Exhibit 10.7
Transition Services Agreement
THIS TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of May 31, 2012,
is entered into by and among Penson Financial Services, Inc., a North
Carolina corporation (“Penson”), and Knight Execution & Clearing Services LLC, a
Delaware limited liability company (“Knight”). Penson and Knight are each
sometimes referred to herein as a “Party” and collectively as the “Parties.”
Except as set forth herein, capitalized terms used but not defined herein shall
have the meaning ascribed to such terms in that certain Asset Purchase
Agreement, dated as of May 28, 2012 (the “Purchase Agreement”), between Penson
Financial Services, Inc. and Knight, pursuant to which Knight has agreed to
acquire the Acquired Assets and to assume the Assumed Liabilities.
Recitals
WHEREAS, it is a condition to the consummation of the transactions contemplated
by the Purchase Agreement that the Parties enter into this Agreement, pursuant
to which, on the terms and conditions set forth herein, during the Term (as
defined below), Penson shall provide certain Transition Services (as defined
below) to Knight relating to the Acquired Assets;
WHEREAS, it is contemplated under the Purchase Agreement that Penson will
provide to Knight the Transition Services (with certain costs of such Transition
Services to be paid by Knight, as further described below) during the Term; and
WHEREAS, Penson is willing to provide, or cause to be provided, the Transition
Services to Knight, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and of the respective
covenants and agreements contained herein and in the Purchase Agreement, the
Parties hereby agree as follows:
1.PROVISION OF SERVICES.
(a)    Services. Penson shall provide to Knight all of the services, functions,
products, software and Intellectual Property currently used to support of the
FCM Business by Penson, by any Transferred Employee or by any employee listed on
Schedule 5.4-C to the Purchase Agreement, in each case employed by the FCM
Business as of the Closing, including, without limitation, (i) those services,
functions, products, software and Intellectual Property that are described on
Annex A; (ii) services in support of the seamless transition of such services to
Knight, including, without limitation, services to ensure compliance by Knight
with applicable reporting, governance, supervision and control requirements; and
(iii) qualified intermediary services, reporting and compliance functions,
technology, operations, compliance, finance services (collectively, the
“Transition Services”). After the date of this Agreement, if Knight identifies a
service that it reasonably needs in order to operate and conduct the FCM
Business in substantially the same manner in which it was operated prior to the
Closing and which was previously provide to the FCM Business and such service
was not included on Annex A (other than because the Parties agreed that such

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service shall not be provided), Knight may provide written notice to Penson
requesting such additional services and Penson will provide such additional
services. The Parties will negotiate in good faith to update Annex A to reflect
the addition of any such additional services.
(b)    Service Levels. Penson shall provide the Transition Services (i) with at
least the same degree of skill, attention and care as it exercised in performing
the same or similar services for itself prior to Closing, and in no event less
than that level of skill, attention and care customary for the provision of such
services, and (ii) it will provide Transition Services at levels not less than
those currently provided except to the extent that Penson has transferred assets
and/or personnel required for maintaining such service levels to Knight as part
of the Purchase Agreement. Penson will use commercially reasonable efforts to
provide Transition Services at the level appropriate for Knight, taking into
account Knight’s circumstances, including, without limitation, that the Acquired
Assets represent a new business for Knight and, as a result, Knight may not have
the necessary infrastructure, equipment and support and the fact that Knight may
be migrating a Service at any given time to its own platform but further taking
into account that Penson’s ability to perform certain of the Transition Services
is dependent in part on the assets and employees that are being transferred to
Knight pursuant to the Asset Purchase Agreement and that as employees and assets
related to the FCM Business are transferred to Knight the Transition Services
will be reduced to reflect the transfer of those capabilities to Knight
(collectively, the “Service Criteria”). If Penson fails in any material respect
to meet any aspect of the Service Criteria, as applicable, Penson shall have
twenty-four (24) hours in the case of service critical failures and five (5)
Business days in the case of other breaches from the time at which notice of
such breach is delivered by Knight to Penson, which notice shall describe in
reasonable detail the circumstances of any such breach, to cure such breach. If
such breach is not cured within such applicable time-period, Knight shall have
the right, in addition to any other remedies available under this Agreement,
Applicable Law or otherwise, to obtain, in whole or in part, the Transition
Services from a third party service provider other than Penson and Penson shall
reimburse Knight for all reasonable costs and expenses of such third party
service provider. Penson reserves the right to modify any of the Transition
Services or the manner in which such Transition Services are provided in
connection with changes to its business units in the ordinary course of business
consistent with past practice; provided, however, that no such modification
shall diminish, modify or impair, in a manner materially adverse to Knight, the
Transition Services, result in a failure to meet the Service Criteria or
increase the costs thereof to be paid by Knight, unless such modification is
agreed to in advance by Knight in a writing executed by Knight. Penson shall
provide Knight with at least five (5) Business Days prior written notice of any
such proposed changes or modifications.
(c)    Services Data. Subject to and in addition to Penson’s duties and
obligations under Section 15 below, Penson shall (i) provide Knight with any
data, content or other information relating to the Transition Services
(collectively, “Services Data”) stored, maintained, generated, processed or
produced by Penson in connection with the Transition Services, where applicable,
in compliance with Applicable Law, both during the Term and upon the expiration
or termination thereof, in industry standard formats and files and on storage
mediums or using telecommunications means mutually agreeable to the Parties, and
(ii) to the extent reasonably possible, segregate any Services Data from other
data, content or information generated or maintained by Penson. For the
avoidance of doubt, Penson acknowledges and agrees that all Services Data is and
shall be owned exclusively by Knight,

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and if and to the extent Penson acquires any interest therein, Penson hereby
irrevocably agrees to assign and hereby assigns to Knight all of its rights,
title and interests therein. To the extent that Knight requests any data,
content or information other than the Services Data, such request shall be made
in writing to Penson. Penson shall use commercially reasonable efforts to
provide such other data, content or information and Penson and Knight shall
negotiate in good faith the terms of providing the same and any reasonable
payment (if any) therefor.
(d)    Subcontractors. In connection with and to the extent necessary or
appropriate to perform the Transition Services, Penson shall have the right and
the obligation to enter into and pay (with reimbursement by Knight in accordance
with Annex A) and perform contracts with one or more third party service
providers as set forth on Annex A-1 and Annex B; provided, however, that Penson
shall be responsible for the actions and performance of its third party service
providers in connection with the performance of the Transition Services and
shall remain solely responsible for the performance of the Transition Services
hereunder. Penson acknowledges and agrees that the lists set forth on Annex A-1
and Annex B identify and represent a complete and accurate list, to the best of
Penson’s knowledge as of the date hereof, of third party service providers
required or necessary to provider the Transition Services hereunder. If a
service provider is not listed on Annex A-1 or Annex B, Penson shall have the
right to (1) update the relevant annex upon notice and consent of Knight or (2)
if Knight refuses to provide such consent, Penson shall terminate the services
of such service provider. Notwithstanding the foregoing and in addition thereto,
Penson shall, within ten (10) Business Days of the date hereof, notify Knight,
in writing, of any third party service providers required or necessary to
provider the Transition Services hereunder that Penson proposes to be added to
Annex A-1 and Annex B, which notice shall include the name of each such third
party service provider and a summary of the products and/or services provided by
such third party service provider. Upon receipt of such notice, the Parties
shall discuss, in good faith, any questions or concerns raised by either Party
in connection with the designation of such third party service providers. Within
five (5) Business Days of Knight’s receipt of such notice from Penson, Knight
shall respond, in writing, to Penson’s written request to include such third
party service providers identified in Penson’s original notice hereunder, which
response shall include an approval or a rejection of each such third party
service provider. Knight may reject any such proposed third party service
provider in its sole discretion. In the event that the Knight fails to provide
notice to Penson, in writing, of its approval or rejection of a proposed third
party service provider within such five (5) day period, the proposed third party
service provider shall be deemed approved and the applicable Annex shall deemed
to include any third party service provider approved hereunder. Except for those
third party service providers set forth on Annex A-1 and Annex B or except as
may be required by Applicable Law, during the Term, Penson shall not engage any
unaffiliated third party to perform any of the Transition Services without the
prior written consent of Knight.
(e)    Employees. All employees and representatives of Penson shall be deemed
for purposes of all compensation and employee benefits matters to be employees
or representatives of Penson and not employees or representatives of Knight. In
performing the Transition Services, such employees and representatives shall be
under the direction, control and supervision of Penson (and not Knight) and
Penson shall have the sole right to exercise all authority with respect to the
employment (including, without limitation, termination of employment),
assignment and compensation of such employees and representatives; provided,
however, that those Penson

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employees listed on Schedules 5.4-C and 5.4-D to the Purchase Agreement may not
be terminated except for cause or reassigned, and shall be made available to
perform Transition Services, during the thirty (30) days following the Closing.
Knight shall not be liable for any severance, termination costs or other
liabilities associated with the termination of any employment, engagement or
other relationship between Penson and its employees or representatives.
2.    AUTHORITY, LICENSE AND COMPLIANCE WITH APPLICABLE LAW.
(a)    Penson and its employees and agents will, at its own cost, maintain
throughout the Term, all requisite authority and any applicable licenses or
registrations, whether arising under Applicable Law or otherwise, to enter into
this Agreement and to provide the Transition Services in accordance with the
terms of this Agreement; provided further however that nothing shall require to
replace any memberships or other approvals transferred to Knight or to maintain
any approvals or authorization to hold or handle customer accounts following the
transfer of the Client Contracts to Knight. Penson is, and during the Term shall
remain, in compliance with Applicable Law, including, without limitation,
federal, state and provincial securities laws and the rules and regulations of
any applicable self-regulatory organization. Penson shall notify Knight as
promptly as commercially possible in the event that it becomes aware that any of
the foregoing ceases to be true and correct in any material respect.
(b)    Penson, during the Term of this Agreement, will, at its own cost,
maintain or obtain all rights, titles, licenses, permissions, consents,
approvals and authority required for (i) Penson to provide the Transition
Services to Knight (including, without limitation, those portions of the
Transition Services created or provided by one or more third party service
providers) in accordance with and as contemplated by this Agreement, (ii) Knight
and its clients, customers and correspondents to use, in connection with the
provision of the Services, the Transition Services in accordance with and as
contemplated by this Agreement, and (iii) Penson and its Affiliates and
permitted subcontractors to perform Penson’s obligations under this Agreement;
(c)    Each of the Parties shall use commercially reasonable efforts to (i)
cooperate and jointly conduct negotiations with the providers (“Third Party
Providers”) of any software, products or services to be licensed and/or used by
Penson in providing the Transition Services (“Third Party Rights”), including,
without limitation, the Third Party Providers identified in Annex A-1, (ii)
obtain any required consents of such Third Party Providers or amendments with
respect to the license and/or use of such Third Party Rights, and (iii) where
necessary, to obtain new licenses or similar agreements to permit Penson to
license and/or use to or for Knight the Third Party Rights during the Term,
provided that Penson shall pay (subject to certain reimbursement by Knight in
accordance with Annex A) for any and all additional costs, fees, charges,
expenditures or payments associated with Third Party Rights licenses or such
consents as necessary for Penson to provide the Transition Services during the
Term. Notwithstanding the terms set forth in this Section 2(c), Penson shall
remain solely responsible and liable for the use of such Third Party Rights in
connection with the performance of the Transition Services hereunder and any
compliance with the terms of any license or similar agreement related thereto.
3.    COOPERATION.

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(a)    Penson shall, and shall cause its respective Affiliates and make
reasonable commercial efforts to cause its third party service providers and
vendors, to cooperate with Knight in all matters relating to the provision and
receipt of the Transition Services, and shall perform all obligations hereunder
in good faith and in accordance with principles of fair dealing and in a
commercially reasonable manner. Such cooperation shall include, without
limitation, (i) the execution and delivery of such further instruments or
documents as may be reasonably requested by Knight to enable the full
performance of each Party’s obligations hereunder and (ii) notifying Knight in
advance, where reasonably possible to do so, of any changes to Transferred
Employees prior to such Transferred Employee accepting employment with Knight
(especially changes with respect to employee status), and working with Knight to
minimize the effect of such changes.
(b)    Knight shall make available to Penson, upon Penson’s reasonable request,
all information and materials that are necessary to (i) provide the Transition
Services hereunder and/or (ii) comply with any requests from any governmental or
regulatory authorities.
(c)    Penson shall use commercially reasonable efforts to follow, and shall
cause its Affiliates and third party service providers and vendors to follow,
the policies, procedures and practices of Knight that are applicable to the
provision of the Transition Services, provided however; that Penson receives
such policies, procedures and practices in writing from Knight at least thirty
(30) days before it is required to follow them, except where Penson reasonably
believe that such policies, procedures or practices, or any subset thereof,
would result in Penson being in violation of Applicable Law, including, without
limitation, federal and state securities law and the rules and regulations of
any applicable self-regulatory organization. Notwithstanding the foregoing, in
the event that Penson is in violation of Applicable Law, rule or regulation,
including, without limitation, federal and state securities law and the rules
and regulations of any applicable self-regulatory organization, Penson shall
comply with and follow any and all instructions, policies, procedures and
practices within twenty-four (24) hours of receipt of notice of any such
violation. In the event that Penson is not in material compliance with Knight’s
policies, procedures and practices, Penson shall have five (5) Business Days
upon notice from Knight to cure such breach. If Penson, or its personnel, will
be given access to any of the Knight’s computer systems in connection with the
performance of the Transition Services, Penson or its personnel, as the case may
be, shall (i) comply with all of Knight’s system security policies, procedures
and requirements (as amended from time to time, the “Security Regulations”);
(ii) not tamper with, compromise or circumvent any security or audit measures
employed by Knight; (iii) access only that part of Knight’s system and/or data
as is required in the performance of Transition Services; (iv) limit access to
those personnel and representatives with a bona fide need in performing Penson’s
obligations hereunder; and (v) immediately notify Knight of any unauthorized
access to Knight’s systems (whether by an employee or representative of Penson
or otherwise).
4.    COMPENSATION; PAYMENT
(a)    Fee for Transition Services. The fees (the “Applicable Fees”) to be paid
by Knight for the Transition Services are set forth on Annex A. If the scope of
any individual Service is reduced by Knight, as provided in Section 5(b) below,
the Applicable Fee for such Service shall be reduced by the corresponding
reduction in cost of providing the Service or on a proportionate basis based

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upon Knight’s proportionate reduction in use. After the end of each month,
Penson will submit an invoice to Knight for all Transition Services provided to
Knight hereunder during such month. Each invoice shall include, at a minimum, a
list identifying (a) the specific Transition Services for which there is an
Applicable Fee; and (b) with respect to amounts paid by Penson to third party
service providers identified in Annex A-1 or Annex B pursuant to the terms of
Annex A, the name of the third party service provider and the applicable
Transition Services provided such third party service provider, and such
documentation as may reasonably be requested by Knight to verify the amount
thereof, provided that, Penson shall provide at the request of Knight with
respect to third party service providers identified in Annex A-1 or Annex B
pursuant to the terms of Annex A, copies of invoices provided by such third
party providers to Penson for the same or similar services prior to the Closing
as well as copies of the invoices provided to Penson by such third party service
provider for the Transition Services provided hereunder. The Parties acknowledge
and agree that (i) Knight shall only be obligated to pay to Penson amounts paid
by Penson to third party service providers identified in Annex B pursuant to the
terms of Annex A that are substantially equivalent to the level of services and
(ii) the Applicable Fees set forth in Annex A represents the total compensation
due Penson and that no other compensation is or will be due Penson or any other
entity or person relating to the Transition Services provided hereunder.
(b)    Rights of Set-off. Knight may set off against any amounts payable to
Penson hereunder all present and future indebtedness of or other amounts payable
by Penson to Knight, after giving effect to any actual cash payments, setoffs or
recoupment of cash amounts in each case actually received, realized or retained
by an indemnified party as a result of any matter giving rise to a claim for
such indemnification, arising from any or all of the transactions contemplated
by the Purchase Agreement and any such set-off will be deemed to be payment by
Knight for all purposes. Nothing in this Section 4(b) will require any party to
pursue recovery under any of its insurance polices
(c)    Payments. All payments due from Knight to Penson pursuant to this Section
4 shall be paid within thirty (30) calendar days after the receipt of the
invoice described in Section 4(a) above by electronic funds transmission in U.S.
dollars to the applicable Penson account set forth on Annex C hereto.
(d)    Sales and Use Taxes. To the extent not otherwise reimbursed by Knight in
accordance with the terms and conditions of Annex A, Knight shall be responsible
for and shall pay any U.S. or foreign sales or use taxes imposed in connection
with Knight’s use of the Transition Services.
5.    TERM; TERMINATION; REDUCTION.
(a)    Term. The term of each Service shall commence on the Closing Date and
continue for a period of six (6) months (the “Term”). At any time during the
Term, Knight may terminate the Agreement by giving Penson at least thirty (30)
days’ prior written notice. Penson may terminate the Agreement upon written
notice to Knight for Knight’s breach of its obligation to pay amounts due
hereunder not being contested in good faith on an objectively reasonable basis
in respect of the terms and conditions of the Agreement, which breach remained
uncured thirty (30) days after the date on which such amounts were due pursuant
to the terms of Section 4(c).

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(b)    Termination and Reduction.
(i)    Notwithstanding anything to the contrary contained herein, Knight may
terminate or reduce any individual Service, including, without limitation,
Transition Services provided by any third party service provider, at any time
during the Term (x)  immediately upon written notice to Penson, if Penson is in
breach of its obligations hereunder, or (y) upon five (5) business days’ prior
written notice to Penson, for any reason or no reason at all, identifying the
particular Service and third party service provider, if any, to be terminated or
reduced and the effective date of termination or reduction.
(ii)    If, at any time during the Term, Knight determines, in good faith, that
the number of Penson personnel performing the Transition Services hereunder
should and can be reduced, Knight shall notify Penson in writing of such
requested reduction of personnel. The Parties shall meet and confer in respect
of such requested reduction and the impact it may have on the provision of
Transition Services and the costs therefor, but Penson acknowledges and agrees
that Knight ultimately is entitled to require a reduction and Penson shall
comply with such request and notice within fifteen (15) days of receipt thereof.
(c)    Books and Records. Upon notice from Knight, Penson shall provide Knight
with access during Business Days and normal hours to all Documents related to
the Services that are generated or prepared by Penson in connection with the
provision of the Transition Services, including, without limitation, with
respect to the Applicable Fees. As soon as reasonably practicable following any
expiration or termination of this Agreement or any Service, Penson shall
transfer to Knight in an industry standard format to be mutually agreed upon by
the Parties all such Documents.
(d)    Termination of Transition Services. At Knight’s request upon the
termination of any given Service for any reason, Penson shall extend the
provision of the affected Service(s) for a period not to exceed ninety (90) days
(the “Transition Period”) beyond the effective date of expiry or termination of
this Agreement or such Service(s). Penson shall, in a good faith and
commercially reasonable manner, agree to provide termination transition services
during such Transition Period to Knight in order to effect an orderly,
continuous and seamless transition of Knight from the affected Service(s) to a
new vendor or provider and to prevent Service interruptions or degradation of
Transition Services (the “Termination Transition Services”). Any Termination
Transition Services to be provided by Penson during the Transition Period shall
be requested by Knight in writing and Knight shall compensate Penson in
accordance with the terms of Section 4(a) of this Agreement, or as otherwise
agreed to by the Parties in writing. Termination Transition Services shall also
include, as requested by Knight, the right for Knight to take possession and
control of all necessary office and data center space and related facilities, to
use equipment, hardware and software and to obtain consulting services, support
and assistance from Penson personnel, and Penson shall cooperate fully with
Knight and any new or additional vendor(s) or service provider(s) that Knight
may wish to use in connection with the subject transition or its business. In
addition, during the Transition Period, unless otherwise agreed to by the
Parties in writing, Penson shall continue to provide the Service(s) as they had
been provided prior to the termination or expiration of the Agreement or of any
given Service(s) in accordance with the terms and conditions set forth in this
Agreement. In addition to the foregoing and subject to third party rights and
Applicable Law, Penson

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shall use commercially reasonable efforts to grant (and, at Penson’s sole cost,
not subject to reimbursement, to cause third parties to grant) to Knight all
rights necessary to take possession or control of tangible and intangible
property and FCM Business personnel owned or used by Penson, including, without
limitation, software (including, without limitation, source code and object
code), Intellectual Property, hardware and personnel that are necessary for
Knight or its designee(s) to provide and use the Transition Services should
Penson become incapable of providing one or more of the Transition Services.
6.    INDEMNIFICATION; LIMITATION OF LIABILITY.
(a)    Penson shall indemnify, defend, and hold harmless Knight, its Affiliates
and controlling Persons and each of their respective officers, directors,
employees, stockholders, agents and representatives from and against any and all
(i) Losses resulting from or arising out of any claim (including, without
limitation, any claim made by employees and representatives of Penson) against
Knight related to Penson’s breach of any provision of this Agreement or the
performance of the Transition Services, (ii) Losses resulting from or arising
out of the negligence or willful misconduct of Penson or any of its Affiliates,
or any of their respective agents, employees, officers and directors in regard
to the performance of the Transition Services, (iii) Losses resulting from or
arising out of any claim by a third party contending that the Transition
Services, or the provision thereof, or Knight’s access or use thereof, infringe
or misappropriate any Intellectual Property of such third party, (iv) Losses
resulting from or arising out of the failure of the Transition Services to
comply with any Applicable Law, (v) Losses resulting from or arising out of
Penson’s failure to have, obtain and/or maintain all the rights, titles,
licenses, permissions, consents, approvals and authority required for Penson to
provide the Transition Services to Knight, and (vi) Losses resulting from or
arising out of the failure of the Transition Services to constitute all of the
services, functions, products and end-user or client-type software or
Intellectual property provided to or used for the benefit of or in support of
the Services by Penson or by any Transferred Employees, in each case, as of the
Closing.
(b)    Penson will institute a defense against any third party claims at the
sole expense of Penson and using counsel acceptable to Knight. Penson will keep
Knight informed of the status of the defense of such claims, and Penson will not
agree to any settlement without the prior written consent of Knight, which
consent will not be unreasonably withheld. Notwithstanding the foregoing, Knight
will have the right to assume or participate in the defense of such claims at
the sole expense of Penson.
(c)    Knight shall indemnify, defend, and hold harmless Penson, its Affiliates
and controlling Persons and each of their respective officers, directors,
employees, stockholders, agents and representatives from and against any and all
(a) Losses resulting from or arising out of any claim (including, without
limitation, any claim made by employees and representatives of Knight) against
Penson related to Knight’s breach of any provision of this Agreement or the
performance of the Transition Services and (b) Losses resulting from or arising
out of the negligence or willful misconduct of Knight or any of its Affiliates,
or any of their respective agents, employees, officers and directors in regard
to the performance of the Transition Services.
(d)    Knight and Penson shall have no liability under any provision of this
Agreement or otherwise for any punitive damages or, any incidental,
consequential or special or indirect damages,

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including, without limitation, loss of future revenue, profit or income, or loss
of business reputation or opportunity (provided that the foregoing shall not
limit any liability for any such punitive or other damages to the extent
recovered by a third party claim which is subject to indemnification).
7.    TRADE PROCESSING ERRORS. 
Unless such Loss arises solely as a result of the gross negligence or willful
misconduct of Knight, notwithstanding any limitation to the contrary set forth
herein, Penson shall be solely responsible for any Losses relating to or arising
out of any Trade Processing Error and Penson releases and holds harmless Knight
in connection with such Losses.  For purposes of this Agreement, “Trade
Processing Error” shall mean any error (including, but not limited to, hardware
malfunction, software logic error, system performance or maintenance, processes,
procedures, or human or other error, act or omission) resulting from or arising
out of trade execution services provided by Penson or a third party service
provider, vendor or subcontractor hired by Penson in connection with the
execution of an order that involves the Transition Services or required Penson’s
involvement in the execution of such order.
8.    CONFIDENTIAL INFORMATION.
(a)    “Confidential Information” of a Party shall mean all confidential or
non-public data and information submitted to the other Party or obtained by the
other Party in connection with, in the course of and during this Agreement, in
whatever format it exists, including verbal, written, visual, graphic,
electronic or machine-readable form. Confidential Information shall include all
information that a Party designates as being confidential or that either by its
nature or under the circumstances surrounding disclosure ought to be recognized
by the receiving Party as being confidential. Confidential Information also
includes information received from third parties that a Party is obligated to
treat as confidential. By way of example only and without limitation,
Confidential Information includes, with relation to either Party: any trade
secrets; information concerning, relating to or making reference to, in any way,
the business and affairs of either Party; financial practices or information;
business practices, plans and strategies; price lists; customer lists and
customer information (whether provided directly by a Party or otherwise);
current and anticipated customer requirements; market studies including
information relating to the marketing or promotion of the disclosing Party’s
products; product specifications, data, know-how, formulae, compositions,
processes, designs, diagrams, sketches, models, photographs, graphs, drawings,
samples, inventions and ideas; past, current, and planned research and
development; current and planned manufacturing plans, methods and processes;
computer software and programs (including object code and source code); database
technologies, systems, structures and architecture; systems manuals; information
related to employees, contractors, subcontractors, consultants and suppliers;
and any other information, however documented, that is deemed by a Party to be
proprietary that is disclosed by one Party to the other pursuant to or in
connection with this Agreement and the Transition Services provided hereunder.
(b)    Exceptions. Notwithstanding the foregoing, Confidential Information shall
not include information which (i) is developed by the other Party without use of
or reference to the Confidential Information or violating the disclosing Party’s
proprietary rights; (ii) is or becomes publicly known (other than through
unauthorized disclosure); (iii) is disclosed by the owner of such

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information to a third party free of any obligation of confidentiality; (iv) is
already known by such Party without an obligation of confidentiality other than
pursuant to this Agreement or any confidentiality agreements entered into
between the Parties prior to the execution of this Agreement (provided that the
foregoing shall not apply to information relating to any of the Acquired Assets
or Assumed Liabilities known to Penson); or (v) is rightfully received by a
Party free of any obligation of confidentiality.
(c)    Disclosure Restrictions.
(i)    All Confidential Information relating to a Party shall be held in
confidence by the other Party to the same extent and in at least the same manner
as such Party protects its own confidential or proprietary information and shall
to extent related to the FCM Business shall not be used by such Party or its
Affiliates other than to fulfill its obligations hereunder.
(ii)    In the event that Knight instructs Penson to send customers of Knight
marketing materials via statement inserts or other marketing brochures on
Knight’s behalf, Knight represents and warrants that Knight is in compliance
with Section 248.13 of Regulation S-P and has provided customer with a clear and
conspicuous notice that Knight may share customer information with
non-affiliated third parties for marketing purposes.
(iii)    Notwithstanding anything set forth in this Agreement or any other
agreement, nothing shall prevent Knight or any of its Subsidiaries from giving
or allowing access to any information or materials to any employee, consultant,
agent or contractor of Knight or any of its Subsidiaries as Knight reasonably
determines is necessary for Knight and its Subsidiaries to transition or make
effective use of the Services, in each case, as contemplated by this Agreement,
provided that such employee, consultant, agent or contractor is subject to a
reasonable written obligation of confidentiality.
(d)    Permitted Disclosure. The obligations in this Section shall not restrict
any disclosure by either Party pursuant to any Applicable Law, or by order of
any court or government agency, including, without limitation, any examination
or audit of Penson by a self-regulatory organization or the SEC, provided that
the disclosing Party shall give prompt notice to the non-disclosing Party of
such order, to the extent possible, unless otherwise prohibited under law, rule
or regulation.
(e)    Ownership of Confidential Information. All Confidential Information is
and shall remain the property of the disclosing Party. By disclosing the
Confidential Information to the receiving Party, the disclosing Party does not
grant to the receiving Party any license, interest or rights of any kind in and
to the Confidential Information. The receiving Party agrees that the disclosure
of the Confidential Information of the disclosing Party does not confer upon the
receiving Party any rights in or to the disclosing Party’s Confidential
Information.
(f)    Return of Confidential Information. At the earlier of the written request
of the disclosing Party and the termination or expiration of this Agreement, the
receiving Party will, and will cause its Subsidiaries and/or Affiliates to,
immediately return to the disclosing Party all copies of all the Confidential
Information which has been provided to it, and destroy those portions of any

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written summaries of any oral analyses, compilations, studies or other documents
containing the Confidential Information prepared by or on behalf of the
receiving Party for purposes of providing the Transition Services hereunder or
provided by the disclosing Party. Notwithstanding the foregoing, the receiving
Party will be entitled to keep any records required by statutes, rules and
regulations to which the receiving Party is subject. Any Confidential
Information that is not returned or destroyed, including, without limitation any
oral Confidential Information, shall remain subject to the confidentiality and
non-use obligations set forth in this Agreement. Obligations under this
Agreement shall survive any return or destruction of the Confidential
Information.
9.    AMENDMENTS AND WAIVERS. Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by both Parties, or in the case of a waiver, by the
Party against whom the waiver is to be effective. No failure or delay by any
Party 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 right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Applicable Law.
10.    WARRANTIES.
(a)    Penson hereby represents, warrants and covenants to Knight that: (i) it
has all necessary corporate power and authority to enter into, execute and
deliver this Agreement and to perform its obligations hereunder; (ii) the
execution and delivery by Penson of this Agreement and the performance by Penson
of its obligations hereunder have been duly and validly authorized by all
necessary corporate action; (iii) this Agreement constitutes the legal, valid
and binding obligation of Penson, enforceable against Penson in accordance with
its terms and conditions, and (iv) Penson’s performance of this Agreement and
Penson’s provision of the Transition Services to Knight as contemplated herein
shall not cause Penson to violate or breach any license, contract, agreement or
undertaking of Penson with or in favor of any third party.
(b)    Knight hereby represents, warrants and covenants to Penson that: (i) it
has all necessary corporate power and authority to enter into, execute and
deliver this Agreement and to perform its obligations hereunder; (ii) the
execution and delivery by Knight of this Agreement and the performance by Knight
of its obligations hereunder have been duly and validly authorized by all
necessary corporate action; and (iii) this Agreement constitutes the legal,
valid and binding obligation of Knight, enforceable against Knight in accordance
with its terms and conditions.
11.    NO ASSIGNMENT OR BENEFIT TO THIRD PARTIES. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors, legal representatives and permitted assigns. Penson may not assign
or transfer any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of Knight. Knight may assign or
transfer its rights under this Agreement or delegate its obligations under this
Agreement in Knight’s sole discretion, without any requirement that Knight
obtain the consent of Penson. Subsidiaries of Knight are intended third party
beneficiaries of this Agreement although only Knight shall be contractually
bound by this Agreement. In addition, Penson hereby acknowledges and agrees that
any and all obligations of Knight or any of its Subsidiaries under this

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Agreement are subject to regulatory (including, without limitation, clearing
corporation, exchange, etc.) approvals. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the Parties, the
indemnified parties hereunder and their respective successors, legal
representatives and permitted assigns, any rights or remedies under or by reason
of this Agreement.
12.    ENTIRE AGREEMENT. This Agreement (including the Annexes hereto), together
with the Purchase Agreement and the License Agreement, contain the entire
agreement between the Parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
13.    NOTICES. All notices and communications hereunder shall be deemed to have
been duly given and made if in writing and if served by personal delivery upon
the Party for whom it is intended or delivered by registered or certified mail,
return receipt requested, or if sent by email (with confirmation), to the Person
at the address set forth below, or such other address as may be designated in
writing hereafter, in the same manner, by such Person:
To Knight:
Knight Execution & Clearing Services LLC
c/o Knight Capital Group, Inc.
545 Washington Boulevard
Jersey City, NJ 07310
Telephone:     (201) 222-9400
Telecopy:     (201) 795-5038
Attn: General Counsel
To Penson:
Penson Financial Services, Inc.
1700 Pacific Avenue, Suite 1400
Dallas, TX 75201
Telephone:    (214) 765-1100
Telecopy:     (214) 217-5096
Attn:        General Counsel
14.    INSPECTION RIGHTS. Upon prior notice from Knight, Penson shall provide
access to such auditors and inspectors as Knight may designate in such notice
with reasonable access during normal business days and hours to Penson’s (a)
facilities where the Transition Services are being performed and (b) books and
records established and maintained by Penson by reason of its performance of
this Agreement. Penson shall provide such auditors and inspectors with any
assistance that they may reasonably require. Without limiting the generality of
the foregoing, Penson agrees that all books and records in the possession of
Penson relating to its performance under this Agreement will be made available
for inspection by any regulatory authority with jurisdiction over Knight’s
business, including, without limitation, the Services. If access to Knight’s
customer data is required, access will be provided in such a way as to preserve
the confidentiality of Knight’s

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customer data. Knight may notify Penson of any failure to comply in all material
respects with the terms and conditions of this Agreement specified in writing by
any auditor and/or inspector, and Penson agrees to correct any such failure in
all material respects and to use commercially reasonable efforts to comply
within the time period specified by the auditors/inspectors.
15.    PRIVACY.
(a)    In addition to its other obligations under this Agreement: (i) Penson
acknowledges that Knight and/or its Affiliates is/are and/or may be subject to
United States federal and state laws and regulations, Canadian federal and
provincial laws and regulations as well as laws and regulations of other foreign
jurisdictions (collectively, “Privacy Laws”) governing the privacy of personal
or personally identifiable information and records of or regarding Knight’s or
its Affiliates' employees, investors, customers and prospective customers
(“Personal Information”); (ii) Penson agrees to and shall ensure that its
employees, agents and Affiliates cooperate with Knight and/or its Affiliates
with respect to Knight’s or its Affiliates' obligations under the Privacy Laws
and comply with all provisions of Privacy Laws applicable to Penson or Knight or
Knight’s Affiliates relating to the collection, storage, use, processing,
disclosure or disposal of Personal Information provided to or accessible by
Penson or any of its employees, agents or Affiliates in the course of carrying
out this Agreement or providing the Transition Services to Knight or its
Affiliates; and (iii) if in the course of carrying out this Agreement or
providing the Transition Services to Knight or its Affiliates, Penson or any of
its employees, agents or Affiliates possesses, collects, processes or obtains
access to any Personal Information, Penson shall not and it shall cause its
employees, agents and Affiliates not to use any such information, except to
carry out the obligations set forth in this Agreement, or disclose that
information to third parties unless pursuant to the express written consent of
Knight or its Affiliate or the employee, investor, customer or prospective
customer, as applicable.
(b)    Notwithstanding the generality of the foregoing and in addition thereto,
if Penson or any of its employees, agents or Affiliates possesses, collects,
processes or obtains access to any Personal Information or Confidential
Information: (i) Penson certifies that it has and shall ensure its employees,
agents or Affiliates have implemented and will maintain an effective information
security program to protect Personal Information and Confidential Information,
which program includes administrative, technical and physical safeguards and
written policies and procedures reasonably designed to (A) insure the security
and confidentiality of such Personal Information and Confidential Information;
(B) protect against any anticipated threats or hazards to the security or
integrity of such Personal Information and Confidential Information; and (C)
protect against unauthorized access to or use of such Personal Information and
Confidential Information; (ii) Penson shall restrict access to such Personal
Information and Confidential Information to its employees, agents or Affiliates
who have a need to know information contained therein for the purpose of
providing deliverables and Transition Services to and for Knight or its
Affiliates; (iii) on Knight’s written request, Penson shall provide a written
description of Penson’s or its Affiliate’s and/or subcontractor’s (as
applicable) information security program to Knight and shall promptly give
Knight written notice of any material change in such information security
program; (iv) Penson represents and warrants to Knight and its Affiliates that:
(1) any description provided by Penson of its information security program is
accurate and complete, and (2) except as specifically disclosed to Knight in
writing, Penson’s or its Affiliate’s and/or subcontractor’s (as applicable)
information

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security program at a minimum complies with reasonable information security
practices in the industry; and (v) Knight, its Affiliates or its and their
regulators shall have the right to audit (or have an auditing firm audit)
Penson’s and its employees, agents or Affiliates’ compliance with such program
and this Agreement, and in the event that such audit reveals a material failure
to comply with any provision of such program or this Agreement, Penson shall
bear the cost of such audit and promptly cure such failure at its own expense.
The information security program referenced above shall include written policies
and procedures containing administrative, technical, and physical safeguards
used to access, collect, distribute, process, protect, store, use, transmit,
dispose of, or otherwise handle Personal Information and Confidential
Information, where such safeguards include the following elements: (a)
designating an employee or employees to coordinate Penson’s information security
program; (b) identifying reasonably foreseeable internal and external risks to
the security, confidentiality, and integrity of Personal Information and
Confidential Information that could result in the unauthorized disclosure,
misuse, alteration, destruction or other compromise of such information, and
assess the sufficiency of any safeguards in place to control these risks; and
(c) designing and implementing information safeguards to control the risks
Penson identifies through risk assessment, and regularly testing or otherwise
monitoring the effectiveness of the safeguards’ key controls, systems, and
procedures. At a minimum, such a risk assessment should include consideration of
risks in each relevant area of Penson’s operations, including, without
limitation: (1) employee training and management; (2) information systems,
including network and software design, as well as information processing,
storage, transmission and disposal; and (3) detecting, preventing and responding
to attacks, intrusions, or other systems failures.
(c)    Notwithstanding the generality of the foregoing and in addition thereto,
in connection with the disposal (including, but not limited to, discarding,
selling, donating, transferring, abandoning or other forms of disposal) by or
for Penson or any of its employees, agents or Affiliates of any computers, hard
disks, optical disks, tapes and other storage media (collectively, “Electronic
Media”) or paper or other non-electronic media documents or records
(collectively, “Non-Electronic Media”) that contain any Confidential Information
or Personal Information, Penson shall take or, to the extent that disposal is
being carried out by a third party, cause such third party to take reasonable
measures to prevent unauthorized access to or use of any Confidential
Information or Personal Information. For Electronic Media, such measures shall
include the destruction of the Electronic Media and/or erasure of all the
Confidential Information and Personal Information so that no Confidential
Information or Personal Information can practicably be read or reconstructed.
For Non-Electronic Media, such measures shall include pulverizing, burning,
shredding or otherwise destroying the Non-Electronic Media so that no
Confidential Information or Personal Information can practicably be read or
reconstructed.
16.    BUSINESS CONTINUITY. Penson acknowledges and agrees that it is a critical
vendor of Knight. Penson shall maintain and comply with its business continuity
plan summarized in Annex D (the “Business Continuity Plan”). Penson shall notify
Knight immediately upon the occurrence of an event affecting the provision of
Transition Services by Penson and shall comply with the Business Continuity
Plan, and Penson shall work with Knight to establish a plan for alternative
communications in such event. Penson shall test its Business Continuity Plan
periodically. Knight agrees to participate in and assist Penson with such test,
if so requested. Upon Knight’s request, test results will be made available to
Knight’s management, regulators, auditors, and insurance

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underwriters.
17.    HEADINGS, INTERPRETATION. The heading references herein are for
convenience purposes only, and shall not be deemed to limit or affect any of the
provisions hereof. As used herein, the singular includes the plural, the plural
includes the singular, and words in one gender include the other. As used
herein, the terms “herein”, “hereunder” and “hereof” refer to the whole of this
Agreement, and “include”, “including” and similar terms are not words of
limitation. No rule of construction against the draftsperson shall be applied in
connection with the interpretation or enforcement of this Agreement, as this
Agreement is the product of negotiation between sophisticated parties advised by
counsel.
18.    COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement. This Agreement may be executed by facsimile signature or by
other electronic means, which shall be accepted as if they were original
execution signatures.
19.    SEVERABILITY; ENFORCEMENT. 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.
20.    SPECIFIC PERFORMANCE. The Parties acknowledge and agree that irreparable
harm for which monetary damages would not be an adequate remedy would occur in
the event of a breach of any of the terms or provisions of this Agreement.
Accordingly, the Parties agree that, in addition to other remedies, each of the
Parties shall be entitled to specific performance without the necessity of
proving the inadequacy of monetary damages as a remedy and to obtain injunctive
relief against any such breaches or threatened breaches of this Agreement.
21.    GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM; WAIVER OF
TRIAL BY JURY. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. Each Party agrees that it shall bring any action or proceeding in
respect of any claim arising out of or related to this Agreement or the
transactions contained in or contemplated by this Agreement exclusively in the
United States District Court for the Southern District of New York or any New
York State court sitting in New York County (the “Chosen Courts”), and solely in
connection with claims arising under this Agreement or the transactions that are
the subject of this Agreement (i) irrevocably submits to the exclusive
jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in
any such action or proceeding in the Chosen Courts, (iii) waives any objection
that the Chosen Courts are an inconvenient forum or do not have jurisdiction
over any Party and (iv) agrees that service of process upon such Party in any
such action or proceeding shall be effective if notice is given in accordance
with Section 13. Each Party irrevocably waives any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement.
22.    INDEPENDENT CONTRACTOR. Nothing contained in this Agreement shall be
deemed

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or construed to create a partnership or joint venture, to create the
relationships of employee/employer or principal/agent, or otherwise create any
liability whatsoever of either Party with respect to the indebtedness,
liabilities, obligations or actions of the other or any of their respective
officers, directors, employees, stockholders, agents or representatives, or any
other person or entity.
23.    SURVIVAL. Sections 1(c), (d) and (e), 2, 3, 5(c) and (d), 6, 7, 8, 10,
11, 13, 14, 15, 16, 19, 20, 21, 23, 24, 25, 26, 27 and 28 shall survive any
expiration or termination of this Agreement or the termination of any given
Service for any reason. In addition, all rights and obligations of the Parties
that, by their nature or terms, do not or would not reasonably be expected to
terminate with the expiration or termination of this Agreement shall survive the
expiration or termination of this Agreement.
24.    FORCE MAJEURE. Penson shall not be in default hereunder by reason of any
failure or delay in the performance of its obligations hereunder where such
failure or delay is due to any cause beyond its reasonable control, including,
but not limited to, civil disturbances, riot, rebellion, invasion, epidemic,
hostilities, war, embargo, natural disaster, acts of God, acts of terrorism,
flood, fire, sabotage, delay in transportation, loss and destruction of
property, intervention by governmental entities, or other events or any other
circumstances or causes beyond Penson’s reasonable control. Upon learning of the
occurrence of such event of force majeure, Penson shall immediately notify
Knight, either orally or in writing. In the event of any failure or delay in the
performance of the Transition Services, Penson shall use its best efforts to
restore the Transition Services as soon as may be reasonably possible in
accordance with its existing contingency plans for the Transition Services or,
with respect to Penson, in accordance with its Business Continuity Plan. If such
failure is not remedied within three (3) Business Days, Knight shall have the
right to obtain, in whole or in part, the Transition Services from a third party
service provider other than Penson and Penson shall reimburse Knight for all
reasonable costs and expenses of such third-party service provider. Knight shall
not be liable for the payment of any Applicable Fees for any Service during the
period in which that Service is not provided to Knight by reason of force
majeure.
25.    SECTION 365(N) OF THE BANKRUPTCY CODE. Notwithstanding anything set forth
in this Agreement, if any entity included within Penson becomes the subject of a
case commenced under Title 11 of the United States Code or the equivalent in any
state or foreign jurisdiction (collectively, the “Bankruptcy Code”), and such
entity, as debtor-in-possession, or a trustee appointed for such entity (the
“Trustee”) attempts to reject or rejects this Agreement pursuant to Section
365(a) of the Bankruptcy Code or the equivalent in any state or foreign
jurisdiction, then Knight, in addition to all rights conferred by the Bankruptcy
Code and other Applicable Law, shall have the right to either treat this
Agreement as terminated or to retain its rights under this Agreement. If Knight
decides to retain its rights under this Agreement, then: (i) on written request
of Knight, such entity or the Trustee shall provide Knight with the Transition
Services in their then existing form plus any and all source code and
documentation pertaining to the Transition Services held by the Trustee or such
entity; and (ii) such entity or the Trustee shall not interfere with the rights
of Knight pursuant to this Agreement or interfere with any effort by Knight or
any agent or contractor thereof to hire, solicit the employment or retention of
or obtain any information pertaining to the Transition Services from such entity
or any other entity or individual, including, without limitation, employees,
consultants and former employees and consultants of Penson. Penson acknowledges

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and consents that the automatic stay imposed by Section 362 of the Bankruptcy
Code or the equivalent in any state or foreign jurisdiction shall be
automatically lifted, modified and/or vacated to allow Knight to realize any and
all of its rights herein. The Parties hereby agree and affirm that all payments
at such time already made by Knight: (i) are in consideration of Penson’s
obligations and undertakings pursuant to this paragraph, and (ii) shall not be
deemed to be royalty payments for the purpose of Section 365(n) of the
Bankruptcy Code and the equivalent in any state or foreign jurisdiction, and if
any entity of Penson rejects this Agreement and Knight decides to retain its
rights hereunder, Knight shall be relieved from its obligation to make such
payments.
26.    NO IMPLIED REPRESENTATIONS OR WARRANTIES. EXCEPT AS EXPRESSLY OTHERWISE
SET FORTH IN THIS AGREEMENT, THE SERVICES ARE PROVIDED TO KNIGHT “AS-IS,” AND
PENSON AND THEIR AFFILIATES MAKE NO IMPLIED REPRESENTATIONS, WARRANTIES OR
CONDITIONS, WHETHER BY STATUTE, LAW, USAGE OF TRADE, COURSE OF DEALING OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED REPRESENTATIONS,
WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
IN CONNECTION WITH THE PROVISION OF THE SERVICES HEREUNDER.
27.    USE OF NAME. Penson shall not use Knight’s or any of Knight’s
Subsidiaries’ names, trademarks or service marks without Knight’s written
consent, which, if given, may be withdrawn at any time (except as permitted by
Section 8(d) and as required to perform services under this Agreement).
[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first set forth above.
PENSON FINANCIAL SERVICES, INC.
By: /s/ Philip A. Pendergraft        
Name: Philip A. Pendergraft
Title: Chairman
KNIGHT EXECUTION & CLEARING SERVICES LLC
By: /s/ Steven J. Sadoff        
Name: Steven J. Sadoff
Title: Executive Vice President