EXHIBIT 10.5 FAHNESTOCK VINER HOLDINGS INC. FORM 8-K DATED JANUARY 17, 2003
CLEARING AGREEMENT

Date: January 2, 2003

 

Fahnestock & Co., Inc.
125 Broad Street
New York, NY 10004

Gentlemen:

This will confirm our agreement ("Agreement") under which we ("we", "us", "our"
or "Clearing Firm") shall act as clearing broker for the accounts of customers
introduced to us by you ("you", "your" or "Introducing Firm") on a fully
disclosed basis as introducing broker. For the purpose of the Securities
Investors Protection Act ("SIPA"), and the financial responsibility rules of the
Securities and Exchange Commission ("SEC") and the Commodity Futures Trading
Commission ("CFTC"), your customers shall be treated as customers of Clearing
Firm and not of Introducing Firm. Capitalized terms not defined herein shall
have the meanings given to them in the Asset Purchase Agreement dated December
9, 2002 ("Asset Purchase Agreement"), between the parties. You and we further
agree:

1. Clearing Firm shall:

(a) execute and/or clear and/or settle (hereafter referred to as "clear",
"clearing", or other forms of the word "clear" as the context requires)
transactions in securities and exchange-traded futures on a fully disclosed
basis for you and the accounts of Brokerage Business customers (hereafter
collectively referred to as "Customers"), according to orders given to us by
you;

(b) monitor and request of Customers (directly or through you as necessary) the
following:

(i) timely payment of Customer obligations for purchases, interest and other
charges,

(ii) timely delivery of securities sold, and

(iii) the maintenance of sufficient money and securities in Customer accounts
required by Federal Reserve Board Regulation T and all other applicable laws,
rules and regulations and additional requirements imposed by us, and buy-in or
sell-out positions in accounts of Customers who fail to comply with the
foregoing;

(c) extend credit for margin purchases in Customer accounts in accordance with
applicable laws, rules and regulations and the Clearing Firm’s own credit
policies and additional requirements;

transfer securities to and from Customers' accounts, provide for the custody,
safeguarding and segregation of Customers' money and securities left with us,
including, without limitation, receipt and payment of dividends on Customer
securities, and arrange for the receipt and delivery of securities for
exchange/tender offers, rights and warrants offerings, redemptions and other
similar transactions according to your instructions;

provide custodial services for Individual Retirement Accounts owned by Customers
at the same level of service as provided by us to Customers as of the effective
date of the Asset Purchase Agreement;

(f) maintain and preserve books, records and reports required by applicable
laws, rules and regulations regarding Customers' accounts for brokers having
custody of Customers' money and securities, including reports required to be
retained and preserved under NYSE Rule 382(e)(2);

(g) issue required confirmations, statements and notices ("Notices") directly to
Customers:

(i) on Introducing Firm forms, as may be modified in consultation with you to
meet our operational, formatting and production requirements, which contain an
appropriate legend reflecting our agreement with Clearing Firm with duplicates
thereof to you; or

(ii) at our option, we will prepare and send to Customers daily purchase and
sale confirmations and monthly statements of accounts, which shall meet our
requirements as to format and quality, and will send duplicates to you. Such
confirmations and statements will indicate that the account was introduced by
you. Furthermore, all statements shall state that all customer funds and
securities are located at Clearing Firm and shall furnish the name of a contact
person or department at Clearing Firm with whom the customer may address
inquiries;

secure and maintain licenses, registrations, permits, approvals and agreements
required under applicable laws, rules and regulations for us to clear securities
transactions or engage in any other transaction or business which are to be
performed hereunder;

provide Introducing Firm such forms and documents as are
necessary for Introducing Firm to open and maintain accounts in such
quantities as necessary;

(j) remit to you on a weekly basis an amount equal to 75% of commissions and
fees earned on Customer Accounts less all accrued compensation due to us under
Section 4(a) of this Agreement, with the balance due on any earned commissions
(including interest participation) earned remitted to you by the 15th of the
following calendar month net of other adjustments and offsets provided
hereunder;

(k) notify you and the NYSE promptly of any written customer complaint that we
receive which relates to your responsibilities, or those of your associated
persons, under this Agreement, and notify the complaining customer in writing of
the receipt of such complaint and its transmittal to you and the NYSE; and

(l) promptly after the execution of this Agreement and annually thereafter (but
only if this Agreement is still in effect), furnish you a list of all exception
and other reports that we prepare to assist you in supervising and monitoring
your Customer accounts in order to carry out your responsibilities under this
Agreement.

2. Limitations on Clearing Firm Responsibilities.

Our obligations under this Agreement, including Section 1 hereof, shall be
conditioned on our receipt of proper documentation necessary under applicable
laws and regulations to support the opening of accounts, including Customer
accounts, on our books. You agree that we are not required to clear any
transaction or otherwise perform any services for (i) the accounts of persons
other than Customers, (ii) with respect to instruments, products and services
not offered to Customers by us as of the effective date of the Asset Purchase
Agreement, or (iii) any transaction or class of transaction not specifically
referred to in this Agreement, without our consent and unless and until the
terms and compensation for such accounts or transactions have been agreed upon
in writing between you and us.

3. Introducing Firm shall:

(a) at or before the opening of Customer accounts, at our request, provide us
with your completed new account form and any other information or documentation
that we may request related to the opening of such account, and inform us of any
changes regarding such information;

secure from Customers all agreements, papers and documents reasonably required
or requested by us to carry out any of our clearing functions, extend credit to
Customers or engage in the borrowing or lending of Customers' securities or
other transactions which we may effect, on forms provided by us. We may, without
relieving you of your duties hereunder, secure such agreements and documents
from Customers directly;

(c) pay then-applicable exchange fees and clearing charges for securities
transactions we clear hereunder;

(d) be solely and exclusively responsible for compliance with all applicable
Customer suitability, "know your customer" and similar requirements created or
imposed under New York Stock Exchange ("NYSE") Rule 405 and other applicable
laws, rules and regulations; establish, review, approve and maintain new account
files of Customers; establish procedures to supervise your representatives,
agents and employees to effect the foregoing; and maintain books and records
reasonably reflecting your activities and required under applicable regulatory
and self-regulatory laws, rules and regulations as they pertain to you and your
activities;

(e) agree that additional rules and regulations that pertain to broker-dealers
may apply to this Agreement, and upon our request to adhere to such applicable
rules and regulations;

(f) notify Customers in writing of our respective Customer-related
responsibilities as required by NYSE Rule 382 and other NYSE Rules;

(g) secure and maintain licenses, registrations, permits, approvals and
agreements required under applicable laws, rules and regulations for you or your
representatives, agents, and employees to effect any transactions for, or render
services to, or for Customers;

(h) secure from your representatives, agents and employees their express written
agreement to comply in all respects with "insider trading," anti-manipulation
and employee securities transactions policies, procedures and rules that are
established and maintained by us;

(i) obtain all necessary authorizations from Customers, including, without
limitation, authorization to hypothecate Customer securities and authorizations
pursuant to Department of Labor Prohibited Transaction Exemption 79-1 and SEC
Rule 11a2-2(T) under the Securities Exchange Act, to permit you and us to act as
brokers, exercise and perform our respective rights, duties and obligations
hereunder and retain commissions for effecting brokerage transactions;

(j) be solely and exclusively responsible for any investment advice given by you
to Customers, and securing all authorizations and agreements necessary to render
investment advice or exercise discretionary authority;

(k) direct Customers to make payments of money and deliver securities to us and,
if such payments or deliveries are made to you to promptly pay such money or
deliver such securities to us within the meaning of SEC or CFTC (to the extent
applicable) financial responsibility rules;

(l) accept or reject orders from Customers; provided, however, that we may in
our sole and absolute discretion, refuse to execute and clear any transaction
introduced by you to us;

(m) accurately transmit orders to us within a time period to be mutually
determined by the parties;

(n) negotiate commission charges with Customers; provided, however, in no event
shall we be entitled to less than amounts to be paid to us hereunder;

(o) respond to Customer inquiries or complaints and promptly notify us of
inquiries or complaints directed to or made against you or us;

(p) be solely and exclusively responsible for payment and or delivery of "when
issued" transactions in Customers accounts;

(q) obtain advance written approval from us as to an account for a Customer who
comes under any prohibition contained in NYSE Rule 407;

(r) furnish us copies of FOCUS Reports, financial statements for the current
fiscal year, the executed Forms X-17a5 (Parts I and IIA) filed with the SEC, any
amendments to your SEC Form BD, and any other regulatory or financial reports
Clearing Firm may from time to time require, such reports to be provided to us
at the time you file such reports with your primary examining authority; and
notify us at least ten (10) days in advance of withdrawals that will reduce your
net capital below 150% of your regulatory requirement;

(s) prepare, submit, and maintain copies of all reports, records and regulatory
filings required of you by any entity that regulates you including, but not
limited to, copies of all account agreements and similar documentation obtained
pursuant to paragraph 3(e) of this Agreement and any reports and records
required to be made or kept under the Currency and Foreign Transactions
Reporting Act of 1970, the Money Laundering Act of 1986, the USA PATRIOT Act,
and any rules and regulations promulgated pursuant thereto; to the extent that
we are required to prepare or submit any reports or records by any entity that
regulates us, you shall cooperate in providing us with any information needed in
order to prepare such reports or records;

(t) promptly advise us after discovery by you of any alleged errors contained in
any Notice sent by us to Customers;

(u) be solely and exclusively responsible for assuring that cash and securities
received by us from Customers are genuine and not lost, stolen, forged or
counterfeit, and that securities ordered by you to be sold or transferred may be
sold or transferred without restriction or that all restrictions on sale or
transfer have been complied with;

(v) be solely and exclusively responsible for determining whether any securities
held in your or your Customer accounts are restricted or control securities as
defined by applicable laws, rules, or regulations, and assuring that orders
executed for such securities comply with such laws, rules and regulations;

(w) maintain a Brokers Blanket Bond with the minimum coverage required by the
National Association of Securities Dealers, Inc.("NASD");

(x) upon the receipt of the list of reports referenced in Section 1(l) of this
Agreement, notify us promptly of those reports that you require to supervise and
monitor your Customer accounts; and

(y) give required notice and obtain required approvals of employers in each case
in which a customer is an employee of a broker-dealer, a self -regulatory
organization, or a financial institution, including but not limited to any
accounts that are subject to NYSE Rule 407A.

4. Compensation for Services.

For our services provided pursuant to this Agreement you shall pay us the amount
of $7.00 per Customer transaction effected through our ADP system, paid in the
manner provided in subparagraph (j) of section 1 of this Agreement.

We agree that you shall be entitled to retain any interest income, Rule 12b-1
fees, rebates, credits or other concessions ("compensation") that were earned
by, or allocated or paid to, us with respect to any credit or debit balance in
Customer accounts after the effective date of this Agreement. All other
compensation earned by, or paid or allocated to, any third party with respect to
any Customer account shall continue to be earned by, or paid or allocated to,
such third parties. We shall retain all compensation with respect to any
accounts that are not part of the Brokerage Business.

5. Representations and Warranties.

Each party represents and warrants to the other party that: (i) it, and each of
its officers, directors, and employees engaged in the securities or investment
business, is duly registered, qualified, licensed and/or a member in good
standing with or of the SEC, NASD, NYSE and the National Futures Association
("NFA"), and each state and/or self-regulatory organization where or on which it
conducts business; (ii) it is, and at all times during the term of this
Agreement will be, in compliance with applicable net capital, financial
responsibility and customer protections rules of the SEC, the CFTC, the NASD,
the NYSE and the NFA; (iii) it has all the requisite authority in conformity
with all applicable laws and regulations to enter into this Agreement and to
engage in the activities and transactions contemplated hereby; and (iv) it shall
keep confidential, except as may be required by law, any nonpublic information
it may acquire as a result of this Agreement regarding the business, affairs and
customers of the other party, which representation and warranty shall survive
the life of this Agreement.

6. Termination; Events of Default.

(a) This Agreement shall terminate (i) upon the earlier of (yy) the completion
of the Conversion as provided in the Conversion Agreement or (zz) May 31, 2003,
or (ii) by mutual written consent of the parties. Notwithstanding the foregoing,
this Agreement also shall terminate with respect to Customer accounts as such
accounts are Converted as provided in the Conversion Agreement, and we
thereafter shall no longer be required to provide any services hereunder with
respect to such Converted accounts. We further agree that Customers whose
accounts are cleared pursuant to this Agreement shall not be charged any "exit"
or termination fees at the time of their Conversion.

(b) Notwithstanding any provision in this Agreement, the following events or
occurrences shall constitute an Event of Default under this Agreement:

(i) either the Clearing Firm or the Introducing Firm shall fail to perform or
observe any term, covenant or condition to be performed or observed by it
hereunder and such failure shall continue to be unremedied for a period of 30
days (10 days in the case of a failure of the Introducing Firm to maintain net
capital ratios as required by applicable rules and regulations) after written
notice from the non-defaulting party to the defaulting party specifying the
failure and demanding that the same be remedied; or

(ii) any representation or warranty made by either the Clearing Firm or the
Introducing Firm herein shall prove to be incorrect at any time in any material
respect; or

(iii) a receiver, liquidator or trustee of either the Clearing Firm or the
Introducing Firm, or of its property, held by either party is appointed by court
order and such order remains in effect for more than 30 days; or either the
Clearing Firm or the Introducing Firm is adjudicated bankrupt or insolvent; or
any of its property is sequestered by court order and such order remains in
effect for more than 30 days; or a petition is filed against either the Clearing
Firm or the Introducing Firm under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed within 30
days after such filing; or

(iv) either the Clearing Firm or the Introducing Firm files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law; or

(v) either the Clearing Firm or the Introducing Firm makes an assignment for the
benefit of its creditors, or admits in writing its inability to pay its debts
generally as they become due, or consents to the appointment of a receiver,
trustee or liquidator of either the Clearing Firm or the Introducing Firm, or of
any property held by either party.

(c) Upon the occurrence of any such Event of Default, the non-defaulting party
may, at its option, by notice to the defaulting party declare that this
Agreement shall be thereby terminated and such termination shall be effective as
of the date such notice has been sent or communicated to the defaulting party.

7. Indemnification; Other Terms.

(a) If any claim, action or proceeding ("action") is made by us or brought
against us arising out of or related to any transaction we have cleared
hereunder or any other action taken or not taken by us under this Agreement,
then, except for our willful misconduct or fraud, or gross negligence, you shall
indemnify and hold us fully harmless from any and all liabilities, loss, damage
and expenses, including reasonable attorneys' fees (collectively "Costs"),
incurred or sustained by us resulting from or arising out of any action. If you
incur any Costs resulting from or arising out of any action, then, except for
our willful misconduct or fraud, or gross negligence, you hereby waive any right
to contribution or indemnification from us. Without limiting the foregoing, you
agree that you shall hold us fully harmless for any Costs incurred by us arising
out of: (i) your violation of any law, rule or regulation of any federal, state
or foreign regulatory or self-regulatory authority, including but not limited to
the SEC, CFTC, NASD, NYSE and NFA; (ii) your failure to comply with any
suitability, "know your customer," identity verification or customer protection
requirement to which you are subject, or your obligations as set forth in
Section 3 of this Agreement; (iii) the failure of any introduced account to make
timely payment for the securities purchased by it or timely and good delivery of
securities sold for it, or timely compliance by it with margin or margin
maintenance calls, whether or not any margin extensions have been granted by us
Firm pursuant to your request; (iv) the nonpayment or return to us unpaid of any
check or draft given to us by any introduced accounts; (v) the payment and
delivery of all "when issued" or "when distributed" transactions which we may
accept, forward or execute for introduced accounts; and (vi) any transaction or
action taken or refrained from being taken by us based on instructions or
Notices given to us that were fraudulent or not properly authorized.

(b) For extensions of credit by us to Customers in margin accounts or otherwise,
we shall charge interest based upon the average broker's call money rate of a
group of banks selected by us (our "broker's call rate" calculated with respect
to Customer accounts in a manner substantially similar to that in effect as of
December 31, 2002) increased pursuant to our normal rate chart.

(c) If a Customer fails to make full and timely payment or delivery for
securities purchased or sold, respectively, you shall pay to us the amount of
any charges sustained or incurred by us. If use of our funds is involved with
respect to computing part of all of such Cost, such use of funds shall be
calculated at our broker's call rate for each day or part thereof of such late
payment or delivery.

(d) You shall complete, or cause to be completed with all required reviews and
approvals, any "Option Compliance" copy of the "Option Approval Form and
Agreement." Copies of the Option Approval Form shall be sent to the Customer for
signature(s) on a timely basis. You agree that the Customer signed copy will be
in the Clearing Firm main office prior to an initial transaction. If
documentation is not timely filed with Clearing Firm, you understand and agree
that in accordance with regulatory requirements, Clearing Firm shall be required
to freeze said Customer account and only accept "liquidating" transactions in
options thereafter. It also is understood that if your responsible employees or
managers do not qualify for "Registered Options Principal" ("ROP") status under
NYSE Rules, we agree, where necessary, to approve option applications on your
behalf by an eligible ROP. You agree to indemnify us for any Costs arising out
of such approval.

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(e) We may, in our sole and absolute discretion, reject any proposed Customer or
transaction and terminate any Customer account.

(f) ANY DISPUTE OR CLAIM ARISING OUT OF THIS AGREEMENT SHALL BE SUBMITTED TO
ARBITRATION UNDER THE RULES OF THE ARBITRATION COMMITTEE OF THE NYSE, UNLESS THE
TRANSACTION WHICH GAVE RISE TO SUCH DISPUTE OR CONTROVERSY WAS EFFECTED ON
ANOTHER EXCHANGE OR MARKET WHICH PROVIDES ARBITRATION FACILITIES, IN WHICH CASE
IT SHALL BE SETTLED BY ARBITRATION UNDER THE ARBITRATION RULES OF SUCH
FACILITIES. THE DECISION OF THE ARBITRATORS SHALL BE BINDING ON THE PARTIES AND
ANY JUDGMENT UPON ANY AWARD RENDERED MAY BE ENTERED, AND NEITHER PARTY SHALL
OPPOSE SUCH ENTRY, IN A COURT HAVING JURISDICTION HEREOF THAT IS LOCATED IN THE
STATE OF NEW YORK. For these purposes and all other purposes under this
Agreement, you hereby consent to the jurisdiction of the courts of the State of
New York, the federal courts sitting in the State of New York, and the NYSE .

(g) This Agreement shall be governed and construed in accordance with the laws
of the State of New York.

(h) Upon your giving an order to us, you shall be deemed to warrant and
represent that:

(i) such order is lawful, in compliance with all applicable laws, rules and
regulations and within the scope of the authority given to you by your Customer,

(ii) no restrictions or impediments exist with respect to such order, and

(iii) sale orders are for fully registered securities that be sold without
restriction. If the securities subject to an order are restricted under the SEC
Rule 144 or any other restriction, you shall advise us in advance and be deemed
to warrant, represent and agree when placing such order that all necessary
agreements, documents and papers have been or will be duly secured and filed by
you as required by applicable law to permit such transaction.

(i) Each of us shall make available to the other all appropriate data in its
possession necessary for the performance of our respective duties hereunder. All
such data shall be kept confidential and shall not be disclosed in any way to
any person not employed by us or not an officer, director or member of either of
us.

(j) Each of us respectively warrants and represents to the other that there is
no contract, agreement or understanding which would prevent such party from
entering into or performing and observing the terms of this Agreement and each
party further warrants and represents that it is duly registered, licensed or
otherwise permitted under the law to enter into and perform all the terms and
conditions of this Agreement. Unless approved in writing by us, you warrant and
agree that we are your sole clearing agent and that you will maintain no other
clearing arrangements during the term of this Agreement. Each party agrees to
immediately notify the other of any change in the foregoing.

(k) In the event of a conflict in regulatory requirements, the rules of the NYSE
shall take precedence.

(l) In addition to SIPC coverage of $500,000 all introduced Customer accounts
shall be covered by excess loss coverage provided to Clearing Firm by Radian
Asset Assurance.

(m) The indemnification provisions in this Agreement shall remain operative and
in full force and effect, regardless of the termination of this Agreement, and
shall survive any such termination.

We shall not be liable for any loss caused, directly or indirectly, by
government restrictions, exchange or market ruling, suspension of trading, war,
acts of terrorism, strikes or other conditions beyond our control. In the event
that any communications network or computer system used by us, whether or not
owned by us, is rendered inoperable, we shall not be liable to you or your
Customers for any loss, liability, claim, damage or expense resulting, either
directly or indirectly, therefrom; provided, however, that we shall use all
commercially reasonable efforts to provide such services as reconstituted as
quickly as reasonably possible thereafter.

(o) You and we agree that we will reasonably cooperate with each other to
identify and resolve in a timely manner any operational, systems or regulatory
issues or problems that we may encounter in the course of our providing the
services specified in this Agreement, and as necessary agree to any changes or
modifications in those services as may reasonably be required by us.

This Agreement sets forth the complete agreement between the parties and any
modification or termination of any terms of this clearing agreement must be in
writing signed by the parties hereto. If the foregoing correctly sets forth our
agreement, kindly sign this letter where provided and return it to us. We will
thereupon forward one original thereof to the NYSE for its approval.

This Agreement shall take effect upon approval by the New York Stock Exchange
pursuant to its Rule 382.

 

CIBC WORLD MARKETS CORP.

425 Lexington Avenue

New York, NY 10017

By: "Kathryn A. Casparian

Name:Kathyrn A. Casparian

Title: Managing Director

AGREED AND ACCEPTED:

Fahnestock & Co., Inc.

By: "A.G. Lowenthal"

Name: A.G. Lowenthal

Title: Chairman

Date: