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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                    SEVERANCE AGREEMENT, WAIVER, AND RELEASE

      This Severance Agreement, Waiver and Release (the "Agreement"), dated as
of March 4, 2005, is entered into by Charles I. Johnston ("Johnston") and
Ladenburg Thalmann Financial Services Inc. ("LTFS").

      WHEREAS, Johnston has been employed by LTFS as its Chairman and Chief
Executive Officer pursuant to the parties' Employment Agreement, dated as of
March 9, 2004 (the "Employment Agreement");

      WHEREAS, Johnston now desires to retire from his positions with LTFS and
each of LTFS' subsidiaries and affiliates (collectively, the "Company");

      WHEREAS, the parties mutually desire to resolve any and all disputes
between them, including all issues pertaining to the amount and calculation of
compensation and benefits due under the Employment Agreement;

      NOW, THEREFORE, in consideration of the acts, payments, covenants, and
mutual agreements herein described and agreed to be performed, Johnston and the
Company agree as follows (capitalized terms not defined herein shall have the
meanings ascribed to them in the Employment Agreement):

      1.    Effective as of the close of business on March 31, 2005, Johnston
            shall be deemed to have resigned from all positions with the
            Company.

      2.    In connection with Johnston's resignation, the Company shall pay
            Johnston, as severance, a lump sum of $150,000 by the close of
            business on March 31, 2005.

      3.    The Company shall continue to pay or provide, consistent with the
            Company's prior practices applicable to Johnston immediately prior
            to the date hereof as if Johnston is an active employee of the
            Company, health benefits for Johnston (and his dependents) and all
            other benefits described in Section 5(A) of the Employment
            Agreement, until the earlier of (i) the second anniversary of the
            date hereof and (ii) the date Johnston becomes eligible to be
            covered under another substantially equivalent program by reason of
            employment or consultancy elsewhere.

      4.    Effective March 31, 2005, the Employment Agreement shall be deemed
            terminated, except for the provisions of Sections 5(C), Sections
            6(A), (C) and (D) and Section 8 thereof which shall survive
            termination of the Employment Agreement. For the avoidance of doubt,
            the restrictive covenants provided in Section 6(B) of the Employment
            Agreement shall terminate on March 31, 2005.

      5.    The terms and provisions of the Indemnification Agreement between
            Johnston and LTFS, dated as of March 9, 2004 ("Indemnification
            Agreement"), shall remain in full force and effect and shall survive
            termination of the Employment Agreement.

      6.    Johnston shall be entitled to exercise options to purchase 100,000
            shares of common stock represented by the two Stock Option
            Agreements, each dated as of March 9, 2004, between LTFS and
            Johnston. Such 100,000 options shall remain exercisable for a period

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            of twelve (12) months from the date of hereof. The option to
            purchase the remaining 2,400,000 shares of common stock shall
            terminate.

COMPLETE RELEASE

      In consideration of the Company's obligations stated above, Johnston
hereby forever releases the Company, its past and present employees, officers,
directors, parent companies, subsidiaries, divisions, successors and assigns
from all claims Johnston may now have based on his employment with the Company
or the separation of that employment through the date of execution of this
Agreement to the maximum extent permitted by law. This includes a release, to
the maximum extent permitted by law, of any rights or claims Johnston may have
under: (1) the Age Discrimination Employment Act, which generally prohibits age
discrimination in employment; Title VII of the Civil Rights Act of 1964, which
generally prohibits discrimination in employment based on race, color, national
origin, religion or sex; the Equal Pay Act, which generally prohibits paying men
and women unequal pay for equal work; the Americans with Disabilities Act, which
generally prohibits discrimination on the basis of disability; the Employee
Retirement Income Security Act of 1974, which governs the provision of pension
and welfare benefits; and all other federal, state or local laws prohibiting
employment discrimination, or (2) Section 806 of 18 U.S.C. 1514A, which
generally provides certain protection for employees of publicly traded companies
and all other federal, state or local laws providing similar protection. This
also includes a release by Johnston of any claims for wrongful discharge, any
compensation claims (other than as provided in this Agreement) or any other
claims under any statute, rule, regulation, or under the common law. This
release covers both claims known and unknown to Johnston based on his employment
with the Company or the separation of that employment through the date of
execution of this Agreement.

      Johnston further promises never to file or voluntarily participate or
voluntarily assist in any lawsuit, arbitration or other legal action asserting
any claims that are released under this Agreement, provided, however, that
nothing herein shall restrict Johnston' ability to respond to any inquiry from
applicable regulatory authorities or to provide information pursuant to legal
process or to participate in any lawsuit, arbitration or other legal action
pursuant to legal process. If Johnston breaches this Section and files a lawsuit
or arbitration based on legal claims that he has released and the court or
arbitrator decides in favor of the Company, Johnston will pay for all costs
incurred by the Company, including reasonable attorneys' fees, in defending
against such claim.

      In consideration of Johnston providing the Company with the release as
referenced above, the Company for itself, and on behalf of its past, present
and/or future parent companies, and any and all of its or their subsidiaries,
divisions, employee benefit and/or pension plans or funds, successors and
assigns, and all of its or their past and/or present employees, directors,
attorneys and assigns, hereby forever releases Johnston, his heirs, successors
and assigns, from any and all claims (whether known or unknown) it may now have
based upon his employment with the Company, the separation or termination of
that employment, his holding any office or position with the Company or any
employee benefit plan through the date of execution of this Agreement to the
maximum extent permitted by law.

      The Company further promises and covenants not to voluntarily participate
or assist in any lawsuit, arbitration or other legal action asserting any claims
that are released under this Agreement, provided, however, that nothing herein
shall restrict the Company's ability to provide complete information concerning
Johnston's employment when required to do so under applicable law, rule or
regulatory requirements. If the Company breaches this Section and files a
lawsuit or arbitration based upon legal claims that it has released and the
court or arbitrator decides in favor of Johnston, the Company agrees that it
will pay for all costs incurred by Johnston, including reasonable attorneys'
fees, in defending against the Company's claim.

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      Notwithstanding anything herein to the contrary, nothing contained herein
shall release any claims Johnston or the Company may have to enforce their
rights under this Agreement or the Indemnification Agreement.

RETURN OF MATERIALS

      At the Company's request, Johnston will promptly deliver to the Company
all memoranda, notes, records, reports, customer lists, manuals, drawings and
other documents (and all copies thereof) relating to the business of the Company
and all property associated therewith (excluding the Computers), which he may
now possess or have under his control (other than his rolodex or similar address
and telephone directories, any documents provided to Johnston in his capacity as
a participant in any employee benefit plan or program, any agreement between
Johnston and the Company with regard to Johnston's employment with, or
termination from, the Company and any information that is required for the
preparation of Johnston's personal tax return).

FUTURE COOPERATION

      Johnston agrees to reasonably cooperate with the Company and its legal
advisors in connection with business matters in which Johnston was involved or
any claims investigations, administrative proceedings or lawsuits which relate
to his employment with the Company and of which Johnston has knowledge. Any
request for cooperation will be upon reasonable advance notice and in writing.
All cooperation from Johnston will be at mutually convenient times and locations
and shall be subject to Johnston's personal and business commitments. The
Company shall pay Johnston's reasonable out of pocket expenses in connection
with such cooperation, and the Company will pay Johnston an hourly rate mutually
agreed to between the parties at the time the Company requests Johnston's
reasonable cooperation (other than for cooperation during court testimony).

RIGHT TO RECOVER PAYMENTS; ARBITRATION

      If Johnston materially violates his obligations under this Agreement (as
determined by a court or arbitrator), and fails to cure such violation(s) within
fifteen business days following receipt of notice from the Company specifically
setting forth the obligation(s) violated, the paragraph(s) violated and the
actions and/or inactions constituting the violation(s), the Company's
obligations under this Agreement shall cease (other than any rights to
indemnification). Any controversy arising out of or relating to this Agreement
shall be submitted to one arbitrator in New York City pursuant to the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association. The arbitrator's award shall be final and binding on all parties,
and judgment may be entered on an arbitrator's award in any court having
competent jurisdiction. The losing party shall pay all costs and expenses,
including reasonable legal fees, incurred by the prevailing party in any such
arbitration.

NO MITIGATION/SET-OFF

      Johnston is not required to seek other employment or otherwise mitigate
the amount of any payments to be made by the Company pursuant to this Agreement,
and there shall be no offset against any amounts due to Johnston under this
Agreement on account of any remuneration attributable to any subsequent
employment that Johnston may obtain. The Company's obligation to pay or provide
Johnston with the amounts and benefits provided under this Agreement shall not
be subject to set-off, counterclaim, or recoupment of amounts owed by Johnston
to the Company except for any specific amounts that Johnston agrees he owes to
the Company.

CONSULTATION WITH ATTORNEY

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      Johnston hereby confirms that he has been advised to consult with an
attorney concerning this Agreement and acknowledges that he has had ample
opportunity to do so before signing said Agreement.

ENTIRE AGREEMENT

      This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and cannot be altered except in writing
signed by both parties. Except as otherwise provided herein, the terms of this
Agreement and the Indemnification Agreement supersede any other oral or written
arrangement between Johnston and the Company with respect to Johnston's
employment or the separation of his employment by the Company (other than any
stock option or other equity agreement). Both parties acknowledge that no
representations were made to induce execution of this Agreement which are not
expressly contained in this Agreement.

SUCCESSORSHIP; CONTROLLING LAW

      This Agreement will be binding on the Company and its successors and
assigns and will also be binding on Johnston, his heirs, administrators,
executors and assigns. This Agreement shall be assignable by the Company only to
an acquirer of all or substantially all of the assets of the Company. The
Company shall require any successor to all or substantially all of the business
and/or assets of the Company, whether direct or indirect, by purchase, merger,
consolidation, acquisition of stock, or otherwise, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent as the
Company would be required to perform it if no such succession had taken place.
This Agreement will be construed under the law of the State of New York, without
regard to conflict of law principles.

PERIOD FOR REVIEW AND CONSIDERATION OF AGREEMENT

      Johnston understands that he has a period of twenty-one (21) days from the
date of this Agreement to review and consider this Agreement before signing it.
Johnston may use as much of this twenty-one (21) day period as he wishes prior
to signing. If Johnston has not signed and returned this Agreement to Ladenburg
Thalmann Financial Services Inc., at the address provided under the "Notice"
paragraph below, by the date which is twenty-one (21) days after the date of
this Agreement, Johnston will not be eligible to receive the payments and
benefits described in this Agreement (provided, notwithstanding the foregoing,
that the Indemnification Agreement and any stock option agreements between the
Company and Johnston shall continue in accordance with their terms).

EMPLOYEE'S RIGHTS TO REVOKE AGREEMENT

      Johnston may revoke this Agreement within seven (7) days of signing it.
Revocation can be made by delivering a written notice of revocation to Joseph
Giovanniello Jr., at the address noted in the following paragraph. If Johnston
revokes this Agreement, it will not be effective or enforceable and Johnston
will not receive the payments described herein (provided, notwithstanding the
foregoing, that the Employment Agreement, the Indemnification Agreement and any
stock option agreements between the Company and Johnston shall continue in
accordance with their terms).

NOTICE

      For purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed to the
Company at Ladenburg Thalmann Financial Services Inc., 590 Madison Avenue, 34th
Floor, New

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York, New York 10022, Legal Department, Attn: Joseph Giovanniello Jr. and to
Johnston at his principal residence, as contained in the most recent records of
the Company, with a copy to Christopher Manno, Esq., Willkie Farr & Gallagher
LLP, 787 Seventh Avenue, New York, New York 10019 or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.

MISCELLANEOUS

      In the event of Johnston's death, or a judicial determination of his
incompetence, the compensation and benefits due to Johnston under this Agreement
shall be paid to his estate or legal representative.

      The Company hereby represents and warrants that the execution, delivery
and performance of this Agreement has been duly authorized by the Company, and
all actions required to execute and perform this Agreement have been duly
authorized by the Company.

      This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.

                                   LADENBURG THALMANN FINANCIAL SERVICES INC.

                                   By: /s/ Salvatore Giardina
                                       ----------------------
                                       Name: Salvatore Giardina
                                       Title: Vice President and Chief Financial
                                              Officer

AGREED AND ACCEPTED:

/s/ Charles I. Johnston
-----------------------
         CHARLES I. JOHNSTON

Date: March 8, 2005