Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report: June 30, 2008
NATIONAL
HOLDINGS CORPORATION
(Exact
name of Registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
001-12629
(Commission
File Number)
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36-4128138
(I.R.S.
Employer
Identification
No.)
|
120
Broadway, 27th
Floor, New York, NY 10271
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (212)
417-8000
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting
material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 1.01 Entry
into a Material Definitive Agreement.
On
June
30, 2008, National Holdings Corporation (the “Company,” “we” or “us”) completed
a private placement of securities pursuant to the terms of a Securities Purchase
Agreement (the “Purchase Agreement”), dated June 30, 2008, by and between the
Company and St. Cloud Capital Partners II, L.P., a Los Angeles, California
based
private mezzanine investment fund formed in May 2007 that invests in debt and
equity securities of lower middle market companies (“St. Cloud”).
In
connection with the private placement, we sold to St. Cloud a 10%
senior
subordinated convertible promissory note (the “Note”) in the principal amount of
$3,000,000 and
a
warrant (the “Warrant”) to purchase 468,750 shares of our common stock, par
value $0.02 per share (the “Common Stock”). The Company and St. Cloud also
entered into a Registration Rights Agreement (the “Registration Rights
Agreement”) in connection with the private placement. Marshall S. Geller, a
Co-Founder and Senior Managing Partner of St. Cloud, is a member of the
Company’s board of directors, and Robert W. Lautz, Jr., a Managing Director of
St. Cloud, is a newly elected member of the Company’s board of directors. The
Company paid a $60,000 closing fee in connection with this
transaction.
Note
The
principal amount of the Note issued in the private placement was $3,000,000.
The
Note
bears interest at 10% per annum payable quarterly in arrears, matures four
years
from the date of issuance, is unsecured and is initially convertible into
1,875,000 shares of Common Stock. The Note may be redeemed at the option of
the
Company at redemption prices as follows: (i) 125% of the principal amount of
the
note plus accrued and unpaid interest if redeemed between June 30, 2009 and
June
30, 2010, (ii) 145% of the principal amount of the note plus accrued and unpaid
interest if redeemed between June 30, 2010 and June 30, 2011, and (iii) 165%
of
the principal amount of the note plus accrued and unpaid interest if redeemed
between June 30, 2011 and June 30, 2012. St. Cloud may convert the Note at
any
time. In addition, the Company may require St. Cloud to convert the Note if
the
market price and trading volume of the Company’s Common Stock reaches certain
levels, as set forth in the Note. The Note is automatically prepayable upon
the
occurrence of a Change of Control (as defined in the Note) or at the option
of
the holder in event of the death of, or termination under certain circumstances
of the employment of Mark Goldwasser, the Company’s Chief Executive Officer. As
a material inducement for providing this financing, Mr. Goldwasser agreed to
limit the amount of damages that the Company would be required to indemnify
him
for in connection with a certain ongoing FINRA arbitration to
$1,000,000.
Warrant
In
connection with the private placement, the Company issued to St. Cloud a Warrant
to purchase 468,750 shares of Common Stock. The Warrant has an exercise price
of
$2.00 per share and expires five years from the date of issuance. The number
of
shares of Common Stock subject to the Warrant is subject to adjustment in the
event of stock splits, dividends, distributions and similar adjustments to
our
capital stock.
Registration
Rights Agreement
We
entered into a Registration Rights Agreement with St. Cloud in connection with
the private placement. Pursuant to the terms of the Registration Rights
Agreement, the Company has agreed to use its best efforts to register
(i) the shares of Common Stock that are issuable upon conversion of the
Note and (ii) the shares of Common Stock issuable upon exercise of the
Warrant (collectively, “Registrable Shares”). The Company is required to
prepare
and file with the SEC a registration statement upon the earlier of 90
days
following the consummation or termination of the Company’s merger with vFinance,
Inc. (see Item 2.01 below) and shall use commercially reasonable efforts to
have
the registration statement declared effective as soon as practicable, but in
any
event within 180 days following the consummation of the Company’s merger with
vFinance, Inc. If the registration statement is not filed or declared
effective by the SEC prior to such dates (any such failure or breach being
referred to as an “Event”, and the date on which such Event occurs being
referred to as an “Event Date”), then, on each 30 day period following such
Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, as liquidated damages and not as a penalty,
the interest rate of the Note shall increase by 1% per annum, but in no event
shall the interest rate of the Note exceed 15% per annum.
The
description of the Purchase Agreement, the Registration Rights Agreement, and
the terms of the Note and Warrant issued in the private placement, contained
in
this Item 1.01 is a summary and is qualified in its entirety by reference
to the copies of the Purchase Agreement, Registration Rights Agreement, Note
and
Warrant that are attached hereto as exhibits, each of which is incorporated
herein by reference. A copy of the press release that we issued regarding the
completion of the private placement is attached hereto as Exhibit 99.1, and
is
also incorporated herein by reference.
In
connection with the closing of the Merger (as defined below) the Company entered
into a number of additional definitive material agreements as set forth in
Item,
2.01 below.
On
November 7, 2007, we announced that we had entered into an Agreement and Plan
of
Merger, dated as of November 7, 2007 (the “Merger Agreement”), by and among the
Company, vFin Acquisition Corporation, a wholly owned subsidiary of the Company,
and vFinance, Inc. (“vFinance”). Effective as of 12:01 a.m. (EDT) July 1, 2008
(the “Effective Date”), the Merger was completed.
Pursuant
to the terms of the Merger Agreement, Merger Sub was merged with and into
vFinance (the “Merger”), with vFinance the surviving corporation and a wholly
owned subsidiary of the Company. Under the terms of the Merger Agreement, on
the
Effective Date each of the 55,635,066 shares of vFinance common stock issued
and
outstanding immediately prior to the Effective Date was exchanged for 0.14
shares of Company common stock, or approximately 7,788,910 shares of Company
common stock. The closing price of the Company’s common stock, as quoted on the
Over-the-Counter Bulletin Board, on June 30, 2008 was $1.75 per
share.
Each
option and warrant to purchase shares of vFinance common stock outstanding
prior
to the Effective Date was converted into options or warrants, as applicable,
to
acquire the number of shares of the Company’s Common Stock determined by
multiplying (i) the number of vFinance shares of common stock underlying each
outstanding vFinance stock option or warrant immediately prior to the Effective
Date of the Merger by (ii) 0.14, at an exercise price per share of the Company’s
Common Stock equal to (i) the exercise price per share of each stock option
or
warrant otherwise purchasable pursuant to the vFinance stock option divided
by
(ii) 0.14.
Voting
Agreement
Pursuant
to the Merger Agreement, on the Effective Date Mark Goldwasser, Chairman of
the
board of directors of the Company, Christopher Dewey, Vice Chairman of the
board
of directors of the Company, and Leonard J. Sokolow, Vice Chairman of the board
of directors of the Company and former Chief Executive Officer and Chairman
of
the board of directors of vFinance, entered into an agreement (the “Voting
Agreement”) to vote their shares of the Company for the election of each other
and their designated nominees until the earlier to occur of: (i) the Company’s
merger, consolidation or reorganization whereby the holders of the Company’s
voting stock immediately prior to such transaction own less than 50% of the
voting power of the Company immediately after such transaction, (ii) by mutual
consent of the parties thereto, (iii) the date that Messrs. Goldwasser, Sokolow
and Dewey own in the aggregate less than one percent of the outstanding voting
securities of the Company, (iv) upon the fifth anniversary of the Voting
Agreement or (v) upon listing of the Company’s Common Stock on AMEX, the NASDAQ
Capital Market or the NASDAQ Global Market.
The
description of the Voting Agreement does not purport to be complete and is
qualified in their entirety by reference to the full text of such agreements.
The Voting Agreement, which is included as Exhibit 10.41 hereto, is incorporated
herein by reference.
Sokolow
Employment Termination Agreement
On
the
Effective Date, the principal office of vFinance was relocated to New York,
New
York. Accordingly, pursuant to the terms of Mr. Sokolow’s employment agreement
with vFinance dated November 16, 2004, as amended, Mr. Sokolow received a lump
sum cash payment of $1,150,000 as of the Effective Date. On the Effective Date,
Mr. Sokolow and vFinance entered into an employment termination agreement
(“Termination Agreement”). The following description of the Termination
Agreement is qualified in its entirety by reference to the full text of the
Termination Agreement, which is included as Exhibit 10.42 hereto and is
incorporated herein by reference.
Pursuant
to the Termination Agreement, Mr. Sokolow’s employment agreement with vFinance
terminated, Mr. Sokolow waived the acceleration of vesting of his unvested
stock
option to purchase shares of vFinance common stock (as provided in his present
employment agreement with vFinance) and he received a lump sum cash payment
of
$1,150,000 as required under the terms of his employment agreement with
vFinance. However, if: (i) Mr. Sokolow’s employment is terminated by the Company
with cause or (ii) Mr. Sokolow voluntarily resigns his employment with the
Company, all stock options Mr. Sokolow received in exchange for his vFinance
stock options pursuant to the terms of the Merger Agreement will become 100%
vested and will remain exercisable by Mr. Sokolow or his beneficiaries for
a
period of nine months from the date of such event; provided, however, such
period of nine months will not exceed the earlier of the latest date upon which
such options could have expired by the original terms under the circumstances
or
the tenth anniversary of the original date of the grant of the options.
Pursuant
to the terms of the Termination Agreement, if any payments made to Mr. Sokolow,
including the acceleration of the vesting of his Company stock options, will
be
subject to the tax imposed by Section 4999 of the Internal Revenue Code of
1986,
as amended, vFinance has agreed to pay Mr. Sokolow an additional amount such
that the net amount retained by him, after deduction of any tax on such payment,
will equal the payments received by Mr. Sokolow under the Termination Agreement.
Employment
Agreements Entered into on the Effective Date
Employment
Agreements with Messrs. Goldwasser and Sokolow
In
connection with the Merger Agreement, on the Effective Date Messrs. Goldwasser
and Sokolow each entered into substantially identical five-year employment
agreements with the Company, pursuant to which Mr. Goldwasser will be employed
by the Company as Chairman and Chief Executive Officer and Mr. Sokolow will
be
employed by the Company as Vice Chairman and President, on the Effective Date
of
the Merger. Under the terms of the employment agreements, Messrs. Goldwasser
and
Sokolow will each receive an annual base salary of $450,000, which will increase
5% per year, and a non-accountable automobile expense allowance of $1,000 per
month. In addition, each of them will be entitled to receive on a fiscal year
basis a cash bonus determined in the discretion of the Compensation Committee
of
the board of directors of the Company of not less than: (i) $225,000, (ii)
5% of
the Company’s fiscal year consolidated net income in excess of $4.5 million, up
to 100% of the difference between their then current base salaries and $225,000
and (iii) such additional bonuses as the board of directors of the Company
may
determine based upon the Board’s assessment of their performance in the
following areas: revenue growth of the Company, new business development,
investor relations, communications with the board of directors, communication
and collaboration with the other members of the executive committee of the
board
of directors and special projects as assigned by the board of directors.
Each
employment agreement terminates upon the earliest to occur of: (i) the death
of
the employee; (ii) a termination by the Company by reason of the disability
of
the employee; (iii) a termination by the Company with or without cause; (iv)
a
termination by the employee with or without good reason, (v) upon a Change
of
Control or (vi) the non-renewal of the agreement. Upon the termination due
to
the death or disability of the employee, by the Company without cause, by the
employee with good reason, upon a Change of Control or upon the expiration
of
the employment agreement if the Company or the employee refuses to extend the
term of the employment agreement, the employee will be entitled to: (i) any
accrued but unpaid salary or bonus or unreimbursed expenses; (ii) any bonus
payable for the portion of the fiscal year during which the termination occurs;
(iii) 100% of the employee’s base salary (150% in the event of termination by
the Company without cause or by the employee with good reason); (iv) the
continuation of health benefits until the earlier of (a) 18 months after
termination and (b) the date the employee accepts other employment; and (v)
all
unvested options granted pursuant to the employment agreements will become
immediately vested and be exercisable for a period of nine months.
Pursuant
to each employment agreement, on the Effective Date each of Messrs. Goldwasser
and Sokolow were granted non-qualified stock options to purchase 1,000,000
shares of the Company’s common stock at a purchase price of $1.64 (equal to the
average of the 10-day closing market price of the Company’s Common Stock prior
to the Effective Date of the Merger). The options vest and become exercisable
as
to 25% of the shares underlying the options on the Effective Date and every
12
months thereafter. The options expire 7 years from the Effective Date.
Employment
Agreement with Alan Levin
In
accordance with the terms of the Merger Agreement, on the Effective Date Alan
B.
Levin, the Chief Financial Officer of vFinance, entered into a one-year
employment agreement with the Company, pursuant to which he will be employed
on
the Effective Date as the Chief Financial Officer. Under the terms of the
agreement, Mr. Levin will receive an annual base salary of $180,000. In
addition, he will be entitled to receive an annual cash bonus determined in
the
discretion of the Compensation Committee of the board of directors of the
Company based upon its assessment of Mr. Levin’s performance in the following
areas: revenue, net income and revenue growth of the Company, new business
development, investor relations, communications with the board of directors,
communication and collaboration with the other members of the Executive
Committee of the board of directors, and other factors including, without
limitation, special projects as assigned by the President, executive committee
or the board of directors of the Company.
The
description of the employment agreements does not purport to be complete and
is
qualified in its entirety by reference to the full text of such agreements,
which are included as Exhibits 10.36, 10.37 and 10.38 hereto and are
incorporated herein by reference.
Item 2.03
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet
Arrangement of a Registrant.
The
information set forth in Item 1.01 hereof is incorporated herein by
reference.
The
information set forth in Item 1.01 hereof is incorporated herein by
reference.
The
issuance and sale of the securities in the private placement is exempt from
registration under the Securities Act of 1933 pursuant to Regulation D and
Rule 506 promulgated thereunder. We have furnished certain information to
St. Cloud as required by Regulation D, and St. Cloud has provided certain
representations to us evidencing that it is an “accredited investor” as defined
in Regulation D. We have not engaged in general solicitation or advertising
with regard to the private placement and have not offered securities to the
public in connection with the private placement.
Item
5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain
Officers; Compensatory Arrangements of Certain Officers.
Effective
July 1, 2008, in connection with the consummation of the Merger, Gary A.
Rosenberg, Norman J. Kurlan and Robert J. Rosan each resigned as a member of
the
board of directors of the Company. In addition, Mark Goldwasser resigned as
President of the Company and Robert H. Daskal resigned as Chief Financial
Officer and Secretary of the Company. Mr. Goldwasser remains the Chairman of
the
Board and Chief Executive Officer of the Company.
Effective
July 1, 2008, the Company appointed Leonard J. Sokolow, Charles Modica, Jorge
Ortega and Robert W. Lautz, Jr. as members of the board of directors of the
Company (Classes III, II, II and III, respectively). As part of the conditions
of the Merger, vFinance, Inc. was entitled to nominate three members of the
Company’s board of directors. Such nominees are Messrs. Sokolow, Modica and
Ortega. As part of the conditions of the St. Cloud financing described in Item
1.01 above, St. Cloud was entitled to have an additional nominee elected to
the
Company’s board of directors. Such nominee is Mr. Lautz.
Mr.
Lautz
is has served as a Managing Director of St. Cloud Capital, a Los Angeles based
private equity fund formed, since December 2001. Mr. Lautz was formerly the
Chairman of REO.com, the nations leading Internet-based sales mechanism for
bank
foreclosed properties. Prior to that he served as the CEO of ListingLink, the
original Internet-based residential property multiple listing service. Mr.
Lautz
formed and was Chairman and CEO of Indenet, Inc., a Nasdaq listed private
satellite-based network that delivered digital advertisements and programming
to
the 3000+ national broadcast and cable television networks. From 1994 to 1997,
he built Indenet from a public shell with $4 million in cash to a company with
over $50 million in revenue, $120 million in market value and 650 employees
in
19 facilities around the world. Mr. Lautz also owned and operated Peerless
Capital, a venture capital business which invested in various management led
leveraged buyouts and private equity transactions. Mr. Lautz began his career
within Citibank's Operating Group where he rose to become the Senior Financial
Officer, responsible for all financial functions and strategic planning for
his
division. He currently serves on the board of directors of Compact Power, Inc.,
Security Contractor Services, Inc., MEDirect Latino, Inc. (MLTO.PK), and
SecureOne Data Solutions, LLC, and as a board observer for XLNT Veterinary
Care,
Inc. Mr. Lautz earned a Master's degree from the American Graduate School of
International Management (Thunderbird), and a BS in Business Administration
from
Miami University in Oxford, Ohio.
Also
as
of the Effective Date, Mr. Sokolow was elected to service as Vice Chairman
and
President of the Company, Alan B. Levin was elected as Chief Financial Officer
and Secretary and Jonathan Rich was elected as an Executive Vice President
of
the Company.
The
information required by Items 401(b), (d) and (e) and Item 404(a) of Regulation
S-K with respect to Messrs. Sokolow, Modica, Ortega, Levin, and Rich is
incorporated by reference from our Registration Statement on Form S-4 with
the
Securities and Exchange Commission on April 18, 2008 and declared effective
on
May 9, 2008.
For
a
description of any material plan, contract or arrangement to which any of our
new directors or officers are a party to, see Items 1.01 and 2.01
above.
Item
7.01. Regulation
FD Disclosure
On
July
1, 2008, the Company and vFinance issued a joint press release announcing the
closing of the Merger. A copy of the press release is filed as an exhibit
herewith.
Item
9.01 Financial
Statements and Exhibits
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4.8
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Warrant,
dated as of June 30, 2008.
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4.9
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10%
Senior Subordinated Convertible Promissory Note, dated June 30,
2008.
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10.34
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Securities
Purchase Agreement, dated as of June 30, 2008 by and between National
Holdings Corporation and St. Cloud Capital Partners II,
L.P.
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10.35
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Registration
Rights Agreement, dated as of June 30, 2008 by and between National
Holdings Corporation and St. Cloud Capital Partners II,
L.P.
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10.36
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Employment
Agreement, dated as of July 1, 2008, by and between the Company and
Mark
Goldwasser.*
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10.37
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Employment
Agreement, dated as of July 1, 2008, by and between the Company and
Leonard J. Sokolow.*
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10.38
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Employment
Agreement, dated as of July 1, 2008, by and between the Company and
Alan
B. Levin.*
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10.39
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Option
Agreement, dated as of July 1, 2008, by and between the Company and
Mark
Goldwasser.*
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10.40
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Option
Agreement, dated as of July 1, 2008, by and between the Company and
Leonard J. Sokolow.*
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10.41
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Voting
Agreement, dated as of July 1, 2008, by and among the Company, Mark
Goldwasser, Leonard J. Sokolow and Christopher C.
Dewey.
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10.42
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Termination
Agreement, dated as of July 1, 2008, by and between vFinance, Inc.
and
Leonard J. Sokolow.
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21
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Subsidiaries.
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99.1
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Press
Release dated July 1, 2008.
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*
Compensatory Agreements
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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NATIONAL
HOLDINGS CORPORATION
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By:
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/s/
Mark Goldwasser
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Mark
Goldwasser
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Chief
Executive Officer
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