NOTE: PORTIONS OF THIS AGREEMENT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES ANDEXCHANGE COMMISSION. SUCH PORTIONS HAVE BEEN REDACTED AND ARE MARKED WITH A [****] IN PLACE OF THE REDACTEDLANGUAGE. BROADRIDGE FINANCIAL SOLUTIONS, INC. 1981 Marcus Avenue Lake Success, New York

EX-10.41 4 d368181dex1041.htm MASTER SERVICES AGREEMENT ENTERED INTO ON JUNE 5, 2012 Master Services Agreement entered into on June 5, 2012

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

EXHIBIT 10.41

Execution Version

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

June 5, 2012

Apex Clearing Corporation

c/o Apex Clearing Holding LLC

141 W. Jackson Blvd., Suite 500

Chicago, IL 60604

Attn: Danny Rosenthal

Re:	Services Agreement between Broadridge Financial Solutions, Inc. and Apex Clearing Corporation (“Apex”)

Background

Broadridge Financial Solutions, Inc. (“Broadridge”) and Penson Worldwide, Inc. (“Penson”) entered into a Master Services Agreement dated as of November 2, 2009, as amended or modified from time to time (collectively, and a full and complete copy of which is attached hereto, the “Penson MSA”). Pursuant to the Penson MSA, Ridge Clearing & Outsourcing Solutions, Inc. (“Ridge”, now known as Apex) and Penson Financial Services, Inc. (“PFSI”) entered into that certain Schedule A (United States) Service Bureau and Operations Support Services Schedule to the Penson MSA, dated as of November 2, 2009, as amended or modified from time to time (collectively, and a full and complete copy of which is attached hereto, the “U.S. MSA Schedule”, and collectively together with the Penson MSA, the “MSA Documents”). In connection with a series of transactions, including those described on the Term Sheet attached as Attachment 1 hereto (the “Term Sheet”), the securities clearing contracts of PFSI which were the subject of the services being provided by Broadridge and its affiliates under the MSA Documents are being assigned by PFSI to Apex (the “Transactions”, with Apex also being referred to in the Term Sheet as “JVP1 Sub”). As a result of, and as a pre-condition to, the Transactions, (i) the MSA Documents will be terminated by mutual agreement of Broadridge, PFSI and Penson pursuant to a Termination and Mutual Release Agreement dated the date hereof (the “Termination Agreement”), and (ii) Apex desires to have Broadridge and its affiliates provide to Apex the services previously provided by Broadridge and its affiliates to PFSI under the MSA Documents, subject to the terms of this letter. As a result of the termination of the MSA Documents as noted above, and Apex’s willingness to enter into the agreements

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

set forth herein, PFSI will be relieved of its obligation to pay certain amounts, as more fully described in the Termination Agreement (collectively, the “Debt Forgiveness”). In the absence of Apex’s agreements set forth herein, the Debt Forgiveness would not occur. This letter sets forth the agreement of Apex to purchase, and Broadridge to provide, certain services, all in accordance with and as further described in this letter.

Interim Agreement

Broadridge (itself or through its affiliates) will provide services to Apex under this letter agreement in accordance with the terms of the MSA Documents for a term of ten (10) years commencing on June 5, 2012, based on, and as modified by, the charges, early termination penalties and other business terms as set forth in the Agreed Upon Business Terms set forth in Schedule A hereto (notwithstanding anything in the MSA Documents to the contrary), including the Term Sheet and the Term Sheet Supplement attached hereto as Attachment 2. Accordingly, in connection with the application of the MSA Documents to the services provided under this letter agreement, (i) all provisions in the MSA Documents relating to pricing, fees or expense reimbursement (including without limitation, pricing terms in Section V and Attachment B to the U.S. MSA Schedule) are hereby replaced, superseded, amended and restated in their entirety with the pricing provisions set forth in Schedule A hereto, including the Term Sheet and the Term Sheet Supplement attached hereto as Attachment 2; and (ii) the termination fee amounts set forth in Section IV.B(i) and Section IV.B(iii) of the U.S. MSA Schedule are hereby replaced, superseded, amended and restated in their entirety with the termination fee amount determined in accordance with Section 2(c) of Services Agreement provisions of Attachment 1 to Schedule A hereto. In the event of any conflict between this letter agreement (including all schedules and exhibits hereto) and the MSA Documents, this letter agreement shall control. This letter agreement constitutes a binding agreement between the parties in accordance with its terms, until such time as a Definitive Agreement (defined below) has been mutually executed and delivered by the parties hereto, if ever.

Definitive Agreement

Broadridge and Apex agree to use good faith efforts to, as expeditiously as practicable, negotiate the terms of, and enter into, a Services Agreement which will supersede and replace the terms of this letter agreement (the “Definitive Agreement”) within ninety (90) days of the date of this letter. The Definitive Agreement will be based upon the terms of the MSA Documents, with modifications including: (i) incorporation of terms applicable to the Interim Agreement set forth in subparts (i) and (ii) of the previous paragraph; (ii) the Agreed Upon Business Terms as set forth in Schedule A hereto, (iii) modifications necessary to address the changed corporate structure of Apex as the service recipient, and (iv) such other modifications as may be mutually agreed upon by Broadridge and Apex, provided the final terms of the Definitive Agreement (not taking into consideration the modifications agreed to in this letter, including Schedule A and the Attachments) will be no less favorable to Apex in the aggregate than the terms of the MSA Documents to PFSI. In the event that the parties are unable to finalize and execute the Definitive Agreement in the time frame set forth above, the parties shall continue to operate under the interim agreement evidenced hereby and shall continue to use good faith efforts to, as expeditiously as practicable, finalize and execute the Definitive Agreement.

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Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Miscellaneous

This letter agreement will inure to the benefit of and bind the respective successors and assigns of the parties hereto. This letter agreement shall be governed by and construed in accordance with the internal substantive laws of the State of New York without giving effect to conflict of laws principles thereof. This letter 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. In the event any portion of this letter agreement is held to be illegal or unenforceable, the reminder shall continue in full force and effect. This letter agreement constitutes the entire understanding between the parties with respect to its subject matter and may not be modified, amended, terminated or waived except in a writing signed by the parties.

IN WITNESS WHEREOF, this letter agreement has been duly executed and delivered as of the date first above written.


Apex Clearing Corporation

By:		/s/ Danny Rosenthal
		Name: Danny Rosenthal
		Title: Chief Executive Officer and President


Broadridge Financial Solutions, Inc.

By:		/s/ John Hogan
		Name: John Hogan
		Title: President

Agreed and Accepted, but only with respect to the obligations of PEAK6 Investments, L.P. contained Section 11 of the Term Sheet Supplement (Attachment 2).


PEAK6 Investments, L.P.

By:		PEAK6 LLC
Its:		General Partner

By:		/s/ Jay Coppoletta
		Name: Jay Coppoletta
		Title: Chief Legal Officer

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Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Signature Page to MSA Letter Agreement

-4-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Schedule A

Terms and Conditions

The following business terms have been agreed upon by Broadridge and Apex, which will apply to all services being provided by Broadridge under this letter and will be contained in any Definitive Agreement:

Agreed Upon Business Terms

Section 2 of the “Services Agreement” portion of the Term Sheet attached hereto as Attachment 1, as modified or supplemented by the Term Sheet Supplement set forth in Attachment 2, including Attachments 2A through 2D, all of which are hereby incorporated by reference.

-5-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

ATTACHMENT 1

Term Sheet

May 21, 2012

[****]

[**** ]

[****]

[****.]

[****]

Services Agreements

[****]

Broadridge enters into a new 10-year master services agreement (the “MSA”) with Newco and JVP1 Sub for Broadridge and its affiliates to provide services to Newco and JVP1 Sub. In the event that the Existing MSA is assigned to JVP1 Sub, upon the entry into the MSA, the Existing MSA will terminate without any penalty, fee or obligation except as set forth in Section 6 below.

Broadridge agrees that under the MSA it will perform, in consideration of the revenue sharing arrangement set forth below, (i) all services consistent with the services Broadridge currently provides and services Broadridge has committed to provide to PFSI, and (ii) as necessary, any or all services to be

-6-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

provided by PFSI and/or Nexa pursuant to the PFSI/Nexa TSA in the event PFSI and/or Nexa do not perform any or all such services pursuant to, and for the remainder of the term of, the PFSI/Nexa TSA. The services in (i) above shall include [****]. To the extent Broadridge performs any services pursuant to the PFSI/Nexa TSA, Broadridge shall be paid in accordance with the terms of the TSA (but in no event more for such services than PFSI’s cost therefor). The parties intend that the MSA (or other agreement entered into relating to such services) shall contain “catch-all” and “no-extras” provisions to this effect. Payments to Broadridge under the MSA will be as follows:

[****] of Net Revenue – [****]% of such Net Revenues [****]

Next [****] of Net Revenue – [****]% of such Net Revenues

Net Revenues in excess of [****] – [****]% of such Net Revenues

“Net Revenue” shall mean annual (calendar year) revenues from correspondent clearing businesses run on the Broadridge platform only and shall exclude any revenues relating to non-correspondent clearing businesses such as revenue from floor brokerage operations, clearance, execution, order routing and other fees (but only to the extent such revenues are related to non-correspondent clearing businesses).

If Newco and/or JVP1 Sub identify any product or service needed (based on the current business operations of the operations to be acquired by JVP1 Sub and Newco) to operate their respective businesses within four months of closing that is not provided under the MSA or currently performed by PFSI or one of its affiliates for itself, Broadridge will agree to build or otherwise obtain such product or service [****] and provide such product or service to Newco and JVP1 Sub at [****], except to the extent prohibited by law, rule or regulation, or by a regulator. After expiration of such four month period, if Newco and/or JVP1 Sub identify any product or service needed to operate their respective businesses that is not provided under the MSA or currently performed by PFSI or one of its affiliates for itself, Broadridge shall supply such product or service to Newco and JVP1 Sub (i) [****] or (ii) at a price to be negotiated between JVP1 Sub and Broadridge in good faith if provision of such product or service to JVP1 Sub will cost Broadridge more than the additional revenues reasonably expected to be received by Broadridge as a result of such product or service.

If the entire MSA is terminated by Newco for convenience, Broadridge shall receive a payment equal to $[****], reduced on a straight-line basis over the term of the MSA (reduced on a monthly basis by $[****] on each monthly anniversary of entry into the MSA) (the “Termination Fee”).

If Broadridge fails to meet its obligations to provide services under the MSA, its payments under the MSA may, at the election of the other party to the agreement, be reduced to offset losses and damages in connection with such failure, provided that such payments will, other than certain to be agreed exceptions, be capped for each year of the term at the greater of (i) for year one of the MSA, $[****] million, year two of the MSA, $[****] million, and thereafter $[****] million and (ii) the amount of compensation Broadridge has received under such agreement over the prior rolling [****]-month period (as measured from the date of such failure. If Broadridge is in material default and does not cure within 30 days, Newco and JVP1 Sub shall be entitled to terminate the MSA and all schedules thereto without payment of the termination fee set forth above.

Broadridge shall have audit rights with regard to Net Revenue calculations.

Broadridge and PEAK6 will mutually agree on a list of additional services to be included in the MSA that Broadridge will provide for no additional cost.

[****]

[**** ]

[****]

PFSI and Broadridge and their respective affiliates, including Nexa, agree not to, directly or indirectly, through ownership, control, management or otherwise, compete with, facilitate competition with or provide intellectual property or know-how to an entity that directly or indirectly competes with Newco or JVP1 Sub in the correspondent clearing business; provided, however, that Broadridge may provide services to other parties similar to what it will provide Newco and JVP1 Sub under the MSA. The MSA will contain a mutually agreed to exclusivity provision from JVP1 Sub and Newco.

-7-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

[****]

Governmental Approvals

All governmental, regulatory body and exchange approvals and consents (including approvals of self-regulatory organizations) in form and substance acceptable to PEAK6 will be in place at closing.

Funding

Replacement overnight funding for the clearing business in amounts reasonably acceptable to PEAK6 shall be in place as of the closing.

Confidentiality

The parties agree that the terms of this term sheet and all confidential and proprietary material disclosed to one another during the course of negotiations of the transaction contemplated hereby will be considered confidential and will not, without the other parties’ prior written consent, be disclosed to any third party, in any manner whatsoever, in whole or in part, other than as otherwise required by law or permitted pursuant to confidentiality agreements between the parties hereto, and will not be used by any party other than in connection with the transaction contemplated hereby.

Other; Non-Binding Nature

This term sheet may be executed in counterparts (whether by original signature or facsimile copy thereof), each of which shall be deemed to constitute an original but all of which, when taken together, shall constitute one and the same instrument.

This Term Sheet was prepared to facilitate discussions regarding the proposed transactions outlined above. This Term Sheet does not constitute an offer to enter into negotiations; it is only a non-binding preliminary expression of interest. No obligations with respect to the negotiation, execution or closing of the proposed Transaction are created, implied or inferred hereby. The only legally binding obligations that will exist among the parties will be those expressly set forth in definitive transaction documents when and if such definitive transaction documents are executed and delivered. PEAK6 reserves the right to withdraw from the negotiations and to not proceed with the transactions contemplated hereby or with any transactions for any or no reason at any time prior to the execution and delivery of such definitive transaction documents.

Agreed and accepted:


PEAK6 INVESTMENTS, L.P.

By:		/s/ Daniel Rosenthal
		Name: Daniel Rosenthal
		Title: Partner, Peak6 Investments

Date: May 21, 2012

-8-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83


BROADRIDGE FINANCIAL SOLUTIONS, INC.

By:		/s/ John Hogan
		Name: John Hogan Title: President

Date: 5/21/12

PENSON FINANCIAL SERVICES, INC.

By:		/s/ Philip A. Pendergraft
		Name: Philip A. Pendergraft Title: Chairman

Date: 5/21/12

NEXA TECHNOLOGIES, INC.

By:		/s/ Philip A. Pendergraft
		Name: Title:

Date:

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Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Signature Page to Non-Binding Term Sheet Dated May 21, 2012

-10-

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2

Term Sheet Supplement

The revenue share for the remainder of Calendar 2012 under Section 2(a) of the Services Agreement provisions of the Term Sheet for [****] of Net Revenue shall be reduced from [****]% to (i) [****]%, for June 2012, (ii) [****]%, for July, August and September 2012, and (iii)[ ****]%, for October, November and December 2012. Thereafter, the revenue share under Section 2(a) of the Services Agreement provisions of the Term Sheet for [****] of Net Revenue shall be increased from [****]% to [****]% for the remainder of the Term.

The parties agree that Net Revenues of PFSI for the first Quarter of 2012, calculated in accordance with this Agreement, were equal to $26,764,000, as determined in accordance with the Q1 2012 Net Revenue Reconciliation attached hereto as Attachment 2A hereto. The parties shall determine Net Revenue for the remainder of the Term in a manner consistent with such Attachment 2A. Each month’s revenue share percentage will be determined based on the annualized revenue for that month, determined based on the revenue per day in that month times the number of days in a year. In addition, Apex shall reimburse Broadridge for the pass-through expenses consistent with those paid by PFSI over the previous twelve months, including for illustrative purposes without limitation those pass-through expenses set forth on Attachment 2B hereto.

3.	Pursuant to Section 2(f) of the Services Agreement provisions of the Term Sheet, the following additional services will be provided by Broadridge at no additional cost to Apex

(a)

The Business as Usual items listed on Attachment 2C hereto (“BAU”) will be completed by Broadridge in accordance with the current schedule included on such Attachment 2C, or as otherwise mutually agreed to by Apex and Broadridge, including the following:

(i)

Broadridge shall take over correspondent billing, including paying for staffing by end 2012.

(ii)

Broadridge shall provide all services around any additional gaps (as compared to the products and services that PFSI was receiving from Wall Street Concepts) that arise in tax processing.

(b)

Handle all trade upload support (taking over remaining trade upload functions still at PFSI).

(c)

Broadridge will take responsibility to get the existing PFSI cost basis data base up to date and cleansed in order to facilitate a timely conversion to the Broadridge system in order to insure 2012 tax year reporting and filing deadlines are met. Broadridge will provide cost basis reporting in compliance with tax laws for 2012 tax year and beyond. In order to provide the foregoing, Broadridge will rely on (i) having access to the existing operating PFSI system in order to update it and cleanse it and (ii) PFSI providing the part time support of subject matter experts relative to their system which will be required until this data base is converted to the Broadridge system (and that such access and support shall be free of charge to Broadridge for the 2012 tax reporting year).

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

(d)

Broadridge will provide transition services supporting acquired correspondents throughout the Term using the minimum number of resources described on Attachment 2D hereto.

(e)

Broadridge will perform the transition of daily customer reporting from the DataWatch system to Broadridge’s PostEdge system in a timely manner in accordance with mutually acceptable schedules. In addition, Broadridge agrees to maintain the StorQM system to continue to support Apex’s regulatory record retention requirements.

(f)

Broadridge will handle all OATS reporting for Apex for orders processed through Broadridge order processing systems until such time as Apex elects to transition that function “in house” or to a third party.

4.	Apex has the option to engage Broadridge to provide System Administration and Data Base Administration services at Broadridge’s incremental cost.

5.	Additional services requested by Apex and not identified in the Term Sheet or this Term Sheet Supplement to be provided by Broadridge [**] Such services will be provided in a manner that is consistent with Broadridge quality and also meets the requirements of the MSA Documents. [**].

6.	Broadridge and Apex agree to work in good faith with each other to reduce their expenses that are mutually agreed to be unnecessary, such as among other things the elimination of unnecessary and or excessive electronic storage of reports or images and documents.

7.	Immediately following the execution of the letter agreement, the Broadridge and Apex will negotiate in good faith the terms of one or more additional Service Level Agreements, with the expectation of entering into the Service Level Agreements within thirty (30) days.

[****].

9.	Broadridge and Apex agree that, for the purposes of calculating Net Revenue, the following shall apply:

(a)

Regulatory and exchange fee pass-throughs will be a contra expense and excluded from Net Revenue.

(b)

Amounts passed through to customers up to expenses for postage and statements will be booked as contra expenses against customer fees collected and not included in Net Revenue. Amounts passed through to customers in excess of expenses for postage and statements will be booked as and included in Net Revenue.

(c)

Reimbursement from a customer of any other pass-through cost will be excluded from Net Revenue. For the avoidance of doubt, the parties agree that the $26,764,000 amount referred to in item 2 above does not include any pass-through costs.

(d)

Amounts paid by issuers and passed through to Apex by Broadridge for proxy, e-mail or other communications with customers pursuant to a separate agreement between Apex and Broadridge shall be excluded from Net Revenue.

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

10.	The indemnification provided by Broadridge under Section 14(A) of the MSA shall include Losses incurred by Apex Client Indemnities arising out of the gross negligence or willful misconduct of Broadridge.

11.

In lieu of Section 17.A of the MSA, PEAK6 Investments, L.P. (“PEAK6”) and Apex agree that throughout the Term of the letter agreement PEAK6, Apex and their Subsidiaries (but not including PEAK6 Advisors LLC, PEAK6 Opportunities Management and the respective funds and accounts for which they serve as an investment manager or managing member) shall not engage in the business of providing clearing and settlement services for unaffiliated correspondent customers (the “Prohibited Activity”) in competition with Broadridge; it being understood that nothing in this provision shall prohibit PEAK6, Apex or any of their Subsidiaries from: (i) owning up to 10% in the aggregate any class of capital stock of any corporation if such stock is publicly traded and listed on any national or regional stock exchange or on the Nasdaq national market; or (ii) acquiring an entity, business, operations or assets if the Prohibited Activity comprises less than 15% of the revenue of such acquired entity, business, operations or assets. This restriction shall not apply to the extent that Broadridge does not perform any required clearing services in a particular geographic market or is otherwise not capable of performing the services in a competitive manner to the same level and in accordance with the other requirements of the MSA Documents.

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2A

Q1 2012 Net Revenue Reconciliation

[****]

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2B

Pass-Through Expenses

[****]

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2B cont’d

[****]

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2C

BAU LIST

[****]

Confidential Treatment is Requested by Broadridge Financial Solutions, Inc.

Pursuant to 17 C.F.R. 200.83

Attachment 2D

Transition Services

[****]