Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Agreement (this “Agreement”), effective as of January 3, 2017 (the
“Effective Date”), by and between National Holdings Corporation, a Delaware
corporation with an address at 410 Park Avenue, New York, New York 10022 (the
“Company”), and Michael Mullen, an individual having a mailing address at 400
Chambers Street, 4G, New York, NY 10282 (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ the Executive as Co-Chief Executive
Officer of the Company, and the Executive desires to serve the Company in such
capacity, upon the terms and subject to the conditions contained in this
Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:

 

1.     Employment.

 

(a)     Services. The Executive will be employed by the Company as its Co-Chief
Executive Officer, until such time as the other Co-Chief Executive Officer as of
the Effective Date has been removed or has resigned, in such case the Executive
will automatically assume the title and duties of Chief Executive Officer under
the terms of this Agreement. [In addition, during the Term, Executive shall be
Chairman of the Board of each of Company’s operating subsidiaries including but
not limited to: National Securities Corporation, National Asset Management
Corporation, National Insurance Corporation, vFinance Corporation and Gilman and
Ciocia Corporation.] The Executive shall report exclusively to the Board of
Directors of the Company (the “Board”) and shall perform such duties as are
consistent with his position and as directed by the Board (the “Services”). The
Executive agrees to perform such duties faithfully and to devote such of his
time, attention and energies to the business of the Company as he deems
necessary to carry out his role.

 

(b)     Acceptance. The Executive hereby accepts such employment and agrees to
render the Services as of the Effective Date.

 

2.     Term. The Executive’s employment under this Agreement (the “Term”) shall
commence on the Effective Date, and shall continue until terminated pursuant to
Section 8 of this Agreement.

 

3.     Limited Extent of Service.

 

(a)     Business Activities. Subject to Sections 5 and 6, Executive shall not be
restricted from pursuing, or being actively engaged in, any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage, and whether or not such business activity is
currently existing or is hereafter conducted. Executive’s Service to Opus
National Private Client Group and interest in branch offices of National
Securities shall expressly be permitted.

 

 
1

--------------------------------------------------------------------------------

 

 

(b)     Location. The duties to be performed by the Executive hereunder shall be
performed primarily at the office of the Company in or around New York City,
subject to reasonable travel requirements on behalf of the Company, or such
other place as the Board may reasonably designate. Notwithstanding the
foregoing, the Executive’s primary place of business may not be relocated to
another city without his written consent.

 

4.     Compensation. As full compensation for the performance by the Executive
of his duties under this Agreement, the Company shall pay the Executive as
follows:

 

(a)     Base Salary. Commencing upon the Effective Date, the Company shall pay
the Executive a salary (the “Base Salary”) at the rate of Three Hundred Sixty
Thousand Dollars ($360,000) per year. Payment shall be made bi-monthly in
accordance with the Company’s normal payroll practices. The Board shall review
Executive’s Base Salary annually and may increase (but not decrease) Executive’s
Base Salary from year to year. Such adjusted salary then shall become
Executive’s Base Salary for purposes of this Agreement. The annual review of
Executive’s salary by the Board will consider, among other things, Executive’s
own performance, the Company’s performance and market practice.

 

(b)     Annual Bonus. During the Term, the Executive shall be eligible to earn
an annual cash bonus, conditioned upon the achievement of annual performance
goals and objectives established by agreement between the Executive and the
Board before March 1 of each calendar year. The Executive’s target annual bonus
opportunity shall be equal to 100% of his Base Salary (such amount being
referred to herein as the “Target Bonus”), subject to the Executive’s
achievement of such performance goals and objectives.

 

(c)     Withholding. The Company shall be entitled to withhold all applicable
federal, state and local taxes and social security and such other amounts as may
be required by law from all amounts payable to the Executive under this Section
4.

 

(d)     Grants of Restricted Stock.

 

The Company shall award Executive 625,000 restricted shares of common stock of
the Company (the “Time Vesting Restricted Shares”), which shall vest as follows:
(1) 312,500 shall equally vest in 25% increments on the anniversary date of the
Effective Date over the next four years; (2) 52,083 shall vest based upon the
Company first achieving a market capitalization of $75,000,000 ($75 million) for
30 consecutive trading days; 52,083 shall vest based upon the Company first
achieving a market capitalization of $100,000,000 ($100 million) for 30
consecutive trading days; 52,084 shall vest based upon the Company first
achieving a market capitalization of $150,000,000 ($150 million) for 30
consecutive trading days ; and (3) 52,083 shall vest based upon the Company’s
EBITDA first being equal to or greater than $10,000,000 ($10 million) at the end
of a fiscal year; 52,083 shall vest based upon the Company’s EBITDA first being
equal to or greater than $15,000,000 ($15 million) at the end of a fiscal year;
52,084 shall vest based upon the Company’s EBITDA first being equal to or
greater than $25,000,000 ($25 million) at the end of a fiscal year. Vesting
under clauses (2) and (3) shall require certification by the Compensation
Committee that such performance goals have been met and shall occur on the date
of such certification.

 

 
2

--------------------------------------------------------------------------------

 

 

(e)     Additional Stock-Based Awards. During the Term, the Executive may be
eligible for additional stock-based awards under the Company’s long-term
incentive plan, as determined by the Board. Nothing herein requires the Board to
make additional grants of restricted stock or other awards in any year.

 

(f)     Expenses. During the Term, the Company shall reimburse the Executive for
all reasonable expenses incurred by the Executive in furtherance of the business
and affairs of the Company, including but not limited to travel and
entertainment expenses. The Executive will timely supply the Company with
appropriate vouchers or other proof of the Executive’s expenditures and
otherwise will comply with any expense reimbursement policy as may from time to
time be adopted by the Company.

 

(g)     Notwithstanding anything in this Agreement to the contrary, if Executive
is entitled to be paid or reimbursed for any taxable expenses under this
Agreement, and such payments or reimbursements are includible in Executive’s
federal gross taxable income, then: (i) the amount of any expense reimbursement
or benefit provided during the Executive’s taxable year shall not affect any
expenses eligible for reimbursement or benefit to be provided in any other
taxable year; (ii) the reimbursement of any eligible expense shall be made no
later than the last day of the Executive’s taxable year that immediately follows
the taxable year in which the expense was incurred; and (iii) the right to any
such expense reimbursement or benefit shall not be subject to liquidation or
exchange for another benefit.

 

(h)     Other Benefits. During the Term, the Executive shall be entitled to all
rights and benefits for which he shall be eligible under any benefit or other
plans (including, without limitation, dental, medical, medical reimbursement and
hospital plans, pension plans, employee stock purchase plans, profit sharing
plans, bonus plans, prescription drug reimbursement plans, short and long term
disability plans, life insurance and other so-called “fringe” benefits) as the
Company shall make available to its senior executives from time to time. The
Executive shall be eligible to participate in the Company’s 401(k) plan on the
Effective Date, and his contributions to the 401(k) plan may begin on the first
day of the fiscal quarter immediately following the Effective Date.

 

(i)     Vacation. During the Term, the Executive shall be entitled to a vacation
of twenty (20) days per annum, in addition to holidays observed by the Company.
During the Term, the Executive shall not be entitled to carry forward vacation
days from one calendar year of employment to the next calendar year of
employment.

 

5.     Non-Disclosure of Confidential Information and Trade Secrets; Return of
Property; Invention Assignment.

 

(a)     The Executive understands and agrees that the Confidential Information
and Trade Secrets constitute valuable assets of the Company and may not be
converted to his own use. The Executive hereby agrees that throughout the term
of his employment and at all times after his separation from employment, for so
long as the information at issue remains either Confidential Information or a
Trade Secret, the Executive will not, directly or indirectly, reveal, divulge,
or disclose to any person or entity not expressly authorized by the Company any
Confidential Information or Trade Secrets and will not, directly or indirectly,
use or make use of any Confidential Information or Trade Secrets in connection
with any business activity other than that of the Company.

 

 
3

--------------------------------------------------------------------------------

 

 

Anything herein to the contrary notwithstanding, the Executive shall not be
restricted from disclosing or using Confidential Information or Trade Secrets
that are required to be disclosed by law, court order or other legal process;
provided, however, that in the event disclosure is required by law, the
Executive shall provide the Company with prompt written notice of such
requirement in time to permit the Company to seek an appropriate protective
order or other similar protection prior to any such disclosure by the Executive.

 

The parties acknowledge and agree that this Agreement is not intended to, and
will not, alter or diminish either the Company’s rights or the Executive’s
obligations under any state or federal statutory or common law regarding
confidential information, trade secrets and unfair trade practices and all
potential remedies under such laws remain available.

 

For purposes of this Agreement, “Confidential Information” means all data and
information relating to the business of the Company that is disclosed to the
Executive or of which the Executive becomes aware as a consequence of his
employment and that has value to the Company and is not generally known to those
not employed or otherwise engaged by the Company. “Confidential Information”
shall include, but is not limited to, financial plans and data concerning
Company; management planning information; Company’s business plans or strategies
(including, without limitation, any merger or acquisition plans); “know how;”
Company’s operational methods; market studies; marketing plans or strategies;
product development techniques or plans; client and prospective client lists;
details of client and vendor contracts; current and anticipated client
requirements; past, current and planned research and development; business
acquisition plans; employee compensation and other personnel information; and
new personnel acquisition plans. “Confidential Information” shall not include
data or information (a) which has been voluntarily disclosed to the public by
Company, except where such public disclosure was made without authorization from
the Company; (b) which has been independently developed and disclosed by Persons
other than the Company or its principals or representatives; or (c) which has
otherwise entered the public domain through lawful means. This definition shall
not limit any definition of “confidential information” or any equivalent term
under applicable state or federal law.

 

For purposes of this Agreement, “Trade Secret” means information, without regard
to form, relating to the Company, its activities, businesses or clients,
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential clients which is not commonly known by or available to the public via
lawful means and which: (A) derives economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and (B) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. Trade Secret shall include, but not be
limited to, client lists, client billing and pricing information, technical
information regarding the Company’s intellectual property, product development
information, patent information and all other information permitted to be
covered under the Uniform Trade Secrets Act. This definition shall not limit any
definition of “trade secret” or any equivalent term under applicable state or
federal law.

 

 
4

--------------------------------------------------------------------------------

 

 

(b)     The Executive agrees that he will not retain or destroy, and will
immediately return to the Company on or prior to his last day of employment, or
at any other time the Company requests such return, any and all property of the
Company that is in his possession or subject to his control, including, but not
limited to, keys, credit and identification cards, equipment, client files and
information, and all Confidential Information and Trade Secrets. The Executive
will not make, distribute or retain copies of any such information or property.
The Executive agrees that he will reimburse the Company for all of its costs,
including reasonable attorneys’ fees, of recovering the above materials and
otherwise enforcing compliance with this provision if the Executive does not
return the materials to the Company on or prior to his separation from
employment or at any other time the materials are requested by Company, or if
the Executive otherwise fails to comply with this provision.

 

(c)     The Executive agrees that he will promptly and fully disclose in writing
to the Company inventions, designs, concepts, discoveries, developments,
improvements, and innovations, whether or not they merit patent, trademark or
copyright protection, conceived of, designed or reduced to practice by the
Executive, either solely or in concert with others, at any time during his
employment, which (a) relate in any manner, whether at the time of conception,
design or reduction to practice, to the Company’s business or its actual or
demonstrably anticipated research or development; (b) result from any work
performed by the Executive on behalf of the Company; or (c) result from the use
of the Company’s equipment, facilities, Confidential Information or Trade
Secrets (collectively referred to as “Inventions”).

 

The Executive acknowledges and agrees that he will keep and maintain adequate
written records of all such Inventions at all stages thereof in the form of
notes, sketches, drawings, photographs, printouts, and/or reports relating
thereto. These records are and shall remain the property of, and be available
to, the Company or its designee(s) at all times. Executive further acknowledges
that all such Inventions shall be the exclusive property of the Company. As
such, the Executive hereby assigns his entire right, title, and interest in and
to all such Inventions to the Company or its designee(s). The Executive will, at
the Company’s request and expense, execute specific transfers, assignments,
documents or other instruments and take such further action as may be considered
necessary by the Company at any time during or subsequent to the Executive’s
employment to obtain and defend any intellectual property rights and vest
complete title and ownership to such Inventions to the Company or its
designee(s).

 

(d)     The provisions of this Section 5 shall survive any termination of this
Agreement.

 

6.     Non-Competition and Non-Disparagement.

 

(a)     The Executive acknowledges and agrees that his services to the Company
are special, unique and extraordinary and that in the course of performing such
services the Executive will be provided with and have access to and knowledge of
Confidential Information and Trade Secrets that would be extremely valuable to
competitors of the Company. The Executive further acknowledges and agrees that,
due to the unique nature of the Company’s business, the loss of any of its
clients or the improper use of its Confidential and Proprietary Information
could create significant instability and cause substantial and irreparable
damage to the Company and therefore the Company has a strong legitimate business
interest in protecting the continuity of its business interests and the
restrictions herein agreed to by the Executive narrowly and fairly serves such
an important and critical business interest of the Company. Nonetheless, the
Company also recognizes that the Executive has and will continue to have certain
economic interests relating to his own clients. Accordingly, the Company agrees
that nothing whatsoever contained in this Agreement shall limit the Executive’s
ability to service said clients.

 

 
5

--------------------------------------------------------------------------------

 

 

(b)     The Executive agrees that during his employment and for a period of
twelve (12) months following the date of termination of the Executive’s
employment for any reason whatsoever, he shall not, directly or indirectly, on
behalf of himself or any person, firm, partnership, joint venture, corporation
or other business entity (“Person”), engage in any Competitive Business (the
“Competitive Business”) within the geographic area in which the Company does
business. Notwithstanding the foregoing, nothing contained in this Section 6(b)
shall be deemed to prohibit the Executive from acquiring or holding, solely for
investment, publicly traded securities of any corporation, some or all of the
activities of which are deemed a Competitive Business so long as such securities
do not, in the aggregate, constitute 9.9% or more of any class or series of
outstanding securities of such corporation. Additionally, nothing contained in
this Section 6(b) shall be deemed to prohibit the Executive from continuing to
service his own clients in accordance with Section 10 of the Agreement between
National Securities and Michael Mullen, dated April 22, 2008, and Section XIX of
the Independent Contractor Agreement between National Securities Corporation and
Michael Mullen, dated May 15, 2008 (collectively, the “IC Agreements”). The IC
Agreements shall also continue in full force and effect to govern the duties and
responsibilities of the Company and Executive as it relates to the Executive’s
clients.

 

(c)     The Executive agrees that during his employment and for a period of
twelve (12) months following the date of termination of the Executive’s
employment for any reason whatsoever, he shall not directly or indirectly make
any disparaging statement, whether or not true, with respect to the name or
reputation of the Company or any of its affiliates, including but not limited
to, any officer, director, employee or stockholder of the Company or any of its
affiliates (as defined below). Notwithstanding this Section, nothing contained
herein shall limit or impair the ability of the Executive to make truthful
statements or disclosures that are required by applicable law, regulation, or
legal process, including, but not limited to, providing truthful testimony in
response to any validly issued subpoena. Similarly, this Section is not intended
in any way to limit the Executive’s protected rights contained in Section 3 of
the Release.

 

(d)     In the event that the Executive breaches any provisions of Section 5 or
this Section 6 or there is a threatened breach, then, in addition to any other
rights which the Company may have, the Company shall (i) be entitled, without
the posting of a bond or other security, to seek injunctive relief to enforce
the restrictions contained in such Sections and (ii) to the extent permitted by
law, have the right to require the Executive to account to the Company all
compensation, profits, monies, accruals, increments and other benefits
(collectively “Benefits”) derived or received by the Executive as a result of
any transaction constituting a breach of any of the provisions of Sections 5 or
6 and the Executive hereby agrees to account for and pay over such Benefits to
the Company. The Company and the Executive agree that any such action for
injunctive relief shall be heard in any of the courts set forth in Section 12(c)
below, and each of the parties hereto agrees to accept service of process by
registered or certified mail and to otherwise consent to the jurisdiction of
such courts.

 

 
6

--------------------------------------------------------------------------------

 

 

(e)     Each of the rights and remedies enumerated in Section 6(d) shall be
independent of the others and shall be in addition to and not in lieu of any
other rights and remedies available to the Company at law or in equity. If any
of the covenants contained in Section 5 or this Section 6, or any part of any of
them, is hereafter construed or adjudicated to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants or rights or
remedies which shall be given full effect without regard to the invalid
portions. If any of the covenants contained in Section 5 or this Section 6 is
held to be invalid or unenforceable because of the duration of such provision or
the area covered thereby, the parties agree that the court or arbitrator making
such determination shall have the power to reduce the duration and/or area of
such provision and in its reduced form such provision shall then be enforceable.
No such holding of invalidity or unenforceability in one jurisdiction shall bar
or in any way affect the Company’s right to the relief provided in this Section
6 or otherwise in the courts of any other state or jurisdiction within the
geographical scope of such covenants as to breaches of such covenants in such
other respective states or jurisdictions, such covenants being, for this
purpose, severable into diverse and independent covenants.

 

(f)     In the event that an actual proceeding is brought in equity to enforce
the provisions of Section 5 or this Section 6, the Executive shall not urge as a
defense that there is an adequate remedy at law nor shall the Company be
prevented from seeking any other remedies which may be available.

 

(g)     The provisions of this Section 6 shall survive any termination of this
Agreement.

 

7.     Representations and Warranties. The Executive hereby represents and
warrants to the Company as follows:

 

(a)     Neither the execution or delivery of this Agreement nor the performance
by the Executive of his duties and other obligations hereunder violate or will
violate any statute, law, determination or award, or conflict with or constitute
a default or breach of any covenant or obligation under (whether immediately,
upon the giving of notice or lapse of time or both) any prior employment
agreement, contract, or other instrument to which the Executive is a party or by
which he is bound.

 

(b)     The Executive has the full right, power and legal capacity to enter and
deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
the Executive enforceable against him in accordance with its terms. No approvals
or consents of any persons or entities are required for the Executive to execute
and deliver this Agreement or perform his duties and other obligations
hereunder.

 

 
7

--------------------------------------------------------------------------------

 

 

8.     Termination. The Executive’s employment hereunder shall be terminated
upon the Executive’s death and may be terminated as follows:

 

(a)     The Executive’s employment hereunder may be terminated by the Board for
Cause. Any of the following actions by the Executive shall constitute “Cause”:

 

(i)     the Executive’s breach of the covenants contained in Sections 5 and 6
hereof, or material breach of any other provision of this Agreement;

 

(ii)     the willful and continual failure or refusal by the Executive to
perform his duties under this Agreement (other than by reason of death or
Disability (as defined below)), provided such failure or refusal continues for a
period of thirty (30) days after receipt of written notice thereof from the
Board in reasonable detail of such failure or refusal;

 

(iii)     any action by Executive constituting willful misconduct or gross
negligence in respect of the Executive’s obligation to the Company that results
in material economic damage to the Company; and

 

(iv)     conviction of the Executive, or a plea of guilty or nolo contendere to,
a felony.

 

Notwithstanding the foregoing, the following shall not constitute Cause for the
termination of the employment of the Executive: or any action taken by the
Executive in connection with his duties hereunder if the Executive acted in good
faith and in a manner he reasonably believed to be in, and not opposed to, the
best interest of the Company.

 

(b)     The Executive’s employment hereunder may be terminated by the Board due
to the Executive’s Disability. For purposes of this Agreement, a termination for
“Disability” shall occur (i) when the Board has provided a written termination
notice to the Executive supported by a written statement from a reputable
independent physician, after an appropriate examination, to the effect that the
Executive shall have become so physically or mentally incapacitated as to be
unable to resume, within the ensuing six (6) months, his employment under this
Agreement by reason of physical or mental illness or injury or (ii) upon
rendering of a written termination notice by the Board after the Executive has
been unable to substantially perform his duties hereunder for ninety (90) or
more consecutive days, or more than one hundred and eighty (180) days in any
consecutive twelve month period, by reason of any physical or mental illness or
injury. For purposes of this Section 8(b), the Executive agrees to make himself
available and to cooperate in a reasonable examination by a reputable
independent physician retained by the Company.

 

 
8

--------------------------------------------------------------------------------

 

 

(c)     The Executive’s employment hereunder may be terminated by the Executive
for Good Reason.

 

(i)     For purposes of this Agreement, “Good Reason” shall mean the occurrence
of any of the following without the Executive’s express written consent (any of
which shall constitute a “Good Reason Condition”):

 

(A)     any material breach of this Agreement by the Company;

 

(B)     a material reduction by the Company of the Executive’s duties,
responsibilities, or authority;

 

(C)     a material reduction in Executive’s Base Salary; or

 

(D)     a material change in the geographic location at which the Executive must
perform services (which, for purposes of this Agreement, means a relocation of
the Company’s principal place of business of the Executive outside of the New
York City metropolitan area).

 

(ii)     The Executive may terminate his employment for Good Reason for any Good
Reason Condition only if (A) the Executive has provided the Company with written
notice of the asserted Good Reason Condition within ninety (90) days after its
initial existence; (B) the Company fails to cure the condition within thirty
(30) days after receiving such written notice; and (C) the Executive terminates
employment within ninety (90) days following Executive’s written notice to the
Company of the existence of the Good Reason condition.

 

(d)     The Executive’s employment may be terminated by the Company without
Cause or by the Executive with or without Good Reason on ninety (90) days prior
written notice to the other party. The Company may terminate Executive’s
employment for Cause immediately.

 

9.     Compensation upon Termination.

 

(a)     If, during the Term, the Executive’s employment is terminated as a
result of his death or Disability, the Company shall pay to the Executive or to
the Executive’s estate, as applicable, (i) his Base Salary through the date of
his termination, (ii) any benefits which Executive is entitled to receive under
any Company plan, (iii) any expense reimbursement amounts owed the Executive,
and (iv) any accrued but unpaid annual bonuses earned by the Executive prior to
the date of the Executive’s death or termination for Disability. Subject to
Section 9(e), any such payments of Base Salary and accrued but unpaid annual
bonus shall be made to the Executive or to the Executive’s estate, as
applicable, within sixty (60) days after his death or termination for
Disability. In addition, the Company shall pay to the Executive or the
Executive’s estate, as applicable, an amount equal to (A) the Target Bonus for
the year in which the date of termination occurs, multiplied by (B) a fraction,
the numerator of which is the number of days worked by the Executive during the
year in which is date of termination occurs and the denominator of which is 365
(the “Prorated Target Bonus”). The Prorated Target Bonus shall be paid to the
Executive or his estate in a lump sum in cash within sixty (60) days after his
date of termination (or such later date as may be required pursuant to Section
9(e)). In addition, any shares of annual restricted stock awards outstanding on
the date of his termination shall become fully-vested and non-forfeitable as of
his date of termination. The vested portion of any stock options outstanding on
the date of his termination shall remain exercisable by the Executive or his
estate for a period of twenty (24) months following the date of his termination
(or, if earlier, the normal expiration date of such stock options), and any
unvested portion of outstanding stock options shall lapse and be forfeited
without consideration as of the date of termination.

 

 
9

--------------------------------------------------------------------------------

 

 

(b)     If, during the Term, the Executive’s employment is terminated by the
Board for Cause or by the Executive without Good Reason then the Company shall
pay to the Executive his Base Salary through the date of his termination, any
expense reimbursement amounts owed the Executive, and any accrued but unpaid
annual bonuses earned by the Executive prior to the date of the Executive’s
termination. The Executive shall have no further entitlement hereunder to any
other compensation or benefits from the Company except to the extent otherwise
provided by law. Any shares of unvested annual restricted stock awards
outstanding on the date of his termination shall be forfeited without
consideration as of the date of termination. The vested portion of any stock
options outstanding on the date of his termination shall remain exercisable by
the Executive for a period of thirty 30 days following the date of his
termination (or, if earlier, the normal expiration date of such stock options),
and any unvested portion of outstanding stock options shall lapse and be
forfeited without consideration as of the date of termination.

 

(c)     If, during the Term, the Executive’s employment is terminated by the
Company other than as a result of the Executive’s death or Disability and other
than for reasons specified in Section 9(b) or 9(d), or if the Executive
terminates his employment for Good Reason other than as specified in Section
9(d), then, and, with respect to the payments and benefits described in clauses
(i), (ii), (iii), (v) and (vi) below, only if within forty-five (45) days after
the date of termination, the Executive shall have executed a general release of
claims and covenant not to sue in the form attached hereto as Exhibit A (the
“Release”), and does not revoke such Release, the Company shall (i) pay to the
Executive a lump sum severance payment equal to 1.5 times the sum of his Base
Salary, (ii) if the Executive elects to continue participation in in any group
medical, dental, vision and/or prescription drug plan benefits to which
Executive and/or Executive’s eligible dependents would be entitled under Section
4980B of the Code (COBRA), then for a period of eighteen (18) months following
termination the Company shall pay the excess of (a) the COBRA cost of such
coverage over (b) the amount that Executive would have had to pay for such
coverage if he had remained employed during such period and paid the active
employee rate for such coverage, provided, however, that such period shall run
concurrently with any period for which Executive is eligible to elect health
coverage under COBRA; (iii) pay additional severance equal to the Prorated
Target Bonus; (iv) pay any expense reimbursement amounts owed the Executive; (v)
any shares of annual restricted stock awards outstanding on the date of his
termination shall become fully-vested and non-forfeitable as of his date of
termination; and (vi) any stock options outstanding on the date of his
termination shall become fully-vested and shall remain exercisable by the
Executive for a period of twelve (12) months following the date of his
termination (or, if earlier, the normal expiration date of such stock options).
Subject to Section 9(e), the payments specified in clauses (i), (iii), and (iv)
of the preceding sentence shall be paid to the Executive in a lump sum within
sixty (60) days following the Executive’s date of termination.

 

 
10

--------------------------------------------------------------------------------

 

 

(d)     If, during the Term, the Executive’s employment is terminated upon or
following the occurrence of a Change in Control (as defined below) (X) by the
Company (or its successor) other than as a result of the Executive’s death or
Disability and other than for reasons specified in Section 9(b), or (Y) by the
Executive for Good Reason, then, provided that within forty-five (45) days after
the date of termination, the Executive shall have executed a general release of
claims and covenant not to sue in the form attached hereto as Exhibit A, and
does not revoke such release of claims and covenant not to sue, the Company (or
its successor, as applicable) shall (i) pay to the Executive a lump sum
severance payment equal to two (2) times the sum of his Base Salary; (ii) if the
Executive elects to continue participation in in any group medical, dental,
vision and/or prescription drug plan benefits to which Executive and/or
Executive’s eligible dependents would be entitled under Section 4980B of the
Code (COBRA), then for a period of eighteen (18) months following termination
the Company shall pay the excess of (a) the COBRA cost of such coverage over (b)
the amount that Executive would have had to pay for such coverage if he had
remained employed during such period and paid the active employee rate for such
coverage, provided, however, that such period shall run concurrently with any
period for which Executive is eligible to elect health coverage under COBRA;
(iii) pay additional severance equal to the Prorated Target Bonus; (iv) pay any
expense reimbursement amounts owed the Executive; (v) any shares annual
restricted stock awards outstanding on the date of his termination shall become
fully-vested and non-forfeitable as of the date of his termination; and (vi) any
stock options outstanding on the date of his termination shall become
fully-vested and, provided that such stock options are not cancelled and
cashed-out in connection with the Change in Control (as defined below), shall
remain exercisable by the Executive for twelve (12) months following the date of
his termination (or, if earlier, the normal expiration date of such stock
options). Subject to Section 9(e), the payments specified in clauses (i), (iii),
and (iv) shall be paid to the Executive in a lump sum within sixty (60) days
following the Executive’s date of termination. For purposes of this Agreement,
“Change in Control” means and includes the occurrence of any one of the
following events but shall specifically exclude a Public Offering (as defined
herein): (i) the acquisition, directly or indirectly, following the date hereof
by any person (as such term is defined in Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended), in one transaction or a series of
related transactions, of securities of the Company representing in excess of
fifty percent (50%) or more of the combined voting power of the Company’s then
outstanding securities if such person or his or its affiliate(s) do not own in
excess of fifty percent (50%) of such voting power on the Effective Date, but
excluding an acquisition where the stockholders holding fifty percent (50%) of
the voting power of the Company’s then outstanding securities continue to hold
fifty percent (50%) or more of the voting power of an entity that holds fifty
percent (50%) or more of the voting power of the Company’s then outstanding
voting securities, or (ii) the future disposition by the Company (whether direct
or indirect, by sale of assets or stock, merger, consolidation or otherwise) of
all or substantially all of its business and/or assets in one transaction or
series of related transactions (other than a merger effected exclusively for the
purpose of changing the domicile of the Company). For purposes of this
Agreement, “Public Offering” means a public offering of any class or series of
the Company’s equity securities pursuant to a registration statement filed by
the Company under the Securities Act of 1933 Act, as amended.

 

(e)     This Agreement shall be interpreted and administered in a manner so that
any amount or benefit payable hereunder shall be paid or provided in a manner
that is either exempt from or compliant with the requirements of Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations
and other guidance thereunder and any state law of similar effect (collectively
“Section 409A”). Nevertheless, the tax treatment of the benefits provided under
the Agreement is not warranted or guaranteed. Neither the Company nor its
affiliates, nor their directors, officers, employees or advisers, shall be held
liable for any taxes, interest, penalties or other monetary amounts owed by the
Executive as a result of the application of Section 409A of the Code.

 

 
11

--------------------------------------------------------------------------------

 

 

(i)     Notwithstanding anything in this Agreement to the contrary, to the
extent that any amount or benefit that would constitute non-exempt “deferred
compensation” for purposes of Section 409A of the Code (“Non-Exempt Deferred
Compensation”) would otherwise be payable or distributable hereunder, or a
different form of payment of such Non-Exempt Deferred Compensation would be
effected, by reason of a Change in Control or Executive’s termination of
employment, such Non-Exempt Deferred Compensation will not be payable or
distributable to Executive, and/or such different form of payment will not be
effected, by reason of such circumstance unless the circumstances giving rise to
such Change in Control or termination of employment, as the case may be, meet
any description or definition of “change in control event” or “separation from
service,” as the case may be, in Section 409A of the Code and applicable
regulations (without giving effect to any elective provisions that may be
available under such definition). This provision does not affect the dollar
amount or prohibit the vesting of any Non-Exempt Deferred Compensation upon a
Change in Control or termination of employment, however defined. If this
provision prevents the payment or distribution of any Non-Exempt Deferred
Compensation, or the application of a different form of payment, then, subject
to subsection (iii) below, such payment or distribution shall be made at the
time and in the form that would have applied absent the non-409A-conforming
event.

 

(ii)     It is intended that (A) each payment of termination benefits under this
Agreement shall be regarded as a separate “payment” for purposes of Treasury
Regulations Section 1.409A-2(b)(2)(i), for purposes of Section 409A of the Code,
(B) all payments of any such benefits shall satisfy, to the greatest extent
possible, the exemptions from the application of Section 409A provided under
Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (C)
any such benefits consisting of premiums payable under the COBRA also shall
satisfy, to the greatest extent possible, the exemption from the application of
Section 409A provided under Treasury Regulations Section 1.409A-1(b)(9)(v).
Notwithstanding anything in this Agreement to the contrary, if any amount or
benefit that would constitute Non-Exempt Deferred Compensation would otherwise
be payable or distributable under this Agreement by reason of Executive’s
separation from service during a period in which the Executive is a “specified
employee” of the Company, as such term is defined in Section 409A(a)(2)(B)(i),
then, subject to any permissible acceleration of payment by the Company under
Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii)
(conflicts of interest), or (j)(4)(vi) (payment of employment taxes), (i) the
timing of such amounts or payments shall be delayed until the earlier of (a) the
date that is six (6) months and one (1) day after the Executive’s Separation
from Service and (b) the date of the Executive’s death (such applicable date,
the “Delayed Initial Payment Date”), and (ii) the Company shall (a) pay the
Executive a lump sum amount equal to the sum of the benefit payments that the
Executive would otherwise have received through the Delayed Initial Payment Date
if the commencement of the payment of the benefits had not been delayed pursuant
to this paragraph and (b) commence paying the balance, if any, of the benefits
in accordance with the applicable payment schedule.

 

(iii)     Whenever in this Agreement a payment or benefit is conditioned on the
Executive’s execution of the Release, the Company shall provide such Release to
the Executive promptly following the date of termination, and such Release must
be executed and all revocation periods shall have expired in accordance with
terms set forth in the release, but in no case later than sixty (60) days after
the date of termination; failing which such payment or benefit shall be
forfeited. If such payment or benefit constitutes “Non-Exempt Deferred
Compensation”, then, subject to subsection (ii) above, such payment or benefit
(including any installment payments) that would have otherwise been payable
during such 60-day period shall be accumulated and paid on the 60th day after
the date of termination provided such release shall have been executed and such
revocation periods shall have expired. If such payment or benefit is exempt from
Section 409A of the Code, the Company may elect to make or commence payment at
any time during such 60-day period.

 

 
12

--------------------------------------------------------------------------------

 

 

10.     Mandatory Reduction of Payments in Certain Events.

 

(a)     Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment or distribution by the Company to or for
the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
“Payment”) would be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), then, prior to the making of any Payment to Executive,
a calculation shall be made comparing (i) the net benefit to Executive of the
Payment after payment of the Excise Tax, to (ii) the net benefit to Executive if
the Payment had been limited to the extent necessary to avoid being subject to
the Excise Tax. If the amount calculated under (i) above is less than the amount
calculated under (ii) above, then the Payment shall be limited to the extent
necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). The
reduction of the Payments due hereunder, if applicable, shall be made by first
reducing cash Payments and then, to the extent necessary, reducing those
Payments having the next highest ratio of Parachute Value to actual present
value of such Payments as of the date of the change of control, as determined by
the Determination Firm (as defined in Section 10(b) below). For purposes of this
Section 10, present value shall be determined in accordance with Section
280G(d)(4) of the Code. For purposes of this Section 10, the “Parachute Value”
of a Payment means the present value as of the date of the change of control of
the portion of such Payment that constitutes a “parachute payment” under Section
280G(b)(2) of the Code, as determined by the Determination Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such
Payment.

 

(b)     The determination of whether an Excise Tax would be imposed, the amount
of such Excise Tax, and the calculation of the amounts referred to Section
10(a)(i) and (ii) above shall be made by an independent, nationally recognized
accounting firm or compensation consulting firm mutually acceptable to the
Company and Executive (the “Determination Firm”) which shall provide detailed
supporting calculations. Any determination by the Determination Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Determination Firm hereunder, it is possible that Payments the Executive
was entitled to, but did not receive pursuant to Section 10(a), could have been
made without the imposition of the Excise Tax (“Underpayment”). In such event,
the Determination Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Executive but no later than March 15 of the year after the
year in which the Underpayment is determined to exist, which is when the legally
binding right to such Underpayment arises.

 

 
13

--------------------------------------------------------------------------------

 

 

(c)     In the event that the provisions of Code Section 280G and 4999 or any
successor provisions are repealed without succession, this Section 10 shall be
of no further force or effect.

 

11.     Indemnification. The Company shall defend and indemnify the Executive to
the fullest extent permitted under the Delaware General Corporate Law (the
“DGCL”). The rights to indemnification shall survive any termination of this
Agreement. The Executive shall also have the right to choose his own counsel
under Section 11 of this Agreement, and the Company shall not object to the
Executive’s choice; provided however, there is no actual conflict regarding the
representation.

 

12.     Dispute Resolution.

 

(a)     Executive and Company agree that any and all controversies or claims
(whether contract, tort or statutory) between Executive and the Company arising
out of Executive’s employment, the termination of that employment, and any
agreements previously or hereafter entered into by Executive and Company in
connection with such employment relationship, that could have been filed in a
court of law (or an administrative agency) shall be settled by final and binding
arbitration. The claims covered by this Agreement include, but are not limited
to, claims for wrongful termination, wages or other compensation due, breach of
contract, tort, discrimination or harassment (including race, sex, religion,
national origin, age, marital status, medical condition or disability),
violation of any public policies, and claims for violation of federal, state or
other governmental law, statute, regulation or ordinance.

 

(b)     The arbitration shall be conducted in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association then in effect before a single arbitrator mutually selected by the
Executive and the Company. For the purpose of any judicial proceeding to enforce
such award or incidental to such arbitration or to compel arbitration and for
purposes of Sections 5 and 6 hereof, the parties hereby submit to the
non-exclusive jurisdiction of the state or federal courts within the State of
New York, as appropriate, and agree that service of process in such arbitration
or court proceedings shall be satisfactorily made upon it if sent by registered
mail addressed to it at the address referred to below in Section 12(f).

 

(c)     The Arbitrator shall be empowered to award any party any remedy at law
or in equity that the prevailing party would otherwise have been entitled to had
the matter been litigated or pursued in a civil court or administrative forum
including, but not limited to, general, special, and punitive damages, and
injunctive relief. However, the Arbitrator’s authority to award any remedy is
subject to whatever limitations, if any, exist in the applicable law on such
remedies. Any award pursuant to arbitration hereunder shall be included in a
written decision that will state the legal and factual basis for the award and
shall set forth the basis for calculating any damages award. The arbitrator’s
award, order or judgment shall be deemed final and binding upon the parties.

 

 
14

--------------------------------------------------------------------------------

 

 

(d)     A demand for arbitration must be submitted within the limitations period
that would be applicable in court. If either party does not submit and serve a
written demand for arbitration within the applicable statute of limitations,
such failure shall constitute an absolute bar to the institution of any
proceedings in any forum, and shall constitute a waiver of any rights regarding
that claim.

 

(e)     Neither party nor the arbitrator may disclose the existence, content or
results of any arbitrations under this Agreement without the prior written
consent of all parties hereto.

 

(f)     Pending such resolution of any claim, the Executive shall be entitled to
continue to receive all payments and benefits due under this Agreement or
otherwise, unless the arbitration panel determines otherwise. Judgment on the
arbitration award may be entered by any court of competent jurisdiction.

 

(g)     Nothing in this Agreement shall prevent the parties from agreeing
voluntarily after a claim or controversy has arisen to submit such claim or
controversy to mediation or other informal settlement process. However, if the
dispute is not resolved through mediation or such other process, it shall be
submitted to binding arbitration pursuant to this Agreement.

 

13.     Miscellaneous.

 

(a)     This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York, without giving effect to its
principles of conflicts of laws.

 

(b)     This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective heirs, legal representatives, successors
and assigns.

 

(c)     This Agreement, and the Executive’s rights and obligations hereunder,
may not be assigned by the Executive. The Company may assign its rights,
together with its obligations, hereunder in connection with any sale, transfer
or other disposition of all or substantially all of its business or assets.

 

(d)     This Agreement cannot be amended orally, or by any course of conduct or
dealing, but only by a written agreement signed by the parties hereto.

 

(e)     The failure of either party to insist upon the strict performance of any
of the terms, conditions and provisions of this Agreement shall not be construed
as a waiver or relinquishment of future compliance therewith, and such terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.

 

(f)     All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be delivered
personally or by an overnight courier service or sent by registered or certified
mail, postage prepaid, return receipt requested, to the parties at the addresses
set forth on the first page of this Agreement, and shall be deemed given when so
delivered personally or by overnight courier or when actually received if sent
by registered or certified mail. Each party may designate another address, for
receipt of notices hereunder by giving notice to the other party in accordance
with this paragraph (f) of this Section 12.

 

 
15

--------------------------------------------------------------------------------

 

 

(g)     This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or oral, relating to the
subject matter hereof, except for the IC Agreements, as described above, that
will remain in full force and effect to govern the relationship of the Company
and Executive regarding the Executive’s clients. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.

 

(h)     As used in this Agreement, “affiliate” of a specified Person shall mean
and include any Person controlling, controlled by or under common control with
the specified Person.

 

(i)     The section headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.

 

(j)     This Agreement may be executed in any number of counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument.

 

(k)     As used in this Agreement, the masculine, feminine or neuter gender, and
the singular or plural, shall be deemed to include the others whenever and
wherever the context so requires. Additionally, unless the context requires
otherwise, “or” is not exclusive.

 

Remainder of Page Intentionally Left Blank; Signature Page Follows

  

 
16

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, which shall
be deemed effective as of the Effective Date set forth herein.

 

 

NATIONAL HOLDINGS CORPORATION

 

 

 

 

 

 

 

 

 

By:

/s/ Michael S. Weiss

 

 

Name:  

Michael S. Weiss

 

 

Title:

Chairman of the Board of Directors

 

 

 

 

 

 

 

 

 

MICHAEL MULLEN  

 

 

 

 

 

 

 

 

 

/s/ Michael Mullen

 

 

17