Document:

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                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

            EMPLOYMENT AGREEMENT, dated as of March 4, 2005 (the "Effective
Date") by and between Ladenburg Thalmann Financial Services Inc. (the
"Company"), and Mark D. Klein ("Executive").

            IN CONSIDERATION of the premises and the mutual covenants set forth
below, the parties hereby agree as follows:

            1.    Employment. The Company hereby agrees to employ Executive as
the President and Chief Executive Officer of the Company, and Executive hereby
accepts such employment, on the terms and conditions hereinafter set forth.

            2.    Term. The period of employment of Executive by the Company
under this Agreement (the "Employment Period") shall commence on April 1, 2005
(the "Commencement Date") and shall continue through the second (2nd)
anniversary thereof; provided, that, on the second anniversary of the
Commencement Date and on each anniversary thereafter, the Employment Period
shall automatically be extended for one (1) additional year unless either party
gives written notice to the other party not to extend this Agreement at least
ninety (90) days prior to the end of the Employment Period. The Employment
Period may be sooner terminated by either party in accordance with Section 6 of
this Agreement.

            3.    Position and Duties. During the Employment Period, Executive
shall serve as President and Chief Executive Officer of the Company, and shall
report solely and directly to the Board of Directors of the Company (the
"Board"). Executive shall have those powers and duties normally associated with
the position of President and Chief Executive Officer of entities comparable to
the Company and such other powers and duties as may be prescribed by the Board;
provided, that, such other powers and duties are consistent with Executive's
position as President and Chief Executive Officer. Executive shall devote his
full business time to satisfactorily perform his duties and responsibilities for
the Company hereunder. Notwithstanding the above, Executive shall be permitted,
to the extent such activities do not substantially interfere with the
performance by Executive of his duties and responsibilities hereunder, to (i)
manage Executive's personal, financial and legal affairs, and (ii) to serve on
civic or charitable boards or committees (it being expressly understood and
agreed that Executive's continuing to serve on any such board and/or committees
on which Executive is serving, or with which Executive is otherwise associated,
as of the Commencement Date, (all of which are listed on Schedule A hereto),
shall be deemed not to interfere with the performance by Executive of his duties
and responsibilities under this Agreement). During the Employment Period, the
Company will use its best efforts to cause Executive to be nominated to serve as
a director of the Company, and Executive agrees to serve as a director of the
Company, without additional compensation. During the Employment Period,
Executive also shall serve as Chairman and Chief Executive Officer of the
Company's subsidiary, Ladenburg Thalmann & Co. Inc. ("Ladenburg").

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            4.    Place of Performance. The principal place of employment of
Executive shall be at the Company's principal executive offices in Manhattan,
New York.

            5.    Compensation and Related Matters.

            (a)   Base Salary and Bonus. During the Employment Period, the
Company shall pay Executive a base salary at the rate of not less than $500,000
per year ("Base Salary"). Executive's Base Salary shall be paid in approximately
equal installments in accordance with the Company's customary payroll practices.
The Compensation Committee of the Board (the "Committee") shall review
Executive's Base Salary for increase (but not decrease) no less frequently than
annually and consistent with the compensation practices and guidelines of the
Company. If Executive's Base Salary is increased by the Company, such increased
Base Salary shall then constitute the Base Salary for all purposes of this
Agreement.

            (b)   Bonus. In addition to Base Salary, Executive shall be eligible
to be paid an annual bonus of $500,000 per year (the "Bonus"), based upon the
achievement of performance goals which have been agreed to by the parties. For
the first year of the Term (the twelve months following the Commencement Date),
the performance goals shall be: preparation of a business plan and operating
budget; review and evaluation of current personnel and development of management
incentive program; origination of at least $1 million of gross revenue from any
source (including existing sources if generated by new hires or if in excess of
amount generated from that source in previous year, by any employees) (for the
avoidance of doubt, there shall be no offset against this amount if revenue from
existing sources is lost). For the second year of the Term (which shall for
bonus purposes be coterminous with the first full fiscal year that begins and
ends during the Term), and each full fiscal year thereafter (if any),
performance goals shall be set by Executive and reasonably agreed to by the
Committee. In addition, Executive shall be eligible for such additional bonuses
as may be determined by the Board.

            (c)   Expenses. The Company shall promptly reimburse Executive for
all reasonable out-of-pocket business expenses incurred by Executive in
performing his duties hereunder upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.

            (d)   Vacation. Executive shall be entitled five (5) weeks vacation
annually. Unused vacation may be carried forward from year to year. In addition
to vacation, Executive shall be entitled to the number of sick days and personal
days per year that other senior executive officers of the Company are entitled
under the Company's policies.

            (e)   Services Furnished. During the Employment Period, the Company
shall furnish Executive, with office space, secretarial assistance and such
other similar facilities and services on a basis that is reasonably determined
by Executive.

            (f)   Director and Officer Liability Insurance. During the
Employment Period, the Company shall use its commercially reasonable efforts to
obtain and maintain adequate

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officer and director liability insurance in such amounts as the Board shall so
determine (which in no event shall be less than $5,000,000) (provided the
Company shall not be required to expend on an annual basis more than 125% of the
amount expended in 2004 for such coverage). Executive shall be covered at all
times by such policy in all of his capacities with the Company. In addition, for
a period of six (6) years after the Date of Termination, the Company shall use
its commercially reasonable efforts to maintain in effect one or more policies
of directors' and officers' liability insurance with respect to any claim,
action, suit, proceeding or investigation arising from facts or events which
occurred during the Executive's employment with the Company and such policy or
policies shall be with a carrier or carriers reasonably satisfactory to the
parties intended to be benefited thereby and with limits, exclusions,
deductibles, and other characteristics no less favorable than those in place on
the date Executive ceased being an employee of the Company (provided the Company
shall not be required to expend on an annual basis more than 125% of the amount
expended in 2004 for such coverage). Any and all such policies shall be issued
by leading insurance carriers and shall otherwise be in form and substance
reasonably satisfactory to those persons who are officers and directors of the
Company as of the date hereof. The provisions of this clause (f) shall survive
termination of this Agreement and/or any termination of Executive's employment
with the Company.

            (g)   Welfare, Pension and Employee Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs. The Company shall at all times
provide to Executive (and his spouse and dependents to the extent provided under
the applicable plans or programs) (subject to modifications affecting all senior
executive officers) the same type and levels of participation and benefits as
are being provided to other senior executives (and their spouses and dependents
to the extent provided under the applicable plans or programs) on the
Commencement Date. In addition, during the Employment Period, Executive shall be
eligible to participate in all pension, retirement, savings and other employee
benefit plans and programs maintained from time to time by the Company for the
benefit of its senior executives. During the Employment Period, the Company
shall maintain a term life insurance policy for the benefit of Executive which
provides for a death benefit of at least $2,000,000 and a long-term disability
insurance plan which provides Executive with disability benefits equal to at
least 60% of his average annual compensation until Executive is at least age 65.
Executive represents that he is no worse than a "standard risk" for an insured
party.

            (h)   Stock Options.

                  (i)   Grant of Stock Option. On the date of this Agreement,
the Company hereby grants to Executive a stock option to purchase 5,000,000
shares of Company common stock (the "Option") at an exercise price per share
equal to $.465 pursuant to the terms of the option agreement executed
simultaneously herewith ("Option Agreement"). The Option shall be granted
pursuant to the terms of the Company's 1999 Equity Plan or other comparable
plan.

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                  (ii)  Vesting. Subject to the terms of the Option Agreement,
the Option shall vest as to 10% of the shares subject thereto on the date of
grant and as to an additional 22.5% on each of the 1st, 2nd, 3rd and 4th
anniversaries of the date of grant.

                  (iii) Adjustment. The Option shall be subject to adjustment
for stock splits, stock dividends and similar transactions to preserve the
economic intent of such grant.

                  (iv)  Term of Option. Subject to the terms of the Option
Agreement, the Option shall remain exercisable for 10 years from the date of
grant.

                  (v)   Treatment of Option upon Termination of Employment. In
the event that Executive's employment is terminated by reason of his death,
Disability (as defined below), by the Company without Cause (as defined below)
or by Executive for Good Reason (as defined below), all unvested Options that
would have vested had Executive remained employed for the remainder of the then
current Employment Period shall immediately vest and all outstanding Options
shall remain exercisable for a period of one (1) year following Executive's
termination of employment, but not beyond their term.

                  (vi)  Treatment of Option upon Change in Control. In the event
of a Change in Control (as defined herein), Executive's Options shall
immediately vest and become exercisable and remain exercisable for the remainder
of the term of the Options.

                  (vii) Securities Exchange Commission (the "SEC") Registration.
The Company agrees to file an appropriate registration statement with the SEC
covering the common stock issuable upon exercise of the Option and the re-sale
of the shares subject to such Option.

            (i)   Sale of Shares. As further inducement for Executive to enter
into this Agreement, the Company has authorized the sale to Executive of
2,222,222 shares of its common stock at $.45 per share (for an aggregate
purchase price of $1 million) pursuant to the terms of a subscription agreement
executed simultaneously herewith ("Subscription Agreement"). Pursuant to the
terms of the Subscription Agreement, the closing of the purchase of the shares
shall occur simultaneously with the Company's previously announced debt
conversion and private placement.

            (j)   Legal Expenses. The Company will pay Executive for all
reasonable legal fees and expenses in connection with the preparation of this
Agreement and any agreements related thereto.

            6.    Termination. Executive's employment hereunder may be
terminated during the Employment Period under the following circumstances:

                  (a) Death. Executive's employment hereunder shall terminate
upon his death.

                  (b) Disability. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been substantially unable to
perform his normal duties hereunder for an entire period of six (6) consecutive
months, and within thirty (30) days after

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written Notice of Termination is given after such six (6) month period,
Executive shall not have returned to the substantial performance of his duties
on a full-time basis, the Company shall have the right to terminate Executive's
employment hereunder for "Disability", and such termination in and of itself
shall not be, nor shall it be deemed to be, a breach of this Agreement.

                  (c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's: (i) conviction of a felony, (ii) alcoholism or drug
addiction which materially impairs his ability to perform his duties hereunder,
(iii) continued, intentional and willful failure to substantially and materially
perform his material duties hereunder (other than absences due to illness or
vacation) after the Board provides Executive a written notice specifically
identifying the manner in which Executive has failed to materially perform his
duties and Executive has not cured such failure within 30 days of such notice,
or (iv) willful and deliberate misconduct that results, or is reasonably likely
to result, in material and demonstrative harm to the Company or any of its
subsidiaries or Affiliates.

For purposes of this Section 6(c), no act, or failure to act, by Executive shall
be considered "willful" unless committed in bad faith and without a reasonable
belief that the act or omission was in the best interests of the Company or any
entity in control of, controlled by or under common control with the Company
("Affiliates") thereof. Cause shall not exist under clause (iii) unless and
until the Board determines that Executive was guilty of the conduct set forth in
clause (iii). This Section 6(c) shall not prevent Executive from challenging in
any arbitration or court of competent jurisdiction the Board's determination
that Cause exists or that Executive has failed to cure any act (or failure to
act) that purportedly formed the basis for the Board's determination.

                  (d) Good Reason. Executive may terminate his employment for
"Good Reason" any time after Executive has actual knowledge of the occurrence,
without the written consent of Executive, of one of the following events:

                        (i) (A) any change in the duties or responsibilities
      (including reporting responsibilities) of Executive that is inconsistent
      in any material adverse respect with Executive's position(s), duties,
      responsibilities or status with the Company (or Ladenburg) immediately
      prior to such change (including any diminution of such duties or
      responsibilities) or (B) a material adverse change in Executive's titles
      or offices with the (including, membership on the Board) with the Company
      (or Ladenburg);

                        (ii) a reduction in Executive's Base Salary or Bonus;

                        (iii) the relocation of the Company's principal
      executive offices or Executive's own office location to a location outside
      of Manhattan, New York;

                        (iv) the Company's or any Affiliate's failure to provide
      in all material respects the indemnification set forth in the
      Indemnification Agreement entered into by the Company and Executive on the
      date of this Agreement;

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                        (v) a Change in Control of the Company, provided, that
      Executive must provide Notice of Termination within 90 days of such Change
      of Control;

                        (vi) the failure of the Company to obtain the assumption
      agreement from any successor as contemplated in Section 12(a); or

                        (vii) any other breach of a material provision of this
      Agreement by the Company or any Affiliate after written notice from
      Executive specifically identifying the breach and the Company has not
      cured such breach within 30 days of such notice.

Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any event or condition constituting Good Reason.

                  (e) Without Cause. The Company shall have the right to
terminate Executive's employment hereunder without Cause by providing Executive
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.

                  (f) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination at least thirty (30) days prior to such
termination, and such termination shall not in and of itself be, nor shall it be
deemed to be, a breach of this Agreement.

For purposes of this Agreement, a "Change in Control" of the Company means the
occurrence of one of the following events: (i) consummation of a reorganization,
merger or consolidation, sale, disposition of all or substantially all of the
assets or stock of the Company or any other similar corporate event (a "Business
Combination"), in each case, unless, following such Business Combination, all or
substantially all of the individuals or entities who were the beneficial owners,
respectively, of the voting securities of the Company entitled to vote generally
in the election of directors immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries); or (ii) Board
approval of a complete dissolution or liquidation of the Company; or (iii) any
"person" (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934 (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), other than Dr. Phillip Frost, any member of his immediate
family, and any "person" or "group" (as used in Section 13(d)(3) of the Exchange
Act) that is controlled by Dr. Frost or any member of his immediate family, any
beneficiary of the estate of Dr. Frost, or any trust, partnership, corporation
or other entity controlled by any of the foregoing, is or becomes, after the
Commencement Date, a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board.

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            7.    Termination Procedure.

                  (a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 13.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth (other than termination pursuant to Sections 6(e) or
6(f)) in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.

                  (b) Date of Termination. "Date of Termination" shall mean (i)
if Executive's employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated pursuant to Section 6(b), thirty
(30) days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.

            8.    Compensation Upon Termination or During Disability. In the
event Executive is disabled or his employment terminates during the Employment
Period, the Company shall provide Executive with the payments and benefits set
forth below. Executive acknowledges and agrees that the payments set forth in
this Section 8 constitute liquidated damages for termination of his employment
during the Employment Period.

                  (a) Termination By Company without Cause, By Executive for
Good Reason or Expiration of the Term. If Executive's employment is terminated
by the Company without Cause, by Executive for Good Reason or if the Company
provides Executive the notice contemplated in Section 2 hereof not to extend the
Employment Period:

                        (i) within five (5) days following such termination, the
      Company shall pay to Executive in a lump-sum: (A) (1) if such termination
      occurs on or after the second anniversary of the Commencement Date, an
      amount equal to $750,000 (or if greater, 150% of Executive's then current
      Base Salary (not taking into account any reductions in such Base Salary
      which have not been agreed to in writing by Executive)) or (2) if such
      termination occurs prior to the second anniversary of the Commencement
      Date, the greater of (a) or (b), where (a) is equal to $750,000 (or if
      greater, 150% of Executive's then current Base Salary (not taking into
      account any reductions in such Base Salary which have not been agreed to
      in writing by Executive)) and (b) is equal to the remaining Base Salary
      and Bonus (assuming that Executive would have attained all of the
      performance targets applicable to such Bonus) that would have been paid to
      Executive for the remainder of the then current Employment Period if his
      employment had not been terminated and (B) his earned, but yet unpaid Base
      Salary, Bonus and accrued vacation pay through the Date of Termination;
      and

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                        (ii) the Company shall maintain in full force and
      effect, for the continued benefit of Executive, his spouse and his
      dependents for a period of two (2) years following the Date of Termination
      the medical, hospitalization, dental, and life insurance programs in which
      Executive, his spouse and his dependents were participating immediately
      prior to the Date of Termination at the level in effect and upon
      substantially the same terms and conditions (including without limitation
      contributions required by Executive for such benefits) as existed
      immediately prior to the Date of Termination; provided, that, if
      Executive, his spouse or his dependents cannot continue to participate in
      the Company programs providing such benefits, the Company shall arrange to
      provide Executive, his spouse and his dependents with the economic
      equivalent of such benefits which they otherwise would have been entitled
      to receive under such plans and programs ("Continued Benefits"), provided,
      that, such Continued Benefits shall terminate on the date or dates
      Executive receives equivalent coverage and benefits, without waiting
      period or pre-existing condition limitations, under the plans and programs
      of a subsequent employer (such coverage and benefits to be determined on a
      coverage-by-coverage or benefit-by-benefit, basis); and

                        (iii) the Company shall reimburse Executive pursuant to
      Section 5(c) for reasonable expenses incurred, but not paid prior to such
      termination of employment; and

                        (iv) Executive shall be entitled to any other rights,
      compensation and/or benefits as may be due to Executive in accordance with
      the terms and provisions of any agreements, plans or programs of the
      Company; and

                        (v) Executive shall be entitled to any other rights,
      compensation and/or benefits as may be due to Executive in accordance with
      the terms and provisions of any agreements, plans or programs of the
      Company.

                  (b) Cause or By Executive without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):

                        (i) the Company shall pay Executive his earned, but yet
      unpaid Base Salary, Bonus and accrued vacation pay through the Date of
      Termination, as soon as practicable following the Date of Termination; and

                        (ii) the Company shall reimburse Executive pursuant to
      Section 5(c) for reasonable expenses incurred, but not paid prior to such
      termination of employment; and

                        (iii) Executive shall be entitled to any other rights,
      compensation and/or benefits as may be due to Executive in accordance with
      the terms and provisions of any agreements, plans or programs of the
      Company.

                        (c) Disability. During any period that Executive fails
to perform his duties hereunder as a result of incapacity due to physical or
mental illness ("Disability Period"),

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Executive shall continue to receive his full Base Salary and Bonus set forth in
Section 5(a) until his employment is terminated pursuant to Section 6(b). In the
event Executive's employment is terminated for Disability pursuant to Section
6(b):

                        (i) the Company shall (A) pay to Executive his earned,
      but yet unpaid Base Salary, Bonus and accrued vacation pay through the
      Date of Termination, as soon as practicable following the Date of
      Termination and (B) provide Continued Benefits for a period of two (2)
      years following the Date of Termination; and

                        (ii) the Company shall reimburse Executive pursuant to
      Section 5(c) for reasonable expenses incurred, but not paid prior to such
      termination of employment; and

                        (iii) Executive shall be entitled to any other rights,
      compensation and/or benefits as may be due to Executive in accordance with
      the terms and provisions of any agreements, plans or programs of the
      Company.

                  (d) Death. If Executive's employment is terminated by his
death:

                        (i) the Company shall pay in a lump sum to Executive's
      beneficiary, legal representatives or estate, as the case may be,
      Executive's earned, but yet unpaid Base Salary, Bonus and accrued vacation
      pay through the Date of Termination; and

                        (ii) the Company shall provide Executive's spouse and
      dependents with Continued Benefits for two (2) years; and

                        (iii) the Company shall reimburse Executive's
      beneficiary, legal representatives, or estate, as the case may be,
      pursuant to Section 5(c) for reasonable expenses incurred, but not paid
      prior to such termination of employment; and

                        (iv) Executive's beneficiary, legal representatives or
      estate, as the case may be, shall be entitled to any other rights,
      compensation and benefits as may be due to any such persons or estate in
      accordance with the terms and provisions of any agreements, plans or
      programs of the Company.

                  (e) Additional Payments. (i) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment,
award, benefit or distribution (or any acceleration of any payment, award,
benefit or distribution) by the Company or any entity which effectuates a Change
in Control (or other change in ownership) to or for the benefit of Executive
(the "Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the

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sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any
deductions disallowed because of the inclusion of the Gross-Up Payment in
Executive's adjusted gross income and the highest applicable marginal rate of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to (A) pay federal income taxes at the highest
marginal rates of federal income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, (B) pay
applicable state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes and (C) have otherwise allowable deductions for
federal income tax purposes at least equal to those which could be disallowed
because of the inclusion of the Gross-Up Payment in Executive's adjusted gross
income.

                  (ii) Subject to the provisions of Section 8(e)(i), all
determinations required to be made under this Section 8(e), including whether
and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determinations, shall be made
by a nationally recognized public accounting firm that is selected by Executive
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and Executive within fifteen (15) business days of the
receipt of notice from the Company or Executive that there has been a Payment,
or such earlier time as is requested by the Company or Executive (collectively,
the "Determination"). All fees and expenses of the Accounting Firm shall be
borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 8(e) with respect to
any Payments made to Executive shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty.

                  (iii) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-Up Payments are made by the Company which should
not have been made ("Overpayment"), consistent with the calculations required to
be made hereunder. In the event that Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse Executive for his Excise Tax, the Accounting
Firm shall determine the amount of the Overpayment that has been made and any
such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contest or disputes
with the Internal Revenue Service in connection with the Excise Tax.

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            9.    Mitigation. Executive shall not be required to mitigate
amounts payable under this Agreement by seeking other employment or otherwise,
and there shall be no offset against amounts due Executive under this Agreement
on account of subsequent employment except as specifically provided herein.

            10.   Restrictive Covenants.

                  (a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.

                  (b) Non-Solicitation. (i) Executive hereby agrees, in
consideration of his employment hereunder and in view of the confidential
position to be held by Executive hereunder, that after his termination of
employment in which he is entitled to the benefits set forth in Section 8 hereof
and through the one (1) year anniversary thereof (the "Restricted Period"),
Executive shall not directly or indirectly induce any employee of the Company to
terminate such employment or to become employed by any other company.

                        (ii) Executive agrees that during the Restricted Period,
Executive shall not interfere with or endeavor to entice any of the Company's
customers and/or clients to cease conducting business with the Company;
provided, that, this clause (b)(ii) shall not apply with respect to any customer
and/or client of the Company with whom Executive had or has a business
relationship immediately prior to the Commencement Date.

                  (c) Remedies. Executive hereby expressly acknowledges that any
breach or threatened breach by Executive of any of the terms set forth in
Section 10 of this Agreement may result in significant and continuing injury to
the Company, the monetary value of which would be impossible to establish.
Therefore, Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction.

            11.   Arbitration. Except as provided for in Section 10 of this
Agreement, if any contest or dispute arises between the parties with respect to
this Agreement, such contest or dispute shall be submitted to binding
arbitration for resolution in New York, New York in accordance with the rules
and procedures of the Employment Dispute Resolution Rules of the American
Arbitration Association then in effect. The decision of the arbitrator shall be
final and

                                       11

<PAGE>

binding on both parties, and any court of competent jurisdiction may enter
judgment upon the award. The losing party shall pay all expenses relating to
such arbitration, including, but not limited to, the winning party's legal fees
and expenses.

            12.   Successors; Binding Agreement.

            (a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 12 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.

            (b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.

                                       12

<PAGE>

            13.   Notice. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered either personally or
by United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:

                  If to Executive:

                  Mark D. Klein
                  3 Olmsted Road
                  Scarsdale, New York 10583

                  with a copy to:

                  Akin Gump Strauss Hauer & Feld LLP
                  1333 New Hampshire Avenue, N.W.
                  Washington, D.C. 20036
                  Attention:  Bruce S. Mendelsohn

                  If to the Company:

                  Ladenburg Thalmann Financial Services, Inc.
                  590 Madison Avenue
                  New York, NY  10022
                  Attention:  General Counsel

                  with a copy to:

                  Graubard Miller
                  405 Lexington Avenue
                  New York, NY 10174
                  Attention:  David Alan Miller

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

            14.   Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended

                                       13

<PAGE>

preservation of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles.

            15.   Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.

            16.   Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

            17.   Entire Agreement. Except as other provided herein, this
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto in respect of such subject matter. Except as other provided
herein, any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.

            18.   Withholding. All payments hereunder shall be subject to any
required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.

            19.   Noncontravention. The Company and Executive each represent to
the other that the Company and Executive, as the case may be, are not prevented
from entering into, or performing, this Agreement by the terms of any law,
order, rule or regulation, its by-laws or declaration of trust, or any agreement
to which the Company or Executive, as the case may be, is a party.

            20.   Section Headings. The section headings in this Agreement are
for convenience of reference only, and they form no part of this Agreement and
shall not affect its interpretation.

                           - SIGNATURE PAGE FOLLOWS -

                                       14

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.

                                    LADENBURG THALMANN FINANCIAL
                                    SERVICES INC.

                                    By: /s/ Salvatore Giardina
                                        ----------------------
                                          Salvatore Giardina, Vice President and
                                          CFO

                                    /s/ Mark D. Klein
                                    -----------------
                                    Mark D. Klein

                                       15<PAGE>

                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                   LADENBURG THALMANN FINANCIAL SERVICES INC.
                         590 MADISON AVENUE, 34TH FLOOR
                               NEW YORK, NY 10022

                                       As of March 4, 2005

Mr. Mark D. Klein
3 Olmstead Road
Scarsdale, New York  10583

Dear Mr. Klein:

      We are pleased to inform you that Ladenburg Thalmann Financial Services
Inc. (the "Company") has granted you a nonqualified option (the "Option") to
purchase 5,000,000 shares of the Company's common stock, par value $.0001 per
share (the "Common Stock"), at a purchase price of $0.465 per share (any of the
underlying shares of Common Stock to be issued upon exercise of the Option are
referred to hereinafter as the "Shares"). Capitalized forms used and not
otherwise defined herein shall have the meanings ascribed to them in the
employment agreement of even date herewith between you and the Company
("Employment Agreement").

      1.    Subject to the terms hereof, the Option may be exercised on or prior
to March 4, 2015 (after which date the Option will, to the extent not previously
exercised, expire). The Option shall vest and become exercisable as to 500,000
of the Shares on and after the date hereof and as to 1,125,000 of the Shares on
and after each of March 4, 2006, 2007, 2008 and 2009, provided you are then
employed by the Company and/or one of its present or future subsidiaries or
affiliates (for purposes of this Agreement, any other entity controlling,
controlled by, or under common control with, the Company); provided, however,
that the entire Option shall vest earlier and become immediately exercisable in
the event that your employment is terminated by reason of your death or
Disability, by the Company without Cause or by you for Good Reason
(collectively, "Vesting Events").

      2.    The Option, from and after the date it vests and becomes exercisable
pursuant to Section 1 hereof, may be exercised in whole or in part by delivering
to the Company a written notice of exercise in the form attached hereto as
Exhibit A (or such other form approved by the Company), specifying the number of
the Shares to be purchased and the purchase price therefor, together with
payment of the purchase price of the Shares to be purchased. The purchase price
is to be paid in cash or by delivering shares of Common Stock already owned by
you for at least six months ("Mature Shares") and having a "Fair Market Value"
on the date of exercise equal to the purchase price of the Option being
exercised, or a combination of such shares and cash. "Fair Market Value," unless
otherwise required by any applicable provision of the Internal Revenue

<PAGE>

Mr. Mark D. Klein
As of March 4, 2005
Page 2

Code of 1986, as amended from time to time, and any successor thereto and the
regulations promulgated thereunder, means, as of any given date: (i) if the
Common Stock is listed on a national securities exchange or quoted on the Nasdaq
National Market or Nasdaq Small Cap Market, the last sale price of the Common
Stock in the principal trading market for the Common Stock on the last trading
day preceding the date of grant of an award hereunder, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed
on a national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, but is traded in the over-the-counter market, the
closing bid price for the Common Stock on the last trading day preceding the
date of grant of an award hereunder for which such quotations are reported by
the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the Fair Market Value of the Common
Stock cannot be determined pursuant to clause (i) or (ii) above, such price as
the Compensation Committee of the Company shall determine, in good faith.

            In addition, payment of the purchase price of the Shares to be
purchased may also be made by delivering a properly executed notice to the
Company, together with a copy of the irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary to
pay the purchase price, and, if required, the amount of any federal, state or
local withholding taxes.

            No Shares shall be issued until full payment therefor has been made.
You shall have all of the rights of a stockholder of the Company holding the
Common Stock that is subject to the Option (including, if applicable, the right
to vote the Shares and the right to receive dividends thereon), when you have
given written notice of exercise, have paid in full for such Shares and, if
requested, have given the certificate described in Section 8 hereof.

      3.    In the event your employment with the Company is terminated for any
reason, the Option shall forthwith terminate, provided that, if a Vesting Event
has occurred, you may exercise any then unexercised portion of the Option then
vested and exercisable pursuant to Section 1 hereof at any time prior to the
earlier of one year after the termination of your employment and the expiration
of the Option. In the event of your death or Disability, the Option may be
exercised by your personal representative or representatives, or by the person
or persons to whom your rights under the Option shall pass by will or by the
applicable laws of descent and distribution.

      4.    The Option is not transferable except by will or the applicable laws
of descent and distribution. Notwithstanding the foregoing, with the approval of
the Compensation Committee, you may transfer the Option (i) (A) by gift, for no
consideration, or (B) pursuant to a domestic relations order, in either case, to
or for the benefit of your "Immediate Family" (as defined below), or (ii) to an
entity in which you and/or members of your Immediate Family own more than fifty
percent of the voting interest, in exchange for an interest in that entity,
provided that such transfer is being made for estate, tax and/or personal
planning purposes and will not have adverse tax consequences to the Company and
subject to such limits as the Compensation

<PAGE>

Mr. Mark D. Klein
As of March 4, 2005
Page 3

Committee may establish and the execution of such documents as the Compensation
Committee may require. In such event, the transferee shall remain subject to all
the terms and conditions applicable to the Option prior to such transfer. The
term "Immediate Family" shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law, including adoptive relationships, any person sharing your
household (other than a tenant or employee), a trust in which these persons have
more than fifty percent beneficial interest, and a foundation in which these
persons (or you) control the management of the assets.

      5.    In the event of any change in the shares of Common Stock of the
Company as a whole occurring as the result of a stock split, reverse stock
split, stock dividend payable on shares of Common Stock, combination or exchange
of shares, or other extraordinary or unusual event occurring after the date
hereof, the Board of Directors of the Company (the "Board") shall make
appropriate adjustments in the terms of the Option to preserve the economic
interest of the grant. Any such adjustments will be made by the Board, whose
determination will be final, binding and conclusive.

      6.    The grant of the Option does not confer on you any right to continue
in the employ of the Company or any of its subsidiaries or affiliates or
interfere in any way with the right of the Company or its subsidiaries or
affiliates to terminate the term of your employment.

      7.    The Company shall require as a condition to the exercise of any
portion of the Option that you pay to the Company, or make other arrangements
regarding the payment of, any federal state or local taxes required by law to be
withheld as a result of such exercise. If the Board consents, you may pay such
taxes using Mature Shares, valued at Fair Market Value.

      8.    Unless at the time of the exercise of any portion of the Option a
registration statement under the Securities Act of 1933, as amended (the "Act"),
is in effect as to the Shares, the Shares shall be acquired for investment and
not for sale or distribution, and if the Company so requests, upon any exercise
of the Option, in whole or in part, you agree to execute and deliver to the
Company a reasonable certificate to such effect.

      9.    You agree to abide by all of the Company's policies in effect at the
time you acquire any Shares and thereafter, including the Company's Insider
Trading Policy, with respect to the ownership and trading of the Company's
securities.

      10.   The Company represents and warrants to you as follows: (i) this
Agreement and the grant of the Option hereunder have been authorized by all
necessary corporate action by the Company and this letter is a valid and binding
Agreement of the Company enforceable against the Company in accordance with its
terms; (ii) the Company will obtain, at its expense, any regulatory approvals
necessary or advisable in connection with the grant of the Option or the
issuance of the Shares; and (iii) the Company currently has reserved and
available, and will

<PAGE>

Mr. Mark D. Klein
As of March 4, 2005
Page 4

continue to have reserved and available during the term of the Option,
sufficient authorized and issued shares of its Common Stock for issuance upon
exercise of the Option.

      11.   Promptly following the date hereof, the Company shall use its best
efforts to file and keep in effect a Registration Statement on Form S-8 or other
applicable form to register under the Act the resale of the Shares issuable to
you upon exercise of the Option.

      12.   This Agreement contains all the understandings between the Company
and you pertaining to the matters referred to herein, and supercedes all
undertakings and agreements, whether oral or in writing, previously entered into
by the Company and you with respect hereto. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by you and a duly authorized officer of the Company. No waiver by the
Company or you of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time, any
prior time or any subsequent time. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws principles. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

      Would you kindly evidence your acceptance of the Option and your agreement
to comply with the provisions hereof by executing this Agreement in the space
provided below.

                                  Very truly yours,

                                  LADENBURG THALMANN FINANCIAL SERVICES INC.

                                  By: /s/ Salvatore Giardina
                                      ----------------------
                                      Salvatore Giardina
                                      Vice President and Chief Financial Officer
AGREED TO AND ACCEPTED:

/s/ Mark D. Klein
-----------------
MARK D. KLEIN

<PAGE>

                                                                       EXHIBIT A

Ladenburg Thalmann Financial Services Inc.
590 Madison Avenue, 34th Floor
New York, NY  10022

Gentlemen:

      Notice is hereby given of my election to purchase _________ shares of
Common Stock, $.0001 par value (the "Shares"), of Ladenburg Thalmann Financial
Services Inc., at a price of $______ per Share, pursuant to the provisions of
the stock option granted to me as of March ___, 2005. Enclosed in payment for
the Shares is:

            [ ]   my check in the amount of $_________________.

            [ ]   ______________ Shares having a total value of $______________,
                  such value being based on the closing price(s) of the Shares
                  on the date hereof.

      The following information is supplied for use in issuing and registering
the Shares purchased hereby:

                     Number of Certificates
                        and Denominations            ___________________________

                     Name                            ___________________________

                     Address                         ___________________________

                                                     ___________________________

                                                     ___________________________

                     Social Security No.             ___________________________

Dated:
                                                     Very truly yours,

                                                     Mark D. Klein

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