealer purchases a sufficient amount of the security to make full delivery on the fail position and that purchase clears and settles. If a clearing broker-dealer becomes subject to the borrowing penalty, the penalty will prohibit the clearing broker-dealer from effecting short sales for its own account or for that of any correspondent broker-dealer or customer unless the clearing broker-dealer has borrowed the securities in question or has entered into a bona-fide arrangement to borrow the securities. Clearing broker-dealers are permitted to reasonably allocate the close-out requirement to a correspondent broker-dealer that is responsible for the fail position. Accordingly, if we have a fail position that we are unable to timely cover, or where the fail position was the responsibility of one of our correspondent broker-dealers and we cannot allocate the close-out responsibility to it, we would be subject to the borrowing penalty. We could remain subject to the borrowing penalty until such time as we have purchased a sufficient amount of the security to make full delivery on the fail position and that purchase has cleared and settled, which generally is three business days after the purchase. Due to the requirements of Rule 204, our costs associated with securities

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borrowings to facilitate customer short selling may continue to increase and the scope of our securities lending business may significantly decrease, which may adversely affect our operations and financial condition.

Failure to maintain the required net capital, accurately compute the reserve formula or comply with Regulation T, portfolio margining rules or Regulation SHO may subject us to suspension or revocation of registration by the SEC and suspension or expulsion by NYSE, FINRA and other regulatory bodies and, if not cured, could ultimately require our U.S. broker-dealer subsidiary’s liquidation. A change in the net capital rule, the customer protection rule, Regulation T or the portfolio margining rules or the imposition of new rules could adversely impact our ability to engage in securities lending and borrowing.

Regulation of internet activities

Our business, both directly and indirectly, relies extensively on the Internet and other electronic communications gateways. To date, the use of the Internet has been relatively free from regulatory restraints. However, the governmental agencies within the U.S. and elsewhere are beginning to address regulatory issues that may arise in connection with the use of the Internet. Accordingly, new regulations or interpretations may be adopted that change our own and our correspondents’ abilities to transact business through the Internet or other electronic communications gateways.

Regulatory capital requirements

As a registered broker-dealer and member of NYSE and FINRA, PFSI is subject to the SEC’s net capital rule. The net capital rule, which specifies minimum net capital requirements for registered broker-dealers, is designed to measure the general financial integrity and liquidity of a broker-dealer and requires that at least a minimum part of its assets be kept in relatively liquid form. Among deductions from net capital are adjustments that are commonly called “haircuts,” which reflect the possibility of a decline in the market value of firm inventory prior to disposition.

Failure to maintain the required net capital would require us to cease securities activities during any period where we did not meet minimum levels of net capital and may subject us to suspension or revocation of registration by the SEC and suspension or expulsion by NYSE, FINRA and other regulatory bodies and, if not cured, could ultimately require liquidation of our U.S. clearing operations. The net capital rule prohibits payments of dividends, redemption of stock, the prepayment of subordinated indebtedness and the making of any unsecured advance or loan to a stockholder, employee or affiliate, if such payment would reduce our net capital below required levels. Finally, NYSE and FINRA rules prevent a broker-dealer from expanding its business or permit NYSE or FINRA to require reductions in the broker-dealer’s business for broker-dealers experiencing financial or operational difficulties.

The net capital rule also requires notice to regulators with respect to certain capital withdrawals and provides that the SEC may restrict any capital withdrawal, including the withdrawal of equity capital, or unsecured loans or advances to stockholders, employees or affiliates, if such capital withdrawal, together with all other net capital withdrawals during a 30-day period, exceeds 30% of excess net capital and the SEC concludes that the capital withdrawal may be detrimental to the financial integrity of the broker-dealer. In addition, the net capital rule provides that the total outstanding principal amount of a broker-dealer’s indebtedness under specified subordination agreements, the proceeds of which are included in its net capital, may not exceed 70% of the sum of the outstanding principal amount of all subordinated indebtedness included in net capital, par or stated value of capital stock, paid in capital in excess of par, retained earnings and other capital accounts for a period in excess of 90 days.

A change in the net capital rule, the imposition of new rules or any unusually large charges against net capital could limit some of our operations that require the intensive use of capital and also could restrict our ability to withdraw capital from PFSI, which in turn could limit our ability to pay dividends, repay or repurchase debt, including the 8.00% Senior Convertible Notes due 2014, or repurchase shares of outstanding stock. A significant operating loss or any unusually large charge against net capital could adversely affect our ability to expand or even maintain our present levels of business.

Our U.K. subsidiary is subject to FSA rules that require it to maintain adequate financial resources (including both capital resources and liquidity resources) in order to meet its liabilities as they fall due. The current capital

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resources requirement for the subsidiary is approximately £4.6 million although the capital resources requirement will vary depending on the current expenditure, liabilities and risks incurred or assumed. Capital resources may be constituted by eligible share capital and eligible subordinated debt. The subsidiary must constantly monitor compliance with its financial resource requirements, regularly submit financial reports to the FSA (monthly) and report any breach of the financial resource requirements to the FSA. A breach of the financial resource requirements may result in disciplinary action against the subsidiary for which it may receive a financial penalty, or where the breach is serious, a suspension or cessation of the subsidiary’s business and a withdrawal of the subsidiary’s authorization to conduct investment business in whole or in part. The imposition of FSA disciplinary sanctions, the temporary suspension of business or the partial revocation of the subsidiary’s authorization to conduct investment business may severely damage the reputation of the subsidiary and result in diminution of earnings. The revocation of the subsidiary’s authorization to conduct investment business in the U.K. may result in a discontinuation of our U.K. operations and the loss of its revenues.

PFSC is a member of the IIROC, an approved participant with the Montreal Exchange, a participating organization of the Toronto Stock Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems. PFSC is subject to rules, including those of the IIROC, relating to the maintenance of capital. The IIROC regulates the maintenance of capital by member broker-dealers by requiring that broker-dealers periodically calculate their risk adjusted capital (“RAC”) in accordance with a prescribed formula which is intended to ensure that members will be in a position to meet their liabilities as they become due.

A member’s RAC is calculated by starting with its net allowable assets, which are assets that are conservatively valued with emphasis on liquidity, and excluding assets that cannot be disposed of in a short time frame or whose current realizable value is not readily known, net of all liabilities, and deducting the applicable minimum capital and margin requirements, adding tax recoveries, if any, and subtracting the member’s securities concentration charge.

Furthermore, the IIROC rules provide for an early warning system which is designed to provide advance warning of a member encountering financial difficulties. Various parameters based on prescribed calculations involving the member’s RAC are designed to identify members with capital adequacy problems. If any of the parameters are violated, several sanctions or restrictions are imposed on the member. These sanctions, which may include the early filing of a monthly financial report, a written explanation to the IIROC from the Chief Executive Officer and Chief Financial Officer, a description of the resolution, or an on-site visit by an examiner, are designed to reduce further financial deterioration and prevent a subsequent capital deficiency.

Failure of a member to maintain the required risk adjusted capital as calculated in accordance with applicable IIROC requirements can result in further sanctions such as monetary penalties, suspension or other sanctions, including expulsion of the member.

PFSA holds an Australian Financial Services License and is a market participant of the ASE and a clearing participant of the Australian Clearing House (“ACH”). As such, PFSA is subject to the rules established by the ASE and ACH governing the minimum risk based capital requirements for participants in the ASE and ACH. The ASE and ACH capital requirements establish minimum core liquid capital requirements and minimum requirements for a participant’s liquid capital as compared to a number of different risk based metrics which make up the participant’s total risk requirement. The risk requirements vary depending on the operations undertaken by the participant. A participant’s core liquid capital is based principally on a participant’s equity and retained profits, while the liquid capital adjusts core liquid capital to take account of reserves and in certain cases subordinated debt and preferred stock. Currently, participants, including PFSA, are required to maintain a core liquid capital of at least AUD$2,000,000. The core liquid capital requirement for self clearing participants of ASE is currently scheduled to increase to AUD$5,000,000 in July 2010 while the requirement for general clearing participants, such as PFSA, will increase to AUD$10,000,000 in July 2010. Participants of the ASE are also required to maintain a ratio of their liquid capital to total risk requirements of greater than 1.2. Participants of the ACH are required to maintain a ratio of total option risk margin to liquid capital of less than 2.0, in the event that this ratio is 2.0 or more the participant is required to deposit funds to reduce the ratio and such funds may then not be withdrawn until the ratio is below 1.6. PFSA is currently in compliance with the minimum capital requirements established by the ASE and ACH which are applicable to it and regularly calculates its core liquid capital, liquid capital, total risk requirements and other

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applicable metrics to monitor ongoing compliance with the minimum capital requirements established by the ASE and ACH.

Our futures clearing business is subject to the capital and segregation rules of the CFTC, NFA, and futures exchanges in the U.S. and the FSA and futures exchanges in the U.K. Our acquisition of GHCO and FCG substantially increased our exposure to these rules as well as the capital requirements of applicable exchanges and clearing houses of which we are a clearing member. If we fail to maintain the required capital or violate the customer segregation rules, we may be subject to monetary fines and the suspension or revocation of our license to clear futures contracts and carry customer accounts. Any interruption in our ability to continue this business would impact our revenues and profitability.

The regulatory capital requirements that affect our regulated subsidiaries are stringent and subject to significant and uncontrollable change. Our inability to comply with any of the current requirements or any future changes to these requirements could cause us to suffer significant financial loss.

Margin risk management

Our margin lending activities expose our capital to significant risks. These risks include, but are not limited to, absolute and relative price movements, price volatility and changes in liquidity, over which we have virtually no control.

We attempt to minimize the risks inherent in our margin lending activities by retaining in our margin lending agreements the ability to adjust margin requirements as needed and by exercising a high degree of selectivity when accepting new correspondents. When determining whether to accept a new correspondent, we evaluate, among other factors, the correspondent’s experience in the industry, its financial condition and the background of the principals of the firm. In addition, we have multiple layers of protection, including the balances in customers’ accounts, correspondents’ commissions on deposit, clearing deposits and equity in correspondent firms, in the event that a correspondent or one of its customers does not deliver payment for our services. We also maintain a bad debt reserve.

Our customer agreements and fully-disclosed clearing agreements require industry arbitration in the event of a dispute. Arbitration is generally less expensive and more timely than dispute resolution through the court system. Although we attempt to minimize the risk associated with our margin lending activities, there is no assurance that the assumptions on which we base our decisions will be correct or that we are in a position to predict factors or events which will have an adverse impact on any individual customer or issuer, or the securities markets in general.

Local regulations

PFSI is a broker-dealer authorized to conduct business in all 50 states, the District of Columbia and Puerto Rico under applicable local securities regulations. PFSC is authorized to conduct business in all major provinces and territories in Canada.

Employees

As of December 31, 2009, we had 1,031 employees, of whom 459 were employed in clearing operations, 320 in technology support and development, 54 in sales and marketing and 198 in finance and administration. Of our 1,031 employees, 722 are employed in the U.S., 58 in the U.K., 220 in Canada, 10 in Asia and 21 in Australia. Our employees are not represented by any collective bargaining organization or covered by a collective bargaining agreement. We believe that our relationship with our employees is good.

Our continued success depends largely on our ability to attract and retain highly skilled personnel. Competition for such personnel is intense, and should we be unable to recruit and retain the necessary personnel, the development, sale and performance of new or enhanced services would likely be delayed or prevented. In addition, difficulties we encounter in attracting and retaining qualified personnel may result in higher than anticipated salaries, benefits and recruiting costs, which could adversely affect our business.

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Public reporting

Once filed with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at www.penson.com. The information found on our website is not part of this or any other report we file with or furnish to the SEC. Any materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The SEC maintains a website at www.sec.gov that contains the reports we file with the SEC. We also make available on our website, free of charge, our Code of Business Conduct and Ethics, our Corporate Business Principles and Governance Guidelines, and the charters for our Nominating and Corporate Governance, Audit and Compensation Committees. Any stockholder who so requests may obtain a printed copy of any of these documents, free of charge, by writing to us at 1700 Pacific Avenue, Suite 1400, Dallas, Texas 75201, Attention: Corporate Secretary.

Item 1A.   Risk Factors

Many factors could have an effect on PWI’s financial condition, cash flows and results of operations. We are subject to various risks resulting from changing economic, environmental, political, industry, business and financial conditions. The principal factors are described below.

Risks related to our business and our industry

We face substantial competition from other securities and commodities processing and infrastructure firms, which could harm our financial performance and reduce our market share.

The market for securities and futures processing infrastructure products and services is rapidly evolving and highly competitive. We compete with a number of firms that provide similar products and services to our market. Our competitors include Goldman Sachs Execution & Clearing, L.P.; Pershing LLC, a member of BNY Securities Group; National Financial Services LLC, a Fidelity Investments company; Merrill Lynch & Co., Inc., a subsidiary of Bank of America; MF Global Ltd. (formerly Man Financial) and RJ Obrien & Associates LLC. Many of our competitors have significantly greater financial, technical, marketing and other resources than we have. Some of our competitors also offer a wider range of services and financial products than we do and have greater name recognition and more extensive client bases than ours. These competitors may be able to respond more quickly to new or changing opportunities, technologies and client requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to clients and adopt more aggressive pricing policies than ours. There can be no assurance that we will be able to compete effectively with current or future competitors. If we fail to compete effectively, our market share could decrease and our business, financial condition and operating results could be materially harmed.

Increased competition has contributed to the decline in net clearing revenue per transaction that we have experienced in recent years and may continue to create downward pressure on our net clearing revenue per transaction. In the past, we have responded to the decline in net clearing revenue by reducing our expenses, but if the decline continues, we may be unable to reduce our expenses at a comparable rate. Our failure to reduce expenses comparably would reduce our profit margins.

We depend on a limited number of clients for a significant portion of our clearing revenues.

Our ten largest current clients accounted for approximately 28.5% of our total net revenues for the year ended December 31, 2009, while no client accounted for more than 5.9% of net revenues. The loss of even a small number of these clients at any one time could cause our revenues to decline. Our clearing contracts generally have an initial term of two years, and allow the correspondent to cancel our services upon providing us with 45 days of notice, in most cases after the expiration of the fixed term. Many of our futures clearing contracts with correspondents may be terminated with a 30-day notice. Our clearing contracts with these correspondents can also terminate automatically if we are suspended from any of the national exchanges of which we are a member for failure to comply with the rules or regulations thereof. In past periods, we have experienced temporary declines in our revenues when large clients have switched to other service providers. There can be no assurance that our largest clients will continue to use our products and services.

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Our clearing operations could expose us to legal liability for errors in performing clearing functions and improper activities of our correspondents.

Any intentional failure or negligence in properly performing our clearing functions or any mishandling of funds and securities held by us on behalf of our correspondents and their customers could lead to censures, fines or other sanctions by applicable authorities as well as actions in tort brought by parties who are financially harmed by those failures or mishandlings. Any litigation that arises as a result of our clearing operations could harm our reputation and cause us to incur substantial expenses associated with litigation and damage awards that could exceed our liability insurance by unknown but significant amounts. In the normal course of business, we purchase and sell securities as both principal and agent. If another party to the transaction fails to fulfill its contractual obligations, we may incur a loss if the market value of the security is different from the contract amount of the transaction.

In the past, clearing firms in the U.S. have been held liable for failing to take action upon the receipt of customer complaints, failing to know about the suspicious activities of correspondents or their customers under circumstances where they should have known, and even aiding and abetting, or causing, the improper activities of their correspondents. Although our correspondents provide us with indemnity under our contracts, we cannot assure you that our procedures will be sufficient to properly monitor our correspondents or protect us from liability for the acts of our correspondents under current laws and regulations or that securities industry regulators will not enact more restrictive laws or regulations or change their interpretations of current laws and regulations. If we fail to implement proper procedures or fail to adapt our existing procedures to new or more restrictive regulations, we may be subject to liability that could result in substantial costs to us and distract our management from our business.

Continuing low, short-term interest rates have negatively impacted the profitability of our margin lending business.

The profitability of our margin lending activities depends to a great extent on the difference between interest income earned on margin loans and investments of customer cash and the interest expense paid on customer cash balances and borrowings. While they are not linearly connected, if short-term interest rates fall, we generally expect to receive a smaller gross interest spread, causing the profitability of our margin lending and other interest-sensitive revenue sources to decline. Recent decreases in short-term interest rates have contributed to a decrease in our profitability and will continue to do so while lower rates continue to be in effect. Assuming constant customer balances, we expect that a 25 basis point change in the federal funds rate would affect our pre-tax income by approximately $1 million per quarter.

Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. In particular, decreases in the federal funds rate by the Federal Reserve usually lead to decreasing interest rates in the U.S., which generally lead to a decrease in the gross spread we earn. This is most significant when the federal funds rate is on the lower end of its historical range, as it is today. Interest rates in Canada and Europe are also subject to fluctuations based on governmental policies and economic factors and these fluctuations could also affect the profitability of our margin lending operations in these markets.

Our margin lending business subjects us to credit risks and if we are unable to liquidate an investor’s securities when the margin collateral becomes insufficient, the profitability of our business may suffer.

We provide margin loans to investors; therefore, we are subject to risks inherent in extending credit. As of December 31, 2009, our receivables from customers and correspondents were $1.1 billion, which predominantly reflected margin loans. Our credit risks include the risk that the value of the collateral we hold could fall below the amount of an investor’s indebtedness. This risk is especially great when the market is rapidly declining. Agreements with margin account investors permit us to liquidate their securities with or without prior notice in the event that the amount of margin collateral becomes insufficient. Despite those agreements and our house policies with respect to margin, which may be more restrictive than is required under applicable laws and regulations, we may be unable to liquidate the customers’ securities for various reasons, including:

•  the pledged securities may not be actively traded;

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•  there may be an undue concentration of securities pledged; or

•  an order to stop transfer by the issuer of securities may be issued with regard to pledged securities.

In the U.S., our margin lending is subject to the margin rules of the Federal Reserve, NYSE and FINRA, whose rules generally permit margin loans of up to 50% of the value of the securities collateralizing the margin account loan at the time the loan is made, subject to requirements that the customer deposit additional securities or cash in its accounts so that the customer’s equity in the account is at least 25% of the value of the securities in the account. We are also subject to rules and regulations in Canada and the U.K. with regard to our margin lending activities in those markets. In certain circumstances, we may provide a higher degree of margin leverage to our correspondents with respect to their proprietary trading businesses than otherwise permitted by the margin rules described above based on an exemption for correspondents that purchase a class of preferred stock of PFSI. In addition, for our portfolio margining accounts, we are able to extend substantially more credit to approved customers pursuant to a risk formula adopted by the SEC. As a result, we may increase the risks otherwise associated with margin lending with respect to these correspondent and customer accounts.

We rely, in part, on third parties to provide and support the software and systems we use to provide our services. Any interruption or cessation of service by these third parties could harm our business.

We have contracted with SunGard Data Systems and IBM Canada Limited (“IBM Canada”) to provide a major portion of the software and systems necessary for our execution and clearing services. On September 25, 2008, we entered into an amendment to our current agreement with SunGard that requires SunGard to provide a dedicated processing platform for the processing of our U.S. clearing operations. Our current agreement with SunGard will expire in February, 2014, but can be terminated by SunGard upon written notice in the event that we breach the agreement. Our current agreement with IBM Canada expires in August, 2010; however, we have an option to retain IBM Canada’s services for up to six months beyond that date to allow us to efficiently transition the processing of our Canadian clearing and execution operations to Broadridge, should we elect to exercise that option. The agreement with IBM Canada can be terminated by IBM Canada upon written notice in the event that we breach the agreement. In the past, we have experienced limited processing delays, occasional hardware and software outages with SunGard and IBM Canada. Any major interruption in our ability to process our transactions through SunGard or IBM Canada would harm our relationships with our clients and impact our growth. We also license many additional generally available software packages. Failures in any of these applications could also harm our business operations. We rely on similar systems for other subsidiaries, problems with each of which could cause similar problems and results in us suffering significant financial harm.

We rely on SunGard, IBM Canada and other third parties to enhance their current products, develop new products on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. If we consummate the Broadridge transaction, we will rely on Broadridge to be able to provide similar future product developments for our U.S., U.K. and Canadian securities operations. See “Business — Strategic Acquisitions” for a description of the proposed Broadridge transaction. Certain of our subsidiaries will continue to use SunGard to provide the software and systems necessary to provide services to our clients even if the Broadridge transaction is consummated, including Penson GHCO and PFSA. SunGard’s provision of a dedicated processing platform allowed us to process our increased U.S. trade volume in 2009 and we anticipate it will be able to do so in 2010 and beyond. If in the future, however, enhancements or upgrades of third-party software and systems cannot be integrated with our technologies or if the technologies on which we rely fail to respond to industry standards or technological changes, we may be required to redesign our proprietary systems. Software products may contain defects or errors, especially when first introduced or when new versions or enhancements are released. The inability of third parties to supply us with software or systems on a reliable, timely basis or to allocate sufficient capacity to meet our trading volume requirements could harm relationships with our clients and our ability to achieve our projected level of growth.

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Our anticipated transition of certain support services to Ridge and Broadridge may involve unforeseen delays, costs or technological complications. If we are unable to transition our services efficiently to Broadridge, we may experience interruptions or difficulties with respect to the services Broadridge is expected to provide.

We have signed an outsourcing agreement with Broadridge whereby Broadridge is expected to replace IBM Canada, SunGard and our PFSL service providers as our provider of certain software and systems necessary for our execution and clearing services. See “Business — Strategic Acquisitions” for a description of the proposed Broadridge transaction. We anticipate transitioning to those software and systems over the next one to two years. Any delays, technology issues or unexpected costs could substantially impair our ability to continue to provide clearing and execution services to our clients that could cause us to suffer material financial loss. In addition, there can be no guarantees that we will not experience additional issues with respect to processing delays, hardware and software outages, or other service issues with Broadridge than we experience with our current providers. Any additional processing delays or issues we experience could impair our ability to provide services to our clients, which could impact our growth and cause significant financial loss.

Our products and services, and the products and services provided to us by third parties, may infringe upon intellectual property rights of third parties, and any infringement claims could require us to incur substantial costs, distract our management or prevent us from conducting our business.

Although we attempt to avoid infringing upon known proprietary rights of third parties and typically incorporate indemnification provisions in any agreements where we license third party software, we are subject to the risk of claims alleging infringement of third-party proprietary rights. If we infringe upon the rights of third parties through use of our proprietary software or software licensed to us by third parties, we may be unable to obtain licenses to use those or similar rights on commercially reasonable terms. In either of these events, we would need to undertake substantial reengineering to continue offering our services and may not be successful. In addition, any claim of infringement could cause us to incur substantial costs defending the claim, even if the claim is invalid, and could distract our management from our business. Furthermore, a party making such a claim could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from conducting our business.

We may not be able to protect our intellectual property rights against unauthorized use and infringement by third parties, and our failure to do so may weaken our competitive position, and any legal claim we seek to pursue may require us to incur substantial cost and distract management and us from conducting our business.

Despite the precautions we take to protect our intellectual property rights, it is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe upon our proprietary rights. It is also possible that third parties may independently develop technologies similar to ours. It may be difficult for us to police unauthorized use of our intellectual property. We cannot be certain that our intellectual property rights are sufficiently protected against unauthorized use and infringement by third parties, and our failure to do so may weaken our competitive position. In addition, litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets, which may require us to incur substantial cost and distract our management and us from conducting our business. See also “Business — Intellectual property and other proprietary rights.”

If our clients’ account information is misappropriated, we may be held liable or suffer harm to our reputation.

Recent increased public attention regarding the corporate use of personal information has led to increasingly complex legislation and regulations intended to strengthen data protection, information security and consumer privacy. The law in these areas is not consistent or settled. While we employ what we believe to be a high degree of care in protecting our clients’ confidential information, if third parties penetrate our network security or otherwise misappropriate our clients’ personal or account information, or we were to otherwise release any such confidential information without our clients’ permission, unintentionally or otherwise, we could be subject to liability arising

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from claims related to impersonation or similar fraud claims or other misuse of personal information, as well as suffer harm to our reputation. To effect secure transmissions of confidential information over computer systems and the Internet, we rely on encryption and authentication technology. While we periodically test the integrity and security of our systems, we cannot assure you that our efforts to maintain the confidentiality of our clients’ account information will be successful.

Internet security concerns have been a barrier to the acceptance of online trading, and any well-publicized compromise of security could hinder the growth of the online brokerage industry. We cannot assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise or breach of the technology we use to protect clients’ transactions and account data. We may incur significant costs to protect against the threat of network or Internet security breaches or to alleviate problems caused by such breaches.

We may be subject to material litigation proceedings that could cause us significant reputational harm and financial loss.

We are subject from time-to-time to legal claims or regulatory matters involving stockholder, customer, and other issues on a global basis, based on our activity or the activity of our correspondents. As described in “Item 3: Legal Proceedings,” we are currently engaged in a number of litigation matters. These matters include our involvement in a bankruptcy proceeding concerning Sentinel Management Group, Inc. (“Sentinel”), which is described in detail in Item 3. The bankruptcy trustee in this matter is seeking the return of pre- and post-bankruptcy petition transfers made to Penson GHCO and Penson Financial Futures, Inc. (“PFFI”), a subsidiary of PWI, to which we have objected. We intend to vigorously defend this position, but we are not able to predict the outcome of this dispute at this time. In the event that Penson GHCO and PFFI are obligated to return a substantial portion of previously distributed funds to the Sentinel estate, it could have a material adverse effect on our operating results for the period in which the payment is made.

Litigation generally is subject to inherent uncertainties, and unfavorable rulings can occur. An unfavorable ruling in any matter could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from providing clearing or technology services. If we were to receive an unfavorable ruling in a matter, our business and results of operations could suffer significant reputational and financial loss.

Any slowdown or failure of our computer or communications systems could subject us to liability for losses suffered by our clients or their customers.

Our services depend on our ability to store, retrieve, process and manage significant databases, and to receive and process securities and futures orders through a variety of electronic media. Our principal computer equipment and software systems, including backup systems, are maintained at various locations in Texas, Chicago, New Jersey, Toronto, Montreal and London. Our systems or any other systems in the trading process could slow down significantly or fail for a variety of reasons, including:

•  computer viruses or undetected errors in our internal software programs or computer systems;

•  inability to rapidly monitor all intraday trading activity;

•  inability to effectively resolve any errors in our internal software programs or computer systems once they are detected;

•  heavy stress placed on our systems during peak trading times; or

•  power or telecommunications failure, fire, tornado or any other natural disaster.

While we continue to monitor system loads and performance and implement system upgrades to handle predicted increases in trading volume and volatility, we cannot assure you that we will be able to accurately predict future volume increases or volatility or that our systems will be able to accommodate these volume increases or volatility without failure or degradation. Any significant degradation or failure of our computer systems, communications systems or any other systems in the clearing or trading processes could cause the customers of our clients to suffer delays in the execution of their trades. These delays could cause substantial losses for our clients or

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their customers and could subject us to claims and losses, including litigation claiming fraud or negligence, damage our reputation, increase our service costs, cause us to lose revenues or divert our technical resources.

If our operational systems and infrastructure fail to keep pace with our anticipated growth, we may experience operating inefficiencies, client dissatisfaction and lost revenue opportunities.

We have experienced significant growth in our client base, business activities and the number of our employees. The growth of our business and expansion of our client base has placed, and will continue to place, a significant strain on our management and operations. We believe that our current and anticipated future growth will require the implementation of new and enhanced communications and information systems, the training of personnel to operate these systems and the expansion and upgrade of core technologies. While many of our systems are designed to accommodate additional growth without redesign or replacement, we may nevertheless need to make significant investments in additional hardware and software to accommodate growth. In addition, we cannot assure you that we will be able to accurately predict the timing or rate of this growth or expand and upgrade our systems and infrastructure on a timely basis.

In addition, the scope of procedures for assuring compliance with applicable rules and regulations has changed as the size and complexity of our business has increased. We have implemented and continue to implement formal compliance procedures to respond to these changes and the impact of our growth. Our future operating results will depend on our ability:

•  to improve our systems for operations, financial controls, and communication and information management;

•  to refine our compliance procedures and enhance our compliance oversight; and

•  to recruit, train, manage and retain our employees.

Our growth has required and will continue to require increased investments in management personnel and systems, financial systems and controls and office facilities. In the absence of continued revenue growth, the costs associated with these investments would cause our operating margins to decline from current levels. We cannot assure you that we will be able to manage or continue to manage our recent or future growth successfully. If we fail to manage our growth, we may experience operating inefficiencies, dissatisfaction among our client base and lost revenue opportunities.

A failure in the operational systems of third parties could significantly disrupt our business and cause losses.

We face the risk of operational failure, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other financial intermediaries we use to facilitate our securities transactions. In recent years, there has been significant consolidation among clearing agents, exchanges, clearing houses and other financial intermediaries, which has increased our exposure to operational failure, termination or capacity constraints of the particular financial intermediaries that we use and could affect our ability to find adequate and cost-effective alternatives in the event of any such failure, termination or constraint. Any such failure, termination or constraint could adversely affect our ability to effect transactions, service our clients and manage our exposure to risk.

If we are unable to respond to the demands of our existing and new clients, our ability to reach our revenue goals or maintain our profitability could be diminished.

The global securities and futures industry is characterized by increasingly complex infrastructures and products, new and changing business models and rapid technological changes. Our clients’ needs and demands for our products and services evolve with these changes. For example, an increasing number of our clients are from market segments including hedge funds, algorithmic traders and direct access customers who demand increasingly sophisticated products. Our future success will depend, in part, on our ability to respond to our clients’ demands for new services, products and technologies on a timely and cost-effective basis, to adapt to technological advancements and changing standards and to address the increasingly sophisticated requirements of our clients.

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Our existing correspondents may choose to perform their own clearing services as their operations grow, in which case we would lose the revenues generated by such correspondents.

We market our clearing services to our existing correspondents on the strength of our ability to process transactions and perform related back-office functions at a lower cost than the correspondents could perform these functions themselves. As our correspondents’ operations grow, they often consider the option of performing clearing functions themselves, in a process referred to in the securities industry as “self-clearing.” As the transaction volume of a correspondent grows, the cost of implementing the necessary infrastructure for self-clearing may eventually be offset by the elimination of per-transaction processing fees that would otherwise be paid to a clearing firm. Additionally, performing their own clearing services allows self-clearing firms to retain their customers’ margin balances, free credit balances and securities for use in margin lending activities. If our clients choose to self-clear, we would lose their revenue and our business could be adversely affected.

Our ability to sell our services and grow our business could be significantly impaired if we lose the services of key personnel.

Our business is highly dependent on a small number of key executive officers. We have entered into compensation agreements with various personnel, but we do not have employment agreements with most of our employees. The loss of the services of any of the key personnel or the inability to identify, hire, train and retain other qualified personnel in the future could harm our business. Competition for key personnel and other highly qualified technical and managerial personnel in the securities and futures processing infrastructure industry is intense, and there is no assurance that we would be able to recruit management personnel to replace these individuals in a timely manner, or at all, on acceptable terms.

We may face risks associated with potential future acquisitions that could reduce our profitability or hinder our ability to successfully expand our operations.

Over the past few years, our business strategy has included engaging in acquisitions which have facilitated our ability to provide technology infrastructure and establish a presence in international markets. We have completed four acquisitions since 2006, including the acquisitions of GHCO and FCG in 2007 that significantly expanded our futures business, and anticipate completing the acquisition of substantially all of Ridge’s contracts with its securities clearing clients in the first or second quarter of 2010. In the future, we plan to acquire additional businesses or technologies as part of our growth strategy. We cannot assure you that we will be able to successfully integrate future acquisitions, which potentially involve the following risks:

•  diversion of management’s time and attention to the negotiation of the acquisitions;

•  difficulties in assimilating acquired businesses, technologies, operations and personnel including, but not limited to, the increased trade volume of acquired businesses;

•  the need to modify financial and other systems and to add management resources;

•  assumption of unknown liabilities of the acquired businesses;

•  unforeseen difficulties in the acquired operations and disruption of our ongoing business;

•  dilution to our existing stockholders due to the issuance of equity securities that may make it difficult for us to raise capital from equity financing in the future;

•  possible adverse short-term effects on our cash flows or operating results; and

•  possible accounting charges due to impairment of goodwill or other purchased intangible assets.

Failure to manage our acquisitions to avoid these risks could harm our business, financial condition and operating results.

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Our inability to obtain credit on favorable terms could significantly restrict our business activities

Our $100.0 million senior secured revolving credit facility is currently scheduled to expire in April 2010. There is no guarantee that we will be able to renew or amend this credit facility, obtain a new senior secured credit facility or otherwise obtain credit from an alternative source on favorable terms. Failure to renew or amend our existing credit facility or obtain suitable alternative funding may significantly curtail our business activities, which would have a materially adverse effect on our financial condition.

Covenants in our credit agreement will restrict our business in many ways.

Our senior secured revolving credit facility includes various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things: incur additional indebtedness, pay dividends on our capital stock or redeem, repurchase or retire our capital stock or prepay certain indebtedness, make investments, make capital expenditures, engage in certain transactions with our affiliates, enter into acquisitions, consolidate, merge or sell assets, incur liens and change the business conducted by us and our subsidiaries.

In addition, the facility contains covenants that require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may not be able to meet those tests. A breach of any of these covenants could result in a default under such credit facility. Upon the occurrence of an event of default under such senior secured revolving credit facility, the lenders could elect to declare all amounts outstanding under such credit facility to be immediately due and payable and terminate all commitments to extend further credit. If the lenders under our senior secured revolving credit facility accelerated the repayment of borrowings, we may not have sufficient assets to repay the amounts outstanding thereunder which could have a material adverse effect on us.

Our revenues may decrease due to declines in trading volume, market prices, liquidity of securities markets or proprietary trading activity.

We generate revenues primarily from transaction processing fees we earn from our clearing operations and interest income from our margin lending activities and interest earned by investing customers’ cash. These revenue sources are substantially dependent on customer trading volumes, market prices and liquidity of securities markets. Over the past several years the U.S. and foreign securities markets have experienced significant volatility. Sudden or gradual but sustained declines in market values of securities can result in:

•  reduced trading activity;

•  illiquid markets;

•  declines in the market values of securities carried by our customers and correspondents;

•  the failure of buyers and sellers of securities to fulfill their settlement obligations;

•  reduced margin loan balances of investors; and

•  increases in claims and litigation.

The occurrence of any of these events would likely result in reduced revenues and decreased profitability from our clearing operations and margin lending activities.

Certain of our subsidiaries engage in proprietary trading activities. Please see our discussion in “Business — Securities-processing” and “Proprietary trading.” Historically these activities have accounted for a very small portion of our total revenues and net income. With respect to most of such trading, we endeavor to limit our exposure to markets through, among other means, employing hedging strategies and by limiting the period of time that we have market exposure. However, we are not completely protected against market risk from such trading at any particular point in time and proprietary trading risks could adversely impact operating results in a specific financial period.

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Continued market instability could negatively affect our operations and financial condition.

As a financial services provider, our business is sensitive to conditions in the global financial markets and economic conditions generally, as well as to the soundness of particular financial services institutions with which we transact business. Among other things, national and international markets have continued through 2009 to suffer significant turmoil initially caused by a sharp downturn in markets for mortgage-related securities and non-investment grade debt securities and loans. Several large financial institutions including, without limitation, commercial banks, insurance companies, and brokerage firms, have either filed for bankruptcy or been the subject of governmental intervention in the form of loans, equity infusions or direct government ownership in receivership. Others have been sold in whole or in part to third parties. Financial services institutions that deal with each other are often interrelated as a result of trading, clearing, counterparty, or other relationships. As a result, a default or failure by, or even concerns about the stability or liquidity of, one or more financial services institutions could lead to significant market-wide liquidity problems, or losses or defaults by other institutions, including us. In addition, our operations may suffer to the extent that ongoing market volatility causes individuals and institutional traders and other market participants to curtail or forego trading activities, which could adversely affect our operations and financial conditions.

Our significant non-U.S. operation exposes us to global exchange rate fluctuations that could impact our profitability.

We are exposed to market risk through commercial and financial operations. Our market risk consists principally of exposure to fluctuations in currency exchange and interest rates. As we conduct a significant portion of our operations outside the U.S., fluctuations in currencies of other countries, especially the British Pound, the Euro and the Canadian dollar, may materially affect our operating results. As we continue to expand our business operations globally, our exposure to fluctuations in currencies of other countries will continue to increase.

We do not typically use financial instruments to hedge our income statement exposure to foreign currency fluctuations. A substantial portion of our revenues and cost of operating expenses are denominated in currencies other than the U.S. dollar. In our consolidated financial statements, we translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period and financial position based on the exchange rate at the end of that period. During times of a strengthening U.S. dollar, at a constant level of business, our reported international revenues, earnings, assets and liabilities will be reduced because the local currency will translate into fewer U.S. dollars.

Given the volatility of exchange rates, we may not be able to manage our currency transaction and/or translation risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to significant additional risk.

The growth of electronic trading and our increasing provision of direct market access to our correspondents may subject us to additional market exposure.

The growth of electronic trading and the introduction of new products and technologies presents certain additional challenges. As we increasingly allow direct market access to our correspondents through our systems and as we allow certain of our correspondents to clear or execute some or all of their trades through third parties, we may face additional potential liabilities due to our inability to monitor all of the trading activities of our correspondents. If we cannot adequately assess the risks involved with all of the trading activities of our correspondents, we may be unable to protect ourselves from those risks.

Requirements to close out fails resulting from short sales could increase our costs and adversely affect our securities lending business.

We are subject to Rule 204 under the Exchange Act, which requires clearing broker-dealers to make delivery on short sales effected in the U.S. no later than T+3. Under Rule 204, clearing broker-dealers that do not purchase or borrow securities to cover certain fail positions as of the opening of trading on T+4 are subject to a borrowing penalty for each security that the clearing-broker fails to deliver (subject to the allocation provision noted below). The borrowing penalty, which requires pre-borrowing in connection with short sales, will apply until the clearing

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broker purchases a sufficient amount of the security to make full delivery on the fail position and that purchase clears and settles. If a clearing broker becomes subject to the borrowing penalty, the penalty will prohibit the clearing broker from effecting short sales in that security for its own account or for that of any introducing broker or customer unless the clearing broker has borrowed the securities in question or has entered into a bona fide arrangement to borrow the securities. Clearing broker-dealers are permitted to reasonably allocate the close-out requirement to an introducing broker that is responsible for the fail position. As the clearing broker-dealer, if we are unable to timely cover a fail position and cannot allocate the close-out responsibility to the broker-dealer that is responsible for the fail position, we would be subject to the borrowing penalty until such time as we have purchased a sufficient amount of the security to make full delivery on the fail position and that purchase has cleared and settled, which generally is three business days after the purchase. Foreign jurisdictions in which we operate also have restrictions on short selling. Because of the requirements of Rule 204 and foreign restrictions on short selling, our costs associated with handling short sales, including the costs associated with closing out fail positions and borrowing securities to facilitate short selling may increase significantly. In addition, if we become subject to the borrowing penalty, our customers may be less likely to use our securities lending department for short sale transactions and the scope of our securities lending business may significantly decrease, which will adversely affect our operations and financial conditions.

On February 24, 2010, the SEC adopted additional restrictions on short selling stock. These restrictions, known as the alternative uptick rule, restrict short selling in securities that have dropped more than 10% in one day. These changes and potential future regulatory changes related to short-selling of securities may have a negative impact on our ability to earn the spreads we have historically collected.

General economic and political conditions and broad trends in business and finance that are beyond our control may contribute to reduced levels of activity in the securities markets, which could result in lower revenues from our business operations.

Trading volume, market prices and liquidity are affected by general national and international economic and political conditions and broad trends in business and finance that result in changes in volume and price levels of securities transactions. These factors include:

•  the availability of short-term and long-term funding and capital;

•  the level and volatility of interest rates;

•  legislative and regulatory changes;

•  currency values and inflation; and

•  national, state and local taxation levels affecting securities transactions.

These factors are beyond our control and may contribute to reduced levels of activity in the securities markets. Our largest source of revenues has historically been our revenues from clearing operations, which are largely driven by the volume of trading activities of the customers of our correspondents and proprietary trading by our correspondents. Our margin lending revenues and our technology revenues are also impacted by changes in the trading activities of our correspondents and clients. Accordingly, any significant reduction in activity in the securities markets would likely result in lower revenues from our business operations.

Our quarterly revenue and operating results are subject to significant fluctuations.

Our quarterly revenue and operating results may fluctuate significantly in the future due to a number of factors, including:

•  changes in the proportion of clearing operations revenues and interest income;

•  the lengthy sales and integration cycle with new correspondents;

•  the gain or loss of business from a correspondent;

•  reductions in per-transaction clearing fees;

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•  changes in bad debt expense from margin lending as compared to historical levels;

•  changes in the rates we charge for margin loans, changes in the rates we pay for cash deposits we hold on behalf of our correspondents and their customers and changes in the rates at which we can invest such cash deposits;

•  changes in the market price of securities and our ability to manage related risks;

•  fluctuations in overall market trading volume;

•  the relative success and/or failure of third party clearing competitors, many of which have increasingly larger resources than we have as a result of recent consolidation in our industry;

•  the relative success and/or failure of third party technology competitors including, without limitation, competitors to our Nexa business;

•  our ability to manage personnel, overhead and other expenses; and

•  the amount and timing of capital expenditures.

Our expense structure is based on historical expense levels and the expected levels of demand for our clearing, margin lending and other services. If demand for our services declines, we may be unable to adjust our cost structure on a timely basis in order to sustain our profitability.

Due to the foregoing factors, period-to-period comparisons of our historical revenues and operating results are not necessarily meaningful, and you should not rely upon such comparisons as indicators of future performance. We also cannot assure you that we will be able to sustain the rates of revenue growth we have experienced in the past, improve our operating results or sustain our profitability on a quarterly basis.

Our involvement in futures and options markets subjects us to risks inherent in conducting business in those markets.

We principally clear futures and options contracts on behalf of our correspondents and their respective customers. Trading in futures and options contracts is generally more highly leveraged than trading in other types of securities. This additional leverage increases the risk associated with trading in futures and options contracts, which in turn raises the risk that a correspondent, introducing broker, or customer may not be able to fully repay its creditors, including us, if it experiences losses in its futures and options contract trading business. In 2007, we acquired the partnership interests of GHCO, and the limited liability company interests of FCG, which substantially increased our operations in the futures markets. Because of this increased activity, we will face more exposure to the risks associated with the clearing of futures contracts.

We may not be able to or determine not to hedge our foreign exchange risk.

As a foreign exchange trade dealer, we enter into currency transactions with certain of our institutional clients or other institutions using modeled prices that we determine and may seek to hedge our risk by executing similar transactions on the various exchanges or electronic communication networks of which we are a participant. While we expect to be able to limit our risk in our transactions with our clients through hedging transactions on exchanges or ECNs or through other counterparty relationships, there is no guarantee that we will be able to enter into these transactions at prices similar to those which we entered into with our clients. In addition, while we may intend to enter into the hedging transactions after we enter into a transaction with our client or the relevant institution, it is possible that currency prices could fluctuate before we are able to enter into such hedging transactions or, for other reasons, we may determine not to hedge such risk.

The securities and futures businesses are highly dependent on certain market centers that may be targets of terrorism.

Our business is dependent on exchanges and market centers being able to process trades. Terrorist activities in September 2001 caused the U.S. securities markets to close for four days. This impacted our revenue and

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profitability for that period of time. If future terrorist incidents cause interruption of market activity, our revenues and profits may be negatively impacted.

Risks related to government regulation

All aspects of our business are subject to extensive government regulation. If we fail to comply with these regulations, we may be subject to disciplinary or other action by regulatory organizations, and we could suffer significant reputational and financial loss.

The securities industry in the U.S. is subject to extensive regulation under both federal and state laws. In addition to these laws, we must comply with rules and regulations of the SEC, NYSE, FINRA, the CFTC, the NFA, various stock and futures exchanges, state securities commissions and other regulatory bodies charged with safeguarding the integrity of the securities markets and other financial markets and protecting the interests of investors participating in these markets. Broker-dealers and FCMs are subject to regulations covering all aspects of the securities and futures businesses, including:

•  sales methods;

•  trade practices among broker-dealers and FCMs;

•  use and safekeeping of investors’ funds and securities;

•  capital structure;

•  margin lending;

•  record keeping;

•  conduct of directors, officers and employees; and

•  supervision of investor accounts.

Our ability to comply with these regulations depends largely on the establishment and maintenance of an effective compliance system as well as our ability to attract and retain qualified compliance personnel. We could be subject to disciplinary or other actions due to claimed non-compliance with these regulations in the future and even for the claimed non-compliance of our correspondents with such regulations. If a claim of non-compliance is made by a regulatory authority, the efforts of our management could be diverted to responding to such a claim and we could be subject to a range of possible consequences, including the payment of fines and the suspension of one or more portions of our business. Additionally, our clearing contracts generally include automatic termination provisions which are triggered in the event we are suspended from any of the national exchanges of which we are a member for failure to comply with the rules or regulations thereof.

We and certain of our officers and employees have been subject to claims of non-compliance in the past, and may be subject to claims and legal proceedings in the future.

We also operate clearing and related businesses in the U.K., Canada and Australia and execute transactions in global markets. These non-U.S. businesses are also heavily regulated. To the extent that different regulatory regimes impose inconsistent or iterative requirements on the conduct of our business, we will face complexity and additional costs in our compliance efforts. In addition, as we expand into new non-U.S. markets with which we may have relatively less experience, there is a risk that our lack of familiarity with the regulations impacting such markets may affect our performance and results.

The regulatory environment in which we operate has experienced increasing scrutiny by regulatory authorities in recent years and further changes in legislation or regulations may affect our ability to conduct our business or reduce our profitability.

The legislative and regulatory environment in which we operate has undergone significant change in the past and may undergo further change in the future. The CFTC, SEC, NYSE, FINRA, NFA, various securities or futures exchanges and other U.S. and foreign governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations. These legislative and regulatory initiatives

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may affect the way in which we conduct our business and may make our business less profitable. Changes in the interpretation or enforcement of existing laws and regulations by those entities may also adversely affect our business. Certain regulatory authorities have been more likely in recent years to commence enforcement actions against companies in our industry and penalties and fines sought by certain regulatory authorities have increased substantially in recent years.

In addition, because our industry is heavily regulated, regulatory approval may be required prior to expansion of our business activities. We may not be able to obtain the necessary regulatory approvals for any desired expansion. Even if approvals are obtained, they may impose restrictions on our business and could require us to incur significant compliance costs or adversely affect the development of business activities in affected markets.

If we do not maintain the capital levels required by regulations, we may be subject to fines, suspension, revocation of registration or expulsion by regulatory authorities.

We are subject to stringent rules imposed by the SEC, NYSE, FINRA, and various other regulatory agencies which require broker-dealers to maintain specific levels of net capital. Net capital is the net worth of a broker-dealer, less deductions, for other types of assets including assets not readily convertible into cash and specified percentages of a broker-dealer’s proprietary securities positions. If we fail to maintain the required net capital, we may be subject to suspension or revocation of registration by the SEC and suspension or expulsion by NYSE and/or FINRA, which, if not cured, could ultimately lead to our liquidation. If the net capital rules are changed or expanded, or if there is an unusually large charge against our net capital, we might be required to limit or discontinue our clearing and margin lending operations that require the intensive use of capital. In addition, our ability to withdraw capital from our subsidiaries could be restricted, which in turn could limit our ability to pay dividends, repay or repurchase debt, including the notes, at the parent company level and redeem or purchase shares of our outstanding stock, if necessary. A large operating loss or charge against net capital could impede our ability to expand or even maintain our present volume of business.

Our futures clearing business is subject to the capital and segregation rules of the NFA and CFTC. Our 2007 acquisitions of GHCO and FCG substantially increased our exposure to these rules. If we fail to maintain the required capital, or if we violate the customer segregation rules, we may be subject to monetary fines, and the suspension or revocation of our license to clear futures contracts. Any interruption in our ability to continue this business would impact our revenues and profitability.

Outside of the U.S., we are subject to other regulatory capital requirements. Our U.K. subsidiary is subject to capital adequacy rules that require our subsidiary to maintain stockholders’ equity and qualifying subordinated loans at specified minimum levels. If we fail to maintain the required regulatory capital, we may be subject to fine, suspension or revocation of our license with the FSA. If our license is suspended or revoked or if the capital adequacy requirements are changed or expanded, we may be required to discontinue our U.K. operations, which could result in diminished revenues.

As a member of the IIROC, an approved participant with the Montreal Exchange, a participating organization with the Toronto Stock Exchange and a member of the TSX Venture Exchange and various Canadian alternative trading systems, PFSC is subject to the rules and policies of the IIROC and other rules relating to the maintenance of regulatory capital. Specifically, to ensure that the IIROC members will be able to meet liabilities as they become due, the IIROC requires its member broker-dealers to periodically calculate their risk adjusted capital in accordance with a prescribed formula. If PFSC fails to maintain the required risk adjusted capital, it may be subject to monetary sanctions, suspensions or other sanctions, including expulsion as a member. If PFSC is sanctioned or expelled or if the risk adjusted capital requirements are changed or expanded, PFSC may be required to discontinue operations in Canada, which could result in diminished revenues.

PFSA holds an Australian Financial Services License and is a market participant of the ASE and a clearing participant of the ACH. As such, PFSA is subject to the rules established by the ASE and ACH governing the minimum risk based capital requirements for participants in the ASE and ACH. The ASE and ACH capital requirements establish minimum core liquid capital requirements and minimum requirements for a participant’s liquid capital as compared to a number of different risk based metrics which make up the participant’s total risk requirement. The risk requirements vary depending on the operations undertaken by the participant. A participant’s

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core liquid capital is based principally on a participant’s equity and retained profits, while the liquid capital adjusts core liquid capital to take account of reserves and in certain cases subordinated debt and preferred stock. If PFSA should fail to comply with the requirements of these various measures of capital, its revenues could be substantially impacted.

In addition, some of the investments we make in our business may impact our regulatory capital. We have made large investments into Nexa and expect to continue to do so in the future. Investments in non-regulated subsidiaries and increases in illiquid assets, including unsecured customer accounts decrease the capital available for our regulated subsidiaries. If we experience increased levels of unsecured and partially secured accounts in the future, we could suffer significant financial loss.

Procedures and requirements of the USA PATRIOT Act may expose us to significant costs or penalties.

As participants in the financial services industry, our subsidiaries are subject to laws and regulations, including the USA PATRIOT Act of 2001, which require that they know certain information about their customers and monitor transactions for suspicious financial activities. The cost of complying with the PATRIOT Act and related laws and regulations is significant. We may face particular difficulties in identifying our international customers, gathering the required information about them and monitoring their activities. We face risks that our policies, procedures, technology and personnel directed toward complying with the PATRIOT Act are insufficient and that we could be subject to significant criminal and civil penalties due to noncompliance. Such penalties could have a material adverse effect on our business, financial condition and operating results and cash flows.

Risks related to our corporate structure

Our discontinued operations expose us to legal and other risks.

In May, 2006, we completed the disposal by split off of certain non-core business operations that were placed into the subsidiaries of a newly formed holding company known as SAMCO Holdings, Inc. (SAMCO). Our then existing stockholders exchanged $10.4 million of SAMCO net assets and $7.3 million of cash for 1.0 million Penson shares. The split off transaction was structured to be tax free to the Company and our stockholders, and the net assets were distributed at net book value. Though there was substantial common ownership between the Company and SAMCO, we did not retain any ownership interest in SAMCO, which is operated independently. Although the split off transaction occurred over three years ago, we may incur future liabilities related to the operations of the SAMCO entities. Due to the Company’s indirect ownership of the SAMCO entities prior to our initial public offering we may be exposed to additional liabilities beyond what we may ordinarily encounter in our typical customer relationships.

Provisions in our certificate of incorporation and bylaws and under Delaware law may prevent or frustrate a change in control or a change in management that stockholders believe is desirable.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•  a classified board of directors;

•  limitations on the removal of directors;

•  advance notice requirements for stockholder proposals and nominations of directors at meetings of our stockholders; and

•  the inability of stockholders to act by written consent or to call special meetings.

In addition, our Board of Directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used to institute a rights plan, or a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors.

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The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation. In addition, absent approval of our Board of Directors, our bylaws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our Company.

Risks related to our requirements as a public company

Our stockholders could be harmed if our management and larger stockholders use their influence in a manner adverse to other stockholders’ interests.

At the date of this report, our executive officers, directors and 5% stockholders beneficially own, in the aggregate, approximately 50.1% of our outstanding common stock. As a result, these stockholders may have the ability to control all fundamental matters affecting us, including the election of the majority of the board of directors and approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in our control even if beneficial to stockholders. The interests of these stockholders with respect to such matters could conflict with the interests of public stockholders.

The price of our common stock may be volatile.

Since the completion of our initial public offering in May 2006, the price at which our common stock has traded has been subject to significant fluctuation. The price of our common stock may continue to be volatile in the future and could be subject to wide fluctuations in response to:

•  reductions in market prices or volume;

•  changes in securities or other government regulations;

•  quarterly variations in operating results;

•  our technological capabilities to accommodate any future growth in our operations or clients;

•  announcements of technological innovations, new products, services, significant contracts, acquisitions or joint ventures by us or our competitors;

•  issuance and sales of our securities in financing transactions; and

•  changes in financial estimates and recommendations by securities analysts or our failure to meet or exceed analyst estimates.

As a result, shareholders may be unable to sell their stock at or above the price they paid for it.

Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to provide an attestation report as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We are continuously evaluating our internal controls over financial reporting in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”) and rules and regulations of the SEC there under, which we refer to as Section 404. While we have not identified material weaknesses to date, we may from time to time identify conditions that may result in material weaknesses.

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Item 1B.   Unresolved Staff Comments

None

Item 2.   Properties

Description of property

Our headquarters are located in Dallas, Texas, under a lease that expires in June 2016. This lease covers approximately 94,690 square feet at our headquarters, and our fixed rent is approximately $134,000 per month. We have one five-year option to extend the lease at the prevailing market rate. We sublease approximately 18,000 square feet of this space to SAMCO Holdings. In addition, our Canadian subsidiary leases approximately 42,420 square feet in the Canadian cities of Montreal and Toronto. We also lease additional office space at locations in California, Illinois, New York, Minnesota, Wisconsin, Texas, London, Hong Kong, Tokyo, Sydney and other locations to support our operations. We believe that our present facilities, together with our current options to extend lease terms and occupy additional space, are adequate for our current needs.

Item 3.   Legal Proceedings

In re Sentinel Management Group, Inc. is a Chapter 11 bankruptcy case filed on August 17, 2007 in the U.S. Bankruptcy Court for the Northern District of Illinois by Sentinel. Prior to the filing of this action, Penson GHCO and PFFI held customer segregated accounts with Sentinel totaling approximately $36 million. Sentinel subsequently sold certain securities to Citadel Equity Fund, Ltd. and Citadel Limited Partnership. On August 20, 2007, the Bankruptcy Court authorized distributions of 95 percent of the proceeds Sentinel received from the sale of those securities to certain FCM clients of Sentinel, including Penson GHCO. This distribution to the Penson GHCO and PFFI customer segregated accounts along with a distribution received immediately prior to the bankruptcy filing totaled approximately $25.4 million.

On May 12, 2008, a committee of Sentinel creditors, consisting of a majority of non-FCM creditors, together with the trustee appointed to manage the affairs and liquidation of Sentinel (the “Sentinel Trustee”), filed with the Court their proposed Plan of Liquidation (the “Committee Plan”) and on May 13, 2008 filed a Disclosure Statement related thereto. The Committee Plan allows the Sentinel Trustee to seek the return from FCMs, including Penson GHCO and PFFI, of a portion of the funds previously distributed to their customer segregated accounts. On June 19, 2008, the Court entered an order approving the Disclosure Statement over objections by Penson GHCO and others. On September 16, 2008, the Sentinel Trustee filed suit against Penson GHCO and PFFI along with several other FCMs that received distributions to their customer segregated accounts from Sentinel. The suit against Penson GHCO and PFFI seeks the return of approximately $23.6 million of post-bankruptcy petition transfers and $14.4 million of pre-bankruptcy petition transfers. The suit also seeks to declare that the funds distributed to the customer segregated accounts of Penson GHCO and PFFI by Sentinel are the property of the Sentinel bankruptcy estate rather than the property of customers of Penson GHCO and PFFI.

On December 15, 2008, over the objections of Penson GHCO and PFFI, the court entered an order confirming the Committee Plan, and the Committee Plan became effective on December 17, 2008. On January 7, 2009 Penson GHCO and PFFI filed their answer and affirmative defenses to the suit brought by the Sentinel Trustee. Also on January 7, 2009, Penson GHCO, PFFI and a number of other FCMs that had placed customer funds with Sentinel filed motions to withdraw the reference with the federal district court for the Northern District of Illinois, effectively asking the federal district court to remove the Sentinel suits against the FCMs from the bankruptcy court and consolidate them with other Sentinel related actions pending in the federal district court. On April 8, 2009, the Sentinel Trustee filed an amended complaint, which added a claim for unjust enrichment. Penson GHCO and PFFI’s response seeking to dismiss this claim was filed on May 8, 2009. On June 30, 2009, the Court denied the motion to dismiss without prejudice. The Court also held a preliminary pretrial hearing on June 30, 2009, and ordered that the first trial of the Sentinel Trustee’s claims against one FCM would commence on July 6, 2010, and the thirteen remaining trials would be scheduled at one month intervals thereafter. The trial of the Sentinel Trustee’s claims against Penson GHCO and PFFI is tentatively scheduled to proceed from September 20-23, 2010.

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On July 31, 2009, Penson GHCO and PFFI filed their motion for reconsideration of the Court’s order denying their motion to dismiss the unjust enrichment claim. On September 1, 2009, the Court denied the motion for reconsideration without prejudice. On September 11, 2009, Penson GHCO and PFFI filed their amended answer and amended affirmative defenses to the Sentinel Trustee’s amended complaint. On October 28, 2009, the federal district court for the Northern District of Illinois granted Penson GHCO, PFFI, and certain other FCM’s motions requesting removal of the matters referenced above from the bankruptcy court, thereby removing these matters to the federal district court. While the trial schedule referenced above is still pending, it may change given the granting of the motions removing these matters to the federal district court.

The Company believes that the Court was correct in ordering the prior distributions and Penson GHCO and PFFI intend to continue to vigorously defend their position. However, there can be no assurance that any actions by Penson GHCO or PFFI will result in a limitation or avoidance of potential repayment liabilities. In the event that Penson GHCO and PFFI are obligated to return all previously distributed funds to the Sentinel Estate, any losses the Company might suffer would most likely be partially mitigated as it is likely that Penson GHCO and PFFI would share in the funds ultimately disbursed by the Sentinel Estate.

Various Claimants v. Penson Financial Services, Inc., et al. On July 18, 2006, three claimants filed separate arbitration claims with the NASD (which is now known as FINRA) against PFSI related to the sale of certain collateralized mortgage obligations by SAMCO Financial Services, Inc. (“SAMCO Financial”), a former correspondent of PFSI, to its customers. In the ensuing months, additional arbitration claims were filed against PFSI and certain of our directors and officers based upon substantially similar underlying facts. These claims generally allege, among other things, that SAMCO Financial, in its capacity as broker, and PFSI, in its capacity as the clearing broker, failed to adequately supervise certain registered representatives of SAMCO Financial, and otherwise acted improperly in connection with the sale of these securities during the time period from approximately June, 2004 to May, 2006. Claimants have generally requested compensation for losses incurred through the depreciation in market value or liquidation of the collateralized mortgage obligations, interest on any losses suffered, punitive damages, court costs and attorneys’ fees. In addition to the arbitration claims, on March 21, 2008, Ward Insurance Company, Inc., et al, filed a claim against PFSI and Roger J. Engemoen, Jr., the Company’s Chairman of the Board, in the Superior Court of California, County of San Diego, Central District, based upon substantially similar facts. This case was filed after a FINRA arbitration panel had previously ruled against the claimant on substantially similar facts, but in that action, PFSI and Mr. Engemoen were not parties. Among other defenses asserted, the Company is seeking to have the court enforce the earlier arbitration panel determination.

Mr. Engemoen, the Company’s Chairman of the Board, is the Chairman of the Board, and beneficially owns approximately 52% of the outstanding stock, of SAMCO Holdings, Inc., the holding company of SAMCO Financial and SAMCO Capital Markets, Inc. (SAMCO Holdings, Inc. and its affiliated companies are referred to as the “SAMCO Entities”). Certain of the SAMCO Entities received certain assets from the Company when those assets were split-off immediately prior to the Company’s initial public offering in 2006 (the “Split-Off”). In connection with the Split-Off and through contractual and other arrangements, certain of the SAMCO Entities have agreed to indemnify the Company and its affiliates against liabilities that were incurred by any of the SAMCO Entities in connection with the operation of their businesses, either prior to or following the Split-Off. During the third quarter of 2008, the Company’s management determined that, based on the financial condition of the SAMCO Entities, sufficient risk existed with respect to the indemnification protections to warrant a modification of these arrangements with the SAMCO Entities, as described below.

On November 5, 2008, the Company entered into a settlement agreement with certain of the SAMCO Entities pursuant to which the Company received a limited personal guaranty from Mr. Engemoen of certain of the indemnification obligations of various SAMCO Entities with respect to claims related to the underlying facts described above, and, in exchange, the Company agreed to limit the aggregate indemnification obligations of the SAMCO Entities with respect to certain matters described above to $2,965,243. Unpaid indemnification obligations of $800,000 were satisfied prior to February 15, 2009. Of the $800,000 obligation, $86,000 was satisfied through a setoff against an obligation owed to the SAMCO Entities by PFSI, with the balance paid in cash. Of the remaining $2,165,243 indemnity obligation, $600,000 was paid to the Company prior to June 15, 2009 and the remainder was paid in December, 2009. Effective as of December 31, 2009, the Company and the SAMCO entities entered into an amendment to the settlement agreement, whereby SAMCO Holdings, Inc. agreed to pay an additional $133,333 on

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the last business day of each of the first six calendar months of 2010 (a total of $800,000). In each of January and February, 2010, SAMCO Holdings, Inc. paid $133,333 to the Company pursuant to the terms of the amendment to the settlement agreement. The SAMCO Entities remain responsible for the payment of their own defense costs and any claims from any third parties not expressly released under the settlement agreement, irrespective of amounts paid to indemnify the Company. The settlement agreement only relates to the matters described above and does not alter the indemnification obligations of the SAMCO Entities with respect to unrelated matters.

In the event the exposure of the Company with respect to these claims exceeds the agreed limits on the indemnification obligations of the SAMCO Entities, such excess amounts may be borne by the Company. While we believe we have good defenses, there can be no assurance that our defenses and indemnification protections will be sufficient to avoid all liabilities. Accordingly, to account for liabilities related to the aforementioned claims that may be borne by the Company, we recorded a pre-tax charge of $2.35 million in the third quarter of 2008. The Company will continue to monitor its financial exposure with respect to these matters and there can be no assurance that the Company’s ultimate costs with respect to these claims will not exceed the amount of this liability.

In the general course of business, the Company and certain of its officers have been named as defendants in other various pending lawsuits and arbitration and regulatory proceedings. These other claims allege violation of federal and state securities laws, among other matters. The Company believes that resolution of these claims will not result in any material adverse effect on its business, financial condition, or results of operation.

Item 4.   Reserved

PART II

Item 5.   Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market information

The Common Stock of the Company has been traded on the NASDAQ Global Select Market under the symbol PNSN since the Company’s initial public offering on May 16, 2006. Prior to that time there was no public market for the Company’s Common Stock or other securities.

The following table sets forth the high and low closing sales prices of our Common Stock, for the periods indicated.

	Price Range
	High		Low
2009
Quarter ended March 31, 2009	$	8.43	$	4.02
Quarter ended June 30, 2009	$	12.04	$	6.73
Quarter ended September 30, 2009	$	11.74	$	8.37
Quarter ended December 31, 2009	$	11.07	$	8.56
2008
Quarter ended March 31, 2008	$	14.26	$	8.15
Quarter ended June 30, 2008	$	13.61	$	9.37
Quarter ended September 30, 2008	$	19.11	$	10.69
Quarter ended December 31, 2008	$	13.48	$	4.98

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Holders

No shares of the Company’s preferred stock are issued and outstanding. As of February 26, 2010, there were 55 holders of record of our common stock. By including persons holding shares in broker accounts under street names, however, we estimate our shareholder base to be approximately 3,456 as of February 26, 2010.

Dividend policy

We currently intend to retain any earnings to develop and expand our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination with respect to the payment of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our operating results, financial condition and regulatory capital requirements, the terms of then-existing indebtedness, general business conditions and other factors our Board of Directors deems relevant.

Our Board of Directors may, at any time, modify or revoke our dividend policy on our common stock.

Under Delaware law, our Board of Directors may declare dividends only to the extent of our “surplus” (which is defined as total assets at fair market value minus total liabilities, minus statutory capital), or if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal years. The value of a corporation’s assets can be measured in a number of ways and may not necessarily equal their book value. The value of our capital may be adjusted from time to time by our Board of Directors but in no event will be less than the aggregate par value of our issued stock. Our Board of Directors may base this determination on our consolidated financial statements, a fair valuation of our assets or another reasonable method. Our Board of Directors will seek to assure itself that the statutory requirements will be met before actually declaring dividends. In future periods, our Board of Directors may seek opinions from outside valuation firms to the effect that our solvency or assets are sufficient to allow payment of dividends, and such opinions may not be forthcoming. If we sought and were not able to obtain such an opinion, we likely would not be able to pay dividends. In addition, pursuant to the terms of our preferred stock (were any to be issued), we are prohibited from paying a dividend on our common stock unless all payments due and payable under the preferred stock have been made.

PWI’s purchases of its equity securities

The table below sets forth the information with respect to purchases made by or on behalf of the Company of its common stock during the fourth quarter of the year ended December 31, 2009:

					Total Number of
					Shares Purchased as		Maximum Number of
	Total Number				Part of Publicly		Shares that May Yet be
	of Shares		Average Price		Announced Plans or		Purchased Under the Plans
Period	Purchased(a)		Paid per Share		Programs		or Programs(b)
October		10,036	$	9.70		—		483,366
November		6,031	$	9.49		—		494,062
December		9,056	$	9.08		—		516,371

(a)	Includes shares withheld to cover tax-withholding requirements related to the vesting of restricted stock units issued to employees pursuant to the Company’s shareholder-approved stock incentive plan.
(b)	Remaining shares represent the remaining dollar amount authorized divided by the average purchase price in the month.

Recent sales of unregistered securities

None

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Stock Performance Graph
Cumulative Total Return to Stockholders
Penson Worldwide, Inc., NASDAQ Composite Index and NASDAQ Financial Stocks Index
% Return to Stockholders, May 16, 2006 to December 31, 2009

Total Return Performance

This comparison is based on a return assuming $100 invested May 16, 2006 in Penson Worldwide, Inc. Common Stock, the NASDAQ Composite Index and the NASDAQ Financial Stocks Index, assuming the reinvestment of all dividends. May 16, 2006 is the date the Company’s Common Stock commenced trading on the NASDAQ Global Select Market.

The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

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Item 6.   Selected Financial Data

The following table sets forth summary consolidated financial data for our company for the periods indicated below. The summary consolidated statements of income data for the three years ended December 31, 2009 and the summary consolidated balance sheet data as of December 31, 2009 and 2008 has been derived from our audited consolidated financial statements included elsewhere in this document, and should be read in conjunction with the “Management’s discussion and analysis of financial condition and results of operations” section below and our consolidated financial statements and the notes included in this Annual Report on pages F-2 through F-39. The consolidated statements of income data for the years ended December 31, 2006 and 2005 and the consolidated balance sheet data as of December 31, 2007, 2006 and 2005, all of which are set forth below, are based on the Company’s historical audited consolidated financial statements and the underlying accounting records.

	Year Ended December 31,
	2009		2008		2007		2006		2005
	(In thousands, except per share data)
Consolidated statement of income data:
Net revenues	$	289,881	$	293,170	$	264,725	$	198,189	$	127,907
Total expenses(1)		264,045		276,521		222,767		160,611		123,229
Income from continuing operations before income taxes		25,836		16,649		41,958		37,578		4,678
Income tax expense		9,825		5,993		15,125		13,299		1,951
Income from continuing operations		16,011		10,656		26,833		24,279		2,727
Income from discontinued operations, net of tax(2)		—		—		—		243		177
Net income	$	16,011	$	10,656	$	26,833	$	24,522	$	2,904
Earnings per share — basic
Earnings per share from continuing operations	$	.63	$	.42	$	1.02	$	1.07	$	0.18
Earnings per share from discontinued operations		—		—		—		0.01		0.01
Earnings per share	$	.63	$	.42	$	1.02	$	1.08	$	0.19
Earnings per share — diluted
Earnings per share from continuing operations	$	.63	$	.42	$	1.00	$	1.05	$	0.16
Earnings per share from discontinued operations		—		—		—		0.01		0.01
Earnings per share	$	.63	$	.42	$	1.00	$	1.06	$	0.17
Weighted average shares outstanding — basic and diluted
Basic		25,373		25,217		26,232		22,689		15,185
Diluted		25,591		25,416		26,817		23,058		18,300

(1)

Results from 2009, 2008, 2007 and 2006 include $5.1 million, $4.5 million, $4.7 million and $3.1 million of compensation expense related to accounting for share-based payment awards that began January 1, 2006. Accordingly, 2009, 2008, 2007 and 2006 results may not be comparable to prior periods.

(2)

Concurrent with our public offering, we split off certain non-core business operations into SAMCO Holdings, a newly formed company which gives effect to a capital contribution to SAMCO in an amount equal to the difference between the net book value of the division to be split off, as of such date, and the value of the 1,041,667 shares of our common stock to be exchanged in the split off. Except as otherwise indicated, financial information presented sets forth the results of operations and balance sheet data of the entities split off as discontinued operations.

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	As of December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	48,643	$	38,825	$	120,923	$	103,054	$	99,506
Total assets		7,251,075		5,539,195		7,846,977		4,644,390		3,578,881
Notes payable		132,769		75,000		55,000		10,000		52,395
Total stockholders’ equity		298,902		264,467		265,428		211,784		89,952

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with Part II, Item 6 “Selected Financial Data” and our audited consolidated financial statements and the related notes included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors including the risks discussed in Item 1A “Risk Factors”, “Special Note Regarding Forward-Looking Statements” and elsewhere in this annual report on Form 10-K.

Market and Economic Conditions in 2009

The financial crisis of 2008 continued to have an effect on the securities and credit markets in 2009.

•  The Federal Reserve maintained its stimulative low interest rate policy. For all of 2009, the targeted federal funds rate was set at 0.25%. In 2008, the targeted federal funds rate fell from an average of 3.22% in the first quarter to an average of 1.06% in the fourth quarter, averaging 2.09% for the year.

•  After falling 25% from year end 2008, to a low of 6,547 in early March 2009, the Dow Jones Industrial Average rebounded 61%, to end 2009 at 10,428.

•  The VIX, the ticker symbol for the Chicago Board of Options Exchange Volatility Index, a popular measure of implied stock market volatility, fell fairly steadily. In December 2009, it averaged 21, down 60% from 52 in December 2008.

•  Short interest declined. The average number of shorted shares of New York Stock Exchange listed companies fell 7%, to 14.5 billion in 2009, from 15.6 billion in 2008.

•  Margin debt fell. Aggregate debits in securities margin accounts of New York Stock Exchange member organizations declined 30%, to $200.4 billion in 2009, from $285.2 billion in 2008.

•  There were no major regulatory changes that broadly affected the securities industry in 2009. However, government and regulatory officials in the U.S. did discuss increased restrictions on shorting stocks and sponsored access, and taxing securities transactions as well as raising taxes on capital gains.

Market and Economic Conditions in 2008

During 2008, financial and credit market dislocations, and the recession, caused increased volatility and rapid changes among a wide variety of financial indicators and markets:

•  The Federal Reserve lowered the targeted federal funds rate by approximately 400 basis points to approximately .25% at December 31, 2008 from 4.25% at December 31, 2007.

•  The VIX, the ticker symbol for the Chicago Board of Options Exchange Volatility Index, a popular measure of implied stock market volatility, reached an intraday high of more than 89 in October 2008, versus an average of about 19 since 1990.

•  In September and October of 2008, the U.S., U.K. and other countries implemented a series of temporary and other, more lasting restrictions on the short sales of shares of financial service companies.

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•  New York Stock Exchange short interest, which, as a percentage of total shares outstanding at month end, reached a high of 4.86 in July 2008, an increase of 43% from December 2007, and, following the implemented restrictions, declined 26%, to 3.59 in December 2008.

•  The Dow Jones Industrial Average closed at 8,778 on December 31, 2008, having previously reached a low of 7,392 in November 2008, from a high for the year of 13,338 in January 2008.

•  Consolidated NASDAQ trading volume increased 47%, to 2.3 trillion shares in 2008, from 1.5 trillion shares in 2007.

•  Margin debt on NYSE stocks declined 42%, to $187 billion in December 2008, from $323 billion in December 2007.

Overview

We are a leading provider of a broad range of critical securities and futures processing infrastructure products and services to the global financial services industry. Our products and services include securities and futures clearing and execution, financing and cash management technology and other related offerings, and we provide tools and services to support trading in multiple markets, asset classes and currencies.

Since starting our business in 1995 with three correspondents, we have grown to serve approximately 241 active securities clearing correspondents and 49 futures clearing correspondents as of December 31, 2009. Our net revenues were approximately $289.9 million in 2009, $293.2 million in 2008 and $264.7 million in 2007, and consist primarily of transaction processing fees earned from our clearing operations and net interest income earned from our margin lending activities, from investing customers’ cash and from stock lending activities. Our clearing and commission fees are based principally on the number of trades we clear. We receive interest income from financing the securities purchased on margin by the customers of our clients. We also earn licensing and development revenues from fees we charge to our clients for their use of our technology solutions.

Beginning with the fourth quarter and year-end 2007 results, the Company started reporting on the more widely used “net revenues” basis, instead of “total revenues” used previously. Total revenues will continue to be included in the consolidated statements of income. Net revenues reflect interest revenue from securities operations after deducting associated interest expenses. The Company believes this provides a more useful assessment of the actual contribution of its operations that generate interest revenue.

Fiscal 2009 highlights

•  We founded PFSA, which began clearing operations in December, 2009.

•  We invested additional customer segregated funds into higher yielding FDIC insured bank accounts during 2009 with approximately $2.6 billion moved as of December 31, 2009.

•  In June 2009 we issued $60 million of 8.00% convertible notes due June 1, 2014.

•  In September 2009 we amended our revolving credit facility, increasing it to $100 million.

•  We cleared more than 101 million option contracts in the fourth quarter and 346 million option contracts in 2009, both new records.

•  On November 2, 2009 we signed a definitive agreement to acquire the clearing and execution services business of Ridge Clearing & Outsourcing Solutions, Inc.

Acquisition of Ridge

On November 2, 2009, PWI, together with PFSI, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Broadridge and its wholly owned subsidiary Ridge to acquire substantially all of Ridge’s contracts with its securities clearing clients. Under the terms of the Asset Purchase Agreement, management currently estimates the Company will pay between $45 million and $54 million in total consideration (the “Purchase Price”) to Broadridge consisting of (a) a five-year subordinated note (the “Seller Note”) payable by PWI

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bearing interest at an annual rate equal to 90-day LIBOR plus 5.5%, and (b) shares of PWI’s common stock (“PWI Common Stock”) equal to the lesser of (i) the number of shares of PWI Common Stock equal to the quotient of one third of the Purchase Price divided by the volume weighted-average selling price of PWI Common Stock over the 10 trading day period immediately prior to the closing, (ii) the number of shares of PWI Common Stock equal to 9.9% of the issued and outstanding shares of PWI as of the close of business on the business day immediately prior to the closing, or (iii) 2,517,451 shares of PWI Common Stock. The specific amount of such consideration will be determined immediately prior to closing pursuant to an agreed formula based upon the revenues attributable to the contracts being purchased by PFSI. The allocation of the consideration between the Seller Note and the PWI Common Stock will also be determined prior to the closing of the transaction. The Purchase Price will be subject to certain adjustments post-closing upon the occurrence of agreed upon events.

Acquisition of FCG

In November 2007, our subsidiary Penson GHCO acquired all of the assets of FCG, an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and paid approximately $9.4 million in cash, subject to a reconciliation to reported actual net income for the period ended November 30, 2008, as defined in the purchase agreement and approximately 150,000 shares of common stock valued at $2.2 million to the previous owners of FCG. In addition, the Company agreed to pay an annual earnout in cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. The Company paid approximately $8.7 million related to the first year of the earnout period. The Company did not make an earnout payment related to the second year of the earnout period. The Company finalized the acquisition valuation during the third quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. The financial results of FCG have been included in the Company’s consolidated financial statements since the November 30, 2007 acquisition date. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

Acquisition of GHCO

In November 2006, the Company entered into a definitive agreement to acquire the partnership interests of Chicago-based GHCO, a leading international futures clearing and execution firm. The Company closed the transaction on February 16, 2007 and paid $27.9 million, including cash and approximately 139,000 shares of common stock valued at $3.9 million to the previous owners of GHCO. In addition, the Company agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase agreement executed with the previous owners of GHCO. The Company did not make an earnout payment related to the first and second years of the integrated Penson GHCO business. Goodwill of approximately $2.8 million and intangibles of approximately $1.0 million were recorded in connection with the acquisition. The assets and liabilities acquired as well as the financial results of Penson GHCO have been included in the Company’s consolidated financial statements since the February 16, 2007 acquisition date.

Acquisition of Schonfeld

In November 2006, the Company acquired the clearing business of Schonfeld Securities LLC (“Schonfeld”), a New York based securities firm. The Company closed the transaction in November 2006 and in January 2007, the Company issued approximately 1.1 million shares of common stock valued at $28.3 million to the previous owners of Schonfeld as partial consideration for the assets acquired of which approximately $14.8 million was recorded as goodwill and $13.5 million as intangibles. In addition, the Company agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the asset purchase agreement, for the acquired business. The Company successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007. A payment of approximately $26.6 million was paid in connection with the first year earnout that ended May 31, 2008 and approximately $25.5 million was paid in connection with

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the second year of the earnout that ended May 31, 2009. At December 31, 2009, a liability of approximately $8.5 million was accrued as a result of the third year of the earnout ending May 31, 2010. This balance is included in other liabilities in the condensed consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets.

Financial overview

Net revenues

Revenues

We generate revenues from most clients in several different categories. Clients generating revenues for us from clearing transactions almost always also generate significant interest income from related balances. Revenues from clearing transactions are driven largely by the volume of trading activities of the customers of our correspondents and proprietary trading by our correspondents. Our average clearing revenue per trade is a function of numerous pricing elements that vary based on individual correspondent volumes, customer mix, and the level of margin debit balances and credit balances. Our clearing revenue fluctuates as a result of these factors as well as changes in trading volume. We focus on maintaining the profitability of our overall correspondent relationships, including the clearing revenue from trades and net interest from related customer margin balances, and by reducing associated variable costs. We collect the fees for our services directly from customer accounts when trades are processed. We only remit commissions charged by our correspondents to them after deducting our charges. For this reason, we have no significant receivables to collect.

We often refer to our interest income as “Interest, gross” to distinguish this category of revenue from “Interest, net” that is generally used in our industry. Interest, gross is generated by charges to customers or correspondents on margin balances and interest earned by investing customers’ cash, and therefore these revenues fluctuate based on the volume of our total margin loans outstanding, the volume of the cash balances we hold for our correspondents’ customers, the rates of interest we can competitively charge on margin loans and the rates at which we can invest such balances. We also earn interest from our stock borrowing and lending activities.

Technology revenues consist of transactional, development and licensing revenues generated by Nexa. A significant portion of these revenues are collected directly from clearing customers along with other charges for clearing services as described above. Most development revenues and some transaction revenues are collected directly from clients and are reflected as receivables until they are collected.

Other revenues include charges assessed directly to customers for certain transactions or types of accounts, trade aggregation and profits from proprietary trading activities, including foreign exchange transactions and fees charged to our correspondents’ customers. Subject to certain exceptions, our clearing brokers in the U.S., Canada, the U.K. and Australia each generate these types of transactions.

Interest expense from securities operations

Interest expense is incurred in our daily operations in connection with interest we pay on credit balances we hold and on short-term borrowings we make to fund activities of our correspondents and their customers. We have two primary sources of borrowing: commercial banks and stock lending institutions. Regulations differ by country as to how operational needs can be funded, but we often find that stock loans that are secured with customer or correspondent securities as collateral can be obtained at a lower rate of interest than loans from commercial banks. Operationally, we review cash requirements each day and borrow the requirements from the most cost effective source.

Revenues from clearing and commission fees represented 50% and 51% of our total net revenues for the years ended December 31, 2009 and 2008, respectively. Net interest income represented 23% and 26% of our total net revenues for years ended December 31, 2009 and 2008, respectively.

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Expenses

Employee compensation and benefits

Our largest category of expense is the compensation and benefits that we pay to our employees that includes salaries, bonuses, group insurance, contributions to benefit programs, stock compensation and other related employee costs. These costs vary by country according to the local prevailing wage standards. We utilize technology whenever practical to limit the number of employees and thus keep costs competitive. In the U.S., most of our employees are located in cities where employee costs are lower than where our largest competitors primarily operate. A portion of total employee compensation is paid in the form of bonuses and performance-based compensation. As a result, depending on the performance of particular business units and the overall Company performance, total employee compensation and benefits could vary materially from period to period.

Other operating expenses

Expenses incurred to process trades include floor brokerage and exchange and clearance fees, and those expenses tend to vary significantly with the level of trading activity. The related data processing and communication costs vary less with the level of trading activity. Occupancy and equipment expenses include lease expenses for office space, computers and other equipment that we require to operate our businesses. Other expenses include legal, regulatory, professional consulting, accounting, travel and miscellaneous expenses.

In addition, as a public company, we incur additional costs for external advisers such as legal, accounting, auditing and investor relations services, as well as additional costs for compliance with the Sarbanes-Oxley Act of 2002.

Profitability of services provided

Management records revenue for the clearing operations and technology business separately. We record expenses in the aggregate as many of these expenses are attributable to multiple business activities. As such, net profitability before tax is determined in the aggregate. We also separately record interest income and interest expense to determine the overall profitability of this activity.

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Results of operations

The following table summarizes our operating results as a percentage of net revenues for each of the periods shown.

	Year Ended December 31
	2009			2008			2007
Revenues:
Clearing and commission fees		50	%		51	%		45	%
Technology		8	%		8	%		6	%
Interest, gross		35	%		57	%		86	%
Other revenues		19	%		15	%		16	%
Total revenues		112	%		131	%		153	%
Interest expense from securities operations		12	%		31	%		53	%
Net revenues		100	%		100	%		100	%
Expenses:
Employee compensation and benefits		39	%		39	%		38	%
Floor brokerage exchange and clearance fees		11	%		9	%		9	%
Communications and data processing		16	%		13	%		13	%
Occupancy and equipment		10	%		10	%		9	%
Vendor related asset impairment		—			—			4	%
Correspondent asset loss		—			9	%		—
Other expenses		11	%		13	%		10	%
Interest expense on long-term debt		4	%		1	%		1	%
Total expenses		91	%		94	%		84	%
Income before income taxes		9	%		6	%		16	%
Provision for income taxes		3	%		2	%		6	%
Income before income taxes		6	%		4	%		10	%

Comparison of years ended December 31, 2009 and December 31, 2008

Overview

Results of operations declined for the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily due to lower clearing and commission fees, lower net interest revenue, higher floor brokerage, exchange and clearance fees due to the timing of rebates received in the prior year and higher communications and data processing fees resulting from a move to SunGard’s latest generation system consisting of equipment dedicated to our U.S. clearing business, partially offset by higher technology and other revenues. Technology revenues increased due to licensing revenue for the current year that did not begin until the third quarter of 2008. The decline in net interest earned is a result of higher customer average paying balances, lower average balances in our conduit business and lower interest spreads on our customer balances in the current period as compared to the year ago period, offset slightly by higher interest rate spreads on our conduit business and higher customer average earning balances. Results of operations from our U.S., Canadian and U.K. operating businesses were $69.5 million in 2009 as compared to $49.6 million in 2008. This increase was a result of the correspondent asset loss related to the unsecured receivable from Evergreen Capital Partners, Inc. in 2008 (see Note 26 to our consolidated financial statements).

Our U.S. operating subsidiaries experienced an increase in operating profits of approximately $4.3 million due primarily to higher other revenues and higher technology revenue offset by lower net interest income, higher floor brokerage, exchange and clearance fees and higher communications and data processing costs. Our Canadian

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business experienced an operating profit of $10.4 million for the year ended December 31, 2009 compared to an operating loss of $9.6 million for the year ended December 31, 2008. This increase is primarily due to the previously mentioned correspondent asset loss in 2008, offset by lower net interest income and higher floor brokerage, exchange and clearance fees. The U.K. incurred an operating loss of $7.1 million in the current period compared to an operating loss of $2.7 million in the year ago period, due primarily to the loss of the contracts for difference business, lower net interest income and additional data processing expenses of approximately $1 million related to the transition to a new back office system.

While we have continued to see profitability in our stock loan conduit business, there has been decreased demand resulting from regulatory changes. The business consists of a “matched book” where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning an average net spread of 60 to 90 basis points on the transactions. Due to regulatory and marketplace changes regarding short-selling of certain securities, clearing brokers that violate certain short-selling rules, including the failure to timely deliver securities, are now subject to significantly more stringent penalties. These changes and potential future regulatory changes have had and may continue to have a negative impact on the earnings we have historically seen in our conduit business.

The above factors resulted in higher operating income for the year ended December 31, 2009 compared to the year ended December 31, 2008.

The following is a summary of the increases (decreases) in the categories of net revenues and expenses for the year ended December 31, 2009 compared to the year ended December 31, 2008.

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				%
	Change			Change from
	Amount			Previous Year
	(In thousands)
Revenues:
Clearing and commission fees	$	(5,509	)		(3.7	)
Technology		1,602			7.2
Interest:
Interest on asset based balances		(36,723	)		(33.5	)
Interest on conduit borrows		(24,410	)		(49.3	)
Money market		(4,405	)		(65.5	)
Interest, gross		(65,538	)		(39.5	)
Other revenue		9,736			21.5
Total revenues		(59,709	)		(15.6	)
Interest expense:
Interest expense on liability based balances		(36,295	)		(70.1	)
Interest on conduit loans		(20,125	)		(51.7	)
Interest expense from securities operations		(56,420	)		(62.2	)
Net revenues		(3,289	)		(1.1	)
Expenses:
Employee compensation and benefits		(614	)		(0.5	)
Floor brokerage, exchange and clearance fees		6,267			24.0
Communications and data processing		6,176			15.7
Occupancy and equipment		530			1.8
Vendor related asset impairment		(3	)		(0.4	)
Correspondent asset loss		(26,421	)		(100.0	)
Other expenses		(4,901	)		(13.1	)
Interest expense on long-term debt		6,490			168.4
		(12,476	)		(4.5	)
Income before income taxes	$	9,187			55.2

Net revenues

Net revenues decreased $3.3 million, or 1.1%, to $289.9 million from the year ended December 31, 2008 to the year ended December 31, 2009. The decrease is primarily attributed to the following:

Clearing and commission fees decreased $5.5 million, or 3.7%, to $145.0 million during this same period primarily due to a lower volume of equity and futures transactions, partially offset by an increase in options contracts.

Technology revenue increased $1.6 million, or 7.2%, to $23.8 million primarily due to approximately $.6 million in licensing revenue and higher recurring revenue of $3.2 million, offset by lower development revenue of $2.2 million resulting from a decline in new projects resulting from the current economic conditions.

Interest, gross decreased $65.5 million or 39.5%, to $100.2 million in 2009 compared to 2008. Interest revenues from customer balances decreased $41.1 million or 35.4% to $75.2 million as our average daily interest rate decreased 98 basis points or 40.8% to 1.42% (during this same period the average federal funds rate decreased 184 basis points) offset by an increase in our average daily interest earning assets of $552.6 million, or 12.1% to $5.1 billion. Interest from our stock conduit borrows operations decreased $24.4 million or 49.3% to $25.1 million,

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due to decrease in our average daily assets of $842.5 million or 57.4% to $625.0 million, offset by an increase in our average daily interest rate of approximately 64 basis points, or 19.0% to 4.01% (see page 51 for a description of our conduit business).

Other revenue increased $9.7 million, or 21.5%, to $55.1 million due to increased revenues of $1.0 million from our trade aggregation business in the U.S, increased execution services revenues of $5.1 million and investment income of $4.8 million related to the sale of LCH.Clearnet stock obtained as part of the February 2007 GHCO acquisition, offset by decreases in foreign exchange trading.

Interest expense from securities operations decreased $56.4 million, or 62.2%, to $34.3 million from the year ended December 31, 2008 to the year ended December 31, 2009. Interest expense from clearing operations decreased approximately $36.3 million, or 70.1%, to $15.5 million due to a 99 basis point or 74.4% decrease in our average daily interest rate to .34%, offset by an increase in our average daily balances of our short-term obligations of $724.4 million, or 18.7%, to $4.6 billion. Interest from our stock conduit loans decreased $20.1 million, or 51.7% to $18.8 million due to a $835.4 million, or 57.3% decrease in our average daily balances to $623.0 million, offset by a 34 basis point increase, or 12.7% in our average daily interest rate to 3.01%.

Interest, net decreased from $75.1 million for the year ended December 31, 2008 to $65.9 million for the year ended December 31, 2009. This decrease was due to a higher ratio of customer interest paying balances to interest earning balances combined with significantly lower conduit balances, offset slightly by a higher interest rate spread of one basis point on customer balances and 30 basis points on conduit balances.

Employee compensation and benefits

Total employee costs decreased $0.6 million, or 0.5%, to $113.1 million from the year ended December 31, 2008 to the year ended December 31, 2009, primarily due to lower incentive-based compensation expense, partially offset by $.8 million of severance costs in the first quarter. Employee count remained fairly constant, decreasing slightly to 1,031 as of December 31, 2009 from 1,058 at December 31, 2008.

Floor brokerage, exchange and clearance fees

Floor brokerage, exchange and clearance fees increased $6.3 million, or 24.0% to $32.4 million for the year ended December 31, 2009 from the year ended December 31, 2008, primarily due to lower industry rebates received in 2009 as compared to 2008. These expenses also reflected increased fees due to higher option volumes, offset in part by lower futures volumes.

Communications and data processing

Total expenses for our communication and data processing requirements increased $6.2 million, or 15.7%, to $45.4 million from the year ended December 31, 2008 to the year ended December 31, 2009. This increase reflects costs associated with additional data processing capacity resulting from a move to SunGard’s latest generation system consisting of equipment dedicated to our U.S. clearing business and approximately $1 million related to the transition to a new back office system.

Occupancy and equipment

Total expenses for occupancy and equipment increased $0.5 million, or 1.8%, to $29.4 million from the year ended December 31, 2008 to the year ended December 31, 2009. This increase is primarily related to increased rental expense associated with our occupancy leases.

Vendor related asset impairment

In both 2009 and 2008 we have incurred expenses of $0.8 million related to ongoing legal expenses from the loss of funds placed with Sentinel Management Group. See Part I, Item 3. Legal Proceedings, and Note 25 to our consolidated financial statements.

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Correspondent asset loss

In the fourth quarter of 2008 the Company recorded a charge of approximately $26.4 million, net of estimated recoveries and professional fees related to nonpayment of an unsecured receivable as a result of a number of transactions involving listed Canadian equity securities by Evergreen Capital Partners, Inc. See Note 26 to our consolidated financial statements.

PFSC has now obtained from Evergreen’s bankruptcy estate an assignment of Evergreen’s claims against certain of Evergreen’s customers, and in June, 2009, PFSC commenced legal proceedings against, among others, those customers of Evergreen in an attempt to recover lost funds.

Other expenses

Other expenses decreased $4.9 million, or 13.1%, to $32.5 million from the year ended December 31, 2008 to the year ended December 31, 2009. The decrease relates to the $2.4 million litigation charge recorded in the quarter ended September 30, 2008 (see Part I, Item 3. Legal Proceedings) as well as lower travel expenses, legal and consulting fees.

Interest expense on long-term debt

Interest expense on long-term debt increased $6.5 million, from $3.8 million for the year ended December 31, 2008 to $10.3 million for the year ended December 31, 2009, as a result of additional interest expense of approximately $4.4 million associated with our senior convertible notes issued on June 3, 2009 ($2.8 million cash interest) and higher interest expense on our revolving credit facility due to higher interest rates and higher average balances.

Income tax expense

Income tax expense, based on an effective income tax rate of approximately 38.0%, was $9.8 million for the year ended December 31, 2009 as compared to an effective tax rate of 36.0% and income tax expense of $6.0 million for the year ended December 31, 2008. This increase is attributable to a higher operating profit in the current year combined with a higher effective tax rate. The higher effective tax rate is primarily attributable to international trade tax credits in Canada in the prior year offset by a lower ratio of state and local taxes.

Net income

As a result of the foregoing, net income increased to $16.0 million for the year ended December 31, 2009 from $10.7 million for the year ended December 31, 2008.

Comparison of years ended December 31, 2008 and December 31, 2007

Overview

Results of operations improved in our clearing operations and in our technology business for the year ended December 31, 2008 compared to the year ended December 31, 2007. We saw a decline in our net interest earned as a result in the decreases in the targeted federal funds rate that began in the fourth quarter of 2007 and continued throughout 2008. Operating results decreased during 2008, as compared to 2007, due to decreases in the average federal funds rate, which led to lower interest rate spreads and the correspondent asset loss related to the unsecured receivable from Evergreen Capital Partners, Inc. (see Note 26 to our consolidated financial statements) during the fourth quarter of 2008, offset by increased trading volumes in the U.S. and Canada, the results of a full year of Penson GHCO (acquired in February 2007) and the acquisitions of Schonfeld (acquired in November 2006, with the majority of the conversions completed in the second quarter 2007) and FCG in November 2007 and the improvements in our Nexa business discussed below. Operating results in 2007 were negatively affected by the charge incurred in the third quarter of 2007 resulting from the vendor related asset impairment (see Note 25 to our consolidated financial statements). In addition, our U.K. business incurred an operating loss of $2.7 million in 2008 compared to operating profit of $2.6 million in 2007 due to lower trading volumes, primarily in the contract for difference business.

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In 2008 we saw increased profitability in our stock loan conduit business. The business consists of a “matched book” where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning a net spread of 30 to 90 basis points on the transactions. Due to recent regulatory and marketplace changes regarding short-selling of certain securities, clearing brokers that violate certain short-selling rules, including the failure to timely deliver securities, are now subject to significantly more stringent penalties. These changes and potential future regulatory changes have had and may continue to have a negative impact on the earnings we have historically seen in our conduit business.

We also have made improvements in our technology business. Nexa experienced an operating profit of $.4 million for 2008 as compared to a $1.8 million operating loss for 2007. Increases in development and recurring revenues and approximately $2 million in licensing fees resulting from a licensing agreement signed in the third quarter of 2008 accounted for this improvement.

The above factors resulted in lower operating income for the year ended December 31, 2008 compared to the year ended December 31, 2007.

The following is a summary of the increases (decreases) in the categories of net revenues and expenses for the year ended December 31, 2008 compared to the year ended December 31, 2007.

				%
	Change			Change from
	Amount			Previous Year
	(In thousands)
Revenues:
Clearing and commission fees	$	32,649			27.7
Technology		7,000			46.1
Interest:
Interest on asset based balances		(43,344	)		(28.3	)
Interest on conduit borrows		(19,378	)		(28.1	)
Money market		2			—
Interest, gross		(62,720	)		(27.5	)
Other revenue		2,138			4.9
Total revenues		(20,933	)		(5.2	)
Interest expense:
Interest expense on liability based balances		(26,638	)		(34.0	)
Interest on conduit loans		(22,740	)		(36.9	)
Interest expense from securities operations		(49,378	)		(35.3	)
Net revenues		28,445			10.7
Expenses:
Employee compensation and benefits		11,736			11.5
Floor brokerage, exchange and clearance fees		(1,208	)		(4.4	)
Communications and data processing		8,496			27.6
Occupancy and equipment		5,317			22.6
Vendor related asset impairment		(10,034	)		(92.4	)
Correspondent asset loss		26,421
Other expenses		12,066			47.6
Interest expense on long-term debt		960			33.2
		53,754			24.1
Income before income taxes	$	(25,309	)		(60.3	)

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Net revenues

Net revenues increased $28.4 million, or 10.7%, to $293.2 million from the year ended December 31, 2007 to the year ended December 31, 2008. The increase is primarily attributed to the following:

Clearing and commission fees increased $32.6 million, or 27.7%, to $150.6 million, during this same period primarily due to our acquisitions of GHCO, FCG and the clearing operations of Schonfeld, an increase in the number of correspondents, a change in our mix of correspondents and an increase in our volume of transactions in the U.S. and Canada.

Technology revenue increased $7.0 million, or 46.1%, to $22.2 million primarily due to higher recurring and development revenue as well approximately $2 million in licensing fees resulting from a licensing agreement signed in the third quarter of 2008.

Interest, gross decreased $62.7 million, or 27.5%, to $165.8 million during the year ended December 31, 2008 compared to the year ended December 31, 2007. Interest revenues from customer balances decreased $43.3 million, or 27.2%, to $116.3 million as our average daily interest rate decreased 212 basis points or 46.9% to 2.40% (during this same period the average federal funds rate decreased 296 basis points) offset by an increase in our earning assets of $1.2 billion, or 35.0% to $4.6 billion for the year ended December 31, 2008. Interest income from our stock conduit borrows operations decreased $19.4 million, or 28.1%, to $49.5 million, as a result of a decrease in our average daily interest rate of approximately 115 basis points, or 25.4%, to 3.37% coupled with a $57.5 million, or 3.8% decrease in our average daily assets (see page 55 for a description of our conduit business).

Other revenue increased $2.1 million, or 4.9% to $45.4 million, due to the introduction of trade aggregation in the U.S. in the fourth quarter of 2007, which resulted in an increase of approximately $2.2 million, increased fees and increased foreign exchange trading revenues offset by decreases in equity trading revenues.

Interest expense from securities operations decreased $49.4 million, or 35.3%, to $90.7 million from the year ended December 31, 2007 to the year ended December 31, 2008. Interest expense from clearing operations decreased $26.6 million, or 34.0%, to $51.8 million, as our average daily interest rate decreased 158 basis points, or 54.3%, to 1.33%, offset by an increase in our daily average balances of our short-term obligations of $1.2 billion, or 43.8%, to $3.9 billion. Interest from our stock conduit loans decreased $22.7 million, or 36.9%, due to a 138 basis point decrease in our average daily interest rate to 2.67%, combined with a $64.0 million, or 4.2% decrease in our average daily balances to $1.5 billion.

Interest, net decreased from $88.4 million for the year ended December 31, 2007 to $75.1 million for the year ended December 31, 2008. This decrease was primarily due to a diminished interest rate spread on customer balances of 33.5% to 107 basis points at December 31, 2008 from 161 basis points at December 31, 2007 brought on by decreases in the targeted federal funds rate offset by higher average balances.

Employee compensation and benefits

Total employee costs increased $11.7 million, or 11.5%, to $113.7 million from the year ended December 31, 2007 to the year ended December 31, 2008, primarily due to a 15% increase in headcount to 1,058 as of December 31, 2008 as well as the affect of acquiring Penson GHCO in February 2007 and FCG in November 2007. The headcount increase is primarily attributed to increases in our U.S. clearing operations as a result of the expansion of our services offered and the number of correspondents served as well as the acquisition of FCG in November 2007.

Floor brokerage, exchange and clearance fees

Floor brokerage, exchange and clearance fees decreased $1.2 million, or 4.4% to $26.1 million for the year ended December 31, 2008 from the year ended December 31, 2007, as a result of larger exchange refunds in the first quarter combined with lower fourth quarter clearance fees as well as decreases in the CFD business in 2008 compared to 2007 offset by higher clearing volumes and the acquisitions of GHCO, FCG and Schonfeld.

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Communications and data processing

Total expenses for our communication and data processing requirements increased $8.5 million, or 27.6%, to $39.3 million from the year ended December 31, 2007 to the year ended December 31, 2008. This increase reflects additional growth in volumes in our U.S. operations, primarily from the Schonfeld acquisition, and in our Canadian operations.

Occupancy and equipment

Total expenses for occupancy and equipment increased $5.3 million, or 22.6%, to $28.9 million from the year ended December 31, 2007 to the year ended December 31, 2008. This increase is primarily due to additional equipment that was acquired to support the growth in our businesses.

Vendor related asset impairment

In 2007 we recorded a charge of $10.9 million from the loss of funds placed with Sentinel Management Group. For the year ended December 31, 2008 we have incurred expenses $.8 million related to ongoing legal costs. See Part I, Item 3. Legal Proceedings and Note 25 to our consolidated financial statements.

Correspondent asset loss

As reported in October 2008, the Company’s Canadian subsidiary obtained an unsecured receivable as a result of a number of transactions involving listed Canadian equity securities by Evergreen Capital Partners Inc. (“Evergreen”) on behalf of itself and/or its customers, for which Evergreen and/or its customers were unable to make payment. Subsequently, Evergreen ceased operations and filed for bankruptcy protection. The Company commenced an investigation into the circumstances surrounding the events that resulted in the unsecured receivable and retained the services of various professional advisors to assist in the investigation.

In connection with the Company’s preparation of its financial statements for inclusion in this annual report on Form 10-K, the Company’s management, after consultation with the Company’s Board of Directors and outside advisors, concluded that as of December 31, 2008, a significant amount of the receivable was not recoverable and recorded a charge of approximately $26.4 million, net of estimated recoveries and professional fees. The Company is continuing to explore ways to further recover amounts associated with this charge and, other than recurring professional fees, does not anticipate incurring any additional losses relative to this matter.

Based on our internal review, we are satisfied with our operations around the world and believe they should not be subject to a similar risk. We also retained Promontory Financial Group as an outside risk consultant to evaluate our risk monitoring systems. We have designed and implemented several new risk management and fraud detection processes, which we believe will prevent any future recurrences of this type of activity.

Other expenses

Other expenses increased $12.1 million, or 47.6%, to $37.4 million from the year ended December 31, 2007 to the year ended December 31, 2008. The increase relates to increases in legal, professional consulting fees related to maintenance, support and other improvements to our capacity and accounting expenses and a $2.4 million litigation charge (see Part I, Item 3. Legal Proceedings).

Interest expense on long-term debt

Interest expense on long-term debt increased from $2.9 million for the year ended December 31, 2007 to $3.9 million for the year ended December 31, 2008 as a result of higher borrowing levels offset by lower interest rates.

Income tax expense

Income tax expense, based on an effective income tax rate of approximately 36.0%, was $6.0 million for the year ended December 31, 2008 as compared to an effective tax rate of 36.0% and $15.1 million for the year ended

57

December 31, 2007. This decrease is primarily attributed to lower pretax income of approximately $25.3 million due to the correspondent asset loss previously discussed. Additionally, the Company received international trade tax credits in Canada related to prior years, offset by a lower benefit from stock-based compensation as a result of book expense exceeding tax deductible amounts.

Net income

As a result of the foregoing, net income decreased to $10.7 million for the year ended December 31, 2008 from $26.8 million for the year ended December 31, 2007.

Liquidity and capital resources

Operating Liquidity — Our clearing broker-dealer subsidiaries typically finance their operating liquidity needs through secured bank lines of credit and through secured borrowings from stock lending counterparties in the securities business, which we refer to as “stock loans.” Most of our borrowings are driven by the activities of our clients or correspondents, primarily the purchase of securities on margin by those parties. As of December 31, 2009, we had seven uncommitted lines of credit with seven financial institutions for the purpose of facilitating our clearing business as well as the activities of our customers and correspondents. Five of these lines of credit permitted us to borrow up to an aggregate of approximately $312.7 million while two lines had no stated limit. As of December 31, 2009, we had approximately $113.2 million in short-term bank loans outstanding, which left approximately $267.5 million available under our lines of credit with stated limitations.

As noted above, our businesses that are clearing brokers also have the ability to borrow through stock loan arrangements. There are no specific limitations on our borrowing capacities pursuant to our stock loan arrangements. Borrowings under these arrangements bear interest at variable rates, are secured primarily by our firm inventory or customers’ margin account securities, and are repayable on demand. At December 31, 2009, we had approximately $411.2 million in borrowings under stock loan arrangements.

As a result of our customers’ and correspondents’ aforementioned activities, our operating cash flows may vary from year to year.

Capital Resources — PWI provides capital to most of our subsidiaries. PWI has the ability to obtain capital through equipment leases and through a $100.0 million line of credit under a secured credit facility. As of December 31, 2009, the Company had $88.5 million outstanding on this line of credit that expires in April 2010. We are currently evaluating several capital raising alternatives in preparation for the expiration of our secured facility and the expected funding of the Ridge transaction. Among other options, we are evaluating the extension or expansion of our current secured facility; however, we cannot guarantee that we will be able to obtain credit on terms acceptable to the Company. On November 18, 2009, we filed a registration statement on Form S-3, which was declared effective by the SEC on December 17, 2009. We may utilize the registration statement in connection with our capital raising; however, we cannot guarantee that we will be able to issue debt or equity securities on terms acceptable to the Company. Equipment purchased under capital leases is typically secured by the equipment itself. On June 3, 2009, the Company issued $60 million aggregate principal amount of 8.00% Senior Convertible Notes due 2014. The net proceeds from the sale of the convertible notes were approximately $56.2 after initial purchaser discounts and other expenses.

As a holding company, we access the earnings of our operating subsidiaries through the receipt of dividends from these subsidiaries. Some of our subsidiaries are subject to the requirements of securities regulators in their respective countries relating to liquidity and capital standards, which may serve to limit funds available for the payment of dividends to the holding company.

Our principal U.S. broker-dealer subsidiary, PFSI, is subject to the SEC Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of a minimum net capital. PFSI elected to use the alternative method, permitted by Rule 15c3-1, which requires PFSI to maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances, as defined in the SEC’s Reserve Requirement Rule (“Rule 15c3-3”). At December 31, 2009, PFSI had net capital of $94.7 million, which was $70.4 million in excess of its required net capital of $24.3 million.

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Our Penson GHCO, PFSL, PFSC and PFSA subsidiaries are also subject to minimum financial and capital requirements. These requirements are not material either individually or collectively to the consolidated financial statements as of December 31, 2009. All subsidiaries were in compliance with their minimum financial and capital requirements as of December 31, 2009.

Contractual obligations

We have contractual obligations to make future payments under long-term debt and long-term non-cancelable lease agreements and have contingent commitments under a variety of commercial arrangements. See Note 20 to our consolidated financial statements for further information regarding our commitments and contingencies. There were no amounts outstanding under repurchase agreements at December 31, 2009. The table below shows our contractual obligations and commitments as of December 31, 2009, including our payments due by period:

			Less Than						More Than
Contractual Obligations	Total		1 Year		1—3 Years		4—5 Years		5 Years
	(In thousands)
Long-term debt obligations and accrued interest(1)	$	150,401	$	90,401	$	—	$	60,000	$	—
Capital lease obligations		10,471		6,218		4,253		—		—
Operating lease obligations		28,584		5,579		9,701		6,581		6,723
Total	$	189,456	$	102,198	$	13,954	$	66,581	$	6,723

(1) The long-term debt obligations and accrued interest consists of our revolving credit facility and accrued interest of $90,001 of which the Company may pay down at any time and our 8.00% Senior Convertible Notes due 2014 and accrued interest of $60,400. Only interest accrued at December 31, 2009 has been included.

As of December 31, 2009 the Company had accrued income tax liabilities for uncertain tax positions of approximately $1.0 million. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.

Off-balance sheet arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

See Note 16 to the consolidated financial statements for information on off-balance sheet arrangements and Note 24 to the consolidated financial statements for information on exchange member guarantees.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We review our estimates on an on-going basis. We base our estimates on our experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to consolidated financial statements, we believe the accounting policies that require management to make assumptions and estimates involving significant judgment are those relating to revenue recognition, fair value, software development and the valuation of stock-based compensation.

Revenue recognition

Revenues from clearing transactions are recorded in the Company’s consolidated financial statements on a trade date basis. Cash received in advance of revenue recognition is recorded as deferred revenue.

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There are three major types of technology revenues: (1) completed products that are processing transactions every month generate revenues per transaction which are recognized on a trade date basis; (2) these same completed products may also generate monthly terminal charges for the delivery of data or processing capability that are recognized in the month to which the charges apply; (3) technology development services are recognized when the service is performed or under the terms of the technology development contract as described below. Interest and other revenues are recorded in the month that they are earned.

To date, the majority of our technology development contracts have not required significant production, modification or customization such that the service element of our overall relationship with the client generally does meet the criteria for separate accounting under the FASB Codification. All of our products are fully functional when initially delivered to our clients, and any additional technology development work that is contracted for is as outlined below. Technology development contracts generally cover only additional work that is performed to modify existing products to meet the specific needs of individual customers. This work can range from cosmetic modifications to the customer interface (private labeling) to custom development of additional features requested by the client. Technology revenues arising from development contracts are recorded on a percentage-of-completion basis based on outputs unless there are significant uncertainties preventing the use of this approach in which case a completed contract basis is used. The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance in the FASB Codification and Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”).

Fair value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company’s financial assets and liabilities are primarily recorded at fair value.

In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. The fair value model establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

•  Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Assets and liabilities utilizing Level 1 inputs include corporate equity, U.S. Treasury and money market securities. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

•  Level 2 — Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Assets and liabilities utilizing Level 2 inputs include certificates of deposit, term deposits, corporate debt securities and Canadian government obligations. These financial instruments are valued by quoted prices that are less frequent than those in active markets or by models that use various assumptions that are derived from or supported by data that is generally observable in the marketplace. Valuations in this category are inherently less reliable than quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying assumptions.

•  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data. The Company does not currently have any financial instruments utilizing Level 3 inputs. These financial

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instruments have significant inputs that cannot be validated by readily determinable data and generally involve considerable judgment by management.

See Note 6 to our consolidated financial statements for a description of the financial assets carried at fair value.

Software development

Costs associated with software developed for internal use are capitalized based on the applicable guidance in the FASB Codification. Capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll for employees directly associated with, and who devote time to, the development of the internal-use software. Costs incurred in development and enhancement of software that do not meet the capitalization criteria, such as costs of activities performed during the preliminary and post- implementation stages, are expensed as incurred. Costs incurred in development and enhancements that do not meet the criteria to capitalize are activities performed during the application development stage such as designing, coding, installing and testing. The critical estimate related to this process is the determination of the amount of time devoted by employees to specific stages of internal-use software development projects. We review any impairment of the capitalized costs on a periodic basis.

Stock-based compensation

The Company’s accounting for stock-based employee compensation plans focuses primarily on accounting for transactions in which an entity exchanges its equity instruments for employee services, and carries forward prior guidance for share-based payments for transactions with non-employees. Under the modified prospective transition method, the Company is required to recognize compensation cost, after the effective date, for the portion of all previously granted awards that were not vested, and the vested portion of all new stock option grants and restricted stock. The compensation cost is based upon the original grant-date fair market value of the grant. The Company recognizes expense relating to stock-based compensation on a straight-line basis over the requisite service period which is generally the vesting period. Forfeitures of unvested stock grants are estimated and recognized as a reduction of expense.

Item 7A.   Quantitative and Qualitative Disclosure about Market Risk

Prior to the fourth quarter of 2007, we did not have material exposure to reductions in the targeted federal funds rate. Beginning in the fourth quarter of 2007 there were significant decreases in these rates. We encountered a 50 basis point decrease in the federal funds rate in the fourth quarter of 2007. Actual rates fell approximately 400 basis points during 2008, to a federal funds rate of approximately .25% as of December 31, 2008, which is the current rate as of December 31, 2009. Based upon the December quarter average customer balances, assuming no increase, and adjusting for the timing of these rate reductions, we believe that each 25 basis point increase or decrease will affect pretax income by approximately $1 million per quarter. Despite such interest rate changes, we do not have material exposure to commodity price changes or similar market risks. Accordingly, we have not entered into any derivative contracts to mitigate such risk. In addition, we do not maintain material inventories of securities for sale, and therefore are not subject to equity price risk.

We extend margin credit and leverage to our correspondents and their customers, which is subject to various regulatory and clearing firm margin requirements. Margin credit is collateralized by cash and securities in the customers’ accounts. Our directors and executive officers and their associates, including family members, from time to time may be or may have been indebted to one or more of our operating subsidiaries or one of their respective correspondents or introducing brokers, as customers, in connection with margin account loans. Such indebtedness is in the ordinary course of business, is on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties who are not our employees and does not involve more than normal risk of collectability or present other unfavorable features. Leverage involves securing a large potential future obligation with a proportional amount of cash or securities. The risks associated with margin credit and leverage increase during periods of fast market movements or in cases where leverage or collateral is concentrated and market movements occur. During such times, customers who utilize margin credit or leverage and who have collateralized their obligations with securities may find that the securities

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have a rapidly depreciating value and may not be sufficient to cover their obligations in the event of liquidation. Although we monitor margin balances on an intra-day basis in order to control our risk exposure, we are not able to eliminate all risks associated with margin lending.

We are also exposed to credit risk when our correspondents’ customers execute transactions, such as short sales of options and equities, which can expose them to risk beyond their invested capital. We are indemnified and held harmless by our correspondents from certain liabilities or claims, the use of margin credit, leverage and short sales of their customers. However, if our correspondents do not have sufficient regulatory capital to cover such conditions, we may be exposed to significant off-balance sheet risk in the event that collateral requirements are not sufficient to fully cover losses that customers may incur and those customers and their correspondents fail to satisfy their obligations. Our account level margin credit and leverage requirements meet or exceed those required by Regulation T of the Board of Governors of the Federal Reserve, or similar regulatory requirements in other jurisdictions. The SEC and other self-regulated organizations (“SROs”) have approved new rules permitting portfolio margining that have the effect of permitting increased leverage on securities held in portfolio margin accounts relative to non-portfolio accounts. We began offering portfolio margining to our clients in 2007. We intend to continue to meet or exceed any account level margin credit and leverage requirements mandated by the SEC, other SROs, or similar regulatory requirements in other jurisdictions as we expand the offering of portfolio margining to our clients.

The profitability of our margin lending activities depends to a great extent on the difference between interest income earned on margin loans and investments of customer cash and the interest expense paid on customer cash balances and borrowings. If short-term interest rates fall, we generally expect to receive a smaller gross interest spread, causing the profitability of our margin lending and other interest-sensitive revenue sources to decline. Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. In particular, decreases in the federal funds rate by the Federal Reserve System usually lead to decreasing interest rates in the U.S., which generally lead to a decrease in the gross spread we earn. This is most significant when the federal funds rate is on the low end of its historical range, as is the case now. Interest rates in Canada, Europe and Australia are also subject to fluctuations based on governmental policies and economic factors and these fluctuations could also affect the profitability of our margin lending operations in these markets.

Given the volatility of exchange rates, we may not be able to manage our currency transaction and/or translation risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to a significant additional risk.

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Item 8.   Financial Statements and Supplementary Data

The Company’s consolidated financial statements and supplementary data are included in pages F-2 through F-39 of this Annual Report on Form 10-K. See accompanying “Item 15. Exhibits and Financial Statement Schedules” and Index to the consolidated financial statements on page F-1.

Quarterly results of operations (unaudited)

	Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,			Sep. 30,		Jun. 30,		Mar. 31,
Quarter Ended	2009		2009		2009		2009		2008			2008		2008		2008
	(In thousands, except per share data)
Revenues:
Clearing and commission fees	$	34,826	$	36,911	$	38,183	$	35,125	$	36,478		$	40,215	$	37,348	$	36,513
Technology		5,410		6,266		6,452		5,665		6,102			6,190		5,100		4,799
Interest, gross		22,246		25,096		30,841		22,036		25,095			47,250		44,934		48,478
Other		19,266		12,551		11,809		11,477		13,023			11,267		11,294		9,783
Total revenues		81,748		80,824		87,285		74,303		80,698			104,922		98,676		99,573
Interest expense from securities operations		7,328		8,601		10,804		7,546		11,638			25,620		24,068		29,373
Net revenues		74,420		72,223		76,481		66,757		69,060			79,302		74,608		70,200
Expenses:
Employee compensation and benefits		27,780		27,204		29,188		28,929		27,218			28,197		29,477		28,823
Floor brokerage, exchange and clearance fees		7,666		8,544		8,759		7,416		5,055			8,568		8,692		3,803
Communications and data processing		11,572		11,745		11,568		10,557		10,225			10,274		9,579		9,188
Occupancy and equipment		7,385		7,422		7,365		7,245		6,762			7,810		7,293		7,022
Vendor related asset impairment		247		189		175		213		243			320		189		75
Correspondent asset loss		—		—		—		—		26,421			—		—		—
Other expenses		8,576		7,463		7,525		8,968		10,222			11,187		8,742		7,282
Interest expense on long-term debt		4,303		3,480		1,876		685		807			885		1,086		1,076
		67,529		66,047		66,456		64,013		86,953			67,241		65,058		57,269
Income (loss) before income taxes		6,891		6,176		10,025		2,744		(17,893	)		12,061		9,550		12,931
Income tax expense (benefit)		2,550		2,309		3,910		1,056		(7,092	)		4,583		3,653		4,849
Net income (loss)	$	4,341	$	3,867	$	6,115	$	1,688	$	(10,801	)	$	7,478	$	5,897	$	8,082
Earnings (loss) per share — basic	$	0.17	$	0.15	$	0.24	$	0.07	$	(0.43	)	$	0.30	$	0.23	$	0.32
Earnings (loss) per share — diluted	$	0.17	$	0.15	$	0.24	$	0.07	$	(0.43	)	$	0.29	$	0.23	$	0.32
Weighted average shares outstanding — basic		25,491		25,411		25,329		25,260		25,187			25,108		25,115		25,461
Weighted average shares outstanding — diluted		25,651		25,765		25,614		25,300		25,187			25,811		25,200		25,541

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation was conducted under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2009. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2009 to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules.

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Changes in internal control over financial reporting

There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) during the quarter ended December 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management’s report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended our internal control over financial reporting is designed 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.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on our assessment, management concluded that, as of December 31, 2009, we have maintained effective internal control over financial reporting.

The Company’s independent registered public accounting firm has audited the Company’s internal control over financial reporting as of December 31, 2009 as stated in their report.

Inherent limitation of the effectiveness of internal control

A control system, no matter how well conceived, implemented and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of such inherent limitations, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company or any division of a company have been detected.

Item 9B.   Other Information

None.

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

The information required by this Item 10 is incorporated herein by reference from the section captioned “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance” of the Company’s definitive proxy statement for the 2010 annual meeting of stockholders to be filed not later than April 30, 2010 with the SEC pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “2010 Proxy Statement”).

Item 11.   Executive Compensation

The information required by this Item 11 is incorporated by reference from the section captioned “Executive Compensation” of the 2010 Proxy Statement.

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Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity compensation plans

	Number of Securities to		Weighted-Average
	be Issued Upon Exercise		Exercise Price of		Number of Securities
	of Outstanding Options,		Outstanding Options,		Remaining Available
Plan Category	Warrants and Rights(a)		Warrants and Rights		for Future Issuance
Equity Compensation Plans Approved by Security Holders(b)		1,506,199	$	14.48		2,079,556
Equity Compensation Plans Not Approved By Security Holders		—		—		—
		1,506,199	$	14.48		2,079,556

(a)	Includes shares issuable for unvested restricted stock units.
(b)	Includes shares issuable pursuant to the Penson Worldwide, Inc. Amended and Restated 2000 Stock Incentive Plan, of which there were 1,988,800 shares remaining available for future issuance and the Penson Worldwide, Inc. 2005 Employee Stock Purchase Plan of which there were 90,756 shares remaining available for future issuance.

Other information required by this Item 12 is incorporated by reference from the section captioned “Security Ownership of Certain Beneficial Owners and Management” of the 2010 Proxy Statement.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated by reference from the section captioned “Certain Relationships and Related Party Transactions” of the 2010 Proxy Statement.

Item 14.   Principal Accounting Fees and Services

The information required by this Item 14 is incorporated by reference from the section captioned “Ratification of Independent Registered Public Accounting Firm” of the 2010 Proxy Statement.

PART IV

Item 15.   Exhibits and Financial Statement Schedules

1. Financial statements.

The reports of our independent registered public accounting firm and our consolidated financial statements are listed below and begin on page F-1 of this Annual Report on Form 10-K.

	Page
	Number
Reports of Independent Registered Public Accounting Firm		F-2
Statements of Financial Condition		F-4
Statements of Income		F-5
Statements of Stockholders’ Equity		F-6
Statements of Cash Flows		F-7
Notes to the Consolidated Financial Statements		F-8

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2. Financial statement schedules.

Schedule I — Condensed Financial Information of Registrant has been incorporated into the notes to the consolidated financial statements.

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted.

3. Exhibit list.

The exhibits required to be furnished pursuant to Item 15 are listed in the Exhibit Index filed herewith, which Exhibit Index is incorporated herein by reference.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

PENSON WORLDWIDE, INC.

By:  /s/  PHILIP A. PENDERGRAFT

Name:     Philip A. Pendergraft

Title:  Chief Executive Officer

Date:  March 5, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/  ROGER J. ENGEMOEN, JR. Roger J. Engemoen, Jr.	Chairman	March 5, 2010
/s/  PHILIP A. PENDERGRAFT Philip A. Pendergraft	Chief Executive Officer (Principal Executive Officer) and Director	March 5, 2010
/s/  DANIEL P. SON Daniel P. Son	President and Director	March 5, 2010
/s/  KEVIN W. MCALEER Kevin W. McAleer	Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)	March 5, 2010
/s/  JAMES S. DYER James S. Dyer	Director	March 5, 2010
/s/  DAVID JOHNSON David Johnson	Director	March 5, 2010
/s/  THOMAS R. JOHNSON Thomas R. Johnson	Director	March 5, 2010
/s/  DAVID M. KELLY David M. Kelly	Director	March 5, 2010
/s/  DAVID REED David Reed	Director	March 5, 2010

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Index to consolidated financial statements

Penson Worldwide, Inc. consolidated financial statements:
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Statements of Financial Condition	F-4
Statements of Income	F-5
Statements of Stockholders’ Equity	F-6
Statements of Cash Flows	F-7
Notes to the Consolidated Financial Statements	F-8

F-1

Report of independent registered public accounting firm

Board of Directors and Stockholders

Penson Worldwide, Inc.

Dallas, Texas

We have audited the accompanying consolidated statements of financial condition of Penson Worldwide, Inc. (the “Company”) as of December 31, 2009 and 2008 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Penson Worldwide, Inc. at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Penson Worldwide, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 5, 2010, expressed an unqualified opinion thereon.

/s/  BDO Seidman, llp

BDO Seidman, LLP

Dallas, Texas

March 5, 2010

F-2

Report of independent registered public accounting firm

Board of Directors and Stockholders

Penson Worldwide, Inc.

Dallas, Texas

We have audited Penson Worldwide, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Penson Worldwide, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Penson Worldwide, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009 and our report dated March 5, 2010 expressed an unqualified opinion thereon.

/s/  BDO Seidman, llp

BDO Seidman, LLP

Dallas, Texas

March 5, 2010

F-3

Penson Worldwide, Inc.

Consolidated Statements of Financial Condition

	December 31,
	2009			2008
	(In thousands,
	except par values)
ASSETS
Cash and cash equivalents	$	48,643		$	38,825
Cash and securities — segregated under federal and other regulations		3,605,651			2,383,948
Receivable from broker-dealers and clearing organizations (including securities at fair value of $5,149 at December 31,2009 and $17,369 at December 31, 2008)		225,130			318,278
Receivable from customers, net		1,038,796			687,194
Receivable from correspondents		74,992			135,092
Securities borrowed		1,271,033			964,080
Securities owned, at fair value		223,480			429,531
Deposits with clearing organizations (including securities at fair value of $356,582 at December 31, 2009 and $290,316 at December 31, 2008)		433,243			327,544
Property and equipment, net		34,895			28,428
Other assets		295,212			226,275
Total assets	$	7,251,075		$	5,539,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Payable to broker-dealers and clearing organizations	$	336,056		$	345,094
Payable to customers		5,038,338			3,575,401
Payable to correspondents		249,659			161,422
Short-term bank loans		113,213			130,846
Notes payable		132,769			75,000
Securities loaned		898,957			842,034
Securities sold, not yet purchased, at fair value		97,308			48,383
Accounts payable, accrued and other liabilities		85,873			96,548
Total liabilities		6,952,173			5,274,728
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 10,000 shares authorized; none issued and outstanding as of December 31, 2009 and 2008		—			—
Common stock, $0.01 par value, 100,000 shares authorized; 29,022 issued and 25,548 outstanding as of December 31, 2009; 28,604 issued and 25,207 outstanding as of December 31, 2008		290			286
Additional paid-in capital		258,375			244,052
Accumulated other comprehensive income (loss), net		1,748			(3,025	)
Retained earnings		92,482			76,471
Treasury stock, at cost; 3,474 shares at December 31, 2009; 3,397 shares at December 31, 2008		(53,993	)		(53,317	)
Total stockholders’ equity		298,902			264,467
Total liabilities and stockholders’ equity	$	7,251,075		$	5,539,195

See accompanying notes to consolidated financial statements.

F-4

Penson Worldwide, Inc.

Consolidated Statements of Income

	Year Ended December 31,
	2009		2008		2007
	(In thousands, except per share data)
Revenues
Clearing and commission fees	$	145,045	$	150,554	$	117,905
Technology		23,793		22,191		15,191
Interest, gross		100,219		165,757		228,477
Other		55,103		45,367		43,229
Total revenues		324,160		383,869		404,802
Interest expense from securities operations		34,279		90,699		140,077
Net revenues		289,881		293,170		264,725
Expenses
Employee compensation and benefits		113,101		113,715		101,979
Floor brokerage, exchange and clearance fees		32,385		26,118		27,326
Communications and data processing		45,442		39,266		30,770
Occupancy and equipment		29,417		28,887		23,570
Vendor related asset impairment		824		827		10,861
Correspondent asset loss		—		26,421		—
Other expenses		32,532		37,433		25,367
Interest expense on long-term debt		10,344		3,854		2,894
		264,045		276,521		222,767
Income before income taxes		25,836		16,649		41,958
Income tax expense		9,825		5,993		15,125
Net income	$	16,011	$	10,656	$	26,833
Earnings per share — basic	$	0.63	$	0.42	$	1.02
Earnings per share — diluted	$	0.63	$	0.42	$	1.00
Weighted average common shares — basic		25,373		25,217		26,232
Weighted average common shares — diluted		25,591		25,416		26,817

See accompanying notes to consolidated financial statements

F-5

Penson Worldwide, Inc.

Consolidated Statements of Stockholders’ Equity

														Accumulated
	Preferred							Additional						Other						Total
	Stock		Common stock					Paid-In			Treasury			Comprehensive			Retained			Stockholders’
	Amount		Shares			Amount		Capital			Stock			Income (loss)			Earnings			Equity
	(In thousands)
Balance, December 31, 2006	$	—		25,078		$	262	$	188,219		$	(18,418	)	$	2,159		$	39,562		$	211,784
Net income		—		—			—		—			—			—			26,833			26,833
Foreign currency translation adjustments, net of tax of $3,098		—		—			—		—			—			4,805			—			4,805
Repurchase of treasury stock		—		(1,607	)		—		—			(27,468	)		—			—			(27,468	)
Stock-based compensation expense		—		173			1		4,692			—			—			—			4,693
Exercise of stock options		—		112			1		1,066			—			—			—			1,067
Excess tax benefit from stock-based compensation plans		—		—			—		823			—			—			—			823
Purchases of stock under the employee stock purchase plan		—		128			1		2,014			—			—			—			2,015
Issuance of common stock		—		1,659			17		41,439			—			—			—			41,456
Cumulative effect of adoption of FIN 48 (ASC 740)		—		—			—		—			—			—			(580	)		(580	)
Balance, December 31, 2007		—		25,543			282		238,253			(45,886	)		6,964			65,815			265,428
Net income		—		—			—		—			—			—			10,656			10,656
Foreign currency translation adjustments, net of tax of $6,440		—		—			—		—			—			(9,989	)		—			(9,989	)
Repurchase of treasury stock		—		(714	)		—		—			(7,431	)		—			—			(7,431	)
Stock-based compensation expense		—		188			2		4,521			—			—			—			4,523
Exercise of stock options		—		36			—		168			—			—			—			168
Excess tax deficiency from stock-based compensation plans		—		—			—		(459	)		—			—			—			(459	)
Purchases of stock under the employee stock purchase plan		—		110			1		999			—			—			—			1,000
Issuance of common stock		—		44			1		570			—			—			—			571
Balance, December 31, 2008		—		25,207			286		244,052			(53,317	)		(3,025	)		76,471			264,467
Net income		—		—			—		—			—			—			16,011			16,011
Foreign currency translation adjustments, net of tax of $3,077		—		—			—		—			—			4,773			—			4,773
Repurchase of treasury stock		—		(77	)		—		—			(676	)		—			—			(676	)
Stock-based compensation expense		—		275			3		5,084			—			—			—			5,087
Excess tax deficiency from stock-based compensation plans		—		—			—		(473	)		—			—			—			(473	)
Purchases of stock under the employee stock purchase plan		—		108			1		655			—			—			—			656
Equity component of the conversion feature attributable to senior convertible notes, net of tax of $5,593		—		—			—		8,822			—			—			—			8,822
Issuance of common stock		—		35			—		235			—			—			—			235
Balance, December 31, 2009	$	—		25,548		$	290	$	258,375		$	(53,993	)	$	1,748		$	92,482		$	298,902

See accompanying notes to consolidated financial statements

F-6

Penson Worldwide, Inc.

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Cash flows from operating activities:
Net income	$	16,011		$	10,656		$	26,833
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		19,158			20,247			16,777
Deferred income taxes		5,131			977			(2,274	)
Stock-based compensation		5,087			4,523			4,693
Debt discount accretion		1,534			—			—
Debt issuance costs		1,081			—			—
Changes in operating assets and liabilities:
Cash and securities — segregated under federal and other regulations		(1,195,735	)		(1,005,993	)		(804,145	)
Net receivable/payable with customers		1,072,964			736,513			1,291,953
Net receivable/payable with correspondents		142,377			(63,611	)		(51,266	)
Securities borrowed		(293,329	)		1,089,050			(282,594	)
Securities owned		235,270			(234,799	)		(58,533	)
Deposits with clearing organizations		(103,306	)		(35,589	)		(82,314	)
Other assets		(43,318	)		92,189			(146,832	)
Net receivable/payable with broker-dealers and clearing organizations		65,517			449,542			(334,763	)
Securities loaned		56,452			(882,064	)		137,282
Securities sold, not yet purchased		40,418			(25,495	)		21,992
Accounts payable, accrued and other liabilities		(12,353	)		8,051			24,114
Net cash provided by (used in) operating activities		12,959			164,197			(239,077	)
Cash flows from investing activities:
Business combinations, net of cash acquired		(32,262	)		(33,370	)		(34,156	)
Purchases of property and equipment		(21,741	)		(19,031	)		(15,484	)
Net cash used in investing activities		(54,003	)		(52,401	)		(49,640	)
Cash flows from financing activities:
Net proceeds from convertible notes		56,200			—			—
Proceeds from revolving credit facility		50,000			20,000			206,000
Repayments of revolving credit facility		(36,500	)		—			(161,000	)
Net borrowing (repayments) on short-term bank loans		(20,905	)		(196,380	)		280,344
Exercise of stock options		—			168			1,067
Excess tax benefit from stock-based compensation plans		27			75			823
Purchase of treasury stock		(676	)		(7,431	)		(27,468	)
Issuance of common stock		656			1,000			2,015
Net cash provided by (used in) financing activities		48,802			(182,568	)		301,781
Effect of exchange rates on cash		2,060			(11,326	)		4,805
Increase (decrease) in cash and cash equivalents		9,818			(82,098	)		17,869
Cash and cash equivalents at beginning of period		38,825			120,923			103,054
Cash and cash equivalents at end of period	$	48,643		$	38,825		$	120,923
Supplemental cash flow disclosures:
Interest payments	$	10,633		$	18,277		$	23,252
Income tax payments	$	3,807		$	19,639		$	16,466

See accompanying notes to consolidated financial statements.

F-7

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements

(In thousands, except per share data or where noted)

1.   Basis of presentation

Organization and Business — Penson Worldwide, Inc. (“PWI” or the “Company”) is a holding company incorporated in Delaware. The Company conducts business through its wholly owned subsidiary SAI Holdings, Inc. (“SAI”). SAI conducts business through its principal direct and indirect wholly owned operating subsidiaries, Penson Financial Services, Inc. (“PFSI”), Penson Financial Services Canada Inc. (“PFSC”), Penson Financial Services Ltd. (“PFSL”), Nexa Technologies, Inc. (“Nexa”), Penson GHCO (“Penson GHCO”), Penson Asia Limited (“Penson Asia”) and Penson Financial Services Australia Pty Ltd (“PFSA”). Through these operating subsidiaries, the Company provides securities and futures clearing services including integrated trade execution, clearing and custody services, trade settlement, technology services, risk management services, customer account processing and customized data processing services. The Company also participates in margin lending and securities borrowing and lending transactions, primarily to facilitate clearing and financing activities.

As of the date of this Annual Report, PWI has one class of common stock and one class of convertible preferred stock. The common stock is currently held by public shareholders and certain directors, officers and employees of the Company. None of the preferred stock is issued and outstanding. As used in this Annual Report, the term “common stock” means the common stock, and the term “preferred stock” means the convertible preferred stock, in each case unless otherwise specified.

The accompanying consolidated financial statements include the accounts of PWI and its wholly-owned subsidiary SAI. SAI’s wholly owned subsidiaries include among others, PFSI, Nexa, Penson Execution Services, Inc., GHP1, Inc. (“GHP1”), which includes its direct and indirect subsidiaries GHP2, LLC (“GHP2”), and Penson GHCO and Penson Holdings, Inc. (“PHI”), which includes its subsidiaries PFSC, PFSL, Penson Asia and PFSA. All significant intercompany transactions and balances have been eliminated in consolidation.

In connection with the delivery of products and services to its clients and customers, the Company manages its revenues and related expenses in the aggregate. As such, the Company evaluates the performance of its business activities, the Company evaluates clearing and commission, technology, interest income along with the associated interest expense as one integrated activity.

The Company’s cost infrastructure supporting its business activities varies by activity. In some instances, these costs are directly attributable to one business activity and sometimes to multiple activities. As such, in assessing the performance of its business activities, the Company does not consider these costs separately, but instead, evaluates performance in the aggregate along with the related revenues. Therefore, the Company’s pricing considers both the direct and indirect costs associated with transactions related to each business activity, the client relationship and the demand for the particular product or service in the marketplace. As a result, the Company does not manage or capture the costs associated with the products or services sold, or its general and administrative costs by revenue line.

2.   Summary of significant accounting policies

Securities Transactions — Proprietary securities transactions are recorded at fair value on a trade-date basis. Customer securities transactions are reported on a settlement-date basis. Amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded net on the consolidated statements of financial condition. All such pending transactions were settled after December 31, 2009 without any material adverse effect on the Company’s financial condition.

Securities Lending Activities — Securities borrowed and securities loaned transactions are reported as collateralized financings. Securities borrowed transactions occur when the Company deposits cash with the lender in exchange for borrowing securities. With respect to securities loaned, the Company receives in cash an amount generally in excess of the fair value of securities loaned. The Company monitors the fair value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary.

F-8

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Reverse Repurchase and Repurchase Agreements — The Company enters into transactions involving purchases of securities under agreements to resell (“reverse repurchase agreements”) or sales of securities under agreements to repurchase (“repurchase agreements”), which are accounted for as collateralized financings except where the Company does not have an agreement to sell (or purchase) the same or substantially the same securities before maturity at a fixed or determinable price. It is the policy of the Company to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under reverse repurchase agreements. To ensure that the market value of the underlying collateral remains sufficient, collateral is generally valued daily and the Company may require counterparties to deposit additional collateral or may return collateral pledged when appropriate. Reverse repurchase agreements are carried at the amounts at which the securities were initially acquired plus accrued interest. Repurchase agreements are carried at the amounts at which the securities were initially sold plus accrued interest.

Revenue Recognition — Revenues from clearing transactions are recorded in the Company’s consolidated financial statements on a trade date basis. Cash received in advance of revenue recognition is recorded as deferred revenue.

There are three major types of technology revenues: (1) completed products that are processing transactions every month generate revenues per transaction which are recognized on a trade date basis; (2) these same completed products may also generate monthly terminal charges for the delivery of data or processing capability which are recognized in the month to which the charges apply; (3) technology development services are recognized when the service is performed or under the terms of the technology development contract as described below. Interest and other revenues are recorded in the month that they are earned.

To date, the majority of our technology development contracts have not required significant production, modification or customization such that the service element of our overall relationship with the client generally does meet the criteria for separate accounting under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB Codification”). All of our products are fully functional when initially delivered to our clients, and any additional technology development work that is contracted for is recognized as revenue as outlined below. Technology development contracts generally cover only additional work that is performed to modify existing products to meet the specific needs of individual customers. This work can range from cosmetic modifications to the customer interface (private labeling) to custom development of additional features requested by the client. Technology revenues arising from development contracts are recorded on a percentage-of-completion basis based on outputs unless there are significant uncertainties preventing the use of this approach in which case a completed contract basis is used. The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance in the FASB Codification and Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”).

Income Taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Property and Equipment — Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives, generally 3 to 7 years, of the assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. The Company periodically reviews the carrying value of its long-

F-9

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

lived assets for possible impairment. In management’s opinion, there was no impairment of such assets at December 31, 2009 or 2008.

Goodwill — Goodwill represents the excess purchase price over the fair value of all tangible and identifiable intangible net assets acquired in a business acquisition. Substantially all of the Company’s goodwill is deductible for tax purposes. The Company complies with the relevant guidance in the FASB Codification for accounting for goodwill which requires, among other things, that companies no longer amortize goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. The Company conducts on at least an annual basis a review of its reporting units’ assets and liabilities to determine whether the goodwill is impaired. The goodwill impairment test is a two-step test. Under the first step, fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of the goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. The Company conducted its annual impairment during the fourth quarter of 2009 and 2008 and in management’s opinion; there was no impairment of such assets at December 31, 2009 or 2008. The changes in goodwill during 2009 and 2008 were as follows:

Balance, December 31, 2007	$	44,117
Goodwill acquired		50,770
Balance, December 31, 2008		94,887
Goodwill acquired		17,936
Balance, December 31, 2009	$	112,823

All goodwill acquired in 2008 and 2009 was related to the United States operating segment. Goodwill is included in other assets in the consolidated statements of financial condition.

Intangibles — Intangibles consisted of the following at December 31:

	Gross Carrying		Accumulated		Net Carrying
2009	Amount		Amortization		Value
Customer related intangible assets	$	20,007	$	3,762	$	16,245
Purchased technology		14,082		13,094		988
Other		2,760		251		2,509
Total	$	36,849	$	17,107	$	19,742

	Gross Carrying		Accumulated		Net Carrying
2008	Amount		Amortization		Value
Customer related intangible assets	$	20,007	$	2,310	$	17,697
Purchased technology		14,082		11,521		2,561
Other		2,760		140		2,620
Total	$	36,849	$	13,971	$	22,878

Customer related intangible assets represents customer contracts obtained as part of acquired businesses and are amortized on a straight-line basis over their estimated useful lives, ranging from 10 to 15 years. Purchased technology represents software and technology intangible assets acquired as part of acquired businesses and are

F-10

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

amortized over their estimated useful lives, generally 5 years. Other related primarily to the efutures.com domain name acquired with FCG which has an indefinite life and a non-compete agreement with an estimated useful life of 11 years. Intangible assets are included in other assets. Amortization expense related to intangible assets was approximately $3,136, $4,132 and $3,554 in 2009, 2008 and 2007, respectively. The Company estimates that amortization expense will be approximately $2,209 in 2010, $1,885 in 2011, $1,549 in 2012 and $1,535 in 2013 and 2014, respectively.

Financing Costs — Financing costs associated with the Company’s debt financing arrangements are capitalized and amortized over the life of the related debt in compliance with the effective interest method of the FASB Codification.

Operating Leases — Rent expense is provided on operating leases evenly over the applicable lease periods taking into account rent holidays. Amortization of leasehold improvements is provided evenly over the lesser of the estimated useful life or expected lease terms.

Stock-Based Compensation — The Company’s accounting for stock-based employee compensation plans focuses primarily on accounting for transactions in which an entity exchanges its equity instruments for employee services, and carries forward prior guidance for share-based payments for transactions with non-employees. The compensation cost is based upon the original grant-date fair value of the grant. The Company recognizes expense relating to stock-based compensation on a straight-line basis over the requisite service period which is generally the vesting period. Forfeitures of unvested stock grants are estimated and recognized as a reduction of expense.

Management’s Estimates and Assumptions — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company reviews all significant estimates affecting the consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.

Cash and Cash Equivalents — The Company considers cash equivalents to be highly liquid investments with original maturities of less than 90 days that are not held for sale in the ordinary course of business. Assets segregated for regulatory purposes are not included as cash and cash equivalents for purposes of the consolidated statements of cash flows because such assets are segregated for the benefit of customers only.

Securities Owned and Securities Sold, Not Yet Purchased — The Company has classified its investments in securities owned and securities sold, not yet purchased as “trading” and has reported those investments at their fair or market values in the consolidated statements of financial condition. Unrealized gains or losses are included in earnings.

Fair Value of Financial Instruments — The financial instruments of the Company are reported on the consolidated statements of financial condition at fair values, or at carrying amounts that approximate fair values because of the short maturity of the instruments. See Note 6 for a description of financial instruments carried at fair value.

Allowance for Doubtful Accounts — The Company generally does not lend money to customers or correspondents except on a fully collateralized basis. When the value of that collateral declines, the Company has the right to demand additional collateral. In cases where the collateral loses its liquidity, the Company might also demand personal guarantees or guarantees from other parties. In valuing receivables that become less than fully collateralized, the Company compares the market value of the collateral and any additional guarantees to the balance of the loan outstanding. To the extent that the collateral, the guarantees and any other rights the Company has against the customer or the related introducing broker are not sufficient to cover any potential losses, then the Company records an appropriate allowance for doubtful accounts. The Company monitors every account that is less

F-11

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

than fully collateralized with liquid securities every day. The Company reviews all such accounts on a monthly basis to determine if a change in the allowance for doubtful accounts is necessary. This specific, account-by-account review is supplemented by the risk management procedures that identify positions in illiquid securities and other market developments that could affect accounts that otherwise appear to be fully collateralized. The corporate and local country risk management officers monitor market developments on a daily basis. The Company maintains an allowance for doubtful accounts that represents amounts, in the judgment of management, necessary to adequately absorb losses from known and inherent losses in outstanding receivables. Provisions made to this allowance are charged to operations based on anticipated recoverability. The allowance for doubtful accounts was $9,705 and $8,160 at December 31, 2009 and 2008, respectively.

Software Costs and Expenses — Costs associated with software developed for internal use are capitalized based on guidance in the FASB Codification. Capitalized costs include external direct costs of materials and services consumed in developing or obtaining internal-use software and payroll for employees directly associated with, and who devote time to, the development of the internal-use software. Costs incurred in development and enhancement of software that do not meet the capitalization criteria, such as costs of activities performed during the preliminary and post-implementation stages, are expensed as incurred. Costs incurred in development and enhancements that do not meet the criteria to capitalize are activities performed during the application development stage such as designing, coding, installing and testing. The critical estimate related to this process is the determination of the amount of time devoted by employees to specific stages of internal-use software development projects. The Company reviews any impairment of the capitalized costs on a periodic basis. The Company amortizes such costs over the estimated useful life of the software, which is three to five years once the software has been placed in service. The Company capitalized software development costs of approximately $6,880, $5,491 and $2,049 in 2009, 2008 and 2007 respectively. Amortization expense related to capitalized software development costs was approximately $2,543, $719 and $322 for the years ended December 31, 2009, 2008 and 2007, respectively.

Net Income Per Share — Net income per common share is computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period presented. Basic earnings per share excludes any dilutive effects of options. Diluted net income per share considers the impact of potential dilutive common shares, unless the inclusion of such shares would have an antidilutive effect.

Foreign Currency Translation Adjustments — The Company has, in consolidation, translated the account balances of PFSL, PFSC, Penson Asia and PFSA from their functional currency to U.S. Dollars, the Company’s reporting currency. Translation gains and losses are recorded as an accumulated balance, net of tax, in the consolidated statements of stockholders’ equity. See Note 15.

Reclassifications — The Company has reclassified certain prior period amounts to conform to the current year’s presentation. The reclassifications had no effect on the consolidated statements of operations or stockholders’ equity as previously reported.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (the “Codification”), the single source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States. All guidance contained in the Codification carries an equal level of authority. The Codification supersedes all existing non-SEC accounting and reporting standards and was effective for the Company beginning July 1, 2009. The FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates. The FASB will not consider Accounting Standards Updates as authoritative in their own right; these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the changes in the Codification.

F-12

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

In May 2008, the FASB issued authoritative guidance for convertible debt instruments. This guidance requires that entities with convertible debt instruments that may be settled entirely or partially in cash upon conversion should separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s economic interest cost. The effect of the new rules on the Company’s convertible debentures is that the equity component is included in the paid-in-capital section of stockholders’ equity on the Company’s consolidated balance sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of convertible debt. The Company adopted this guidance on January 1, 2009. See Note 9 for the impact on our consolidated financial statements.

In April 2009, the FASB issued authoritative disclosure guidance for financial instruments. The guidance requires an entity to provide interim disclosures about the fair value of financial instruments and to include disclosures related to the methods and significant assumptions used in estimating those instruments. The Company adopted this guidance during the quarter ended June 30, 2009. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued additional guidance on estimating fair value when the volume and level of transaction activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. Additionally, this guidance requires additional disclosures regarding fair value in interim and annual reports. The Company adopted this guidance during the quarter ended June 30, 2009. The adoption did not have a material impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued authoritative guidance for subsequent events, which establishes standards on events that occur after the balance sheet date but prior to the issuance of the financial statements. This guidance distinguishes events requiring recognition in the financial statements and those that may require disclosure in the financial statements. Furthermore, it requires disclosure of the date through which subsequent events were evaluated. The Company adopted this guidance during the quarter ended June 30, 2009. The Company has evaluated subsequent events for potential recognition and/or disclosure through March 5, 2010, the date the consolidated financial statements included in this Annual Report on Form 10-K were issued.

3.   Acquisitions

Acquisition of Ridge

On November 2, 2009, PWI, together with PFSI, entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Broadridge Financial Solutions, Inc. (“Broadridge”) and its wholly owned subsidiary Ridge Clearing & Outsourcing Solutions, Inc. (“Ridge”) to acquire substantially all of Ridge’s contracts with its securities clearing clients. Under the terms of the Asset Purchase Agreement, PWI currently expects to pay between $45 million and $54 million in total consideration (the “Purchase Price”) to Broadridge consisting of (a) a five-year subordinated note (the “Seller Note”) payable by PWI bearing interest at an annual rate equal to 90-day LIBOR plus 5.5%, and (b) shares of PWI’s common stock (“PWI Common Stock”) equal to the lesser of (i) the number of shares of PWI Common Stock equal to the quotient of one third of the Purchase Price divided by the volume weighted-average selling price of PWI Common Stock over the 10 trading day period immediately prior to the closing, (ii) the number of shares of PWI Common Stock equal to 9.9% of the issued and outstanding shares of PWI as of the close of business on the business day immediately prior to the closing, or (iii) 2,517,451 shares of PWI Common Stock. The specific amount of such consideration will be determined immediately prior to closing pursuant to an agreed formula based upon the revenues attributable to the contracts being purchased by PFSI. The allocation of the consideration between the Seller Note and the PWI Common Stock will also be determined prior to the closing of the transaction. The Purchase Price will be subject to certain adjustments post-closing upon the occurrence of agreed upon events. The Company anticipates the transaction closing in the second quarter of 2010.

F-13

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Acquisition of First Capitol Group LLC

In November 2007, our subsidiary Penson GHCO acquired all of the assets of First Capitol Group LLC (“FCG”), an FCM and a leading provider of technology products and services to futures traders, and assigned the purchased membership interest to GHP1 effective immediately thereafter. We closed the transaction in November, 2007 and paid approximately $9.4 million in cash, subject to a reconciliation to reported actual net income for the period ended November 30, 2008, as defined in the purchase agreement and approximately 150 shares of common stock valued at $2.2 million to the previous owners of FCG. In addition, the Company agreed to pay an annual earnout in cash for the two year period following the actual net income reconciliation, based on average net income, subject to certain adjustments including cost of capital, for the acquired business. The Company paid approximately $8.7 million related to the first year of the earnout period. The Company did not make an earnout payment related to the second year of the earnout period. The Company finalized the acquisition valuation during the third quarter of 2008 and recorded goodwill of approximately $4.0 million and intangibles of approximately $7.6 million. The financial results of FCG have been included in the Company’s consolidated financial statements since the November 30, 2007 acquisition date. On May 31, 2008, Penson GHCO acquired substantially all of the assets of FCG as part of an internal reorganization and consolidation of assets. FCG currently conducts business as a division of Penson GHCO.

Acquisition of GHCO

In November 2006, the Company entered into a definitive agreement to acquire the partnership interests of Chicago-based GHCO, a leading international futures clearing and execution firm. The Company closed the transaction on February 16, 2007 and paid $27.9 million, including cash and approximately 139 shares of common stock valued at $3.9 million to the previous owners of GHCO. In addition, the Company agreed to pay additional consideration in the form of an earnout over the next three years, in an amount equal to 25% of Penson GHCO’s pre-tax earnings, as defined in the purchase agreement executed with the previous owners of GHCO. The Company did not make an earnout payment related to the first and second years of the integrated Penson GHCO business. Goodwill of approximately $2.8 million and intangibles of approximately $1.0 million were recorded in connection with the acquisition. The assets and liabilities acquired as well as the financial results of Penson GHCO have been included in the Company’s consolidated financial statements since the February 16, 2007 acquisition date.

Acquisition of Schonfeld

In November 2006, the Company acquired the clearing business of Schonfeld Securities LLC (“Schonfeld”), a New York based securities firm. The Company closed the transaction in November 2006 and in January 2007, the Company issued approximately 1.1 million shares of common stock valued at $28.3 million to the previous owners of Schonfeld as partial consideration for the assets acquired of which approximately $14.8 million was recorded as goodwill and $13.5 million as intangibles. In addition, the Company agreed to pay an annual earnout of stock and cash over a four year period that commenced on June 1, 2007, based on net income, as defined in the asset purchase agreement, for the acquired business. The Company successfully completed the conversion of the seven Schonfeld correspondents in the second quarter of 2007. A payment of approximately $26.6 million was paid in connection with the first year earnout that ended May 31, 2008 and approximately $25.5 million was paid in connection with the second year of the earnout that ended May 31, 2009. At December 31, 2009, a liability of approximately $8.5 million was accrued as a result of the third year of the earnout ending May 31, 2010. This balance is included in other liabilities in the condensed consolidated statement of financial condition. The offset of this liability, goodwill, is included in other assets.

F-14

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

5.   Computation of net income per share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per common share computation (“EPS”). Common stock equivalents related to stock options are excluded from the diluted EPS calculation if their effect would be anti-dilutive to EPS.

	Year Ended December 31,
	2009		2008		2007
Basic and diluted:
Net income	$	16,011	$	10,656	$	26,833
Weighted average common shares outstanding — basic		25,373		25,217		26,232
Incremental shares from outstanding stock options		26		33		202
Incremental shares from non-vested restricted stock units		101		12		120
Shares issuable		18		154		263
Convertible debt		73		—		—
Weighted average common shares and common share equivalents — diluted		25,591		25,416		26,817
Basic earnings per common share	$	.63	$	.42	$	1.02
Diluted earnings per common share	$	.63	$	.42	$	1.00

At December 31, 2009, 2008 and 2007 stock options and restricted stock units totaling 1,272, 1,565 and 1,348, respectively were excluded from the computation of diluted EPS as their effect would have been anti-dilutive.

6.   Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. The fair value model establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

•  Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

•  Level 2 — Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. These financial instruments are valued by quoted prices that are less frequent than those in active markets or by models that use various assumptions that are derived from or supported by data that is generally observable in the marketplace. Valuations in this category are

F-15

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

inherently less reliable than quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying assumptions.

•  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data. The Company does not currently have any financial instruments utilizing Level 3 inputs. These financial instruments have significant inputs that cannot be validated by readily determinable data and generally involve considerable judgment by management.

The following is a description of the valuation techniques applied to the Company’s major categories of assets and liabilities measured at fair value on a recurring basis:

U.S. government and agency securities

U.S. government securities are valued using quoted market prices in active markets. Accordingly, U.S. government securities are categorized in Level 1 of the fair value hierarchy.

U.S. agency securities consist of agency issued debt and are valued using quoted market prices in active markets. As such these securities are categorized in Level 1 of the fair value hierarchy.

Canadian government obligations

Canadian government securities include both Canadian federal obligations and Canadian provincial obligations. These securities are valued using quoted market prices. These bonds are generally categorized in Level 2 of the fair value hierarchy as the price quotations are not always from active markets.

Corporate equity

Corporate equity securities represent exchange-traded securities and are generally valued based on quoted prices in active markets. These securities are categorized in Level 1 of the fair value hierarchy.

Corporate debt

Corporate bonds are generally valued using quoted market prices. Corporate bonds are generally classified in Level 2 of the fair value hierarchy as prices are not always from active markets.

Listed option contracts

Listed options are exchange traded and are generally valued based on quoted prices in active markets and are categorized in Level 1 of the fair value hierarchy.

Certificates of deposit and term deposits

The fair value of certificates of deposits and term deposits is estimated using third-party quotations. These deposits are categorized in Level 2 of the fair value hierarchy.

Money market

Money market funds are generally valued based on quoted prices in active markets. These securities are categorized in Level 1 of the fair value hierarchy.

F-16

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The following tables summarizes by level within the fair value hierarchy “Receivable from broker-dealers and clearing organizations”, “Securities owned, at fair value”, “Deposits with clearing organizations” and “Securities sold, not yet purchased, at fair value” as of December 31, 2009 and 2008.

December 31, 2009	Level 1		Level 2		Total
Receivable from broker-dealers and clearing organizations
U.S. government and agency securities	$	5,149	$	—	$	5,149
	$	5,149	$	—	$	5,149
Securities owned
Corporate equity	$	2,021	$	—	$	2,021
Listed option contracts		127		—		127
Corporate debt		—		70,398		70,398
Certificates of deposit and term deposits		—		26,368		26,368
U.S. government and agency securities		73,775		—		73,775
Canadian government obligations		—		33,691		33,691
Money market		17,100		—		17,100
	$	93,023	$	130,457	$	223,480
Deposits with clearing organizations
U.S. government and agency securities	$	261,050	$	—	$	261,050
Money market		95,532		—		95,532
	$	356,582	$	—	$	356,582
Securities sold, not yet purchased
Corporate equity	$	16	$	—	$	16
Listed option contracts		228		—		228
Corporate debt		—		63,850		63,850
Canadian government obligations		—		33,214		33,214
	$	244	$	97,064	$	97,308

F-17

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

December 31, 2008	Level 1		Level 2		Total
Receivable from broker-dealers and clearing organizations
U.S. government and agency securities	$	17,369	$	—	$	17,369
	$	17,369	$	—	$	17,369
Securities owned
Corporate equity	$	2,493	$	—	$	2,493
Listed option contracts		38		—		38
Corporate debt		—		24,062		24,062
Certificates of deposit and term deposits		—		82,049		82,049
U.S. government and agency securities		63,261		—		63,261
Canadian government obligations		—		51,428		51,428
Money market		206,200		—		206,200
	$	271,992	$	157,539	$	429,531
Deposits with clearing organizations
U.S. government and agency securities	$	231,962	$	—	$	231,962
Money market		58,354		—		58,354
	$	290,316	$	—	$	290,316
Securities sold, not yet purchased
Corporate equity	$	1,044	$	—	$	1,044
Listed option contracts		1,878		—		1,878
Corporate debt		—		16,217		16,217
Certificates of deposit and term deposits		—		9,658		9,658
Canadian government obligations		—		19,586		19,586
	$	2,922	$	45,461	$	48,383

7.   Segregated assets

Cash and securities segregated under U.S. federal and other regulations totaled $3,605,651 at December 31, 2009. Cash and securities segregated under federal and other regulations by PFSI totaled $3,172,172 at December 31, 2009. Of this amount, $3,161,464 was segregated for the benefit of customers under Rule 15c3-3 of the Securities and Exchange Commission, against a requirement as of December 31, 2009 of $3,176,130. An additional deposit of $60,000 was made on January 5, 2010 as allowed by Rule 15c3-3. The remaining balance of $10,708 at year end relates to the Company’s election to compute a reserve requirement for Proprietary Accounts of Introducing Broker-Dealers (“PAIB”), as defined against a requirement as of December 31, 2009 of $12,533. An additional deposit of $12,000 was made on January 5, 2010 as allowed by Rule 15c3-3. The PAIB is completed in order for each correspondent firm that uses the Company as its clearing broker-dealer to classify its assets held by the Company as allowable assets in the correspondent’s net capital calculation. In addition, $413,669, including $181,522 in cash, was segregated for the benefit of customers by Penson GHCO to Commodity Futures Trading Commission Rule 1.20. Finally, $113,073 was segregated under similar Canadian regulations by PFSC and $138,884 was segregated under similar regulations in the United Kingdom by PFSL. At December 31, 2008, $2,383,948 was segregated for the benefit of customers under Rule 15c3-3 of the Exchange Act and PAIB, and similar Canadian and United Kingdom regulations.

F-18

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

8.   Receivable from and payable to broker-dealers and clearing organizations

Amounts receivable from and payable to broker-dealers and clearing organizations consists of the following:

	December 31,
	2009		2008
Receivable:
Securities failed to deliver	$	62,613	$	75,022
Receivable from clearing organizations		162,517		243,256
	$	225,130	$	318,278
Payable:
Securities failed to receive	$	51,695	$	41,108
Payable to clearing organizations		284,361		303,986
	$	336,056	$	345,094

Receivables from broker-dealers and clearing organizations include amounts receivable for securities failed to deliver, amounts receivable from clearing organizations relating to open transactions, good-faith and margin deposits, and floor-brokerage receivables.

Payables to broker-dealers and clearing organizations include amounts payable for securities failed to receive, amounts payable to clearing organizations on open transactions, and floor-brokerage payables. In addition, the net receivable or payable arising from unsettled trades is reflected in these categories.

9.   Receivable from and payable to customers and correspondents

Receivable from and payable to customers and correspondents include amounts due on cash and margin transactions. Securities owned by customers and correspondents are held as collateral for receivables. Such collateral is not reflected in the consolidated financial statements. Payable to correspondents also includes commissions due on customer transactions.

F-19

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

10.   Securities owned and securities sold, not yet purchased

Securities owned and securities sold, not yet purchased consist of trading and investment securities at fair value as follows:

	December 31,
	2009		2008
Securities Owned:
Corporate equity	$	2,021	$	2,493
Listed option contracts		127		38
Corporate debt		70,398		24,062
Certificates of deposit and term deposits		26,368		82,049
U.S. federal and agency securities		73,775		63,261
Canadian government obligations		33,691		51,428
Money market		17,100		206,200
	$	223,480	$	429,531
Securities Sold, Not Yet Purchased:
Corporate equity	$	16	$	1,044
Listed option contracts		228		1,878
Corporate debt		63,850		16,217
Certificates of deposit and term deposits		33,214		9,658
Canadian government obligations		—		19,586
	$	97,308	$	48,383

As of December 31, 2009 and 2008 securities owned of approximately $25,355 and $32,366, respectively, have been pledged to secure short-term borrowings.

11.   Reverse repurchase and repurchase agreements

At December 31, 2009 the Company held reverse repurchase agreements of $117,485 collateralized by Canadian government obligations and corporate debt of approximately $117,485. At December 31, 2008 the Company held $50,706 of reverse repurchase agreements collateralized by Canadian government obligations and corporate debt of approximately $50,706, The reverse repurchase agreements are included in other assets. There were no repurchase agreements outstanding at December 31, 2009 and 2008.

F-20

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

12.   Property and equipment

Property and equipment consists of the following:

	December 31,
	2009		2008
Equipment	$	33,729	$	26,604
Software		61,925		46,372
Furniture		5,146		4,837
Leasehold improvements		6,825		6,293
Other		1,826		1,647
		109,451		85,753
Less accumulated depreciation and amortization		74,556		57,325
Property and equipment, net	$	34,895	$	28,428

Depreciation and amortization is provided over the estimated useful lives of the assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. Depreciation and amortization is generally provided over three to seven years for equipment and other, over three years for software, over five years for furniture and over the lesser of the estimated useful life or lease term from three to twelve years for leasehold improvements. Depreciation and amortization expense for the years ended December 31, 2009, 2008 and 2007 was approximately $15,965, $15,990 and $12,769, respectively.

13.   Short-term bank loans

At December 31, 2009 and 2008, the Company had $113,213 and $130,846, respectively in short-term bank loans outstanding with weighted average interest rates of approximately 1.2% and 1.4%, respectively. As of December 31, 2009 the Company had seven uncommitted lines of credit with seven financial institutions. Five of these lines of credit permitted the Company to borrow up to an aggregate of approximately $312,726 while two lines do not have specified borrowing limits. The fair value of short-term bank loans approximates their carrying values.

The Company also has the ability to borrow under stock loan arrangements. At December 31, 2009 and 2008, the Company had $411,162 and $319,801, respectively, with weighted average interest rates of approximately 0.7% and 1.4% respectively, in borrowings and no specific limitations on additional borrowing capacities. Borrowings under these arrangements bear interest at variable rates, are secured primarily by our firm inventory and customers’ margin account securities, and are repayable on demand. The fair value of these borrowings approximates their carrying values. The remaining balance in securities loaned relates to the Company’s conduit stock loan business.

14.   Notes payable

Notes Payable consists of the following:

	December 31,
	2009		2008
Bank credit line up to $100,000, unsecured, with a variable rate of interest that approximated 7.0% and 7.6% at December 31, 2009 and 2008. Payable in full in April 2010	$	88,500	$	75,000
8.00% Senior Convertible Notes with a principal amount of $60,000, unsecured. Payable in full in June 2014		44,269		—
	$	132,769	$	75,000

F-21

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Revolving Credit Facility

On May 1, 2009 the Company signed a new secured revolving credit facility (the “Credit Facility”) with a syndicate of financial institutions. The Credit Facility was subsequently amended on May 27, 2009 and September 22, 2009. The Credit Facility allows the Company to borrow up to a maximum $100,000 at a variable rate of interest with a term of 364 days. The Company’s obligations under the Credit Facility are secured by a guaranty from SAI and PHI, and a pledge by the Company, SAI and PHI of the equity interests of certain of the Company’s subsidiaries. The Credit Facility contains various positive and negative covenants, including certain financial covenants such as maintenance of minimum consolidated tangible net worth, a minimum fixed charge coverage ratio, a maximum consolidated leverage ratio, a minimum capital requirement, a minimum liquidity requirement and maximum capital expenditures. The fair value of the Credit Facility approximates its carrying value. On November 2, 2009 PWI entered into the Third Amendment (the “Third Amendment”) to the Credit Facility. The Third Amendment, among other things, makes changes to a number of covenants in the Credit Agreement, including the financial covenants, in order to permit the acquisition of the clearing contracts of Ridge and the issuance of the common stock portion of the purchase price, the Seller Note and the Backstop Note. In addition, the Third Amendment authorizes PWI to raise additional capital. In the event that the Backstop Note has been issued at the time of such capital raising, the Third Amendment requires that the proceeds will be used to repay the Backstop Note. The Company is currently evaluating several capital raising alternatives in preparation for the expiration of the Credit Facility and the expected funding of the Ridge transaction. Among other options, the Company is evaluating the extension or expansion of the current Credit Facility.

Senior Convertible Notes

On June 3, 2009, the Company issued $60,000 aggregate principal amount of 8.00% Senior Convertible Notes due 2014 (the “Convertible Notes”). The $60,000 aggregate principal amount of Convertible Notes includes $10,000 issued in connection with the exercise in full by the initial purchasers of their over-allotment option. The net proceeds from the sale of the convertible notes were approximately $56,200 after initial purchaser discounts and other expenses.

The Convertible Notes bear interest at a rate of 8.0% per year. Interest on the Convertible Notes is payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2009. The Convertible Notes will mature on June 1, 2014, subject to earlier repurchase or conversion.

Holders may convert their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding the maturity date for such Convertible Notes under the following circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 30, 2009 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 120% of the conversion price of the Convertible Notes on the last day of such preceding fiscal quarter; (2) during the five business-day period after any five consecutive trading-day period in which the trading price per $1,000 (in whole dollars) principal amount of the Convertible Notes for each day of that period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the Convertible Notes on each such day; (3) upon the occurrence of specified corporate transactions, including upon certain distributions to holders of the Company’s common stock and certain fundamental changes, including changes of control and dispositions of substantially all of the Company’s assets; and (4) at any time beginning on March 1, 2014. Upon conversion, the Company will pay or deliver, at the Company’s option, cash, shares of the Company’s common stock or a combination thereof. The initial conversion rate for the Convertible Notes will be 101.9420 shares of the Company’s common stock per $1,000 (in whole dollars) principal amount of Convertible Notes (6,117 shares), equivalent to an initial conversion price of approximately $9.81 per share of common stock. Such conversion rate will be subject to adjustment in certain events, but will not be adjusted for accrued or additional interest. In addition, the Indenture provides that, in no event will the Company issue shares upon

F-22

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

conversion of Convertible Notes that exceed 19.99% of its common stock outstanding as of June 3, 2009, unless it has obtained stockholder approval in accordance with NASDAQ listing standards.

Following certain corporate transactions, the Company will increase the applicable conversion rate for a holder who elects to convert its Convertible Notes in connection with such corporate transactions by a number of additional shares of common stock. The Company may not redeem the Convertible Notes prior to their stated maturity date. If the Company undergoes a fundamental change, holders may require the Company to repurchase all or a portion of the holders’ Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus any accrued and unpaid interest, including any additional interest, to, but excluding, the fundamental change purchase date.

The Convertible Notes are unsecured obligations of the Company and contain customary covenants, such as reporting of annual and quarterly financial results, and restrictions on certain mergers, consolidations and changes of control. The Convertible Notes also contain customary events of default, including failure to pay principal or interest, breach of covenants, cross-acceleration to other debt in excess of $20,000, unsatisfied judgments of $20,000 or more and bankruptcy events. The Convertible Notes contain no financial covenants.

The Company is required to separately account for the liability and equity components of the Convertible Notes in a manner that reflects the Company’s nonconvertible debt borrowing rate at the date of issuance when interest cost is recognized in subsequent periods. The Company allocated approximately $8,822, net of tax of $5,593, of the $60,000 principal amount of the Convertible Notes to the equity component, which represents a discount to the debt and is being amortized into interest expense using the effective interest method through June 1, 2014. Accordingly, the Company’s effective interest rate on the Convertible Notes is 15.0%. The Company will recognize interest expense during the twelve months ended May 2010 on the Convertible Notes in an amount that approximates 15.0% of $45,585, the liability component of the Convertible Notes at the date of issuance. The Convertible Notes were further discounted by approximately $2,850 for the costs associated with the initial purchasers. These costs and other debt issuance costs are being amortized into interest expense over the life of the Convertible Notes. The interest expense recognized for the Convertible Notes in the twelve months ended May 2011 and subsequent periods will be greater as the discount is amortized and the effective interest method is applied. For the year ended December 31, 2009, the Company recognized interest expense of $2,773 related to the coupon, $1,201 related to the conversion feature and $417 related various issuance costs.

The estimated fair value of the Convertible Notes was estimated using a discounted cash flow analysis based on our current borrowing rate for an instrument with similar terms. At December 31, 2009 the fair value of the Convertible Notes approximated the carrying value of $46,787.

Approximate future annual maturities of the Company’s notes payable at December 31, 2009 are listed below:

	Amount
2010	$	88,500
2011		—
2012		—
2013		—
2014		60,000
	$	148,500

F-23

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

15.   Stockholders’ equity

The following table details the Company’s share activity

	Preferred		Common			Treasury
	Stock		Stock			Stock
Balance, December 31, 2006		—		25,078			1,076
Issuance of common stock		—		1,659			—
Repurchase of treasury stock		—		(1,607	)		1,607
Stock-based compensation		—		173			—
Purchases under the employee stock purchase plan		—		128			—
Exercise of stock options		—		112			—
Balance, December 31, 2007		—		25,543			2,683
Issuance of common stock		—		44			—
Repurchase of treasury stock		—		(714	)		714
Stock-based compensation		—		188			—
Purchases under the employee stock purchase plan		—		110			—
Exercise of stock options		—		36			—
Balance, December 31, 2008		—		25,207			3,397
Issuance of common stock		—		35			—
Repurchase of treasury stock		—		(77	)		77
Stock-based compensation		—		275			—
Purchases under the employee stock purchase plan		—		108			—
Balance, December 31, 2009		—		25,548			3,474

Additional paid-in capital

During the years ended December 31, 2009 and 2008, the Company did not grant any stock options and granted 206 and 599 restricted stock units (“RSUs”) with a fair value of $1,336 and $6,027, respectively. As a result, additional paid-in capital increased by $5,084 and $4,521 during the years ended December 31, 2009 and 2008, respectively to reflect the amortization of the fair value of the stock options and RSUs. This increase included $218 and $184 of expense related to features of the employee stock purchase plan (see Note 19).

Comprehensive income

Comprehensive income, which is displayed in the consolidated statements of stockholders’ equity, represents net income plus the results of certain stockholders’ equity changes not reflected in the consolidated statements of income.

The after-tax components of accumulated other comprehensive income are as follows:

	Year Ended December 31,
	2009		2008			2007
Net income	$	16,011	$	10,656		$	26,833
Foreign currency translation gain (loss)		4,773		(9,989	)		4,805
Comprehensive income	$	20,784	$	667		$	31,638

F-24

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The exchange rates used in the translation of amounts into U.S. dollars are as follows:

	Year Ended December 31,
	2009		2008		2007
Canadian Dollars
Income statement	$	0.88	$	0.95	$	0.95
Balance sheet		0.95		0.82		1.01
British Pounds
Income statement	$	1.56	$	1.85	$	2.01
Balance sheet		1.61		1.44		1.99
Australian Dollars
Income statement	$	0.90	$	—	$	—
Balance sheet		0.90		—		—

The rate used to translate asset and liability accounts is the exchange rate in effect at the balance sheet date. The rate used to translate income statement accounts is the weighted average exchange rate in effect during the period.

Dividends

The Company does not currently pay dividends on its common shares and there are no preferred shares outstanding.

16.   Financial instruments with off-balance sheet risk

In the normal course of business, the Company purchases and sells securities as both principal and agent. If another party to the transaction fails to fulfill its contractual obligation, the Company may incur a loss if the market value of the security is different from the contract amount of the transaction.

The Company deposits customers’ margin account securities with lending institutions as collateral for borrowings. If a lending institution does not return a security, the Company may be obligated to purchase the security in order to return it to the customer. In such circumstances, the Company may incur a loss equal to the amount by which the market value of the security on the date of nonperformance exceeds the value of the loan from the institution.

In the event a customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer’s obligations. The Company seeks to control the risks 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 on an intra-day basis and, pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary. Although the Company monitors margin balances on an intra-day basis in order to control our risk exposure, the Company is not able to eliminate all risks associated with margin lending.

Securities purchased under agreements to resell are collateralized by U.S. government or U.S. government-guaranteed securities. Such transactions may expose the Company to off-balance-sheet risk in the event such borrowers do not repay the loans and the value of collateral held is less than that of the underlying contract amount. A similar risk exists on Canadian government securities purchased under agreements to resell that are a part of other assets. These agreements provide the Company with the right to maintain the relationship between market value of the collateral and the contract amount of the receivable.

The Company’s policy is to regularly monitor its market exposure and counterparty risk. The Company does not anticipate nonperformance by counterparties and maintains a policy of reviewing the credit standing of all parties, including customers, with which it conducts business.

F-25

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

For customers introduced on a fully-disclosed basis by other broker-dealers, the Company has the contractual right of recovery from such introducing broker-dealers in the event of nonperformance by the customer.

In addition, the Company has sold securities that it does not currently own and will therefore be obligated to purchase such securities at a future date. The Company has recorded these obligations in the financial statements at December 31, 2009, at fair values of the related securities and may incur a loss if the fair value of the securities increases subsequent to December 31, 2009.

17.   Related party transactions

The Company’s chairman, Mr. Engemoen, is a significant stockholder (directly or indirectly) in, and serves as the Chairman of the Board for, SAMCO Holdings, Inc. (“SAMCO”), which owns all of the outstanding stock or equity interests, as applicable, of each of SAMCO Financial Services, Inc. (“SAMCO Financial”), SAMCO Capital Markets, Inc. (“SAMCO Capital Markets”), and SAMCO-BD, LLC (“SAMCO-BD”). SAMCO and its affiliated entities are referred to as the “SAMCO Entities.” The Company currently provides technology support and other similar services to SAMCO and provides clearing services, including margin lending, to the customers of SAMCO Capital Markets. The Company had provided clearing and margin lending services to customers of SAMCO Financial prior to SAMCO Financial’s termination of its broker-dealer status on December 31, 2006.

On July 18, 2006, three claimants filed separate arbitration claims with the NASD (which is now known as FINRA) against PFSI related to the sale of certain collateralized mortgage obligations by SAMCO Financial Services, Inc. (“SAMCO Financial”) to its customers. In the ensuing months, additional arbitration claims were filed against PFSI and certain of our directors and officers based upon substantially similar underlying facts. These claims generally allege, among other things, that SAMCO Financial, in its capacity as broker, and PFSI, in its capacity as the clearing broker, failed to adequately supervise certain registered representatives of SAMCO Financial, and otherwise acted improperly in connection with the sale of these securities during the time period from approximately June 2004 to May 2006. Claimants have generally requested compensation for losses incurred through the depreciation in market value or liquidation of the collateralized mortgage obligations, interest on any losses suffered, punitive damages, court costs and attorneys’ fees. In addition to the arbitration claims, on March 21, 2008, Ward Insurance Company, Inc., et al, filed a claim against PFSI and Roger J. Engemoen, Jr., the Company’s Chairman of the Board, in the Superior Court of California, County of San Diego, Central District, based upon substantially similar facts. This case was filed after a FINRA arbitration panel had previously ruled against the claimant on substantially similar facts, but in that action, PFSI and Mr. Engemoen were not parties. Among other defenses asserted, the Company is seeking to have the court enforce the earlier arbitration panel determination.

Mr. Engemoen, the Company’s Chairman of the Board, is the Chairman of the Board, and beneficially owns approximately 52% of the outstanding stock, of SAMCO Holdings, Inc., the holding company of SAMCO Financial and SAMCO Capital Markets, Inc. (SAMCO Holdings, Inc. and its affiliated companies are referred to as the “SAMCO Entities”). Certain of the SAMCO Entities received certain assets from the Company when those assets were split-off immediately prior to the Company’s initial public offering in 2006 (the “Split-Off”). In connection with the Split-Off and through contractual and other arrangements, certain of the SAMCO Entities have agreed to indemnify the Company and its affiliates against liabilities that were incurred by any of the SAMCO Entities in connection with the operation of their businesses, either prior to or following the Split-Off. During the third quarter of 2008, the Company’s management determined that, based on the financial condition of the SAMCO Entities, sufficient risk existed with respect to the indemnification protections to warrant a modification of these arrangements with the SAMCO Entities, as described below.

On November 5, 2008, the Company entered into a settlement agreement with certain of the SAMCO Entities pursuant to which the Company received a limited personal guaranty from Mr. Engemoen of certain of the indemnification obligations of various SAMCO Entities with respect to claims related to the underlying facts described above, and, in exchange, the Company agreed to limit the aggregate indemnification obligations of the SAMCO Entities with respect to certain matters described above to $2,965. Unpaid indemnification obligations of

F-26

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

$800 were satisfied prior to February 15, 2009. Of the $800 obligation, $86 was satisfied through a setoff against an obligation owed to the SAMCO Entities by PFSI, with the balance paid in cash. Of the remaining $2,165 indemnity obligation, $600 was paid to the Company prior to June 15, 2009 and the remainder was paid in December, 2009. Effective as of December 31, 2009, the Company and the SAMCO entities entered into an amendment to the settlement agreement, whereby SAMCO Holdings, Inc. agreed to pay an additional $133 on the last business day of each of the first six calendar months of 2010 (a total of $800). In each of January and February, 2010, SAMCO Holdings, Inc. paid $133 to the Company pursuant to the terms of the amendment to the settlement agreement. The SAMCO Entities remain responsible for the payment of their own defense costs and any claims from any third parties not expressly released under the settlement agreement, irrespective of amounts paid to indemnify the Company. The settlement agreement only relates to the matters described above and does not alter the indemnification obligations of the SAMCO Entities with respect to unrelated matters.

In the event the exposure of the Company with respect to these claims exceeds the agreed limits on the indemnification obligations of the SAMCO Entities such excess amounts may be borne by the Company. While the Company believes it has good defenses, there can be no assurance that its defenses and indemnification protections will be sufficient to avoid all liabilities. Accordingly, to account for liabilities related to the aforementioned claims that may be borne by the Company, a pre-tax charge of $2,350 was recorded in the third quarter of 2008. The Company will continue to monitor its financial exposure with respect to these matters and there can be no assurance that the Company’s ultimate costs with respect to these claims will not exceed the amount of this liability.

In the general course of business, the Company and certain of its officers have been named as defendants in other various pending lawsuits and arbitration and regulatory proceedings. These other claims allege violation of federal and state securities laws, among other matters. The Company believes that resolution of these claims will not result in any material adverse effect on its business, financial condition, or results of operation.

Technology support and similar services are provided to SAMCO pursuant to the terms of a Transition Services Agreement entered into between the Company and SAMCO on May 16, 2006. That agreement was entered into at arm’s length and the Company believes it to be on market terms. Clearing services are provided to SAMCO Capital Markets pursuant to the terms of a clearing agreement entered into between the Company and SAMCO Capital Markets on May 19, 2005, as amended effective December 31, 2009. That agreement, as amended, was also entered into at arm’s length and is similar to clearing agreements the Company enters into from time to time with other similarly situated correspondents. The Company believes the terms to be no more favorable to SAMCO Capital Markets than what the Company would offer similarly situated correspondents. In 2009 the Company generated $105 in revenue from providing technology support and similar services to SAMCO and approximately $687 in revenue from the Company’s clearing relationship with SAMCO Capital Markets.

The Company sublets space to SAMCO Capital Markets at the Company’s principal offices at 1700 Pacific Avenue in Dallas, Texas and at One Penn Plaza, in New York, NY. For each sublease, SAMCO Capital Markets is required to pay the percentage of the rental expense the Company incurs equal to the percentage of space SAMCO Capital Markets occupies. The Company believes each sublease to be on market terms. In 2009, for occupying the 20th floor of the Company’s Dallas office, SAMCO Capital Markets made payments totaling $120 the landlord of that property. For occupying half of Suite 5120 in the Company’s New York office, SAMCO Capital Markets made payments totaling $450 to the landlord of that property.

Mr. Thomas R. Johnson, a member of the Company’s Board of Directors, is also a member of the board of directors and the President, CEO and a stockholder of Call Now, Inc. (“Call Now”), a publicly traded company. Over the past several years, the Company has, through PFSI, its U.S. securities clearing broker-dealer subsidiary, extended margin credit to Call Now, among other of the Company’s related parties. Such credit has been extended in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties and had not involved more than normal risk of collectability or presented other unfavorable features.

F-27

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The Company’s management recently determined that certain municipal bonds underlying Call Now’s margin position had suffered reduced liquidity, and began working with Call Now to restructure the margin loan. As part of the restructuring, on February 25, 2010, Call Now converted $13,922 of its outstanding margin loan into a Promissory Note in favor of the Company accumulating interest at a rate of 10% per year. The Company’s management currently believes that all amounts due under the Promissory Note will be collected pursuant to the terms of the Promissory Note. As of February 28, 2010, the total balance due under the loan, including accrued interest, was approximately $13,934, which is the largest balance that Call Now has owed under the Promissory Note. The unpaid principal balance of the Promissory Note, together with all accrued and unpaid interest, is due no later than February 25, 2012. Should Call Now default on its obligations under the Promissory Note, the principal balance together with all accrued and unpaid interest will become immediately due and payable. As of February 28, 2010, Call Now has made no interest or principal payments with respect to the Promissory Note. As part of the restructuring, Call Now has assigned to the Company certain of its economic interests and in connection with the Promissory Note, pledged its interest in certain partnerships together with all assets held in the Call Now margin account to serve as additional collateral securing the loan. Mr. Thomas Johnson has no interest in the Call Now margin account or the Promissory Note, except to the extent of his approximately 3.2% ownership interest in Call Now. Mr. Johnson abstained from voting on all matters on behalf of the Company.

18.   Employee benefit plan

The Company sponsors a defined contribution 401(k) employee benefit plan (the “Plan”) that covers substantially all U.S. employees. Under the Plan, the Company may make a discretionary contribution. All U.S. employees are eligible to participate in the Plan, based on meeting certain age and term of employment requirements. The Company contributed approximately $1,963, $1,278 and $1,044 during 2009, 2008 and 2007, respectively.

19.   Stock-based compensation

The Company grants awards of stock options and restricted stock units (“RSUs”) under the Amended and Restated 2000 Stock Incentive Plan, as amended in May 2009 (the “2000 Stock Incentive Plan”), under which 4,466 shares of common stock have been authorized for issuance. Of this amount, options and RSUs to purchase 2,477 shares of common stock, net of forfeitures have been granted and 1,989 shares remain available for future grants at December 31, 2009. The Company also provides an employee stock purchase plan (“ESPP”).

The 2000 Stock Incentive Plan includes three separate programs: (1) the discretionary option grant program under which eligible individuals in the Company’s employ or service (including officers, non-employee board members and consultants) may be granted options to purchase shares of common stock of the Company; (2) the stock issuance program under which such individuals may be issued shares of common stock directly or stock awards that vest over time, through the purchase of such shares or as a bonus tied to the performance of services; and (3) the automatic grant program under which grants will automatically be made at periodic intervals to eligible non-employee board members. The Company’s Board of Directors or its Compensation Committee may amend or modify the 2000 Stock Incentive Plan at any time, subject to any required stockholder approval.

Stock options

During 2007, the Company granted stock options to employees. The grant price of the options was the quoted market value of the common stock at the date of grant. The options have a term of seven years and vest quarterly over four years. Additionally, the Company granted stock options to its non-employee directors. Options issued to non-employee directors have a term of ten years and vest quarterly over three years.

F-28

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

The fair value of each option granted is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The weighted average assumptions used in the model are outlined in the following table:

	Year Ended December 31,
	2009		2008		2007
Weighted-average grant date fair value	$	—	$	—	$	6.93
Weighted average assumptions used:
Expected volatility		—		—		27.0	%
Expected term (in years)		—		—		3.90
Risk-free interest rate		—		—		4.7	%
Expected dividend yield		—		—		—

Due to its own lack of extensive history, the Company utilizes historical industry volatilities as well as historical volatilities of peer companies when computing the expected volatility assumption to be used in the Black-Scholes-Merton calculations for new grants. Also because of its limited trading history, when establishing the expected life assumptions, the Company utilizes the “simplified” method permitted by Staff Accounting Bulletin No. 110 to determine the expected term of the future option grants. The Company typically grants options with a contractual term of seven years which vest quarterly over four years. The resulting expected term from the simplified method is 4.75 years.

The Company recorded compensation expense relating to options of approximately $1,197, $1,521 and $1,683 during the years ended December 31, 2009, 2008 and 2007, respectively.

A summary of the Company’s stock option activity is as follows:

						Weighted		Aggregate
				Weighted		Average		Intrinsic
	Number of			Average		Contractual		Value of In-the
	Shares			Exercise Price		Term		Money Options
				(In whole dollars)		(In years)
Outstanding, December 31, 2006		1,280		$	15.44		6.43	$	15,320
Granted		160			25.22		—		—
Exercised		(112	)		9.54		—		—
Forfeited, cancelled or expired		(159	)		17.16		—		—
Outstanding, December 31, 2007		1,169		$	17.10		5.79	$	946
Granted		—			—		—		—
Exercised		(36	)		4.72		—		—
Forfeited, cancelled or expired		(105	)		18.95		—		—
Outstanding, December 31, 2008		1,028		$	17.35		4.78	$	206
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited, cancelled or expired		(96	)		19.35		—		—
Outstanding, December 31, 2009		932		$	17.13		3.91	$	290
Options exercisable at December 31, 2009		817		$	16.90		3.92	$	290

The aggregate intrinsic value of the options exercised during the years ended December 31, 2009, 2008 and 2007 was $0, $367 and $2,065. At December 31, 2009 and 2008, the Company had approximately $492 and $1,561 of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be

F-29

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

recognized over the weighted average period of .81 and 1.57 years, respectively. Cash received from stock option exercises totaled approximately $0 and $168 during the years ended December 31, 2009 and 2008, respectively.

Restricted stock units

A summary of the Company’s Restricted Stock Unit activity is as follows:

				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Grant Date		Contractual		Intrinsic
	Units			Fair Value		Term		Value
				(In whole dollars)		(In years)
Outstanding, December 31, 2006		559		$	14.44		3.2	$	15,335
Granted		94			27.12		—		—
Vested and issued		(170	)		15.51		—		—
Terminated, cancelled or expired		(93	)		13.42		—		—
Outstanding, December 31, 2007		390		$	17.39		2.6	$	5,596
Granted		599			10.07		—		—
Vested and issued		(188	)		15.22		—		—
Terminated, cancelled or expired		(52	)		17.97		—		—
Outstanding, December 31, 2008		749		$	12.06		2.9	$	5,704
Granted		207			6.72		—		—
Vested and issued		(275	)		12.76		—		—
Terminated, cancelled or expired		(107	)		10.06		—		—
Outstanding, December 31, 2009		574		$	10.17		2.4	$	5,202

The Company recorded compensation expense relating to restricted stock units of approximately $3,672, $2,818 and $2,660 during the years ended December 31, 2009, 2008 and 2007, respectively. There is approximately $4,806 and $7,739 of unamortized compensation expense, net of estimated forfeitures, related to unvested restricted stock units outstanding at December 31, 2009 and 2008, respectively.

Employee stock purchase plan

In July 2005, the Company’s Board of Directors adopted the ESPP, designed to allow eligible employees of the Company to purchase shares of common stock, at semiannual intervals, through periodic payroll deductions. A total of 313 shares of common stock were initially reserved under the ESPP. The share reserve will automatically increase on the first trading day of January each calendar year, beginning in calendar year 2007, by an amount equal to 1% of the total number of outstanding shares of common stock on the last trading day in December in the prior calendar year. Under the current plan, no such annual increase may exceed 63 shares.

The ESPP may have a series of offering periods, each with a maximum duration of 24 months. Offering periods will begin at semi-annual intervals as determined by the plan administrator. Individuals regularly expected to work more than 20 hours per week for more than five calendar months per year may join an offering period on the start date of that period. However, employees may participate in only one offering period at a time. Participants may contribute 1% to 15% of their annual compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share shall be determined by the plan administrator at the start of each offering period and shall not be less than 85% of the lower of the fair market value per share on the start date of the offering period in which the participant is enrolled or the fair market value per share on the semi-annual purchase date. The plan administrator shall have the discretionary authority to establish the maximum number of shares of common stock purchasable per participant and in total by

F-30

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

all participants in that particular offering period. The Company’s Board of Directors or its Compensation Committee may amend, suspend or terminate the ESPP at any time, and the ESPP will terminate no later than the last business day of June 2015. As of December 31, 2009, 500 shares of common stock had been reserved and 409 shares of common stock had been purchased by employees pursuant to the ESPP plan. The Company recognized expense of $218, $184 and $350 for the years ended December 31, 2009, 2008 and 2007, respectively.

20.   Commitments and contingencies

The Company has obligations under capital and operating leases with initial noncancelable terms in excess of one year. Minimum non-cancelable lease payments required under operating and capital leases for the years subsequent to December 31, 2009, are as follows:

	Capital		Operating
	Leases		Leases
2010	$	6,218	$	5,579
2011		3,765		5,383
2012		488		4,318
2013		—		3,706
2014		—		2,875
2015 and thereafter		—		6,723
	$	10,471	$	28,584

The Company has recorded assets under capital leases, included in property and equipment in the consolidated statements of financial condition, totaling $20,270 of equipment and $5,269 of software at December 31, 2009 and $14,914 of equipment and $3,228 of software at December 31, 2008. The related capital lease obligations are included in accounts payable, accrued and other liabilities on the consolidated statements of financial condition.

Rent expense for the years ended December 31, 2009, 2008 and 2007 was $6,325, $5,838 and $6,269, respectively.

From time to time, we are involved in other legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, our role as clearing broker for our correspondents. In some instances, but not all, where we are named in arbitration proceedings solely in our role as the clearing broker for our correspondents, we are able to pass through expenses related to the arbitration to the correspondent involved in the arbitration (see Note 17).

Under its bylaws, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director’s serving in such capacity. The Company has entered into indemnification agreements with each of its directors that require us to indemnify our directors to the extent permitted under our bylaws and applicable law. Although management is not aware of any claims, the maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a directors and officer liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of December 31, 2009.

F-31

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

21.   Income taxes

Income before income taxes consisted of the following:

	Year Ended December 31,
	2009		2008			2007
Income before income taxes:
U.S.	$	14,975	$	25,993		$	23,238
Non-U.S.		10,861		(9,344	)		18,720
		25,836		16,649			41,958

The provision for (benefit from) income taxes consisted of the following:

	Year Ended December 31,
	2009		2008			2007
Current:
Federal	$	1,125	$	8,804		$	9,877
State		354		617			1,875
Non-U.S.		3,215		(4,405	)		5,647
		4,694		5,016			17,399
Deferred:
Federal	$	4,557	$	930		$	(1,818	)
State		543		110			(215	)
Non-U.S.		31		(63	)		(241	)
		5,131		977			(2,274	)
Total	$	9,825	$	5,993		$	15,125

The differences in income tax provided and the amounts determined by applying the statutory rate to income before income taxes results from the following:

	Year Ended December 31,
	2009			2008			2007
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
Lower tax rates applicable to non-U.S. earnings		(2.1	)		(2.4	)		(2.7	)
International trade tax credit		—			(4.8	)		—
State and local income taxes, net of U.S. federal income tax benefits		2.3			5.2			2.6
Stock-based compensation		2.2			3.4			1.0
Other, net		0.6			(0.4	)		0.1
		38.0	%		36.0	%		36.0	%

Deferred taxes are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. Valuation allowances recorded on the balance sheet dates are necessary in cases where management believes that it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management has determined that no valuation allowance was necessary at December 31, 2009 and 2008. Deferred taxes are included in accounts payable, accrued and other liabilities as of December 31, 2009 and other assets as of December 31, 2008.

F-32

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Deferred income taxes consist of the following:

	December 31,
	2009			2008
Current deferred taxes:
Bad debt allowance	$	2,158		$	1,559
Accrued expenses		—			662
Prepaid assets		(690	)		(1,498	)
Total	$	1,468		$	723
Non-current deferred taxes:
Fixed asset basis differences	$	(2,890	)	$	1,241
Intangible assets		(3,155	)		(183	)
Stock-based compensation		1,824			1,078
Equity component of the conversion feature attributable to senior convertible notes		(4,968	)		—
Other		(137	)		(167	)
Total	$	(9,326	)	$	1,969
Total	$	(7,858	)	$	2,692

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Company intends to continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005. The Company does not anticipate the results of any open examinations would result in a material change to its financial position.

The Company adopted the amended provisions of ASC Topic 740, Income Taxes, on January 1, 2007. As a result of the implementation, the Company recognized a $580 increase to liabilities for uncertain tax positions. This increase was accounted for as a cumulative adjustment to retained earnings on the consolidated statements of financial condition. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2007	$	580
Additions based on tax positions related to the current year		398
Reductions for tax positions of prior years		(152	)
Balance at December 31, 2007		826
Additions based on tax positions related to the current year		657
Reductions for tax positions of prior years		(526	)
Balance at December 31, 2008		957
Additions based on tax positions related to the current year		230
Reductions for tax positions of prior years		(191	)
Balance at December 31, 2009	$	996

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes. The Company recognized penalties and interest of approximately $83, $111 and $0, respectively, for the years ended December 31, 2009, 2008 and 2007 and had accrued approximately $403 and $320 for the payment of

F-33

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

penalties and interest at December 31, 2009 and 2008, respectively. The reserves for uncertain tax positions are included in accounts payable, accrued and other liabilities as of December 31, 2009 and 2008.

22.   Segment information

The Company is organized into operating segments based on geographic regions. These operating segments have been aggregated into three reportable segments; United States, Canada and Other. The Company evaluates the performance of its operating segments based upon operating income before unusual and non-recurring items. The following table summarizes selected financial information:

	United
December 31, 2009	States		Canada		Other		Consolidated
Revenues	$	260,064	$	52,404	$	11,692	$	324,160
Interest, net		60,710		3,649		1,581		65,940
Income before tax		14,975		10,442		419		25,836
Net income		8,396		7,285		330		16,011
Segment assets		5,918,739		1,122,703		209,633		7,251,075
Goodwill and intangibles		131,715		538		312		132,565
Capital expenditures		18,435		1,272		2,034		21,741
Depreciation and amortization		13,346		1,120		1,556		16,022
Amortization of intangibles		3,136		—		—		3,136

	United
December 31, 2008	States		Canada			Other		Consolidated
Revenues	$	291,643	$	71,302		$	20,924	$	383,869
Interest, net		61,535		11,365			2,158		75,058
Income (loss) before tax		25,993		(9,554	)		210		16,649
Net income (loss)		15,532		(4,964	)		88		10,656
Segment assets		4,610,951		607,500			320,744		5,539,195
Goodwill and intangibles		116,915		538			312		117,765
Capital expenditures		14,803		1,130			3,098		19,031
Depreciation and amortization		13,265		1,536			1,314		16,115
Amortization of intangibles		4,121		11			—		4,132

	United
December 31, 2007	States		Canada		Other		Consolidated
Revenues	$	303,999	$	75,279	$	25,524	$	404,802
Interest, net		73,688		12,664		2,048		88,400
Income before tax		23,238		16,025		2,695		41,958
Net income		13,519		11,442		1,872		26,833
Segment assets		5,957,182		1,619,398		270,397		7,846,977
Goodwill and intangibles		74,216		549		312		75,077
Capital expenditures		11,888		1,807		1,789		15,484
Depreciation and amortization		10,853		1,388		982		13,223
Amortization of intangibles		3,498		56		—		3,554

F-34

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

23.   Regulatory requirements

PFSI is subject to the SEC Uniform Net Capital Rule (“Rule 15c3-1”), which requires the maintenance of minimum net capital. PFSI elected to use the alternative method, permitted by Rule 15c3-1, which requires that PFSI maintain minimum net capital, as defined, equal to the greater of $250 or 2% of aggregate debit balances, as defined in the SEC’s Reserve Requirement Rule (“Rule 15c3-3”). At December 31, 2009, PFSI had net capital of $94,738, and was $70,417 in excess of its required net capital of $24,321. At December 31, 2008, PFSI had net capital of $85,535, and was $66,558 in excess of its required net capital of $18,977.

The Company’s Penson GHCO, PFSL, PFSC and PFSA subsidiaries are also subject to minimum financial and capital requirements. All subsidiaries were in compliance with their minimum financial and capital requirements as of December 31, 2009.

The regulatory rules referred to above may restrict the Company’s ability to withdraw capital from its regulated subsidiaries, which in turn could limit the Subsidiaries’ ability to pay dividends and the Company’s abilities to satisfy its debt obligations. PFSC, PFSL and PFSA are subject to regulatory requirements in their respective countries which also limit the amount of dividends that they may be able to pay to their parent. The Company has no current plans to seek any dividends from these entities.

24.   Guarantees

The Company is required to disclose information about its obligations under certain guarantee arrangements. Guarantees are defined as contracts and indemnification agreements that contingently require a guarantor to make payments for the guaranteed party based on changes in an underlying (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or non-occurrence of a specified event) asset, liability, or equity security of a guaranteed party. They are further defined as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity’s failure to perform under an agreement as well as indirect guarantees of the indebtedness of others.

The Company is a member of various exchanges that trade and clear securities, futures and commodities. Associated with its membership, the Company may be required to pay a proportionate share of the financial obligations of another member who may default on its obligations to the exchange. While the rules governing different exchange memberships vary, in general the Company’s guarantee obligations would arise only if the exchange had previously exhausted its resources. In addition, any such guarantee obligation would be apportioned among the other non-defaulting members of the exchange. Any potential contingent liability under these membership agreements cannot be estimated. Prior to making such an estimate, the Company would be required to know the size of the member company that would experience financial difficulty as well as the amount of recovery that could be expected from the exchange as well as the other member firms of the exchange. Accordingly, the Company has not recorded any liability in the consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote.

25.   Vendor related asset impairment

In re Sentinel Management Group, Inc. is a Chapter 11 bankruptcy case filed on August 17, 2007 in the U.S. Bankruptcy Court for the Northern District of Illinois by Sentinel. Prior to the filing of this action, Penson GHCO and PFFI held customer segregated accounts with Sentinel totaling approximately $36 million. Sentinel subsequently sold certain securities to Citadel Equity Fund, Ltd. and Citadel Limited Partnership. On August 20, 2007, the Bankruptcy Court authorized distributions of 95 percent of the proceeds Sentinel received from the sale of those securities to certain FCM clients of Sentinel, including Penson GHCO. This distribution to the Penson GHCO and PFFI customer segregated accounts along with a distribution received immediately prior to the bankruptcy filing totaled approximately $25.4 million.

F-35

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

On May 12, 2008, a committee of Sentinel creditors, consisting of a majority of non-FCM creditors, together with the trustee appointed to manage the affairs and liquidation of Sentinel (the “Sentinel Trustee”), filed with the Court their proposed Plan of Liquidation (the “Committee Plan”) and on May 13, 2008 filed a Disclosure Statement related thereto. The Committee Plan allows the Sentinel Trustee to seek the return from FCMs, including Penson GHCO and PFFI, of a portion of the funds previously distributed to their customer segregated accounts. On June 19, 2008, the Court entered an order approving the Disclosure Statement over objections by Penson GHCO and others. On September 16, 2008, the Sentinel Trustee filed suit against Penson GHCO and PFFI along with several other FCMs that received distributions to their customer segregated accounts from Sentinel. The suit against Penson GHCO and PFFI seeks the return of approximately $23.6 million of post-bankruptcy petition transfers and $14.4 million of pre-bankruptcy petition transfers. The suit also seeks to declare that the funds distributed to the customer segregated accounts of Penson GHCO and PFFI by Sentinel are the property of the Sentinel bankruptcy estate rather than the property of customers of Penson GHCO and PFFI.

On December 15, 2008, over the objections of Penson GHCO and PFFI, the court entered an order confirming the Committee Plan, and the Committee Plan became effective on December 17, 2008. On January 7, 2009 Penson GHCO and PFFI filed their answer and affirmative defenses to the suit brought by the Sentinel Trustee. Also on January 7, 2009, Penson GHCO, PFFI and a number of other FCMs that had placed customer funds with Sentinel filed motions to withdraw the reference with the federal district court for the Northern District of Illinois, effectively asking the federal district court to remove the Sentinel suits against the FCMs from the bankruptcy court and consolidate them with other Sentinel related actions pending in the federal district court. On April 8, 2009, the Sentinel Trustee filed an amended complaint, which added a claim for unjust enrichment. Penson GHCO and PFFI’s response seeking to dismiss this claim was filed on May 8, 2009. On June 30, 2009, the Court denied the motion to dismiss without prejudice. The Court also held a preliminary pretrial hearing on June 30, 2009, and ordered that the first trial of the Sentinel Trustee’s claims against one FCM would commence on July 6, 2010, and the thirteen remaining trials would be scheduled at one month intervals thereafter. The trial of the Sentinel Trustee’s claims against Penson GHCO and PFFI is tentatively scheduled to proceed from September 20-23, 2010.

On July 31, 2009, Penson GHCO and PFFI filed their motion for reconsideration of the Court’s order denying their motion to dismiss the unjust enrichment claim. On September 1, 2009, the Court denied the motion for reconsideration without prejudice. On September 11, 2009, Penson GHCO and PFFI filed their amended answer and amended affirmative defenses to the Sentinel Trustee’s amended complaint. On October 28, 2009, the federal district court for the Northern District of Illinois granted Penson GHCO, PFFI, and certain other FCM’s motions requesting removal of the matters referenced above from the bankruptcy court, thereby removing these matters to the federal district court. While the trial schedule referenced above is still pending, it may change given the granting of the motions removing these matters to the federal district court.

The Company believes that the Court was correct in ordering the prior distributions and Penson GHCO and PFFI intend to continue to vigorously defend their position. However, there can be no assurance that any actions by Penson GHCO or PFFI will result in a limitation or avoidance of potential repayment liabilities. In the event that Penson GHCO and PFFI are obligated to return all previously distributed funds to the Sentinel Estate, any losses the Company might suffer would most likely be partially mitigated as it is likely that Penson GHCO and PFFI would share in the funds ultimately disbursed by the Sentinel Estate.

26.   Correspondent asset loss

As reported in October 2008, the Company’s Canadian subsidiary obtained an unsecured receivable as a result of a number of transactions involving listed Canadian equity securities by Evergreen Capital Partners Inc. (“Evergreen”) on behalf of itself and/or its customers, for which Evergreen and/or its customers were unable to make payment. Subsequently, Evergreen ceased operations and filed for bankruptcy protection. The Company conducted an investigation into the circumstances surrounding the events that resulted in the unsecured receivable and retained the services of various professional advisors to assist in the investigation. PFSC has now obtained from

F-36

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Evergreen’s bankruptcy estate an assignment of Evergreen’s claims against certain of Evergreen’s customers, and in June, 2009, PFSC commenced legal proceedings against, among others, those customers of Evergreen in an attempt to recover lost funds.

In connection with the Company’s preparation of its 2008 consolidated financial statements, the Company’s management, after consultation with the Company’s Board of Directors and outside advisors, concluded that as of December 31, 2008, a significant amount of the receivable was not recoverable and recorded a charge of approximately $26.4 million, net of estimated recoveries and professional fees. The Company is continuing to explore ways to further recover amounts associated with this charge and, other than recurring professional fees, does not anticipate incurring any additional losses relative to this matter.

27.   Stock repurchase program

On July 3, 2007, the Company’s Board of Directors authorized the Company to purchase up to $25.0 million of its common stock in open market purchases and privately negotiated transactions. The Company repurchased approximately 1,475 shares at an average price of $16.98 per share. The repurchase program was completed in October 2007. On December 6, 2007, the Company’s Board of Directors authorized the Company to purchase an additional $12.5 million of its common stock. In 2007, the Company repurchased approximately 74 shares at an average price of $14.28 per share. During 2008, the Company repurchased approximately 654 shares at an average price of $10.32 per share. No shares were repurchased during the year ended December 31, 2009. The Company has approximately $4.7 million available under the current repurchase program as of December 31, 2009; however, our senior secured revolving credit facility limits our ability to repurchase our stock.

28.   Condensed financial statements of Penson Worldwide, Inc. (parent only)

Presented below are the Condensed Statements of Financial Condition, Income and Cash Flows for the Company on an unconsolidated basis.

Penson Worldwide, Inc. (parent only)
Condensed Statements of Financial Condition

	December 31,
	2009		2008
Assets
Cash and cash equivalents	$	249	$	9
Receivable from affiliates		202,929		140,255
Property and equipment, net		9,848		5,815
Investment in subsidiaries		234,032		194,236
Other assets		2,990		6,789
Total assets	$	450,048	$	347,104
Liabilities and stockholders’ equity
Notes payable	$	132,769	$	75,000
Accounts payable, accrued and other liabilities		18,377		7,637
Total liabilities		151,146		82,637
Total stockholders’ equity		298,902		264,467
Total liabilities and stockholders’ equity	$	450,048	$	347,104

F-37

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Penson Worldwide, Inc. (parent only)
Condensed Statements of Income

	Year Ended December 31,
	2009			2008			2007
Revenues	$	5,075		$	5,097		$	4,776
Expenses
Employee compensation and benefits		12,753			11,533			440
Communications and data processing		2,562			60			—
Occupancy and equipment		7,170			4,745			—
Other expenses		4,522			6,562			8,132
Interest expense on long-term debt		10,187			3,854			2,894
		37,194			26,754			11,466
Loss before income taxes and equity in earnings of subsidiaries		(32,119	)		(21,657	)		(6,690	)
Income tax benefit		(16,182	)		(10,669	)		(11,057	)
Income (loss) before equity in earnings of subsidiaries		(15,937	)		(10,988	)		4,367
Equity in earnings of subsidiaries		31,948			21,644			22,466
Net income	$	16,011		$	10,656		$	26,833

F-38

Penson Worldwide, Inc.

Notes to the Consolidated Financial Statements — (Continued)

Penson Worldwide, Inc. (parent only)
Condensed Statements of Cash Flows

	Year Ended December 31,
	2009			2008			2007
Cash flows from operating activities:
Net income	$	16,011		$	10,656		$	26,833
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		5,376			4,722			4,112
Deferred income taxes		5,131			977			(2,274	)
Stock based compensation		5,087			4,523			4,693
Debt discount accretion		1,534			—			—
Debt issuance costs		882			—			—
Changes in operating assets and liabilities:
Net receivable/payable with affiliates		(62,674	)		(6,494	)		(29,500	)
Other assets		1,410			(2,417	)		(262	)
Accounts payable, accrued and other liabilities		4,921			(5,695	)		4,808
Net cash provided by (used in) operating activities		(22,322	)		6,272			8,410
Cash flows from investing activities:
Purchase of property and equipment, net		(9,409	)		(3,545	)		(4,277	)
Increase in investment in subsidiaries		(39,796	)		(5,216	)		(30,369	)
Net cash used in investing activities		(49,205	)		(8,761	)		(34,646	)
Cash flows from financing activities:
Net proceeds from convertible notes		56,200			—			—
Proceeds from revolving credit facility		50,000			20,000			206,000
Repayments of revolving credit facility		(36,500	)		—			(161,000	)
Exercise of stock options		—			168			1,067
Excess tax benefit on exercise of stock options		27			75			823
Purchase of treasury stock		(676	)		(7,431	)		(27,468	)
Issuance of common stock		656			1,000			2,016
Net cash provided by financing activities		69,707			13,812			21,438
Effect of exchange rates on cash		2,060			(11,326	)		4,805
Increase (decrease) in cash and cash equivalents		240			(3	)		7
Cash and cash equivalents at beginning of period		9			12			5
Cash and cash equivalents at end of period	$	249		$	9		$	12
Supplemental cash flow disclosures:
Interest payments	$	5,350		$	4,265		$	1,562
Income tax payments	$	3,409		$	11,762		$	9,940

F-39

INDEX TO EXHIBITS

				Incorporated by Reference			Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit	Date
	2	.1	Asset Purchase Agreement by and between SAI Holdings, Inc. and Schonfeld Securities, LLC, dated as of November 20, 2006	8-K	001-32878	2.1	11/21/06
	2	.2	Purchase Agreement by and among Goldenberg Hehmeyer & Co. and Goldenberg LLC, Hehmeyer LLC, GHCO Partners LLC, GH Traders LLC, each of the Principals listed on the signature pages thereto and SAI Holdings, Inc., GHP1, Inc., GHP2, LLC and Christopher Hehmeyer in his capacity as Sellers’ Representative	8-K	001-32878	2.1	11/7/06
	2	.3	Letter Agreement, dated as of October 8, 2007, by and among SAI Holdings, Inc., Penson Financial Services, Inc., Schonfeld Group Holdings LLC, Schonfeld Securities, LLC, Opus Trading Fund LLC and Quantitative Trading Strategies LLC	8-K	001-32878	2.1	10/12/07
	2	.4*†	Asset Purchase Agreement by and among Penson Worldwide, Inc., Penson Financial Services, Inc., Broadridge Financial Solutions, Inc. and Ridge Clearing & Outsourcing Solutions, Inc., dated November 2, 2009
	3	.1	Form of Amended and Restated Certificate of Incorporation of Penson Worldwide, Inc.	S-1/A	333-127385	3.1	5/1/06
	3	.2	Form of Third Amended and Restated Bylaws of Penson Worldwide, Inc.	8-K	001-32878	3.2	6/5/09
	4	.1	Specimen certificate for shares of Common Stock	S-1	333-127385	4.1	4/24/06
	4	.2+	Amended and Restated Registration Rights Agreement between Roger J. Engemoen, Jr., Philip A. Pendergraft and Daniel P. Son and Penson Worldwide, Inc. dated November 30, 2000	S-1	333-127385	4.2	8/10/05
	4	.3	Indenture, dated June 3, 2009, between Penson Worldwide, Inc. and U.S. Bank National Association	8-K	001-32878	4.1	6/5/09
	4	.4	Form of 8.00% Senior Convertible Note due 2014	8-K	001-32878	4.2	6/5/09
	10	.1+	Penson Worldwide, Inc. Amended and Restated 2000 Stock Incentive Plan	DEF 14A	001-32878	Appendix A	4/8/09
	10	.2+	Penson Worldwide, Inc. 2005 Employee Stock Purchase Plan	S-1/A	333-127385	10.2	4/24/06
	10	.3	1700 Pacific Avenue Office Lease by and between F/P/D Master Lease, Inc. and Penson Financial Services, Inc. (f/k/a Service Asset Management Company) dated May 20, 1998 as amended July 16, 1998, February 17, 1999, September 20, 1999, November 30, 1999, May 25, 2000 and January 9, 2001	S-1	333-127385	10.3	8/10/05
	10	.4	Lease of Premises between Downing Street Holdings (330 Bay St), Inc. and Penson Financial Services Canada Inc. (one of our subsidiaries) dated September 17, 2002	S-1	333-127385	10.4	8/10/05

				Incorporated by Reference			Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit	Date
	10	.5	Offer to Lease between Penson Financial Services Canada Inc. and 360 St-Jacques Nova Scotia Company dated October 14, 2003	S-1	333-127385	10.5	8/10/05
	10	.6	Lease agreement between Derwent Valley London Limited, Derwent Valley Central Limited, Penson Financial Services Limited, and Penson Worldwide, Inc. effective August 11, 2005	S-1	333-127385	10.6	8/10/05
	10	.7†	Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	S-1/A	333-127385	10.11	8/10/05
	10	.8	Form of SAMCO Reorganization Agreement by and between Penson Worldwide, Inc., SAI Holdings, Inc. and Penson Financial Services, Inc. and SAMCO Capital Markets, Inc. and SAMCO Holdings, Inc.	S-1/A	333-127385	10.12	5/1/06
	10	.9	Form of Transition Services Agreement by and between SAMCO Holdings, Inc. and Penson Worldwide, Inc.	S-1/A	333-127385	10.13	5/1/06
	10	.10+	Employment Letter Agreement between the Company and Andrew Koslow dated August 26, 2002	S-1	333-127385	10.15	8/10/05
	10	.11+	Form of Indemnification Agreement entered into between Penson Worldwide, Inc. and its officers and directors	S-1	333-127385	10.16	8/10/05
	10	.12	Registration Rights Agreement by and between Penson Worldwide, Inc. and Schonfeld Securities, LLC, dated as of November 20, 2006	8-K	001-32878	10.1	3/21/06
	10	.13	Stockholder’s Agreement effective as of November 20, 2006 between Penson Worldwide, Inc. and Schonfeld Securities, LLC	8-K	001-32878	10.2	11/21/06
	10	.14	Guaranty Agreement made as of November 20, 2006 by Schonfeld Group Holdings LLC in favor of SAI Holdings, Inc. and Penson Financial Services, Inc.	8-K	001-32878	10.3	11/21/06
	10	.15	Unconditional Guaranty Agreement made as of November 20, 2006 by Schonfeld Group Holdings LLC, Schonfeld Securities LLC and Steven B. Schonfeld in favor of Penson Financial Services, Inc.	8-K	001-32878	10.4	11/21/06
	10	.16	Termination/Compensation Payment Agreement, dated as of November 20, 2006, by and among Opus Trading Fund LLC, Quantitative Trading Solutions, LLC and Penson Financial Services, Inc.	8-K	001-32878	10.5	11/21/06
	10	.17+	Employment Letter Agreement between the Company and Kevin W. McAleer dated February 15, 2006	S-1/A	333-127385	10.22	3/21/06
	10	.18+	Executive Employment Agreement between the Company and Philip A. Pendergraft dated April 21, 2006	S-1/A	333-127385	10.23	5/1/06
	10	.19+	Executive Employment Agreement between the Company and Daniel P. Son dated April 21, 2006	S-1/A	333-127385	10.24	5/1/06

				Incorporated by Reference			Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit	Date
	10	.20	Eighth Amendment to 1700 Pacific Avenue Office Lease by and between Berkeley First City, Ltd. and Penson Worldwide, Inc. dated April 12, 2006	S-1/A	333-127385	10.25	5/9/06
	10	.21†	Amendment to Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	8-K	001-32878	10.10	7/31/06
	10	.22	Letter Agreement dated February 16th, 2007, amending that certain Purchase Agreement dated as of November 6, 2006 among Goldenberg Hehmeyer & Co., Goldenberg LLC, Hehmeyer LLC, GH Trading LLC, GHCO Partners LLC, Christopher Hehmeyer, Ralph Goldenberg, SAI Holdings, Inc., GH1 Inc. and GH2 LLC and Christopher Hehmeyer in his capacity as Seller’s Representative	8-K	001-32878	10.2	2/16/07
	10	.23†	Schedule E, dated July 23, 2007, to the Remote Processing Agreement between Penson Worldwide, Inc. and SunGard Data Systems Inc. dated July 10, 1995, as amended September 13, 1996 and August 1, 2002	10-Q	001-32878	10.2	11/13/07
	10	.24+	2008 Restricted Stock Bonus Incentive Plan	8-K	001-32878	10.1	6/25/08
	10	.25+	Amended and Restated Executive Employment Agreement between the Company and Daniel P. Son, dated December 31, 2008	10-K	001-32878	10.44	3/16/09
	10	.26+	Amended and Restated Executive Employment Agreement between the Company and Philip A. Pendergraft, dated December 31, 2008	10-K	001-32878	10.45	3/16/09
	10	.27+	Amendment to Compensation Letter between the Company and Andrew B. Koslow, dated December 31, 2008	10-K	001-32878	10.46	3/16/09
	10	.28+	Amendment to Compensation Letter between the Company and Kevin W. McAleer, dated December 31, 2008	10-K	001-32878	10.47	3/16/09
	10	.29	Purchase Agreement by and among Penson Worldwide, Inc. and J.P. Morgan Securities Inc. and Morgan Keegan & Company, Inc., dated May 28, 2009	8-K	001-32878	10.1	5/29/09
	10	.30+	2010 Executive Bonus Plan	8-K	001-32878	10.1	2/16/10
	10	.31†	Eighth Amendment to Credit Agreement, dated the 16th day of March, 2009, effective as of December 31, 2008, by and among the Company, Guaranty Bank, as Administrative Agent, Swing Line Lender, Arranger and Letter of Credit Issuer, Wachovia Bank, National Association, as Documentation Agent and the other lenders party thereto	10-Q	001-32878	10.1	5/8/09
	10	.32†	Amended and Restated Credit Agreement, dated the 1st day of May, 2009, by and among the Company, Regions Bank, as Administrative Agent, Swing Line Lender, and Letter of Credit Issuer, the lenders party thereto and the other parties thereto	10-Q	001-32878	10.1	8/4/09

				Incorporated by Reference			Filing
Exhibit			Name of Exhibit	Form	File Number	Exhibit	Date
	10	.33†	First Amendment to the Amended and Restated Credit Agreement, dated the 1st day of May, 2009, by and among the Company, Regions Bank, as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, the lenders party thereto and the other parties thereto	10-Q	001-32878	10.2	8/4/09
	10	.34†	Second Amendment to the Amended and Restated Credit Agreement, dated the 22nd day of September, 2009, by and among the Company, Regions Bank, as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, the lenders party thereto and the other parties thereto	10-Q	001-32878	10.1	11/6/09
	10	.35*†	Master Services Agreement by and between Penson Worldwide, Inc. and Broadridge Financial Solutions, Inc., dated November 2, 2009
	10	.36*†	Service Bureau and Operations Support Services Schedule to the Master Services Agreement between Penson Worldwide, Inc. and Broadridge Financial Solutions, Inc., dated November 2, 2009, by and between Penson Financial Services, Inc. and Ridge Clearing & Outsourcing Solutions, Inc. dated November 2, 2009
	10	.37*†	Service Bureau and Operations Support Services Schedule to the Master Services Agreement between Penson Worldwide, Inc. and Broadridge Financial Solutions, Inc., dated November 2, 2009, by and between Penson Financial Services Canada Inc. and Ridge Clearing & Outsourcing Solutions, Inc. dated November 2, 2009
	11	.1	Statement regarding computation of per share earnings	S-1/A	333-127385	11.1	5/1/06
	12	.1*	Statement regarding computation of ratios
	21	.1*	List of Subsidiaries
	23	.1*	Consent of BDO Seidman, LLP
	31	.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	31	.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	32	.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	32	.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

*	Filed herewith.
+	Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
†	Confidential treatment has been requested for certain information contained in this document. Such information has been omitted and filed separately with the Securities and Exchange Commission.

EX-2.4

Exhibit 2.4

Execution Copy

NOTE: PORTIONS OF THIS AGREEMENT ARE THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS HAVE BEEN
REDACTED AND ARE MARKED WITH A “[****]” IN PLACE OF THE REDACTED LANGUAGE.

ASSET PURCHASE AGREEMENT

dated as of NOVEMBER 2, 2009

among

PENSON WORLDWIDE, INC.,

PENSON FINANCIAL SERVICES, INC.,

BROADRIDGE FINANCIAL SOLUTIONS, INC.

and

RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.

ARTICLE I DEFINITIONS	1
1.1 Definitions	1
1.2 Other Defined Terms	8
ARTICLE II PURCHASE AND SALE	10
2.1 Purchase and Sale of the Purchased Assets	10
2.2 Excluded Assets	11
2.3 Assumed Liabilities	11
2.4 Excluded Liabilities	11
2.5 Purchase Price	12
2.6 Purchase Price Adjustments	12
2.7 Allocation	18
2.8 Consents	19
2.9 Closing Assigned Contracts	20
2.10 Closing Other Purchased Assets	20
ARTICLE III CLOSING	20
3.1 Closing Date	20
3.2 Deliveries by Seller at the Closing	20
3.3 Deliveries by Buyer at the Closing	21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER	22
4.1 Organization and Good Standing	22
4.2 Authority and Enforceability	22
4.3 No Conflicts; Consents	23
4.4 Taxes	23
4.5 Compliance with Law	24
4.6 Title to Personal Property	24
4.7 Absence of Certain Changes or Events	24
4.8 Contracts	25
4.9 Litigation	25
4.10 Customers	25
4.11 Broker-Dealer	26
4.12 Investment Representations	28
4.13 Sufficiency of Purchased Assets	29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PW AND BUYER	29
5.1 Organization and Good Standing	29
5.2 Authority and Enforceability	30
5.3 Issuance of Shares	30
5.4 No Conflicts; Consents	30
5.5 Litigation	31
5.6 Financial Statements; No PW Material Adverse Effect	31
5.7 No Default	31
5.8 Insurance	31

5.9 Taxes	31
5.10 Capitalization	32
5.11 Disclosure	33
5.12 Compliance with Laws	33
5.13 Leverage Calculation Under Credit Agreement Amendment	33
ARTICLE VI COVENANTS OF PARENT AND SELLER	33
6.1 Conduct of Business	33
6.2 Negative Covenants	34
6.3 Access to Information; Investigation	34
6.4 Confidentiality	35
6.5 Release of Liens	35
6.6 Consents	35
6.7 Notification of Certain Matters	35
6.8 Restrictive Covenant	36
6.9 No Negotiation	36
ARTICLE VII COVENANTS OF THE PARTIES	36
7.1 Regulatory Approvals	36
7.2 Public Announcements	37
7.3 Customer Communications	37
7.4 Employees	38
7.5 Taxes	40
7.6 Bulk Sales Laws	41
7.7 Discharge of Business Obligations After Closing	41
7.8 Access to Books and Records	41
7.9 Financing	42
7.10 Cooperation with Preparation of PW Audited Financials	42
7.11 Further Assurances	42
7.12 Payment of Termination Fees	42
7.13 Vendor Contracts	43
ARTICLE VIII CONDITIONS TO CLOSING	43
8.1 Conditions to Obligations of the Parties	43
8.2 Conditions to Obligation of PW and Buyer	43
8.3 Conditions to Obligation of Parent and Seller	45
ARTICLE IX TERMINATION	46
9.1 Termination	46
9.2 Effect of Termination	47
9.3 Remedies	47
ARTICLE X INDEMNIFICATION	47
10.1 Survival	47
10.2 Indemnification by Parent and Seller	48
10.3 Indemnification by PW and Buyer	49
10.4 Indemnification Procedures for Third Party Claims	50

ii

10.5 Indemnification Procedures for Non-Third Party Claims	52
10.6 Effect of Investigation; Waiver	52
10.7 Other Rights and Remedies	53
10.8 Tax Treatment of Indemnification Payments	53
ARTICLE XI MISCELLANEOUS	53
11.1 Notices	53
11.2 Amendments and Waivers	54
11.3 Expenses	55
11.4 Successors and Assigns	55
11.5 Governing Law	55
11.6 Waiver of Jury Trial	55
11.7 Obligations of PW and Parent	55
11.8 Counterparts	55
11.9 Third Party Beneficiaries	56
11.10 Entire Agreement	56
11.11 Captions	56
11.12 Severability	56
11.13 Specific Performance	56
11.14 Interpretation	56
11.15 Independent Investigation	57

iii

EXHIBITS

Exhibit A	Outsourcing Agreement
Exhibit B	Form of Seller Note
Exhibit C	Bill of Sale and Assignment and Assumption Agreement
Exhibit D	Joint Selling Agreement
Exhibit E	Stockholder’s and Registration Rights Agreement
Exhibit F	Form of Backstop Note

SCHEDULES

Schedule 2.1(a)	Assigned Contracts
Schedule 2.1(e)	Other Purchased Assets
Schedule 7.4(a)	Business Employees For Which No Access Granted
Schedule 7.13	Vendor Contracts

Seller Disclosure Schedule
Section 4.1	Jurisdictions
Section 4.3(a)	Consents
Section 4.8	Contracts
Section 4.9	Litigation
Schedule 4.11(a)	Broker-Dealer
Buyer Disclosure Schedule
Section 5.4(b)	Authorization
Section 5.5	Litigation
Section 5.8	Insurance

iv

ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT, dated as of November 2, 2009 (the “Agreement”), among Penson Worldwide, Inc., a Delaware corporation (“PW”), Penson Financial Services, Inc., a North Carolina corporation and an indirect subsidiary of PW (“Buyer”), Broadridge Financial Solutions, Inc., a Delaware corporation (“Parent”), and Ridge Clearing & Outsourcing Solutions, Inc., a New York corporation and a wholly owned subsidiary of Parent (“Seller”).

     WHEREAS, Seller is engaged in the business of providing trade execution, clearing, custody, settlement and other products and services customarily provided in connection with clearing services to the global financial industry (excluding outsourcing services, which include, without limitation, services to be provided under the Outsourcing Agreement) (the “Business”);

     WHEREAS, the parties will, contemporaneously with the execution of this Agreement, enter into a Master Services Agreement in the form of Exhibit A hereof (“Outsourcing Agreement”);

     WHEREAS, the parties desire that Seller sell, assign, transfer, convey and deliver to Buyer, and that Buyer purchase and acquire from Seller, all of the right, title and interest of Seller in and to the Purchased Assets (as hereinafter defined), and that Buyer assume the Assumed Liabilities (as hereinafter defined), upon the terms and subject to the conditions of this Agreement; and

     NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Definitions. When used in this Agreement, the following terms shall have the meanings assigned to them in this Article I or in the applicable Section of this Agreement to which reference is made in this Article I.

     “Affiliate” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

     “Aggregate Share Value” means an amount equal to the product of (i) the number of shares of PW Common Stock issued to Seller on the Closing Date multiplied by (ii) the Measurement Price.

     “Ancillary Agreements” means the Bill of Sale and Assignment and Assumption Agreement, the Note, the Outsourcing Agreement, the Marketing Agreement, the Stockholder’s and Registration Rights Agreement, the Conversion Agreement, the Backstop Note and the other agreements, instruments and documents delivered at the Closing.

     “Applicable Law” means any and all applicable laws (whether civil, criminal or

administrative) including common law, statutes, subordinate legislation, treaties, regulations, rules, directives, decisions, by-laws, circulars, codes, orders, notices, demands, decrees, injunctions, guidance, judgments or resolutions of a parliamentary government, quasi-government, federal, state or local government, statutory, administrative or regulatory body, securities exchange, court or agency in any part of the world which is in force or enacted and legally binding and any and all rules of any applicable SRO, each as of the applicable time.

     “Authorization” means any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity or pursuant to any Law.

     “Benefit Plan” means (a) any “employee benefit plan” as defined in ERISA Section 3(3), including any (i) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (ii) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in ERISA Section 3(37)) and (iv) Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan or program, or (b) stock purchase, stock option, severance pay, employment, change-in-control, vacation pay, company awards, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement, whether or not subject to ERISA.

     “Binding Arbitrator” means one or more impartial persons to which a dispute is referred for final and binding determination.

     “Books and Records” means all books of account and other financial Records, files, documents, instruments, books and Records relating principally to Seller or any Seller Correspondent, including the books and Records required under Rules 17a-3 and 17a-4 of the Exchange Act and other Applicable Law.

     “Business Authorizations” means all authorizations which are necessary for Seller to conduct business relating to the Purchased Assets as currently conducted or as proposed to be conducted or for the ownership and use of the assets owned and used by Seller in the conduct of business relating to the Purchased Assets.

     “Business Day” means a day other than a Saturday, Sunday or other day on which the New York Stock Exchange is authorized or required by Law to close.

     “Business Employee” means any individual employed by Seller in connection with the Business as of the Closing.

     “Capital Stock” means (a) in the case of a corporation, its shares of capital stock, (b) in the case of a partnership or limited liability company, its partnership or membership interests or units (whether general or limited), and (c) any other interest that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets, of the issuing entity.

     “Charter Documents” means, with respect to any entity, the certificate of incorporation, the articles of incorporation, by-laws, articles of organization, limited liability company

2

agreement, partnership agreement, formation agreement, joint venture agreement or other similar organizational documents of such entity (in each case, as amended).

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

     “Contract” means any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales order or purchase order.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, from time to time.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, from time to time.

     “FINRA” means the Financial Industry Regulatory Authority, Inc.

     “GAAP” means generally accepted accounting principles in the United States.

     “Governmental Entity” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States or foreign federal, state, local, or municipal government, any supranational, international, multinational, national or other government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations or orders of such body have the force of Law, including, without limitation, FINRA and any other applicable SRO.

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

     “Indebtedness” means any of the following: (a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds, debentures, notes or other similar instruments, (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and not delinquent, (d) any obligations as lessee under capitalized leases or operating leases functionally the equivalent of debt, (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (f) any obligations, contingent or otherwise, under acceptance credit, letters of credit or similar facilities, (g) any obligations secured by any Purchased Assets, and (h) any guaranty of any of the foregoing.

     “Indemnitee” means any Person that is seeking indemnification from an Indemnitor pursuant to the provisions of this Agreement.

     “Indemnitor” means any party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

     “Internal Control Event” means a material weakness in, or fraud, that involves management or other employees who have a significant role in, PW’s internal controls over financial reporting, in each case as described in the U.S. securities laws.

3

     “IRS” means the United States Internal Revenue Service.

     “Knowledge” of Seller or Buyer, as the case may be, or any similar phrase means, with respect to any fact or matter, the actual knowledge of the directors and executive officers of Parent and Seller, or PW and Buyer, as the case may be, and any other employee of Parent and Seller, or PW and Buyer, as the case may be, with a title of Executive Vice President or above, together with such knowledge that such directors, executive officers or other employees could reasonably be expected to discover after due investigation concerning the existence of the fact or matter in question.

     “Law” means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, directive, rule, regulation and any other decision, ruling, notification requirement or determination of any Governmental Entity (whether or not having the force of law).

     “Liabilities” means any and all debts, losses, liabilities, offsets, claims, damages, fines, obligations, payments and accounts payable, whether accrued or fixed, absolute or contingent, liquidated or unliquidated, matured or unmatured or determinable, including, without limitation, those arising under any Applicable Law, action or governmental order (including, without limitation, those arising out of any award, demand, assessment, penalty, fine, settlement, judgment or compromise relating to any Applicable Law, action or governmental order and those arising under any contract, agreement, arrangement, commitment or undertaking), and accruals for out-of-pocket costs and expenses (including, without limitation, reasonable legal, accounting and other professional fees and expenses incurred in investigating, preparing or defending any action or governmental order).

     “Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest or other encumbrance in respect of such property or asset.

     “Loss” or “Losses” means any and all losses, liabilities, costs, claims, damages, diminution in value based upon loss of revenue, penalties, interest, and expenses (including reasonable attorney’s fees and expenses and reasonable costs of investigation but excluding lost profits and consequential damages). In the event that any of the foregoing are indemnifiable hereunder, the terms “Loss” and “Losses” shall include any and all reasonable attorneys’ fees and expenses and reasonable costs of investigation incurred by the Indemnitee in enforcing such indemnity.

     “Measurement Price” means the average of the daily volume weighted average price per share of the PW Common Stock quoted for trading on NASDAQ Stock Market or other national securities exchange as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)) for the 10 consecutive trading days ended on the last day immediately preceding the Closing Date.

     “Net Revenue” means, with respect to an Assigned Contract, the total contract revenue as set forth in Schedule 2.1(a), as the same may be modified and amended in accordance with the terms of this Agreement, including, among other things, net interest revenues (net also of any interest required to be shared with the Seller Correspondent), securities clearing and execution

4

revenue (excluding amortization of client concessions granted), money market revenues (net of any money market revenues required to be shared with the Seller Correspondent), and other revenues earned for related activities (net of any revenues required to be shared with the Seller Correspondent), whether specifically identified with a Seller Correspondent or allocated to a Seller Correspondent consistent with past practice. “Net Revenues” include charges that are passed through to a Seller Correspondent or their customers for expenses on a marked up basis, but does not include charges that are passed through to a Seller Correspondent or their customers for expenses on an at-cost basis. “Net Revenues” excludes Non-Recurring Revenues and Termination Fees.

     “Non-Recurring Revenues” means revenues earned on a non-recurring basis outside of the ordinary course of business and categorized in a manner consistent with “Non-Recurring Revenues” as reflected in Schedule 2.1(a).

     “Notice of Objection” means a notice to Buyer which sets forth Seller’s objections to Buyer’s calculation of any component of any Purchase Price Adjustment pursuant to Section 2.6 hereof. Any Notice of Objection shall specify those items or amounts with which Seller disagrees, together with a detailed written explanation of the reasons for disagreement with each such item or amount, and shall set forth Seller’s calculation of the adjustment. To the extent not set forth in the Notice of Objection, Seller shall be deemed to have agreed with Buyer’s calculation of all other items and amounts contained in Buyer’s statement detailing the basis for the adjustment.

     “Order” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction or by a Binding Arbitrator.

     “Other Antitrust Laws” means the antitrust and competition Laws of all jurisdictions other than those of the United States.

     “Permitted Liens” means (a) Liens for current real or personal property Taxes not yet due and payable and with respect to which Seller maintains adequate reserves, (b) workers’, carriers’ and mechanics’ or other like Liens incurred in the ordinary course of business with respect to which payment is not due and that do not impair the conduct of business or the present or proposed use of the affected property and (c) Liens in favor of Buyer.

     “Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any other entity or body.

     “PW Financial Statements” means the audited consolidated balance sheet of PW and its Subsidiaries for the fiscal year ended December 31, 2008, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of PW and its subsidiaries, including the notes thereto.

     “PW Material Adverse Effect” means any change, event, circumstances or effect that, individually or taken together with all other changes, events, circumstances or effects, has a material adverse effect on PW’s financial condition or in the earnings, business or operations of PW and its Subsidiaries, considered as one entity, or on the ability of PW or Buyer to perform its

5

obligations hereunder, in each case, other than any effect arising or resulting from (a) a change in general economic conditions, (b) a change affecting the securities markets or the brokerage industries in the United States generally or (c) a change arising from the execution and delivery of this Agreement or the transactions contemplated hereby or any announcement hereof.

     “Records” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

     “Reference Period” means, for each Seller Correspondent that has been a party to an Assigned Contract for at least six full calendar months prior to the Closing Date, the six full calendar month period ending on the date immediately prior to the Closing Date.

     “Run-Rate Revenue” means, as applicable depending on the amount of time the Seller Correspondent has been a customer of Seller, (a) an amount equal to the product of the Net Revenue recognized from any Seller Correspondent during a Reference Period multiplied by two, or (b) an amount equal to the greater of (i) the Net Revenue recognized from any Seller Correspondent during a Stub Reference Period multiplied by a number that will annualize such revenue and (ii) the monthly minimum contractual Net Revenue for such Seller Correspondent during the Stub Reference Period multiplied by twelve each as set forth in Schedule 2.1(a), as the same may be modified and amended in accordance with the terms of this Agreement; provided, however, the Run Rate Revenue of each Seller Correspondent shall be adjusted (A) to include any Once Yearly Revenue not included in the calculations in clauses (a) or (b) above because of its recognition during the portion of the year outside the applicable Reference Period or Stub Reference Period , (B) to exclude any multiple-counting of Once Yearly Revenue included in the calculations in clauses (a) or (b) above because of its recognition during the applicable Reference Period and (C) to exclude any Run-Rate Revenue with respect to a Restricted Contract. For purposes herein, “Once Yearly Revenue” shall mean any type of revenue recognized once annually per contract and shall specifically include, but not be limited to, annual IRA fees, excess SIPC IRA account fees, excess SIPC fees with respect to all other accounts and annual inactive account fees. For the avoidance of doubt, the calculation of Run-Rate Revenue shall be calculated in good faith to avoid the multiple-counting of any Once Yearly Revenue, to exclude any Non-Recurring Revenues recognized within a Reference Period, to exclude Termination Fees and to exclude any Run-Rate Revenue with respect to Restricted Contracts.

     “SEC” means the U.S. Securities and Exchange Commission.

     “SEC Filings” means shall mean (i) PW’s annual report on Form 10-K for fiscal year ended December 31, 2008 filed on March 16, 2009 (the “2008 Form 10-K”) and (ii) any filing made by the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act, including any amendment or supplement thereto, during the period between the filing of the 2008 Form 10-K and the Closing Date.

     “Seller Benefit Plans” means all Benefit Plans maintained or contributed to by Seller for the benefit of any present or former directors, employees, contractors or consultants with respect to which Seller otherwise has any present or future Liability.

     “Seller Correspondent” means a correspondent clearing customer of Seller that is a

6

party to an Assigned Contract.

     “Seller Material Adverse Effect” means any change, event, circumstances or effect that, individually or taken together with all other changes, events, circumstances or effects, has a material adverse effect on the Purchased Assets or on the ability of the Seller or Parent to perform its obligations hereunder, in each case, other than any effect arising or resulting from (a) a change in general economic conditions, (b) a change affecting the securities markets or the brokerage industries in the United States generally or (c) a change arising from the execution and delivery of this Agreement or the transactions contemplated hereby or any announcement hereof.

     “SRO” means any self-regulatory organization, including but not limited to FINRA.

     “Stub Reference Period” means a period in which a Seller Correspondent has been a party to an Assigned Contract for at least one, but fewer than six, full calendar months as of the Closing Date.

     “Subsidiary” or “Subsidiaries” means, with respect to any party, any Person, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the ordinary voting interest in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of directors or others performing similar functions with respect to such Person is directly or indirectly owned or controlled by such party and/or by any one or more of its Subsidiaries.

     “Tax” or “Taxes” means any and all federal, state, local, or foreign net or gross income, gross receipts, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, service, service use, occupation, severance, energy, unemployment, social security, capital, premium, and other taxes, assessments, customs, duties, levies, or other governmental charges of any nature whatever, whether disputed or not, whether computed on a separate or consolidated, unitary, combined or similar basis, together with any interest, penalties, or any other additions to Tax with respect thereto.

     “Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

     “Taxing Authority” means any Governmental Entity having jurisdiction with respect to any Tax.

     “Termination Fee” means, with respect to any Assigned Contract, any amounts payable by the Seller Correspondent party thereto as a result of a termination, de-conversion or other similar extinguishment of the rights under an Assigned Contract, other than any amounts payable with respect to periods prior to any such termination, de-conversion or extinguishment or any other similar amount.

     “$” means United States dollars.

7

     1.2 Other Defined Terms. The following terms have the meanings assigned to such terms in the Sections of the Agreement set forth below:

Action	4.9
Agreement	Preamble
Allocation Statement	2.7
Applicable Survival Period	10.1(d)
Assigned Contracts	2.1(a)
Assumed Liabilities	2.3
Backstop Note	3.2(g)
Backstop Note Notice	7.9
Base Run-Rate Revenue	2.6(d)(i)(A)
Bill of Sale and Assignment and Assumption Agreement	3.2(a)
Business	Preamble
Buyer	Preamble
Buyer Closing Certificate	8.3(c)
Buyer Disclosure Schedule	Article V
Buyer Indemnitees	10.2(a)
Buyer Plan	7.4(l)
Buyer Welfare Plan	7.4(m)
Buyer Warranty Losses	10.2(b)
Cash Payment	10.2(c)
Change In Circumstance	2.9
Closing	3.1
Closing Assigned Contracts Schedule	2.9
Closing Other Purchased Assets Schedule	2.10
Closing Date	3.1
Closing Run-Rate Revenue	2.6(d)(i)(B)
Closing Run-Rate Revenue Statement	2.6(d)(i)(C)
COBRA	7.4(i)
Confidentiality Agreement	6.3
Consents	4.3(a)
Conversion Agreement	3.2(h)
Credit Agreement	5.13
DOJ	7.1(a)
Early Termination Amount	2.6(g)
Excluded Assets	2.2
Excluded Contracts	2.9
Excluded Liabilities	2.4
Final Run-Rate Revenue	2.6(d)(i)(D)
FTC	7.1(a)
Independent Expert	2.6(l)
Investment Advisers Act	4.11(g)(i)
Live Date	2.6(d)(i)(E)
Marketing Agreement	3.2(e)
New Contract	2.9

8

Non-Revenue Assigned Contract	2.6(e)(i)(A)
Non-Revenue Contract Adjustment Amount	2.6(e)(ii)
Note	2.5(b)
Note Principal True-Up Amount	2.6(j)
Notice of Claim	10.4(a)
Outsourcing Agreement	Preamble
Parent	Preamble
Personal Property	4.6
Plans	4.11(h)
Post-Closing Reference Period	2.6(e)(i)(B)
Post-Closing Run-Rate Revenue	2.6(e)(i)(C)
Post-Closing Run-Rate Revenue Statement	2.6(e)(i)(D)
Post-Closing Tax Period	7.5(b)
Pre-Closing Reduced Revenue Contract Adjustment Amount	2.6(h)
Pre-Closing Tax Period	7.5(b)
Purchase Price	2.5(a)
Purchase Price Adjustment	2.6(a)
Purchased Assets	2.1
PW	Preamble
PW Common Stock	5.10(b)
Reduced Revenue Contract Adjustment Amount	2.6(i)
Regulatory Agreement	4.11(d)
Representatives	6.3
Restricted Contract	2.8(a)
Restricted Contract Amount	2.6(k)
Review Period	2.6(d)(i)(F)
Section 1060 Forms	2.7
Securities Act	4.12(a)
Seller	Preamble
Seller Closing Certificate	8.2(c)
Seller Disclosure Schedule	Article IV
Seller Employees	7.4(f)
Seller Group	4.4(a)
Seller Indemnitees	10.3(a)
Seller Policies and Procedures	4.11(e)
Seller Warranty Losses	10.3(b)
Shares	2.5(b)
Special Seller Correspondent	2.6(f)
Special Seller Correspondent Early Termination Amount	2.6(f)
Stockholder’s and Registration Rights Agreement	3.2(f)
Stub Seller Correspondent	2.6(d)(i)(G)
Stub Seller Correspondent Adjustment Amount	2.6(d)(iv)
Third Amendment	5.13
Third Party Claim	10.4(a)
Third Party Defense	10.4(b)
Third Party Financing	7.9

9

Transferred Employees	7.4(b)
Transfer Tax	7.5
Working Capital Funding	7.9

ARTICLE II

PURCHASE AND SALE

     2.1 Purchase and Sale of the Purchased Assets. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, free and clear of Liens except for Permitted Liens, the entire right, title and interest of Seller in only the following assets, properties and rights:

          (a) subject to Section 2.8 hereof, all Contracts between Seller and another party (including any Affiliates of Parent other than Seller) for the provision by Seller of services related to the Business listed on Schedule 2.1(a), as such schedule may be updated pursuant to Section 2.9 hereof (the “Assigned Contracts”), and to the extent relating to the Assigned Contracts:

               (i) all rights of the Seller in underlying agreements relating to the Assigned Contracts between Seller Correspondents and customers, including any rights of Seller as a third party beneficiary;

               (ii) all account records of Seller Correspondents including all intangible rights relating to such account records, including telephone, telecopy and e-mail addresses and listings;

               (iii) all data and Records of Seller and Seller Correspondents related to any accounts transferred, including client and customer lists and Records, referral sources, research and development reports and Records, financial and accounting Records, reports, correspondence and other similar documents;

               (iv) all rights to security or other deposits from any Seller Correspondents and rights and Liens thereof;

          (b) all data and Records related to the employee and personnel Records of any Transferred Employees;

          (c) all balances and positions associated with any Assigned Contract other than such balances and positions not accepted by PW;

          (d) all rights of Seller to indemnification with respect to the Purchased Assets to the extent permitted under the Contract or Contracts pursuant to which such indemnification rights arise; and

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          (e) all other assets, properties and rights expressly listed on Schedule 2.1(e), as such schedule may be updated pursuant to Section 2.10 hereof (the assets described in Sections 2.1(a) through (e), collectively, the “Purchased Assets”).

     2.2 Excluded Assets. For the avoidance of doubt, the Purchased Assets do not include, and Seller is not selling, assigning, transferring, conveying or delivering, and Buyer is not purchasing, acquiring or accepting from Seller, any assets, properties and rights not expressly set forth in Section 2.1 (collectively, the “Excluded Assets”).

     2.3 Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, including without limitation Section 2.8 hereof, Buyer shall assume effective as of the Closing, and from and after the Closing, Buyer shall pay, discharge or perform when due, as appropriate, only the Liabilities in respect of the Assigned Contracts but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the ordinary course of the business relating to the Assigned Contracts and do not relate to any actual or alleged failure to perform, improper performance, warranty or other breach, default or violation by Seller on or prior to the Closing (the “Assumed Liabilities”), and no other Liabilities.

     2.4 Excluded Liabilities. Neither Buyer nor any of its Affiliates shall assume any Liabilities of Seller (such unassumed Liabilities, the “Excluded Liabilities”) other than those specifically set forth in Section 2.3. Without limiting the generality of the foregoing, in no event shall Buyer or any of its Affiliates assume or incur any Liability in respect of, and Seller shall remain bound by and liable for, and shall pay, discharge or perform when due, the following Liabilities of Seller:

          (a) all Liabilities under any Assigned Contract that arise after the Closing Date but that arise out of or relate to any failure to perform, improper performance, warranty or other breach, default or violation that occurred on or prior to the Closing Date, including any failure to comply with or any violation of any Law by Seller or its Affiliates;

          (b) all Liabilities for Taxes of the Seller (including, for the avoidance of doubt, any Taxes of Affiliates of the Seller for which the Seller is liable pursuant to Treasury Regulation Section 1.1502-6 or any similar provision of state, local or non-U.S. Law) including (i) any Taxes of the Seller arising as a result of Seller’s operation of its business or ownership of the Purchased Assets on or prior to the Closing Date, (ii) any Taxes of the Seller that will arise as a result of the sale and transfer of the Purchased Assets pursuant to this Agreement (other than any such Taxes as Buyer has agreed to bear as provided in Section 7.5(a)), and (iii) any deferred Taxes of any nature;

          (c) all Liabilities of Seller under the Seller Benefit Plans or relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans, health care plans or benefits or any other employee plans or benefits of any kind for Seller’s employees or former employees or both; and

          (d) all Liabilities of Seller under any employment, severance, retention or termination agreement with any employee of Seller or any of its Affiliates.

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     2.5 Purchase Price.

          (a) The consideration to be paid by Buyer to Seller or an Affiliate of Seller for the Purchased Assets shall be, (i) subject to adjustment as set forth in Sections 2.6 and Article X hereof, the product of nine-tenths (0.9) times the aggregate Run-Rate Revenues based upon the Assigned Contracts (other than Restricted Contracts) listed in the Closing Assigned Contracts Schedule (as estimated as of the Closing Date as provided in Section 2.9 and subject to adjustment as set forth in Section 2.6 to reflect actual Run-Rate Revenues as of the Closing and the Run-Rate Revenues of Restricted Contracts assigned after the Closing pursuant to Section 2.8), and (ii) the assumption of the Assumed Liabilities (the “Purchase Price”).

          (b) The Purchase Price shall be paid to Seller or an Affiliate of Seller as follows:

               (i) delivery to Seller or an Affiliate of Seller of an unsecured promissory note in the form attached hereto as Exhibit B (the “Note”), having a principal face amount equal to (x) the Purchase Price, less (y) the Aggregate Share Value; and

               (ii) the lesser of (x) the number of shares of PW Common Stock equal to the quotient of one third of the Purchase Price (based upon the Closing Assigned Contracts Schedule delivered at the Closing) divided by the Measurement Price, (y) such number of shares of PW Common Stock as would constitute 9.9% of the issued and outstanding shares of PW as of the close of business on the Business Day immediately preceding the Closing Date, as adjusted to give effect to such issuance to Seller or an Affiliate of Seller and (z) 2,517,451 shares of PW Common Stock (the “Shares”).

     2.6 Purchase Price Adjustments.

          (a) The Purchase Price shall be adjusted by an amount equal to nine-tenths (0.9) times the amount (which may be negative) of each of the following amounts set forth in (i) – (viii) below. Each such adjustment shall be referred to as a “Purchase Price Adjustment.”

               (i) The Non-Revenue Contract Adjustment Amount (as defined in Section 2.6(e) below).

               (ii) the Stub Seller Correspondent Adjustment Amount (as defined in Section 2.6(d) below), whether the Stub Seller Correspondent Adjustment Amount is a positive or negative number;

               (iii) any Special Seller Correspondent Early Termination Amount (as defined in Section 2.6(f) below);

               (iv) any Early Termination Amount (as defined in Section 2.6(g) below);

               (v) any Pre-Closing Reduced Revenue Contract Adjustment Amount (as defined in Section 2.6(h) below);

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               (vi) any Reduced Revenue Contract Adjustment Amount (as defined in Section 2.6(i) below);

               (vii) any Note Principal True-Up Amount (as defined in Section 2.6(j) below); and

               (viii) any Restricted Contract Amount (as defined in Section 2.6(k) below).

          (b) If the Purchase Price Adjustment is positive, the Purchase Price shall be increased by the absolute value of the Purchase Price Adjustment. If the Purchase Price Adjustment is negative, the Purchase Price shall be reduced by the absolute value of the Purchase Price Adjustment.

          (c) Any Purchase Price Adjustment required to be made pursuant to Section 2.6(b) shall be recorded on the Note by Seller as an adjustment to the principal amount of the Note (i) promptly following the final determination of the Pre-Closing Reduced Revenue Contract Adjustment and the Note Principal True-Up Amount, (ii) on the date occurring 14 months after the Closing Date for any other adjustment that has been finally determined pursuant to this Section 2.6 by such date, (iii) on the date occurring 19 months after the Closing Date for any adjustment that has been finally determined pursuant to this Section 2.6 by such date and not previously reflected on the Note, (iv) promptly after the final determination of any Purchase Price Adjustments for which Notices of Objection were delivered and which were not previously reflected on the Note pursuant to clauses (i), (ii) or (iii) above; and (v) at such other times as may be mutually agreed by PW and Parent. A copy thereof reflecting the recording of any such adjustment will be promptly delivered to Buyer, provided, that the failure to do so will not affect the validity of any adjustment made in accordance with the provisions of this Agreement or the Note.

          (d) The Stub Seller Correspondent Adjustment Amount shall be calculated as follows:

               (i) For purposes of this Section 2.6, the following terms shall have the meanings assigned to them in this Section 2.6(d)(i):

                    (A) “Base Run-Rate Revenue” means the aggregate Run-Rate Revenue for all Stub Seller Correspondents as of the Closing Date.

                    (B) “Closing Run-Rate Revenue” means the annualized aggregate amount of Net Revenue for each Assigned Contract included in the Base Run-Rate Revenue during the six month period beginning on the later of the Live Date and the Closing Date;

                    (C) “Closing Run-Rate Revenue Statement” means an unaudited statement of Closing Run-Rate Revenue that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and containing reasonable detail showing how the amount or amounts set forth therein were calculated.

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                    (D) “Final Run-Rate Revenue” means the Closing Run-Rate Revenue (x) as shown in the Closing Run-Rate Revenue Statement delivered by Buyer to Seller pursuant to Section 2.6(d)(ii), if no Notice of Objection with respect thereto is timely delivered by Seller to Buyer pursuant to Section 2.6(d)(iii); or (y) if a Notice of Objection is so delivered, (1) as agreed by Buyer and Seller pursuant to Section 2.6(m) or (2) in the absence of such agreement, as shown in the Independent Expert’s calculation delivered pursuant to Section 2.6(m).

                    (E) “Live Date” means, with respect to a Seller Correspondent, the first date, if any, on or within 6 months after the Closing Date on which live execution of trades occurs with Buyer being the clearing and settlement broker of record (excluding beta testing).

                    (F) “Review Period” means the period 30 days from receipt by Seller of, as applicable, the Closing Run-Rate Revenue Statement, the Post-Closing Run-Rate Revenue Statement, or statements setting forth any Special Seller Correspondent Early Termination Amount, Early Termination Amount, Reduced Revenue Contract Adjustment Amount, Note Principal True-Up Amount or Restricted Contract Amount, in each case, containing information with respect to all adjustments, in their entirety, to be considered, as required by Section 2.6.

                    (G) “Stub Seller Correspondent” means a Seller Correspondent that has been a party to an Assigned Contract and for which Seller has recognized Net Revenue for at least one, but fewer than six, full calendar months as of the Closing Date.

               (ii) Within thirteen (13) months but no earlier than twelve (12) months after the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller the Closing Run-Rate Revenue Statement which shall set forth in reasonable detail Buyer’s calculation of the Closing Run-Rate Revenue.

               (iii) If Seller disagrees with Buyer’s computation of Closing Run-Rate Revenue, Seller may, on or prior to the last day of the Review Period with respect to the Closing Run-Rate Revenue Statement, deliver a Notice of Objection to Buyer.

               (iv) The amount equal to the difference of the Final Run-Rate Revenue minus the Base Run-Rate Revenue shall be referred to as the “Stub Seller Correspondent Adjustment Amount.”

          (e) The Non-Revenue Contract Adjustment Amount shall be calculated as follows:

               (i) For purposes of this Section 2.6, the following terms shall have the meanings assigned to them in this Section 2.6(e)(i):

                    (A) “Non-Revenue Assigned Contract” means any Assigned Contract that was entered into on or prior to the Closing Date, but pursuant to which Seller had not recognized at least one full calendar month of Net Revenue related to a Seller Correspondent on or prior to the Closing Date.

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                    (B) “Post-Closing Reference Period” means a period of six (6) full calendar months beginning with the third full calendar month immediately after the later of the Live Date and the Closing Date.

                    (C) “Post-Closing Run-Rate Revenue” means the Net Revenue recognized from any Seller Correspondent with respect to a Non-Revenue Assigned Contract during the Post-Closing Reference Period multiplied by two (2).

                    (D) “Post-Closing Run-Rate Revenue Statement” means an unaudited statement of Post-Closing Run-Rate Revenue that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and containing reasonable detail showing how the amount or amounts set forth therein were calculated.

               (ii) Within sixteen (16) months but no earlier than fifteen (15) months following the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller the Post-Closing Run-Rate Revenue Statement for all Non-Revenue Assigned Contracts if any Net Revenue was recognized from Seller Correspondents during the six-month period immediately after the Live Date. The Post-Closing Run-Rate Revenue Statement shall set forth in reasonable detail Buyer’s calculation of the Post-Closing Run-Rate Revenue for each such Non-Revenue Assigned Contract. The amount equal to the aggregate Post-Closing Run-Rate Revenue shall be referred to as “Non-Revenue Contract Adjustment Amount.”

               (iii) If Seller disagrees with Buyer’s computation of Post-Closing Run-Rate Revenue, Seller may, on or prior to the last day of the Review Period with respect to the Post-Closing Run-Rate Revenue Statement, deliver a Notice of Objection to Buyer.

          (f) If, at any time prior to the date occurring twelve (12) full calendar months following the later of the Live Date and the Closing Date, (i) any Assigned Contract with a Special Seller Correspondent is terminated by such Special Seller Correspondent earlier than the stated term contained in such Assigned Contract, (ii) any Assigned Contract with a Special Seller Correspondent is not renewed by such Special Seller Correspondent following the expiration of the term of such Assigned Contract or (iii) any Governmental Entity or SRO requires any Assigned Contract with a Special Seller Correspondent to be terminated, then the negative of the amount equal to the absolute value of the Run-Rate Revenue attributable to each such Assigned Contract shall collectively be referred to as the “Special Seller Correspondent Early Termination Amount.” For purposes of this Section 2.6(f), a “Special Seller Correspondent” means a Seller Correspondent that has been responsible for more than five percent (5%) of the aggregate Run-Rate Revenue recognized by the Seller, as reflected in the Closing Assigned Contracts Schedule. Within nineteen (19) months after the Closing Date but no earlier than eighteen (18) months, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and which shall set forth in reasonable detail any Special Seller Correspondent Early Termination Amount. If Seller disagrees with Buyer’s computation of the Special Seller Correspondent Early Termination Amount, Seller may, on or prior to the last day of the Review Period with respect to the statement setting forth

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the Special Seller Correspondent Early Termination Amount, deliver a Notice of Objection to Buyer.

          (g) If, at any time prior to the date occurring six (6) full calendar months following the later of the Live Date and the Closing Date, (i) any Assigned Contract is terminated earlier than the stated term contained in such Assigned Contract by a Seller Correspondent, (ii) any Assigned Contract is not renewed by a Seller Correspondent following the expiration of the term of such Assigned Contract or (iii) any Governmental Entity or SRO requires any Assigned Contract with a Seller Correspondent to be terminated, then the negative of the amount equal to the Run-Rate Revenue, the Final Run-Rate Revenue or the Post-Closing Run-Rate Revenue, as applicable, attributable to all such Assigned Contract shall collectively be referred to as the “Early Termination Amount.” Within thirteen (13) months but no earlier than twelve (12) months after the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and which shall set forth in reasonable detail any Early Termination Amount. If Seller disagrees with Buyer’s computation of the Early Termination Amount, Seller may, on or prior to the last day of the Review Period with respect to the statement setting forth the Early Termination Amount, deliver a Notice of Objection to Buyer.

          (h) If at any time on or following the date of this Agreement and prior to the Closing Date, Seller and any Seller Correspondent implement a reduction in the price of the securities clearing or execution services provided under an Assigned Contract, then the amount equal to the difference between the Run-Rate Revenue as of the date of this Agreement, adjusted to reflect the reduced pricing terms of each such Assigned Contracts and the Run-Rate Revenue as of the Closing Date attributable to each such Assigned Contract shall collectively and in the aggregate be referred to as the “Pre-Closing Reduced Revenue Contract Adjustment Amount.” Within 60 days following the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and setting forth in reasonable detail Buyer’s calculation of the Pre-Closing Reduced Revenue Contract Adjustment Amount. If Seller disagrees with Buyer’s computation of the Pre-Closing Reduced Revenue Contract Adjustment Amount, Seller may, on or prior to the last day of the Review Period with respect to a statement setting forth the Pre-Closing Reduced Revenue Contract Adjustment Amount, deliver a Notice of Objection to Buyer.

          (i) If, at any time prior to twelve (12) months (in the case of any Special Seller Correspondent), or six (6) months (in the case of any other Seller Correspondent that is not a Special Seller Correspondent), following the later of the Live Date or the Closing Date, Buyer and any Seller Correspondent or Special Seller Correspondent, as applicable, implement a reduction in the price of the securities clearing and execution services provided under an Assigned Contract, then the amount equal to the difference between the Run-Rate Revenue, the Final Run-Rate Revenue or the Post-Closing Run-Rate Revenue, as applicable, adjusted to reflect the reduced pricing terms of each such Assigned Contracts and the Run-Rate Revenue, the Final Run-Rate Revenue or Post-Closing Run-Rate Revenue attributable to such Assigned Contract shall collectively and in the aggregate be referred to as the “Reduced Revenue Contract Adjustment Amount.” Within thirteen (13) months but no earlier than twelve (12)

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months after the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and which shall set forth in reasonable detail any Reduced Revenue Contract Adjustment Amount with respect to Seller Correspondents that are not Special Seller Correspondents. Within nineteen (19) months after the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP and which shall set forth in reasonable detail any Reduced Revenue Contract Adjustment Amount with respect to Special Seller Correspondents. If Seller disagrees with Buyer’s computation of the Reduced Revenue Contract Adjustment Amount, Seller may, on or prior to the last day of the Review Period with respect to a statement setting forth the Reduced Revenue Contract Adjustment Amount, deliver a Notice of Objection to Buyer.

          (j) The Note Principal True-Up Amount shall be calculated as follows:

               (i) Within 60 days following the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP setting forth in reasonable detail Buyer’s calculation of the aggregate Run-Rate Revenue for all Assigned Contracts as of the Closing. The difference between the actual Run-Rate Revenue as of the Closing and the estimated Run-Rate Revenue as set forth in Schedule 2.1(a) at the Closing shall be referred to as “Note Principal True-Up Amount.”

               (ii) If Seller disagrees with Buyer’s computation of the Note Principal True-Up Amount, Seller may, on or prior to the last day of the Review Period with respect to the Note Principal True-Up Amount, deliver a Notice of Objection to Buyer.

          (k) The Restricted Contract Amount shall be calculated as follows:

               (i) Within 120 days following the Closing Date, Buyer will prepare, or cause to be prepared, and deliver to Seller a statement that is prepared in a manner consistent with Seller’s past practice and based upon statements that were prepared in accordance with GAAP setting forth in reasonable detail Buyer’s calculation of the aggregate Run-Rate Revenues for all Restricted Contracts transferred to Buyer pursuant to Section 2.8 within ninety (90) days following the Closing Date. The aggregate Run-Rate Revenues for all such Restricted Contracts transferred to Buyer pursuant to Section 2.8 shall be referred to as the “Restricted Contract Amount.”

               (ii) If Seller disagrees with Buyer’s computation of the Restricted Contract Amount, Seller may, on or prior to the last day of the Review Period with respect to the Restricted Contract Amount, deliver a Notice of Objection to Buyer.

          (l) Any rights accruing to a party under this Section 2.6 shall be in addition to and independent of the rights to indemnification under Article X and any payments made to any party under this Section 2.6 shall not be subject to the terms of Article X.

          (m) For all proposed adjustments to the Purchase Price under this Section 2.6, unless Seller delivers the Notice of Objection to Buyer within the Review Period for each such

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adjustment, Seller shall be deemed to have accepted Buyer’s calculation, and Buyer’s calculation shall be final, conclusive and binding. If Seller delivers the Notice of Objection to Buyer within the Review Period, Buyer and Seller shall, during the 30 days following such delivery or any mutually agreed extension thereof, use their commercially reasonable efforts to reach agreement on the disputed items and amounts in order to determine the amount in dispute. If, at the end of such period or any mutually agreed extension thereof, Buyer and Seller are unable to resolve their disagreements, they shall jointly retain and refer their disagreements to a nationally recognized independent accounting firm mutually acceptable to Buyer and Seller (an “Independent Expert”). The parties shall instruct the Independent Expert promptly to review this Agreement and to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, Buyer’s proposed adjustment should be changed or modified. The Independent Expert shall act as an expert and not an arbitrator or mediator and shall base its determination solely on written submissions by Buyer and Seller and not on an independent review. Buyer and Seller shall make available to the Independent Expert all relevant Books and Records and other items reasonably requested by the Independent Expert. The parties shall request that the Independent Expert deliver to Buyer and Seller, as promptly as practicable but in no event later than 45 days after its retention, a report which sets forth its resolution of the disputed items and amounts and its calculation of the relevant adjustment; provided that in no event shall the Independent Expert’s determination of the adjustment be more than Buyer’s calculation nor less than Seller’s calculation as set forth in the Notice of Objection. The decision of the Independent Expert shall be final, conclusive and binding on the parties. The costs and expenses of the Independent Expert shall be split equally between Buyer and Seller. Each party agrees to execute, if requested by the Independent Expert, a reasonable engagement letter, including a confidentiality provision and customary indemnities in favor of the Independent Expert.

     2.7 Allocation.

          (a) As soon as reasonably practicable, but in no event later than 120 days following the Closing, Buyer shall deliver to Seller a draft allocation statement setting forth Buyer’s proposed allocation of the Purchase Price for Tax purposes, which shall be subject to the consent of Seller (not to be unreasonably withheld) (such draft allocation statement, once agreed to by both parties or resolved by an Independent Expert (as described below), the “Allocation Statement”). If the parties are unable to resolve any disagreement regarding the draft allocation statement within forty-five (45) days of Seller’s receipt thereof, such dispute shall be resolved by an Independent Expert in the manner provided in Section 2.6(m).

          (b) In the event that the Purchase Price is subsequently adjusted pursuant to Section 2.6, Buyer shall deliver to Seller a revised Allocation Statement (that is consistent with the agreed methodology reflected in the original allocation Statement) as soon as reasonably practicable following the date of such adjustment.

          (c) Except as otherwise required by Law, Buyer and Seller shall, and shall cause each of their Affiliates to, file all Tax Returns (such as IRS Form 8594 or any other forms or reports required to be filed pursuant to Section 1060 of the Code or any comparable provisions of Law (“Section 1060 Forms”)) in a manner that is consistent with the Allocation Statement and refrain from taking any action inconsistent therewith. Buyer and Seller shall, and shall cause

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their respective Affiliates to, cooperate in the preparation of Section 1060 Forms and file such Section 1060 Forms timely and in the manner required by Applicable Law.

     2.8 Consents.

          (a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to sell, assign, transfer, convey or deliver any Purchased Asset or any benefit arising under or resulting from such Purchased Asset if the sale, assignment, transfer, conveyance or delivery thereof, without the Consent of a third party, (i) would constitute a breach or other contravention of the rights of such third party, (ii) would be ineffective with respect to any party to a Contract concerning such Purchased Asset, (iii) would breach any restriction imposed by any Governmental Entity on the assignment of the Purchased Asset in question, or (iv) would, upon transfer, in any way adversely affect the rights of Buyer under such Purchased Asset. If the sale, assignment, transfer, conveyance or delivery by Seller to, or any assumption by Buyer of, any interest in, or Liability under, any Purchased Asset requires the Consent of a third party, then such sale, assignment, transfer, conveyance, delivery or assumption shall be subject to such Consent being obtained. Without limiting Section 2.8(b), to the extent any Assigned Contract may not be assigned to Buyer by reason of the absence of any such Consent (“Restricted Contract”), Buyer shall not be required to assume any Assumed Liabilities arising under such Restricted Contract.

          (b) To the extent that any Consent in respect of a Restricted Contract or any other Purchased Asset shall not have been obtained on or before the Closing Date, Seller shall continue to use commercially reasonable efforts to obtain any such Consent after the Closing Date until the expiration of the time period set forth in paragraph (c) below, provided that use of commercially reasonable efforts shall not require payment of any fee in connection therewith. Seller shall cooperate with Buyer in any economically feasible arrangement proposed by Buyer to provide that Buyer shall receive the interest of Seller in the benefits under such Restricted Contract or other Purchased Asset. Seller shall pay and discharge, and shall indemnify and hold harmless, Buyer and its Affiliates from and against any and all out-of-pocket costs of seeking to obtain or obtaining any such Consent whether before or after the Closing Date. As soon as a Consent for the sale, assignment, transfer, conveyance, delivery or assumption of a Restricted Contract or other Purchased Asset is obtained, Seller shall promptly assign, transfer, convey and deliver such Restricted Contract or Purchased Asset to Buyer, and Buyer shall, subject to agreement on the Run-Rate Revenues as set forth in the following sentence, assume the Assumed Liabilities under any such Restricted Contract from and after the date of assignment to Buyer pursuant to a special-purpose assignment and assumption agreement substantially similar in terms to those of the Bill of Sale and Assignment and Assumption Agreement. Buyer and Seller shall negotiate in good faith on similar terms as the Assigned Contracts to determine the Run-Rate Revenues for any Restricted Contract for which Seller has received consent pursuant to this Section 2.8.

          (c) To the extent that any Consent in respect of a Restricted Contract or any other Purchased Asset shall not have been obtained within 90 days of the Closing Date despite the reasonable efforts of Seller, Seller shall as soon as reasonably practicable terminate such Restricted Contracts following the written request of Buyer.

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     2.9 Closing Assigned Contracts. Within ten (10) Business Days after the date hereof, Buyer shall prepare and deliver a list of Assigned Contracts included in Schedule 2.1(a) that shall be excluded from the Closing Assigned Contracts Schedule (as defined below) and not assigned to Buyer at the Closing (the “Excluded Contracts”). At least ten (10) Business Days prior to the Closing, Seller shall prepare, and deliver to Buyer, a proposed update to Schedule 2.1(a) as of the Closing Date (the “Closing Assigned Contracts Schedule”), which update shall include all Assigned Contracts included in Schedule 2.1(a) other than the Excluded Contracts and any and all Contracts between Seller and another party for the provision by Seller of services related to the Business entered into after the date hereof (each such Contract, a “New Contract”) and the Net Revenue and Run-Rate Revenue with respect to each listed Contract as of the last day of the month prior to the month of the Closing. Buyer, in its sole discretion, may prior to Closing cause to be excluded from the Closing Assigned Contracts Schedule (i) any New Contract and (ii) any Assigned Contract included by Seller in its proposed Schedule 2.1(a) with a third party that has, in Buyer’s reasonable judgment, suffered a Change In Circumstance. The Assigned Contracts listed in the Closing Assigned Contracts Schedule as determined pursuant to the preceding provisions shall constitute Schedule 2.1(a) as of the Closing. “Change In Circumstance” as used herein means the bankruptcy, insolvency or liquidation of such third party, or any material adverse change in the business of such third party or its relationship with Seller or Buyer.

     2.10 Closing Other Purchased Assets. Buyer, in its sole discretion, may prior to Closing cause to be excluded from Schedule 2.1(e) any item set forth therein as of the date hereof. Schedule 2.1(e) as determined pursuant to the preceding provision shall be referred to as the “Closing Other Purchased Assets Schedule” and shall constitute Schedule 2.1(e) as of the Closing.

ARTICLE III

CLOSING

     3.1 Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Morgan, Lewis & Bockius LLP, on the earlier to occur of (i) the first Business Day of the week, and (ii) the last Business Day of the calendar month, that, in each case, occurs at least four (4) Business Days after satisfaction (or waiver as provided herein) of the conditions set forth in Article VIII (other than those conditions that by their nature will be satisfied at the Closing) has occurred, provided, that if the foregoing would cause the Closing to occur on the last day of a fiscal quarter of PW or Parent, the Closing shall occur on the first Business Day of the week following such quarter-end date, unless another time, date and/or place is agreed to in writing by the parties. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”

     3.2 Deliveries by Seller at the Closing. At the Closing, Seller shall deliver to Buyer the following:

          (a) the Note duly executed by Seller or an Affiliate of Seller designated by Seller;

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          (b) a Bill of Sale and Assignment and Assumption Agreement in the form of Exhibit C hereto (the “Bill of Sale and Assignment and Assumption Agreement”) duly executed by Seller;

          (c) a Joint Selling Agreement in the form of Exhibit D hereto (the “Selling Agreement”) duly executed by Parent;

          (d) a Stockholder’s and Registration Rights Agreement in the form of Exhibit E hereto (the “Stockholder’s and Registration Rights Agreement”) duly executed by Seller or an Affiliate of Seller;

          (e) a Backstop Note in the form of Exhibit F hereto (the “Backstop Note”) duly executed by Seller, if a Backstop Note Notice has been delivered in accordance with Section 7.9;

          (f) a Conversion Agreement in a form mutually agreed to by Buyer and Seller (the “Conversion Agreement”) duly executed by Seller at least 30 days prior to the anticipated Closing Date;

          (g) the Closing Assigned Contracts Schedule with such modifications as permitted pursuant to Section 2.9;

          (h) the Closing Other Purchased Assets Schedule with such modifications as permitted pursuant to Section 2.10;

          (i) with respect to the Outsourcing Agreement, completed SOWs, SLAs, schedules, exhibits and annexes thereto relating to the Purchased Assets, each in a form satisfactory to Buyer and prepared in accordance with the Outsourcing Agreement; and

          (j) the Seller Closing Certificate; and

          (k) such other instruments of transfer as Buyer reasonably deems necessary and appropriate to transfer to Buyer the Purchased Assets.

     3.3 Deliveries by Buyer at the Closing. At the Closing, Buyer shall deliver to Seller the following:

          (a) a certificate representing the Shares in the name of Seller (or a designated Affiliate of Seller, provided that such Affiliate executes and delivers to Buyer a certificate in which it makes the representations set forth in Section 4.12 hereof);

          (b) the Note duly executed by PW;

          (c) the Bill of Sale and Assignment and Assumption Agreement duly executed by Buyer;

          (d) the Selling Agreement duly executed by PW;

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          (e) the Stockholder’s and Registration Rights Agreement duly executed by PW;

          (f) the Backstop Note duly executed by PW, if a Backstop Note Notice has been delivered in accordance with Section 7.9;

          (g) the Conversion Agreement duly executed by PW at least 30 days prior to the anticipated Closing Date; and

          (h) the Buyer Closing Certificate.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

     Parent and Seller, jointly and severally, represent and warrant to Buyer as of the date hereof and as of the Closing Date that the statements contained in this Article IV are true and correct, except as set forth in the disclosure schedule dated and delivered as of the date hereof by Seller to Buyer (the “Seller Disclosure Schedule”), which is attached to this Agreement and is designated therein as being the Seller Disclosure Schedule; it being acknowledged and agreed by PW and Buyer that any matter set forth in any section or subsection of the Seller Disclosure Schedule shall be deemed to be a disclosure for all purposes of this Agreement and all other sections or subsections of the Seller Disclosure Schedule to which such matter could reasonably be expected to be relevant, but shall expressly not be deemed to constitute an admission by Parent or the Seller, or otherwise imply, that any such matter rises to the level of a Seller Material Adverse Effect or is otherwise material for purposes of this Agreement or the Seller Disclosure Schedule.

     4.1 Organization and Good Standing. Each of Parent and Seller is a corporation validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation and in each jurisdiction where it is qualified to do business, has all requisite power to own, lease and operate its properties and to carry on its business as now being conducted and as proposed to be conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification except for those jurisdictions where the failure to be so qualified and in good standing could not individually or in the aggregate have a Seller Material Adverse Effect. Seller is not in default under its Charter Documents. Schedule 4.1 of the Seller Disclosure Schedule sets forth each jurisdiction where Seller is qualified to do business or has a business operation.

     4.2 Authority and Enforceability. Each of Parent and Seller has the requisite power and authority to enter into this Agreement and each Ancillary Agreement to which it is a party, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each Ancillary Agreement to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Parent and Seller. Each of Parent and Seller has duly executed and delivered this Agreement and the Outsourcing Agreement and will duly execute and deliver each other Ancillary Agreement to which it is a party. Assuming due

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authorization, execution and delivery by PW and Buyer, as applicable, this Agreement and the Outsourcing Agreement constitute, and each other Ancillary Agreement to which it is a party will constitute, the valid and binding obligation of Parent and Seller, enforceable against them in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies. The Ancillary Agreements will effectively vest in Buyer good, valid and marketable title to all the Purchased Assets free and clear of all Liens other than Permitted Liens.

     4.3 No Conflicts; Consents.

          (a) The execution and delivery of this Agreement by each of Parent and Seller do not, and the execution and delivery of each Ancillary Agreement to which it is a party, the performance by Parent and Seller of its obligations hereunder and thereunder and the consummation by Parent and Seller of the transactions contemplated hereby and thereby (in each case, with or without the giving of notice or lapse of time, or both), will not, directly or indirectly, (i) violate the provisions of any of the Charter Documents of Parent or Seller, (ii) except as set forth in Section 4.3(a) of the Seller Disclosure Schedule, violate or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights under any Assigned Contract or other material Contract to which Parent, Seller or any of the Purchased Assets are bound and subject, in each case in any material respect, (iii) violate or conflict with any Law, Authorization or Order applicable to Parent or Seller, or give any Governmental Entity or other Person the right to challenge any of the transactions contemplated by this Agreement or the Ancillary Agreements or to exercise any remedy, obtain any relief under or revoke or otherwise modify any rights held under, any such Law, Authorization or Order, in each case in any material respect, or (iv) result in the creation of any Liens upon any of the Purchased Assets. Section 4.3(a) of the Seller Disclosure Schedule sets forth all material consents, waivers, assignments and other approvals and actions that are required in connection with the transactions contemplated by this Agreement under any Assigned Contract (collectively, “Consents”).

          (b) No Authorization or Order of, registration, declaration or filing with, or notice to, any Governmental Entity or other Person, is required by or with respect to Parent or Seller in connection with the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, except for such Authorizations, Consents, registrations, declarations, filings and notices as may be required under the HSR Act and the Other Antitrust Laws or the rules of FINRA or the New York Stock Exchange.

     4.4 Taxes.

          (a) All material Tax Returns relating to the Business that were required to have been filed by or with respect to Seller or any affiliated, combined, consolidated, unitary or similar group of which Seller is or was a member (the “Seller Group”) have been duly and timely filed taking into account any extensions validly obtained (or, if due between the date hereof and the Closing Date, will be duly and timely filed. All material Taxes relating to the Business that are owed by Seller or any member of the Seller Group (whether or not shown on

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any Tax Return) have been paid (or, if due between the date hereof and the Closing Date, will be paid prior to the Closing). Seller has, in all material respects, adequately provided for, in its books of account and related Records, Liability for all unpaid Taxes relating to the Business that are not yet due and payable.

          (b) No Purchased Asset is subject to any Liens with respect to any Taxes (other than Permitted Liens).

          (c) Seller has complied in all material respects with its Tax information reporting obligations with respect to the Seller Correspondents and each customer thereof.

          (d) For the avoidance of doubt, no representation is being made under this Section 4.4 with respect to the tax treatment of the Business for any taxable period (or portion thereof) beginning after the Closing.

     4.5 Compliance with Law. Seller has performed, and is performing, its obligations with respect to the Assigned Contracts in compliance in all material respects with all Applicable Laws. Seller has not received written notice regarding any violation of, conflict with, or failure to perform its obligations with respect to the Assigned Contracts in compliance with, any Applicable Law.

     4.6 Title to Personal Property. Seller has good title to, or a valid lease, license or right to use, the personal properties and assets (“Personal Property”) included in the Purchased Assets. Such Personal Property owned by Seller is held free and clear of any Liens other than Permitted Liens.

     4.7 Absence of Certain Changes or Events. Since June 30, 2009 to the date of this Agreement (with respect to the representation and warranty made as of the date of this Agreement) and to the Closing Date (with respect to the representation and warranty made as of the Closing Date):

          (a) there has not been any Seller Material Adverse Effect;

          (b) Seller has not mortgaged, pledged or subjected to Liens any of the Purchased Assets (other than in connection with hypothecations or stock loans entered in the ordinary course of the Business consistent with past practice) except for Permitted Liens;

          (c) Seller has not entered into, amended, modified, canceled or waived any rights under, any Assigned Contract and no Assigned Contract has been terminated or cancelled;

          (d) Except for the execution of this Agreement and any action specifically contemplated herein, Seller and its Affiliates have not taken any action with respect to the Business outside the ordinary course of business; and

          (e) Seller has not agreed, whether in writing or otherwise, to do any of the foregoing.

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     4.8 Contracts. Each Assigned Contract is valid, in full force and effect and enforceable in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies. Except as set forth in Section 4.8 of the Seller Disclosure Schedule, (x) Seller has not received any written notice of any default under any Assigned Contract and (y) to the Knowledge of Seller, no event has occurred or circumstance exists (with or without notice or lapse of time or both) that may contravene, conflict with or result in a violation or breach of, or give any Person other than Seller the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Assigned Contract. Section 4.8 of the Seller Disclosure Schedule sets forth all obligations of Seller to repay, refund or otherwise share any revenues under any Assigned Contract or to make any advance, loan or investment in any Seller Correspondent. Except as set forth in Section 4.8 of the Seller Disclosure Schedule, no Assigned Contract provides for any Liability of Seller or a Seller Affiliate outside the ordinary course of business or provides for any incentive or performance payments to be paid following the Closing Date. Seller has provided Buyer with a true, correct and complete copy of each Assigned Contract, and there is no side agreement or other understanding with any Seller Correspondent modifying the terms of such agreements.

     4.9 Litigation. Except as set forth in Section 4.9 of the Seller Disclosure Schedule, there is no material action, suit or proceeding, claim, arbitration, litigation or investigation (each, an “Action”), in each case related to the Purchased Assets, (i) pending or, to Seller’s Knowledge, threatened against or affecting Seller or the Purchased Assets, or (ii) that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement or the Ancillary Agreements.

     4.10 Customers.

          (a) Seller has provided to Buyer a list of all correspondents of Seller and provided true, correct and complete copies of all clearing agreements and other customer agreements between Seller and such persons. As of the date hereof, Seller has not received any notice nor has, to the Knowledge of Seller, any reason to believe that any Seller Correspondent has ceased, or will cease, to use the products or services of Seller, or has substantially reduced or will substantially reduce the use of such products or services at any time other than as a result of general market conditions. Seller has provided Buyer with a complete list of all loans, advances or other investments in any Seller Correspondent (including details of the date, amount, nature and principal terms thereof).

          (b) Seller has in its possession or has rights of access to the valid, binding and enforceable documentation necessary to maintain each introducing firm account and to perform brokerage and related services for its customers, in a manner consistent with the activities of such customers and Applicable Law.

          (c) Each transaction effected by Seller in an account on behalf of an introducing firm was performed in a manner not inconsistent with the terms of the customer agreement or other documentation and in accordance with Applicable Law.

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     4.11 Broker-Dealer.

          (a) Seller is, and at all times since November 1, 2004 has been, duly and validly registered as a broker-dealer with the SEC. Seller is duly qualified and validly registered as a (i) member of FINRA and (ii) member or member organization of each other SRO of which it is required to be a member. Section 4.11(a) of the Seller Disclosure Schedule sets forth a complete list of each jurisdiction, exchange and SRO in which Seller is duly qualified or registered as a broker-dealer or of which it is a member. Except as set forth on Schedule 4.11(a) of the Seller Disclosure Schedule, Seller is not, and at no time since November 1, 2004 has it been, required to obtain any registration as a broker dealer, member or member organization of a registered clearing agency or other SRO that has not been properly and timely obtained that would have an adverse effect in any material respect.

          (b) Seller has not exceeded in any material respect the business activities enumerated in any membership agreements or other limitations imposed in connection with its registrations, forms (including Form BDs) and reports filed with FINRA or any Governmental Entity. Seller has filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that it was required to file with any Governmental Entity in connection with the Purchased Assets and Seller has paid all fees and assessments due and payable in connection therewith. The information contained in such registrations, forms and reports was true and complete in all material respects as of the date of the filing thereof. Each such registration is in full force and effect on the date hereof. Except for normal examinations conducted by the SEC or an SRO in the regular course of the business of Seller, no SRO has initiated any proceeding or investigation into the business or operations of Seller or any of its employees, agents, brokers or representatives relating to the Purchased Assets. There is no unresolved violation or exception by any SRO with respect to any report or statement relating to any examination of Seller in connection with the Purchased Assets.

          (c) To the Knowledge of Seller, each of Seller’s employees that is required to be registered or licensed as a registered principal, registered representative or a salesperson with the SEC, the securities commission of any state or foreign jurisdiction or any SRO is duly registered or licensed to act in their respective capacities, and all such registrations and licenses are in full force and effect. All federal, state and foreign registration requirements have been complied with in all respects and such registrations as currently filed, and all periodic reports required to be filed with respect thereto, are accurate and complete in all respects.

          (d) Seller is not subject to any cease-and-desist or other order or enforcement action issued by, or a party to any written agreement, consent agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, any regulatory authority or other Governmental Entity that restricts the conduct of its business related to the Purchased Assets, except any proceeding or investigation that would not have a Seller Material Adverse Effect (each, a “Regulatory Agreement”), nor has Seller or any of its Affiliates, with respect to the Business, been advised in writing or otherwise by any regulatory authority or Governmental Entity that it is considering issuing or requesting any such Regulatory Agreement.

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          (e) Seller (i) has implemented policies and procedures that are reasonably designed to comply with the applicable federal and state securities Laws, including those relating to anti-money laundering, advertising, licensing, sales practices, market conduct, maintenance of net capital, risk assessment and continuing education and the rules of any SRO having jurisdiction (collectively, the “Seller Policies and Procedures”) and (ii) Seller has no Knowledge of any material noncompliance with the Seller Policies and Procedures.

          (f) None of the activities of Seller requires it to be registered as an exchange or transfer agent, a government securities dealer, a commodity trading advisor or commodity pool operator.

          (g) To the Knowledge of Seller, no Transferred Employee is or has been (as applicable):

               (i) subject to a statutory disqualification specified in Section 3(a)(39) of the Exchange Act, Sections 203(e) or (f) of the Investment Advisers Act of 1940, as amended, from time to time (the “Investment Advisers Act”), or any substantially equivalent foreign Law (i) expulsion or suspension from membership, (ii) bar or suspension from association, (iii) denial of trading privileges, (iv) order denying, suspending, or revoking registration or barring or suspending association or (v) finding with respect to causing any such effective foreign suspension, expulsion or order;

               (ii) convicted of any foreign offense, enjoined from any foreign act, conduct or practice, or found to have committed any foreign act substantially equivalent to any of those listed in Sections 15(b)(4)(B), (C), (D) or (E) of the Exchange Act; and

               (iii) found to have made or caused to be made any false foreign statement or omission substantially equivalent to any of those listed in Section 3(a)(39)(E) of the Exchange Act.

          (h) Seller has made available to Buyer true, correct and complete copies of each form of retirement plan or account, including individual retirement accounts under Section 408 or 408A of the Code, education retirement accounts under Section 530 of the Code, custodial account agreements under Section 403(b) of the Code, simplified employee pension plans under Section 408(k) of the Code or plans intended to be qualified under Section 401(a) of the Code and forms of other related agreements or materials currently provided to or made available to customers (collectively, the “Plans”) that is an Assigned Contract with respect to which Seller act as a custodian, trustee and/or prototype sponsor. Seller has not entered into any transaction with regard to such Plans, or any other retirement account or plan for which Seller provides services, that could result in a non-exempt transaction prohibited under Section 406 of ERISA or on which an excise tax would be payable under Section 4975 of the Code which in either case would reasonably be expected to result in a material adverse effect.

          (i) Seller does not serve and has never served as a custodian, trustee and/or prototype sponsor for any retirement plan or account, including individual retirement accounts under Section 408 or 408A of the Code, simplified employee pension plans under Section 408(k) of the Code, education retirement accounts under Section 530 of the Code, custodial account

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agreements under Section 403(b) of the Code or plans intended to be qualified under Section 401(a) of the Code.

          (j) Except as would not reasonably be expected to result in a Seller Material Adverse Effect, with respect to each Assigned Contract that is a retirement account or plan (including individual retirement accounts, 403(b) custodial agreements, simplified employee pension plans under Section 408(k) of the Code and plans intended to be qualified under Section 401(a) of the Code) as to which Seller acts as a custodian, trustee and/or prototype sponsor, the form of such retirement accounts and plans and the conduct of Seller and its Affiliates with respect to such retirement accounts and plans have been and are in compliance with all Laws, including ERISA and the Code, to the extent applicable, and Seller has not incurred and is not reasonably expected to incur any liability under either ERISA or the Code relating to such retirement accounts or with respect to any other retirement account or plan for which Seller provides services which would reasonably be expected to result in a Seller Material Adverse Effect.

          (k) Except as disclosed in writing to Buyer, to the extent applicable, Seller and its Affiliates have obtained a favorable opinion letter from the IRS on changes to the Code and Treasury regulations, including those made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (or filed by applicable deadlines imposed by the IRS and are awaiting receipt of such opinion letter) and all prior legislation with respect to each Assigned Contract that is a retirement account described in subsection (k) above for which Seller or any of its Affiliates serve as a prototype sponsor. No event has occurred that would be reasonably likely to negatively impact reliance on such opinion letter.

          (l) There are no investigations by any Governmental Entity or other claims, suits or proceedings pending or, to the Knowledge of Seller, threatened against Seller or any of its Affiliates with respect to any retirement account or plan (including individual retirement accounts, 403(b) custodial agreements, simplified employee pension plans under Section 408(k) of the Code and plans intended to be qualified under Section 401(a) of the Code) as to which Seller provides services and/or which is an Assigned Contract with respect to which Seller or its Affiliates act as a custodian, trustee and/or prototype sponsor which would reasonably be expected to result in a material adverse effect.

     4.12 Investment Representations.

          (a) Seller is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Seller is purchasing the Shares for its own account, for investment purposes only and has no current arrangements or understandings for the resale or distribution to others in contravention of Applicable Law and will only resell such Shares or any part thereof pursuant to a registration or an available exemption under Applicable Law. Seller acknowledges that the offer and sale of the Shares have not been registered under the Securities Act or the securities Laws of any state or other jurisdiction, and that the Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act, and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or an exemption

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from such registration is available. Seller understands and agrees that the Shares will bear appropriate legends that may be required by Applicable Law.

          (b) Seller has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment in the Shares.

          (c) Seller acknowledges that the Shares must be held pursuant to the provisions of the Stockholder’s and Registration Rights Agreement.

          (d) Seller understands that the sale of the Shares has not been registered under the Securities Act in reliance upon an exemption therefrom. Seller was not offered or sold the Shares, directly or indirectly, by means of any form of general solicitation or general advertisement, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio or (ii) any seminar or other meeting whose attendees had been invited by general solicitation or general advertising.

     4.13 Sufficiency of Purchased Assets.

          (a) To the extent services are to be provided by Seller pursuant to the Outsourcing Agreement, such services are consistent in all material respects with the services provided by Seller with respect to the Purchased Assets prior to the Closing.

          (b) As of the Closing, the underlying positions and balances to be transferred to Buyer at the Closing reflect the underlying positions and balances of the Assigned Contracts immediately prior to the Closing.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PW AND BUYER

     PW and Buyer, jointly and severally, represents and warrants to Parent and Seller that each statement contained in this Article V is true and correct as of the date hereof, except as set forth in the disclosure schedule dated and delivered as of the date hereof by Buyer to Parent and Seller (the “Buyer Disclosure Schedule”), which is attached to this Agreement and is designated therein as being the Buyer Disclosure Schedule, it being acknowledged and agreed by Parent and Seller that any matter set forth in any section or subsection of the Buyer Disclosure Schedule shall be deemed to be a disclosure for all purposes of this Agreement and all other sections or subsections of the Buyer Disclosure Schedule to which such matter could reasonably be expected to be relevant, but shall expressly not be deemed to constitute an admission by PW or Buyer, or otherwise imply, that any such matter rises to the level of a PW Material Adverse Effect or is otherwise material for purposes of this Agreement or the Buyer Disclosure Schedule.

     5.1 Organization and Good Standing. Each of PW and Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has the requisite corporate power to own, lease and operate its properties and to carry on its business as now being conducted.

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     5.2 Authority and Enforceability. Each of PW and Buyer has the requisite corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of PW and Buyer. Each of PW and Buyer has duly executed and delivered this Agreement and the Outsourcing Agreement and will duly execute and deliver each other Ancillary Agreement to which it is a party. Assuming due authorization, execution and delivery by Parent and Seller, as applicable, this Agreement and the Outsourcing Agreement constitute, and each other Ancillary Agreement to which it is a party will constitute, the valid and binding obligations of PW and Buyer, enforceable against them in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors’ rights generally, and (ii) the availability of injunctive relief and other equitable remedies.

     5.3 Issuance of Shares. When issued in compliance with the provisions of this Agreement and the Charter Documents of PW, the Shares will be (i) validly issued, fully paid and nonassessable, (ii) assuming the accuracy of the representations and warranties of Seller (or an Affiliate of Seller if such Shares are issued in the name of such Affiliate pursuant to Section 3.3(a)) in Section 4.12, issued in compliance with applicable federal and state securities Laws, and (iii) except as set forth in the Stockholder’s and Registration Rights Agreement and under applicable federal and state securities Laws, will be free of any restriction on transfer.

     5.4 No Conflicts; Consents.

          (a) The execution and delivery of this Agreement by PW and Buyer do not, and the execution and delivery of the Ancillary Agreements to which they are a party and the consummation of the transactions contemplated hereby and thereby will not, (i) violate the provisions of any of the Charter Documents of PW or Buyer, (ii) violate any Contract to which PW or Buyer is a party, (iii) to the Knowledge of Buyer, violate any Law of any Governmental Entity applicable to PW or Buyer on the date hereof, or (iv) to the Knowledge of Buyer, result in the creation of any Liens upon any of the assets owned or used by PW or Buyer, except in each such case where such violation or Lien would not reasonably be expected materially to impair or delay the ability of PW or Buyer to perform its obligations under this Agreement or the Ancillary Agreements.

          (b) Except as disclosed on Section 5.4(b) of the Buyer Disclosure Schedule, no Authorization or Order of, registration, declaration or filing with, or notice to any Governmental Entity is required by PW or Buyer in connection with the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, except for such Authorizations, Orders, registrations, declarations, filings and notices (i) as may be required under the HSR Act and the Other Antitrust Laws or the rules of FINRA or the New York Stock Exchange, or (ii) the failure to obtain which would not reasonably be expected to materially impair the ability of PW or Buyer to perform its obligations under this Agreement and the Ancillary Agreements to which it is a party.

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     5.5 Litigation. There is no Action pending or, to the Knowledge of PW and Buyer, threatened against, PW or Buyer which (a) challenges or seeks to enjoin, alter or materially delay the consummation of the transactions contemplated by this Agreement, or (b) except as disclosed on Section 5.5 of the Buyer Disclosure Schedule, would reasonably be expected to have a PW Material Adverse Effect.

     5.6 Financial Statements; No PW Material Adverse Effect.

          (a) The PW Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of Buyer and its subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material Indebtedness and other Liabilities, direct or contingent, of PW and its Subsidiaries as of the date thereof, including liabilities for Taxes, material commitments and Indebtedness, in each case to the extent required by GAAP.

          (b) The unaudited consolidated and consolidating balance sheet of PW and its Subsidiaries dated June 30, 2009, and the related consolidated and consolidating statements of in-come or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of PW and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

          (c) Since the date of the PW Financial Statements, there has not been any PW Material Adverse Effect.

          (d) To the Knowledge of PW, no Internal Control Event exists or has occurred since the date of the PW Financial Statements that has resulted in or would reasonably be expected to result in a misstatement in any material respect, of the assets, Liabilities, financial condition or results of operations of Buyer and its Subsidiaries on a consolidated basis.

     5.7 No Default. Neither PW nor any Subsidiary thereof is in default under or with respect to any contractual obligation that would, either individually or in the aggregate, reasonably be expected to have a PW Material Adverse Effect.

     5.8 Insurance. A list of the material policies of insurance held as of the date hereof by PW covering the properties and errors and omissions of PW and its Subsidiaries are set forth in Section 5.8 of the Buyer Disclosure Schedule.

     5.9 Taxes. Except for those failures as would not, individually or in the aggregate, result in a PW Material Adverse Effect:

          (a) each of PW and its Subsidiaries has prepared and timely filed with the appropriate governmental agencies all Tax Returns required to be filed by it, and each such Tax Return is complete and correct in all respects;

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          (b) each of PW and its Subsidiaries has timely paid all Taxes due and payable by it (whether or not shown on any Tax Return), including as a withholding agent, and has made adequate accruals in accordance with GAAP for all Taxes that are not yet due and payable;

          (c) neither PW nor any of its Subsidiaries is presently under examination or audit by any Taxing Authority, neither PW nor any of its Subsidiaries has received written notice of any pending or threatened examination or audit by any Taxing Authority, and no issue previously raised in writing by any such Taxing Authority reasonably would be expected to result in a proposed deficiency, assessment, or other claim for any prior or subsequent period (including periods subsequent to the date hereof);

          (d) neither PW nor any of its Subsidiaries is liable for the Taxes of any other Person, including under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. Law), or as a transferee or successor, by contract or otherwise;

          (e) neither PW nor any of its Subsidiaries will be required to include any item of income in taxable income for any taxable period or portion thereof ending after the Closing Date as a result of any prepaid income, open transactions or adjustments pursuant to Section 481 of the Code (or any similar provision of state, local or non-U.S. law) received or occurring prior to the Closing Date; and

          (f) neither PW nor any of its Subsidiaries has participated in any “listed transactions” within the meaning of Treasury Regulation Section 1.6011-4.

     5.10 Capitalization.

          (a) The authorized capital of PW consists of 100,000,000 shares of common stock. PW has previously delivered or made available to Parent a true and complete copy of the currently effective Certificate of Incorporation dated May 16, 2006 with the rights, restrictions, privileges and preferences of the PW Common Stock.

          (b) As of September 30, 2009, (i) 25,428,798 shares of PW’s common stock (the “PW Common Stock”) are issued and outstanding, (ii) 945,706 shares of PW Common Stock are reserved for issuance pursuant to Buyer options issued and outstanding, (iii) a maximum of 19.99% of PW Common Stock are (subject to stockholder approval) reserved for issuance upon conversion of convertible notes or bonds and (iv) 3,448,568 shares of PW Common Stock are held in the treasury of PW. All of the issued and outstanding shares of PW Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.

          (c) None of the issued and outstanding shares of PW Common Stock was or, upon issuance in connection with the exercise of PW options or conversion of notes, bonds or preferred stock, will be, issued in violation of any preemptive rights. Except for PW options and the convertible notes and as set forth herein, as of the date hereof there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the PW Common Stock or obligating PW to issue or sell any PW Common Stock, or any other interest in, PW. As of the date hereof there are no outstanding contractual obligations of PW to repurchase, redeem or otherwise acquire any PW Common Stock. The PW Common

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Stock described in Section (a) above constitute all of the issued and outstanding capital stock of PW. To Buyer’s Knowledge, there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the issued and outstanding PW Common Stock.

     5.11 Disclosure. As of their respective dates of filing, PW’s SEC Filings did not contain, and each such filing, as amended or supplemented, if applicable, will not contain as of the date of such amendment or supplement 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.

     5.12 Compliance with Laws. PW and each of its Subsidiaries is in compliance in all material respects with the requirements of all laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, would not reasonably be expected to have a PW Material Adverse Effect.

     5.13 Leverage Calculation Under Credit Agreement Amendment. The calculation of compliance with the Consolidated Leverage Ratio in section 7.16(c) of PW’s Amended and Restated Credit Agreement dated as of May 1, 2009 (as amended, the “Credit Agreement”) for the second quarter of 2009 and on a pro forma projected basis for the first and second quarter of 2010, provided by PW to Parent prior to the date of this Agreement, was prepared in a manner consistent with the requirements of Section 7.16(c) of the Credit Agreement and the manner in which PW has previously calculated compliance with such covenant. PW intends to adopt the same methodology for calculating the compliance by PW with Section 7.16(c) (as amended by the Third Amendment to Amended and Restated Credit Agreement dated on or about November 2, 2009 (the “Third Amendment”)) upon Closing, as required by the Third Amendment.

ARTICLE VI

COVENANTS OF PARENT AND SELLER

     6.1 Conduct of Business. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, except with the prior written consent of Buyer, Seller shall:

          (a) (i) maintain its corporate existence, (ii) pay or perform the Liabilities of the Purchased Assets when due, and (iii) carry on the Purchased Assets in the usual, regular and ordinary course in a manner consistent with past practice and in accordance with the provisions of this Agreement (including, without limitation, performance under the Assigned Contracts) and in compliance with all Laws, Business Authorizations and Assigned Contracts;

          (b) use its commercially reasonable efforts consistent with past practices and policies to preserve its relationships with customers, suppliers, distributors, licensors, licensees and others having dealings with the business relating to the Purchased Assets; provided that Seller is not authorized to, and shall not, make any commitments on behalf of Buyer;

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          (c) use its commercially reasonable efforts to maintain the assets, properties and rights included in the Purchased Assets in the same state of repair, order and conditions as they are on the date hereof, reasonable wear and tear excepted;

          (d) maintain the Books and Records in accordance with past practice, and use its commercially reasonable efforts to maintain in full force and effect all Business Authorizations and Seller Policies and Procedures;

          (e) promptly notify Buyer of any event or occurrence not in the ordinary course of the Business, including, without limitation, any material default under any Assigned Contract to the extent not inconsistent with applicable antitrust or competition laws; and

          (f) use its commercially reasonable efforts to (i) conduct the Business in such a manner that on the Closing Date the representations and warranties of Parent and Seller contained in this Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and (ii) cause all of the conditions to the obligations of Buyer under this Agreement to be satisfied as soon as practicable following the date hereof.

     6.2 Negative Covenants. Except as expressly provided in this Agreement and to the extent not inconsistent with applicable antitrust or competition laws and during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing Date, Seller shall not do any of the following, in each case with respect to the Business, without the prior written consent of Buyer:

          (a) sell, lease, transfer or assign any of the Purchased Assets;

          (b) cancel any debts or waive any claims or rights with respect to any of the Purchased Assets that, individually, have a value in excess of $50,000 or, in the aggregate, have a value in excess of $100,000;

          (c) mortgage, pledge or subject to consensual Liens any of the Purchased Assets;

          (d) other than in the ordinary course of the business consistent with past practice, amend, modify, cancel or waive any rights under any Contract which is an Assigned Contract;

          (e) be party to any merger, acquisition, consolidation, recapitalization, liquidation, dissolution or similar transaction involving the Business; or

          (f) agree, whether in writing or otherwise, to do any of the foregoing.

     6.3 Access to Information; Investigation. Subject to the terms of the Confidentiality Agreement by and between Buyer and Seller dated July 29, 2009 (the “Confidentiality Agreement”), Seller shall, and shall cause its Affiliates to, upon reasonable notice during normal business hours during the period prior to and after the Closing, afford to Buyer and its accountants, counsel and other representatives (“Representatives”) reasonable access to all of

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the personnel, properties, Contracts and Books and Records (including work papers, whether prepared by employees, consultants or independent auditors) of Seller, shall furnish promptly to Buyer any information concerning Seller as Buyer may reasonably request and shall assist Buyer in communicating with Persons having business relationships, agreements and arrangements with Seller regarding the transactions contemplated by this Agreement, including the auditors, consultants and other financial and legal advisors of Seller; provided that such access does not disrupt the normal operations of Seller or result in any violation of applicable antitrust Law.

     6.4 Confidentiality. Except as provided in Section 7.2 herein, from and after the Closing Date, Seller will, and will cause its Affiliates to, hold, and will use its commercially reasonable efforts to cause its and their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Purchased Assets, except to the extent that Seller can show that such information (a) is in the public domain through no fault of Seller or any of its Affiliates or their respective Representatives, (b) is lawfully acquired by Seller or any of its Affiliates after the Closing Date from sources that are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation or (c) is in connection with any regulatory investigation or proceeding. If Seller or any of its Affiliates or Representatives is compelled to disclose any such information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information that Seller is legally required to be disclosed; provided that Seller shall exercise its commercially reasonable efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information. Seller shall enforce for the benefit of Buyer all confidentiality, assignment of inventions, non-competition, non-solicitation and similar agreements between Seller and any other party relating to the Purchased Assets that are not Assigned Contracts.

     6.5 Release of Liens. On or prior to the Closing Date, Seller shall cause to be released all Liens in and upon any of the Purchased Assets (all of such Liens are set forth in the Seller Disclosure Schedule) other than Permitted Liens.

     6.6 Consents. Seller shall use reasonable best efforts to obtain all Consents that are required under the Assigned Contracts in connection with the consummation of the transactions contemplated by this Agreement so as to preserve all rights of, and benefits to, Buyer thereunder; provided that no Assigned Contract shall be amended, no right thereunder shall be waived and no payments need be made to obtain any such Consent. All of such Consents are set forth in the Section 4.3(a) of the Seller Disclosure Schedule.

     6.7 Notification of Certain Matters. Seller shall give prompt notice to Buyer of (a) any fact, event or circumstance known to it that individually or taken together with all other facts, events and circumstances known to it, has had or could have, individually or in the aggregate, a Seller Material Adverse Effect, (b) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the consummation of the transactions contemplated by this Agreement, (c) any notice or other communication from any Governmental Entity in connection with the consummation of the transactions contemplated by this Agreement, or (d) the commencement of any Action that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.9; provided, however, (i) the delivery of any notice pursuant to this

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Section 6.7 shall not limit or otherwise affect any remedies available to Buyer, and (ii) disclosure by Parent and Seller shall not be deemed to amend or supplement the Seller Disclosure Schedule or prevent or cure any misrepresentation, breach of warranty or breach of covenant.

     6.8 Restrictive Covenant.

          (a) Parent covenants that for a period beginning on the Closing Date and ending on the date that is two (2) years after the date of any termination of the Outsourcing Agreement following the Closing, Parent shall not, and it shall cause its Affiliates not to, directly or indirectly, disparage Buyer or its Affiliates to any employee of Buyer, Parent or their respective Affiliates or any customer or client or prospective customer or client of Buyer, Parent or their respective Affiliates, or encourage any customer or client or prospective customer or client not to continue to retain the services of Buyer or its Affiliates.

          (b) PW covenants that for a period beginning on the Closing Date and ending on the date that is two (2) years after the date of any termination of the Outsourcing Agreement following the Closing, PW shall not, and it shall cause its Affiliates not to, directly or indirectly, disparage Parent or its Affiliates to any employee of PW, Parent or their respective Affiliates or any customer or client or prospective customer or client of PW, Parent or their respective Affiliates, or encourage any customer or client or prospective customer or client not to continue to retain the services of Parent or its Affiliates.

     6.9 No Negotiation. Until such time as this Agreement shall be terminated pursuant to Section 9.1, Seller shall not, and it shall cause its Affiliates not to, directly or indirectly, solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with or provide any nonpublic information to any Person (other than Buyer) relating to any sale of assets of Seller, any business combination transaction involving Seller or the merger or consolidation of Seller.

ARTICLE VII

COVENANTS OF THE PARTIES

     7.1 Regulatory Approvals.

          (a) Buyer and Seller shall each promptly apply for, and take all reasonably necessary actions to obtain or make, as applicable, all Orders and Authorizations of, and all filings with, any Governmental Entity or other Person required to be obtained or made by it for the consummation of the transactions contemplated by this Agreement. Each party shall cooperate with and promptly furnish information to the other party necessary in connection with any requirements imposed upon such other party in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. Without limiting the generality of the foregoing, if necessary, Buyer and Seller shall, as promptly as practicable after any party hereto determines that such filing shall be made, file with (i) the United States Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”), the notification and report form required for the transactions contemplated hereby and any supplemental information requested in connection therewith pursuant to the HSR Act, which

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forms shall specifically request early termination of the waiting period prescribed by the HSR Act and (ii) any other Governmental Entity, any other filings (or where appropriate, draft submissions), reports, information and documentation required for the transactions contemplated hereby pursuant to any Other Antitrust Laws. Each of Seller and Buyer shall furnish to each other’s counsel such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission that is necessary under the HSR Act and any Other Antitrust Laws. Buyer and Seller shall each be responsible for one half of all filing and other similar fees payable in connection with filings under the HSR Act. Buyer and Seller shall bear all other filing fees and local counsel fees related to Other Antitrust Laws at their own expense.

          (b) Each of Buyer and Seller shall use its reasonable best efforts to promptly obtain any clearance required under the HSR Act and any Other Antitrust Laws for the consummation of the transactions contemplated by this Agreement. Each of Buyer and Seller shall keep the other apprised of the status of any communications with, and any inquiries or requests for additional information from, the FTC and the DOJ and other Governmental Entities and shall comply promptly with any such inquiry or request.

          (c) Buyer and Seller shall instruct their respective counsel to cooperate with each other and use reasonable best efforts to facilitate and expedite the identification and resolution of any issues arising under the HSR Act and Other Antitrust Laws at the earliest practicable dates. Such reasonable best efforts and cooperation include, but are not limited to, counsel’s undertaking (i) to keep each other appropriately informed of communications from and to personnel of any Governmental Entity, and (ii) to confer with each other regarding appropriate contacts with and response to personnel of such Governmental Entity.

     7.2 Public Announcements. None of the parties hereto shall, and Parent will cause its Affiliates not to, issue any press releases or otherwise make any public statements with respect to the transactions contemplated by this Agreement without the approval of the other parties; provided, however, that any party may, without such approval, make disclosures in filings with the SEC, press releases or other public announcement as it believes are required pursuant to applicable securities Laws and any listing agreement with any national securities exchange or stock market; provided, further, that each of the parties will cooperate with and shall allow the other parties reasonable time to comment on any disclosure, release or announcement in advance of such filing with the SEC or issuance irrespective of whether approval is required with respect to such release or announcement and each of the parties may make internal announcements to their respective employees that are consistent with the parties’ proposed or issued public disclosures regarding the transactions contemplated by this Agreement.

     7.3 Customer Communications. Immediately after the date of this Agreement, Seller and Buyer shall jointly prepare, and Seller shall promptly deliver, to each Seller Correspondent, a communication regarding the acquisition of the Purchased Assets by Buyer in accordance with the terms of this Agreement and the consequences of such transaction to such Seller Correspondent. Seller and Buyer shall cooperate, as and when Buyer may reasonably request, in Buyer’s initial contact and subsequent correspondence with each such Seller Correspondent. Except as may be otherwise required by Applicable Law, prior to the Closing, neither Seller nor Buyer shall, and shall permit any agent or Affiliate to, send any communication to any Seller

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Correspondent regarding this Agreement or the transactions contemplated hereby without the mutual consent of Buyer and Seller, not to be unreasonably withheld.

     7.4 Employees.

          (a) Seller represents and warrants that it has provided Buyer with a list (including title, position and location) of all Business Employees engaged in correspondent relationship management, clearing sales, risk management, compliance and legal, together with details of their base and incentive compensation and benefits. Promptly following the execution of this Agreement, Seller shall provide reasonable access to Buyer to the facilities and the personnel Records of Seller for the purpose of preparing for and conducting employment interviews with certain Business Employees engaged in correspondent relationship management, clearing sales, risk management, compliance and legal except those listed on Schedule 7.4(a). Buyer shall not be obligated to offer employment to any such Business Employee.

          (b) Buyer may offer employment to any such Business Employee on such terms and conditions as it deems appropriate in its sole discretion, such employment to be contingent upon and effective immediately following the Closing (it being agreed that Seller may also offer to continue the employment of any such Business Employees). The Business Employees who accept Buyer’s offer of employment and commence employment with Buyer shall be referred to, collectively, as “Transferred Employees.” Seller shall terminate the employment of all Transferred Employees with Seller effective immediately prior to the Closing.

          (c) Any and all Liabilities relating to or arising out of the employment, or cessation of employment, of any Business Employee (whether or not a Transferred Employee) on or prior to the close of business on the Closing Date shall be the sole responsibility of Seller, including wages and other remuneration due through the close of business on the Closing Date.

          (d) From and after the Closing Date, Buyer shall offer to Transferred Employees such Benefit Plans and arrangements as it deems appropriate in its sole discretion. Buyer shall not assume any Liability under any of the Seller Benefit Plans.

          (e) All Transferred Employees who are participants in a Seller Benefit Plan that is an employee pension benefit plan shall retain their accrued benefits under such plans as of the Closing Date, and Seller and/or Seller Benefit Plans shall retain Liability for the payment of benefits as and when such Transferred Employees become eligible therefor under such plans. All Transferred Employees shall become fully vested in their accrued benefits under Seller’s pension benefit plans as of the Closing Date.

          (f) Seller shall be liable for any severance, separation, deferred compensation or similar benefits that are payable under Seller Benefit Plans or Applicable Law (i) to any Person who is or was an employee of Seller and who is not a Transferred Employee, including any Person whose employment with the Business was terminated prior to the Closing (“Seller Employees”), and (ii) to Transferred Employees, to the extent that such Transferred Employee’s right to severance, separation, deferred compensation or similar benefits arises as a result of the transactions contemplated by this Agreement and the Ancillary Agreements.

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          (g) Seller shall be liable for the administration and payment of all workers’ compensation Liabilities and benefits with respect to (i) Transferred Employees to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring on or prior to the Closing, and (ii) Seller Employees. Buyer shall be liable for the administration and payment of all workers’ compensation Liabilities and benefits with respect to Transferred Employees to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring after the Closing Date.

          (h) Seller shall be liable for the administration and payment of all health and welfare Liabilities and benefits under the Seller Benefit Plans with respect to (i) Transferred Employees to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring on or prior to the Closing, and (ii) Seller Employees. Buyer shall be liable for the administration and payment of all health and welfare Liabilities and benefits under Buyer’s Benefit Plans with respect to Transferred Employees participating therein to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring after the Closing Date.

          (i) Seller shall retain and perform all Liabilities and maintain all insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) with respect to Seller Employees and their covered dependents; provided that Buyer shall perform all of its obligations under COBRA with respect to Transferred Employees that become covered by any group health insurance plan of Buyer.

          (j) Except as expressly set forth in this Section 7.4 with respect to Transferred Employees, Buyer shall have no obligation with respect to any Business Employee or any other employee of Seller.

          (k) Nothing in this Agreement confers upon any Business Employee or Transferred Employee any rights or remedies of any nature or kind whatsoever under or by reason of this Section 7.4. Nothing in this Agreement shall limit the right of Buyer to terminate or reassign any Transferred Employee after the Closing or to change the terms and conditions of his or employment in any manner.

          (l) Effective as of the Closing Date, Buyer or its designated Affiliate shall use commercially reasonable efforts to cause each Transferred Employee who was covered under the Seller Benefit Plans immediately prior to such date to be covered under employee benefit plans, programs and arrangements maintained or established by Buyer (the “Buyer Plans”). Buyer shall use commercially reasonable efforts to recognize service under the Seller Benefit Plans (and prior service with Sellers’ predecessors and Affiliates to the extent such prior service is recognized under the Seller Benefit Plans) for eligibility and vesting purposes, but not benefit accrual purposes, under the Buyer Plans.

          (m) Effective as of the Closing Date, each Transferred Employee shall cease to be covered by the Seller Benefit Plans. Sellers shall retain responsibility for all claims for welfare benefits incurred by Transferred Employees prior to the Closing Date. For purposes of this subsection, a claim shall be deemed to have been incurred on the date the medical, dental or vision service giving rise to the claim is performed. With respect to the Transferred Employees,

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effective as of the Closing Date, Buyer shall use commercially reasonable efforts to cause all applicable Buyer Plans that provide medical or dental coverage, life and accident insurance, and disability or similar coverage (collectively, the “Buyer Welfare Plans”) to waive pre-existing condition exclusions, evidence of insurability provisions, waiting period requirements or similar provisions to the extent such exclusions, requirements and provisions were waived or satisfied under the applicable Seller Benefit Plan as of the Closing Date. In addition, Buyer shall use commercially reasonable efforts to cause the applicable Buyer Welfare Plans to credit Buyer Employees with amounts credited by Seller under Seller’s health and dental plans toward the satisfaction of annual deductible and out-of-pocket maximums under such Buyer health and dental plans during the calendar year which includes the Closing Date, provided that the use of commercially reasonable efforts shall not require the payment of any additional fees under the Buyer Welfare Plans.

     7.5 Taxes.

          (a) Seller and Buyer shall each bear 50% of all sales, use, recording, stock transfer, documentary, real estate and other similar transfer Taxes imposed by federal, state or local law, if any, resulting from the sale of the Purchased Assets in accordance herewith, whether imposed by Law on Seller or Buyer (each a “Transfer Tax”), including any additional Transfer Tax resulting from a later adjustment or challenge. Seller and Buyer shall, and shall cause their respective Affiliates, to promptly notify the other party with respect to any determination of a Transfer Tax and to cooperate in the determination of any Transfer Tax and the preparation of any Tax Return for Transfer Taxes. If Seller and Buyer are unable to resolve any disagreement regarding a determination of a Transfer Tax within thirty (30) days of a party’s notification of its determination, such dispute shall be resolved by an Independent Expert in the manner provided in Section 2.6(l). Within five (5) Business Days after the filing of a Tax Return for Transfer Taxes reflecting a final resolution with respect to a Transfer Tax determined pursuant to the procedures above, the non-filing party shall pay the filing party an amount of cash equal to 50% of the Transfer Tax shown on the Tax Return.

          (b) All real property Taxes, personal property Taxes and similar ad valorem obligations levied with respect to the Purchased Assets for a taxable period that includes (but does not end on) the Closing Date shall be apportioned between Seller and Buyer as of the Closing Date based on the number of days of such taxable period included in the period ending with and including the Closing Date (with respect to any such taxable period, the “Pre-Closing Tax Period”), and the number of days of such taxable period beginning after the Closing Date (with respect to any such taxable period, the “Post-Closing Tax Period”). Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Period. If bills for such Taxes have not been issued as of the Closing Date, and, if the amount of such Taxes for the period including the Closing Date is not then known, the apportionment of such Taxes shall be made at Closing on the basis of the prior period’s Taxes. After Closing, upon receipt of bills for the period including the Closing Date, adjustments to the apportionment shall be made by the parties, so that if either party paid more than its proper share at the Closing, the other party shall promptly reimburse such party for the excess amount paid by them.

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          (c) Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Business, the Purchased Assets and Assumed Liabilities (including access to Books and Records) as is reasonably necessary for the filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any Taxing Authority, the prosecution or defense of any Action relating to any Tax or other Tax matters related to this Agreement. Any expenses incurred in furnishing such information or assistance shall be borne by the party requesting it.

     7.6 Bulk Sales Laws. Buyer and Seller hereby waive compliance by Buyer and Seller with the bulk sales Law and any other similar Laws in any applicable jurisdiction in respect of the transactions contemplated by this Agreement and the Ancillary Agreements; provided, however, that Seller shall pay and discharge when due all claims of creditors asserted against Buyer or the Purchased Assets by reason of such noncompliance and shall take promptly all necessary actions required to remove any Lien which may be placed upon any of the Purchased Assets by reason of such noncompliance.

     7.7 Discharge of Business Obligations After Closing.

          (a) From and after the Closing, Seller shall pay and discharge on a timely basis all of the Excluded Liabilities.

          (b) From and after the Closing, if Seller or any of its Affiliates receives or collects any funds relating to any Purchased Asset, Seller or its Affiliate shall remit such funds to Buyer within five Business Days after its receipt thereof. From and after the Closing, if Buyer receives or collects any funds relating to any Excluded Asset, Buyer shall remit any such funds to Seller within five Business Days after its receipt thereof.

     7.8 Access to Books and Records. Each of Seller and Buyer shall preserve until the tenth anniversary of the Closing Date all Records (other than Tax records, Tax Returns and any other Tax related work papers) possessed or to be possessed by such party relating to any of the assets, Liabilities or the Business prior to the Closing. After the Closing Date, where there is a legitimate business purpose, such party shall provide the other party with access, upon prior reasonable written request specifying the need therefor, during regular business hours, to (i) the officers and employees of such party and (ii) the Books and Records (other than Tax records, Tax Returns and any other Tax related work papers) of such party, but, in each case, only to the extent relating to the assets, Liabilities or business of the Business prior to the Closing, and the other party and its representatives shall have the right to make copies of such Books and Records at their sole cost; provided, however, that the foregoing right of access shall not be exercisable in such a manner as to interfere unreasonably with the normal operations and business of such party. Subject to the requirements of Applicable Law, such Records may nevertheless be destroyed by a party if such party sends to the other party written notice of its intent to destroy Records, specifying with particularity the contents of the Records to be destroyed. Such Records may then be destroyed after the 90th day after such notice is given unless the other party objects to the destruction in which case the party seeking to destroy the Records shall deliver such Records to the objecting party at the objecting party’s cost.

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     7.9 Financing. PW and Buyer shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to obtain financing (“Third Party Financing”) the proceeds of which are at least $50 million which proceeds will be used by PW and Buyer to finance the operations of the Purchased Assets (“Working Capital Funding”) as promptly as reasonably practicable, including (i) using commercially reasonable efforts to negotiate and enter into definitive agreements with respect thereto, (ii) satisfy on a timely basis all conditions relating thereto and (iii) consummate such financing at or prior to Closing; provided, however, that Buyer shall be under no obligation to consummate any financing arrangement that is not satisfactory to PW. PW and Buyer shall inform Parent and Seller of all material developments with respect to such efforts to obtain Third Party Financing on a timely basis, including the provision of term sheets and proposals of material terms, to the extent permitted. No later than four (4) Business Days prior to the Closing Date and provided all conditions to Closing have been satisfied and/or waived, in the event PW and Buyer have been unable to obtain Third Party Financing to provide the Working Capital Funding under satisfactory financing arrangements as determined by PW in good faith, PW shall notify Seller of its desire to borrow from Parent up to $50 million pursuant to the Backstop Note (the “Backstop Note Notice”) to be used to provide Working Capital Funding in lieu of Third Party Financing; and the Backstop Note Notice shall state the amount of funds to be borrowed and a certification by the Chief Executive Officer and Chief Financial Officer of PW to the effect that PW and Buyer have been unable to secure Third Party Financing under financing arrangements satisfactory to PW.

     7.10 Cooperation with Preparation of PW Audited Financials. Seller shall, and shall cause its Affiliates to, cooperate with PW to the extent necessary with respect to the preparation of financial statements required pursuant to applicable securities Laws with respect to the Purchased Assets or in connection with the purchase of the Purchased Assets.

     7.11 Further Assurances. Buyer and Seller shall, and Seller shall cause its Affiliates to, execute such documents and other instruments and take such further actions as may be reasonably required or desirable to carry out the provisions of this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. Upon the terms and subject to the conditions hereof, Buyer and Seller shall each use its respective commercially reasonable efforts to (a) take or cause to be taken all actions and to do or cause to be done all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement and the Ancillary Agreements and (b) obtain in a timely manner all Consents and Authorizations and effect all necessary registrations and filings. From time to time after the Closing, at Buyer’s request, Seller shall execute, acknowledge and deliver to Buyer such other instruments of conveyance and transfer and will take such other actions and execute and deliver such other documents, certifications and further assurances as Buyer may reasonably require in order to vest more effectively in Buyer, or to put Buyer more fully in possession of, any of the Purchased Assets.

     7.12 Payment of Termination Fees. If at anytime prior to the date occurring on the last date of the applicable period during which adjustments may be made pursuant to Section 2.6 hereof with respect to a particular Assigned Contract, (i) Buyer gives or receives a notice to terminate an Assigned Contract under circumstances which require the payment by a Seller Correspondent of a Termination Fee, (x) Buyer shall promptly notify Seller in writing of such

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facts and circumstances, and (y) use commercially reasonable efforts to obtain payment of, or cooperate with Seller to facilitate payment of, such Termination Fee from the Seller Correspondent, provided that the use of commercially reasonable efforts shall not require the payment of any funds in connection therewith; and (ii) if Buyer receives payment of any such Termination Fee, (regardless of when received), Buyer shall thereafter promptly remit to Seller 50% of the Termination Fee received.

     7.13 Vendor Contracts. To the extent that the rights or benefits of any Contract with a vendor of Seller listed in Schedule 7.13 hereof is required for Seller or Buyer to perform services under any Assigned Contract, Excluded Contract or Restricted Contract, Buyer and Seller shall cooperate with each other in a commercially reasonable arrangement to provide the other party the rights and benefits of such vendor Contract necessary to perform such services under an Assigned Contract, Excluded Contract or Restricted Contract to the extent permitted under such vendor Contract.

ARTICLE VIII

CONDITIONS TO CLOSING

     8.1 Conditions to Obligations of the Parties. The obligations of the parties hereto to consummate the transactions contemplated by this Agreement are subject to the satisfaction on or prior to the Closing Date of the following conditions:

          (a) Any waiting period applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act and any applicable waiting periods under the Other Antitrust Laws shall have expired or been terminated and all other Authorizations and Orders of, declarations and filings with, and notices to any Governmental Entity, required to permit the consummation of the transactions contemplated by this Agreement shall have been obtained or made and shall be in full force and effect.

          (b) No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the transactions contemplated by this Agreement shall be in effect. No Law shall have been enacted or shall be deemed applicable to the transactions contemplated by this Agreement which makes the consummation of such transactions illegal.

     8.2 Conditions to Obligation of PW and Buyer. The obligation of PW and Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction (or waiver by Buyer in its sole discretion) of the following further conditions:

          (a) The representations and warranties of Parent and Seller that are qualified by materiality or Seller Material Adverse Effect shall be true and correct when made and as of the Closing as if made at and as of the Closing and each such representation and warranty that is not so qualified shall be true and correct in all material respects when made and as of the Closing as if made at and as of the Closing, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

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          (b) Seller and Parent shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller at or prior to the Closing.

          (c) Buyer shall have received a certificate dated the Closing Date signed on behalf of Seller and Parent by the President of Parent and Seller to the effect that the conditions set forth in Sections 8.2(a) and 8.2(b) have been satisfied (the “Seller Closing Certificate”).

          (d) There shall have been no Seller Material Adverse Effect.

          (e) No Action shall be pending before any court, other Governmental Entity or Binding Arbitrator wherein an unfavorable Order would (i) prevent consummation of any of the transactions contemplated by this Agreement or the Ancillary Agreements or (ii) cause any of the transactions contemplated by this Agreement or the Ancillary Agreements to be rescinded following consummation. No such Order shall be in effect.

          (f) Seller shall have assigned to Buyer the Assigned Contracts accounting for at least 80% of the Net Revenues attributable to the Assigned Contracts set forth on the Closing Assigned Contracts Schedule (provided that any Net Revenue attributable to an Assigned Contract which has been terminated or for which a notice of termination has been delivered to Seller shall be excluded from the numerator (but not the denominator) in such calculation).

          (g) Buyer shall have received any Authorizations as may be required by FINRA and the New York Stock Exchange.

          (h) Seller shall have delivered to Buyer all agreements and other documents required to be delivered by Parent and Seller to Buyer pursuant to Section 3.2 of this Agreement.

          (i) Buyer shall have received a certificate of the Secretary of Parent and Seller dated the Closing Date and certifying: (A) that attached thereto are true and complete copies of all resolutions adopted by the Board of Directors of Parent and Seller in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; and (B) to the incumbency and specimen signature of each officer of Parent and Seller executing this Agreement and/or the Ancillary Agreements, and a certification by another officer as to the incumbency and signature of the Secretary of Parent and Seller.

          (j) Buyer shall have received evidence in form and substance satisfactory to Buyer that all Liens on the Purchased Assets, other than Permitted Liens, shall have been released.

          (k) Buyer shall have received the Closing Assigned Contracts Schedule with such modifications as permitted pursuant to Section 2.9.

          (l) If PW elects to obtain capital pursuant to the Backstop Note in accordance with Section 7.9, PW shall have received from Seller pursuant to the Backstop Note the amount set forth in the Backstop Note Notice.

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          (m) Seller shall have transferred to Buyer all balances and positions associated with any Assigned Contract as described in Section 2.1(c) pursuant to the terms of the Conversion Agreement.

     8.3 Conditions to Obligation of Parent and Seller. The obligation of Parent and Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction (or waiver by Seller in its sole discretion) of the following further conditions:

          (a) The representations and warranties of PW and Buyer that are qualified by materiality or PW Material Adverse Effect, shall be correct when made and as of the Closing as if made at and as of the Closing and each such representation and warranty that is not so qualified shall be true and correct in all material respects when made and as of the Closing as if made at and as of the Closing, except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date.

          (b) Buyer shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer at or prior to the Closing.

          (c) Seller shall have received a certificate dated the Closing Date signed on behalf of Buyer by the President of Buyer to the effect that the conditions set forth in Section 8.3(a) and 8.3(b) have been satisfied (the “Buyer Closing Certificate”).

          (d) No Action shall be pending before any court, other Governmental Entity or a Binding Arbitrator wherein an unfavorable Order would (i) prevent consummation of any of the transactions contemplated by this Agreement and the Ancillary Agreements or (ii) cause any of the transactions contemplated by this Agreement and the Ancillary Agreements to be rescinded following consummation. No such Order shall be in effect.

          (e) Buyer shall have delivered to Seller all agreements and other documents required to be delivered by Buyer to Seller pursuant to Section 3.3 of this Agreement.

          (f) Seller shall have received a certificate of the Secretary of Buyer dated the Closing Date and certifying: (A) that attached thereto are true and complete copies of all resolutions adopted by the Board of Directors of Buyer in connection with the transactions contemplated by this Agreement and the Ancillary Agreements, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; and (B) to the incumbency and specimen signature of each officer of Buyer executing this Agreement and the Ancillary Agreements to which it is a party, and a certification by another officer of Buyer as to the incumbency and signature of the Secretary of Buyer.

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ARTICLE IX

TERMINATION

     9.1 Termination.

          (a) This Agreement may be terminated at any time prior to the Closing:

               (i) by mutual written consent of Buyer and Seller;

               (ii) by Buyer or Seller if:

                    (A) the Closing does not occur on or before March 31, 2010; provided that, if satisfaction (or waiver as provided herein) of the conditions set forth in Article VIII (other than the condition set forth in Section 8.2(g) and those conditions that by their nature will be satisfied at the Closing) has occurred, such date shall be extended to the date six (6) months after the date of filing of the application required under FINRA Rule 1017 with respect to the transactions contemplated herein, provided that such application is pending at such time; provided further that the right to terminate this Agreement under this clause (ii)(A) shall not be available to any party whose breach of a representation, warranty, covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; or

                    (B) a Governmental Entity shall have issued an Order or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, which Order or other action is final and non-appealable;

               (iii) by Buyer if:

                    (A) any condition to the obligations of Buyer hereunder becomes incapable of fulfillment other than as a result of a breach by Buyer of any covenant or agreement contained in this Agreement, and such condition is not waived by Buyer; or

                    (B) there has been a breach by Parent or Seller of any representation, warranty, covenant or agreement contained in this Agreement or the Seller Disclosure Schedule, or if any representation or warranty of Parent or Seller shall have become untrue, in either case such that the conditions set forth in Sections 8.2(a) or 8.2(b) would not be satisfied and, in either case, such breach is not curable, or, if curable, is not cured within 30 days after written notice of such breach is given to Seller by Buyer; or

                    (C) if PW elects to obtain capital pursuant to the Backstop Note in accordance with Section 7.9, Seller has failed to deliver to Buyer the amount set forth in the Backstop Note Notice pursuant to the Backstop Note; or

               (iv) by Seller if:

                    (A) any condition to the obligations of Seller hereunder becomes incapable of fulfillment other than as a result of a breach by Seller of any covenant or agreement contained in this Agreement, and such condition is not waived by Seller; or

                    (B) there has been a breach by Buyer of any representation, warranty, covenant or agreement contained in this Agreement or the Buyer Disclosure Schedule, or if any representation or warranty of Buyer shall have become untrue, in either case such that

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the conditions set forth in Sections 8.3(a) or 8.3(b) would not be satisfied and, in either case, such breach is not curable, or, if curable, is not cured within 30 days after written notice of such breach is given to Buyer by Seller.

          (b) The party desiring to terminate this Agreement pursuant to clause (ii), (iii) or (iv) shall give written notice of such termination to the other party hereto.

     9.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, this Agreement shall immediately become null and void and there shall be no Liability or obligation on the part of Seller or Buyer or their respective officers, directors, stockholders or Affiliates, except as set forth in Section 9.3; provided, however, the provisions of Section 7.2 (Public Announcements) and Section 9.3 (Remedies) and Article X of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

     9.3 Remedies. Any party terminating this Agreement pursuant to Section 9.1 shall have the right to recover damages sustained by such party as a result of any breach by the other party of any representation, warranty, covenant or agreement contained in this Agreement or fraud or willful misrepresentation; provided, however, that the party seeking relief is not in breach of any representation, warranty, covenant or agreement contained in this Agreement under circumstances which would have permitted the other party to terminate the Agreement under Section 9.1.

ARTICLE X

INDEMNIFICATION

     10.1 Survival.

          (a) Except as set forth in Section 10.1(b), all representations and warranties contained in this Agreement, and any Schedule, certificate or other document delivered pursuant to this Agreement, shall survive the Closing for a period of two (2) years.

          (b) The representations and warranties of Parent and Seller contained in Sections 4.1 (Organization and Good Standing), 4.2 (Authority and Enforceability) and the representations and warranties of Buyer contained in Sections 5.1 (Organization and Good Standing) and 5.2 (Authority and Enforceability) and claims based on fraudulent misrepresentation shall survive the Closing indefinitely. The representations and warranties of Parent and Seller contained in Sections 4.4 (Taxes) shall survive the Closing until 60 days after the expiration of the applicable statute of limitations period (after giving effect to any waivers and extensions thereof).

          (c) The covenants and agreements which by their terms do not contemplate performance after the Closing shall survive the Closing in accordance with their terms. The covenants and agreements which by their terms contemplate performance after the Closing Date shall survive the Closing indefinitely.

          (d) The period for which a representation or warranty, covenant or agreement survives the Closing is referred to herein as the “Applicable Survival Period.” In the event

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notice of claim for indemnification under Section 10.2 or 10.3 is given within the Applicable Survival Period, the representation or warranty, covenant or agreement that is the subject of such indemnification claim (whether or not formal legal action shall have been commenced based upon such claim) shall survive with respect to such claim until such claim is finally resolved. The Indemnitor shall indemnify the Indemnitee for all Losses (subject to the limitations set forth herein, if applicable) that the Indemnitee may incur in respect of such claim, regardless of when incurred.

     10.2 Indemnification by Parent and Seller.

          (a) Parent and Seller shall, jointly and severally, indemnify and defend Buyer and its Affiliates and their respective stockholders, members, managers, officers, directors, employees, agents, successors and assigns (the “Buyer Indemnitees”) against, and shall hold them harmless from, any and all Losses resulting from, arising out of, or incurred by any Buyer Indemnitee in connection with, or otherwise with respect to:

               (i) any breach of or any inaccuracy in any representation or warranty of Parent or Seller contained in any Schedule, certificate or other document delivered pursuant to this Agreement or any breach of or any inaccuracy in any representation or warranty of Parent or Seller contained in Article IV made as of the date hereof and as though restated on and as of the Closing Date, as may be qualified by the Schedules thereto and;

               (ii) any breach of or failure by Parent or Seller to perform any agreement, covenant or obligation of Parent or Seller contained in this Agreement or any document delivered by Parent or Seller to Buyer at the Closing;

               (iii) any Liability in any way related to, or arising out of or in connection with, any Subsidiary of Parent or Seller and/or the dissolution thereof;

               (iv) any Excluded Liability, regardless of whether or not the Seller Disclosure Schedule discloses any such Excluded Liability;

               (v) any fees, expenses or other payments incurred or owed by Parent or Seller to any agent, broker, investment banker or other firm or person retained or employed by it in connection with the transactions contemplated by this Agreement and the Ancillary Agreements; and

               (vi) fraudulent transfer Laws or the failure to comply with any bulk sales Laws and similar Laws.

          (b) Parent and Seller shall not be liable for any Loss or Losses pursuant to Section 10.2(a)(i) (“Buyer Warranty Losses”) (i) unless and until the aggregate amount of all Buyer Warranty Losses incurred by the Buyer Indemnitees exceeds $[****], in which event Seller shall be liable for all Buyer Warranty Losses from the first dollar, and (ii) to the extent that Buyer Warranty Losses exceed $[****]in the aggregate; provided, however, that the foregoing clauses (i) and (ii) shall not apply to any Loss or Losses resulting from, arising out of or incurred by any Buyer Indemnitee in connection with, or otherwise with respect to, any Excluded Liabilities; provided, further, nothing contained in this Section 10.2(b) shall be deemed to limit

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or restrict in any manner any rights or remedies which Buyer has, or might have, at Law, in equity or otherwise, based on fraud or a willful misrepresentation or willful breach of warranty hereunder.

          (c) Parent and Seller hereby expressly acknowledge and agree that (i) in the case that Buyer is required to make an out-of-pocket cash payment with respect to any Buyer Warranty Losses (a “Cash Payment”), Buyer shall have the right to receive payment of any and all amounts owed to any Buyer Indemnity pursuant to this Article X (or any portion thereof) in cash from Parent or (ii) in the case that Buyer is not required to make a Cash Payment, Buyer shall have the right to be fully and completely offset against and recoup from any and all amounts owed to any Buyer Indemnity pursuant to this Article X (or any portion thereof); provided, however, that any such offset or recoupment shall be made by reducing the principal amount of the Note due to Seller; provided, further, that notwithstanding the foregoing, if such Buyer Warranty Losses exceed the principal amount of the Note, Buyer shall have the right to receive payment of the amount of such excess in cash.

     10.3 Indemnification by PW and Buyer.

          (a) PW and Buyer shall, jointly and severally, indemnify and defend Seller and its Affiliates and their respective stockholders, members, managers, officers, directors, employees, agents, successors and assigns (the “Seller Indemnitees”) against, and shall hold them harmless from, any and all Losses resulting from, arising out of, or incurred by any Seller Indemnitee in connection with, or otherwise with respect to:

               (i) any breach of or any inaccuracy in any representation or warranty of PW or Buyer contained in any Schedule, certificate or other document delivered pursuant to this Agreement or any breach of or any inaccuracy in any representation or warranty of PW or Buyer contained in Article V made as of the date hereof and as though restated on and as of the Closing Date, as may be qualified by the Schedules thereto;

               (ii) any breach of or failure by PW or Buyer to perform any agreement, covenant or obligation of PW or Buyer contained in this Agreement or any document delivered by PW or Buyer to Parent or Seller at the Closing;

               (iii) any Assumed Liability; and

               (iv) any fees, expenses or other payments incurred or owed by PW or Buyer to any agent, broker, investment banker or other firm or person retained or employed by it in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

          (b) PW and Buyer shall not be liable for any Loss or Losses pursuant to 10.3(a)(i) (“Seller Warranty Losses”) (i) unless and until the aggregate amount of all Seller Warranty Losses incurred by the Seller Indemnitees exceeds $[****]in which event Buyer shall be liable for all Seller Warranty Losses from the first dollar, and (ii) to the extent that Seller Warranty Losses exceed $[****]in the aggregate.

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          (c) PW and Buyer hereby expressly acknowledge and agree that Parent or Seller shall have the right to at their election to receive payment of any and all amounts owed to any Seller Indemnified Party pursuant to this Article X (or any portion thereof) in cash from PW or Buyer or to be fully and completely offset against and recoup from any and all amounts owed to any Seller Indemnified Party pursuant to this Article X (or any portion thereof). Any offset or recoupment shall be made, at the Parent or Seller’s option, by increasing the principal amount of the Note due to Seller.

     10.4 Indemnification Procedures for Third Party Claims.

          (a) In the event that an Indemnitee receives notice of the assertion of any claim or the commencement of any Action by a third party in respect of which indemnity may be sought under the provisions of this Article X (“Third Party Claim”), the Indemnitee shall promptly notify the Indemnitor in writing of such Third Party Claim (“Notice of Claim”). Failure or delay in notifying the Indemnitor will not relieve the Indemnitor of any Liability it may have to the Indemnitee, except and only to the extent that such failure or delay causes actual increased Liability to the Indemnitor with respect to such Third Party Claim. The Notice of Claim shall set forth the amount, if known, or, if not known, an estimate of the foreseeable maximum amount of claimed Losses (which estimate shall not be conclusive of the final amount of such Losses) and a description of the basis for such Third Party Claim.

          (b) Subject to the further provisions of this Section 10.4, the Indemnitor will have 30 days (or less if the nature of the Third Party Claim requires) from the date on which the Indemnitor received the Notice of Claim to notify the Indemnitee that the Indemnitor will assume the defense or prosecution of such Third Party Claim and any litigation resulting therefrom with counsel of its choice and at its sole cost and expense (a “Third Party Defense”). If the Indemnitor assumes the Third Party Defense in accordance with the preceding sentence, the Indemnitor shall be conclusively deemed to have acknowledged that the Third Party Claim is within the scope of its indemnity obligation hereunder and shall hold the Indemnitee harmless from and against the full amount of any Losses resulting therefrom (subject to the terms and conditions of this Agreement). Any Indemnitee shall have the right to employ separate counsel in any such Third Party Defense and to participate therein, but the fees and expenses of such counsel shall not be at the expense of the Indemnitor unless (A) the Indemnitor shall have failed, within the time after having been notified by the Indemnitee of the existence of the Third Party Claim as provided in the first sentence of this paragraph (b), to assume the defense of such Third Party Claim, or (B) the employment of such counsel has been specifically authorized in writing by the Indemnitor.

          (c) The Indemnitor will not be entitled to assume the Third Party Defense if:

               (i) the Third Party Claim seeks, in addition to or in lieu of monetary damages, any injunctive or other equitable relief (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages);

               (ii) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation or with respect to Buyer, a regulatory proceeding with any Governmental Entity;

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               (iii) under applicable standards of professional conduct, a conflict on any significant issue exists between the Indemnitee and the Indemnitor in respect of the Third Party Claim; or

               (iv) the Third Party Claim involves Purchased Assets, Transferred Employees or a party to an Assigned Contract (other than a third party claim relating to the transfer of the Purchased Assets pursuant to this Agreement).

          (d) If by reason of the Third Party Claim a Lien, attachment, garnishment or execution is placed upon any of the property or assets of the Indemnitee, the Indemnitor, if it desires to exercise its right to assume such Third Party Defense, must furnish a satisfactory indemnity bond to obtain the prompt release of such Lien, attachment, garnishment or execution.

          (e) If the Indemnitor assumes a Third Party Defense, it will take all steps necessary in the defense, prosecution, or settlement of such claim or litigation and will hold all Indemnitees harmless from and against all Losses caused by or arising out of such Third Party Claim (subject to the last sentence of Section 10.4(b)). The Indemnitor will not consent to the entry of any judgment or enter into any settlement except with the written consent of the Indemnitee to which the Indemnitor is obligated to furnish indemnification pursuant to this Agreement; provided that the consent of the Indemnitee shall not be required if all of the following conditions are met: (i) the Indemnitee has assumed the defense of the Third Party Claim in accordance with the terms of this Agreement, (ii) the terms of the judgment or proposed settlement include as an unconditional term thereof the giving to the Indemnitees by the third party of a release of the Indemnitees from all Liability in respect of such Third Party Claim, (iii) there is no finding or admission of (A) any violation of Law by the Indemnitees (or any Affiliate thereof) and (B) any effect on any other Action or claims of a similar nature that may be made against the Indemnitees (or any Affiliate thereof), and (iv) the sole form of relief is monetary damages which are paid in full by the Indemnitor. The Indemnitor shall conduct the defense of the Third Party Claim actively and diligently, and the Indemnitee will provide reasonable cooperation in the defense of the Third Party Claim. So long as the Indemnitor is reasonably conducting the Third Party Defense in good faith, the Indemnitee will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitor (not to be unreasonably withheld or delayed). Notwithstanding the foregoing, the Indemnitee shall have the right to pay or settle any such Third Party Claim; provided that, in such event, subject to the following sentence, it shall waive any right to indemnity therefor by the Indemnitor for such claim unless the Indemnitor shall have consented to such payment or settlement (such consent not to be unreasonably withheld or delayed).

          (f) In the event that (i) an Indemnitee gives Notice of Claim to the Indemnitor and the Indemnitor fails or elects not to assume a Third Party Defense which the Indemnitor had the right to assume under this Section 10.4 or (ii) the Indemnitor is not entitled to assume the Third Party Defense pursuant to this Section 10.4, the Indemnitee shall have the right, with counsel of its choice, to defend, conduct and control the Third Party Defense, at the sole cost and expense of the Indemnitor. In each case, the Indemnitee shall conduct the Third Party Defense actively and diligently, and the Indemnitor will provide reasonable cooperation in the Third Party Defense. The Indemnitee shall have the right to consent to the entry of any judgment or enter

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into any settlement with respect to the Third Party Claim on such terms as it may deem appropriate; provided, however, that (i) the Indemnitee shall not enter into any settlement, compromise, discharge of a Third Party Claim without the prior written consent of the Indemnitor (which shall not be unreasonably withheld, conditioned or delayed) and (ii) the amount of any settlement made or entry of any judgment consented to by the Indemnitee without the consent of the Indemnitor shall not be determinative of the validity of the claim, except with the consent of the Indemnitor (not to be unreasonably withheld or delayed). If the Indemnitor does not elect to assume a Third Party Defense which it has the right to assume hereunder, the Indemnitee shall have no obligation to do so.

          (g) Each party to this Agreement shall use its commercially reasonable efforts to cooperate and to cause its employees to cooperate with and assist the Indemnitee or the Indemnitor, as the case may be, in connection with any Third Party Defense, including attending conferences, discovery proceedings, hearings, trials and appeals and furnishing Records, information and testimony, as may reasonably be requested; provided that each party shall use its best efforts, in respect of any Third Party Claim of which it has assumed the defense, to preserve the confidentiality of all confidential information and the attorney-client and work-product privileges.

     10.5 Indemnification Procedures for Non-Third Party Claims. In the event of a claim that does not involve a Third Party Claim being asserted against it, the Indemnitee shall send a Notice of Claim to the Indemnitor. The Notice of Claim shall set forth the amount, if known, or, if not known, an estimate of the foreseeable maximum amount of claimed Losses (which estimate shall not be conclusive of the final amount of such Losses) and a description of the basis for such claim, it being agreed by the parties that nothing herein shall be deemed to prevent an Indemnitee from making a claim hereunder for claims or demands that have not yet required the payment of money. The Indemnitor will have 30 days from receipt of such Notice of Claim to dispute the claim and will reasonably cooperate and assist the Indemnitee in determining the validity of the claim for indemnity. If the Indemnitor does not give notice to the Indemnitee that it disputes such claim within 30 days after its receipt of the Notice of Claim, the claim specified in such Notice of Claim will be conclusively deemed a Loss subject to indemnification hereunder.

     10.6 Effect of Investigation; Waiver. An Indemnitee’s right to indemnification or other remedies based upon the representations and warranties and covenants and agreements of the Indemnitor will not be affected by any investigation or knowledge of the Indemnitee or any waiver by the Indemnitee of any condition based on the accuracy of any representation or warranty, or compliance with any covenant or agreement. Such representations and warranties and covenants and agreements shall not be affected or deemed waived by reason of the fact that the Indemnitee knew or should have known that any representation or warranty might be inaccurate or that the Indemnitor failed to comply with any agreement or covenant. Any investigation by such party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.

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     10.7 Other Rights and Remedies.

          (a) After the Closing, the indemnification rights of the parties under this Article X are the sole and exclusive rights and remedies the parties may have at Law or in equity for any misrepresentation or breach of warranty hereunder on the part of any party hereto; provided, however, that nothing contained in this Section 10.7(a) (i) shall limit the right to seek specific performance for any failure to perform any covenant or agreement, and (ii) shall be deemed to limit or restrict in any manner any rights or remedies which the parties have, or might have, at Law, in equity or otherwise, based on fraud or a willful misrepresentation or willful breach of warranty hereunder.

          (b) Except with respect to Third Party Claims, no party hereto shall be liable for, and the parties acknowledge and agree that the term “Losses” expressly excludes, any consequential, treble, punitive or other damages not expressly provided for in this Article X.

          (c) The amount of any Losses incurred by PW and Buyer shall be reduced by the net amount PW or Buyer or any of their subsidiaries recovers (after deducting all attorneys’ fees, expenses and other costs of recovery) from any insurer or other party liable for such Losses. PW and Buyer and their subsidiaries shall use commercially reasonable efforts to effect any such recovery. The amount of any Losses incurred by Seller and Parent shall be reduced by the net amount Seller or Parent or any of their subsidiaries recovers (after deducting all attorneys’ fees, expenses and other costs of recovery) from any insurer or other party liable for such Losses. Seller and Parent and their subsidiaries shall use commercially reasonable efforts to effect any such recovery.

          (d) If PW or Buyer or any of their Subsidiaries receives an amount under insurance coverage or from any Person with respect to Losses sustained at any time subsequent to any payment to PW pursuant to this Article X, then PW shall promptly reimburse Seller for any payment made up to such amount received by PW or Buyer, as applicable. If Seller or Parent or any of their Subsidiaries receives an amount under insurance coverage or from any Person with respect to Losses sustained at any time subsequent to any payment to Parent pursuant to this Article X, then Parent shall promptly reimburse Buyer for any payment made up to such amount received by Seller or Parent, as applicable.

     10.8 Tax Treatment of Indemnification Payments. Except as otherwise required by Law, Buyer and Seller agree to treat any payments made pursuant to the indemnification provisions of this Agreement as an adjustment to the Purchase Price for Tax purposes.

ARTICLE XI

MISCELLANEOUS

     11.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (a) on the date established by the sender as having been delivered personally, (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier, (c) on the date sent by e-mail following the recipients confirmation of receipt, if sent during normal business hours of the recipient, if not, then on the next business day following such confirmation of receipt, or (d) on the fifth day after the date mailed, by certified or

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registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

If to PW or Buyer, to:

Penson Worldwide, Inc.
1700 Pacific Avenue, Suite 1400
Dallas, TX 75201
Attn: Andrew Koslow, Esq.
Facsimile: (214) 217-5096

With a required copy to:

Morgan, Lewis & Bockius LLP
3000 El Camino Real
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Tom Kellerman, Esq.
Facsimile: (650) 843-4001

If to Parent or Seller, to:

Broadridge Financial Solutions, Inc.
1981 Marcus Avenue
Lake Success, NY 11042
Attn: Adam D. Amsterdam, Esq.
E-mail: as delivered in writing to PW as provided above

or to such other address or to the attention of such Person or Persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

     11.2 Amendments and Waivers.

          (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

          (b) No failure or delay by any party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

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          (c) To the maximum extent permitted by Law, (i) no waiver that may be given by a party shall be applicable except in the specific instance for which it was given and (ii) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such party or the right of the party giving such notice or demand to take further action without notice or demand.

     11.3 Expenses. Except as otherwise expressly provided herein, each party shall bear its own costs and expenses in connection with this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, whether or not the transactions contemplated by this Agreement are consummated.

     11.4 Successors and Assigns. This Agreement may not be assigned by either party hereto without the prior written consent of the other party. Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, heirs, personal representatives, successors and assigns.

     11.5 Governing Law. This Agreement and Schedules hereto shall be governed by and interpreted and enforced in accordance with the Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

     11.6 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

     11.7 Obligations of PW and Parent. PW shall ensure that Buyer duly performs, satisfies and discharges on a timely basis each of the covenants, obligations and liabilities of Buyer under this Agreement, and PW shall be jointly and severally liable with Buyer for the performance of the covenants and obligations of Buyer under this Agreement. Parent shall ensure that Seller duly performs, satisfies and discharges on a timely basis each of the covenants, obligations and liabilities of Seller under this Agreement, and Parent shall be jointly and severally liable with Seller for the performance of the covenants and obligations of Seller under this Agreement.

     11.8 Counterparts. This Agreement may be executed in any number of counterparts, and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. The parties agree that the delivery of this Agreement, and the delivery of the Ancillary Agreements and any other agreements and documents at the Closing, may be effected by means of an exchange of facsimile signatures with original copies to follow by mail or courier service.

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     11.9 Third Party Beneficiaries. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder; except that in the case of Article X hereof, the other Indemnitees and their respective heirs, executors, administrators, legal representatives, successors and assigns, are intended third party beneficiaries of such sections and shall have the right to enforce such sections in their own names.

     11.10 Entire Agreement. This Agreement, the Ancillary Agreements, the Schedules and the other documents, instruments and agreements specifically referred to herein or therein or delivered pursuant hereto or thereto set forth the entire understanding of the parties hereto with respect to the transactions contemplated by this Agreement. All Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement. Any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement, except for the Confidentiality Agreement which shall continue in full force and effect in accordance with its terms.

     11.11 Captions. All captions contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

     11.12 Severability. Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     11.13 Specific Performance. Prior to Closing, and as set forth in Sections 6.4 and 10.8 hereof, the parties each agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at Law or equity.

     11.14 Interpretation.

          (a) The meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting either gender shall include both genders as the context requires. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

          (b) The terms “hereof”, “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.

          (c) When a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement unless otherwise specified.

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          (d) The word “include”, “includes”, and “including” when used in this Agreement shall be deemed to be followed by the words “without limitation”, unless otherwise specified.

          (e) A reference to any party to this Agreement or any other agreement or document shall include such party’s predecessors, successors and permitted assigns.

          (f) Reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder.

          (g) A reference to any Governmental Entity shall include such entity’s predecessors and successors.

          (h) The parties have participated jointly in the negotiation and drafting of this Agreement and the Ancillary Agreements. Any rule of construction or interpretation otherwise requiring this Agreement or the Ancillary Agreements to be construed or interpreted against any party by virtue of the authorship of this Agreement or the Ancillary Agreements shall not apply to the construction and interpretation hereof and thereof.

          (i) All accounting terms used and not defined herein shall have the respective meanings given to them under GAAP.

     11.15 Independent Investigation.

          (a) Each of PW and Buyer has conducted its own independent review and analysis of the business, operations, technology, assets, liabilities, results of operations, financial condition and prospects of the Purchased Assets and any financial statements relating thereto, and acknowledges that the Seller has provided PW and Buyer with access to the personnel, properties, premises and books and records of the Seller for this purpose. In entering into this Agreement, each of PW and Buyer has relied solely upon its own investigation and analysis, and each of PW and Buyer acknowledges and agrees that, except for the specific representations and warranties of the Parent and Seller contained in Article IV hereof, none of the Parent, Seller or their respective Affiliates nor any of their respective shareholders, controlling Persons or representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any statement, certificate, document or agreement delivered pursuant hereto and any financial statements and any projections, estimates or other forward-looking information) provided (including in any management presentations, information or descriptive memorandum, supplemental information or other materials or information with respect to any of the above) or otherwise made available to PW, Buyer or any of their Affiliates, shareholders, controlling Persons or representatives; provided, however, nothing contained in this Section 11.15(a) shall be deemed to limit or restrict in any manner any rights or remedies which PW or Buyer has, or might have, at Law, in equity or otherwise, based on fraud or a willful misrepresentation or willful breach of warranty hereunder or with respect to any Excluded Liabilities.

          (b) Each of Parent and Seller has conducted its own independent review and analysis of the business, operations, technology, assets, liabilities, results of operations, financial condition and prospects of PW and its financial statements and acknowledges that PW and the

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Buyer have provided Parent and Seller with access to the personnel, properties, premises and books and records of PW and the Buyer for this purpose. In entering into this Agreement, each of Parent and Seller has relied solely upon its own investigation and analysis, and each of Parent and Seller acknowledges and agrees that, except for the specific representations and warranties of PW and the Buyer contained in Article V hereof, none of PW, the Buyer or their respective Affiliates nor any of their respective shareholders, controlling Persons or representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any statement, certificate, document or agreement delivered pursuant hereto and any financial statements and any projections, estimates or other forward-looking information) provided (including in any management presentations, information or descriptive memorandum, supplemental information or other materials or information with respect to any of the above) or otherwise made available to Parent, Seller or any of their Affiliates, shareholders, controlling Persons or representatives; provided, however, nothing contained in this Section 11.15(b) shall be deemed to limit or restrict in any manner any rights or remedies which Parent or Seller has, or might have, at Law, in equity or otherwise, based on fraud or a willful misrepresentation or willful breach of warranty hereunder.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

PENSON WORLDWIDE, INC.
By:	/s/ Daniel P. Son
Name: Daniel P. Son
Title: President
PENSON FINANCIAL SERVICES, INC.
By:	/s/ Daniel P. Son
Name: Daniel P. Son
Title: President
BROADRIDGE FINANCIAL SOLUTIONS, INC.
By:	/s/ John Hogan
Name: John Hogan
Title: President
RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.
By:	/s/ Joseph Barra
Name: Joseph Barra
Title: President

Exhibit A

Reference is made to Exhibit 10.34; filed with this Form 10-K which is incorporated herein by reference.

Exhibit B

FORM OF SELLER NOTE

FORM OF SELLER NOTE

$                     , ___

     1. FOR VALUE RECEIVED, the undersigned, PENSON WORLDWIDE, INC., a Delaware corporation (the “Company” or “Issuer”), hereby promises to pay to the order of [          ]¹ (“Payee”) the principal amount of $o (the “Initial Amount”), subject to adjustment as provided in this Note (if adjusted, the “Adjusted Amount”) on the Maturity Date (or, if such day is not a Business Day, on the immediately succeeding Business Day), subject to the provisions herein. The Issuer further promises to pay interest on the unpaid principal amount of this Note from time to time at a rate per annum equal to the LIBOR Rate plus an amount (the “Spread”) equal to plus five and one-half percent (5.50%). Interest on this Note shall be due and payable quarterly in arrears in cash on each [December 31, March 31, June 30 and September 30] of each calendar year, provided that if any such day is not a Business Day, payment shall be made on the immediately succeeding Business Day. Notwithstanding the foregoing, while an Event of Default is continuing the Spread shall, to the extent permitted by applicable law, increase by 2.00%, and the Spread will be increased by an additional 2.00% each additional 90 days the Event of Default remains uncured or unwaived, subject to a maximum Spread of 12.0%. After the cure or waiver of any such Event of Default and provided no other Events of Default are then continuing, the Spread shall return to 5.50%.

     Payments of principal hereof and interest hereon shall be made in Dollars in immediately available funds to such account of the Noteholder located in New York, New York, as the Noteholder may designate in writing to the Issuer.

     2. Prepayments; Optional Prepayment. Subject to the provisions herein, the Issuer may, at any time and from time to time prior to the Maturity Date, prepay the principal amount of this Note, in whole or in part, without penalty or premium, on any Business Day. Prepayments of this Note must be accompanied by payment of accrued and unpaid interest on the principal amount prepaid to and including the date of payment.

     3. Negative Covenants. So long as any principal of and interest on this Note or any other amount payable hereunder remains unpaid or unsatisfied:

     (a) Mergers and Consolidations. The Issuer shall not merge or consolidate with or into any Person or sell all or substantially all of its assets, except that so long as both prior to and subsequent to such merger or consolidation, no Event of Default has occurred and is continuing, the Issuer may merge or consolidate with any Person, provided that (x) the Issuer shall be the continuing or surviving Person or (y) if the Issuer shall not be the surviving Person, such surviving Person shall have assumed the obligations of the Issuer hereunder pursuant to documentation in form and substance reasonably satisfactory to the Noteholder (each such merger or consolidation, a “Permitted Merger”).

     (b) Liens. The Issuer shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired to secure Indebtedness without making, or causing such Subsidiary to make effective provision for securing this Note equally and ratably with such Indebtedness or in the event such Indebtedness is subordinate in right of payment to this Note, prior to such Indebtedness, as to such property or assets for so long as such Indebtedness shall be secured. The foregoing restrictions shall not apply to the following Liens:

(A) Liens existing on the date hereof;

¹ Note to be executed by Ridge Clearing & Outsourcing Solutions, Inc. (“Seller”), or an affiliate of Seller (as determined by Seller).

(B)	Liens securing the Credit Agreement (including any modification, replacement, renewal or extension of any such Lien in connection with the modification, renewal, replacements, extension, amendment or amendment and restatement of the Credit Agreement);
(C)	Liens permitted by the Credit Agreement;
(D)	Liens securing Cash Management Obligations, Hedging Agreements and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections, employee credit card programs and other cash management and similar arrangements in the ordinary course of business and any guarantees thereof;
(E)	Liens arising from judgments or orders for the payment of money;
(F)	Liens (I) on cash advances in favor of the seller of any property to be acquired in an investment to be applied against the purchase price for such investment or (II) consisting of an agreement to dispose of any property;
(G)	Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Subsidiary;
(H)	Liens in connection with any sale-leasebacks;
(I)	Liens in connection with any credit facility or other lending arrangement entered into by a Regulated Subsidiary to finance operations in the ordinary course of business;
(J)	Liens on assets of a Regulated Subsidiary resulting from the lending of securities and repurchase and reverse repurchase agreements;
(K)	Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings;
(L)	Liens of materialmen, mechanics, warehousemen, carriers or employees or other similar Liens arising by operation of law in the ordinary course of business;
(M)	Liens consisting of deposits or pledges to secure the performance of bids, trade contracts, leases, public or statutory obligations, or other obligations of a like nature incurred in the ordinary course of business;
(N)	Liens upon or in any assets acquired or held to secure the purchase price of such assets or Indebtedness incurred for the purpose of financing the acquisition of such assets to secure Indebtedness not exceeding

(x) if the Credit Agreement (including any agreement that refinances or replaces the Credit Agreement) is in effect (regardless of whether any indebtedness is outstanding thereunder) $25,000,000 in the aggregate under this clause (N) without prejudice to any other clause hereof or

(y) if the Credit Agreement (including any agreement that refinances or replaces the Credit Agreement) is terminated or otherwise no longer in effect (and not replaced), an amount not to exceed 15% of the Company’s net revenues for the trailing twelve month period (based on the latest period for which internal financial statements are available),

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	in each case, provided that the Liens are restricted to such assets and the proceeds thereof; it being understood that any Lien that was permitted to be incurred as of the date of incurrence shall not violate subsection (y) solely as a result of a subsequent decline in the Issuer’s net revenues;
(O)	restrictions and other minor encumbrances on real property which do not in the aggregate materially impair the use or value of such property;
(P)	the rights of licensors or lessors of property under the license or lease agreements related thereto;
(Q)	Liens which constitute rights of set-off or bankers’ liens or securities intermediaries’ liens whether arising by operation of law or by contract; and
(R)	the modification, replacement, renewal or extension of any Lien permitted under this Section 3(b) (other than Section 3(b)(B)).

     (c) Convertible Notes. Borrower will not voluntarily redeem, purchase or otherwise voluntarily prepay its 8.00% Senior Convertible Notes due 2014 prior to maturity.

     4. Events of Default. The following are “Events of Default”:

     (a) The Issuer fails to pay any interest or principal of this Note as and on the date when due and such failure shall continue unremedied for more than 3 (three) Business Days; or

     (b) (i) The Issuer fails to perform or observe any term, covenant or agreement contained in Section 3(a) hereof or (ii) the Issuer fails to perform or observe any other covenant or agreement (not specified in the preceding clause (b)(i)) contained in this Note on its part to be performed or observed and in the case of this clause (ii) such failure continues unremedied for 45 days; or

     (c) The occurrence of a Change of Control; or

     (d) An event of default has occurred and is continuing under any agreement in respect of Indebtedness with an outstanding principal amount in excess of $50,000,000 or under the Credit Agreement resulting in such Indebtedness or the Credit Agreement being or being declared due and payable (or such default is a failure to pay at maturity); provided, however, if any such acceleration of Indebtedness has been rescinded, there shall no longer be any Event of Default under this Section 4(d) with respect to such acceleration; or

     (e) The Issuer or any Material Subsidiary institutes any proceeding under any Debtor Relief Law, or makes a general assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered, or consented to by such Person, in any such proceeding or an order for the liquidation of any such Person is entered in any such proceeding or any such Person admits in writing its inability to pay its debts generally as they become due (such proceedings collectively, the “Insolvency Proceedings”); or

     (f) Any termination of the Outsourcing Agreement, as such term is defined in the Asset Purchase Agreement, (x) by the Noteholder, pursuant to the exercise of remedies for a material breach of the Outsourcing Agreement by the Issuer entitling such termination or (y) by the Issuer, for any reason (other

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than a termination by the Issuer for a material breach or material failure to perform by the Payee including the exercise of any termination right pursuant to any service level agreement).

     Upon the occurrence and during the continuation of an Event of Default, the Noteholder may declare all sums outstanding hereunder, including all interest thereon, to be immediately due and payable, whereupon the same shall become and be immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived; provided, however, that upon the occurrence of an actual entry of an order for relief with respect to the Issuer under the Bankruptcy Code, all sums outstanding hereunder including all interest thereon, shall become and be immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived.

     5. Guarantees. (i) The Issuer will not permit any of its subsidiaries to Guarantee any Indebtedness of the Issuer, other than the Credit Agreement and except as permitted by the Credit Agreement and except to the extent a Lien of such Indebtedness would be permitted under Section 3(b) above ,and (ii) the Issuer will not permit any of its subsidiaries to Guarantee any Indebtedness issued to a seller for the purposes of financing the acquisition of substantially all the assets of a business, unless in each case such subsidiary, concurrently with the incurrence of any such Guarantee, executes and delivers to the Noteholder a guarantee of the Issuer’s obligations under this Note, in the substantially the same form or otherwise in a form and substance reasonably satisfactory to the Noteholder.

     6. Adjustment of Principal Amount in Certain Cases.

     (a) This Note has been issued in connection with the Asset Purchase Agreement. In accordance with the Asset Purchase Agreement, the principal amount of this Note may, at the Issuer’s option, be reduced by the amount of any Claims of the Issuer or increased by the amount of any Claims of the Payee.

     (b) For the purposes of this Note, “Claims” shall mean, as determined pursuant to the Asset Purchase Agreement, (i) any Purchase Price Adjustment and (ii) any and all Losses (as defined in the Asset Purchase Agreement) in respect of which Issuer or the Payee is entitled to indemnification pursuant to the Asset Purchase Agreement and in accordance with the Asset Purchase Agreement the principal amount of this Note may be adjusted. Payee is authorized to record any such adjustment on the grid attached to this Note in the columns provided therefor and after such record is made, Payee will promptly furnish to Issuer a copy of the Note reflecting such adjustment; provided that the failure to do so will not affect the validity of any adjustment made in accordance with the provisions of the Asset Purchase Agreement and this Note.

     7. Successors and Assigns. The provisions of this Note shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Issuer nor any Guarantor may assign its rights and obligations under this Note other than pursuant to a Permitted Merger. The Noteholder may at any time assign its rights and obligations under this Note to any other Person.

     8. Definitions. As used in this Agreement, the following terms shall have the following meanings:

     “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

     “Asset Purchase Agreement” means that certain Asset Purchase Agreement dated as of November 2, 2009, among the Company, Buyer, Parent and Seller.

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     “Bankruptcy Code” means The Bankruptcy Reform Act of 1978, as codified as 11 U.S.C. Section 101 et seq.

     “Business Day” means any day other than Saturday, Sunday or other day on which the New York Stock Exchange is authorized or required by Law to close.

     “Capitalized Lease” means a lease under which the Issuer or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.

     “Cash Management Obligations” means any obligations of the Issuer or any Subsidiary in respect of overdrafts and related liabilities arising from treasury, depository or cash management services.

     “CFTC” means the Commodity Futures Trading Corporation, or any successor thereto.

     “Change of Control” means

(i) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its subsidiaries, any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) (any such person or group, an “Acquiror” ) files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that, or the Issuer otherwise becomes aware that, such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the equity securities of the Issuer entitled to vote for members of the board of directors or equivalent governing body of the Issuer (“Issuer Voting Securities”) on a fully diluted basis (a “Control Interest”);

(ii) all or substantially all of the assets of the Issuer (on a consolidated basis) are sold or otherwise transferred to any person in one transaction or a series of related transactions in which, immediately after the consummation thereof, the holders of the majority of the Issuer Voting Securities prior to such transaction to not represent a majority of the Issuer Voting Securities or of the equity interests of the surviving or transferee person; or

(iii) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer.

     “Company” has the meaning set forth in Section 1.

     “Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of May 1, 2009, with Regions Bank, as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, the lenders party thereto and other parties thereto, as amended by that certain First Amendment dated as of May 27, 2009 and Second Amendment dated as of September 22, 2009 (together with all exhibits and schedules thereto, as amended, restated, amended and restated, replaced, refinanced, supplemented or otherwise modified in writing from time to time) and any extension, renewal, replacement or refinancing of such credit facility from time to time.

     “Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

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     “Dollar” means lawful money of the United States.

     “Events of Default” has the meaning specified in Section 4.

     “FINRA” means the Financial Industry Regulatory Authority, Inc. or any successors thereto.

     “FSA” means the Financial Services Authority, or any successor thereto.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

     “Guarantee” by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation.

     “Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

     “Indebtedness” of any Person means, 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, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) 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, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, and (g) all obligations under Capitalized Leases.

     “Interest Period” means the period commencing on the date of the initial borrowing under the Note (or the continuation of any prior interest period) and ending on the date three months thereafter; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a business day shall be extended to the next succeeding business day unless such business day falls in another calendar month, in which case such Interest Period shall end on the next preceding business day;

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     (ii) any Interest Period that begins on the last business day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

     “Insolvency Proceedings” has the meaning specified in Section 4(e).

     “LIBOR Rate” means, for any Interest Period, an interest rate per annum equal to the 90-day rate per annum obtained by dividing (a) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in Dollars at 11:00 A.M. (London time) two business days before the first day of such Interest Period for a period equal to such Interest Period (provided that, if for any reason such rate is not available, the term “LIBOR Rate” shall mean, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates) by (b) a percentage equal to 100% minus the LIBOR Rate Reserve Percentage for such Interest Period.

     “LIBOR Rate Reserve Percentage” for any Interest Period means the reserve percentage applicable two business days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (as defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time) (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined) having a term equal to such Interest Period.

     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

     “Loss” has the meaning ascribed to such term in the Asset Purchase Agreement.

     “Material Subsidiary” means any Subsidiary of the Company which at the date of determination is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Securities Exchange Act of 1934 (as such Regulation is in effect on the date hereof).

     “Maturity Date” means [INSERT DATE FIVE YEARS FROM DATE OF NOTE]²

     “Note” means this Senior Note, as amended, restated, extended, supplemented or otherwise modified in writing from time to time.

     “Noteholder” means the Payee and its permitted successors and assigns.

² To be dated the 5th anniversary of the closing date.

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     “Payee” has the meaning set forth in Section 1.

     “Permitted Merger” has the meaning specified in Section 3(a).

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Purchase Price Adjustment” has the meaning ascribed to such term in Section 2.6 of the Asset Purchase Agreement.

     “Regulated Subsidiary” means any Subsidiary registered or regulated as a broker or dealer with or by the SEC, FINRA, FSA, CFTC or any other applicable governmental authority, whether domestic or foreign.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Issuer.

     “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time.

     9. Miscellaneous.

     (a) This Note is subject to the terms and conditions of the Subordination Agreement dated as of [     ], 2010 among [Seller] and Regions Bank, as administrative agent on behalf of the Lenders party to the Credit Agreement (as amended, restated or otherwise modified from time to time, the “Subordination Agreement”). The Payee agrees that, upon the request of the Company and the agent or trustee (or other person performing a similar function) under the Credit Agreement, Payee will promptly execute and deliver a written subordination agreement substantially in the form of the Subordination Agreement.

     (b) No amendment or waiver of any provision of this Note and no consent by the Noteholder to any departure therefrom by the Issuer shall be effective unless such amendment, waiver or consent shall be in writing and signed by the Noteholder, and any such amendment, waiver or consent shall then be effective only for the period and on the conditions and for the specific instance specified in such writing. No failure or delay by the Noteholder in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other rights, power or privilege.

     (c) Except as otherwise expressly provided herein, notices and other communications to each party provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy to the address provided from time to time by such party. All notices and other communications shall be effective upon receipt.

     (d) If any provision of this Note is held to be illegal, invalid or unenforceable, (i) the legality, validity and enforceability of the remaining provisions of this Note shall not be affected or impaired thereby and (ii) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     (e) THIS NOTE IS GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE. THE ISSUER AND NOTEHOLDER EACH HEREBY IRREVOCABLY AND UNCONDI-

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TIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT AND EACH STATE COURT IN THE CITY OF NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. THE ISSUER AND NOTEHOLDER EACH IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE ISSUER OR NOTEHOLDER AT ITS ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO. THE ISSUER AND THE NOTEHOLDER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     (f) THE ISSUER AND THE NOTEHOLDER EACH WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     (g) THIS NOTE AND THE ASSET PURCHASE AGREEMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

PENSON WORLDWIDE, INC.
By:
	Name:
	Title:
[PAYEE]
By:
	Name:
	Title:

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Grid for Recording Adjusted Amount

	Amount of Increase (Decrease) to
Date	Principal Amount	Adjusted Amount	Entered By

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Exhibit C

BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT

BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT

     This BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), is executed as of [ • ] by and between Ridge Clearing & Outsourcing Solutions, Inc., a New York corporation (“Seller”), and Penson Financial Services, Inc., a North Carolina corporation (“Buyer”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Asset Purchase Agreement (as defined hereinafter).

     WHEREAS, this Agreement is being entered into in connection with the transactions contemplated by that certain Asset Purchase Agreement dated as of [ • ] by and among Penson Worldwide, Inc., a Delaware corporation (“PW”), Buyer, Broadridge Financial Solutions, Inc., a Delaware corporation (“Parent”) and Seller (the “Asset Purchase Agreement”);

     WHEREAS, pursuant to the terms of the Asset Purchase Agreement, Seller has agreed to sell, assign, transfer, convey and deliver to Buyer and Buyer has agreed to purchase and acquire from Seller, upon the terms and conditions set forth in the Asset Purchase Agreement, all of the right, title and interest of Seller in and to the Purchased Assets and the Buyer agreed to purchase, acquire and accept from the Seller, free and clear of all liabilities (other than Assumed Liabilities) and all Liens (other than Permitted Liens), all of the Seller’s right, title and interest as of the Closing Date in, to and under the Purchased Assets; and

     NOW THEREFORE, in consideration of the representations, warranties, mutual covenants and agreements set forth in the Asset Purchase Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

     1. Sale and Transfer of Purchased Assets. Effective as of the Closing, Seller hereby sells, transfers, conveys, assigns, grants and delivers to Buyer, free and clear of all Liens, except Permitted Liens, all of its right, title and interest in and to the Purchased Assets, upon the terms and conditions set forth in the Asset Purchase Agreement.

     2. Assignment of Assigned Contracts. Effective as of the Closing, Seller hereby sells, transfers, conveys, assigns, grants and delivers to Buyer, free and clear of all Liens, except Permitted Liens, all of its right, title and interest in and to the Assigned Contracts and Buyer hereby accepts the foregoing assignment of the Assigned Contracts, upon the terms and conditions set forth in the Asset Purchase Agreement.

     3. Assumption of Liabilities. Effective as of the Closing, Buyer does hereby assume, and agrees to pay, defend, discharge and perform as and when due the Assumed Liabilities, upon the terms and conditions set forth in the Asset Purchase Agreement.

     4. Construction. This Agreement is subject in all respects to, and shall be construed in accordance with, the terms of the Asset Purchase Agreement. Nothing in this Agreement shall be deemed to supersede, enlarge, restrict or otherwise modify any of the provisions of the Asset Purchase Agreement or constitute a waiver or release by any party to the Asset Purchase Agreement of any liabilities, duties or obligations imposed thereby, all of which shall survive the execution and delivery of this Agreement as provided and subject to the limitations set forth in the Asset Purchase Agreement. If any conflict exists between the terms of this Agreement and

the terms of the Asset Purchase Agreement, the terms of the Asset Purchase Agreement shall govern and control.

     5. No Third Party Beneficiaries. Subject to the terms and conditions of the Asset Purchase Agreement, this Agreement shall be binding upon and inure solely to the benefit of Seller and Buyer and their respective executors, heirs, personal representatives, successors and assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person, any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

     6. Assignment. This Agreement may not be assigned by Seller without the prior written consent of the Buyer. Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, heirs, personal representatives, successors and assigns.

     7. Amendments and Waivers. This Agreement may be amended, and any provision hereof waived, but only in writing signed by the party against whom such amendment or waiver is sought to be enforced.

     8. Incorporation by Reference. The provisions of Sections 11.1 (Notices), 11.5 (Governing Law), 11.12 (Severability) and 11.14 (Interpretation), of the Asset Purchase Agreement are herein incorporated by reference, mutatis mutandis, as though fully set forth herein.

     9. Entire Agreement. This Agreement, the Asset Purchase Agreement, the Ancillary Agreements (as defined in the Asset Purchase Agreement) along with the Schedules and the Exhibits thereto, contain the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. None of the parties shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein, in the Asset Purchase Agreement or in the Ancillary Documents.

     10. Counterparts. This Agreement may be executed in any number of counterparts, and any party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. The parties agree that the delivery of this Agreement may be effected by means of an exchange of facsimile or electronically transferred signatures.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

2

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

SELLER

RIDGE CLEARING & OUTSOURCING
SOLUTIONS, INC.

By:

Name:

Title:

BUYER

PENSON FINANCIAL SERVICES, INC.

By:

Name:

Title:

Signature Page to Bill of Sale and Assignment and Assumption Agreement

Exhibit D

JOINT SELLING AGREEMENT

JOINT SELLING AGREEMENT

     AGREEMENT made this [     ] day of [  ],                     (the “Effective Date”), is made by and between Penson Worldwide, Inc. a Delaware corporation (“Penson”), Broadridge Financial Solutions, Inc., a Delaware corporation (“Broadridge”), and Ridge Clearing & Outsourcing Solutions, Inc. a New York corporation (a subsidiary of Broadridge, “Ridge”) (each a “Party” and collectively, the “Parties”).

     WHEREAS, pursuant to an Asset Purchase Agreement dated [     ], 2009 (the “Asset Purchase Agreement”), by and among Penson, Penson Financial Services, Inc., a North Carolina corporation (“Buyer”), Broadridge and Ridge, Buyer has purchased certain of the correspondent clearing contracts of Ridge.

     WHEREAS, the Parties will contemporaneously with the execution of this Agreement, enter into a Master Services Agreement and related Services Schedules (“Outsourcing Agreement”).

     WHEREAS, upon the closing of the transactions contemplated by the Asset Purchase Agreement and the Outsourcing Agreement (1) Penson and Buyer will continue to provide correspondent clearing services, including for former correspondents of Ridge, (2) Ridge will continue to provide outsourcing solutions for self-clearing broker dealers, including for Buyer, and, subsequent to a transition period, will permanently discontinue its correspondent clearing services (and will otherwise comply with its obligations set forth in Section 17 of the Outsourcing Agreement), and (3) Broadridge will continue providing back-office securities processing solutions for self-clearing broker dealers as permitted by Section 17 of the Outsourcing Agreement (collectively, the “Clearing and Outsourcing Services”).

     WHEREAS, in connection with the foregoing, the Parties desire to enter into a strategic selling alliance regarding such Clearing and Outsourcing Services where Broadridge and Ridge desire to offer Penson’s and Buyer’s products and services to their current and prospective customers and clients and Penson desires to offer Broadridge and Ridge’s products and services to its current and prospective customers and clients.

     NOW, THEREFORE, in consideration of the mutual premises and covenants herein set forth, the Parties agree as follows:

1. SERVICES. The Parties agree to use their reasonable efforts to cooperate in offering any services and making any proposals provided in accordance with this Agreement. Each Party may use its sales force to initiate and qualify sales leads for prospects for the Clearing and Outsourcing Services. In cases where a Party is not interested in a lead from the other Party, such other Party is free to pursue the opportunity alone (except as prohibited in the Asset Purchase Agreement) or in combination with others, without obligation to the uninterested Party. Broadridge and Ridge shall provide to Penson and Penson shall provide to Broadridge and Ridge the services described in Schedule A attached hereto (the “Services”). Neither party shall enter into or perform under a joint selling or other similar agreement with a correspondent clearing firm with respect to Clearing and Outsourcing Services substantially similar to this Agreement during the term of this Agreement.

2. SELLING PRACTICES.

(a) Neither Party shall make, publish or distribute or cooperate with any third party in making, publishing or distributing any public announcement, press releases, advertising, marketing, promotional or other materials (whether in print, on a website, electronically or

otherwise) (“Materials”) that use the other Party’s name, logos, or trademarks with regard to the execution or performance of this Agreement or otherwise, without the prior written approval of such other Party. The Parties shall provide and designate such Materials that may be used in connection with this Agreement and the alliance contemplated hereby.

(b) Both Parties agree to (i) conduct business in a manner that reflects favorably on the good name, goodwill and reputation of the other Party, (ii) not engage in deceptive, misleading or unethical practices that are or might be detrimental to the other Party, (iii) not make any false or misleading representation with regard to the other Party or its products, (iv) not publish or utilize or cooperate in the publication or utilization of any misleading or deceptive advertising material that relates in any way to the other Party and its products, (v) not make any representation or warranty to anyone with respect to the specifications, features or capabilities of the other Party’s products that are inconsistent with the literature distributed by the other Party, including all disclaimers contained in such literature, (vi) not make any warranty or representation to anyone that would give the recipient any claim of action against the other Party, and (vii) not bind or attempt to bind the other Party, or create any obligation, express or implied, on behalf of the other Party and neither Party is authorized to do so under this Agreement.

3. RESERVATION OF RIGHTS. The Parties acknowledge and agree that each Party will retain all right, title and interest in and to its products, services, trademarks, logos, tradenames, and all content, information and other materials on its website(s), and nothing contained in this Agreement will be construed as conferring upon such Party, by implication, operation of law or otherwise, any other license or right, except as specifically provided in this Agreement.

4. CONFIDENTIAL INFORMATION. The disclosure and use of any confidential information exchanged by the Parties is governed by the terms of the Asset Purchase Agreement.

5. RELATION OF THE PARTIES. This Agreement and the relationships between the Parties established hereby does not constitute a partnership, joint venture, agency, or contract of employment between them.

6. FEES. The Fees for such Services are described in Schedule B attached hereto.

7. TERM. This Agreement shall commence on the Effective Date and shall continue on a term contemporaneously with the Outsourcing Agreement. .

8. HEADINGS. Paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.

9. GOVERNING LAW. This Agreement shall be governed by, and provisions shall be construed in accordance with, the laws of the State of New York. Any disputes relating to or arising from this Agreement shall be subject to the dispute resolution procedures set forth in the Asset Purchase Agreement.

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     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be fully executed as of the day and year first written above.

PENSON WORLDWIDE, INC.
By:
	Name:
	Title
BROADRIDGE FINANCIAL SOLUTIONS, INC.
By:
	Name:
	Title:
RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.
By:
	Name:
	Title

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SCHEDULE A
TO THE JOINT SELLING AGREEMENT
BETWEEN
PENSON WORLDWIDE, INC.
BROADRIDGE FINANCIAL SOLUTIONS, INC.
AND
RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.

SERVICES

1. Broadridge and Ridge Services. Subject to Section 1 of the Agreement, Broadridge and Ridge will take advantage of opportunities to:

(a)	generate leads for Penson’s clearing offering among Broadridge prospects or existing clients that seek a correspondent clearing solution; and
(b)	offer Penson’s Nexa products to its global customers and prospects.

2. Penson Services. Subject to Section 1 of the Agreement, Penson will take advantage of opportunities to:

(a)	generate leads for (i) Ridge’s outsourcing solutions for self-clearing broker dealers and (ii) Broadridge’s securities processing solutions for self-clearing broker dealers, among Penson’s prospects or existing correspondent clearing clients that seek a self-clearing solution; and
(b)	generate leads for Broadridge’s other processing and investor communications solutions.

A-1

SCHEDULE B
TO THE JOINT SELLING AGREEMENT
BETWEEN
PENSON WORLDWIDE, INC.
BROADRIDGE FINANCIAL SOLUTIONS, INC.
AND
RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.

FEES

3. Fees Paid by [Broadridge or Ridge]:

(a)	If Penson refers an existing correspondent to [Broadridge or Ridge] and that correspondent elects to self clear, enabled by [Broadridge’s or Ridge’s] outsourcing or processing solutions, [Broadridge or Ridge] shall pay Penson a finder’s fee, the amount of which will be [     ]1.
(b)	If Penson refers a prospect to [Broadridge or Ridge] that purchases any related processing or investor communications solutions from [Broadridge or Ridge], [Broadridge or Ridge] shall pay Penson a finder’s fee, the amount of which will be [     ]2.

4. Fees Paid by Penson: If [Broadridge or Ridge] refers a current or prospective customer or client to Penson and that customer or client elects to purchase any Nexa products, then Penson shall pay [Broadridge or Ridge] a finder’s fee, the amount of which will be [     ]³

1	Amount to be mutually agreed by the Parties.
2	Amount to be mutually agreed by the Parties.
3	Amount to be mutually agreed by the Parties.

-2-

EXHIBIT E

PENSON WORLDWIDE, INC.
STOCKHOLDER’S AND REGISTRATION RIGHTS AGREEMENT

PENSON WORLDWIDE, INC.
STOCKHOLDER’S AND REGISTRATION RIGHTS AGREEMENT

     THIS STOCKHOLDER’S AND REGISTRATION RIGHTS AGREEMENT is made effective as of the ___day of                     , 2010 (the “Effective Date”), between Penson Worldwide, Inc., a Delaware corporation (the “Company”), and [     ]¹, Inc. (“Stockholder”). All capitalized terms used in this Agreement shall have the meaning assigned to them in this Agreement or in the attached Appendix.

AGREEMENT

     In consideration of certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

     A. TRANSFER AND REGISTRATION RIGHTS

          1. Restriction on Transfer. The Stockholder agrees that it will not Transfer, other than a Permitted Transfer, the Shares prior to the first anniversary of the date of this Agreement, without the prior written consent of the Company. Each person to whom the Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company in form and substance satisfactory to the Company that such person is bound by the provisions of this Agreement and that the transferred shares remain subject to (i) the Market Stand-Off and (ii) Restrictions on Unsolicited Acquisition Activities, to the same extent such shares would be so subject if retained by the transferor.

     The Company shall not be required (i) to transfer on its books any Shares which have been sold or transferred in violation of the provisions of this Agreement, or (ii) to treat as the owner of the Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom the Shares have been transferred in contravention of this Agreement.

          2. Registration Rights. The Stockholder shall have the right to have its Registrable Securities registered under the Securities Act and applicable state securities laws in accordance with the following provisions.

          3. Demand Registration.

          (i) Request for Registration. On or after the first anniversary of the date of this Agreement and subject to Section A(3)(ii) hereof and the other terms and conditions of this Agreement, upon the written request from the Stockholder that the Company effect any registration under the Securities Act (including a shelf registration) with respect to all or a part of the Registrable Securities of Stockholder, the Company shall as soon as practicable use its commercially reasonable best efforts to effect any such registration under the Securities Act in

¹ Insert Ridge Clearing & Outsourcing Solutions, Inc. or an Affiliate thereof.

accordance with Section A(7) hereof with respect to that part of the Registrable Securities that the Company has been requested to register, including, but not limited to, through (1) a shelf registration, (2) a registration on Form S-1 or any similar long-form registration statement (a “Long-Form Registration”) or (3) a Form S-3 or any similar short-form registration statement (a “Short-Form Registration”) if the Company qualifies to effect a Short-Form Registration.

     Any registration statement filed pursuant to a request under this Section A(3)(i) may, subject to the provisions of Section A(3)(iii) below, include other securities of the Company which are held by Persons other than the Stockholder who, by virtue of agreements with the Company, are entitled to include their securities in such registration, but the right of such Persons to include any of their securities in any registration requested by the Stockholder pursuant to Section A(3)(i) hereof shall be subject to the limitations set forth in Section A(3)(iii) below.

     (ii) Limitations on Demand Registrations. The Company shall not be obligated to effect more than one registration pursuant to this Section A(3).

     (iii) Underwriting. The Stockholder may distribute the Registrable Securities covered by its request for a registration pursuant to Section A(3)(i) hereof by means of an underwriting managed by an underwriter which shall be selected by the Company and reasonably acceptable to the Stockholder.

     If holders of Shares other than Registrable Securities who are entitled, by virtue of agreements with the Company, to have Shares included in such an underwritten registration (the “Other Shareholders”) request such inclusion, the securities of such Other Shareholders shall be included in the underwritten registration subject to the applicable provisions of this Section A. The Stockholder and the Company shall (together with all Other Shareholders proposing to distribute their securities through such registration) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Company and reasonably acceptable to the Stockholder. Notwithstanding any other provision of this Section A(3), if the representative for the underwriters advises the Stockholder or the Company in writing that (i) in the representative’s best judgment, marketing factors require a limitation on the number of shares to be underwritten or (ii) the inclusion of shares held by Other Shareholders and, as the case may be, officers, other employees and/or directors of the Company in the offering could, in the representative’s best judgment, reduce the offering price per share or otherwise adversely affect the proposed public offering, then, in the case of the preceding clause (i), Shares held by Other Shareholders shall be excluded from such underwriting to the extent so required by such limitations and, in the case of the preceding clause (ii), Shares held by Other Shareholders and, as the case may be, officers, other employees and/or directors of the Company shall be excluded from such underwriting to the extent advised by the representative. If, after the exclusion of such shares, further reductions are required to meet the limitation on the number of shares to be underwritten as advised by the representative, the number of shares that may be included in the underwriting by the Stockholder shall be reduced by such minimum number of shares as is necessary to comply with such limitation. If

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any Other Shareholder who has requested inclusion in such registration as provided above disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the underwriter and the Stockholders. If the underwriter has not limited the number of Registrable Securities or other securities to be underwritten, the Company may include its securities for its own account in such registration if the representative so agrees and if the number of Registrable Securities and other securities which would otherwise have been included in such registration and underwriting will not thereby be limited. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall not be included in such registration.

     (iv) Notwithstanding the foregoing, if the Company shall furnish to the Stockholder a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board, it would be materially detrimental to the Company and its members for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request for such filing; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period.

     4. Piggyback Registration.

     (i) If at any time after the first anniversary of the date of this Agreement, the Company shall determine to register any of its Shares either for its own account or for the account of a holder or holders of Shares (other than a registration on Form S-8 (or similar or successor form) relating solely to share option, share purchase or other employee benefit plans, or a registration on Form S-4 (or similar or successor form) relating solely to a transaction under Rule 145 of the Securities Act, or a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), the Company will:

     A. promptly give to the Stockholder a written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and

     B. include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in the written request made by the Stockholder within twenty (20) days after the date written notice described in clause (i)(A) above is deemed given (as provided in Section C(2) herein) by the Company except as set forth in Section A(4)(ii)

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     below. Such written request may specify all or a part of the Stockholder’s Registrable Securities.

          (ii) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Stockholder as a part of the written notice given pursuant to Section A(4)(i). In such event, the right of the Stockholder to registration pursuant to this Section A(4) shall be conditioned upon Stockholder’s participation in such underwriting and the inclusion of Stockholder’s Registrable Securities in the underwriting to the extent provided herein. The Stockholder (together with the Company and Other Shareholders distributing their Shares through such underwriting) shall enter into an underwriting agreement in customary form with the representative(s) of the underwriter or underwriters selected for underwriting by the Company. Notwithstanding any other provision of this Section A(4), if the representative advises the Stockholder or the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, then Shares held by Stockholder, Other Shareholders and, as the case may be, officers, other employees and/or directors of the Company shall be excluded from such underwriting on a pro rata basis, by such minimum number of shares as is necessary to comply with such limitation (it is hereby understood that the foregoing shall not be a limitation on the number of Shares to be registered by the Company). If the Stockholder or any officer, director or Other Shareholder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall not be included in such registration.

          (iii) Number. The Stockholder shall be entitled to have its shares included in an unlimited number of registrations pursuant to this Section A(4).

          5. Expenses of Registration. Upon the exercise of registration rights set forth in Section A(3) hereof, the Stockholder shall pay all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant thereto; provided that in the event Other Shareholders and/or the Company elect to include securities to be sold for their own respective accounts in a registration pursuant to Section A(3), such Other Shareholders and the Company shall pay a proportionate part of the Registration Expenses based upon the number of shares so included and shall be responsible for Selling Expenses applicable to the registration of their shares. Upon the exercise of registration rights set forth in Section A(4) hereof, the Company shall pay all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant thereto, provided that the Company shall in no event be responsible for Selling Expenses, which shall be borne by the holders of the securities so registered, pro rata on the basis of the number of their shares so registered.

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          6. Other Registration Requests. If at any time after the first anniversary of the date of this Agreement, the Stockholder requests that the Company register any of the Shares for sale in an underwritten public offering, the Company agrees to consider such request in good faith. If the Company agrees with the request, the Company will take the steps set forth in Section A(7) to effect the registration requested and to consummate the sale of the Shares as contemplated by any such registration. The cost of effecting any such registration will be borne by the Stockholder provided that only shares it requests to be registered are included in any such registration. If shares of Other Shareholders or the Company are included in any such registration, the sharing of the cost of such registration shall be on a basis consistent with Section 5 above. Other than considering such request in good faith, the Company shall have no obligation to effect a registration requested by the Stockholder pursuant to this Section.

          7. Registration Procedures. In the case of each registration effected by the Company pursuant to Section A, the Company will promptly advise the Stockholder in writing as to the initiation of each registration and as to the completion thereof. In connection with any offering of Registrable Securities registered pursuant to subsection (3) of this Section A, and subject to the terms and conditions of Sections A(3) and A(4) hereof, the Company shall:

          (i) prepare and file with the SEC a registration statement on any form for which the Company then qualifies, and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable best efforts to cause such registration statement to become and remain effective as provided herein; provided that (A) at least five (5) Business Days before filing with the SEC a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish counsel selected by the Stockholder copies of all such documents proposed to be filed for said counsel’s review and comment and (B) the Company shall not file with the SEC a registration statement or prospectus or any amendments or supplements thereto to which the Stockholder or its counsel shall reasonably object on a timely basis provided that such written objection is based on information concerning Stockholder and sets forth in reasonable detail the basis for such objection;

          (ii) prepare and file with the SEC such amendments and supplements (provided that if any such amendment or supplement requested by Stockholder is required as a result of information concerning Stockholder not theretofore disclosed to the Company, Stockholder shall reimburse all reasonable costs and expenses of the Company incurred in connection with the filing of such amendment or supplement) to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration effective for a period of sixty (60) days or until the Stockholder has completed the distribution described in the registration statement relating

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thereto, whichever first occurs (but not before the time periods referred to in Section 4(3) of the Securities Act and Rule 174 promulgated thereunder, or any successor provisions, if applicable); cause the related prospectus to be amended or supplemented by any required prospectus supplement and to be filed as so amended or supplemented with the SEC pursuant to Rule 424; respond as promptly as practicable to any comments received from the SEC with respect to such registration statement or any amendment or supplement thereto and provide as promptly as practicable to the Stockholder, to the extent covered by such registration statement copies of all correspondence with the SEC relating to such registration statement or any amendment or supplement thereto; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of securities covered by such registration statement during such period in accordance with the intended method of disposition by sellers thereof set forth in such registration statement as amended or supplemented; provided, however, that (A) such 60-day period shall be extended for a period of time equal to the period, if any, during which the Stockholder refrains from selling any securities included in such registration in accordance with provisions of the last paragraph of this Section A(7), provided that such time period shall not be extended if the amendment or supplement filed is required as a result of information concerning Stockholder and (B) in the case of any registration of Registrable Securities pursuant to a Short-Form Registration which are intended to be offered on a continuous or delayed basis, such 60-day period shall be extended until all such Registrable Securities are sold, provided that (x) Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and (y) the applicable rules under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (1) includes any prospectus required by Section 10(a)(3) of the Securities Act or (2) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation in the registration statement by reference to periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act of the information specified in clauses (1) and (2) above, and (z) in no event shall the Company be required to maintain the effectiveness of such Registration Statement for a period exceeding 180 days;

     (iii) furnish to each underwriter, if any, and covered by such registration statement such number of copies of such registration statement, and the prospectus included in such registration statement (including each preliminary prospectus), each amendment and supplement thereto (in each case including all exhibits thereto and any documents incorporated by reference therein), and such other documents incident thereto as the Stockholder from time to time may reasonably request in order to facilitate the disposition of the Registrable Securities

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owned by the Stockholder in accordance with the intended method of disposition (it being understood that, subject to the terms hereof relating to the obligations of the Stockholder, the Company consents to the use of such prospectus and each such amendment and supplement thereto by each underwriter, if any, and the Stockholder in connection with such disposition);

     (iv) use its commercially reasonable best efforts to register or qualify such Registrable Securities under such other state securities or “blue sky” laws of such jurisdictions as the Stockholder, and underwriter, if any, of Registrable Securities covered by such registration statement reasonably requests and do any and all other acts and things that may be reasonably necessary or advisable to enable the Stockholder and each underwriter, if any, to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Stockholder; provided that the Company will not be required as a result thereof to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this clause (iv), (B) subject itself to taxation or regulation of its business in any such jurisdiction or (C) consent to general service of process in any such jurisdiction;

     (v) use its commercially reasonable best efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Stockholder to consummate the disposition of such Registrable Securities in accordance with the intended method of disposition;

     (vi) immediately notify each underwriter, if any, and the Stockholder at any time when a prospectus relating to its Registrable Securities is required to be delivered under the Securities Act of the happening of any event that comes to the Company’s attention if as a result of such event the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will promptly prepare and furnish to the Stockholder a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an 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 not misleading;

     (vii) use its commercially reasonable best efforts to cause all such Registrable Securities to be listed or quoted on (x) any national securities exchange or market in the United States on which Shares may

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then be listed or quoted and (y) each securities exchange or market on which similar securities issued by the Company may then be listed or quoted, and enter into such customary agreements including a listing application and indemnification agreement in customary form, in each case by the date of the first sale of such Registrable Securities, and to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement no later than the effective date of such registration statement;

     (viii) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;

     (ix) make available for inspection, during business hours of the Company, by the Stockholder, to the extent covered by such registration statement, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by the Stockholder or any such underwriter, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, if any, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees, and those of the Company’s affiliates, if any, to supply all information and respond to all inquiries reasonably requested during the course of any such inspection conducted in connection with such registration statement;

     (x) use its commercially reasonable best efforts to obtain a “cold comfort” letter from the Company’s appointed auditors in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the Stockholder or any underwriter retained by the Stockholder reasonably request;

     (xi) (A) promptly notify the Stockholder of any stop order issued or threatened by the SEC and of the receipt by the Company of any notification with respect to the suspension of the qualification (or exemption from qualification) of any such Registrable Securities under the applicable securities or “blue sky” laws of any jurisdiction and (B) use its commercially reasonable best efforts to prevent the entry or issuance of, or if entered or issued, obtain the withdrawal of such stop order or such suspension at the earliest possible moment;

     (xii) if requested by any underwriter or the Stockholder, promptly incorporate in a prospectus supplement or, subject to subsection (ii)(B)(y) of this Section A(7), post-effective amendment such information as such underwriter the Stockholder reasonably requests to be included therein, including, without limitation, with respect to the number of shares being sold by the Stockholder to such underwriter, the

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purchase price being paid therefor by such underwriter and with respect to any term of the underwritten offering of the securities to be sold in such offering; and make all required filings of such prospectus supplement or, subject to subsection (ii)(B)(y) of this Section A(7), post-effective amendment as soon as practicable after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment;

     (xiii) as promptly as practical after filing with the SEC any document which is incorporated by reference into such registration statement, deliver a copy of such document to each underwriter, if any, and the Stockholder;

     (xiv) cooperate with each underwriter, if any, and the Stockholder to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under such registration statement, and enable such securities to be in such denominations and registered in such names as such underwriter, if any, or the Stockholder reasonably requests; and

     (xv) otherwise comply with all applicable rules and regulations of the SEC and make available to the Stockholder, as soon as reasonably practicable, an earnings statement covering a period of at least twelve months beginning after the effective date of the registration statement (as the term “effective date” is defined in Rule 158(c) under the Securities Act) which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

     It shall be a condition precedent to the obligation of the Company to take any action with respect to any Registrable Securities that the Stockholder thereof shall furnish to the Company in writing such information regarding the Stockholder and the Registrable Securities and any other Shares held by the Stockholder and the intended method of disposition of the Registrable Securities held by the Stockholder as the Company shall reasonably request and as shall be required in connection with the action taken by the Company and the Stockholder shall enter into such customary agreements (including, without limitation, custody agreements) and cause to be delivered on its behalf such customary certificates and legal opinions as the Company may reasonably request.

     The Stockholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section A(7)(vi) hereof, it will forthwith discontinue disposition of Registrable Securities and shall not deliver to any person any copies of the registration statement or prospectus relating to such disposition until the Stockholder is in receipt of the copies of the supplemented or amended prospectus contemplated by Section A(7)(vi) hereof, and, if so directed by the Company (at the Company’s expense, unless the event described in Section A(7)(vi) is the result of information concerning Stockholder), the Stockholder will deliver to the Company all copies (including, without limitation, any and all

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drafts), other than permanent file copies, then in the Stockholder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

          8. Indemnification.

         (i) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the Stockholder, its respective directors, officers, managers and general partners, limited partners, members, and managing directors and each other Person, if any, who controls, is controlled by or is under common control with the Stockholder within the meaning of the Securities Act (and directors, officers, managers and partners, members, and managing directors and controlling Persons of any of the foregoing) against any and all losses, claims, damages and liabilities (or actions or proceedings in respect thereto), joint or several, and costs and expenses (including any amounts paid in any settlement effected with the Company’s consent, which consent will not be unreasonably withheld, delayed or conditioned) to which the Stockholder, any such director, officer, or general or limited partner, member or managing director or any such controlling Person may become subject under the Securities Act, state securities or “blue sky” laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or costs or expenses arise out of or are based upon (A) any untrue statement (or alleged untrue statement) of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (B) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. The Company will reimburse each such director, officer, general partner, limited partner, member, managing director or controlling Person (and directors, officers, managers, partners, members, and managing directors and controlling Persons of any of the foregoing) for any legal and any other expenses reasonably incurred in connection with investigating or defending such claim, loss, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such claim, loss, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based on any untrue statement (or alleged untrue statement) or omission (or alleged omission) made in such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Stockholder or any such director, officer, manager, general or limited partner, member, managing director, or controlling Person specifically stating that it is for use therein.

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     The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of the Stockholder or any such director, officer, manager, general partner, limited partner, member, managing director, or controlling Person and shall survive the transfer of such securities by the Stockholder.

     (ii) The Stockholder will, if Registrable Securities held by it are included in any registration statement filed in accordance with the provisions hereof, (x) indemnify the Company and its directors, officers, controlling Persons and all other prospective sellers and their respective directors, officers, general and limited partners, managing directors, and their respective controlling Persons against all claims, losses, damages and liabilities (or actions in respect thereof) and expenses to which any such Person may become subject under the Securities Act, state securities “blue sky” laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (A) any untrue statement (or alleged untrue statement) of a material fact with respect to the Stockholder contained in any such registration statement, preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (B) any omission (or alleged omission) to state therein a material fact with respect to the Stockholder required to be stated therein or necessary to make the statements made by the Stockholder therein not misleading and (y) reimburse the Company and its directors, officers, controlling Persons and all other prospective sellers and their respective directors, officers, general and limited partners, managing directors, and their respective controlling Persons for any actual legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in the case of both clause (x) and clause (y), to the extent, and only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by the Stockholder with respect to the Stockholder and stated to be specifically for use therein; provided, however, that the obligations of the Stockholder hereunder shall be limited to an amount equal to the net proceeds received by the Stockholder from securities sold by the Stockholder pursuant to such registration statement or prospectus.

     The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or the Stockholder, underwriters or any of their respective directors, officers, general or limited partners, managing directors or controlling Persons and shall survive the transfer of such securities by the Stockholder.

     (iii) Each party entitled to indemnification under this Section A(8) (the “Indemnified Party”) shall give notice to the party required to

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provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld, delayed or conditioned) and the Indemnified Party may participate in such defense at such party’s expense (unless the Indemnified Party shall have reasonably concluded that (A) the Indemnifying Party has failed to promptly assume such defense or vigorously defend such claim or litigation or (B) there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the reasonable fees and expenses of the Indemnified Party’s counsel, which counsel shall have been reasonably agreed to by the Indemnifying Party) shall be at the expense of the Indemnifying Party and shall be reimbursed as they are incurred); and provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section A except to the extent the Indemnifying Party is actually materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the written consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as a term thereof the giving by the claimant or plaintiff to such Indemnified Party of an unconditional release from all liability with respect to such claim or litigation or which includes any statement as to an admission of fault, culpability or failure to act by or on behalf of the Indemnified Party. Each Indemnified Party shall promptly furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

     (iv) In order to provide for a just and equitable contribution in circumstances in which any of the foregoing indemnity agreements provided for in this Section A(8) is for any reason held to be unavailable to an Indemnified Party, the Company and the Stockholder, as the case may be, shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect (A) the relative benefits received by the Company, on the one hand, and the Stockholder on the other hand, and (B) the relative fault of the Company, on the one hand, and the Stockholder, on the other, with respect to the statements or omissions that resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations; provided, however, that no Person guilty of

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fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to a contribution from any Person who was not guilty of such fraudulent misrepresentation. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Stockholder, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Stockholder agree that it would not be just and equitable if a contribution pursuant to this Section A(8) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. Notwithstanding anything to the contrary contained herein, the Company and the Stockholder s agree that any contribution required to be made by the Stockholder pursuant to this Section A(8) shall not exceed the net proceeds from the offering of securities received by the Stockholder with respect to such offering. For purposes of this Section A(8), each Person, if any, who controls the Stockholder within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Stockholder, and each director of the Company, each officer of the Company who signed the registration statement, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company.

          9. Information by the Stockholders. The Stockholder shall furnish to the Company such information regarding and the distribution proposed by the Stockholder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section A.

          10. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may permit the sale of restricted securities to the public without registration, the Company agrees to:

          (i) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act;

          (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements; and

          (iii) so long as the Stockholder owns any Shares, furnish to the Stockholder, upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements).

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          11. “Market Stand-off” Agreement. In addition to the transfer restriction set forth in Section A(1), if any registration of Shares (or other securities) of the Company shall be in connection with an underwritten public offering, the Stockholder agrees not to effect any sale or distribution, including any private placement or any sale pursuant to Rule 144A under the Securities Act (or any successor provision) or otherwise or any sale pursuant to Rule 144 under the Securities Act (or any successor provision) of any Shares, other than (x) to one or more of its transferees who agree to be bound by this Section A(11) or (y) by pro-rata distribution to its shareholders, partners or other beneficial holders who agree to be bound by this Section A(11), and not to effect any such sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) during the ten calendar days prior to, and during the ninety (90) calendar day period (or such other shorter period as may be agreed upon between the Stockholder and the representative of the underwriters of such offering) that begins on the effective date of such registration statement (except as part of such registration), without the consent of the representative of the underwriters of such offerings; provided, that (A) written notice of such registration has been deemed given (as provided in Section C(2) herein) to the Stockholder at least two (2) Business Days prior to the anticipated beginning of the ten calendar day period referred to above and (B) all directors and executive officers of the Company also agree not to effect any such sale or distribution (other than as part of such underwritten offering) during such period. If requested by the representative of the underwriters, the Stockholder shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said 90-day period (or such other shorter period as may be agreed upon between the Company and the representative of the underwriters of such offering in the case of a registration pursuant to Section A(4), or as may be agreed upon between the Company, the representative of the underwriters of such offering and the Stockholder in the case a registration pursuant ot Section A(3)). The provisions of this Section A(11) shall be binding upon any subsequent transferee who acquires Shares in a Permitted Transfer, including, without limitation, any of the Stockholder’s shareholders, partners or other beneficial holders. The obligations described in this Section A(11) shall not apply to a registration relating solely to employee benefit plans on Form S-1 or S-8, or to a registration relating solely to a transaction on Form S-4.

          12. Assignability. The registration rights set forth in this Section A shall be assignable by the Stockholder, in whole or in part, to any transferee of Registrable Securities receiving such transferred Registrable Securities in a Permitted Transfer.

          13. Restrictions on Unsolicited Acquisition Activities. Stockholder agrees that, for a period of two years from the date of this Agreement, without the prior written consent of the Board or pursuant to a transaction otherwise approved by the Board, neither the Stockholder nor its directors or executive officers or its or their affiliates (including any person or entity directly or indirectly, through one or more intermediaries, controlling it or controlled by it or under common control with it) will:

          (i) purchase, offer or agree to purchase, or announce an intention to purchase, directly or indirectly, any voting securities or assets of the Company or

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its subsidiaries, provided, however, that no acquisition described in this clause (i) shall be deemed to occur solely due to (a) a stock split, reverse stock split, reclassification, reorganization or other transaction by the Company affecting the Common Stock generally, (b) a stock dividend or other pro rata distribution by the Company to holders of the outstanding Common Stock; or (c) any other change in the outstanding number of Common Stock; or

     (ii) enter into any agreement, arrangement, or understanding, the effect or intent of which is to mitigate loss, to manage risk or to benefit from changes in the share price of any of the Company’s securities, or increase or decrease the voting power with respect to any of the Company’s securities (including, without limitation, any derivative or short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares); or

     (iii) make, or in any way participate, directly or indirectly, in any “solicitation” of “proxies” to vote or “consents” (as such terms are used in the rules and regulations of the SEC) or seek to advise or influence any Person with respect to the voting of any voting securities of the Company or its subsidiaries; or

     (iv) initiate or support, directly or indirectly, any stockholder proposal with respect to the Company; or

     (v) directly or indirectly make any public announcement with respect to, or submit a proposal for, or offer of (with or without conditions) any extraordinary transaction involving the Company or its subsidiaries, or their respective securities or assets, or of any successor to or person in control of the Company or any of its businesses, or any assets of the Company or any subsidiary or division thereof or of any such successor or controlling person; or

     (vi) seek or propose to influence or control the Company’s management or policies; or

     (vii) seek to negotiate or influence the terms and conditions of employment of employees of the Company or its subsidiaries or any agreement of collective bargaining with employees of the Company or its subsidiaries; or

     (viii) form, join, or in any way participate in a “group” as defined in Section 13(d)(3) of the Exchange Act in connection with any of the foregoing.

     This Section 12 does not prohibit, limit or restrict (i) Stockholder from exercising its respective rights, performing its respective obligations or otherwise consummating the transactions contemplated by this Agreement or (ii) Stockholder from voting its Shares in connection with any matter submitted to the shareholders of the Company, or selling its Shares pursuant to any business combination tender or exchange offer or other extraordinary transaction with respect to the Company, in each case, commenced by any Person (including

15

by Stockholder, so long as such business combination tender or exchange offer or other extraordinary transaction by the Stockholder would not otherwise result in a violation of this Section 12 at such time).

          14. Right to Redemption. If any such transaction would result in Stockholder owning more than 9.9% of the issued and outstanding shares of Common Stock, then concurrently with any purchase, redemption, exchange or other acquisition of shares of its Common Stock, the Company agrees to make an offer to purchase from Stockholder a pro rata portion of the shares held by Stockholder such that Stockholder’s ownership does not exceed 9.9% of the issued and outstanding shares of Common Stock, such offer to be made on same terms and conditions as any such other purchase, redemption, exchange or other acquisition, as the case may be.

          B. LEGEND REQUIREMENTS

          1. Restrictive Legends. The stock certificates for the Shares shall be endorsed with the following restrictive legends:

          (i) “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state’s securities laws and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such shares are registered under such laws or an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that such registration is not required.”

          (ii) “The securities represented by this certificate are subject to certain restrictions and agreements contained in a Stockholders’ Agreement with the Company dated effective as of                     , 2010. A copy of the Stockholders’ Agreement and all applicable amendments thereto will be furnished by the Company to the record holder of this certificate without charge upon written request to the Company at its principal place of business or registered office.”

          2. Following the sale of any Shares in accordance with Section A of this Agreement or pursuant to Rule 144 and, in the case of a sale pursuant to Rule 144, accompanied by an opinion of counsel reasonably satisfactory to the Company, the Company shall use its best efforts to cause the removal from the certificate(s) representing such Shares the legends described in clause (1) above.

          C. GENERAL PROVISIONS

          1. Assignment. The Stockholder may not assign any of its rights or obligations hereunder except as expressly permitted by this Agreement.

          2. Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or mailed by registered or certified mail (return receipt requested):

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(i) If to the Company:

Penson Worldwide, Inc.
1700 Pacific Avenue, Suite 1400
Dallas, Texas 75201
Attn: Chief Executive Officer

With a copy to:

Penson Worldwide, Inc.
1700 Pacific Avenue, Suite 1400
Dallas, Texas 75201
Attn: General Counsel

(ii) If to Stockholder, at the address for Stockholder set forth below its signature hereto.

          Any party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

          3. No Waiver. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

          4. Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without resort to that state’s conflict-of-laws rules. To the fullest extent permitted by applicable law, each party hereto (i) agrees that any claim, action or proceeding by such party seeking any relief whatsoever arising out of, or in connection with, this Agreement shall be brought in any state or federal court of competent jurisdiction sitting in New York County in the State of New York and not in any other state or federal court in the United States of America or any court in any other country, (ii) agrees to submit to the exclusive jurisdiction of such courts described in clause (i) for purposes of all legal proceedings arising out of, or in connection with, this Agreement, (iii) waives and agrees not to assert any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court or any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and (iv) agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.

          5. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Stockholder’s successors and assigns, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms hereof.

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          6. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Stockholder. Any amendment or waiver effected in accordance with this Section C(6) shall be binding upon the Stockholder, each future holder of the Shares and the Company.

          7. Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed and interpreted in such manner as to be effective and valid under applicable law.

          IN WITNESS WHEREOF, the parties have executed this Stockholder’s Agreement on the day and year first indicated above.

PENSON WORLDWIDE, INC.
By:
	Name:	Philip A. Pendergraft
	Title:	Chief Executive Officer
[          ]2
By:
	Name:
	Title:

Address:

² Insert Ridge Clearing & Outsourcing Solutions, Inc. or an Affiliate thereof.

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APPENDIX

     The following definitions shall be in effect under the Agreement:

     A. “Affiliate” shall mean, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

     B. “Agreement” shall mean this Stockholder’s and Registration Rights Agreement.

     C. “Board” shall mean the Company’s Board of Directors.

     D. “Business Day” shall mean a day other than a Saturday, Sunday or other day on which the New York Stock Exchange is authorized or required by Law to close.

     E. “Common Stock” shall mean the Company’s common stock, $0.01 par value per share.

     F. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     G. “Governmental Entity” shall mean any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States or foreign federal, state, local, or municipal government, any supranational, international, multinational, national or other government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations or orders of such body have the force of Law, including, without limitation, FINRA and any other applicable self regulatory organization.

     H. “Law” shall mean any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, directive, rule, regulation and any other decision, ruling, notification requirement or determination of any Governmental Entity (whether or not having the force of law).

     I. “Permitted Transfer” shall mean a Transfer to an Affiliate of the Stockholder.

     J. “Person” shall mean an individual, partnership, joint stock company, joint venture, corporation, trust or unincorporated organization, limited liability company, or a government or agency or political subdivision thereof or any other entity.

     K. “register,” “registered” and “registration” shall refer to a registration effected by preparing and filing a registration statement with the SEC in compliance with the Securities Act (and any pre- and post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement by the SEC.

     L. “Registrable Securities” shall mean all Shares held by the Stockholder, whether now owned or hereafter acquired.

     M. “Registration Expenses” shall mean all expenses incident to a registration effected pursuant to Section A(3) and/or (4) hereof, including, without limitation, all SEC, Financial Industry Regulatory Authority, Inc. (“FINRA”) and stock exchange registration and filing fees and expenses, fees and expenses of compliance with applicable state securities or “blue sky” laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with “blue sky” qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, the fees and expenses incurred in connection with the listing of such securities to be registered on each securities exchange or national market system on which such securities are listed, fees and disbursements of counsel for the Company and all independent certified public accountants (including the expenses of any annual audit and “cold comfort” letters required by or incident to such performance and compliance), the fees and disbursements of underwriters customarily paid by issuers or sellers of securities (including the fees and expenses of any “qualified independent underwriter” required by FINRA) other than Selling Expenses, the reasonable fees and expenses of any special experts retained by the Company in connection with such registration, and reasonable fees and expenses of other Persons retained by the Company (but not including any underwriting discounts or commission or transfer taxes, if any, attributable to the sale of Registrable Securities by holders of such Registrable Securities other than the Company).

     N. “SEC” shall mean the Securities and Exchange Commission.

     O. “Securities Act” shall mean the Securities Act of 1933, as amended.

     P. “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities.

     Q. “Shares” shall mean (a) all Common Stock issued to the Stockholder pursuant to the terms of the Asset Purchase Agreement dated as of the date hereof between the Company, Penson Financial Services, Inc., Stockholder and Broadridge Financial Solutions, Inc.; and (b) all shares of Common Stock and other capital stock, equity security or debt security exercisable or convertible into capital stock of the Company hereafter issued by the Company to the Stockholder, whether in connection with a issuance, grant, stock split, stock dividend, reorganization, warrant, option, convertible security, right to acquire or otherwise. All references herein to Shares owned by the Stockholder shall include: (i) the community interest or similar marital property interest, if any, of the spouse of the Stockholder in such Shares; and (ii) all of the equity interests and voting rights in the Company which are reflected by Share ownership. For purposes of clarification, the term “Shares” shall expressly exclude shares of capital stock of the Company owned or acquired by the Stockholder other than directly from the Company.

     R. “Stockholder” shall mean the Stockholder and all subsequent holders of Shares who derive their ownership of Shares through a Permitted Transfer from the Stockholder.

     S. “Transfer” shall mean any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation, encumbrance or other disposition of Shares (or any interest therein) or of all or part of the voting power (other than the granting of a revocable proxy) associated with the Shares (or any interest therein) whatsoever, or any other transfer of beneficial ownership of

Shares, whether voluntary or involuntary, including, without limitation, any such disposition or transfer as a part of any liquidation of the Stockholder’s assets or any reorganization of the Stockholder pursuant to the United States or any other bankruptcy law or other similar debtor relief laws.

Exhibit F

FORM OF BACKSTOP NOTE

FORM OF BACKSTOP SELLER NOTE

$                     ,      

     1. FOR VALUE RECEIVED, the undersigned, PENSON WORLDWIDE, INC., a Delaware corporation (the “Company” or “Issuer”), hereby promises to pay to the order of BROADRIDGE FINANCIAL SOLUTIONS, INC. (“Payee”) the principal amount of $[     ] (the “Initial Amount”), subject to adjustment as provided in this Note (if adjusted, the “Adjusted Amount”) on the Maturity Date (or, if such day is not a Business Day, on the immediately succeeding Business Day), subject to the provisions herein. The Issuer further promises to pay interest on the unpaid principal amount of this Note from time to time at a rate per annum equal to the LIBOR Rate plus an amount (the “Spread”) equal to plus fourteen percent (14.0%). Interest on this Note shall be due and payable quarterly in arrears in cash on each [December 31, March 31, June 30 and September 30] of each calendar year, provided that if any such day is not a Business Day, payment shall be made on the immediately succeeding Business Day.

     Payments of principal hereof and interest hereon shall be made in Dollars in immediately available funds to such account of the Noteholder located in New York, New York, as the Noteholder may designate in writing to the Issuer.

     2. Prepayments; Optional Prepayment. Subject to the provisions herein, the Issuer may, at any time and from time to time prior to the Maturity Date, prepay the principal amount of this Note, in whole or in part, without penalty or premium, on any Business Day. Prepayments of this Note must be accompanied by payment of accrued and unpaid interest on the principal amount prepaid to and including the date of payment.

     3. Negative Covenants. So long as any principal of and interest on this Note or any other amount payable hereunder remains unpaid or unsatisfied:

     (a) Mergers and Consolidations. The Issuer shall not merge or consolidate with or into any Person or sell all or substantially all of its assets, except that so long as both prior to and subsequent to such merger or consolidation, no Event of Default has occurred and is continuing, the Issuer may merge or consolidate with any Person, provided that (x) the Issuer shall be the continuing or surviving Person or (y) if the Issuer shall not be the surviving Person, such surviving Person shall have assumed the obligations of the Issuer hereunder pursuant to documentation in form and substance reasonably satisfactory to the Noteholder (each such merger or consolidation, a “Permitted Merger”).

     (b) Liens. The Issuer shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired to secure Indebtedness without making, or causing such Subsidiary to make effective provision for securing this Note equally and ratably with such Indebtedness or in the event such Indebtedness is subordinate in right of payment to this Note, prior to such Indebtedness, as to such property or assets for so long as such Indebtedness shall be secured. The foregoing restrictions shall not apply to the following Liens:

(A)	Liens existing on the date hereof;
(B)	Liens securing the Credit Agreement (including any modification, replacement, renewal or extension of any such Lien in connection with the modification, renewal, replacements, extension, amendment or amendment and restatement of the Credit Agreement);
(C)	Liens to the extent such Liens would be permitted by the Credit Agreement (as the Credit Agreement is in effect on the date of the Asset Purchase Agreement);
(D)	Liens securing Cash Management Obligations, Hedging Agreements and other Indebtedness in respect of netting services, automatic clearinghouse arrangements, overdraft protections, employee credit card programs and other cash

	management and similar arrangements in the ordinary course of business and any guarantees thereof;
(E)	Liens arising from judgments or orders for the payment of money;
(F)	Liens (I) on cash advances in favor of the seller of any property to be acquired in an investment to be applied against the purchase price for such investment or (II) consisting of an agreement to dispose of any property;
(G)	Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Subsidiary;
(H)	Liens in connection with any sale-leasebacks;

(I) Liens in connection with any credit facility or other lending arrangement entered into by a Regulated Subsidiary to finance operations in the ordinary course of business;

(J)	Liens on assets of a Regulated Subsidiary resulting from the lending of securities and repurchase and reverse repurchase agreements;
(K)	Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings;
(L)	Liens of materialmen, mechanics, warehousemen, carriers or employees or other similar Liens arising by operation of law in the ordinary course of business;
(M)	Liens consisting of deposits or pledges to secure the performance of bids, trade contracts, leases, public or statutory obligations, or other obligations of a like nature incurred in the ordinary course of business;
(N)	Liens upon or in any assets acquired or held to secure the purchase price of such assets or Indebtedness incurred for the purpose of financing the acquisition of such assets to secure Indebtedness not exceeding

(x) if the Credit Agreement (including any agreement that refinances or replaces the Credit Agreement) is in effect (regardless of whether any indebtedness is outstanding thereunder) $25,000,000 in the aggregate under this clause (N) without prejudice to any other clause hereof or

(y) if the Credit Agreement (including any agreement that refinances or replaces the Credit Agreement) is terminated or otherwise no longer in effect (and not replaced), an amount not to exceed 15% of the Company’s net revenues for the trailing twelve month period (based on the latest period for which internal financial statements are available),

in each case, provided that the Liens are restricted to such assets and the proceeds thereof; it being understood that any Lien that was permitted to be incurred as of the date of incurrence shall not violate subsection (y) solely as a result of a subsequent decline in the Issuer’s net revenues;

(O)	restrictions and other minor encumbrances on real property which do not in the aggregate materially impair the use or value of such property;
(P)	the rights of licensors or lessors of property under the license or lease agreements related thereto;

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(Q)	Liens which constitute rights of set-off or bankers’ liens or securities intermediaries’ liens whether arising by operation of law or by contract; and
(R)	the modification, replacement, renewal or extension of any Lien permitted under this Section 3(b) (other than Section 3(b)(B)).

(c) Convertible Notes. Borrower will not voluntarily redeem, purchase or otherwise voluntarily prepay its 8.00% Senior Convertible Notes due 2014 prior to maturity.

     4. Events of Default. The following are “Events of Default”:

     (a) The Issuer fails to pay any interest or principal of this Note as and on the date when due and such failure shall continue unremedied for more than 3 (three) Business Days; or

     (b) (i) The Issuer fails to perform or observe any term, covenant or agreement contained in Section 3(a) hereof or (ii) the Issuer fails to perform or observe any other covenant or agreement (not specified in the preceding clause (b)(i)) contained in this Note on its part to be performed or observed and in the case of this clause (ii) such failure continues unremedied for 45 days; or

     (c) The occurrence of a Change of Control; or

     (d) An event of default has occurred and is continuing under any agreement in respect of Indebtedness with an outstanding principal amount in excess of $50,000,000 or under the Credit Agreement resulting in such Indebtedness or the Credit Agreement being or being declared due and payable (or such default is a failure to pay at maturity); provided, however, if any such acceleration of Indebtedness has been rescinded, there shall no longer be any Event of Default under this Section 4(d) with respect to such acceleration; or

     (e) The Issuer or any Material Subsidiary institutes any proceeding under any Debtor Relief Law, or makes a general assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered, or consented to by such Person, in any such proceeding or an order for the liquidation of any such Person is entered in any such proceeding or any such Person admits in writing its inability to pay its debts generally as they become due (such proceedings collectively, the “Insolvency Proceedings”); or

     (f) Any termination of the Outsourcing Agreement, as such term is defined in the Asset Purchase Agreement, (x) by the Noteholder, pursuant to the exercise of remedies for a material breach of the Outsourcing Agreement by the Issuer entitling such termination or (y) by the Issuer, for any reason (other than a termination by the Issuer for a material breach or material failure to perform by the Payee including the exercise of any termination right pursuant to any service level agreement).

     Upon the occurrence and during the continuation of an Event of Default, the Noteholder may declare all sums outstanding hereunder, including all interest thereon, to be immediately due and payable, whereupon the same shall become and be immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived; provided, however, that upon the occurrence of an actual entry of an order for relief with respect to the Issuer under the Bankruptcy Code, all sums outstanding hereunder including all interest thereon, shall become and be immediately due and payable, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all of which are hereby expressly waived.

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     5. Guarantees. (i) The Issuer will not permit any of its subsidiaries to Guarantee any Indebtedness of the Issuer, other than the Credit Agreement and except as permitted by the Credit Agreement as in effect on the date of the Asset Purchase Agreement and except to the extent a Lien of such Indebtedness would be permitted under Section 3(b) above ,and (ii) the Issuer will not permit any of its subsidiaries to Guarantee any Indebtedness issued to a seller for the purposes of financing the acquisition of substantially all the assets of a business, unless in each case such subsidiary, concurrently with the incurrence of any such Guarantee, executes and delivers to the Noteholder a guarantee of the Issuer’s obligations under this Note, in the substantially the same form or otherwise in a form and substance reasonably satisfactory to the Noteholder.

     6. Successors and Assigns. The provisions of this Note shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Issuer nor any Guarantor may assign its rights and obligations under this Note other than pursuant to a Permitted Merger. The Noteholder may at any time assign its rights and obligations under this Note to any other Person.

     7. Prepayments; Optional Prepayment, Mandatory Prepayment. Subject to the provisions herein, the Issuer may, at any time and from time to time prior to the Maturity Date, prepay the principal amount of this Note, in whole or in part, without penalty or premium, on any Business Day. Subject to the terms of the Subordination Agreement (as amended, restated, modified or replaced from time to time) and any obligations to prepay the Credit Agreement, the Issuer will prepay the principal amount of this Note to the extent of the Net Cash Proceeds within 5 business days of when received by the Issuer from a Capital Market Transaction completed after the date hereof, provided that payments shall not be required to be made more frequently than once a month. Prepayments of this Note must be accompanied by payment of accrued and unpaid interest on the principal amount prepaid to and including the date of payment.

     8. Definitions. As used in this Agreement, the following terms shall have the following meanings:

     “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

     “Asset Purchase Agreement” means that certain Asset Purchase Agreement dated as of November 2, 2009, among the Company, Buyer, Parent and Seller.

     “Bankruptcy Code” means The Bankruptcy Reform Act of 1978, as codified as 11 U.S.C. Section 101 et seq.

     “Business Day” means any day other than Saturday, Sunday or other day on which the New York Stock Exchange is authorized or required by Law to close.

     “Capitalized Lease” means a lease under which the Issuer or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.

     For the purposes of this Note: (a) “Capital Market Transaction”, means the issuance by the Issuer in a registered public offering , Rule 144A offering or other capital market offering to institutional investors of common stock, preferred stock or Subordinated Debt or securities convertible or exchangeable for any of the aforementioned securities (or any combination thereof) in an offering generating proceeds in excess of $10,000,000; (b) “Net Cash Proceeds” means the excess of (i) the sum of the cash and cash equivalents received by the Issuer in connection with a Capital Market Transaction over (ii) the underwriting discounts and commissions, commitment fees, arrangement fees and other out-of-pocket fees, costs and expenses, incurred in connection with such Capital Market Transaction; and (c) “Subordinated Debt” means

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debt securities of the Issuer expressly subordinated in right of payment to the Credit Agreement or the Issuer’s 8.00% Senior Convertible Notes due 2014.

For the avoidance of doubt, a Capital Market Transaction shall not include (1) any issuances of securities registered on Form S-8 or other issuance to employees of stock, options or restricted stock units, or (2) the issuance of any JBO or similar stock to correspondent and/or customers, or (3) issuances in connection with the acquisition of a business or purchase of assets (including as an earn out, deferred purchase price or similar arrangement), or (4) issuances of securities in respect of the conversion of convertible securities, or (5) incurrence of indebtedness to the extent such indebtedness would have been permitted by the Credit Agreement as of the date of the Asset Purchase Agreement.

     “Cash Management Obligations” means any obligations of the Issuer or any Subsidiary in respect of overdrafts and related liabilities arising from treasury, depository or cash management services.

     “CFTC” means the Commodity Futures Trading Corporation, or any successor thereto.

     “Change of Control” means

(i) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its subsidiaries, any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) (any such person or group, an “Acquiror” ) files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that, or the Issuer otherwise becomes aware that, such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of 50% or more of the equity securities of the Issuer entitled to vote for members of the board of directors or equivalent governing body of the Issuer (“Issuer Voting Securities”) on a fully diluted basis (a “Control Interest”);

(ii) all or substantially all of the assets of the Issuer (on a consolidated basis) are sold or otherwise transferred to any person in one transaction or a series of related transactions in which, immediately after the consummation thereof, the holders of the majority of the Issuer Voting Securities prior to such transaction to not represent a majority of the Issuer Voting Securities or of the equity interests of the surviving or transferee person; or

(iii) the Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer.

“Company” has the meaning set forth in Section 1.

     “Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of May 1, 2009, with Regions Bank, as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, the lenders party thereto and other parties thereto, as amended by that certain First Amendment dated as of May 27, 2009 and Second Amendment dated as of September 22, 2009 (together with all exhibits and schedules thereto, as amended, restated, amended and restated, replaced, refinanced, supplemented or otherwise modified in writing from time to time) and any extension, renewal, replacement or refinancing of such credit facility from time to time.

     “Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

     “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

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     “Dollar” means lawful money of the United States.

     “Events of Default” has the meaning specified in Section 4.

     “FINRA” means the Financial Industry Regulatory Authority, Inc. or any successors thereto.

     “FSA” means the Financial Services Authority, or any successor thereto.

     “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

     “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

     “Guarantee” by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation.

     “Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

     “Indebtedness” of any Person means, 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, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) 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, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, and (g) all obligations under Capitalized Leases.

     “Interest Period” means the period commencing on the date of the initial borrowing under the Note (or the continuation of any prior interest period) and ending on the date three months thereafter; provided that:

     (i) any Interest Period that would otherwise end on a day that is not a business day shall be extended to the next succeeding business day unless such business day falls in another calendar month, in which case such Interest Period shall end on the next preceding business day;

     (ii) any Interest Period that begins on the last business day of a calendar month (or on a day for which there is no numerically corresponding day in the

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calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

     (iii) no Interest Period shall extend beyond the Maturity Date.

“Insolvency Proceedings” has the meaning specified in Section 4(e).

     “LIBOR Rate” means, for any Interest Period, an interest rate per annum equal to the 90-day rate per annum obtained by dividing (a) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in Dollars at 11:00 A.M. (London time) two business days before the first day of such Interest Period for a period equal to such Interest Period (provided that, if for any reason such rate is not available, the term “LIBOR Rate” shall mean, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates) by (b) a percentage equal to 100% minus the LIBOR Rate Reserve Percentage for such Interest Period.

     “LIBOR Rate Reserve Percentage” for any Interest Period means the reserve percentage applicable two business days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (as defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time) (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined) having a term equal to such Interest Period.

     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

     “Loss” has the meaning ascribed to such term in the Asset Purchase Agreement.

     “Material Subsidiary” means any Subsidiary of the Company which at the date of determination is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Securities Exchange Act of 1934 (as such Regulation is in effect on the date hereof).

     “Maturity Date” means [INSERT DATE EIGHTEEN MONTHS FROM DATE OF NOTE]¹

     “Note” means this Senior Note, as amended, restated, extended, supplemented or otherwise modified in writing from time to time.

     “Noteholder” means the Payee and its permitted successors and assigns.

     “Payee” has the meaning set forth in Section 1.

¹ To have a maturity of 18 months.

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     “Permitted Merger” has the meaning specified in Section 3(a).

     “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     “Purchase Price Adjustment” has the meaning ascribed to such term in Section 2.6 of the Asset Purchase Agreement.

     “Regulated Subsidiary” means any Subsidiary registered or regulated as a broker or dealer with or by the SEC, FINRA, FSA, CFTC or any other applicable governmental authority, whether domestic or foreign.

     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Issuer.

     “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time.

     10. Miscellaneous.

     (a) This Note is subject to the terms and conditions of the Subordination Agreement dated as of [     ], 2010 among [Seller] and Regions Bank, as administrative agent on behalf of the Lenders party to the Credit Agreement (as amended, restated or otherwise modified from time to time, the “Subordination Agreement”). The Payee agrees that, upon the request of the Company and the agent or trustee (or other person performing a similar function) under the Credit Agreement, Payee will promptly execute and deliver a written subordination agreement substantially in the form of the Subordination Agreement.

     (b) No amendment or waiver of any provision of this Note and no consent by the Noteholder to any departure therefrom by the Issuer shall be effective unless such amendment, waiver or consent shall be in writing and signed by the Noteholder, and any such amendment, waiver or consent shall then be effective only for the period and on the conditions and for the specific instance specified in such writing. No failure or delay by the Noteholder in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other rights, power or privilege.

     (c) Except as otherwise expressly provided herein, notices and other communications to each party provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy to the address provided from time to time by such party. All notices and other communications shall be effective upon receipt.

     (d) If any provision of this Note is held to be illegal, invalid or unenforceable, (i) the legality, validity and enforceability of the remaining provisions of this Note shall not be affected or impaired thereby and (ii) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     (e) THIS NOTE IS GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE. THE ISSUER AND NOTEHOLDER EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT AND EACH STATE COURT IN THE CITY OF NEW YORK AND

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ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT. THE ISSUER AND NOTEHOLDER EACH IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE ISSUER OR NOTEHOLDER AT ITS ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO. THE ISSUER AND THE NOTEHOLDER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     (f) THE ISSUER AND THE NOTEHOLDER EACH WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     (g) THIS NOTE AND THE ASSET PURCHASE AGREEMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

PENSON WORLDWIDE, INC.
By:
	Name:
	Title:
BROADRIDGE FINANCIAL SOLUTIONS, INC.
By:
	Name:
	Title:

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Grid for Recording Adjusted Amount

	Amount of Increase (Decrease) to
Date	Principal Amount	Adjusted Amount	Entered By

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EX-10.34

Exhibit 10.34

NOTE: PORTIONS OF THIS AGREEMENT ARE THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS HAVE BEEN
REDACTED AND ARE MARKED WITH A “[****]” IN PLACE OF THE REDACTED LANGUAGE.

Broadridge Financial Solutions, Inc.

1981 Marcus Avenue
Lake Success, New York 11042 TO BE PREPARED AND
SIGNED IN DUPLICATE

MASTER SERVICES AGREEMENT

Client:	Penson Worldwide, Inc.
Address:	1700 Pacific Avenue, Suite 1400
City:	Dallas, Texas, 75201

This Master Services Agreement (this “Master Services Agreement”), dated as of November 2, 2009 (the “Effective Date”), is made and entered into by and between Penson Worldwide, Inc. (“Penson”) and Broadridge Financial Solutions, Inc. (“Broadridge”).

WHEREAS, in connection with that certain Asset Purchase Agreement, dated November 2, 2009, (as amended, the “Asset Purchase Agreement”) among Broadridge, Ridge Clearing & Outsourcing Solutions, Inc., Penson and Penson Financial Services, Inc., Client (as defined in Section 1.B below) will acquire certain correspondent clearing contracts and other assets relating to the clearing business of Ridge (as defined in Section 1.B below) (the “Acquisition”); and

WHEREAS, in connection with the Acquisition, Ridge desires to perform, and Client desires to have performed by Ridge, the Services (as defined herein) in connection with the servicing of Client’s and its Affiliates newly acquired, existing and future business in accordance with the terms and conditions set forth in this Master Services Agreement and the Schedules (as defined in Section 1.A below).

NOW THEREFORE, in consideration of the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

1. SCOPE OF AGREEMENT.

A. Services Schedules.

(i)

Broadridge and Penson shall cause their respective Affiliates to enter into schedules (including, without limitation, any and all Attachments thereto, each a “Schedule” and collectively, the “Schedules”) in Canada, the United States and the United Kingdom. The Broadridge Affiliate that is a party to a Schedule is referred to in this Agreement (as defined in Section 1.A (iii) below) as the “Ridge Local Affiliate” and the Client Affiliate that is a party to a Schedule is referred to in this Agreement as the “Client Local Affiliate”. The Client Local Affiliate for the United States Schedule shall be Penson Financial Services, Inc., the Client Local Affiliate for the Canadian Schedule shall be Penson Financial Services Canada, Inc. and the Client Local Affiliate for the United Kingdom Schedule shall be Penson Financial Services Ltd. Each Schedule shall be governed by the terms and conditions of this Master Services Agreement as may be amended in accordance with its terms.

(ii)

Notwithstanding the fact that a Schedule is implemented,

(a) Broadridge shall (x) be responsible for the performance of all of the Services, and the performance of all obligations of Ridge under this Agreement, (y) be responsible for the

Broadridge/Penson Proprietary and Confidential

MASTER SERVICES AGREEMENT

compliance with any provisions of this Agreement applicable to Ridge and (z) if Ridge fails, neglects or refuses to perform any such Services or obligation under or otherwise breaches this Agreement, perform, or cause to be performed, any such Services or obligation or cure, or cause to be cured, such breach and bear joint and several liability with Ridge; provided, however, that in no event shall Broadridge or any other entity that is not properly registered or licensed to perform any such Services or obligation be required to perform such Services or obligation; and

(b)

Penson shall (x) be responsible for the performance of all obligations of Client under this Agreement, (y) be responsible for the compliance with any provisions of this Agreement applicable to Client and (z) if Client fails, neglects or refuses to perform any obligation under or otherwise breaches this Agreement, perform, or cause to be performed, any such obligation or cure, or cause to be cured, such breach, or bear joint and several liability with Client; provided, however, that in no event shall Penson or any other entity that is not properly registered or licensed to perform any such obligation be required to perform of such obligation.

(iii) From time to time during the Term (as defined in Section 2 (Term) below), Broadridge and Penson (or their Affiliates) may elect to enter into additional written schedules in Canada, the United States, the United Kingdom and such other countries for which Broadridge and Penson may agree from time to time (each, a “Territory” and collectively the “Territories”). Each such additional schedule shall set forth:

(a)	the Services (defined below) that Ridge shall perform under such schedule;
(b)	specific Software (defined below) that Ridge licenses to Client in connection with Client’s receipt of the Services to be performed by Ridge under the schedule; and
(c)	other terms and conditions as the parties may agree.

Each such schedule (when signed by authorized officers of both parties) shall be governed by the terms and conditions of this Master Services Agreement and deemed a Schedule hereunder. This Master Services Agreement, together with all Exhibits hereto and the Schedules, together with all Attachments thereto, shall be referred to, collectively, as the or this “Agreement.”

(iv) In the event of a conflict between the terms and conditions of any Schedule (including, without limitation, any Attachment or Appendix) and the terms and conditions of this Master Services Agreement, the terms and conditions of the Schedule shall control for the purpose of the relevant Schedule. Except where otherwise indicated, all references in this Master Services Agreement to Sections or Exhibits are to Sections to, and Exhibits of, this Master Services Agreement.

B.	Certain Defined Terms.
	The term “Affiliate” as used throughout this Agreement means as to any entity, any other entity that, directly or indirectly, Controls, is Controlled by or is under common Control with such entity.
	The term “Client” as used throughout this Agreement means the applicable Client Local Affiliate receiving the Services under the applicable Schedule. For purposes of this Master Services Agreement, the use of the term “Client” shall mean “Penson” when Penson is obligated to perform on behalf of Client under Section 1.A(ii)(b).
	The term “Control” (and derivatives thereof) as used throughout this Agreement means, with respect to any entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities (or other ownership interest), by contract or otherwise.

Broadridge/Penson Proprietary and Confidential

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MASTER SERVICES AGREEMENT

	The term “Governmental Authority” as used throughout this Agreement means any governmental, regulatory or administrative body, agency or authority, any court of judicial authority, any arbitrator or any public, private or industry regulatory authority (including, without limitation, any SRO as defined in the Exchange Act), whether foreign, federal, state or local.
	The term “Laws” as used throughout this Agreement means all laws, rules and regulations, including, without limitation, all privacy and data protection laws, rules and regulations, all as enacted, promulgated and amended from time to time by any Governmental Authority. “Laws” shall also include contractual restrictions or obligations imposed upon a party by a Governmental Authority of which the affected party shall have given notice to the other party.
	The term “Ridge” as used throughout this Agreement means the applicable Ridge Local Affiliate and permitted subcontractors of the applicable Ridge Local Affiliate performing the Services under the applicable Schedule. For purposes of this Master Services Agreement, the use of the term “Ridge” shall mean “Broadridge” when Broadridge is obligated to perform on behalf of Ridge under to Section 1.A(ii)(a).
	The term “Services” as used throughout this Agreement means the services, products, functions and responsibilities of Ridge that are specified in the Schedules, together with the services, products, functions and responsibilities that are an inherent or customary part of such specified services, products, functions and responsibilities, even if such inherent or customary services, products, functions and responsibilities are not specifically described in this Agreement.
	The term “Software” as used throughout this Agreement means all of the software and other technology necessary for Client to access and use the Services, whether owned by Broadridge or Ridge or licensed by Broadridge or Ridge from third parties and including, without limitation, all improvements enhancements, modifications, updates, releases and revisions provided in connection therewith.
C.	Service Levels. Ridge shall provide the Services and, as applicable, the Software so that they meet or exceed the service levels set forth in each Schedule, any applicable service level agreement (each a “Service Level Agreement”), or as otherwise agreed to by the parties in writing (the “Service Levels”). Ridge will in the regular course of its business monitor its performance with respect to such Service Levels and report such performance to Client in writing on a monthly basis or as otherwise required by each Schedule.
	In the event of a Service Level failure by Ridge that is not insignificant, Ridge shall take the following actions, each as soon as practicable under the circumstances: (a) investigate and report in writing on the root cause of the problem, (b) advise Client in writing of the remedial efforts being undertaken with respect to this failure to meet the Service Level and provide Client with and implement an improvement plan, (c) execute such remedial efforts, correct the problem and begin meeting the Service Level, (d) advise Client in writing from time to time on the status of Ridge’s remedial efforts and (e) provide reasonable evidence to Client that the problem has been corrected.
	Upon a failure by Ridge to meet a Service Level, Client shall have the right either (a) to receive, subject to the terms and conditions of Attachment C (Service Levels) to the applicable Schedule, a credit in connection with such failure (each, a “Service Level Credit”) against fees owing by Client under this Agreement, (b) if the acts or omissions or performance that relate to or underlie such failure to meet a Service Level also constitute a breach by Broadridge or Ridge of any of its obligations under this Agreement, to forgo such Service Level Credit and seek monetary damages, subject to the provisions of Section 15 (Limitation on Liability) below or (c) to pursue any termination or other remedy available to Penson or Client under this Agreement.
	Throughout the Term (defined below), Ridge shall seek to improve the quality, efficiency and effectiveness of the Services to keep pace with technological and operational advances. Ridge shall do this, among other things, by identifying and assessing the implementation of industry practices, ‘best practice’ techniques and methods in providing the Services. In addition, Ridge shall provide the Services in a manner consistent with Ridge’s operation of its business generally, including, without limitation, training Ridge personnel in

Broadridge/Penson Proprietary and Confidential

3

MASTER SERVICES AGREEMENT

techniques and technologies used generally within the Ridge’s industry and making investments to maintain the currency of the tools, infrastructure and other resources Ridge uses to provide the Services.

2. TERM.

A.

Term. The term of this Master Services Agreement shall begin on the Effective Date and shall continue until the later to occur of (i) all Schedules hereunder expiring or being terminated and (ii) the end of any applicable Transition Period (as defined below) (the “Term”).

B.

Transition Services. At Client’s request upon termination or expiration of any Schedule for any reason, Ridge shall extend the provision of the Services and the term of any licenses relating to Software for a period not to exceed twenty-four (24) months (“Transition Period”) beyond the effective date of expiry or termination of such Schedule and in good faith and commercially reasonable manner agree to provide transition services to Client as requested by Client in writing for an orderly de-conversion of Client from Ridge’s platform (the “Transition Services”). In addition, during the Transition Period, unless otherwise agreed to by the parties in writing, Ridge shall continue to provide the Services and any Software as they had been provided prior to the termination or expiration of the applicable Schedule in accordance with the terms and conditions set forth in this Agreement. Any Transition Services to be provided by Ridge as requested in writing by Client during the Transition Period shall be provided to Client in accordance with the then-applicable rates for the relevant services (unless the applicable Schedule is terminated pursuant to Section 18.A (Ridge’s Material Breach) in which case Transition Services shall be provided at Ridge’s cost and expense) or as otherwise agreed to by the parties in writing. In the event a Schedule is terminated by Ridge in connection with Client’s failure to pay any fees due under such Schedule (except for payment failures that are subject to a bona fide dispute between the parties), Ridge shall not be required to provide Transition Services or Services during the Transition Period until Client has cured any payment failures that are not subject to a bona fide dispute between the parties and unless Client pays for such Transitions Services and Services monthly in advance.

3. CHARGES.

A.	Fees. The fees for the Services and Software provided to Client under any Schedule shall be set forth in such Schedule. Except as expressly set forth in this Agreement, there shall be no fees payable by Penson or Client in respect of Broadridge’s and Ridge’s performance of its obligations pursuant to this Agreement. Without limiting the generality of the foregoing, except as may be otherwise provided in this Agreement, expenses incurred by Ridge in performing the Services and providing the Software shall not be separately reimbursable by Client.
B.	Fee Increases and Adjustments. Subject to the terms and conditions of any Schedule, Ridge may only increase the charges payable by Client under a Schedule as set forth in the applicable Schedule. Except as set forth in a Schedule, in no event shall the charges be increased at anytime during the Schedule Term (as such term is defined in the applicable Schedule).
C.	Communications and Third-Party Charges. The communication and other non-Affiliated third-party charges set forth in the Schedules, if any, are based on current costs that Ridge pays to common carriers and other third parties. Ridge reserves the right to pass on any increase, and shall pass on any decrease, in the charges of third parties not Affiliated with Ridge to Client provided any such increases shall be passed through only to the extent they are passed through in the applicable Territory to all Ridge customers generally receiving the services of such common carriers and other third parties. Ridge shall use reasonable commercial efforts to provide Client not less than thirty (30) days prior notice thereof. For clarity, Ridge shall not pass through communication or other charges of any Affiliates of Ridge.
D.	Taxes. There shall be added to all charges invoiced to Client pursuant to this Agreement amounts equal to any applicable taxes, duties, charges and other levies of any kind (other than taxes based on Ridge’s income or franchise taxes) applicable in the applicable Territory to the purchase or consumption of the Services, including, without limitation, provincial and local taxes, (exclusive of taxes based on Ridge’s income and franchise taxes), payable in respect of the Services received by Client. Ridge agrees to reasonably cooperate with Client to enable Client to more accurately determine its tax liability and to minimize such liability to the extent legally permissible and administratively reasonable. Ridge shall provide and make

Broadridge/Penson Proprietary and Confidential

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MASTER SERVICES AGREEMENT

	reasonably available to Client any exemption certificates, resale certificates, information regarding out-of-state or out-of-country sales or use of equipment, materials or Services and other information reasonably requested by Client and reasonably available to Ridge.
E.	Payment. Client shall pay each invoice that Ridge provides to Client thirty (30) days after the date Client receives such invoice, subject to any bona fide dispute. If Client fails to pay any undisputed amounts under this Agreement when due, Client shall, upon written demand from Ridge, pay interest on such undisputed amounts at the rate of one percent (1%) per month (but in no event more than the highest interest rate allowable by Law) from the due date until the date of payment.
F.	Rights of Offset. Without prejudice or limitation to any other rights or remedies of Penson or Client, if Penson or Client becomes entitled to receive any payment, or receive any credit, under or in connection with this Agreement, including, but not limited to, in connection with Service Level Credits, indemnification claims and claims by Penson or Client for breach of this Agreement, Penson or Client may, in its sole discretion, elect to reduce the principal amount of any note, or multiple notes, issued in connection with the Asset Purchase Agreement by an amount or amounts equal to all or part of such payment or credit in lieu of collection payment or receiving credit.

4. RIDGE RESPONSIBILITIES. Without limitation or prejudice to the provisions of this Master Services Agreement, any Schedule or any Service Level Agreement, in the performance of any Services under the provisions of a Schedule, Ridge agrees and undertakes to:

A.	perform the Services professionally in accordance with any applicable Service Levels and the applicable provisions of this Agreement;
B.	liaise and communicate in a timely manner with Client through Client’s designated representative or such representative’s designee on matters related to the Services and assign a qualified Ridge representative with whom Client will communicate. Ridge and Client may change their respective representatives from time to time by giving notice to the other. Ridge shall ensure that the representatives servicing Client’s account are fully informed about the Services and Client’s business requirements;
C.	in a timely manner, provide Client with its standard user documentation relating to (i) the Services and/or Software, including, without limitation, any changes thereto and (ii) Ridge’s procedures relating to the Services and use thereof;
D.	to the extent permitted by this Agreement or any applicable user documentation or procedures provided to Client, provide user access to the Services to persons authorized by Client, such access being governed by Ridge’s reasonable security procedures;
E.	notify Client, and secure Client’s prior approval, if expenses beyond the defined charges within a Schedule or any Statement of Work (as defined below) may be incurred or expected, unless otherwise specified in this Agreement;
F.	proceed according to Client’s reasonable written instructions for the disposition or delivery to Client of Client Information (as defined herein) or any data relating to Customers (as defined herein);
G.	provide Penson and Client and their respective employees or authorized contractors with reasonable access to any facilities, machines, supplies or equipment which are owned, operated or leased by Penson or Client in connection with the Services and which are located on the premises of Broadridge, Ridge or their agents subject to compliance by Penson and Client and their respective employees and authorized contactors, with Broadridge’s and Ridge’s reasonable security, data center procedures and confidentiality requirements. Broadridge and Ridge will advise Penson and Client in advance of the applicable procedures and requirements;

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H. from time to time, at Client’s request, perform professional services that will be described in a written statement of work executed by both Ridge and Client (“Statement-of-Work”). Upon the request of Client, Ridge and Client will in good faith, and without undue delay by Ridge, agree to the terms and conditions of a Statement-of-Work that will include, to the extent applicable and without limitation, the information specified below:

(i)	Project identification, approach and objectives and the agreed-upon scope of the services;
(ii)	The deliverables, including, without limitation, reports, software, services, specifications, lists, plans, manuals, diagrams, flow charts, data and other documents reports and recommendations, whether in written or electronic form (“Deliverables”) to be developed, delivered, prepared or required specifically for Client under such Statement of Work;
(iii)	Specifications in respect of each Deliverable;
(iv)	Acceptance tests or means proposed for testing Deliverables (“Acceptance Test”);
(v)	If applicable, the fees for the services under such Statement of Work and the applicable payment terms;
(vi)	Identification of project managers and other staffing by the parties, including, without limitation, names and position titles of key Ridge personnel who will be providing the services (which personnel may be substituted by Ridge);
(vii)	Key project assumptions and responsibilities;
(viii)	Project schedule showing the time frame for all stages of implementation of the services and milestones of the Statement of Work along with all associated milestone dates and production date, and other remedies for non-performance by Ridge;
(ix)	Description of the hardware and software that may have to be procured by Client or any of Customers (as defined herein) for the provision of the services pursuant to the Statement of Work, as applicable;
(x)	Maintenance and support services to be provided by Ridge in connection with the Deliverables, if applicable;
(xi)	Applicable Service Levels, if applicable;
(xi)	Training services and training materials to be provided by Ridge under the Statement of Work, if applicable;
(xii)	Any Client resource commitments and responsibilities in addition to those set forth in this Agreement; and
(xiii)	Any other information or agreements deemed relevant by Ridge and Client;

I.	except as otherwise expressly provided in this Agreement and subject to Client providing the resources and materials required for it to receive the Services, provide at Ridge’s expense, all software, hardware, communication lines and services, equipment, systems and other technology, resources and materials necessary for Ridge to provide the Services to Client in accordance with the provisions of this Agreement;
J.	subject to Section XIV (Acquisition of or by Another Ridge Local Affiliate Client) and Attachment B (Service Bureau and Operations Support Services Price Schedule) of the applicable Schedule, increase or decrease the volume of the Services upon Client’s request;
K.	subject to Section XIV (Acquisition of or by Another Ridge Local Affiliate Client) and Attachment B (Service Bureau and Operations Support Services Price Schedule) of the applicable Schedule, under an existing Schedule provide the Services, in the applicable Territory, to such additional Affiliates of Penson or Client, as may be identified by Penson or Client from time to time to receive the Services at the rates and in accordance with the terms and conditions set forth in this Agreement (however, in no event shall any Affiliate of Penson or Client be obligated or required to receive Services from Ridge); provided, however, that any conversion services required for any such Affiliate shall be implemented pursuant to the Change Control Procedures applicable to Mandatory Changes and the Affiliate shall agree to be bound by the terms and conditions of the applicable Schedule;
L.	notify Client of any proposed change of the locations from which Ridge provides the Services under a Schedule and obtain Client’s prior consent (which consent shall not be unreasonably withheld) with respect to any such change in location only if such consent is required by Law;

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M.	use commercially reasonable efforts to obtain the approval of each relevant regulatory or self-regulatory agency or entity, if any, which regulates Ridge’s performance of the Services and whose approval is necessary for Ridge to perform and deliver the Services in the applicable Territory (including, without limitation, securities and commodities exchanges, associations of securities and/or commodities dealers, federal, provincial and local Governmental Authorities);
N.	as required by all applicable Laws and Ridge policies in effect from time to time, conduct, in compliance with such Laws and policies, a criminal background check and drug-screening on, and provide bonding for, each individual who provides Services, at Ridge’s cost and expense, and not allow anyone to perform Services or assign anyone to the account of Penson or Client who has (i) a felony conviction or (ii) failed a drug test administered by Ridge; and
O.	provide an adequate number of qualified individuals with suitable training, education, experience and skill to perform the Services.

5.	COMMUNICATIONS LINES AND EQUIPMENT. Subject to receiving Client’s approval, Ridge may procure appropriate communications lines and equipment to enable Client to access the Services. Where Ridge procures such communication lines or equipment for Client, Ridge shall procure such services from reputable vendors but shall not be responsible for the reliability or continued availability of the communications lines and equipment used by Client in accessing the Services. Ridge shall replace any such third party vendors in the event that (a) reliability or continued availability is a significant issue or (b) at least fifty percent (50%) of Ridge’s clients utilizing such services in the applicable Territory request such replacement.
6.	GOVERNANCE. Broadridge and Penson shall each appoint at least two senior level managers to a joint committee that shall meet no less than monthly to address issues that may arise in connection with the performance of the Services. In addition to the foregoing, the parties have agreed to the detailed governance provisions set forth in Exhibit C (Governance Structure).
7.	USE OF THE SERVICES AND TRAINING.

A.	Use of Services. Client shall use the Services in accordance with such rules as may be generally established and communicated by Ridge as applied to all of Ridge’s customers in the applicable Territory generally and set forth in materials promptly furnished by Ridge to Client in writing, provided, however, that Ridge shall not change the Services or any such rules in a manner that significantly interferes or significantly negatively impacts Client’s use of the Services or that results in any breach or violation in connection with the Assigned Contracts (as defined in the Asset Purchase Agreement) or establish rules that are inconsistent with or violate the provisions of this Agreement. Ridge agrees to use commercially reasonable efforts to provide Client with no less than thirty (30) days’ notice of any change to the rules relating to the use of the Services.
	Except with respect to those Model A Clearing services provided by Client to its clients in the U.K., Client (and Affiliates of Client who have agreed to be bound by the terms and conditions of the applicable Schedule) shall use the Services only for its own business purposes in support of the brokerage or financial services and/or products it provides to its customers, correspondents and the clients and customers of such correspondents (including, without limitation, the brokerage customers introduced to Client by its correspondents (i.e., broker-dealers or other registered persons clearing or receiving services through Client) (collectively “Customers”)). For the avoidance of doubt, the foregoing prohibits Client (and Affiliates of Clients who have agreed to be bound by the terms and conditions of the applicable Schedule), except as expressly permitted by Ridge in writing, or other than as permitted herein, from selling, leasing, licensing, providing as a service bureau or otherwise providing, directly or indirectly, any of the Services or any portion thereof to any third-party exclusively as a technology services reseller or provider or outsourcer (e.g., acting in the same capacity as Ridge with respect to such third-party) without providing to such third-party Client’s normal course securities or financial services.
B.	Approvals. Client will use commercially reasonable efforts to obtain the approval of each relevant regulatory or self-regulatory agency or entity, if any, which regulates Client and whose approval is

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	necessary for Client to receive the Services in the applicable Territory (including, without limitation, securities and commodities exchanges, associations of securities and/or commodities dealers, federal, provincial and local Governmental Authorities).
C.	Training. Ridge, at its expense, shall provide Client with training in the use of the Services as reasonably requested by Client.

8. SOFTWARE.

A.	License Grant. Broadridge and Ridge hereby grant to Client in each Territory during the applicable Schedule Term a limited, non-exclusive, non-transferable (other than as permitted herein including, without limitation, a permitted assignment), royalty-free license and/or sublicense, as the case may be, to use, and as applicable for Customers to use, the Software and related documentation in connection with their receipt and use of the Services. The Software and documentation may only be used by Client and its Customers in connection with the Services as permitted in Section 7.A (Use of Services). above except as otherwise permitted by Broadridge and Ridge. The license of Software shall be to the object code only unless specifically stated otherwise in the Schedule related thereto. Client accepts such license and/or sublicense, as the case may be, from Broadridge and Ridge for the Software upon the terms and conditions set forth in this Master Services Agreement. Broadridge and Ridge will be responsible for obtaining and maintaining all required consents with respect to the license for the Software in this Section 8.A (License Grant), including, without limitation, responsibility for the financial costs of obtaining such consents (e.g., for third party access, use, update or relocation consents).
B.	Updates. Broadridge and Ridge agree and undertake to provide the Client with, as and when released and at no additional charges, any and all improvements, enhancements, modifications, updates, releases and revisions to the Ridge Products (as defined below), including, without limitation, customizations generally made available to Ridge’s other clients, delivered or made available by Broadridge and Ridge to Ridge’s clients generally using the Services (or applicable portion thereof) or substantially similar services. Client shall use commercially reasonable efforts to implement all improvements, enhancements, modifications, updates, releases and revisions to the Ridge Products delivered by Broadridge or Ridge to Client within forty-five (45) days after Client’s receipt thereof; provided, however, that the implementation of any such change required by the foregoing will not significantly impair use of the Services by Client or its Customers as contemplated by this Agreement. Broadridge and Ridge undertake not to modify the Ridge Products in a manner which negatively impacts use of the Ridge Products by Client or its Customers or receipt of the Services by Client or its Customers as set forth in this Agreement. Client shall not, without the prior consent of Broadridge or Ridge, which shall not be unreasonably withheld or delayed, change or otherwise modify any Software, except for Client Software (as defined below).
C.	Client Software. Upon Client’s request, Ridge shall use its commercially reasonable efforts to provide Client with custom modification to the Services, custom software programming with respect to the Software (the “Client Software”) or custom program maintenance, in which case, the terms and conditions governing such custom modification to the Services, Client Software or custom program maintenance will be set forth in the applicable Schedule or Statement-of-Work (including, without limitation, the ownership thereof and any changes therefor). Any Client Software, custom modification to the Services, custom software programming, custom program maintenance or other professional services associated with the Client Software shall be provided in a timely manner and on terms and conditions at least no less favorable then those offered to any other customer of Ridge (including, without limitation, as to priority and resource allocation).

9. OWNERSHIP AND USE OF RIDGE PRODUCTS.

A. Ownership. Client acknowledges that, as between Client, Broadridge and Ridge, the Ridge Products are and shall remain the exclusive and confidential property of Broadridge and Ridge. For purposes of this Agreement: “Ridge Products” means the Software and systems provided and owned by Broadridge or Ridge and used to provide the Services, the Ridge websites used to host and provide Services through the Internet and the Broadridge or Ridge processes and materials and documentation relating to such Software, Services, systems and websites, including, without limitation, (i) any modifications or enhancements made to the Software, databases that are a part of the Services, or systems used to provide the Services, (ii) any

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plans contemplating further development of the foregoing and (iii) all copyrights, patents, trade secrets and other intellectual and proprietary rights relating to all of the foregoing. Broadridge and Ridge acknowledge that, as between Client, Broadridge and Ridge, the intellectual property owned or provided by Penson or Client is and shall remain the exclusive and confidential property of Client. For the avoidance of doubt, nothing in this Agreement shall transfer, grant or provide Broadridge or Ridge or any other person with any rights in intellectual property or confidential information or proprietary rights or data or information of, or provided by, Penson or Client or any of their Affiliates or any Customers, correspondents or customers and none of such intellectual property or confidential information or proprietary rights or data or information shall be considered Ridge Products or Ridge Information.

B.

Use. Client may use the Ridge Products only in conjunction with the Services and Software. Client shall not copy, in whole or in part, the Ridge Products or related documentation, whether in the form of computer media, printed or in any other form; provided, however, that Client may make an appropriate number of copies of the Ridge Products for back-up, quality assurance, testing, archive and disaster recovery purposes only or to comply with the requirements of Governmental Authorities. Client shall not make any alteration, change or modification to any of the Ridge Products without Broadridge’s or Ridge’s prior consent in each instance, which consent shall not be unreasonably withheld or delayed. CLIENT MAY NOT RECOMPILE, DECOMPILE, DISASSEMBLE, OR REVERSE ENGINEER THE RIDGE PRODUCTS (INCLUDING, WITHOUT LIMITATION, THE SOFTWARE).

C.

Return or Destroy. Upon the later of the (a) completion of Transition Services and (b) expiration or termination of a Schedule for any reason, and subject to the terms and conditions hereof, Client shall return to Ridge or, upon Ridge’s request, use reasonable commercial efforts to destroy, all copies of the Ridge Products that are in its possession that do not relate to any other existing Schedules, except as otherwise required by applicable Law. Nothing is this Agreement will require the destruction of copies of any records or files containing information that has been created pursuant to any automated archiving or back up procedure that cannot be reasonably deleted, which records and files will continue to be subject to the confidentiality provisions herein.

10. CONFIDENTIALITY.

A. Definitions. In connection with this Agreement, including, without limitation, the evaluation of new services contemplated by the parties to be provided by Ridge under this Agreement, information will be exchanged between and among Broadridge, Ridge, Penson and Client. Broadridge and Ridge shall provide information that may include, without limitation, confidential information relating to the Ridge Products, trade secrets, strategic information, information about systems and procedures, confidential reports, Ridge customer information, vendor and other third party information, financial information including, without limitation, cost and pricing, sales strategies, computer software and tapes, programs, source and object codes, and other information that is provided under circumstances reasonably indicating it is confidential (collectively, the “Ridge Information”), and Penson and Client shall provide information that may include, without limitation, confidential information relating to Penson, Client or any of their Affiliates, customer information, which may include Personal Information (defined below), to be processed by the Services, and other information, including, without limitation, trade secrets, strategic information, information about systems and procedures, confidential reports, customer information, vendor and other third party information, financial information including, without limitation, cost and pricing, descriptions of Penson’s or Client’s business (including, without limitation, features of any product or service and details of implementation of any such business), sales strategies, computer software and tapes, programs, source and object codes, and other information that is provided under circumstances reasonably indicating it is confidential (“Client Information”) (the Ridge Information and the Client Information collectively referred to herein as the “Information”). Subject to the terms and conditions hereof, Personal Information that is exchanged shall also be deemed Information hereunder. “Personal Information” means personal information about an identifiable individual including, without limitation, name, address, contact information, age, gender, income, marital status, finances, health, employment, social insurance number and trading activity or history. Subject to applicable legal and regulatory requirements, Personal Information shall not include the name, title or business address or business telephone number of an employee of an organization in relation to such individual’s capacity as an employee of an organization. As between the parties hereto, the Information of each party shall remain the exclusive property of such party.

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	Notwithstanding anything to the contrary, (i) Ridge Information shall not include or contain any Client Information, including, without limitation, Personal Information provided by Penson or Client, which shall remain the exclusive property of Penson or Client and (ii) Client Information shall not include or contain any Ridge Information, including, without limitation, Personal Information provided by Ridge.
B.	Obligations. Subject to the terms and conditions hereof, the receiver of Information (the “Receiver”) shall keep any Information provided by the other party (the “Provider”) strictly confidential and shall not, without the Provider’s prior consent, disclose such Information in any manner whatsoever, in whole or in part, and shall not duplicate, copy or reproduce such Information, including, without limitation, by means of photocopying or transcribing of voice recording, except in accordance with the terms and conditions of this Agreement or in connection with its receipt or provision of Services hereunder. The Receiver shall only use, copy or duplicate the Information as reasonably required to carry out the purposes of this Agreement.
C.	Disclosure Generally. Broadridge and Ridge and Penson and Client agree that the Information shall be disclosed by the Receiver only to: (i) the employees, agents and consultants of the Receiver and its Affiliates who have a “need to know” such Information in connection with Receiver’s performance or use of the Services, as applicable, and (ii) auditors, counsel, and other representatives of the Receiver and its Affiliates for the purpose of providing assistance to the Receiver in the ordinary course of Receiver’s performance or use of the Services, as applicable; in each case, who have been informed of the confidential nature of the Information and agreed to maintain the confidentiality of such Information and who have entered into a written confidentiality agreement with the Receiver on terms and conditions no less restrictive than the confidentiality terms and conditions set forth in this Agreement. The Receiver will take reasonable steps to prevent a breach of its obligations by any employee or third party. The Receiver shall be liable for any violation of this Section 10 (Confidentiality) by its employees, or any third party to whom Receiver discloses Information of the Provider.
D.	Compelled Disclosure. If the Receiver or anyone to whom the Receiver transmits the Information pursuant to this Agreement becomes compelled, in accordance with any legal or regulatory requirement, including, without limitation, the requirements of any self-regulatory organization or agency having jurisdiction over such persons or any regulations or requirements relating to fair disclosure pertaining to a party or its Affiliates, to disclose any of the Information, then the Receiver will provide the Provider with prompt notice before such Information is disclosed (or, in the case of a disclosure by someone to whom the Receiver transmitted the Information, as soon as the Receiver becomes aware of the compelled disclosure), if not legally prohibited from doing so, so that the Provider may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If such protective order or other remedy is not obtained, then the Receiver will furnish only that portion of the Information which the Receiver is advised by reasonable written opinion of counsel is legally required and will exercise its reasonable efforts to assist the Provider (at Provider’s sole expense) in obtaining a protective order or other reliable assurance that confidential treatment will be accorded to the Information that is disclosed.
E.	Exceptions. Except with respect to Personal Information, nothing contained herein shall in any way restrict or impair the right of the Receiver to use, disclose or otherwise deal with:

(i)	Information which at the time of its disclosure is publicly available, by publication or otherwise, or which the Provider publicly discloses either prior to or subsequent to its disclosure to the Receiver or which is or becomes part of the public domain without breach of this Agreement by Receiver;
(ii)	Information which the Receiver can show was in the possession of the Receiver, or its parent, subsidiary or Affiliated company, at the time of disclosure and which was not acquired, directly or indirectly, under any obligation of confidentiality to the Provider;
(iii)	Information which is independently acquired or developed by the Receiver without violation of its obligations hereunder, including, without limitation, Information obtained from a third party, not known by the Receiver to have an obligation to maintain the confidentiality of such information; or

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(iv) Information relating to this Agreement in the Receivers’ or its Affiliates’ public securities filings if the Receiver or its Affiliates shall determine that this Agreement is required to be so disclosed in accordance with applicable securities Laws or any other applicable legal or regulatory requirements.

In addition, each employee of the Receiver shall be free to use for any purpose, after termination of this Master Services Agreement, any general knowledge, skill or expertise (but which shall specifically exclude any Information) that (i) is acquired by such employee in performance of a parties obligations hereunder, (ii) remains part of the general knowledge of such employee after access to the tangible embodiment of the Provider’s Information, (iii) does not contain or include any such Information and (iv) is not otherwise specific to the Provider.

F.

Return or Destroy. Upon the later to occur of the termination of a Schedule for any reason or the completion of the applicable Transition Services, the Receiver shall return to the Provider, or use reasonable commercial efforts to destroy, any and all copies of Information of the other that are in its possession relating to such terminated Schedule, except for any copies reasonably required to maintain the Receiver’s customary archives or computer back-up procedures, and as otherwise required by applicable Law. Notwithstanding anything to the contrary, Broadridge and Ridge shall comply with Penson’s instruction relating to return or disposition of any Client Information in Broadridge’s or Ridge’s possession; provided, however, that, Ridge shall have the right to keep one (1) copy of such Information as may be reasonably required to evidence the fact that it has provided the Services to Client which records and files will continue to be subject to the confidentiality provisions herein. Client shall pay Ridge (at the rates set forth in the applicable Schedule, or, if no such rates are set forth, at Ridge’s then current charges) for Ridge’s actual time spent and incidental expenses actually incurred in connection with such return. Additionally, upon termination or expiration of a Schedule, Ridge agrees to store Client Information and other Client property for a period not to exceed twelve (12) months in a reasonable format required by Client and at Client’s reasonable cost and expense, and Ridge will continue to observe the confidentiality provisions of this Agreement with respect thereto.

11. PERSONAL INFORMATION.

A.

Obligations. Neither Broadridge nor Ridge shall use any Personal Information of Customers or such Customer’s clients except to the extent reasonably required to carry out its obligations under this Agreement and shall only disclose Personal Information to persons who have been informed of the confidential nature of the Personal Information. Broadridge and Ridge shall have such persons sign agreements whereby they agree to keep such information strictly confidential and limit any use made of such Personal Information by such persons to those reasons for which it was explicitly disclosed. In connection with Ridge’s provision of the Services, Ridge shall comply with all privacy and data protection Laws applicable to Ridge or its performance and delivery of the Services, including, without limitation, if applicable, the EU Data Protection Directive and EU Member State implementing laws, including, without limitation, EU laws that apply to cross-border data transfers and corresponding Laws in the Territories. Broadridge and Penson agree that where, in order to receive Services under this Agreement, a Client Local Affiliate in the European Economic Area (“EEA”) or Canada will need to transfer data to Ridge in a country not ensuring an adequate level of data protection, in accordance with EU Laws or Canadian Laws, the applicable Client Local Affiliate and Ridge Local Affiliate will enter into the European Commission’s approved data export clauses for data controller/data processor exports (version 2001) as soon as practicable (and in any event within thirty (30) days) after the date that the need for such transfer of data is first identified by the parties. For avoidance of doubt, Broadridge and Penson understand and acknowledge that these obligations are in addition to the privacy and security obligations specified in this Agreement.

In addition, Ridge shall have obligations with respect to Compliance Directives that relate to privacy and data protection Laws as set forth in Section 16.C (Compliance Directives) below. Broadridge and Ridge agree to (and as long as legally permitted) comply with Penson’s commercially reasonable requests in connection with the treatment, handling and disclosure of Personal Information made available to Ridge by Client, including, without limitation, any information relating to Customers.

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	In addition and notwithstanding anything to the contrary herein or otherwise, with respect to Personal Information provided or otherwise made available to Broadridge or Ridge by Penson, Client or Client’s Affiliates and Customers, Broadridge and Ridge agree:
	(i) not to use the Personal Information for any purposes other than those related to the performance of Broadridge’s or Ridge’s obligations under this Agreement;
	(ii) to promptly forward any individual’s request for access to Personal Information to Penson and Client, and to reasonably co-operate with Penson or Client (at Penson’s or Client’s expense) in responding to such access request, including, without limitation, providing information regarding the use and disclosure of such Personal Information by Broadridge or Ridge;
	(iii) to promptly notify Penson and Client of any complaints received or any notices of investigation or non-compliance from any Governmental Authority related to the collection, use or disclosure of Personal Information, and to reasonably co-operate with Penson and Client and reasonably assist in any such investigation, all at Penson’s and Client’s expense;
	(iv) that as between Penson and Client and Broadridge and Ridge, Penson and Client are and remain the exclusive owners of all right and title in and to the Personal Information and shall be and remain in complete control of the collection, use and disclosure of the Personal Information. No access to or custody over Personal Information by Broadridge or Ridge or other persons as permitted in this Agreement shall be construed in any manner as providing control, power, authority or any other rights with respect to such Personal Information. Control of all Personal Information is vested solely in Penson and Client and their permitted assigns and nothing in this Agreement shall in any way be construed to grant control of the Personal Information to Broadridge and Ridge, or any subsidiary, Affiliate, subcontractor or third party except to the extent expressly permitted by this Agreement. Broadridge and Ridge shall at all times adhere to the written directions of Client (and its assignees) with respect to the Personal Information, so long as such written directions are lawful. Under no circumstances shall Broadridge or Ridge enter into any relationship, contractual or otherwise, with another person (other than regulatory authorities, or as required by applicable Law or the order of any court) involving sharing or access to the Personal Information, except as set out in this Agreement or approved by Penson or Client in advance; and
	(v) upon the expiration or termination of a Schedule or upon Penson’s or Client’s request, to cease any and all use of the Personal Information and other data of Customers or any Affiliates’ customers and their respective clients disclosed under such Schedule and all copies thereof, and return same to Penson or Client or destroy same in a manner designated by Penson or Client or otherwise agreed by the parties, except that Ridge may retain one (1) copy for legal and audit purposes provided such copy is protected as Personal Information and confidential information in accordance with this Agreement.
B.	Security Measures. In connection with providing the Services, Broadridge and Ridge shall (i) establish, implement and maintain commercially reasonable measures to protect the security, confidentiality and integrity of Personal Information of Penson’s or Client’s customers against anticipated threats, unauthorized access, disclosure or use, and improper disposal and (ii) provide Penson or Client with information regarding such security measures upon the reasonable request of Penson or Client.
C.	Security Breaches. Each party shall promptly provide the other party with notice of (i) any disclosure, access to or use of any Personal Information relating to such other party’s customers or employees in breach of this Master Services Agreement and (ii) any unauthorized intrusion into systems containing such other party’s Personal Information. The party who had possession or control of the applicable Personal Information at the time of the breach or intrusion shall at its cost and expense (1) investigate and respond to, and remediate the effects of, the breach or intrusion in accordance with applicable Laws and such party’s own policies and procedures, and using commercially reasonable efforts and (2) provide the other party with assurance reasonably satisfactory to such other party that such breach or intrusion shall not recur. The response and remediation required under the preceding sentence may include, to the extent applicable, (A) developing and delivering legal notices required by any applicable Laws, (B) making available a toll free telephone number or numbers (or where not available, a dedicated telephone number or numbers) where

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affected individuals may receive individual specific assistance and information relating to the breach or intrusion and (C) providing free credit reports, and/or credit monitoring/repair services for affected individuals for the longer of one (1) year or the period required by applicable Laws following the announcement or disclosure of the breach or intrusion or notice to the affected individuals. Client shall have the right to participate in any security investigation relating to the Personal Information of any customer of Penson or Client. Notwithstanding the foregoing or anything in this Agreement to the contrary, neither party shall be precluded from immediately pursuing any rights or remedies it may have under or relating to privacy, security or confidentiality.

12. DATA SECURITY AND ACCESS.

A.	Data Security Measures. Broadridge and Ridge will maintain commercially reasonable security measures, including, without limitation, without limitation those described in Exhibit B (Ridge Data Security Measures) attached hereto, designed to ensure that access to the Penson or Client files is available only to Penson or Client and those entities that process information contained in the Penson or Client files in order for Ridge to execute the Services (e.g., Canadian stock exchanges, clearing agencies, NYSE and DTC). Subject to the foregoing and Section 16 (Laws and Governmental Regulations), Broadridge and Ridge reserve the right to issue and change procedures from time to time to improve file security. Broadridge or Ridge, as applicable, will notify Penson or Client, as applicable, prior to making any such changes and obtain Penson’s or Client’s prior consent (which consent shall not be unreasonably withheld) with respect to the change only if such consent is required by Law.
B.	Loss or Alteration. Broadridge and Ridge will take commercially reasonable precautions to prevent the loss of or alteration of the Penson and Client files retained by Broadridge and Ridge which shall include commercially reasonable data back-up procedures. Penson and Client will keep copies of the source documents of the Penson and Client files delivered to Broadridge or Ridge and will maintain procedures external to the Broadridge and Ridge systems for the identification of such losses and for the reconstruction of lost or altered Penson and Client files, to the extent deemed necessary by Penson and Client.
C.	Audits. Ridge’s practices relating to audits of the Services shall be set forth in the Schedule relating to such Services. Except as otherwise provided in the applicable Schedule relating to specific Services, Ridge shall have an independent third party audit performed annually describing Ridge’s security and control policies and procedures with respect to the Services consistent with past practices.
D.	Personnel. Ridge personnel and contactors performing services at any Client location will observe and comply with Client’s security procedures, rules, regulations, policies, working hours and holiday schedules of which they have actual notice and Ridge will use its commercially reasonable efforts to minimize any disruption to Client’s normal business operations while performing services at any Client location.
E.	Security Breaches. Broadridge and Ridge shall promptly provide Penson or Client, as applicable, with notice of any breach of data security involving Penson or Client files or Information, as applicable, in the possession of Broadridge or Ridge or any of their Affiliates or subcontractors and shall at its cost and expense (1) investigate and respond to, and remediate the effects of, the security breach in accordance with applicable Laws and Broadridge’s and Ridge’s policies and procedures, and using commercially reasonable efforts, (2) provide Penson and Client with assurance reasonably satisfactory to such other party that such breach or intrusion shall not recur, (3) promptly furnish to Penson and Client full details that Broadridge or Ridge has or may obtain regarding such unauthorized access and use reasonable efforts to assist Penson and Client in investigating or preventing the reoccurrence of any such access and (4) cooperate with Penson and Client in any litigation and investigation against third parties deemed reasonably necessary by Penson and Client to protect its rights.
F.	Ownership and Access to Client Data. As between Penson and Client and Broadridge and Ridge, Penson and Client shall own all right, title and interest in and to all Client Information, files and data, including, without limitation, any and all Client Information, files or data resulting from the performance of the Services. Penson and Client shall at all times have the right to access and use the Client Information, files and data. Broadridge and Ridge shall deliver Client Information, files and data, or cause the same to be delivered to Penson and Client, upon demand in accordance with Attachment B (Service Bureau and

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Operations Support Services Price Schedule) to the applicable Schedule or as otherwise agreed by the parties, and upon the later of the expiration or termination of the applicable Schedule or the completion of the Transition Services (at Ridge’s cost). Broadridge and Ridge shall deliver such Information, files and data in the format and on the media in use as of the date of the demand or time of required delivery, as applicable.

13. WARRANTY.

A.	Conformance with Specifications. Broadridge and Ridge warrant to Penson and Client that the Services, the Software and the Client Software, if any, will conform to their respective functional and technical specifications. Such specifications are subject to amendment by mutual agreement, from time to time, in which case the Services, Software and Client Software will conform to their respective modified functional and technical specifications; provided, however, that any such amendment shall not significantly impair or reduce the functionality of the Services or Client’s use of such Services. This warranty shall not extend to Software or Client Software to the extent that the failure to perform is caused by an alteration or modification by anyone other than Broadridge or Ridge or their agents or otherwise authorized by Broadridge or Ridge or their agents.
B.	Right to Furnish. Penson and Client represent and warrant to Broadridge and Ridge that they have the right to furnish the Client Information and any other materials provided to Broadridge and Ridge in connection with Broadridge and Ridge performing their obligations as contemplated herein and in the Schedules (neither Penson nor Client shall be deemed to have furnished to Broadridge or Ridge any Client Information relating to any of the Assigned Contracts (as defined in the Asset Purchase Agreement) as of the Effective Date). Broadridge and Ridge represent and warrant to Client that they have the right (including, without limitation, under the Assigned Contracts) to provide the Services, Software, Ridge Information and any other services provided to Penson and Client under this Agreement in connection with Broadridge and Ridge performing its obligations as contemplated herein and in the Schedules.
C.	Professional Performance. Ridge warrants to Client that the Services shall be performed in a diligent, professional and workmanlike manner and by competent and skilled personnel duly qualified to carry out their responsibilities required for the applicable service.
D.	Viruses. Broadridge and Ridge represent, warrant, and covenant to Penson and Client that they shall use their commercially reasonable efforts to ensure that the Software does not include, and it shall use commercially available virus scanning software to detect the inclusion of, any computer code, program, or programming device designed to disrupt, modify, delete, damage, deactivate, disable, harm, or otherwise impede the operation of the Software, or any other associated programs, firmware, hardware, computer system, or network (sometimes referred to as “Trojan horses,” “viruses,” or “worms”), or any other similar harmful, malicious, or hidden procedures, routines, or mechanisms that would intentionally cause such Software to cease functioning or to damage or corrupt data, storage media, programs, equipment, or communications, or otherwise interfere with Penson’s or Client’s operations (collectively, “Destructive Elements”). If Broadridge or Ridge detect any such Destructive Elements in the Software, Broadridge or Ridge agree to eliminate such Destructive Elements as promptly as reasonably practicable and shall notify Penson and Client thereof as soon as possible.
E.	No Conflict with Assigned Contracts. Broadridge and Ridge represent and warrant to Penson and Client that the transactions contemplated by this Agreement (including, without limitation, the performance of the Services by Ridge in accordance with the provisions of this Agreement), do not conflict with or violate, or otherwise result in a breach of, the provisions of any of the Assigned Contracts. Broadridge and Ridge represent, warrant and covenant to Penson and Client that they shall not implement any changes to the Services that will, or will be likely to, result in a breach under any of the Assigned Contracts.
F.	Disclaimer. EXCEPT AS SPECIFICALLY PROVIDED IN THIS MASTER SERVICES AGREEMENT OR ANY SCHEDULE, THERE ARE NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

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14. INDEMNITY.

A. Broadridge Indemnity. Broadridge shall indemnify, defend and hold harmless Penson and its Affiliates and its and their respective directors, officers, employees, agents, successors and permitted assigns (“Client Indemnitees”) from and against any and all losses, damages, liabilities, demands, claims, actions, proceedings and related expenses (including, without limitation, reasonable attorneys’ fees and expenses) (referred to collectively hereinafter as “Losses”) incurred by Client Indemnitees arising out of or resulting from third-party claims related to:

(i)	any infringement by the Services or the Software of any patent, copyright, trademark, service mark, trade secret or other intellectual property rights in the Territories (“Intellectual Property Right”) of any third party. With respect to claims under this Subsection (i), if Client is enjoined or otherwise prohibited from using the Services or such Software, Broadridge or Ridge shall, at their sole expense and at their option, (a) procure for Client the right to continue using the Services or such Software, or (b) substitute a non-infringing version of the services or such Software so that the Services or such Software becomes non-infringing and still conforms in all material respects to its applicable functional and technical specifications or any documentation provided hereunder, or, if neither of the foregoing options is available in a commercially reasonable solution, then Ridge may terminate the infringing Services and/or Software and eliminate the charges for the terminated Services and/or Software and if Ridge elects to terminate such Services or Software, and as a result of such termination, the Services and/or Software under the applicable Schedule are adversely affected in a material manner, then Client may terminate the applicable Schedule. Notwithstanding the foregoing, Broadridge or Ridge shall have no liability for any claims of infringement of any Intellectual Property Right to the extent such infringement is caused by (x) Client’s use of the Software in combination with software, data or services not supplied by Broadridge or Ridge as part of this Agreement or otherwise authorized by Broadridge or Ridge, or (y) any modification or attempted modification of such Software made by anyone other than Broadridge or Ridge or its agents or without Ridge’s or its agents’ authorization;
(ii)	Broadridge or Ridge’s failure to comply with any Ridge Laws;
(iii)	any fines or penalties assessed by any Governmental Authority resulting from the implementation of any change by Ridge or the establishment of any new or modified rule by Ridge for which Ridge is responsible under Section 16.F (Implementation of Changes in Laws) below;
(iv)	physical injury to persons or tangible personal property caused by the fault or negligence of Broadridge’s or Ridge’s officers, employees, agents, or representatives;
(v)	any claim or assertion by any of the individuals performing the Services including, without limitation, any claim or assertion that Client Indemnitees should be deemed the “employer” or “joint employer” of any of the individuals performing Services under this Agreement, but excluding any claim or assertion that is the subject of Penson’s indemnification obligation under Section 14.B(ii) or Section 14.B(iii) below; or
(vi)	any claims brought against Penson or Client by Ridge’s suppliers arising from or related to Ridge’s provision of providing the Services hereunder, but excluding any claim or assertion that is the subject of Penson’s indemnification obligation under Section 14.B(iii) below.

B. Penson Indemnity. Penson shall indemnify, defend and hold harmless Broadridge and its Affiliates and its and their respective directors, officers, employees, agents, successors and permitted assigns (“Ridge Indemnitees”) from and against any and all Losses incurred by Ridge Indemnitees arising out of or resulting from any third-party claims related to:

(i) Data or information provided by Penson or Client so long as such claims relate to the data or information at the time they were initially provided to Broadridge or Ridge by Penson or Client and in the form they were initially provided to Broadridge or Ridge by Penson or Client;

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(ii)	Penson or Client’s failure to comply with any Client Laws;
(iii)	physical injury to persons or tangible personal property caused by the fault or negligence of Penson’s or Client’s officers, employees, agents or representatives;
(iv)	any Customer Dispute (as defined below) with respect to the Services, except to the extent that such Customer Dispute arise from (a) Broadridge or Ridge’s gross negligence, willful misconduct or fraud; (b) a Ridge operational error for which Ridge is responsible under Section 15.B (Historical Losses) (below); (c) a claim for which Penson or Client is indemnified under Section 14.A (Ridge Indemnity); or (d) a matter that would give rise to an indemnification obligation of Broadridge or Ridge under the Asset Purchase Agreement. For purposes of the forgoing, a “Customer Dispute” shall mean any error, controversy, dispute or discrepancy between Penson or Client and any of its Customers, any Customers’ accounts, any counterparty to a transaction by Penson or Client, and any of its correspondents or any of their Customers or related to the Customers or any Customers accounts or clearing broker proprietary accounts;
(v)	any claims brought against Broadridge or Ridge by Client’s suppliers arising from or related to Ridge’s provision of the Services hereunder, but excluding any claim or assertion that is the subject of Broadridge’s indemnification obligation under Section 14.A(iv) above; or
(vi)	Penson or Client exercising its right to directly, or through an agent, take control of a Service pursuant to Section 19.O (Step In Rights) below.

C. Indemnity Procedures. A party seeking indemnity under this Section 14 (Indemnity) shall: (i) promptly after receiving notice of the commencement of a claim or litigation for which indemnity may be sought under this Section 14 (Indemnity), give the indemnifying party prompt notice thereof, together with any and all documentation received related to such claim or litigation; (ii) give the indemnifying party full control over the defense and settlement of any claim or litigation for which indemnification is sought under this Section 14 (Indemnity), except to extent such claim involves a proceeding with any Governmental Authority or action by or against any customer of Penson or Client; and (iii) reasonably cooperate with the indemnifying party, at the indemnifying party’s expense, to facilitate the defense or settlement of any such claim or litigation; provided, however, that a failure to comply with the foregoing procedures shall relieve the indemnifying party from its obligation to indemnify solely to the extent that such failure results in prejudice to the indemnifying party. The party seeking indemnification may participate in the defense or negotiations at its own expense to protect its interests, except to extent such claim involves a proceeding with any Governmental Authority or action by or against any customer of Penson or Client. The indemnifying party shall not enter into any settlement agreement that impairs the rights or expands the obligations or admits wrongdoing of the party seeking indemnification without the prior consent of such party; provided, however, that the indemnifying party may settle any claim or cause of action to the extent such claim seeks monetary damages if the indemnifying party agrees to pay such monetary damages and that the other party to this Agreement is not required to admit wrongdoing or is not otherwise negatively impacted by the settlement of such claim or cause of action.

15. LIMITATION OF LIABILITY.

[****]

16. LAWS AND GOVERNMENTAL REGULATIONS.

A. Client Laws. As used in this Agreement, “Client Laws” means (a) SARBOX (defined below) and other similar Laws that govern the maintenance and assessment of a company’s internal financial auditing controls, in each case as applicable to Penson or Client, (b) Laws specifically promulgated for implementation by companies in the business of providing correspondent clearing services to brokers, dealers or other financial intermediaries, whether on a fully-disclosed or omnibus basis, including, without

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	limitation, services subject to FINRA Rule 3230, NYSE Rule 382 or comparable rules or laws of any other Governmental Authority, (c) Laws that pertain to the operation of the business of Penson or Client, (d) privacy and data protection Laws that are applicable to Penson or Client or Client’s receipt or use of the Services or the performance of its obligations under this Agreement and (e) Laws that are specifically applicable to the receipt and use of the Services by Client. Penson and Client shall comply with all Client Laws in connection with Client’s receipt and use of the Services and the performance of their obligations under this Agreement; provided, however, that nothing herein shall excuse or otherwise limit the responsibilities of Broadridge or Ridge pursuant to this Agreement. As used herein, the term “SARBOX” means the Sarbanes-Oxley Act of 2002 and any rules and regulations promulgated thereunder (as enacted, promulgated and amended from time to time).
B.	Ridge Laws. As used in this Agreement, “Ridge Laws” means (a) Laws that pertain to the operation of Broadridge’s or Ridge’s business by Broadridge or Ridge; (b) Laws that regulate Broadridge or Ridge in their capacity as a provider of the Services; or (c) privacy and data protection Laws applicable to Broadridge or Ridge or their performance and delivery of the Services or the performance of their obligations under this Agreement. In connection with their performance and delivery of the Services and their performance of their obligations under this Agreement, Broadridge and Ridge shall comply with all applicable Ridge Laws. If Broadridge or Ridge becomes aware of its non-compliance with any Ridge Law, to the extent such non-compliance impacts the Services or the Agreement, Broadridge and Ridge shall promptly notify Penson and Client. Unless such non-compliance is caused by Penson or Client, Broadridge or Ridge shall promptly implement such changes as may be necessary to correct such non-compliance at Broadridge’s or Ridge’s sole cost and expense.
C.	Compliance Directives. From time to time Penson or Client may request Ridge as to the manner in which Ridge should implement compliance with any Client Laws and as to any changes in Ridge’s rules, policies, procedures or processes relating to such compliance that Penson or Client instructs Ridge to make (each, a “Compliance Directive”). Ridge is authorized to act and rely on, and shall promptly implement, each Compliance Directive in the performance and delivery of the Services including, without limitation, required changes to the Software and Ridge Products, in accordance with the Change Control Procedures applicable to Mandatory Changes.
D.	Changes in Laws. Each party shall identify and notify the other party of any change in any Ridge Law or Client Law, as applicable, that affect the delivery, receipt or use of Services of which it may become aware.
E.	Financial Responsibility for Changes to the Services. To the extent that at least fifty percent (50%) of the Ridge clients in the applicable Territory receiving the Services request that Ridge make a change to the Services as a result of a new or modified Law or a change in Law that affect Ridge’s clients or Penson’s clients, Ridge shall make such change to the Services to ensure compliance with such new Law or such change in Law at no additional charge to Client. In the event that (a) Penson or Client requests that Ridge make such a change and (b) the Steering Committee does not agree that such change is required for regulatory compliance purposes, then Ridge shall make such change, at Penson’s or Client’s cost and expense as determined pursuant to the Change Control Procedures set forth in Section IV (Change Control) of Exhibit C (Governance Structure); provided, however, that in the event (i) the Steering Committee subsequently requests that Ridge make such change or (ii) at least fifty percent (50%) of the Ridge clients in the applicable Territory receiving the Services request such change, in each case, within twelve (12) months after Penson’s or Client’s request for such change, Ridge shall credit Penson or Client such costs and expenses paid to Ridge by Penson or Client for such change.
F.	Implementation of Changes in Laws. Notwithstanding anything to the contrary in this Agreement,

(i) if Ridge implements a change to the Services pursuant to Section 16.C (Compliance Directives) or Section 16.E (Financial Responsibility for Changes to the Services) and Ridge fails to implement such change in accordance with the written instructions of Penson or Client or the Steering Committee (as applicable) for such change or implements such change in the production environment prior to Penson’s, Client’s or the Steering Committee’s (as applicable) written acceptance of the implementation of the change, then in accordance with Section 14.A(iii) Ridge shall be liable for any fines or penalties

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assessed against Penson, Client or any of its Affiliates by a Governmental Authority to the extent resulting from Ridge’s implementation of the change;

(ii)

if Ridge implements a change to the Services and Ridge implements such change in the production environment without Penson’s, Client’s or the Steering Committee’s (as applicable) written acceptance of the implementation of the change, then in accordance with Section 14.A(iii) Ridge shall be liable for any fines or penalties assessed against Client or any of its Affiliates by a Governmental Authority to the extent resulting from Ridge’s implementation of the change; or

(iii)

if Ridge establishes a new or modified rule relating to the use of the Services that is inconsistent with or violates any applicable Law, then in accordance with Section 14.A(iii) Ridge shall be liable for any fines or penalties assessed against Penson, Client or any of their Affiliates by a Governmental Authority to the extent resulting from Ridge’s establishment of such new or modified rule.

G.

Services in Violation of Laws. Subject to the provisions hereof, if providing any of the Services to Client hereunder is determined or adjudicated, by any court or Governmental Authority having jurisdiction (by a binding final ruling or order), to constitute a violation of any material Laws or governmental regulations, Ridge shall use commercially reasonable efforts to modify the relevant Services in order to make such Services compliant with the relevant Laws or regulations without material loss of functionality or performance. Where making such Services compliant with such Laws or regulations is not possible, Ridge or Client may, upon reasonable notice to the other party, terminate the provision of such Services, and in any such case, Ridge agrees to provide a refund to Client of any fees paid in advance by Client for such Services, and the applicable Schedule shall be deemed terminated or amended to eliminate such Services and the fees adjusted accordingly.

Client shall have the right to terminate the applicable Schedule if Client’s primary regulators in the applicable Territory prohibit or deny approval, in a final written ruling or order, for Client to receive the Services from Ridge. Any such termination shall be on a “no fault” basis and for greater certainty, Client will have no obligation to pay any termination charges, liquidated damages or other damages or sums set forth hereunder as a result of such termination. For the avoidance of doubt, Client shall be responsible for any use it may make of the Services to assist it in complying with Client Laws, provided, however, that Broadridge and Ridge shall remain responsible for the performance of their obligations under this Agreement, including, without limitation as provided in Section 16.F (Implementation of Changes in Laws).

17. NON-COMPETITION AND NON-SOLICITATION.

A. Non-Competition.

(i)	During the Term and for one (1) year following the expiration or termination thereof (including, without limitation, any Transition Period), unless terminated by Broadridge for Penson’s or Client’s breach of this Agreement, neither Broadridge nor any of its Affiliates shall, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an advisor, partner, agent, representative, consultant or otherwise with or use or permit its name, trade name, service name or service mark to be used in connection with, any Restricted Client Business (defined below).
	As used herein, the term “Restricted Client Business” means correspondent clearing services including, without limitation, with respect to (a) correspondent clearing services subject to FINRA Rule 3230, NYSE Rule 382 or comparable rules of any other Governmental Authority or (b) any business or enterprise involving or engaged in the business as a broker or dealer or future commissions merchant in providing securities, futures, commodities or foreign exchange transaction execution, clearance, settlement or financing (including, without limitation, margin and portfolio margining) to brokers, dealers, other professional traders or financial intermediaries, or customers.
(ii)	It is recognized by Broadridge that the Restricted Client Business as engaged in by Penson, Client and their Affiliates is and will continue to be international in scope, and that geographical limitations on

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	this non-competition covenant (and the non-solicitation covenant set forth in Section 17.B (No Solicitation) below) are therefore not appropriate.
(iii)	The restriction in Section 17.A(i), however, shall not be construed to prohibit Broadridge or any of its Affiliates from:

(a)	conducting or engaging in Model A Clearing services in the U.K., where Broadridge or any of its Affiliates provides, or will provide simultaneously therewith, processing services to the same client or its affiliates in at least one (1) other country;
(b)	maintaining a broker-dealer for purposes other than to provide Restricted Client Business; and
(c)	owning not more than 5% of any class of securities of any corporation which is engaged in the Restricted Client Business having a class of securities registered pursuant to the Securities Exchange Act of 1934 as amended from time to time (the “Exchange Act”); provided, however, that such ownership represents a passive investment and that neither Ridge nor any of its Affiliates nor any group of persons including, without limitation, Ridge or any of its Affiliates in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business other than exercising its rights as a shareholder, or seeks to do any of the foregoing.

(iv)	The parties acknowledge and agree that the agreements and covenants set forth in this Section 17.A (Non-Competition) are: (a) necessary to protect the legitimate business interests of Penson, Client, Broadridge and Ridge, (b) reasonable as to time, geographic area and scope of activity and do not impose a greater restraint on the activities of either party than is reasonably necessary to protect such legitimate business interests of Penson, Client, Broadridge and Ridge and (c) reasonable in light of the consideration and other value provided under the Asset Purchase Agreement and this Agreement.
(v)	The parties acknowledge that (a) the foregoing agreements and covenants are an essential element of this Agreement between the parties, (b) that the foregoing agreements and covenants are a key part of the overall consideration in connection with this Agreement and (c) that in the absence of such limitations the terms and conditions set forth in this Agreement would be substantially different.
(vi)	The parties hereby waive any and all right to, contest the validity of any agreement or covenant in Section 17.A(i) above, including, without limitation, the breadth of its geographic or business coverage or the length of its term, without first procuring an unqualified opinion from a law firm with attorneys licensed to practice in the applicable geographic area stating that such agreement or covenant is unenforceable in such geographic area.
(vii)	If, notwithstanding the foregoing, any of the above agreements and covenants in Section 17.A(i) (or any items or elements thereof) are held to be unreasonable, invalid, or otherwise unenforceable, in whole or in part, Penson, Client, Broadridge and Ridge each agree that any court or authority so finding will have the authority to reform, redraft, blue pencil or otherwise modify any and all portions ruled to be unreasonable, invalid or unenforceable, whether as to time, scope, geography or otherwise, so that the covenant or covenants, as so reformed, will be applicable and enforceable to the fullest extent allowed by Law. The agreements and covenants contained in Section 17.A(i) and each provision thereof are severable and distinct agreements, covenants and provisions. The invalidity or unenforceability of any such agreement, covenant or provision as written shall not invalidate or render unenforceable the remaining agreements, covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such agreement, covenant or provision in any other jurisdiction. The existence of any claim or cause of action by a party against another (or any of its respective Affiliates) will not constitute a defense to the enforcement by a party of such agreements, covenants or provisions.

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B. No Solicitation.

(i)

During the Term, neither Broadridge nor any of its Affiliates shall, either directly or indirectly, (a) call on or solicit or entice, or attempt to solicit or entice, any person, firm, corporation or other entity who or which at any time during the Term is a customer or client, or potential customer or client, of Penson or any of its Affiliates with respect to the provision of the Restricted Client Business, (b) influence, or attempt to influence, any person, firm, corporation or other entity who or which at any time during the Term was or is a customer or client of Penson or any of its Affiliates to stop doing business with Penson or any of its Affiliates in connection with the Restricted Client Business (except that Broadridge may take such actions with respect to clients or customers of Penson or any of its Affiliates who have initiated contact with Broadridge or one of its Affiliates for business other than the Restricted Client Business) or (c) influence, or attempt to influence, any person, firm, corporation or other entity who or which at any time during the Term was or is a customer or client, or potential customer or client, of Penson or any of its Affiliates to do business with a competing entity to provide the Restricted Client Business. The restriction in this Section 17.B(i) shall not be construed to prohibit Broadridge or any of its Affiliates from continuing to call on solicit any person, firm, corporation or other entity who or which was the subject of active calls or solicitation by Broadridge or one of its Affiliates during the six (6) month period immediately prior to the Effective Date.

(ii)

During the Term, neither Penson nor any of its Affiliates shall, either directly or indirectly, (a) call on or solicit or entice, or attempt to solicit or entice, any person, firm, corporation or other entity who or which at any time during the Term is a customer or client, or potential customer or client, of Broadridge or any of its Affiliates with respect to the provision of transaction processing or outsourcing business by Broadridge or its Affiliates, (b) influence, or attempt to influence, any person, firm, corporation or other entity who or which at any time during the Term was or is a customer or client of Broadridge or any of its Affiliates to stop doing business with Broadridge in connection with the transaction procession or outsourcing business by Broadridge or its Affiliates or (c) influence, or attempt to influence, any person, firm, corporation or other entity who or which at any time during the Term was or is a customer or client, or potential customer or client, of Broadridge or any of its Affiliates to do business with a competing entity to provide the transaction processing or outsourcing business by Broadridge or its Affiliates. The restriction in this Section 17.B(ii) shall not be construed to prohibit Penson or any of its Affiliates from continuing to call on solicit any person, firm, corporation or other entity who or which was the subject of active calls or solicitation by Penson or one of its Affiliates during the six (6) month period immediately prior to the Effective Date.

C. Equitable Remedies. In the event of a breach or a threatened breach by either party of any of the provisions of Section 17.A (Non-Competition) or Section 17.B (No Solicitation), each party acknowledges that the other party will suffer irreparable damage or injury not fully compensable by money damages, or the exact amount of which may be impossible to obtain, and, therefore, will not have an adequate remedy available at law. Accordingly, the non-breaching party will be entitled to obtain such injunctive relief or other equitable remedy, without the necessity of posting bond therefor, from any court of competent jurisdiction as may be necessary or appropriate to prevent or curtail any such breach, threatened or actual. The foregoing will be in addition to any other rights the non-breaching party may have at law or in equity, including, without limitation, the right to sue for damages.

18. TERMINATION.

A.	[****]
B.	[****]
C.	Insolvency. This Master Services Agreement or the applicable Schedule shall terminate immediately upon the occurrence of any of the following events:

(i) (a) a party applies for or consents to the appointment of a receiver, trustee or liquidator for substantially all of its assets, or such a receiver, trustee or liquidator is appointed for the other party; (b) a party has filed against it an involuntary petition for bankruptcy that has not been dismissed within

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sixty (60) days thereof, or files a voluntary petition for bankruptcy or a petition or answer seeking reorganization; (c) a party admits in writing its inability to pay its debts as they mature; or (d) a party makes an assignment for the benefit of creditors; or

(ii) a party becomes subject to a consent decree, settlement agreement, enforcement decision, stipulation, letter of acceptance, waiver and consent, or other order from a governmental regulatory body, self-regulatory organization, exchange, or other financial services regulatory or self-regulatory authority that makes it impossible or impractical for Broadridge or Ridge to perform or Penson or Client to receive the Services.

D.	Force Majeure Event. Penson may terminate a Schedule upon notice to Broadridge in the event a Force Majeure Event (as defined below) continues to prevent the performance of the Services under such Schedule for more than a period of thirty (30) days.
E.	[****]
F.	[****]
G.	Termination Relating to Service Levels. Notwithstanding anything to the contrary, the Service Level Agreement shall specify mutually agreed-to termination rights with respect to Service Level failures.
H.	Additional Termination Rights. Penson’s termination rights described herein are in addition to, and shall not limit, the termination rights of the applicable Client Local Affiliate in the applicable Schedule.
I.	[****]
J.	Termination Fees. Except as set forth in Sections IV.B (Client Local Affiliate’s Termination) of any Schedule, no termination fees or termination charges of any type shall be payable by Penson or Client to Broadridge or Ridge in connection with the expiration or any termination of this Master Services Agreement or Schedule in whole or by service.
K.	Survival. Upon expiration or termination of this Master Services Agreement, the following sections shall survive: 1.A (ii) (Services Schedules), 1.B (Certain Defined Terms)), 2.B (Transition Services), 3 (Charges) (with respect to periods to and including the effective date of expiration or termination), 5 (Communications Lines and Equipment), 9.A (Ownership), 9.C (Return or Destroy), 10 (Confidentiality), 11 (Personal Information), 12 (Data Security and Access), 14 (Indemnity), 15 (Limitation of Liability), 16 (Laws and Governmental Regulation), 17.A (Non-Competition), the last sentence of Section 18.B (Client’s Material Breach), 18.K (Survival), 18J (Termination Fees), 19 (General) and any additional provisions of this Master Services Agreement and a Schedule that by their nature continue to survive any expiration or termination of this Master Services Agreement or such Schedule.
L.	Failure to Close Asset Purchase Agreement. The Agreement shall terminate automatically without payment of any termination fees or termination charges by either party pursuant to this Agreement in the event the Asset Purchase Agreement is terminated in accordance with its terms.

19. GENERAL.

A.

No Inducements. Each party acknowledges that it has not been induced to enter into this Master Services Agreement or any of the Schedules by any representation or warranty not set forth in this Master Services Agreement or the Schedules.

B.

Assignment. Neither this Master Services Agreement or any Schedule, nor any of the rights, duties or obligations hereunder, may be delegated or assigned by a party hereto or thereto without the prior consent of the other party hereto except to an Affiliate or as part of any corporate reorganization, including, without limitation, any merger, consolidation acquisition or amalgamation in which all or substantially all of its

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	assets or equity ownership are transferred or as part of any sale of all or substantially all of the capital stock or assets.
	This Master Services Agreement and each Schedule shall be binding upon and shall inure to the benefit of the parties hereto and thereto and their respective successors and permitted assigns.
C.	Severability. If any provision of this Agreement (or any portion hereof) is held to be invalid, illegal or unenforceable, then the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby.
D.	Notices. All notices, consents, approvals, agreements, authorizations, acceptances, rejections, requests and waivers under this Agreement must be in writing and shall be forwarded by registered or certified mail or nationally recognized overnight courier and sent to Broadridge, Ridge, Penson and Client at the addresses set forth on the first page of this Master Services Agreement or to any other address designated in writing hereafter. In the case of notices to Penson or Client, Attention: President, with a copy to Penson Financial Services, Inc, 1700 Pacific Ave., Ste. 1400 Dallas, TX 75201, Attention: General Counsel. Any notice to Broadridge or Ridge shall be sent Attention: President, with a copy to Ridge Clearing & Outsourcing, Inc., 1981 Marcus Avenue, Lake Success, New York 11042, Attention: General Counsel.
E.	Headings. The headings in this Master Services Agreement and the Schedules are intended for convenience of reference and shall not affect their interpretation.
F.	Counterparts. This Master Services Agreement and any Schedule may be executed in counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument. This Master Services Agreement and any Schedule may be executed by facsimile signature.
G.	Equitable Relief. In the event of a breach or a threatened breach by either party or any of its Affiliates of any of the provisions of Section 7.A (Use of the Service), Sections 9 (Ownership and Use of Ridge Products), 10 (Confidentiality), 11 (Personal Information) or 17 (Non-Competition and Non-Solicitation), each party acknowledges that the other party may suffer irreparable damage or injury not fully compensable by money damages, or the exact amount of which may be impossible to obtain, and, therefore, may not have an adequate remedy available at law. Accordingly, the non-breaching party will be entitled to seek to obtain such injunctive relief or other equitable remedy, without the necessity of posting bond therefor, from any court of competent jurisdiction as may be necessary or appropriate to prevent or curtail any such breach, threatened or actual. The foregoing right will apply without having to follow any dispute resolution process or procedure set forth elsewhere in this Agreement. The foregoing will be in addition to any other rights the non-breaching party may have under this Agreement, at Law or in equity, including, without limitation, the right to sue for damages or terminate this Agreement.
H.	Governing Law. This Master Services Agreement and the Schedules shall be governed by, and construed and enforced in accordance with, the Laws of New York applicable to agreements wholly to be executed and to be performed therein.
I.	Independent Contractor. Broadridge and Ridge are independent contractors and their personnel are not Penson’s or Client’s agents or employees for federal, provincial, or local tax purposes or any other purposes. Broadridge and Ridge, and not Penson or Client, are solely responsible for the compensation of personnel assigned to perform Services hereunder, and payment of worker’s compensation, disability, and other similar benefits, unemployment and other similar insurance, for withholding income and payroll taxes and for verifying the work eligibility of each person performing services hereunder.
J.	Relationship of Parties. Nothing contained in this Master Services Agreement or any Schedule, nor shall any activity hereunder, create a general or limited partnership, association, joint venture or agency relationship between Penson and Broadridge or the applicable Client Local Affiliate and Ridge Local Affiliate.

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K.	Cumulative Remedies; Waiver. The enumeration herein of specific remedies shall not be exclusive of any other remedies. Subject to Section 18.I (Timely Exercise of Termination Rights), the waiver by either party of a breach of or a default under any provision of this Agreement shall not be effective unless in writing and shall not be construed as a waiver of any subsequent breach of or default under the same or any other provision of this Agreement.
L.	Third-Party Beneficiaries. This Master Services Agreement is by and between Broadridge and Penson only (and the Schedules are by and between the applicable Ridge Local Affiliate and the applicable Client Local Affiliate only) and, except as otherwise provided in Sections 14 (Indemnity) and 15 (Limitation of Liability), above, is not intended to confer and shall not confer any benefits or rights upon any other persons not expressly made parties hereto, including, without limitation, customers of Penson or service providers of Broadridge.
M.	Force Majeure. In no event shall either party be liable or deemed to be in default for any delay or failure to perform under this Agreement resulting directly or indirectly from any cause beyond its reasonable control, including, without limitation, acts of God, acts of the public enemy, acts of the governments, fires, floods, epidemics, quarantine restrictions, acts of terrorism, riots and freight embargoes (“Force Majeure Event”); provided that (1) the non-performing party (and the suppliers and contractors of such party) are without material fault in causing the default or delay and (2) the default or delay cannot be reasonably circumvented by the non-performing party through the use of commercially reasonable alternative sources, workarounds, plans or other means (including, without limitation, with respect to Ridge, by Ridge meeting its obligations to provide disaster recovery and business continuity services, except to the extent that provision of such services is itself prevented by a Force Majeure Event). Notwithstanding the foregoing, in every case the party claiming excusable delay shall use its commercially reasonable efforts to prevent and mitigate the effect and length of such Force Majeure Event. Performance times under this Agreement shall be considered extended for a period of time equivalent to the time lost because of any delay which is excusable under this Section 19.M (Force Majeure). If Ridge fails to provide the Services due to a Force Majeure Event for more than five (5) days, the fees under this Agreement shall be adjusted in a manner such that Penson and Client are not responsible for the payment of any fees (or other charges) for Services that Ridge fails to provide.
N.	Disaster Recovery and Business Continuity. Ridge shall maintain the disaster recovery and business continuity services as set forth in Attachment E (Disaster Recovery; Business Continuity) to the applicable Schedule. Ridge shall implement its disaster recovery and business continuity plans as required, including, without limitation, in the event of a Force Majeure Event (except to the extent that provision of such services is itself prevented by a Force Majeure Event, in accordance therewith).
O.	Step In Rights. If Ridge fails to provide any Services and such failure would give rise to a right for Penson to terminate this Master Services Agreement or a Schedule pursuant to Section 18.A (Ridge’s Material Breach), Penson or Client may, subject to following, take control of the part of the Services that is impacted and, in doing so, may take such other action as is reasonably necessary to restore the Services. In no event may Penson or Client, or its agents, take control of any of the Services pursuant to this Section 19.O (Step In Rights) to the extent doing so would cause Broadridge or Ridge to be in breach of any agreement it has with any third party. If Penson or Client’s election to take control of the part of the Services that is impacted will require Penson or Client to enter Ridge locations, the provisions of Exhibit D (Step In Rights) shall apply. Ridge shall cooperate fully with Penson or Client and its agents and provide all reasonable assistance at no charge to Penson or Client to restore such Services as soon as possible, including, without limitation, giving Penson or Client and its agents all requested access to Ridge’s premises, equipment, software (including, without limitation, third-party software) and materials. Penson or Client shall disrupt Ridge’s operations or compromise the confidentiality of any other clients of Ridge.
P.	Integration; No Modification. This Master Services Agreement, the Schedules and the agreements, instruments and documents referred to in this Master Services Agreement and the Schedules contain the entire agreement of the parties with respect to its subject matter and supersede all existing agreements and all other oral, written or other communications between them concerning their subject matter. This Master

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	Services Agreement and the Schedules shall not be modified in any way except by a writing signed by both parties.
Q.	Use of Name; Press. Each party agrees that neither it nor any of its Affiliates will display or use any of the other party’s or such party’s Affiliates’ trade-marks, trade names, logos or any other intellectual property or issue any press release or other public statement or notice identifying the other party or its Affiliates or any Customers as customers or otherwise relating to this Agreement or the relationship between Broadridge and Ridge and Penson and Client and/or their Affiliates without the prior consent of the other party, which consent shall not be unreasonably withheld. In the event that a party is required to disclose this Agreement or its existence by Law or to one of its regulators (e.g., publicly filing this Agreement with the United States Securities and Exchange Commission) the parties shall inform each other in writing of such requirement and cooperate in good faith in order for this Agreement to be redacted and afforded as much confidential treatment as is feasible. Any consent of by either party required by this Section 19.P (Integration; No Modification) shall be obtained from an officer holding a title of Executive Vice President or higher.
R.	Claims. Any claims by Broadridge or a Ridge Local Affiliate under this Master Services Agreement or a Schedule shall be brought by Broadridge and Broadridge shall enforce the applicable provisions of this Master Services Agreement or a Schedule to the same extent as a Ridge Local Affiliate as if such Ridge Local Affiliate was a party to this Master Services Agreement. As such, in no event shall a Ridge Local Affiliate be entitled to bring any claim against Penson, or the applicable Client Local Affiliate, under this Master Services Agreement or a Schedule. Notwithstanding the foregoing provisions of this paragraph, a Ridge Local Affiliate may bring a claim against the Client Local Affiliate that is party to such Schedule in the applicable Territory only to the extent such claim is required by Law to be brought in such Territory. Broadridge shall in such instance remain responsible for and shall oversee such claim and such claim shall be subject to the limitations on liability in this Master Services Agreement.
	Any claims by Penson or a Client Local Affiliate under this Master Services Agreement or a Schedule shall be brought by Penson and Penson shall enforce the applicable provisions of this Master Services Agreement or a Schedule to the same extent as a Client Local Affiliate as if such Client Local Affiliate was a party to this Master Services Agreement. As such, in no event shall a Client Local Affiliate be entitled to bring any claim against Broadridge, or the applicable Ridge Local Affiliate, under this Master Services Agreement or a Schedule. Notwithstanding the foregoing provisions of this paragraph, a Client Local Affiliate may bring a claim against the Ridge Local Affiliate that is party to such Schedule in the applicable Territory only to the extent such claim is required by Law to be brought in such Territory. Penson shall in such instance remain responsible for and shall oversee such claim and such claim shall be subject to the limitations on liability in this Master Services Agreement.
	For clarity, Broadridge and Penson shall be entitled to the benefit of all rights, defenses, counterclaims and other protections to which the Ridge Local Affiliate or Client Local Affiliate, as applicable, may be entitled with respect to any such cause of action under this Master Services Agreement or a Schedule.
S.	Audit. Broadridge and Ridge shall maintain such books and records as are (a) necessary to demonstrate Broadridge’s and Ridge’s compliance with its obligations under this Agreement, (b) necessary to verify Service volumes and fees and (c) necessary to comply with all applicable Ridge Laws and (d) necessary to document any Compliance Directives implemented pursuant to the provisions of Section 16.C (Compliance Directives) above. Broadridge and Ridge shall provide to Penson, Client and their auditors access at all reasonable times and after reasonable notice (not to exceed thirty (30) days unless a shorter period is required by a Governmental Authority) to any Ridge service location, to Ridge personnel providing the Services, and to data and records relating to the Services and Broadridge’s or Ridge’s performance under this Agreement, for the purposes of performing audits and inspections of (i) Broadridge’s or Ridge’s compliance with the provisions of this Agreement, including, without limitation, the fees charged to Client and (ii) Penson, Client and their businesses to verify the integrity of Client Information and to examine the Software and Ridge Products and systems that process, store, support and transmit that Information. Additionally, during the Term, Broadridge and Ridge shall obtain and have performed and provide Penson’s and Client’s internal and external auditors and regulators with attested locally applicable audit reports (e.g., Model A / Model B Assurance Report on Internal Controls (AAF), Canadian Institute of

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Chartered Accountants Section 5970 and SAS-70 Type II audit reports) (the “Audit Reports”) on an annual basis each for a period to end on September 30th of each calendar year and delivered no later than November 15th of each calendar year. Broadridge and Ridge shall additionally provide Penson’s and Client’s internal and external auditors, at Penson’s and Client’s request with any reasonable additional information and assistance as may be reasonably requested by Penson and Client (including, without limitation, with requests, reports and information relating to compliance with SARBOX or equivalent regulatory requirements).

T.

Insurance. Ridge shall, throughout the Term and the Transition Period, directly or through the insurance programs of Broadridge, maintain in full force and effect from a third party that is rated “A-” or better in Best’s Insurance Guide at a minimum the following insurance coverage for its operations worldwide:

(i)	A policy of workers’ compensation insurance (as required by the applicable Law) on its employees. Such policy shall provide statutory limits and contain employer’s liability coverage in an amount not less than U.S. $1,000,000.
(ii)	Commercial general liability insuring against bodily injury, property damage, contractors’ completed operations and contractual liability with a combined single limit of not less than U.S. $1,000,000 per claim.
(iii)	Professional liability and errors and omissions insurance in an amount not less than U.S. $25,000,000 per claim.
(iv)	Comprehensive crime insurance, including, without limitation, employee dishonesty and computer fraud, with coverage limits of at least U.S. $10,000,000 in the annual aggregate. The policy shall provide coverage for fraud or dishonesty by Ridge personnel whether acting alone or in collusion with others, and whether acting from Ridge service locations or remote locations.
(v)	Umbrella/Excess liability coverage of not less than U.S. $25,000,000 over the coverages shown above.

Penson and Client shall be named as additional insureds under the policies described in Section 19.T(ii) under which the aforesaid insurance is provided. Insurance carried on a claims made basis shall be maintained for two (2) years after the expiration or termination of the Term. For the avoidance of doubt, any policy amounts or limitations shall not in any event be construed as limitations on Ridge’s liability under this Agreement, nor shall they be construed as expanding Broadridge’s or Ridge’s liability under this Agreement. Ridge shall furnish Penson and Client with certificates of insurance evidencing the above coverages and providing for at least thirty (30) days prior notice to Penson and Client of cancellation or non-renewal; provided, however, that Ridge shall not be obligated to provide such notice if, concurrently with such cancellation or non-renewal, Ridge provides self insurance as described below or obtains coverage from another insurer meeting the requirements described above. Notwithstanding the foregoing, so long as Ridge maintains a credit rating that is not significantly worse than its credit rating as of the Effective Date, Ridge reserves the right to self insure coverage, in whole or in part, in the amounts and categories designated above, in lieu of Ridge’s obligations to maintain insurance as set forth above, at any time.

*  *  *  *

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BROADRIDGE FINANCIAL SOLUTIONS, INC.		PENSON WORLDWIDE, INC.
Approved by: /s/ John Hogan		Approved by: /s/ Daniel P. Son
	(signature -Authorized Officer)		(signature -Authorized Officer)
Name: John Hogan		Name: Daniel P. Son
	(type or print)		(type or print)
Title: President		Title: President
	(type or print)		(type or print)
Dated as of: November 2, 2009		Dated as of: November 2, 2009

THIS AGREEMENT SHALL BECOME EFFECTIVE UPON BEING SIGNED BY AN AUTHORIZED OFFICER OF BOTH BROADRIDGE AND PENSON.

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Exhibit A

Intentionally left blank.

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Exhibit B

Ridge Data Security Measures

	Broadridge and Ridge will carry out the following procedures to protect Client Information:
1.	Maintain a Corporate Security Policy reviewed regularly and approved by Broadridge Executive Management and Ridge Executive Management.
2.	Protect against threats or hazards to confidentiality, availability, and integrity of data and systems through the use of static and or dynamic vulnerability assessment tools.
3.	Employ public or financial industry standards of encryption, when communicating Client Information over untrusted networks, or when transporting confidential information on mobile devices, USB media, and backup media.
4.	Prohibit unauthorized physical access to systems as well as employ facilities protection measures to deter, prevent and track unauthorized access.
5.	Develop operational processes to ensure segregation of duties and maintain access controls to critical resources.
6.	Develop internal processes to limit and track all administrative functions.
7.	Develop documented procedures for system configuration to eliminate potential for unauthorized access.
8.	Employ firewall security and prohibit system administrative functions through remote internet access to the firewall.
9.	Employ a documented process and application development standards based upon reasonable security development practices.
10.	Perform backups of system, application, and data with reasonable procedures and frequency. Maintain backup information in secure off-site storage.
11.	Employ industry reasonable best practices procedures to ensure personnel security and ensure personnel understanding of security processes and procedures.
12.	Develop documented procedures for the retention and destruction of computer media and documents in electronic or paper form.
13.	Perform background checks on all of its new hires who are involved in performing the Services under this Agreement in accordance with Broadridge’s and Ridge’s policies.
14.	Implement and maintain an information security program with a dedicated program manager.
15.	The program shall have the stated objective of continuously improving and monitoring performance of current and future security initiatives.
16.	Comply with legislative and regulatory requirements based on the jurisdiction of the information.
17.	Monitor and log all access to data center facilities.
18.	Implement and maintain adequate system logging to monitor and control changes to the production environment.
19.	Implement and maintain adequate application logging to monitor and control all changes to the production data and operational environment.
20.	Implement data destruction procedures to eliminate the risk of data compromise on decommissioned systems and media. (similar to 12 — but it sounds like they are aiming for e-discovery).
21.	Implement and maintain a training program for developers, administrators, and IT staff which covers topics specific to their duties and expertise (secure development, server hardening, etc.).

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Exhibit C

Governance Structure

I. INTRODUCTION

This Exhibit provides the Governance Structure, which details: (i) those roles and responsibilities of both parties that are required to maintain an effective working relationship and (ii) reporting mechanisms to be established and implemented by the parties to enable Penson and Client to review and evaluate the performance of the Services by Ridge as part of Penson’s and Client’s ongoing duties to supervise and control their business activities as a clearing broker and to conduct continuing due diligence with respect to Ridge’s ability to provide the Services.

The Governance Structure is intended to:

Set forth the procedure for reporting by Ridge, and the related monitoring of the performance of the Services.

Maintain current knowledge of business direction and strategy.

Maintain control of all Changes, and changes that are made to business processes or any of the Services and manage associated financial, technical and operational risks.

Maintain disciplined management regarding cost, quality and each party’s compliance with its contractual commitments and the Laws and Rules.

Provide general oversight and consolidated performance reporting.

Provide a clear route for program reporting; issue escalation and resolution and risk management.

II. GOVERNANCE BODIES AND RESPONSIBILITIES

Governance Structure

The following joint governance bodies (“Governance Bodies”) will be established no later than ninety (90) days after the Effective Date:

Executive Governance Committee

Business Governance Committees

2.1.1 Meetings: The parties agree that meetings within and among the various Governance Bodies shall be part of the normal operations and are necessary (i) to provide the most effective level for the performance of duties under the Schedule and (ii) as part of Penson’s and Client’s ongoing duties to supervise and control its business activities as a clearing broker and to conduct continuing due diligence with respect to Ridge’s ability to provide the Services. Meetings of the various Governance Bodies may be held either in person or telephonically. As a general rule, meetings shall be held in person, with telephone meetings being the exception and only as mutually agreed to by the parties. The venue for meetings shall take into account both parties’ mutual interest in minimizing costs, and each party shall be responsible for its own costs and expenses with regard to attendance at meetings. The frequency of meetings for each Governance Body is set forth below.

2.1.2 Members: The members of each Governance Body are set forth below. If a party’s representative in a Governance Body ceases to be a member of such Governance Body, that party shall, within thirty (30) days, notify the other party of the replacement who shall be an individual of equivalent standing and expertise. The other party’s consent to such proposal may not unreasonably be withheld or delayed.

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Executive Governance Committee

The Executive Governance Committee (“EGC”) shall not be involved in day-to-day management of this Master Services Agreement or a Schedule, but shall retain overall accountability for this Agreement in addition to the business relationship.

2.2.1 Key Responsibilities: The following key responsibilities shall be subject to and in accordance with the terms and conditions of this Agreement:

To monitor and direct the strategic relationship between Penson and Client and Broadridge and Ridge.

To provide an “interface” to the executive teams of the parties by providing regular feedback on progress and achievements to executive meetings.

To review long term plans, business trends and directions.

To oversee compliance with terms and conditions of this Agreement and monitor that regulatory developments are addressed.

To consult on specified material industrial or public relations matters in connection with the Services.

To review overall performance of the Services including, without limitation, financial performance investments and the effectiveness of gain/risk share arrangements.

To resolve issues and/or disagreements escalated by the Business Governance Committees.

To examine and authorize Changes.

To examine and authorize proposals for amendments to the Schedules.

To review new policies or changes to existing policies.

2.2.2 Specific Functions

Review of select reports that are reflective of the performance of Ridge in fulfilling the agreed upon Service Levels, in maintaining accurate books and records, and adherence to various polices, procedures and regulations.

Review of the results of select, completed SRO examinations and audit reports of Broadridge and Ridge and Penson and Client business units.

Review of the feedback provided by key business stakeholders within Penson and Client and Penson’s and Client’s introducing brokers.

The EGC will also address:

o The Service Levels being provided by Ridge

o Broadridge’s and Ridge’s and Penson’s and Client’s adherence to existing polices, procedures and the Laws and Rules

o The resolution of any unresolved disputes and controversies between the parties

o The results of all audits conducted by Penson and Client as well as all SRO examinations

o Broadridge’s, Ridge’s and Penson’s and Client’s readiness in preparing for new regulations and/or industry mandates

o Any changes in the strategic direction of Broadridge or Ridge

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2.2.3	Meetings: Meetings shall take place quarterly, until otherwise agreed by the parties. Each meeting of the EGC shall be attended by at least two members from each of Broadridge and Ridge and Penson and Client.
2.2.4	Unresolved Disputes: In the event that the EGC cannot arrive at a mutually agreeable solution to any dispute or disagreement that is escalated to it, the dispute or disagreement shall be submitted to non-binding mediation prior to and as a condition precedent to the commencement of litigation under the Schedule. Said mediation shall be conducted by and in accordance with the mediation procedures of FINRA. The costs of the mediation shall be borne equally by the parties. All statements of any nature made in connection with this mediation shall be privileged and shall be inadmissible in any subsequent arbitral proceeding involving or relating to the claims at issue in the mediation.
2.2.5	Members of the EGC:
	The members of the EGC shall include an equal number of executive officers from both parties.

Business Governance Committees

2.3.1 Structure:

The parties to each Schedule shall establish a Business Governance Committee.

2.3.2 Purpose:

Provide operational leadership for the Services, including, without limitation, the delivery of the Services and initial strategic initiatives.

2.3.3 Key Responsibilities: The following key responsibilities shall be subject to and in accordance with the terms and conditions of the applicable Schedule:

Regularly establish audit and review responsibilities of Broadridge and Ridge, in accordance with the applicable Schedule.

Draft and update template Certification Reports, and Corrective Action Certifications.

Approve Services plans and guide overall activities.

Review and approve business and technical proposals that impact the business case for the Services.

Review select reports to monitor performance of the Services, including, without limitation, adherence to Service Level Agreements, the agreed-upon code of conduct and to all laws.

Review dependencies between Service areas.

Assess operational and financial risk.

Identify certain material current or future events that may affect Services.

Resolve conflicts relating to Services where these are escalated by management of the parties.

Discuss and implement Changes, projects or new services that should be agreed at a level above the day-to-day management team; part of this role shall be to coordinate the scope of “Change” in the context of its impact on units in the field and on central functions.

Prepare and implement any necessary amendments to the applicable Schedule within the authority of the team (which shall not include any authority to agree to any new Services).

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     Monitor compliance with the Laws and Rules and address routine compliance issues.

2.3.4	Members of the Business Governance Committee:
	The members of the Business Governance Committee (“BGC”) shall include an equal number of senior officers from both parties to the applicable Schedule.
2.3.5	Meeting
	The BGC meetings shall be held monthly or as either party to the applicable Schedule may reasonably request. Relevant Penson and Client representatives and Broadridge and Ridge representatives shall also participate and provide input as required.

III. REPORTS

To facilitate Penson’s and Client’s ongoing duties to supervise and control its business activities as a clearing broker and to conduct continuing due diligence with respect to Ridge’s ability to provide the Services, Broadridge and Ridge shall provide or cause to be provided to Penson and Client copies of mutually agreed-upon reports. All reports are run daily, except where noted.

The parties agree to update the list of reports from time to time as the parties deem necessary to effect the purposes described above, in each case as mutually agreed by the parties in writing.

IV. CHANGE CONTROL

Changes

The parties recognize that during the Term there may be changes to the Services (as agreed upon by Ridge and Client) or the terms and conditions of this Agreement (as agreed upon by Broadridge and Penson) either on a temporary or permanent basis (each, a “Change”). Any such Changes shall be addressed and processed through the “Change Control Procedure” set forth below. Except as set forth in this Section IV regarding Mandatory Changes or as otherwise expressly agreed between the parties in writing, until any Change is agreed between Ridge and Client or Broadridge and Penson, as applicable, in accordance with the Change Control Procedure, Ridge shall continue to perform the Services and be paid the amounts set forth under this Agreement as if the Change had not been requested. Notwithstanding the preceding sentences of this Section IV or any provision of the Schedule (including, without limitation, the Attachments) to the contrary, the parties shall consider all proposed Change Requests in good faith through the Governance Structure, but shall not be required to agree to the terms and conditions of any proposed Change.

Change Control Procedure

4.1	All Change Requests (defined below) and Changes shall be dealt with in accordance with the procedure set forth below. Changes shall be effective only if made in writing and signed by an officer of the parties who is authorized to execute such documents under the terms and conditions of the Schedule and in accordance with this Exhibit.
4.2	At any time and for any reason, either party may request a Change (each, a “Change Request”). Each Change Request shall be submitted in writing to the other party, and shall specify in reasonable detail:

(a)	any proposed Change;
(b)	the impact of the proposed Change on the existing Services;
(c)	any amendment to this Schedule required by the proposed Change;
(d)	other details which the other party might reasonably agree to include in the Change Request; and
(e)	any other details set forth in the Change Request and Approval Form (defined below).

4.3 If Broadridge or Ridge submits the Change Request, it must set forth, if appropriate, in reasonable detail any proposed adjustments to the fees and/or any other pricing mechanisms to be charged or used under the

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applicable Schedule, including, without limitation, any additional costs or expenses which shall be incurred by Penson or Client if and to the extent that the Change Request is approved.

4.4 If Penson or Client submits a Change Request, Broadridge and Ridge shall evaluate the Change Request and, within ten (10) business days, submit a response setting forth in reasonable detail:

(a)	with respect to Changes other than Mandatory Changes, whether or not Broadridge and Ridge are prepared in principle to agree to the proposed Changes;
(b)	any adjustments to the fees and/or other pricing mechanisms to be charged or used under the applicable Schedule that Broadridge and Ridge may propose, including, without limitation, any additional costs or expenses that shall be incurred by Penson or Client in the event the Change Request is approved; and
(c)	a good faith estimate of the effective date for the Change.

4.5	If Broadridge or Ridge requires more time to respond, due to the nature or complexity of Penson’s or Client’s proposed Change Request or otherwise, Broadridge or Ridge shall so inform Penson or Client and Broadridge or Ridge shall have a reasonable amount of additional time to respond.
4.6	If Broadridge or Ridge submits a Change Request, Penson and Client shall evaluate the Change Request and, within ten (10) business days, submit a response setting out in reasonable detail:

(a)	whether or not Client are prepared in principle to agree to the proposed Changes; and
(b)	Penson’s and Client’s response to Broadridge’s or Ridge’s proposed Changes, including, without limitation, any proposed Changes to the Service Charges and/or other pricing mechanisms provided in the applicable Schedule.

4.7	If Penson or Client requires more time to respond because of the size or complexity of Broadridge’s or Ridge’s proposed Change Request or otherwise, Penson or Client shall so inform Broadridge or Ridge and Penson or Client shall have a reasonable amount of additional time to respond.
4.8	Once a response to the Change Request has been submitted, the parties shall discuss the proposed Change and any related matters.
4.9	Changes shall become effective upon execution and delivery by both parties of an amendment to this Master Services Agreement or the applicable Schedule affecting such Change, which amendment shall be executed promptly and shall include all relevant changes to this Master Services Agreement or the applicable Schedule.
4.9	Each party shall bear its respective costs associated with proposing, considering, responding to or otherwise dealing with Change Requests and responses in accordance with this Exhibit, unless the parties otherwise agree in writing.

Mandatory Changes

Notwithstanding any provision to the contrary in this Section IV or elsewhere in this Agreement, any of the following Changes shall be considered a “Mandatory Change”: Changes that (a) involves a request by Penson or Client for the provision of Services to a new Affiliate of Penson, (b) are necessary to implement new or modified Penson or Client policies, which will in any event be processed as a Change, (c) are necessary to effect compliance with a new or modified Client Law, Compliance Directive or Ridge Law or (d) are identified in this Agreement as a Mandatory Change or a Change that is to be implemented in accordance with the Change Control Procedures applicable to Mandatory Changes. Upon receipt of a request for a Mandatory Change, and subject to the “Development Scheduling” Service Level, Broadridge or Ridge shall provide a fee estimate for each Mandatory Change and provide the schedule when such change will be implemented. If such schedule is not acceptable to Penson or Client, Broadridge or Ridge and Penson and Client shall negotiate in good faith an accelerated schedule for the implementation of such change. Notwithstanding any provision to the contrary in this Section IV, all Mandatory Changes shall be implemented (i.e., neither party shall have the right to refuse to approve or implement such Change) in accordance with the Change Control Procedures. Any dispute or disagreement regarding any Mandatory Change (including, without limitation, issues regarding fees, Service Levels, specifications for

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deliverables and the implementation of the Mandatory Change) shall not delay the implementation of the Mandatory Change. For the avoidance of doubt, the Change Control Procedures applicable to Mandatory Changes shall not apply to, and shall not relieve Broadridge or Ridge from, changes Broadridge or Ridge is otherwise required to make pursuant to this Agreement.

V. FEE DISPUTES

In accordance with Section 3.E (Payment) of this Master Services Agreement, Client may withhold the portion of an invoice for particular fees, subject to a bona fide dispute. Upon receipt of a Dispute Notice, the parties shall immediately meet (including, without limitation, by telephone conference) to attempt to resolve the dispute. If the parties are unable to resolve the dispute at such meeting (a “Payment Dispute”) then either party may implement the following expedited payment dispute escalation procedures:

5.1	Either party may initiate the expedited process by an arbitrator by sending notice of such request to the other party and describing the dispute or referencing this Section 5.1 (a “Dispute Notice”).
5.2	For five (5) business days after delivery of the Dispute Notice, the parties each shall use good faith efforts to mutually agree upon an arbitrator. If the parties are not able to agree upon an arbitrator within such period of time, such arbitrator shall be selected in accordance with the International Institute for Conflict Prevention and Resolution for Non-Administered Arbitration, or its successor.
5.3	The arbitrator shall possess at least fifteen (15) years of relevant experience in a law firm or corporate law department of over twenty-five (25) lawyers or a judge of a court of general jurisdiction. The arbitrator shall not have represented or acted on behalf of either party, or be otherwise affiliated with or interested in either party.
5.4	Upon selection of the arbitrator, the parties shall agree on a schedule to present the dispute to the arbitrator and obtain a decision as described herein, during a time frame of no more than twenty (20) days. In the event the parties cannot agree upon a schedule, the arbitrator shall provide a schedule. Each party shall simultaneously submit a memorandum to the arbitrator that is not more than ten (10) pages in length, accompanied by relevant documents and not more than three (3) affidavits. After receiving and reviewing the memoranda and supporting information, the arbitrator shall conduct a hearing of no more than four (4) hours, that shall include not more than two representatives of each party, at which the parties may present their case and shall submit to questioning by the arbitrator. The arbitrator shall render his or her decision within seventy-two (72) hours of the hearing.
5.5	The standard under which the arbitrator shall render his or her decision shall be whether there exists a good faith basis for Client to withhold the disputed charges under the terms and conditions of this Master Services Agreement and the applicable Schedule. The arbitrator shall issue his or her decision in the form of a ruling on that single issue, and shall not provide any written basis or support for his or her opinion. If the arbitrator determines that Client had a good faith basis for withholding the disputed fees, then such sums shall remain in Client’s possession. If the arbitrator determines that Client did not have a good faith basis for withholding the disputed charges, then Client shall pay such disputed fees to Broadridge or Ridge, under reservation of rights, within ten (10) days after the date of the arbitrator’s decision. After the arbitrator renders such decision, each party may pursue any and all rights associated with the Payment Dispute through the dispute escalation procedures set forth in this Exhibit. The decision of the arbitrator shall have no force or effect other than for the limited purposes stated in this Section 5.
5.6	The decision of the arbitrator and all communications, memoranda and supporting documentation exchanged in connection with the procedures set forth in this Section 5 shall be exchanged on a without prejudice basis and the decision of the arbitrator and briefs of the parties shall be inadmissible in any respect in any subsequent proceeding. All communications, memoranda, supporting documentation, and the arbitrator’s decision shall be deemed Information under this Agreement.
5.7	The arbitrator shall be compensated at his or her applicable billing rate, which shall be split equally between the parties. Any costs incurred by either party shall be borne by that party.

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5.8 A party’s failure to commence or pursue the expedited procedures set forth in this Section 5 shall not constitute, operate or be construed as a waiver of any right the party may have under this Agreement.

VI. ACCEPTANCE

Without prejudice or limitation to any other rights or remedies of Client, new Ridge Products shall be subject to acceptance testing by Client to verify that such Ridge Products conform to the specifications provided in connection with such Ridge Products (the “Acceptance Criteria”). When Ridge notifies Client that a Ridge Product is ready for testing for conformance with the Acceptance Criteria, Client may elect to test the Ridge Product to determine whether they comply in all material respects with the Acceptance Criteria. Client shall have thirty (30) business days to complete such testing. Upon completion of such testing, Client shall promptly notify Ridge whether it has accepted such Ridge Product (“Accept”), or whether it has identified discrepancies with the Acceptance Criteria (“Reject”). If Client Accepts the Ridge Product it shall issue a notice thereof. If Client Rejects the Ridge Product, Client shall provide notice setting forth a list of items that Client claims must be corrected and Ridge shall use commercially reasonable efforts to correct such Ridge Product and the testing process shall resume as set forth above. If Client does not provide notice to Ridge after such thirty (30) day period, then the Ridge Products shall be deemed to be accepted.

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Exhibit D

Step In Rights

1.1 If Penson or Client wishes to take action, either itself, through an Affiliate or using a third party acting on its behalf, and such action involves onsite access at a Ridge location, Penson or Client shall notify Broadridge or Ridge of the following:

(a)	the action it wishes to be taken;
(b)	the reason for such action together with supporting evidence;
(c)	the date it wishes to commence such action; and
(d)	the estimated time period which it believes will be necessary for such action.

1.2

Following service of such notice and subject to compliance with the other terms and conditions of this Exhibit and the Agreement, Penson or Client shall take such action as notified under Section 1.1 above and any consequential additional action as it reasonably believes is necessary (together, the “Required Action”) and Broadridge and Ridge shall give all reasonable assistance to Penson or Client while it is taking the Required Action. Penson or Client shall exercise its rights under this Exhibit reasonably and in a manner that complies with applicable standard policies and procedures applicable to onsite access at the Ridge locations (including, without limitation, policies relating to access to other customers’ data).

1.3

Before ceasing the Required Action, if Penson or Client intends to hand the Services back to Ridge, Penson or Client shall deliver notice to Broadridge, specifying in reasonable detail (to the extent that it is reasonably practicable in the circumstances):

(a)	the action it has taken; and
(b)	the date it plans to conclude such action

	(the “Step Out Notice”).
1.4	Unless otherwise agreed by Broadridge or Ridge, Penson’s or Client’s right to have onsite access to the Ridge locations for the purpose of exercising step in rights under this Exhibit shall expire six (6) months after the date that Client first has taken any Required Action onsite at a Ridge location, but only if Penson or Client has not delivered a Step Out Notice prior to the date of such expiration.
1.5	To the extent Penson or Client takes over responsibility for any of the Services while onsite at a Ridge location during the exercise of its step in rights, then Ridge shall not be responsible for meeting the Service Levels that are associated with such Services, to the extent that Penson’s or Client’s actions result in a failure to achieve Service Levels. Penson’s or Client’s exercise of its step in rights shall not constitute a waiver by Penson or Client of any termination rights or rights to pursue a claim for damages arising out of the failure that led to the step in rights being exercised.

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EX-10.35

EXHIBIT 10.35

NOTE: PORTIONS OF THIS AGREEMENT ARE THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS HAVE BEEN
REDACTED AND ARE MARKED WITH A “[****]” IN PLACE OF THE REDACTED
LANGUAGE

Schedule A (United States)

SERVICE BUREAU AND OPERATIONS SUPPORT SERVICES SCHEDULE

To The Master Services Agreement

between

BROADRIDGE FINANCIAL SOLUTIONS, INC.

and

PENSON WORLDWIDE, INC.

This schedule (the “Schedule”), dated as of November 2, 2009 (the “Schedule Effective Date”), between Ridge Clearing & Outsourcing Solutions, Inc. (“Ridge Local Affiliate”) and Penson Financial Services, Inc. (“Client Local Affiliate”), to the Master Services Agreement, dated as of the date hereof, between Broadridge Financial Solutions, Inc. and Penson Worldwide, Inc., sets forth the terms and conditions, in addition to the terms and conditions in the Master Services Agreement, under which Ridge Local Affiliate will provide service bureau and operations support services to Client Local Affiliate to assist and support Client Local Affiliate in functioning as a clearing firm. Each of Client Local Affiliate and Ridge Local Affiliate agrees to comply with and fulfill all terms and conditions applicable to it under the Master Services Agreement.

Unless otherwise defined herein, all capitalized terms shall have the meanings given to them in the Master Services Agreement. In the event of a conflict between the terms and conditions of this Schedule and the terms and conditions of the Master Services Agreement, the terms and conditions of this Schedule shall govern. The term “Client Local Affiliate” as used in this Schedule includes all Affiliates, divisions and subsidiaries of Client Local Affiliate. Except where otherwise indicated, all references in this Schedule to Sections or Attachments are to Sections to, and Attachments of, this Schedule. The term “party” as used in this Schedule means Ridge Local Affiliate or Client Local Affiliate, as applicable. The term “parties” as used in this Schedule means Ridge Local Affiliate and Client Local Affiliate.

I. SUBMISSION OF SCHEDULE

A. During the Schedule Term, Client Local Affiliate and Ridge Local Affiliate shall each be subject, to the extent applicable to such party, to the provisions of federal, state and local laws, rules and regulations and the constitution, by-laws, rules, regulations and stated policies of the Securities and Exchange Commission (“SEC”), the Financial Regulatory Authority (“FINRA”), the New York Stock Exchange, Inc. (“NYSE”), and any other securities exchange, commission, association, regulatory or self-regulatory organization (“SRO”) vested with authority over Client Local Affiliate or Ridge Local Affiliate (to the extent applicable to a party, the “Laws and Rules”). Each party shall perform its obligations under this Schedule in accordance with the Laws and Rules.

B. Client Local Affiliate shall submit this Schedule to FINRA, or any other SRO, as required, on behalf of itself and Ridge Local Affiliate for review and, if necessary, approval. This Schedule shall not become effective until the date upon which all necessary SRO approvals as to both parties are received (the

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“Approval Date”); provided, however, that if no SRO approvals are required for this Schedule to become effective, this Schedule shall become effective as of the Schedule Effective Date. In the event that any such approval is required and this Schedule is not so approved, the parties shall negotiate in good faith to amend this Schedule as may be needed to obtain such approval. This Schedule will be effective in connection with the Acquired Correspondents (“correspondents receiving services under the Assigned Contracts (as such term is defined in the Asset Purchase Agreement)”) upon the later of the Approval Date and the Closing Date (as defined in the Asset Purchase Agreement.)

C. Ridge Local Affiliate acknowledges that Client Local Affiliate has regulatory responsibilities as a clearing firm, including, among other things, a duty to supervise the types of business in which it engages. To assist Client Local Affiliate in satisfying such obligations, Ridge Local Affiliate agrees to provide, at the reasonable request of Client Local Affiliate, performance reports with respect to the Services and full access to relevant books and records, information and Ridge Local Affiliate personnel engaged in providing the Services. Ridge Local Affiliate acknowledges that Client Local Affiliate is required, from time to time, to prepare and file reports with the SEC, FINRA, NYSE and other SROs or Governmental Authorities. To assist Client Local Affiliate in satisfying such requirements, Ridge Local Affiliate agrees to provide Client Local Affiliate with information in its possession that is necessary for Client Local Affiliate to prepare and file any such reports.

D. This Schedule is not intended, and shall not be construed, to limit, reduce, or otherwise change any regulatory, contractual or other obligation that Client Local Affiliate owes to a correspondent or to its customers.

II. SERVICES TO BE PERFORMED BY RIDGE LOCAL AFFILIATE

A. Subject to the second paragraph of Section 16.G of the Master Services Agreement and Section I.B, Ridge Local Affiliate will perform the services, functions and responsibilities described in Attachment A in accordance with the terms and conditions of this Schedule and the Master Services Agreement. Attachment A is hereby incorporated in and made an integral part of this Schedule. Any additional services to be performed by Ridge Local Affiliate shall be subject to the written agreement of the parties.

B. Ridge Local Affiliate represents and warrants that, in providing the Services, the Transferred Operations Support Services (as defined in Attachment A) and the Additional Technology Services (as defined in Attachment A) to the Acquired Correspondents, Ridge Local Affiliate will be providing to the Acquired Correspondents services, products and systems of an identical or higher quality to the services, products and systems provided by Ridge Local Affiliate to such Acquired Correspondents immediately prior to the Schedule Effective Date.

C. This Schedule and the Master Services Agreement are intended to create an exclusive arrangement between Client Local Affiliate and Ridge Local Affiliate with respect to the Services utilized by Client Local Affiliate as of the applicable Live Date in the Territory for which a pricing schedule is included in this Schedule except (A) as otherwise set forth in this Schedule and the Master Services Agreement and (B) in the event that (i) Client Local Affiliate or a Customer of Client Local Affiliate is prohibited by Law from receiving Services from Ridge Local Affiliate in the Territory, (ii) Client Local Affiliate obtains a business and in connection therewith is contractually required to use an alternative system (and not the Services) as a condition of obtaining such business or (iii) during any time period that Ridge Local Affiliate is in material breach of this Schedule and has failed to cure such breach within thirty (30) days following notice from Client Local Affiliate specifying the nature of such breach in reasonable detail.

III. CONVERSION

A. Conversion of Client Correspondents. In connection with the conversion of the correspondents of Client Local Affiliate, other than the Acquired Correspondents, (“Client Correspondents”) to Ridge Local Affiliate, the parties agree to the following:

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(i)

Client Local Affiliate shall provide Ridge Local Affiliate with Client Local Affiliate’s requirements with respect to the Client Local Affiliate files and Service Levels applicable to the Client Correspondents (the “Client Requirements”) after the Schedule Effective Date. The parties shall enter into a statement of work (the “Conversion SOW”) that will describe Client Local Affiliate’s migration to Ridge Local Affiliate’s service delivery and technology platform [****]. The Conversion SOW will define the Target Live Date and describe specific implementation activities and procedures required to migrate Client Correspondents to the Ridge Local Affiliate, including, without limitation, development, implementation and integration of Software and other software and development and integration of correspondent clearing functionalities, reporting and monitoring systems and such other services as may be set forth in the Conversion SOW (the “Conversion Services”). Without limiting the generality of the foregoing, the Conversion SOW shall (1) specify that Ridge Local Affiliate will convert the applicable Client Local Affiliate files to make them compatible with the Services and the other services, as may be required in respect of the migration of Client Local Affiliate’s Customers to the Services and (2) describe the development and integration of correspondent clearing functionalities by Ridge Local Affiliate. The Conversion Services shall be provided at no charge to Client Local Affiliate by Ridge Local Affiliate.

(ii)

The parties shall cooperate and provide each other with all information and assistance reasonably required in connection with the Conversion Services. Each party will assign a liaison person to assist and cooperate with the other party in connection with the Conversion Services (which person may be replaced by a party at its sole discretion from time to time by way of notice to the other party).

IV. TERM OF SCHEDULE

A. Schedule Term. The term of this Schedule (the “Schedule Term”) shall begin on the Schedule Effective Date and shall continue for a period of ten (10) years after the last Live Date with respect to the Schedules under the Master Services Agreement for the U.S., U.K. or Canada (for clarity, the Schedule Term of the Schedules under the Master Services Agreement for the U.S., U.K. and Canada shall be coterminous with each other); provided, however, that this Schedule’s effective date is subject to its review and approval by the applicable regulatory agency as described in Section I.A. The “First Billable Date” for the Services shall mean: (i) for the Services provided in connection with the Acquired Correspondents, the later of the Approval Date and the Closing Date (as such term is defined in the Asset Purchase Agreement); and (ii) for the Services provided in connection with the Client Correspondents, the Live Date. The “Live Date” is defined as the first date upon which Ridge Local Affiliate processes trades on behalf of Client Correspondents in accordance with the provisions and requirements of this Schedule and the Master Services Agreement (excluding any beta testing or similar testing of the system). The Schedule Term shall automatically extend following its scheduled expiration date unless (1) either party gives notice of termination at least one hundred eighty (180) days prior to the scheduled expiration date, in which case the Schedule Term shall expire on the scheduled expiration date or (2) either party gives notice of termination at any time after the date that is one hundred eighty (180) days prior to the scheduled expiration date of the Schedule Term (including any time beyond the scheduled expiration date), in which case the Schedule Term shall expire on the date specified in such notice of termination, which date must be at least one hundred eighty (180) days after the date of such notice.

B.	[****]
C.	[****]
D.	[****]
E.	[****]

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V. CHARGES

A.	The fees for the Services are set forth in Attachment B hereto. Attachment B is hereby incorporated in and made an integral part of this Schedule. All fees and charges set forth in Attachment B are in U.S. dollars.
B.	[****]
C.	[****]

VI.	NO PARTNERSHIP OR AGENCY; NO SPECIAL TREATMENT
	Neither this Schedule nor any activity hereunder shall create a general or limited partnership, association, joint venture, branch or agency relationship between Client Local Affiliate and Ridge Local Affiliate. Client Local Affiliate shall not hold itself out as an agent of Ridge Local Affiliate or of any subsidiary or company controlled directly or indirectly by or affiliated with Ridge Local Affiliate, nor shall it employ Ridge Local Affiliate’s name in any manner that creates the impression that the relationship created or intended between them is anything other than that of service provider and clearing broker. Except as reasonably necessary to provide the Services, Ridge Local Affiliate shall not hold itself out as an agent of Client Local Affiliate or of any subsidiary or company controlled directly or indirectly by or affiliated with Client Local Affiliate, nor shall it employ Client Local Affiliate’s name in any manner that creates the impression that the relationship created or intended between them is anything other than that of service provider and clearing broker. Neither party shall, without the prior approval of the other party, place any advertisement in any newspaper, publication, periodical or any other media if such advertisement in any manner makes reference to the other party or to the arrangements contemplated by this Schedule. Neither party shall, without the prior approval of the other party (which approval shall not be unreasonably withheld), furnish any link to the website(s) of the other party or its Affiliates. For the avoidance of doubt, nothing herein shall prevent the disclosure of (i) Ridge Local Affiliate’s name or the Services to be performed under the Master Services Agreement or this Schedule to any of Client Local Affiliate’s regulators or customers or (ii) a party’s name or the services it offers to the extent necessary to carry out each party’s obligations under the Master Services Agreement, this Schedule or Marketing Agreement.
	Nothing herein shall cause Ridge Local Affiliate to be construed as or deemed to be a fiduciary with respect to Client Local Affiliate, any correspondent of Client Local Affiliate, or any customer of Client Local Affiliate or its correspondents.
	This Schedule is not intended, nor shall it be construed, to bestow upon either party any special treatment regarding any other arrangements, agreements or understandings that exist or may hereafter exist between the parties or their affiliates. Neither party shall have any obligation to deal with the other in any capacity other than as set forth in this Schedule.
VII.	SERVICE LEVELS
	Ridge Local Affiliate shall provide the Services in accordance with the terms and conditions set forth in Section 1.C of the Master Services Agreement and with respect to Service Levels set forth in Attachment C hereto and any other Service Level agreement that may be agreed between the parties from time to time with respect to the Territory. Attachment C is hereby incorporated in and made an integral part of this Schedule. Ridge Local Affiliate agrees that the Service Levels set forth in Attachment C shall be at least as stringent as any service levels provided by Ridge Local Affiliate to its other clients in the U.S.
VIII.	EXCHANGE OF INFORMATION
	Throughout the Schedule Term, each party shall promptly supply the other with information in its possession necessary or appropriate to enable the other party properly to perform its obligations under this Schedule and as a registered broker-dealer.

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IX.	RECORDS RETENTION
	The information that Ridge Local Affiliate generates on behalf of Client Local Affiliate are the books and records of Client Local Affiliate. Notwithstanding anything to the contrary in the Master Services Agreement, Ridge Local Affiliate will maintain and preserve such information in accordance with the agreed-upon record retention policy set forth in Attachment G and the Laws and Rules. Any additional retention period(s) shall be directed by Client Local Affiliate and shall be subject to the mutual written agreement of the parties. Attachment G is hereby incorporated in and made an integral part of this Schedule.
X.	GOVERNANCE
	Ridge Local Affiliate and Client Local Affiliate shall each appoint at least two (2) senior level managers to a joint committee that shall meet no less than monthly to address issues that may arise in connection with the performance of the Services. In addition to the foregoing but without prejudice to the obligations of the parties under this Schedule or the Master Services Agreement, the parties have agreed to the detailed governance provisions set forth in Exhibit C to the Master Services Agreement.
	Ridge Local Affiliate shall provide to Client Local Affiliate the reports set forth in Attachment F. Attachment F is hereby incorporated in and made an integral part of this Schedule.
XI.	TAPE RECORDING
	Unless otherwise prohibited by applicable Law, the parties shall have the right to record telephone conversations between themselves, and waive any right to further notice of any such recording. The parties agree to make such recordings available to each other upon reasonable notice.
XII.	THIRD PARTY VENDOR SERVICES
	Client Local Affiliate may contract directly with and in such case will be responsible for (i) complying with the terms and conditions of use relating to additional third party products or services not affiliated with Ridge Local Affiliate set forth in Attachment A that it elects to receive or access through Ridge Local Affiliate from time to time and (ii) the costs relating thereto as applicable, other than those third party products or services integrated into the Services or provided as part of the Services. If third party products or services, including, without limitation, data, are provided by or through Ridge Local Affiliate to Client Local Affiliate or integrated into the Services or provided as part of the Services, Ridge Local Affiliate shall obtain and warrants and represents that it has the full right, title or license required to provide such product or service to Client Local Affiliate. Additionally, Ridge Local Affiliate hereby grants to Client Local Affiliate and customers of Client Local Affiliate the right to use such product or service during, and for the purposes of, and in accordance with, the Master Services Agreement and this Schedule.
	Client Local Affiliate shall be responsible for complying with the terms and conditions of use (to the extent such terms and conditions of use are provided by Ridge Local Affiliate to Client Local Affiliate) relating to the third party products or services that it receives or accesses through Ridge Local Affiliate and the costs relating thereto. If (i) any third party products or services, or Ridge-owned products or services, provided by Ridge Local Affiliate become unavailable and require replacement, (ii) Ridge Local Affiliate, upon notice to Client Local Affiliate (and upon Client Local Affiliate’s consent, if and to the extent such consent is required by Law), elects to replace any third party products or services or Ridge-owned products or services provided by Ridge Local Affiliate with new or different third party products or services or Ridge-owned products or services or (iii) at least fifty percent (50%) of Ridge Local Affiliate’s clients utilizing such products or services in the Territory request such replacement, in each case, Ridge Local Affiliate shall replace such products or services with equivalent or enhanced products or services without increased cost.
	Client Local Affiliate may contract directly with any vendor or subcontractor of Ridge Local Affiliate for the services provided by such vendor or subcontractor through Ridge Local Affiliate; provided, however,

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	that (a) such contract does not violate Ridge Local Affiliate’s obligations to such vendor or subcontractor and (b) Client Local Affiliate shall be responsible for the cost of any transition services (including, without limitation, any incremental costs resulting from the transition) in connection therewith.
XIII.	OBLIGATIONS FOR RECEIPT OF DATA
	Client Local Affiliate may be using data set forth in Attachment D hereto provided by FT Interactive Data Corporation (“FT Interactive”). In such case, Client Local Affiliate agrees to the provisions attached hereto as Attachment D relating to its use of FT Interactive Data Corporation data in respect of the Services. Attachment D is hereby incorporated in and made an integral part of this Schedule. Client Local Affiliate shall be under no obligation to receive FT Interactive Data Corporation data through Ridge Local Affiliate and to such extent, the previous sentence shall not apply and Ridge Local Affiliate shall not be responsible for the provision of such services to Client Local Affiliate in such case or have any liability for such non-Ridge Local Affiliate FT Interactive Data Corporation services that Client Local Affiliate decides to receive. Ridge Local Affiliate warrants and represents that it has full right, title or license required to provide such data to Client Local Affiliate for use in the Services. Additionally, Ridge Local Affiliate hereby grants to Client Local Affiliate the right to use and store such data pursuant to the terms and conditions of Attachment D, for the purposes of Client Local Affiliate providing services to its customers in the course of Client Local Affiliate’s standard commercial operations.
XIV.	ACQUISITION OF OR BY ANOTHER RIDGE LOCAL AFFILIATE CLIENT
	In the event that Client Local Affiliate acquires, or is acquired by, by stock, acquisition of substantially all the assets of, merger, or consolidation (a “Business Combination”), a Client Local Affiliate of Ridge Local Affiliate’s Brokerage Services Group that receives trade processing services substantially similar to the Services provided under this Schedule (the “Other Entity”), and Client Local Affiliate and the Other Entity, or the resulting entity as the case may be, consolidate the trade processing carried out under this Schedule with the trade processing carried out by the Other Entity prior to the termination or expiration of the Client Local Affiliate’s or the Other Entity’s schedule relating to trade processing services substantially similar to the Services provided under this Schedule so that it is processed by Ridge Local Affiliate as one entity, all service charges, including, without limitation, the Base Fee and any other applicable tiered fees applicable for the brokerage processing services provided by Ridge Local Affiliate shall be renegotiated in good faith between Ridge Local Affiliate and Client Local Affiliate. Otherwise, the Ridge Local Affiliate agreements with Client Local Affiliate and the Other Entity agreements in place prior to the Business Combination shall remain in effect for the respective services provided by Ridge Local Affiliate or any other Ridge Local Affiliate’s Brokerage Services Group entity until the termination or expiration of such agreements. For clarity and notwithstanding anything to the contrary, Client Local Affiliate and the Other Entity shall be free to consolidate their trade processing after the termination or expiration of either of their agreements or relevant Schedule with Ridge Local Affiliate or any entity of the Ridge Local Affiliate Brokerage Services Group without restriction and without any obligation to renegotiate any fees relating to trade processing or otherwise. In the event Client Local Affiliate participates in a Business Combination with an entity that is not a client of Ridge Local Affiliate’s Brokerage Services Group that receives trade processing and/or operations support services substantially similar to the Services provided under this Schedule, all rates in Attachment B (including, without limitation, the Base Fee and any other applicable tiered fees applicable for the brokerage processing services) provided by Ridge Local Affiliate shall remain as set forth in Attachment B, subject to the adjustments described therein.
XV.	CLIENT LOCAL AFFILIATE RESPONSIBILITIES
	Client Local Affiliate shall be responsible, to the extent necessary for the Services it is receiving, in connection with the use of the Services for the following:

A.	User security administration for the Services in accordance with, and as set forth in, the relevant product specifications and user documentation.
B.	Forms and supplies required by Ridge Local Affiliate in connection with the performance of the Services, which are agreed to by the parties in writing. Ridge Local Affiliate shall provide Client

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	Local Affiliate with reasonable advance notice of any such requirements.
C.	Equipment, other than equipment provided by Ridge Local Affiliate, at Client Local Affiliate’s location required in use of the Services (e.g., printers, terminals) as identified by Ridge Local Affiliate in writing.
D.	Dial backup ISDN circuits or other equivalent backup solution selected by Client Local Affiliate.
E.	Third party telecommunications services not otherwise set forth in Attachment B.
F.	Hardware, software, and telecommunications products required to interface to the Services (e.g., terminal emulation software), other than any such hardware, software, and telecommunications products provided by Ridge Local Affiliate.
G.	Special equipment, which Client Local Affiliate may elect to place at Ridge Local Affiliate locations, if required by Client Local Affiliate, specific to Client Local Affiliate’s use of the Services as agreed to by the parties in writing.
H.	Use commercially reasonable efforts to obtain the approval of each relevant regulatory or self-regulatory agency or entity, if any, with regulates Client Local Affiliate’s receipt of the Services (including, without limitation, securities and commodities exchanges, associations of securities and/or commodities dealers, federal, provincial and local Governmental Authorities).

	For the avoidance of doubt, Ridge Local Affiliate shall not be responsible for its failure to provide Services solely to the extent caused by the failure of Client Local Affiliate to perform the above listed requirements. Ridge Local Affiliate shall (i) provide Client Local Affiliate with reasonable notice of Client Local Affiliate’s failure to perform any of its responsibilities set forth in this Schedule and (ii) use commercially reasonable efforts to perform notwithstanding Client Local Affiliate’s failure to perform, subject to Client Local Affiliate reimbursing Ridge Local Affiliate for any reasonable incremental cost to Ridge Local Affiliate in connection with such efforts.
XVI.	REQUIRED PROVISION OF SYBASE, INC.
	Client Local Affiliate acknowledges and agrees that the Sybase SQL Server Program and the Sybase Replication Server Program (the “Programs”) to the extent incorporated into the Services and used in connection with Ridge Local Affiliate’s BPS Advantage product, if selected and received by Client Local Affiliate, shall only be used by the Client Local Affiliate as set forth below to read, in a view-only format, the Services, and the Programs shall not be downloaded or used to create or alter tables, schemas or databases or otherwise develop or modify in any way the applications or performance of other programming tasks. Notwithstanding the foregoing, Client Local Affiliate may access the Programs through Ridge Local Affiliate tools or third party tools; provided, however, that any access shall be restricted to the following: Client Local Affiliate may access the Services embedding a copy of the Programs which are deployed on Ridge Local Affiliate’s premises or Client Local Affiliate’s site, provided, however, that in either instance, Client Local Affiliate shall not (i) copy the application(s) embedding the Programs, (ii) use the Programs other than to process Client Local Affiliate’s own transactions, transactions for entities that are correspondents or customers of the Client Local Affiliate and transactions for entities that operate on a fully disclosed basis through Client Local Affiliate as correspondents, or (iii) access the Programs for general development. Client Local Affiliate may also develop applications against the BPS Advantage database using tools supplied by Ridge Local Affiliate, Sybase or other third parties.
XVII.	SEVERABILITY
	If any provision of this Schedule should be held invalid or unenforceable in a court of law in any jurisdiction, such invalidity or unenforceability shall not affect the enforceability of this Schedule or any other provision thereof. In addition, the parties agree that it is their intention that such provision shall be construed in a manner designed to effectuate the purposes of this Schedule to the fullest extent enforceable under applicable Law. The parties further agree that such ruling shall not affect the construction of that provision or any other of the provisions in any other jurisdiction.
XVIII.	DISASTER RECOVERY; BUSINESS CONTINUITY

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	Ridge Local Affiliate shall maintain the disaster recovery and business continuity services as set forth in Attachment E. Attachment E is hereby incorporated in and made an integral part of this Schedule.
XIX.	[****]
XX.	ACQUIRED CORRESPONDENTS
	In addition, except for services for finance, conversions, legal/compliance, sales/relationship management and risk management (which services shall be provided by Client Local Affiliate), following the Schedule Effective Date and until such time that Client Local Affiliate is completely converted to the Broadridge platform, Ridge Local Affiliate shall provide all Services to Client Local Affiliate hereunder in a substantially similar manner and in accordance with the Service Levels that Ridge Local Affiliate provided with respect to the Acquired Correspondents prior to the Schedule Effective Date.
XXI.	CHANGES TO THE MASTER SERVICES AGREEMENT
	The following general changes shall be made to the Master Services Agreement when incorporating the terms and conditions of the Master Services Agreement into this Schedule: NONE.

*  *  *  *

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IN WITNESS WHEREOF the parties have executed this Schedule as of the date first written above.

RIDGE CLEARING & OUTSOURCING SOLUTIONS, INC.
By: /s/ Joseph Barra
	Name: Joseph Barra Title: President
PENSON FINANCIAL SERVICES, INC.
By: /s/ Daniel P. Son
	Name: Daniel P. Son Title: Vice Chairman

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ATTACHMENT A

DESCRIPTION OF OUTSOURCED SERVICES

[****]

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Appendix 1 to Attachment A

Transferred Operations Support Services

[****]

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Appendix 1-A to Attachment A

Transitional Transferred Operations Support Services

[****]

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Appendix 2 to Attachment A

Transferred Technology Services

[****]

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Appendix 3 to Attachment A

Existing Operations Support Services – U.S.

[****]

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Appendix 4 to Attachment A

Existing Technology Services – U.S.

[****]

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Appendix 5 to Attachment A

Additional Technology Services

[****]

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ATTACHMENT B

Service Bureau and Operations Support Services Price Schedule

1.	Charges for the Services. The charges for the Services are set forth in Attachment B-1.
2.	Changes to Schedule B. The parties agree, subject to the Change Control Procedures set forth in Exhibit C to the Master Services Agreement, that any changes that the Client Local Affiliate makes from time to time that result in the addition or removal of specific Service functions (including, without limitation, material changes required by Applicable Law or by a regulatory body) may require changes to the charges payable by Client Local Affiliate.
3.	Postage. Notwithstanding anything herein to the contrary, postage shall be billed to Client Local Affiliate on a pass-through basis.
4.	Customization. Any customization work shall be provided pursuant to a rate schedule to be agreed upon by the parties no later than the Closing Date.

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Attachment B-1

Base Fee and Tiered Fees

[****]

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Attachment B-2

Third Party Providers

[****]

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ATTACHMENT C

SERVICE LEVELS

I. INTRODUCTION

In order to maintain the specified Service Levels for the Services set forth in Attachment C-1, the parties have agreed that certain defined Service Levels (the “SLAs”) are to be established and measured as set forth below. SLAs related to the Services shall be established by the parties no later than [****] after the Schedule Effective Date. New Service Levels may be added during the Schedule Term, and existing Service Levels may be modified or eliminated, by the mutual agreement of the parties from time to time.

II. OPERATIONS

A. General

Commencing on the Live Date and subject to this Section II, Ridge Local Affiliate’s provision of the Services shall be in accordance with the Service Levels identified in Attachment C-1.

The Service Levels set forth in Attachment C-1 shall (i) meet or exceed in all material respects the service levels required under the Acquired Correspondents’ agreements transferred to Client Local Affiliate under the Asset Purchase Agreement and (ii) be at least at levels that will enable Client Local Affiliate to avoid breaches of any agreements with the Client Correspondents existing as of the date hereof.

B. Reports; Performance Review; Corrective Action

     (a) Ridge Local Affiliate shall, wherever the parties agree to use objective data, utilize continuous measurement and data capture and shall prepare a reasonably detailed report with respect to the Service Levels) (each, a “Service Level Report”). Service Level Reports shall be provided to Client Local Affiliate on a monthly basis.

     (b) Ridge Local Affiliate and Client Local Affiliate shall meet at least quarterly to review Ridge Local Affiliate’s performance with respect to the Services during the immediately preceding quarterly period and the Service Level Reports connected therewith, and, with respect to Ridge Local Affiliate’s failure to achieve any Service Levels, the parties shall (1) jointly formulate a formal action plan for corrective action, as applicable, and (2) agree upon the appropriate consequences if such action plan does not prevent subsequent instances of the same Service Level failures.

     (c) The specific criteria for each Service Level shall be detailed in the applicable SLA set forth in Attachment C-1. Prior to Live Date, the parties shall modify such Service Levels, create such additional Service Levels, or modify the method used to measure performance (including, without limitation, appropriate objective data, quality control process or other methods) as the parties mutually agree in writing.

     (d) [****], the parties shall measure actual Ridge Local Affiliate performance levels in the manner previously agreed to by the parties, and review the method used to measure performance and such performance. The parties shall discuss in good faith any appropriate modifications to the method used to measure performance, the Service Levels or any remedial steps required to be taken by Ridge Local Affiliate in light of such review and shall, at least once annually during the Schedule Term, engage in such good faith discussions to determine any appropriate modifications to the method used to measure performance, the Service Levels or any remedial steps required to be taken by Ridge Local Affiliate in light of such review.

C. Changes to the Service Levels

     (a) The parties acknowledge that the Service Levels shall be subject to continuous improvement and that changing circumstances may necessitate modifications to service, expectations and responsibilities. Accordingly, the parties shall, at least once annually during the Schedule Term, engage in good faith discussions to determine if (i) any modifications to the existing Service Levels are necessary or advisable, (ii) any existing Service Levels should be deleted and (iii) any new Service Levels should be added.

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     (b) For all new Service Levels, the parties shall mutually agree upon the Service Level targets and the methodology and tools used to measure performance. The parties shall mutually agree on any Service Level target based on [****] of measurements of the applicable Service Level utilizing the agreed upon methodology and tools. Any dispute regarding the establishment of such Service Level targets or the methodology and tools used to measure performance shall be resolved by the Executive Governance Committee. In addition, the Executive Governance Committee shall review Service Level targets and performance and shall give weight to Client Local Affiliate’s recommendations for continuous improvement of Service Level targets, based on, among other things, advances in technology.

D Service Level Credits

The amount of Service Level Credits credited to Client Local Affiliate with respect to all Category 1 service level failures occurring in a single month shall not exceed, in total, [****] of the monthly charges payable in connection with the Schedule for that month (the “Service Level Credit Pool – Category 1”). The amount of Service Level Credits credited to Client Local Affiliate with respect to all other service level failures occurring in a single month shall not exceed, in total, [****] of the monthly charges payable in connection with the Schedule for that month (the “Service Level Credit Pool – All Other Categories”, and together with the Services Level Credit Pool – Category 1, the “Service Level Credit Pools”). The Service Level Credit Pools shall be allocated to various Service Levels as set forth in Attachment C-1. The parties shall, at least once annually during the Schedule Term, engage in good faith discussions to determine if any modification to the allocation of the Service Level Credit Pools set forth in Attachment C-1 are necessary or advisable.

E. Root-Cause Analysis

In the event Ridge Local Affiliate has a Service Level failure that is not insignificant, Ridge Local Affiliate shall perform a root-cause analysis as described in Section 1.C of the Master Services Agreement.

F. Excuse

Ridge Local Affiliate shall be excused from performing any Service or obligation hereunder, including, without limitation, the attainment of any Service Level, if and to the extent Ridge Local Affiliate’s failure to perform such Service or obligation is caused by Client Local Affiliate’s or its agents’ act or omission, including, without limitation, (a) Client Local Affiliate providing incomplete or inaccurate data, specifications or requirements; and (b) failures, errors or defects in facilities, equipment, materials or other resources provided by Client Local Affiliate, including, without limitation, telecommunications, hardware, infrastructure and network connectivity.

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Attachment C-1

SLAs

The parties shall include a Service Level for development work no later than [****] after the Schedule Effective Date.

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ATTACHMENT D

No Warranty and Limitation on Liability Provisions
Required by Users of Third Party Data

No Warranties

EXCEPT IN CONNECTION WITH CONTRACTS OF THIRD PARTY DATA SUPPLIERS WITHOUT CONTRACTUAL RESTRICTIONS SIMILAR TO THOSE BELOW, NO THIRD PARTY DATA SUPPLIERS MAKE ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS OR ANY OTHER MATTER.

Limitation on Liability

(a) No third party data supplier shall have any liability to Client Local Affiliate, or any other third party, for errors, omissions or malfunctions in the services provided by such third party data supplier, other than the obligation to endeavor, upon receipt of notice from Client Local Affiliate, to correct a malfunction, error, or omission in any such services.

(b) Client Local Affiliate acknowledges that the services provided by any third party data supplier are intended for use as an aid to institutional investors, registered brokers or professionals of similar sophistication in making informed judgments concerning securities.

Client Local Affiliate accepts responsibility for, and acknowledges it exercises its own independent judgment in, its selection of any of the services provided by any third party data supplier, its selection of the use or intended use of such, and any results obtained. Nothing contained herein shall be deemed to be a waiver of any rights existing under applicable law for the protection of investors.

(c) Client Local Affiliate shall indemnify Ridge Local Affiliate’s third party data suppliers (including, without limitation, FT Interactive) against and hold such third party data suppliers harmless from any and all losses, damages, liability, costs, including, without limitation, attorney’s fees, resulting directly or indirectly from any claim or demand against such third party data suppliers by a third party arising out of or related to the accuracy or completeness of any services received by Client Local Affiliate, or any data, information, service, report, analysis or publication derived therefrom. No third party data supplier shall be liable for any claim or demand against Client Local Affiliate by a third party.

(d) As between a third party data supplier and Client Local Affiliate, neither party shall be liable for (i) any special, indirect or consequential damages (even if advised of the possibility of such), (ii) any delay by reason of circumstances beyond its control, including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God, insurrection, war, riots, or failure beyond its control of transportation or power supply, or (iii) any claim that arose more than one (1) year prior to the institution of suit therefor.

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ATTACHMENT E

DISASTER RECOVERY; BUSINESS CONTINUITY

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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ATTACHMENT F

REPORTS

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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ATTACHMENT G

RECORD RETENTION POLICY

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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EX-10.36

Exhibit 10.36

NOTE: PORTIONS OF THIS AGREEMENT ARE THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS HAVE BEEN
REDACTED AND ARE MARKED WITH A “[****]” IN PLACE OF THE REDACTED LANGUAGE

Schedule A (Canada)

SERVICE BUREAU AND OPERATIONS SUPPORT SERVICES SCHEDULE

To The Master Services Agreement

between

BROADRIDGE FINANCIAL SOLUTIONS, INC.

and

PENSON WORLDWIDE, INC.

This schedule (the “Schedule”), dated as of November 2, 2009 (the “Schedule Effective Date”), between Broadridge Financial Solutions (Canada) Inc. (“Ridge Local Affiliate”) and Penson Financial Services Canada Inc. (“Client Local Affiliate”), to the Master Services Agreement, dated as of the date hereof, between Broadridge Financial Solutions, Inc. and Penson Worldwide, Inc., sets forth the terms and conditions, in addition to the terms and conditions in the Master Services Agreement, under which Ridge Local Affiliate will provide service bureau and operations support services to Client Local Affiliate to assist and support Client Local Affiliate in functioning as a clearing firm. Each of Client Local Affiliate and Ridge Local Affiliate agrees to comply with and fulfill all terms and conditions applicable to it under the Master Services Agreement. Simultaneously with the execution of this Schedule, this Schedule supersedes and replaces the Master Services Agreement, dated June 30, 2009, between Penson Financial Services Canada Inc. and Broadridge Financial Services (Canada) Inc. and the BPS Canadian Services Bureau Schedule, dated June 30, 2009, between Penson Financial Services Canada Inc. and Broadridge Financial Services (Canada) Inc. (the “Existing Canadian Agreement”).

Unless otherwise defined herein, all capitalized terms shall have the meanings given to them in the Master Services Agreement. In the event of a conflict between the terms and conditions of this Schedule and the terms and conditions of the Master Services Agreement, the terms and conditions of this Schedule shall govern. The term “Client Local Affiliate” as used in this Schedule includes all Affiliates, divisions and subsidiaries of Client Local Affiliate. Except where otherwise indicated, all references in this Schedule to Sections or Attachments are to Sections to, and Attachments of, this Schedule. The term “party” as used in this Schedule means Ridge Local Affiliate or Client Local Affiliate, as applicable. The term “parties” as used in this Schedule means Ridge Local Affiliate and Client Local Affiliate.

I. SUBMISSION OF SCHEDULE

A. During the Schedule Term, Client Local Affiliate and Ridge Local Affiliate shall each be subject, to the extent applicable to such party, to the provisions of federal, state and local laws, rules and regulations and the constitution, by-laws, rules, regulations and stated policies of the Investment Industry Regulatory Organization of Canada (“IIROC”), the Canadian Investors Protection Fund (“CIPF”), the Ontario Securities Commission (“OSC”), the Autorité des Marchés Financiers (“AMF”), the Montréal Exchange (“ME”) and any other securities exchange, commission, association, regulatory or self-regulatory organization (“SRO”) vested with authority over Client Local Affiliate or Ridge Local Affiliate (to the extent applicable to a party, the “Laws and Rules”). Each party shall perform its obligations under this Schedule in accordance with the Laws and Rules.

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B. Client Local Affiliate shall submit this Schedule to the IIROC, or any other SRO, as required, on behalf of itself and Ridge Local Affiliate for review and, if necessary, approval. This Schedule shall not become effective until the date upon which all necessary SRO approvals as to both parties are received (the “Approval Date”); provided, however, that if no SRO approvals are required for this Schedule to become effective, this Schedule shall become effective as of the Schedule Effective Date. In the event that any such approval is required and this Schedule is not so approved, the parties shall negotiate in good faith to amend this Schedule as may be needed to obtain such approval.

C. Ridge Local Affiliate acknowledges that Client Local Affiliate has regulatory responsibilities as a clearing firm, including, among other things, a duty to supervise the types of business in which it engages. To assist Client Local Affiliate in satisfying such obligations, Ridge Local Affiliate agrees to provide, at the reasonable request of Client Local Affiliate, performance reports with respect to the Services and full access to relevant books and records, information and Ridge Local Affiliate personnel engaged in providing the Services. Ridge Local Affiliate acknowledges that Client Local Affiliate is required, from time to time, to prepare and file reports with the IIROC, CIPF and other SROs or Governmental Authorities. To assist Client Local Affiliate in satisfying such requirements, Ridge Local Affiliate agrees to provide Client Local Affiliate with information in its possession that is necessary for Client Local Affiliate to prepare and file any such reports.

D. This Schedule is not intended, and shall not be construed, to limit, reduce, or otherwise change any regulatory, contractual or other obligation that Client Local Affiliate owes to a correspondent or to its customers.

II. SERVICES TO BE PERFORMED BY RIDGE LOCAL AFFILIATE

A. Subject to the second paragraph of Section 16.G of the Master Services Agreement and Section I.B, Ridge Local Affiliate will perform the services, functions and responsibilities described in Attachment A in accordance with the terms and conditions of this Schedule and the Master Services Agreement. Attachment A is hereby incorporated in and made an integral part of this Schedule. Any additional services to be performed by Ridge Local Affiliate shall be subject to the written agreement of the parties.

B. Intentionally left blank.

C. This Schedule and the Master Services Agreement are intended to create an exclusive arrangement between Client Local Affiliate and Ridge Local Affiliate with respect to the Services utilized by Client Local Affiliate as of the applicable Live Date in the Territory for which a pricing schedule is included in this Schedule except (A) as otherwise set forth in this Schedule and the Master Services Agreement and (B) in the event that (i) Client Local Affiliate or a Customer of Client Local Affiliate is prohibited by Law from receiving Services from Ridge Local Affiliate in the Territory, (ii) Client Local Affiliate obtains a business and in connection therewith is contractually required to use an alternative system (and not the Services) as a condition of obtaining such business or (iii) during any time period that Ridge Local Affiliate is in material breach of this Schedule and has failed to cure such breach within thirty (30) days following notice from Client Local Affiliate specifying the nature of such breach in reasonable detail.

III. CONVERSION

A. Conversion of Client Correspondents. In connection with the conversion of the correspondents of Client Local Affiliate (“Client Correspondents”) to Ridge Local Affiliate, the parties agree to the following:

(i) Client Local Affiliate shall provide Ridge Local Affiliate with Client Local Affiliate’s requirements with respect to the Client Local Affiliate files and Service Levels applicable to the Client Correspondents (the “Client Requirements”) after the Schedule Effective Date. The parties shall enter into a statement of work (the “Conversion SOW”) that will describe Client Local Affiliate’s migration to Ridge Local Affiliate’s service delivery and

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technology platform [****]. The Conversion SOW will define the Target Live Date for each Service and describe specific implementation activities and procedures required to migrate Client Correspondents to the Ridge Local Affiliate, including, without limitation, development, implementation and integration of Software and other software and development and integration of correspondent clearing functionalities, reporting and monitoring systems and such other services as may be set forth in the Conversion SOW (the “Conversion Services”). Without limiting the generality of the foregoing, the Conversion SOW shall (1) specify that Ridge Local Affiliate will convert the applicable Client Local Affiliate files to make them compatible with the Services and the other services, as may be required in respect of the migration of Client Local Affiliate’s Customers to the Services and (2) describe the development and integration of correspondent clearing functionalities by Ridge Local Affiliate. The Conversion Services shall be provided at no charge to Client Local Affiliate by Ridge Local Affiliate.

(ii) The parties shall cooperate and provide each other with all information and assistance reasonably required in connection with the Conversion Services. Each party will assign a liaison person to assist and cooperate with the other party in connection with the Conversion Services (which person may be replaced by a party at its sole discretion from time to time by way of notice to the other party).

IV. TERM OF SCHEDULE

A. Schedule Term. The term of this Schedule (the “Schedule Term”) shall begin on the Schedule Effective Date and shall continue for a period of ten (10) years after the last Live Date with respect to the Schedules under the Master Services Agreement for the U.S., U.K. or Canada (for clarity, the Schedule Term of the Schedules under the Master Services Agreement for the U.S., U.K. and Canada shall be coterminous with each other); provided, however, that this Schedule’s effective date is subject to its review and approval by the applicable regulatory agency as described in Section I.A. The “Live Date” for a Service is defined as the first date upon which Ridge Local Affiliate processes trades utilizing the applicable Service on behalf of Client Correspondents in accordance with the provisions and requirements of this Schedule and the Master Services Agreement (excluding any beta testing or similar testing of the system). The Schedule Term shall automatically extend following its scheduled expiration date unless (1) either party gives notice of termination at least one hundred eighty (180) days prior to the scheduled expiration date, in which case the Schedule Term shall expire on the scheduled expiration date or (2) either party gives notice of termination at any time after the date that is one hundred eighty (180) days prior to the scheduled expiration date of the Schedule Term (including any time beyond the scheduled expiration date), in which case the Schedule Term shall expire on the date specified in such notice of termination, which date must be at least one hundred eighty (180) days after the date of such notice.

B. [****]

C. [****]

D. [****]

E. [****]

V. CHARGES

A. The fees for the Services are set forth in Attachment B hereto. Attachment B is hereby incorporated in and made an integral part of this Schedule. Unless otherwise indicated, all fees and charges set forth in Attachment B are in Canadian dollars. Notwithstanding the immediately

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	preceding sentence, for purposes of calculating the aggregate amounts in connection with the last paragraph in Attachment A and paragraph six of Section III to Attachment B-1, such calculation shall be in U.S. dollars using the exchange rate published in the Wall Street Journal on the Schedule Effective Date.
B.	[****]
C.	[****]

VI.	NO PARTNERSHIP OR AGENCY; NO SPECIAL TREATMENT
	Neither this Schedule nor any activity hereunder shall create a general or limited partnership, association, joint venture, branch or agency relationship between Client Local Affiliate and Ridge Local Affiliate. Client Local Affiliate shall not hold itself out as an agent of Ridge Local Affiliate or of any subsidiary or company controlled directly or indirectly by or affiliated with Ridge Local Affiliate, nor shall it employ Ridge Local Affiliate’s name in any manner that creates the impression that the relationship created or intended between them is anything other than that of service provider and clearing broker. Except as reasonably necessary to provide the Services, Ridge Local Affiliate shall not hold itself out as an agent of Client Local Affiliate or of any subsidiary or company controlled directly or indirectly by or affiliated with Client Local Affiliate, nor shall it employ Client Local Affiliate’s name in any manner that creates the impression that the relationship created or intended between them is anything other than that of service provider and clearing broker. Neither party shall, without the prior approval of the other party, place any advertisement in any newspaper, publication, periodical or any other media if such advertisement in any manner makes reference to the other party or to the arrangements contemplated by this Schedule. Neither party shall, without the prior approval of the other party (which approval shall not be unreasonably withheld), furnish any link to the website(s) of the other party or its Affiliates. For the avoidance of doubt, nothing herein shall prevent the disclosure of (i) Ridge Local Affiliate’s name or the Services to be performed under the Master Services Agreement or this Schedule to any of Client Local Affiliate’s regulators or customers or (ii) a party’s name or the services it offers to the extent necessary to carry out each party’s obligations under the Master Services Agreement, this Schedule or Marketing Agreement.
	Nothing herein shall cause Ridge Local Affiliate to be construed as or deemed to be a fiduciary with respect to Client Local Affiliate, any correspondent of Client Local Affiliate, or any customer of Client Local Affiliate or its correspondents.
	This Schedule is not intended, nor shall it be construed, to bestow upon either party any special treatment regarding any other arrangements, agreements or understandings that exist or may hereafter exist between the parties or their affiliates. Neither party shall have any obligation to deal with the other in any capacity other than as set forth in this Schedule.
VII.	SERVICE LEVELS
	Ridge Local Affiliate shall provide the Services in accordance with the terms and conditions set forth in Section 1.C of the Master Services Agreement and with respect to Service Levels set forth in Attachment C hereto and any other Service Level agreement that may be agreed between the parties from time to time with respect to the Territory. Attachment C is hereby incorporated in and made an integral part of this Schedule. Ridge Local Affiliate agrees that the Service Levels set forth in Attachment C shall be at least as stringent as any service levels provided by Ridge Local Affiliate to its other clients in Canada.
VIII.	EXCHANGE OF INFORMATION
	Throughout the Schedule Term, each party shall promptly supply the other with information in its possession necessary or appropriate to enable the other party properly to perform its obligations under this Schedule and as a registered broker-dealer.
IX.	RECORDS RETENTION

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	The information that Ridge Local Affiliate generates on behalf of Client Local Affiliate are the books and records of Client Local Affiliate. Notwithstanding anything to the contrary in the Master Services Agreement, Ridge Local Affiliate will maintain and preserve such information in accordance with the agreed-upon record retention policy set forth in Attachment G and the Laws and Rules. Any additional retention period(s) shall be directed by Client Local Affiliate and shall be subject to the mutual written agreement of the parties. Attachment G is hereby incorporated in and made an integral part of this Schedule.
X.	GOVERNANCE
	Ridge Local Affiliate and Client Local Affiliate shall each appoint at least two (2) senior level managers to a joint committee that shall meet no less than monthly to address issues that may arise in connection with the performance of the Services. In addition to the foregoing but without prejudice to the obligations of the parties under this Schedule or the Master Services Agreement, the parties have agreed to the detailed governance provisions set forth in Exhibit C to the Master Services Agreement.
	Ridge Local Affiliate shall provide to Client Local Affiliate the reports set forth in Attachment F. Attachment F is hereby incorporated in and made an integral part of this Schedule.
XI.	TAPE RECORDING
	Unless otherwise prohibited by applicable Law, the parties shall have the right to record telephone conversations between themselves, and waive any right to further notice of any such recording. The parties agree to make such recordings available to each other upon reasonable notice.
XII.	THIRD PARTY VENDOR SERVICES
	Client Local Affiliate may contract directly with and in such case will be responsible for (i) complying with the terms and conditions of use relating to additional third party products or services not affiliated with Ridge Local Affiliate set forth in Attachment A that it elects to receive or access through Ridge Local Affiliate from time to time and (ii) the costs relating thereto as applicable, other than those third party products or services integrated into the Services or provided as part of the Services. If third party products or services, including, without limitation, data, are provided by or through Ridge Local Affiliate to Client Local Affiliate or integrated into the Services or provided as part of the Services, Ridge Local Affiliate shall obtain and warrants and represents that it has the full right, title or license required to provide such product or service to Client Local Affiliate. Additionally, Ridge Local Affiliate hereby grants to Client Local Affiliate and customers of Client Local Affiliate the right to use such product or service during, and for the purposes of, and in accordance with, the Master Services Agreement and this Schedule.
	Client Local Affiliate shall be responsible for complying with the terms and conditions of use (to the extent such terms and conditions of use are provided by Ridge Local Affiliate to Client Local Affiliate) relating to the third party products or services that it receives or accesses through Ridge Local Affiliate and the costs relating thereto. If (i) any third party products or services, or Ridge-owned products or services, provided by Ridge Local Affiliate become unavailable and require replacement, (ii) Ridge Local Affiliate, upon notice to Client Local Affiliate (and upon Client Local Affiliate’s consent, if and to the extent such consent is required by Law), elects to replace any third party products or services or Ridge-owned products or services provided by Ridge Local Affiliate with new or different third party products or services or Ridge-owned products or services or (iii) at least fifty percent (50%) of Ridge Local Affiliate’s clients utilizing such products or services in the Territory request such replacement, in each case, Ridge Local Affiliate shall replace such products or services with equivalent or enhanced products or services without increased cost.
	Client Local Affiliate may contract directly with any vendor or subcontractor of Ridge Local Affiliate for the services provided by such vendor or subcontractor through Ridge Local Affiliate; provided, however, that (a) such contract does not violate Ridge Local Affiliate’s obligations to such vendor or subcontractor

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	and (b) Client Local Affiliate shall be responsible for the cost of any transition services (including, without limitation, any incremental costs resulting from the transition) in connection therewith.
XIII.	OBLIGATIONS FOR RECEIPT OF DATA
	Client Local Affiliate may be using data set forth in Attachment D hereto provided by FT Interactive Data Corporation (“FT Interactive”). In such case, Client Local Affiliate agrees to the provisions attached hereto as Attachment D relating to its use of FT Interactive Data Corporation data in respect of the Services. Attachment D is hereby incorporated in and made an integral part of this Schedule. Client Local Affiliate shall be under no obligation to receive FT Interactive Data Corporation data through Ridge Local Affiliate and to such extent, the previous sentence shall not apply and Ridge Local Affiliate shall not be responsible for the provision of such services to Client Local Affiliate in such case or have any liability for such non-Ridge Local Affiliate FT Interactive Data Corporation services that Client Local Affiliate decides to receive. Ridge Local Affiliate warrants and represents that it has full right, title or license required to provide such data to Client Local Affiliate for use in the Services. Additionally, Ridge Local Affiliate hereby grants to Client Local Affiliate the right to use and store such data pursuant to the terms and conditions of Attachment D, for the purposes of Client Local Affiliate providing services to its customers in the course of Client Local Affiliate’s standard commercial operations.
XIV.	ACQUISITION OF OR BY ANOTHER RIDGE LOCAL AFFILIATE CLIENT
	In the event that Client Local Affiliate acquires, or is acquired by, by stock, acquisition of substantially all the assets of, merger, or consolidation (a “Business Combination”), a Client Local Affiliate of Ridge Local Affiliate’s Brokerage Services Group that receives trade processing services substantially similar to the Services provided under this Schedule (the “Other Entity”), and Client Local Affiliate and the Other Entity, or the resulting entity as the case may be, consolidate the trade processing carried out under this Schedule with the trade processing carried out by the Other Entity prior to the termination or expiration of the Client Local Affiliate’s or the Other Entity’s schedule relating to trade processing services substantially similar to the Services provided under this Schedule so that it is processed by Ridge Local Affiliate as one entity, all service charges, including, without limitation, the Base Fee and any other applicable tiered fees applicable for the brokerage processing services provided by Ridge Local Affiliate shall be renegotiated in good faith between Ridge Local Affiliate and Client Local Affiliate. Otherwise, the Ridge Local Affiliate agreements with Client Local Affiliate and the Other Entity agreements in place prior to the Business Combination shall remain in effect for the respective services provided by Ridge Local Affiliate or any other Ridge Local Affiliate’s Brokerage Services Group entity until the termination or expiration of such agreements. For clarity and notwithstanding anything to the contrary, Client Local Affiliate and the Other Entity shall be free to consolidate their trade processing after the termination or expiration of either of their agreements or relevant Schedule with Ridge Local Affiliate or any entity of the Ridge Local Affiliate Brokerage Services Group without restriction and without any obligation to renegotiate any fees relating to trade processing or otherwise. In the event Client Local Affiliate participates in a Business Combination with an entity that is not a client of Ridge Local Affiliate’s Brokerage Services Group that receives trade processing and/or operations support services substantially similar to the Services provided under this Schedule, all rates in Attachment B (including, without limitation, the Base Fee and any other applicable tiered fees applicable for the brokerage processing services) provided by Ridge Local Affiliate shall remain as set forth in Attachment B, subject to the adjustments described therein.
XV.	CLIENT LOCAL AFFILIATE RESPONSIBILITIES
	Client Local Affiliate shall be responsible, to the extent necessary for the Services it is receiving, in connection with the use of the Services for the following:

A.	User security administration for the Services in accordance with, and as set forth in, the relevant product specifications and user documentation.
B.	Forms and supplies required by Ridge Local Affiliate in connection with the performance of the Services, which are agreed to by the parties in writing. Ridge Local Affiliate shall provide Client Local Affiliate with reasonable advance notice of any such requirements.

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C.	Equipment, other than equipment provided by Ridge Local Affiliate, at Client Local Affiliate’s location required in use of the Services (e.g., printers, terminals) as identified by Ridge Local Affiliate in writing.
D.	Dial backup ISDN circuits or other equivalent backup solution selected by Client Local Affiliate.
E.	Third party telecommunications services not otherwise set forth in Attachment B.
F.	Hardware, software, and telecommunications products required to interface to the Services (e.g., terminal emulation software), other than any such hardware, software, and telecommunications products provided by Ridge Local Affiliate.
G.	Special equipment, which Client Local Affiliate may elect to place at Ridge Local Affiliate locations, if required by Client Local Affiliate, specific to Client Local Affiliate’s use of the Services as agreed to by the parties in writing.
H.	Use commercially reasonable efforts to obtain the approval of each relevant regulatory or self-regulatory agency or entity, if any, with regulates Client Local Affiliate’s receipt of the Services (including, without limitation, securities and commodities exchanges, associations of securities and/or commodities dealers, federal, provincial and local Governmental Authorities).

	For the avoidance of doubt, Ridge Local Affiliate shall not be responsible for its failure to provide Services solely to the extent caused by the failure of Client Local Affiliate to perform the above listed requirements. Ridge Local Affiliate shall (i) provide Client Local Affiliate with reasonable notice of Client Local Affiliate’s failure to perform any of its responsibilities set forth in this Schedule and (ii) use commercially reasonable efforts to perform notwithstanding Client Local Affiliate’s failure to perform, subject to Client Local Affiliate reimbursing Ridge Local Affiliate for any reasonable incremental cost to Ridge Local Affiliate in connection with such efforts.
XVI.	REQUIRED PROVISION OF SYBASE, INC.
	Client Local Affiliate acknowledges and agrees that the Sybase SQL Server Program and the Sybase Replication Server Program (the “Programs”) to the extent incorporated into the Services and used in connection with Ridge Local Affiliate’s BPS Advantage product, if selected and received by Client Local Affiliate, shall only be used by the Client Local Affiliate as set forth below to read, in a view-only format, the Services, and the Programs shall not be downloaded or used to create or alter tables, schemas or databases or otherwise develop or modify in any way the applications or performance of other programming tasks. Notwithstanding the foregoing, Client Local Affiliate may access the Programs through Ridge Local Affiliate tools or third party tools; provided, however, that any access shall be restricted to the following: Client Local Affiliate may access the Services embedding a copy of the Programs which are deployed on Ridge Local Affiliate’s premises or Client Local Affiliate’s site, provided, however, that in either instance, Client Local Affiliate shall not (i) copy the application(s) embedding the Programs, (ii) use the Programs other than to process Client Local Affiliate’s own transactions, transactions for entities that are correspondents or customers of the Client Local Affiliate and transactions for entities that operate on a fully disclosed basis through Client Local Affiliate as correspondents, or (iii) access the Programs for general development. Client Local Affiliate may also develop applications against the BPS Advantage database using tools supplied by Ridge Local Affiliate, Sybase or other third parties.
XVII.	SEVERABILITY
	If any provision of this Schedule should be held invalid or unenforceable in a court of law in any jurisdiction, such invalidity or unenforceability shall not affect the enforceability of this Schedule or any other provision thereof. In addition, the parties agree that it is their intention that such provision shall be construed in a manner designed to effectuate the purposes of this Schedule to the fullest extent enforceable under applicable Law. The parties further agree that such ruling shall not affect the construction of that provision or any other of the provisions in any other jurisdiction.
XVIII.	DISASTER RECOVERY; BUSINESS CONTINUITY
	Ridge Local Affiliate shall maintain the disaster recovery and business continuity services as set forth in Attachment E. Attachment E is hereby incorporated in and made an integral part of this Schedule.

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XIX.	INTENTIONALLY LEFT BLANK
XX.	INTENTIONALLY LEFT BLANK
XXI.	CHANGES TO THE MASTER SERVICES AGREEMENT
	The following general changes shall be made to the Master Services Agreement when incorporating the terms and conditions of the Master Services Agreement into this Schedule: NONE.

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IN WITNESS WHEREOF the parties have executed this Schedule as of the date first written above.

BROADRIDGE FINANCIAL SOLUTIONS (CANADA) INC.
By: /s/ Michael Dignam
	Name: Michael Dignam
	Title: President
PENSON FINANCIAL SERVICES CANADA INC.
By: /s/ Philip A. Pendergraft
	Name: Philip A Pendergraft
	Title: Director

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ATTACHMENT A

DESCRIPTION OF OUTSOURCED SERVICES

[****]

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Appendix 1 to Attachment A

Intentionally left blank.

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Appendix 2 to Attachment A

Intentionally left blank.

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Appendix 3 to Attachment A

Existing Operations Support Services – Canada

[****]

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Appendix 4 to Attachment A

Existing Technology Services — Canada

[****]

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Appendix 5 to Attachment A

Intentionally left blank.

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ATTACHMENT B

Service Bureau and Operations Support Services Price Schedule

1.	Charges for the Services. The charges for the Services are set forth in Attachment B-1.
2.	Changes to Schedule B. The parties agree, subject to the Change Control Procedures set forth in Exhibit C to the Master Services Agreement, that any changes that the Client Local Affiliate makes from time to time that result in the addition or removal of specific Service functions (including, without limitation, material changes required by Applicable Law or by a regulatory body) may require changes to the charges payable by Client Local Affiliate.
3.	Postage. Notwithstanding anything herein to the contrary, postage shall be billed to Client Local Affiliate on a pass-through basis.
4.	Customization. Any customization work shall be provided pursuant to a rate schedule to be agreed upon by the parties no later than the Closing Date.

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Attachment B-1

Base Fee and Tiered Fees

[****]

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ATTACHMENT C

SERVICE LEVELS

I. INTRODUCTION

In order to maintain the specified Service Levels for the Services set forth in Attachment C-1, the parties have agreed that certain defined Service Levels (the “SLAs”) are to be established and measured as set forth below. SLAs related to the Services shall be established by the parties no later than [****] after the Schedule Effective Date. New Service Levels may be added during the Schedule Term, and existing Service Levels may be modified or eliminated, by the mutual agreement of the parties from time to time.

II. OPERATIONS

A. General

Commencing on the Live Date and subject to this Section II, Ridge Local Affiliate’s provision of the Services shall be in accordance with the Service Levels identified in Attachment C-1.

B. Reports; Performance Review; Corrective Action

     (a) Ridge Local Affiliate shall, wherever the parties agree to use objective data, utilize continuous measurement and data capture and shall prepare a reasonably detailed report with respect to the Service Levels) (each, a “Service Level Report”). Service Level Reports shall be provided to Client Local Affiliate on a monthly basis.

     (b) Ridge Local Affiliate and Client Local Affiliate shall meet at least quarterly to review Ridge Local Affiliate’s performance with respect to the Services during the immediately preceding quarterly period and the Service Level Reports connected therewith, and, with respect to Ridge Local Affiliate’s failure to achieve any Service Levels, the parties shall (1) jointly formulate a formal action plan for corrective action, as applicable, and (2) agree upon the appropriate consequences if such action plan does not prevent subsequent instances of the same Service Level failures.

     (c) The specific criteria for each Service Level shall be detailed in the applicable SLA set forth in Attachment C-1. Prior to Live Date, the parties shall modify such Service Levels, create such additional Service Levels, or modify the method used to measure performance (including, without limitation, appropriate objective data, quality control process or other methods) as the parties mutually agree in writing.

     (d) [****], the parties shall measure actual Ridge Local Affiliate performance levels in the manner previously agreed to by the parties, and review the method used to measure performance and such performance. The parties shall discuss in good faith any appropriate modifications to the method used to measure performance, the Service Levels or any remedial steps required to be taken by Ridge Local Affiliate in light of such review and shall, at least once annually during the Schedule Term, engage in such good faith discussions to determine any appropriate modifications to the method used to measure performance, the Service Levels or any remedial steps required to be taken by Ridge Local Affiliate in light of such review.

C. Changes to the Service Levels

     (a) The parties acknowledge that the Service Levels shall be subject to continuous improvement and that changing circumstances may necessitate modifications to service, expectations and responsibilities. Accordingly, the parties shall, at least once annually during the Schedule Term, engage in good faith discussions to determine if (i) any modifications to the existing Service Levels are necessary or advisable, (ii) any existing Service Levels should be deleted and (iii) any new Service Levels should be added.

     (b) For all new Service Levels, the parties shall mutually agree upon the Service Level targets and the methodology and tools used to measure performance. The parties shall mutually agree on any Service Level target based on [****] of measurements of the applicable Service Level utilizing the agreed upon methodology and tools.

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Any dispute regarding the establishment of such Service Level targets or the methodology and tools used to measure performance shall be resolved by the Executive Governance Committee. In addition, the Executive Governance Committee shall review Service Level targets and performance and shall give weight to Client Local Affiliate’s recommendations for continuous improvement of Service Level targets, based on, among other things, advances in technology.

D Service Level Credits

The amount of Service Level Credits credited to Client Local Affiliate with respect to all Category 1 service level failures occurring in a single month shall not exceed, in total, [****] of the monthly charges payable in connection with the Schedule for that month (the “Service Level Credit Pool – Category 1”). The amount of Service Level Credits credited to Client Local Affiliate with respect to all other service level failures occurring in a single month shall not exceed, in total, [****] of the monthly charges payable in connection with the Schedule for that month (the “Service Level Credit Pool – All Other Categories”, and together with the Services Level Credit Pool – Category 1, the “Service Level Credit Pools”). The Service Level Credit Pools shall be allocated to various Service Levels as set forth in Attachment C-1. The parties shall, at least once annually during the Schedule Term, engage in good faith discussions to determine if any modification to the allocation of the Service Level Credit Pools set forth in Attachment C-1 are necessary or advisable.

E. Root-Cause Analysis

In the event Ridge Local Affiliate has a Service Level failure that is not insignificant, Ridge Local Affiliate shall perform a root-cause analysis as described in Section 1.C of the Master Services Agreement.

F. Excuse

Ridge Local Affiliate shall be excused from performing any Service or obligation hereunder, including, without limitation, the attainment of any Service Level, if and to the extent Ridge Local Affiliate’s failure to perform such Service or obligation is caused by Client Local Affiliate’s or its agents’ act or omission, including, without limitation, (a) Client Local Affiliate providing incomplete or inaccurate data, specifications or requirements; and (b) failures, errors or defects in facilities, equipment, materials or other resources provided by Client Local Affiliate, including, without limitation, telecommunications, hardware, infrastructure and network connectivity.

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Attachment C-1

SLAs

The parties shall include a Service Level for development work no later than [****] after the Schedule Effective Date.

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ATTACHMENT D

No Warranty and Limitation on Liability Provisions
Required by Users of Third Party Data

No Warranties

EXCEPT IN CONNECTION WITH CONTRACTS OF THIRD PARTY DATA SUPPLIERS WITHOUT CONTRACTUAL RESTRICTIONS SIMILAR TO THOSE BELOW, NO THIRD PARTY DATA SUPPLIERS MAKE ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS OR ANY OTHER MATTER.

Limitation on Liability

(a) No third party data supplier shall have any liability to Client Local Affiliate, or any other third party, for errors, omissions or malfunctions in the services provided by such third party data supplier, other than the obligation to endeavor, upon receipt of notice from Client Local Affiliate, to correct a malfunction, error, or omission in any such services.

(b) Client Local Affiliate acknowledges that the services provided by any third party data supplier are intended for use as an aid to institutional investors, registered brokers or professionals of similar sophistication in making informed judgments concerning securities.

Client Local Affiliate accepts responsibility for, and acknowledges it exercises its own independent judgment in, its selection of any of the services provided by any third party data supplier, its selection of the use or intended use of such, and any results obtained. Nothing contained herein shall be deemed to be a waiver of any rights existing under applicable law for the protection of investors.

(c) Client Local Affiliate shall indemnify Ridge Local Affiliate’s third party data suppliers (including, without limitation, FT Interactive) against and hold such third party data suppliers harmless from any and all losses, damages, liability, costs, including, without limitation, attorney’s fees, resulting directly or indirectly from any claim or demand against such third party data suppliers by a third party arising out of or related to the accuracy or completeness of any services received by Client Local Affiliate, or any data, information, service, report, analysis or publication derived therefrom. No third party data supplier shall be liable for any claim or demand against Client Local Affiliate by a third party.

(d) As between a third party data supplier and Client Local Affiliate, neither party shall be liable for (i) any special, indirect or consequential damages (even if advised of the possibility of such), (ii) any delay by reason of circumstances beyond its control, including, without limitation, acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God, insurrection, war, riots, or failure beyond its control of transportation or power supply, or (iii) any claim that arose more than one (1) year prior to the institution of suit therefor.

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ATTACHMENT E

DISASTER RECOVERY; BUSINESS CONTINUITY

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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ATTACHMENT F

REPORTS

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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ATTACHMENT G

RECORD RETENTION POLICY

To be agreed upon by the parties within [****] after the Schedule Effective Date.

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EX-12.1

Exhibit 12.1

STATEMENTS REGARDING COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES

	Year ended December 31,
	2009		2008		2007		2006		2005
Earnings:
Income from continuing operations before income taxes	$	25,836	$	16,649	$	41,958	$	37,578	$	4,678
Fixed charges excluding interest from securities operations		12,535		5,911		5,193		4,420		4,563
Subtotal		38,371		22,560		47,151		41,998		9,241
Interest expense from securities operations		34,279		90,699		140,077		89,429		46,661
Total	$	72,650	$	113,259	$	187,228	$	131,427	$	55,902
Fixed charges:
Interest expense on long-term debt	$	10,344	$	3,854	$	2,894	$	2,951	$	3,123
Interest factor in rents and other interest-bearing liabilities		2,191		2,057		2,299		1,469		1,440
Subtotal		12,535		5,911		5,193		4,420		4,563
Interest expense from securities operations		34,279		90,699		140,077		89,429		46,661
Total	$	46,814	$	96,610	$	145,270	$	93,849	$	51,224
Ratio of earnings to fixed charges:
Including interest expense from securities operations		1.6		1.2		1.3		1.4		1.1
Excluding interest expense from securities operations		3.1		3.8		9.1		9.5		2.0

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF PENSON WORLDWIDE, INC.

1. SAI Holdings, Inc. (a Texas corporation)

2. Penson Financial Services, Inc. (a North Carolina corporation that is a subsidiary of SAI Holdings, Inc.)

3. Nexa Technologies, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

4. Penson Holdings, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

5. Penson Financial Futures, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

6. Penson Execution Services, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

7. Penson Financial Futures, Inc. (a Delaware corporation that is a subsidiary of SAI Holdings, Inc.)

8. Penson Financial Services Limited (a company incorporated in England that is a subsidiary of Penson Holdings, Inc.)

9. Worldwide Nominees Ltd. (a company incorporated in England that is a subsidiary of Penson Financial Services Limited)

10. Penson Financial Services Canada Inc. (a Canadian corporation that is a subsidiary of Penson Holdings, Inc.)

11. Penson Ventures, Inc. (a Canadian corporation that is a subsidiary of Penson Holdings, Inc.)

12. Penson Asia Limited (a Hong Kong company that is a subsidiary of Penson Holdings, Inc.)

13. Market Essentials Group, Inc. (a Canadian corporation that is a subsidiary of Penson Ventures, Inc.)

14. Turnpike Trading Systems, Inc. (a Canadian corporation that is a subsidiary of Penson Ventures, Inc.)

15. GHP1, Inc. (a Texas corporation that is a subsidiary of SAI Holdings, Inc.)

16. GHP2, LLC (a Delaware limited liability company that is a subsidiary of GHP1, Inc.)

17. Penson GHCO (an Illinois general partnership that is a subsidiary of GHP1, Inc. and GHP2, LLC)

18. Penson Financial Services Australia Pty Ltd (an Australian corporation that is a subsidiary of Penson Holdings, Inc.)

19. Penson Australia Nominees Pty Ltd (an Australian corporation that is a subsidiary of Penson Financial Services Australia Pty Ltd)

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Penson Worldwide, Inc.
Dallas, Texas

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-134374) and Form S-3 (No. 333-163191) of Penson Worldwide, Inc. of our reports dated March 5, 2010, relating to the consolidated financial statements and the effectiveness of Penson Worldwide, Inc.’s internal control over financial reporting, which appears in this Form 10-K.

/s/ BDO Seidman, LLP BDO Seidman, LLP

Dallas, Texas
March 5, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip A. Pendergraft, certify that:

1.	I have reviewed this annual report on Form 10-K of Penson Worldwide, Inc;
2.	Based on my knowledge, this annual 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 annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 annual 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 annual 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 annual 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 registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2010

/s/ Philip A. Pendergraft Philip A. Pendergraft
Chief Executive Officer
and principal executive officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin W. McAleer, certify that:

1. I have reviewed this annual report on Form 10-K of Penson Worldwide, Inc;

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 annual 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 annual 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 annual report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 registrant’s Board of Directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2010

/s/ Kevin W. McAleer Kevin W. McAleer
Executive Vice President, Chief Financial Officer
and principal financial and accounting officer

EX-32.1

Exhibit 32.1

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

In connection with the Annual Report of Penson Worldwide, Inc (the “Company”) on Form 10-K for the period ending December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip A. Pendergraft, Chief Executive Officer and principal executive officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 5, 2010

/s/ Philip A. Pendergraft Philip A. Pendergraft
Chief Executive Officer
and principal executive officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Penson Worldwide, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin W. McAleer, Executive Vice President, Chief Financial Officer and principal financial and accounting officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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

Date: March 5, 2010

/s/ Kevin W. McAleer Kevin W. McAleer
Executive Vice President, Chief Financial Officer
and principal financial and accounting officer