National Holdings Corporation (NHLD)

[glass99]

NHLD's silence is curious.

NHLD was supposed to have announced its road show by now, but it has not. We know some of the directors/shareholders believe that NHLD could "achieve maximum value for stockholders through a sale of the Company," and that a "critical M&A window of opportunity will not be perpetual."

Is NHLD in a quiet period?

Furthermore, why did NHLD amend its CFO's employment contract last week?

Many companies take care of key employees when acquired. Alan B. Levin's (NHLD CFO) contract is usually reviewed annually in July, but NHLD amended his contract on March 30, 2015, a few months before its review date. Levin's severance was increased from six months to a year, and if the his CFO duties are diminished after a takeover, he can elect to terminate his own employment for good reason and receive the one-year severance.

It is all very curious. Perhaps, NHLD will make an announcement soon.


As noted earlier, these 14 factors that make NHLD an attractive acquisition target:

Small company size…NHLD's market capitalization is slightly over $50 million

Ignored by Wall Street…NHLD has no analysts who follow it

Low Valuation…NHLD's Price-to-Book is close to 1

Low Price-Earnings…NHLD's Price-Earnings Ratio is less than 3 (adjusted is around 10)

Inside Ownership…NHLD's insiders own 28% of common stock

Clean Capital Structure…NHLD has no Debt

Cash on Balance Sheet…NHLD has $22 million ($1.75 per
share)

Low Enterprise Value…NHLD's EV = $28 million ($2.50 per share)

Deferred Tax Asset…NHLD's net Deferred Tax Asset = $11.8 million

Expandable Margins…NHLD margins could be expanded and overhead
eliminated

Solid Distribution Network…Fagenson said “the strength of distribution network is something that we feel that many in the investment community don’t adequately understand.”

CEO retirement is imminent…Fagenson is 66 and he does “not intend to spend my 70th birthday here.”

Known Litigation Risk/Threats…NHLD has reserved probable and estimable risks of $0.7 million


Alan B. Levin's Background Reference Data:

https://www.sec.gov/Archives/edgar/data/1023844/000143774915006855/ex10-2.htm

https://www.sec.gov/Archives/edgar/data/1023844/000114420408038177/v118754_ex10-38.htm

Alan B. Levin's:

(b) Duties of Executive.

Old:
During the Term of Employment, the Executive shall be employed and serve as the Chief Financial Officer and Chief Accounting Officer, and shall have such duties typically associated with such title and shall exercise such power and authority as may from time to time be delegated to him by the President.

New:
“During the Term of Employment, the Executive shall have such financial duties, titles, power and authority as maybe delegated to him, from time to time, by the Company’s Chief Executive Officer. At present, such duties, titles, power and authority shall encompass being employed and serving as the Chief Financial Officer and Chief Accounting Officer.”

6 (i) Change in Control of the Company.

Old:
If the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason during the six (6) month period immediately following the Change in Control of the Company, then the Executive shall be entitled to the same payments and benefits as provided in Section 6(e) above for a termination due to the Executive’s Termination Without Cause.

New:
If the Executive elects to terminate his employment for Good Reason during the thirty (30) day period immediately following the Change in Control of the Company, then the Executive shall be entitled to the same payments and benefits as provided in Section 6(e) above for a termination due to the Executive’s Termination Without Cause. Notwithstanding the foregoing, for purposes of this Paragraph only, the definition of Good Reason contained in Paragraph 1(q)(i) relating to a material diminution in such position, authority, duties or responsibilities after the date of the Change in Control, shall be determined based on the Executive’s position, authority, duties, and responsibilities as of immediately prior to the Change of Control of the Company.”

1 (t) “Severance Amount”

Old:
“Severance Amount” shall mean 50% of the Executive’s annual Base Salary.

New:
“50%” is hereby deleted and substituted in its place by “100%”

1 (u) “Severance Term”

Old:
(u) “Severance Term” shall mean the six (6) month period following the Termination Date.

New:
“six (6)” is hereby deleted and substituted in its place by “twelve (12)”.

Relevant Referenced Sections:

(f) Termination by Executive for Good Reason. The Executive may terminate the Term of Employment for Good Reason by providing the Company thirty (30) days’ written notice setting forth in reasonable specificity the event that constitutes Good Reason, which written notice, to be effective, must be provided to the Company within thirty (30) days of the occurrence of such event. During such thirty (30) day notice period, the Company shall have a cure right (if curable), and if not cured within such period, the Executive’s termination shall be effective upon the date immediately following the expiration of the thirty (30) day notice period, and the Executive shall be entitled to the same payments and benefits as provided in Section 6(e) above for a termination due to the Executive’s Termination Without Cause.

(e) Termination Without Cause. The Company may terminate the Term of Employment at any time without Cause, by written notice to the Executive. In the event that the Term of Employment is terminated by the Company without Cause (other than due to the Executive’s death or Disability), the Executive shall be entitled to:

(i) the Accrued Obligations, payable as soon as practicable following the Termination Date;

(ii) the Severance Amount, payable in equal monthly installments during the Severance Term;

(iii) continuation of the health benefits provided to the Executive and his covered dependents under the Company health plans as in effect from time to time after the date of such termination with the Company paying all premiums relating thereto until the earlier of: (A) twelve (12) months following the Termination Date, or (B) the date the Executive commences employment with any person or entity and, thus, is eligible for health insurance benefits; provided, however, that as a condition of continuation of such benefits, the Company may require the Executive to elect to continue his health insurance pursuant to COBRA; and

(iv) any options granted to Executive to purchase the Company’s common stock prior to or after the date of this Agreement shall immediately vest and be exercisable for a period of six (6) months from the date of the termination; provided, however, such period of six (6) months shall not exceed the earlier of the latest date upon which such options could have expired by their original terms under any circumstances.

(f) “Change in Control of the Company” shall mean:

(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) approval by the Board of Directors of the Company 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), 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 of Directors of the Company.