EXHIBIT 10.1
 
July 17th, 2012
 
Terms and Conditions for 195-Day Extension of 10% Senior Subordinated
Convertible Promissory Note
 
This letter serves as our proposal to offer a 195-day extension for the
$3,000,000 Senior Subordinated Convertible Promissory Note that was due on June
30th, 2012. St. Cloud Capital Partners II, LP ("St. Cloud") shall provide a
195-day extension, terminating on January 31st, 2013 at 5 PM EDT, subject to the
satisfactory acceptance and execution of the terms and conditions listed below.
 
 
1.
St. Cloud shall immediately receive payment on all outstanding interest and
expenses owed. In addition, St. Cloud shall be entitled to receive any expenses
in connection with costs to collect on its Note per Section 15 of the $3,000,000
Senior Subordinated Convertible Promissory Note Agreement.

 
 
2.
St. Cloud shall receive a $1,200,000 payment to reduce the principal amount of
its Note.

 
 
3.
Security Interest:
National Holdings Corporation ("NHLD") shall grant a general security interest
in certain assets of NHLD. St. Cloud shall be authorized to file a UCC-1 and, if
required to perfect such security interest, NHLD shall deliver share
certificates. The security interest shall expressly include:

 
(a)
A pledge of all assets and equity associated with National Asset Management,
Inc. in conjunction with all necessary regulatory approvals and authorizations.

 
(b)
In the event that NHLD fails to make payment on the Note by the maturity date of
January 31st, 2013 and fails to cure within 5 business days from this date, NHLD
shall not impede St. Cloud's efforts to initiate "friendly foreclosure"
proceedings.

 
 
4.
National Securities Growth Partners, LLC ("NSGP"):

 
(a)
NSGP shall extend the maturity date of its 6% Subordinated Convertible
Promissory Note by 195 days, so that the variance in the maturity date with that
of St. Cloud's Note is always equal to a minimum of 6 months.

 
(b)
NSGP shall invest $2,000,000 into NHLD under such terms and conditions as shall
be agreed to by and between NSGP and the Board of Directors of NHLD.

 
(c)
NSGP shall assist management of NHLD in the timely filing with FINRA of the
necessary forms for compliance with NASD Rule 1017 to cover the $6 million total
investment with qualified investors within 60 days of executing this proposal.
NSGP shall use their best efforts to raise and invest the additional $4,000,000
into NHLD during the term of this extension in order to bring the total of new
capital invested by NSGP and others to $10 million. New qualified investors need
not necessarily invest through NSGP.

 
 
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5.
Mark Goldwasser and Lenny Sokolow accept NSGP's already-instituted compensation
reductions for NHLD's Management as not triggering penalty payments in their
respective employment agreements. Mr. Goldwasser shall remain CEO and Mr.
Sokolow shall become a consultant to the Company, remain a member of the board
and remain non-executive Vice Chairman of the Board if this is permissible under
law. Upon execution of this extension agreement, Robert Fagenson and Mark Klein
shall share the roles of Co-Executive Chairmen and assume active roles in
day-to-day management as part of the Executive Management Committee comprised of
Mr. Goldwasser, Mr. Fagenson and Mr. Klein.

 
 
6.
Within 60 days of executing this proposal, NHLD shall set forth a plan for a
potential longer term rollover extension of St. Cloud's Note, which encompasses
additional elements such as convertibility, modifications, etc. Within this
60-day period, NHLD shall continue its timely efforts to reconcile the
capitalization through continuing negotiations for warrant conversion and any
other modifications necessary for a more unified and simplified structure.

 
Please review all the terms and conditions listed above. If the terms and
conditions set forth herein are acceptable, please evidence your acceptance of
this proposal by executing where indicated. Please return a signed copy of this
proposal no later than 5 PM PDT this Tuesday, July 17th, 2012, after which this
proposal in its entirety shall expire. As a courtesy, we remind you that
pursuant to Section 8(c) of St. Cloud's Senior Subordinated Convertible
Promissory Note Agreement, the failure of NHLD to make any installment of
principal when due or interest within five (5) business days of written notice
constitutes an Event of Default. In the Event of Default, we shall exercise any
and all rights, powers or remedies, including foreclosure proceedings on all
assets and equity of NHLD and its existing subsidiaries.
 
Please feel free to contact us anytime if you have any questions. Thank you.
 
Sincerely,
 
 
/s/ Robert Lautz
Robert Lautz
Managing Member
SCGP II, LLC
 
 
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/s/ Robert Lautz                              
Robert Lautz
Managing Member
SCGP II, LLC
 

 
/s/ Mark Goldwasser                      
Mark Goldwasser
Chief Executive Officer
National Holdings Corporation

/s/ Robert Fagenson                       
Robert Fagenson
Managing Member
National Securities Growth Partners, LLC
 
 
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