NATIONAL HOLDING CORPORATION
120 Broadway, 27th Floor
New York, NY 10271
July 1, 2008
Leonard J. Sokolow
3010 North Military Trail, Suite 300
Boca Raton, FL 33431

Dear Lenny:

We are pleased to inform you that National Holdings Corporation (the “Company”),
has granted you a nonqualified option (the “Option”) to purchase the 1,000,000
shares of the Company’s common stock, par value $.02 per share (the “Common
Stock”), at a purchase price of $1.64 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 terms 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 June
30, 2015 (after which date the Option will, to the extent not previously
exercised, expire). The Option shall vest and become exercisable as to 25% of
the Shares on and after each of July 1, 2008, 2009, 2010 and 2011, provided you
are then still employed by of the Company.

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 1
(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 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 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 Global Select, Global or Capital Markets
(collectively, the “Nasdaq Markets”), the last sale price of the Common Stock in
the principal trading market for the Common Stock on the last trading day on or
before such date, 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 any of the Nasdaq Markets, but is traded in the over-the-counter
market, the last sale price for the Common Stock on the last trading day on or
before such date 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 shareholder 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 9 hereof.

3. The Option shall immediately vest and become exercisable as to all of the
Shares pursuant to the terms and conditions of the Employment Agreement.

4. In the event your employment with the Company is terminated, the Option shall
forthwith terminate, provided that 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 nine months after such date, or the expiration of
the Option.

5. The Option is not transferable except (i) by will or the applicable laws of
descent and distribution or (ii) for transfers to your family members or trusts
or other entities whose beneficiaries are your family members, 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. In such event, the
transferee shall remain subject to all the terms and conditions applicable to
the Option prior to such transfer.

6. 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, within the nine-month period following termination due
to death or Disability.

7. 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 (“Board”), or a committee thereof 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, or a
committee thereof, whose determination will be final, binding and conclusive.

- 2 -

--------------------------------------------------------------------------------

8.  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.

9. 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.

10. 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.

11. You understand and acknowledge that: (i) any Shares purchased by you upon
exercise of the Option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) certificates for Shares to be issued to you hereunder shall bear a legend
to the effect that the Shares have not been registered under the Act and that
the Shares may not be sold, hypothecated or otherwise transferred in the absence
of an effective registration statement under the Act relating thereto or an
opinion of counsel satisfactory to the Company that such registration is not
required; (iv) the Company shall place an appropriate “stop transfer” order with
its transfer agent with respect to such Shares; and (v) you shall 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.
 
12. The Company shall use commercially reasonable to file and keep in effect a
Registration Statement on Form S-8 registering under the Act the Shares issuable
to you upon exercise of the Option.

- 3 -

--------------------------------------------------------------------------------

13. 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 agreement is a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms; (ii) the grant of the Option to you on the terms set forth herein will be
exempt from the provisions of Section 16(b) of the Exchange Act pursuant to
Rule 16b-3(d) thereunder; (iii) 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 (iv) the Company currently has
reserved and available, and will 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.

14. This agreement and the Employment Agreement contain all the understandings
between the Company and you pertaining to the matters referred to herein, and
supersedes 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.

- 4 -

--------------------------------------------------------------------------------

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,
 
NATIONAL HOLDINGS CORPORATION  
     
By:  
/S/ MARK GOLDWASSER
 
 
Authorized Representative 
     
AGREED TO AND ACCEPTED:  
 
 
     
/S/ LEONARD J. SOKOLOW
   
Leonard J. Sokolow
   

- 5 -

--------------------------------------------------------------------------------

EXHIBIT 1 
NATIONAL HOLDING CORPORATION
120 Broadway, 27th Floor
New York, NY 10271

Gentlemen:

Notice is hereby given of my election to purchase ____________ shares of Common
Stock, $.02 par value (the “Shares”), of National Holdings Corporation, at a
price of $_________ per Share, pursuant to the provisions of the stock option
granted to me on July 1, 2008. Enclosed in payment for the Shares is:

o     my check in the amount of $______.
o     ______ Shares having a total value of $________, such value being based on
the Fair Market Value of the Shares on the date of exercise.

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,
 
 
Leonard J. Sokolow

- 6 -

--------------------------------------------------------------------------------