Exhibit 10.1

 EXECUTION VERSION

 

 

CO-EXECUTIVE CHAIRMAN COMPENSATION PLAN

 

Dated: June 20, 2013

 

This Compensation Plan (the “Plan”) sets forth the terms of Robert B. Fagenson’s
(the “Executive”) employment with National Holdings Corporation, a Delaware
corporation (the “Company”) for the period beginning on January 25, 2013 (the
“Commencement Date”) and ending on September 30, 2015 (the “Term”). This Plan,
together with the Annexes A through and including E (collectively, the
“Annexes”) hereto (which are incorporated herein by reference), shall constitute
the entire agreement among the parties regarding the Executive’s employment with
the Company and supersedes any prior agreements, discussions, arrangements and
understandings (whether written or oral) regarding such employment. Capitalized
terms not defined in the Plan shall have the meaning set forth on the Annexes.

Position/Duties

During the Term, Executive shall serve as Co-Executive Chairman of the Company
and shall have such duties and responsibilities as are typically associated with
such titles. The Executive shall also serve as a Member of the Executive
Committee of National Securities Corporation. 

 

The Company and the Executive acknowledge and agree that the Executive has
interests in, and is required to devote his time and attention to the businesses
listed on Annex A hereto (the “Other Businesses”), and further, that the
Executive serves on the corporate boards of the organizations set forth on Annex
B hereto the “Board Memberships”). Notwithstanding the Executive’s duties and
responsibilities to the Company and its affiliates or any term of this Plan (and
the Annexes), Executive’s interests in the Other Businesses, and his devotion of
time and attention, and/or service to the Other Businesses and the Board
Memberships shall not be a breach of the terms of this Plan or any fiduciary
duty or grounds for termination of Executive’s employment by the Company prior
to the end of the Term. Further, the Company agrees (on its own behalf and on
behalf of its affiliates and equityholders) that Executive’s involvement with
the Other Businesses, and devotion of time and/or service to the Other
Businesses and the Board Memberships, including the evaluation of business
opportunities and development or acquisition of business opportunities shall not
give rise to, and such parties shall not pursue, any claim, suit, proceeding or
cause of action against the Executive, including, without limitation, with
respect to any corporate opportunity or any interest or expectancy of the
Company or its affiliates in business opportunities (or any opportunity that may
be offered) with respect to the Other Businesses, including, but not limited to,
opportunities that might be in a type of business that is the same as, or
similar to, a business or activity conducted by the Company, which shall, upon
approval of this Plan by the Company, hereby be renounced for all purposes;
provided, that, the Company shall be offered prior to any Other Business any
opportunity presented to the Executive to acquire control of an “independent
retail securities brokerage business” as reasonably determined in good faith by
the Executive. In furtherance of the foregoing and except as explicitly set
forth in this paragraph, the Company acknowledges that it has obtained approval
of its Board of Directors of this Plan in general and specifically this
paragraph in accordance with Delaware General Corporation Law Section 122(17)
renouncing any interest or expectancy of the Company in, or in being offered an
opportunity to participate in, business opportunities that are presented to the
Executive and his affiliates or the Other Businesses.

 

 
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 EXECUTION VERSION

 

The Company shall indemnify and hold harmless the Executive to the fullest
extent permitted by law in respect of any claim, suit, proceeding or cause of
action regarding in any respect the actions permitted by the immediately
preceding paragraph, including, without limitation, with respect to any and all
damages, expenses (including reasonable attorneys’ fees), judgments, penalties,
fines, settlements, and all other liabilities.

 

The Executive shall be permitted to manage his personal investments and to serve
on other corporate boards, or civic or charitable boards or committees, subject
to the prior approval of the Company’s Board of Directors (the “Board”), which
shall not be unreasonably withheld or delayed.

Executive Committee

During the Term, the Executive shall serve as a member of the Executive
Committee of the Company, and the Board shall take all necessary actions to
appoint and retain the Executive on such Executive Committee. The only other
Member of such Executive Committee shall be Mark D. Klein; provided that, on and
following Mr. Klein’s termination of employment for any or no reason, the
Executive Committee shall be terminated and the Executive shall report directly
to the Board.

Base Salary

The Executive’s Base Salary for the period from the Commencement Date until
September 30, 2013 shall be at the rate of $1.00 per annum (“Base Salary”). From
and after September 30, 2013, the Executive’s rate of Base Salary for the
remainder of the Term shall be as determined by the Compensation Committee (with
advice (as appropriate) from the Board), who shall review the Executive’s Base
Salary no less frequently than each fiscal year; provided, however, Base Salary
for any year beginning October 1, 2013 shall not be less than at the rate of
$180,000 per year. As part of any such review by the Compensation Committee and
the setting of any Base Salary for any fiscal year of the Term commencing after
September 30, 2013, the Compensation Committee will, among such other
determinative factors it determines, identify external reference points within
the Company’s industry. Base Salary shall be paid in cash in accordance with the
Company’s payroll practices in effect for its employees from time to time. The
Executive’s rate of Base Salary shall not be subject to reduction without the
Executive’s prior written consent.

 

 
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 EXECUTION VERSION

 

Bonus

The Executive will be eligible for an annual bonus for each fiscal year of the
Term as determined by the Compensation Committee.

Equity Awards

On the date hereof, the Executive will be awarded 1,500,000 nonforfeitable,
nonqualified stock options (the “Sign On Grant”) to purchase common shares of
the Company on the terms set forth on Annex C hereto. One-third of the options
vest immediately, one-third of the options vest on the one year anniversary of
the date hereof, and one-third of the options vest on the two year anniversary
of the date hereof. The options shall be fully vested and non-forfeitable upon a
Qualifying Termination, as hereinafter defined. In addition, the Executive shall
be eligible to be awarded Equity Awards (other than the Sign On Grant) on the
terms and conditions as determined by the Board (or a committee thereof), in its
discretion and pursuant to the plan or arrangement pursuant to which they are
granted.

Benefits/Insurance

During the Term, the Executive shall be entitled to participate in all employee
benefit plans as are offered by the Company to its executive personnel, subject
to the eligibility and participation provisions set forth therein, provided,
that such eligibility and participation rights shall be no less favorable than
any other executive employee. During the Term, the Company shall pay (at the
“Buy-Up Premium” level) all health (including, without limitation, medical and
dental) insurance premiums for the Executive and his dependents, or, if
Executive should elect not to participate in all or any of such plans (or should
such participation not be permitted under applicable law or should result in
material adverse tax consequences to the Company), the Company will reimburse
the Executive for the expense incurred in participating in another comparable or
better plan in an amount not to exceed the cost of participation of the
Executive and his dependents in the Company’s health plans or pay the Executive
a flat dollar amount equal to the cost of participation of the Executive and his
dependents in such Company plans; provided, that the Executive will not be
entitled to any such coverage or reimbursement for medical insurance during the
period that the Executive is covered by the medical insurance plan of his prior
employer.

Expenses

The Executive shall be reimbursed by the Company, subject to the Company’s
executive expense reimbursement policy, for expenses reasonably incurred by him,
including, without limitation, for his cell phone and Blackberry (or similar
devices).

 

 
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 EXECUTION VERSION

 

Insurance/Indemnity

The Executive shall be added as an insured to any director and officer and
errors and omissions insurance policy of the Company and any of the Company’s
subsidiaries or affiliates. The amount of coverage under each such D&O and E&O
policy shall be no less than the coverage in effect on January 25, 2013. The
Company shall maintain in effect for six (6) years following termination of the
Executive’s employment, for any or no reason, at the Company’s sole cost such
D&O and E&O policies (or substitute policies providing for tail coverage with an
A.M. Best Company rating no less favorable than the rating for the insurer(s) of
such policies in effect as of the last day of the Executive’s employment with
the Company) or, if such policies do not permit, in whole or in part, such
continued coverage or if the Company reasonably determines that reimbursement is
more cost-efficient for the Company and the Executive can reasonably obtain a
personal tail policy with substantially similar coverage and benefits, the
Company shall reimburse the Executive (in advance, each year) for the premiums
for a substitute insurance policy of substantially similar coverage and
benefits.

 

The Company shall indemnify and hold harmless the Executive to the fullest
extent permitted by law from and against any and all claims, damages, expenses
(including reasonable attorneys’ fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in connection
with the investigation, defense, prosecution, settlement or appeal of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and to which the Executive was or is a
party or is threatened to be made a party by reason of the fact that the
Executive is or was an officer, the Executive or agent of the Company, or by
reason of anything done or not done by the Executive in any such capacity or
capacities, provided that the Executive acted in good faith consistent with this
Plan, in a manner that was not grossly negligent or constituted willful
misconduct and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company (consistent with this Plan), and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Company also shall pay (i) any and all expenses
(including reasonable attorney’s fees) incurred by the Executive as a result of
the Executive being called as a witness in connection with any matter involving
the Company and/or any of its officers or directors, and (ii) any and all
expenses (including reasonable attorneys’ fees), judgments, penalties, fines,
settlements, and other liabilities incurred by the Executive in investigating,
defending, settling or appealing any action, suit or proceeding described herein
in advance of the final disposition of such action, suit or proceeding. The
Company shall promptly pay such expense amount to the Executive, but in no event
later than 10 days following the Executive’s delivery to the Company of a
written request for an advance pursuant to this Plan, together with a reasonable
accounting of such expenses.

 

 
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 EXECUTION VERSION

 

These insurance and indemnity obligations shall survive following the
termination of the Executive’s employment.

Working Facilities

The Executive Committee shall have a Company-provided office.

Termination of the Term

The Term may only be terminated prior to its scheduled expiration as follows:
(i) (a) by the Company without “Cause”, (b) by the Company due to “Disability”,
(c) by the Executive with “Good Reason,” or (d) upon the Executive’s death (each
a “Qualifying Termination”), (ii) by the Company for “Cause” or (iii) by the
Executive voluntarily without Good Reason.

 

In the event of any termination of the Term, the Executive will receive the
Accrued Obligations.

 

In the event of a Qualifying Termination, the Executive shall receive the
Severance Benefits in addition to the Accrued Obligations. The cash portion of
the Severance Benefits shall be payable, subject to execution (and
nonrevocation) by the Executive (or his legal representative or executor, as the
case may be) of the Release set forth on Exhibit E hereof within sixty (60) days
following the effective date of such Qualifying Termination (which execution
version must be executed by the Company and delivered by the Company to the
Executive (or his executor) within five calendar days following any such
Qualifying Termination).

 

The Executive agrees that the Company may obtain a life insurance and/or
disability insurance policy in respect of the Executive (for which the Company
is the beneficiary) and the Executive agrees to reasonably cooperate with the
Company in connection with the underwriting requirements (if any) that may be
required in respect of any such policy.

Attorneys’ Fees

The Company agrees to pay the Executive’s reasonable costs and expenses for
legal counsel to advise him in the negotiation, drafting and execution of his
employment arrangements with the Company, including, without limitation, the
Plan.

Additional Terms

The additional terms set forth on Annex D shall be incorporated herein and the
terms of this Plan and the Annexes shall survive the Term and termination of the
Executive’s employment for so long as necessary to give full effect thereto.

 

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

 
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 EXECUTION VERSION

 

IN WITNESS WHEREOF, the undersigned have executed this Plan (and the Annexes) as
of the date first above written.

COMPANY:

NATIONAL HOLDINGS CORPORATION

 

By:_/s/ Mark Klein_____________________________

Name: Mark Klein _____________________________

Title: Chief Executive Office______________________

 

EXECUTIVE:

/s/ Robert B. Fagenson__________________________

ROBERT B. FAGENSON

 

 

 
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 EXECUTION VERSION

 

ANNEX A

OTHER BUSINESSES

 

***

 

 
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 EXECUTION VERSION

 

ANNEX B

APPROVED BOARDS

 

 

 

 
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 EXECUTION VERSION

 

 

ANNEX C

STOCK OPTION TERMS

The terms of this Annex C will apply to the Sign On Grant, which shall be
granted under the Company’s 2006 and/or 2008 Stock Option Plans, and/or the
Company’s 2013 Omnibus Incentive Plan or such other arrangement as approved by
the Board, on terms acceptable to Executive and consistent with customary
practice. Such Sign On Grant shall be the subject of an award agreement
acceptable to the Executive.1

 

 

■

The Sign On Grant will cover shares of the Company’s common stock.

 

■

For purposes of the Sign On Grant (and any other equity award granted to the
Executive), references in the Sign On Grant to terms that are defined herein, in
the Plan or the Annexes (including without limitation the definition of “Cause”)
shall have the meanings ascribed them herein, the Plan or the Annexes as
applicable.

 

■

The Sign On Grant will be awarded in respect of 1,500,000 shares, in three
tranches of 500,000, with each tranche having an exercise price as follows:

 

●

Tranche A: 500,000 shares with an exercise price of $0.50 per share

 

●

Tranche B: 500,000 shares with an exercise price of $0.70 per share

 

●

Tranche C: 500,000 shares of the Company with an exercise price of $0.90 per
share

 

■

One third of the Sign On Grant will vest immediately, one third of the Sign On
Grant will be vested on the first anniversary of the date hereof and one third
of the Sign On Grant will be vested on the second year anniversary of the date
hereof. The Sign On Grant shall become fully vested and nonforfeitable upon a
Qualifying Termination.

 

■

The option term will expire on September 30, 2020 and the Sign On Grant will be
exercisable at any time during the option term; provided, that the option term
will expire on the three year anniversary of any termination that is not a
Qualifying Termination (i.e., a resignation by the Executive without Good Reason
or the Company’s termination for Cause), but in no event later than September
30, 2020.

 

■

The Sign On Grant will provide for cashless and net exercise and/or by the
delivery of vested shares held by the Executive, and shall not permit
withholding of shares to satisfy tax obligations.

 

■

The terms of the Sign On Grant shall be adjusted for any ordinary or
extraordinary dividend, transaction, or customary adjustment events declared by
the Board.

 

■

Registration Rights will be afforded the Executive with respect to the shares
underlying the Sign On Grant.

***

 

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1      To the extent that any stock options or restricted stock granted
hereunder are not made pursuant to the Company’s 2006 or 2008 Stock Option Plans
or other plan covered by a registration statement declared effective by the
Securities and Exchange Commission (the “SEC”), the Company agrees to file with
the SEC, within a reasonable period following the grant of such options or award
of restricted stock, a Form S-1 or Form S-8 registration statement covering the
shares of common stock issuable upon exercise of the stock options or the
restricted stock.

 

 
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 EXECUTION VERSION

 

 

ANNEX D

OTHER TERMS

1.         Definitions.

a.        “Agreement” shall mean the Plan together with the Annexes thereto.

b.        “Accrued Obligations” shall mean:

i.       any accrued but unpaid Base Salary through the Termination Date;

ii.      any unpaid or unreimbursed expenses incurred in accordance with Company
policy or the Agreement, to the extent incurred on or prior to the Termination
Date;

iii.     any benefits provided under the Company’s benefit plans upon
termination of the Executive’s employment, in accordance with the terms therein,
including rights to equity in the Company pursuant to any plan or grant, and
settlement of any Equity Awards (including, without limitation, the Sign On
Grant) in accordance with the terms of such Equity Awards;

iv.     any unpaid bonus in respect to any completed fiscal year that has ended
on or prior to the Termination Date; and

v.     rights to indemnification by virtue of the Executive’s position as an
officer or director of the Company or its subsidiaries and the benefits under
any directors’ and officers’ liability insurance policy maintained by the
Company, in accordance with its terms thereof and this Plan.

The Accrued Obligations shall be paid within fourteen (14) days following the
Termination Date, unless otherwise set forth in the applicable plan or
arrangement governing same (e.g., indemnification and insurance rights shall
survive the Term).

c.       “Cause” shall mean, with respect to the Executive, the following:

i.     the conviction of or plea of guilty or nolo contendere to a felony or
other crime involving moral turpitude carrying mandatory jail time of more than
twelve (12) months; or

ii.     the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any Related Entity or any of its or their
respective clients, which results or is reasonably likely to result in material
harm to such parties; provided that Executive shall be entitled to (A) written
notice within 10 calendar days of such act or omission and (B) an opportunity to
cure such act or omission to the Board’s reasonable satisfaction during a period
of no less than 30 calendar days following notice of such act or omission; or

 

 

 
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 EXECUTION VERSION

 

iii.     breach of fiduciary duty, willful misconduct or gross negligence with
respect to the Company or any Related Entity, which results or is reasonably
likely to result in material harm to the Company or any Related Entity, provided
that Executive shall be entitled to (A) written notice within 10 calendar days
of such breach, action or omission and (B) an opportunity to cure such breach,
action or omission to the Board’s reasonable satisfaction during a period of no
less than 30 calendar days following notice of such act or omission; or

iv.     material breach of any material provision of this Agreement (other than
due to disability or sickness or the provision of services to the Other
Businesses); provided, however, that, Executive shall be entitled to written
notice within 10 calendar days of such purported breach and an opportunity to
cure such breach to the Board’s reasonable satisfaction during a period of no
less than 30 calendar days following notice of such breach. For the avoidance of
doubt, failure of Executive to perform his duties satisfactorily shall not be a
material breach of this Agreement; or

v.     any final, non-appealable action taken against Executive by a regulatory
body or self- regulatory organization that renders the Executive ineligible to
perform his duties for the Company for a period of no less than 120 days.

Any termination by the Board for grounds purporting to constitute Cause shall be
described in a prior written notice from the Board to the Executive. Such notice
shall describe in detail the acts or omissions purporting to constitute Cause.
The acts or omissions that the Board purports to constitute Cause shall only
constitute Cause after (i) the expiration of any remedial period without
Executive having remedied such act or omission, and (ii) the Executive has been
provided with a reasonable opportunity (together with counsel of his choosing)
to contest such grounds constituting Cause before the full Board. An act or
failure to act shall not be “willful” if (A) done by the Executive in good faith
and (B) the Executive reasonably believed that such action or inaction was in
the best interests of the Company and the Related Entities. For the avoidance of
doubt, the parties agree that grounds purporting to constitute Cause hereunder
that are ultimately determined or overturned in favor of the Executive on appeal
(or similar proceeding) to the adjudicating body, regulatory body,
self-regulatory organization or otherwise, shall result retroactively in the
Company’s termination of the Executive being a Qualifying Termination and the
Company shall immediately reinstate the Severance Benefits (with any amounts
that would have been paid or provided prior to such reinstatement, being paid on
the date of such reinstatement in cash).

d.            “Change in Control of the Company” shall mean any transaction(s)
of the type described in Q/A 27 through and including Q/A 29 of Treasury
Regulation 1.280G-1 and applicable published guidance thereunder, or any
successor regulation or pronouncement thereto.

e.             “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended from time to time.

f.             “Code” shall mean the Internal Revenue Code of 1986, as amended.

g.            “Confidential Information” shall mean all trade secrets and
information disclosed to the Executive or known by the Executive as a
consequence of or through the unique position of his employment with the Company
or any Related Entity (including information conceived, originated, discovered
or developed by the Executive and information acquired by the Company or any
Related Entity from others) prior to or after the date hereof, and which the
Company or Related Entities treat as confidential and which are not generally or
publicly known (other than as a result of unauthorized disclosure by the
Executive), about the Company or any Related Entity or its business.

 

 

 
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h.           “Disability” shall have the meaning set forth in a policy or
policies of long-term disability insurance, if any, the Company obtains for the
benefit of itself and/or its employees. If there is no definition of
“disability” applicable under any such policy or policies, if any, then the
Executive shall be considered disabled due to mental or physical impairment or
disability, despite reasonable accommodations by the Company and any Related
Entity, to perform his customary or other comparable duties with the Company and
any Related Entity immediately prior to such disability for a period of at least
120 consecutive days or for at least 180 non-consecutive days in any 12-month
period.

i.             “Equity Awards” shall mean any stock options (including, without
limitation, the Sign On Grant), restricted stock, restricted stock units, stock
appreciation rights, phantom stock or other equity based awards granted by the
Company to the Executive.

j.             “fiscal year” shall mean the Company’s applicable fiscal year
ending September 30.

k.            “Good Reason” shall mean any of the following without the
Executive’s prior written consent:

i.     the assignment to the Executive of any duties inconsistent in any
material respect with the Executive’s position (including status, titles and
reporting requirements), authority, duties or responsibilities, or any other
action or omission by the Company that results in a material diminution in such
position, title, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of written notice
thereof given by the Executive; or

ii.     any material failure by the Company to pay compensation when due, other
than an isolated, insubstantial and inadvertent failure not occurring in bad
faith and that is remedied by the Company promptly after receipt of written
notice thereof given by the Executive; or

iii.     the Company’s requiring the Executive to be based at any office or
location located more than fifty (50) miles outside of New York, New York,
except for travel reasonably required in the performance of the Executive’s
responsibilities; or

iv.     any decrease in Base Salary or target bonus opportunity once established
by the Board; or

v.     the Company’s material breach of this Agreement (including, without
limitation, failing to arrange for a purchaser of all or substantially all of
the Company’s assets or other successor to assume this Agreement and any failure
to pay compensation when due), other than an isolated, insubstantial and
inadvertent breach not occurring in bad faith that is remedied by the Company
promptly following receipt of written notice thereof given by the Executive.

 

 
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The Executive may terminate the Term for Good Reason by providing the Company
thirty (30) days’ written notice setting forth in reasonable detail the event
that constitutes Good Reason, which written notice, to be effective, must be
provided to the Company within thirty (30) days following 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.

 

l.            “Related Entity” shall mean the Company and any direct or indirect
subsidiary of the Company or the subsidiary, and any business, corporation,
partnership, limited liability company or other entity designated by the Board
in a writing provided to Executive and agreed to by Executive, in which the
Company or a subsidiary holds a substantial ownership interest, directly or
indirectly.

 

m.          “Restricted Period” shall be the period of the Executive’s
employment with the Company and the twelve (12) month period immediately
following termination of the Termination Date.

 

n.           “Severance Benefits” shall mean:

i.     A lump-sum cash payment of $360,000 minus what has been therefore paid in
salary, provided, that such amount increases by 50% of what is paid pursuant to
the foregoing calculation if a Qualifying Termination occurs in connection with,
contingent on or within the twelve (12) months following a Change in Control of
the Company determined in a manner consistent with Code Section 280G and the
regulations and applicable published guidance thereunder; and

ii.     continuation of the health benefits provided to the Executive and his
covered dependants under the Company health plans as in effect from time to time
after the date of such termination with the Company paying all premiums in a
manner most reasonably tax efficient for Executive until the earlier of (A)
eighteen (18) 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.

o.             “Termination Date” shall mean the effective date of the
termination of the Executive’s employment with the Company.

2.     Cooperation: Following termination of the Executive’s employment, the
Executive shall give his assistance and cooperation willingly, upon reasonable
advance notice with due consideration for his other business or personal
commitments, in any matter relating to his position with the Company, or his
expertise or experience as the Company or any Related Entity may reasonably
request, including his attendance and truthful testimony where deemed
appropriate by the Company or any Related Entity, with respect to any
investigation or the Company’s or any Related Entity’s defense or prosecution of
any existing or future claims or litigations or other proceedings relating to
matters in which he was involved or potentially had knowledge by virtue of his
employment with the Company. In no event shall his cooperation materially
interfere with his services for the Other Businesses, a subsequent employer or
other similar service recipient. To the extent permitted by law, the Company
agrees that (i) it shall promptly reimburse the Executive for his reasonable and
documented expenses in connection with his rendering assistance and/or
cooperation under this Section 2 upon his presentation of documentation for such
expenses and (ii) the Executive shall be reasonably compensated for any
continued material services as required under this Section 2.

 

 
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3.     Section 409A. The intent of the parties is that payments and benefits
under this Agreement comply with or are exempt from Internal Revenue Code
Section 409A and the regulations and guidance promulgated thereunder
(collectively “Code Section 409A”) and, accordingly, to the maximum extent
permitted, this Agreement shall be interpreted to be in compliance therewith or
exempt therefrom. If the Executive notifies the Company (with specificity as to
the reason therefore) that the Executive believes that any provision of this
Agreement (or of any award of compensation, including equity compensation or
benefits) would cause the Executive to incur any additional tax or interest
under Code Section 409A, the Company shall, after consulting with the Executive,
reform such provision to try to comply with Code Section 409A through good faith
modifications to the minimum extent reasonably appropriate to conform with Code
Section 409A. To the extent that any provision hereof is modified in order to
comply with Code Section 409A, such modification shall be made in good faith and
shall, to the maximum extent reasonably possible, maintain the original intent
and economic benefit to the Executive and the Company of the applicable
provision without violating the provisions of Code Section 409A. In connection
with any proposed modification or Code Section 409A violation, the Company shall
reimburse Executive for attorneys’ fees for the Executive’s choosing reasonably
incurred in connection with such modification or violation.

Notwithstanding any provision to the contrary in this Agreement, if the
Executive is deemed on the date of termination to be a “specified employee”
within the meaning of that term under Code Section 409A(a)(2)(B), then with
regard to any payment or the provision of any benefit that constitutes an item
of deferred compensation under Section 409A and becomes payable by reason of the
Executive’s separation from service, such payment or benefit shall not be made
or provided (subject to the penultimate sentence of this paragraph)) prior to
the earlier of (i) the expiration of the six (6)-month period measured from the
date of the Executive’s “separation from service” (as such term is defined under
Code Section 409A), and (ii) the date of Executive’s death (the “Delay Period”).
Upon the expiration of the Delay Period, all payments and benefits delayed
pursuant to this paragraph (whether they would have otherwise been payable in a
single sum or in installments in the absence of such delay) shall be paid or
reimbursed to the Executive in a lump sum, and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein. Each payment under this
Agreement shall be a separate payment in a series of separate payments or
purposes of Code Section 409A.

 

 
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4.     Other Business Intellectual Property. The Company and the Executive each
acknowledge and agree that the Executive and/or the Other Businesses have
developed and may develop intellectual property, not relating to the Company,
and the Company acknowledges and agrees that the Executive shall have exclusive
access and all rights to such intellectual property at all times during the
Executive’s employment and at all times thereafter, and that, notwithstanding
anything herein or in any other agreement to the contrary, the Executive or the
Other Businesses, as the case may be, shall be the sole owner of such
intellectual property with the full panoply of rights to such intellectual
property as the case may be (including, without limitation, the ability to
license same) and that the Company shall have no rights to such intellectual
property unless expressly agreed to in writing by the Executive or the Other
Businesses, as the case may be.

5.     Taxes. Anything in this Agreement to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Executive or his
estate or beneficiaries shall be subject to the withholding of such amounts
relating to taxes as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, the Company may, in its sole discretion, accept
other provisions for payment of taxes and withholding as required by law,
provided it is satisfied that all requirements of law affecting its
responsibilities to withhold have been satisfied.

6.     Assignment. This Agreement shall be binding upon the successors and
assigns of the Company. The Company shall have the right to assign this
Agreement and its rights and obligations hereunder in whole, but not in part, to
any corporation or other entity with or into which the Company merges or
consolidates or to which the Company transfers all or substantially all of its
assets, if in any such case said corporation or other entity shall by operation
of law or expressly in writing assume all obligations of the Company hereunder
as fully as if it had been originally made a party hereto, but may not otherwise
assign this Agreement or its rights and obligations hereunder. The Executive may
not assign or transfer this Agreement or any rights or obligations hereunder.

7.     Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to principles of conflict of laws.

8.     WAIVER OF JURY TRIAL.    EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EQUITY AWARD, AND ANY
DISPUTES IN CONNECTION THEREWITH SHALL BE HEARD IN A COURT OF COMPETENT
JURISDICTION, UNLESS OTHERWISE AGREED UPON IN WRITING BY THE PARTIES HERETO.

9.     Restrictive Covenants.

a.     The Executive recognizes and acknowledges that the Company, Related
Entities and their subsidiaries, through the expenditure of considerable time
and money, have developed and will continue to develop the Confidential
Information. In consideration of the Executive’s continued employment by the
Company hereunder, Executive agrees that he will not, during the Restricted
Period, directly or indirectly, make any disclosure of Confidential Information
now or hereafter possessed by the Company, Related Entities, and/or any of their
current or future, direct or indirect subsidiaries (collectively, the “Group”),
to any person, partnership, corporation or entity either during or after the
term hereunder, except to employees of the Group and to others within or without
the Group, as the Executive may deem necessary in order to conduct the Group’s
business and except as may be required pursuant to any court order, judgment or
decision from any court of competent jurisdiction. The foregoing shall not apply
to information which is in the public domain on the date hereof; which, after it
is disclosed to the Executive by the Group, is published or becomes part of the
public domain through no fault of the Executive; which is known to the Executive
prior to disclosure thereof to him by the Group as evidenced by his written
records; or, after the Executive is no longer employed by the Group, which is
thereafter disclosed to the Executive in good faith by a third party which is
not under any obligation of confidence or secrecy to the Group with respect to
such information at the time of disclosure to him. The provisions of this
Section 9a shall continue in full force and effect notwithstanding termination
of the Executive’s employment under this Agreement or otherwise. Any
intellectual property of the Executive or the Other Businesses shall not be
Confidential Information of the Group.

 

 
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b.     The Executive agrees that if the Company has made and is continuing to
make all required payments (and benefits) to the Executive upon and after
termination of the Executive’s employment, then during the Restricted Period,
the Executive shall neither directly and/or indirectly (a) solicit, hire and/or
contact any prior (within twelve (12) months) or then current employee of the
Group, nor (b) interfere with any relationship with any prior (within twelve
(12) months of termination) or then current customer and/or client of the Group.
In addition, Executive shall not attempt (directly and/or indirectly) to do
anything either by himself or through others that he is prohibited from doing
pursuant to this Section 9b (except as expressly permitted or contemplated by
this Agreement).

c.     The Executive agrees that the Executive shall not make any false,
defamatory or disparaging statements about the Company, its affiliates, or their
respective officers or directors that are reasonably likely to cause material
damage to the Company, its affiliates, or their respective officers or
directors; provided that the provisions of this subsection shall not apply to
truthful testimony as a witness in any investigative, adjudicatory, agency or
court proceeding, or in compliance with other legal obligations. The Company
agrees that the Company shall ensure that the Board, its members and any senior
executive of the Company, and any board (and its members) or senior executive of
the Company’s affiliates, shall not make any false, defamatory or disparaging
statements about the Executive that are reasonably likely to case material
damage to the Executive; provided that the provisions of this subsection shall
not apply to truthful testimony as a witness in any investigative, adjudicatory,
agency or court proceeding, or in compliance with other legal obligations.

d.     The Executive acknowledges that the restrictive covenants contained in
this Section 9 (the “Restrictive Covenants”) are a condition of his continued
employment and are reasonable and valid in geographical and temporal scope and
in all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court shall have the power
to reduce the geographic or temporal scope of such provision, as the case may
be, and, in its reduced form, such provision shall then be enforceable. If the
Executive breaches, or threatens to breach, any of the Restrictive Covenants,
the Company, in addition to and not in lieu of any other rights and remedies it
may have at law or in equity, shall have the right to seek injunctive relief; it
being acknowledged and agreed to by the Executive that any such breach or
threatened breach could cause irreparable and continuing injury to the Company
and that money damages might not provide an adequate remedy to the Company.

 

 
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10.     Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be personally delivered by courier or sent by registered
or certified mail, return receipt requested addressed as set forth herein.
Notices personally delivered or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as evidenced
by the return receipt thereof, or three (3) days after deposit in the U.S. mail.
Notice shall be sent (i) if to the Company, addressed to National Holdings
Corporation, 120 Broadway, 27th Floor, New York, NY 10271, Attention: Chairman
of the Compensation Committee, and (ii) if to the Executive, to his address as
reflected on the payroll records of the Company, or to such other address as
either party shall request by notice to the other in accordance with this
provision.

11.     Benefits; Binding Effect. This Agreement shall be for the benefit of and
binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where permitted and
applicable, assigns, including, without limitation, any successor to the
Company, whether by merger, consolidation, sale of stock, sale of assets or
otherwise.

12.     Right to Consult with Counsel; No Drafting Party. The Executive
acknowledges having read and considered all of the provisions of this Agreement
carefully, and having had the opportunity to consult with counsel of his own
choosing, and, given this, the Executive agrees that the obligations created
hereby are not unreasonable. The Executive acknowledges that he has had an
opportunity to negotiate any and all of these provisions and no rule of
construction shall be used that would interpret any provision in favor of or
against a party on the basis of who drafted the Agreement.

13.     Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses, provisions, sections or articles contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part thereof, all of which are inserted conditionally on their being
valid in law, and, in the event that any one or more of the words, phrases,
sentences, clauses, provisions, sections or articles contained in this Agreement
shall be declared invalid, this Agreement shall be construed as if such invalid
word or words, phrase or phrases, sentence or sentences, clause or clauses,
provisions or provisions, section or sections or article or articles had not
been inserted. If such invalidity is caused by length of time or size of area,
or both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.

 

 
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 EXECUTION VERSION

 

14.     Waivers. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.

15.     No Mitigation. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement.

16.     Section Headings. The article, section and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.

17.     No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs,
beneficiaries, personal representatives, legal representatives, successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.

18.     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 shall constitute one and the same instrument and agreement.

19.     Amendment. This Agreement may not be modified in any way unless by a
written instrument signed by both the Company and the Executive.

***

 

 

 
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 EXECUTION VERSION

 

 

ANNEX E

RELEASE

ROBERT B. FAGENSON (the “Executive”), on behalf of myself and my heirs,
successors and assigns, in consideration of the performance by National Holdings
Corporation., a Delaware corporation (together with its Subsidiaries, the
“Company”), of its material obligations under the Employment Agreement, dated
______________ (the “Agreement”), AND THE UNDERSIGNED ON BEHALF OF THE RELEASED
PARTIES (as defined below) do hereby release and forever discharge as of the
date hereof the other (the Company, its affiliates, each such Person’s
respective successors and assigns and each of the foregoing Persons’ respective
present and former directors, officers, partners, stockholders, members,
managers, agents, representatives, employees and affiliates (and each such
Person’s respective successors and assigns) collectively, the “Released
Parties”). Capitalized terms not herein defined shall have the meanings ascribed
them in the Agreement. References herein to “I” shall mean “Executive,” and each
of the Executive, and the Company (on its behalf and on behalf of the Released
Parties) shall be a “Party” to this General Release and collectively referred to
as the “Parties.”

 

1.     I understand that any payments or benefits paid or granted to me under
the Agreement (as described herein on the Annex hereto) represent, in part,
consideration for signing this General Release and are not salary, wages or
benefits to which I was already entitled. I understand and agree that I will not
receive the cash Severance Benefits specified in the Agreement unless I execute
this General Release and do not revoke this General Release within the time
period permitted hereafter or breach this General Release.

 

2.     I knowingly and voluntarily release and forever discharge the Company and
the other Released Parties from any and all claims, controversies, actions,
causes of action, cross-claims, counter-claims, demands, debts, compensatory
damages, liquidated damages, punitive or exemplary damages, other damages,
claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in
law and in equity, both past and present (through the date of this General
Release), whether under the laws of the United States or another jurisdiction
and whether known or unknown, suspected or claimed against the Company or any of
the Released Parties which I, my spouse, or any of my heirs, executors,
administrators or assigns, have or may have, which arise out of or are connected
with my employment with, or my separation from, the Company (including, but not
limited to, any allegation, claim or violation, arising under: Title VII of the
Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967, as amended (including the Older
Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the
Americans with Disabilities Act of 1990; the Family and Medical Leave Act of
1993; the Civil Rights Act of 1866, as amended; the Worker Adjustment Retraining
and Notification Act; the Employee Retirement Income Security Act of 1974; any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil or
human rights law, or under any other local, state, or federal law, regulation or
ordinance; or under any public policy, contract or tort, or under common law; or
arising under any policies, practices or procedures of the Company; or any claim
for wrongful discharge, breach of contract, infliction of emotional distress, or
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters) (all of the foregoing collectively
referred to herein as the “Claims”); provided, however, that nothing contained
in this General Release shall apply to or release any of the Released Parties
from, (i) any obligation of the Company contained in the Agreement to be
performed after the date hereof or any consideration that serves as the basis
for this General Release (including, without limitation, the cash Severance
Benefits), (ii) any vested or accrued benefits pursuant to any employee benefit
plan, program or policy of the Company, (iii) any rights to indemnification,
contribution, D&O or E&O insurance, (iv) any rights in respect of any equity
awards or other equity or securities in any of the Released Parties or their
affiliates, or (v) any rights in respect of the Other Businesses.

 

 

 
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 EXECUTION VERSION

 

 

For fair and adequate consideration under this Agreement, the sufficiency of
which is hereby expressly acknowledged by the parties, and subject to this
Agreement becoming effective pursuant to the terms of hereof, the Company on
behalf of itself and any of the Released Parties, knowingly and voluntarily
releases, acquits and forever discharges Executive and his heirs of and from any
and all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, bonuses,
controversies, agreements, liabilities, promises, claims, obligations, costs,
losses, damages and demands of whatever character, in law or in equity, from the
beginning of time through the date of execution of this Agreement (all of the
foregoing collectively referred to herein as the “Company Claims”).

 

3.     The Parties represent that they have made no assignment or transfer of
any right, claim, demand, cause of action, or other matter covered by this
General Release.

 

4.     I agree that this General Release does not waive or release any rights or
claims that I may have under the Age Discrimination in Employment Act of 1967
which arise after the date I execute this General Release.

 

5.     In signing this General Release, the Parties acknowledge and intend that
it shall be effective as a bar to each and every one of the Claims or Company
Claims hereinabove released. The Parties expressly consent that this General
Release shall be given full force and effect according to each and all of its
express terms and provisions, including those relating to unknown and
unsuspected Claims or Company Claims (notwithstanding any state statute that
expressly limits the effectiveness of a general release of unknown, unsuspected
and unanticipated Claims or Company Claims), if any, as well as those relating
to any other Claims or Company Claims hereinabove mentioned or implied. The
Parties acknowledge and agree that this waiver is an essential and material term
of this General Release and that without such waiver the Parties would not have
agreed to the terms of the Agreement. The Parties covenant that they shall not
directly or indirectly, commence, maintain or prosecute or sue any of the
parties released hereunder either affirmatively or by way of cross-complaint,
indemnity claim, defense or counterclaim or in any other manner or at all on any
Claim or Company Claim covered by this General Release. I further agree that in
the event such Party should bring a Claim or Company Claim seeking damages
against the other, or in the event a Party should seek to recover against the
other in any Claim or Company Claim brought by a governmental agency on the
other’s behalf, this General Release shall serve as a complete defense to such
Claims or Company Claims. The Parties further agree that they are not aware of
any pending charge or complaint of the type described in paragraph 2 as of the
execution of this General Release.

 

 

 
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 EXECUTION VERSION

  

 

6.     Both Parties agree that neither this General Release, nor the furnishing
of the consideration for this General Release, shall be deemed or construed at
any time to be an admission by the other, any Released Party or Executive of any
improper or unlawful conduct.

 

7.     Except as required by applicable law, the Parties agree that this General
Release is confidential and agree not to disclose any information regarding the
terms of this General Release, except to my immediate family and any tax, legal
or other counsel the Parties have consulted regarding the meaning or effect
hereof or as required by law, and the Parties will instruct each of the
foregoing not to disclose the same to anyone.

 

8.     Any non-disclosure provision in this General Release does not prohibit or
restrict Executive (or Executive’s attorney) from responding to any inquiry
about this General Release or its underlying facts and circumstances by the
Securities and Exchange Commission, FINRA or any other self- regulatory
organization or governmental entity.

 

9.     Without limitation of any provision of the Agreement, the Parties hereby
expressly re-affirm their obligations under the Plan.

 

10.    Whenever possible, each provision of this General Release shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this General Release is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this General Release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

“Affiliate” means, with respect to any Person, any Person that controls, is
controlled by or is under common control with such Person or an Affiliate of
such Person.

 

“Person” means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, investment fund, any other business entity and a
governmental entity or any department, agency or political subdivision thereof.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association, or business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a
majority of partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, or other
business entity gains or losses or shall be or control any managing director or
general partner of such limited liability company, partnership, association, or
other business entity.

 

 

 
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BY SIGNING THIS GENERAL RELEASE, THE PARTIES REPRESENT AND AGREE THAT:

 

(a)     THE PARTIES HAVE READ IT CAREFULLY;

 

(b)     THE PARTIES UNDERSTAND ALL OF ITS TERMS AND KNOW THAT THE PARTIES ARE
GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH
DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED;

 

(c)     THE PARTIES VOLUNTARILY CONSENT TO EVERYTHING IN IT;

 

(d)     THE PARTIES HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE
AGREEMENT AND THIS RELEASE) BEFORE EXECUTING IT AND THE PARTIES HAVE DONE SO OR,
AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN
VOLITION;

 

(e)     I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE
SUBSTANTIALLY IN ITS FINAL FORM ON ____________ __, __ TO CONSIDER IT AND THE
CHANGES MADE SINCE THE __________ ___, ___ VERSION OF THIS RELEASE ARE NOT
MATERIAL AND WILL NOT RESTART THE REQUIRED 21-DAY PERIOD;

 

(f)     I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS RELEASE
TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE
UNTIL THE EIGHTH DAY FOLLOWING EXECUTION OF THE AGREEMENT;

 

(g)     THE PARTIES HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY
AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE SUCH PARTY WITH RESPECT TO
IT; AND

 

 

 
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 EXECUTION VERSION

 

 

(h)     THE PARTIES AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE
AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED
BY AN AUTHORIZED REPRESENTATIVE OF BOTH PARTIES.

 

(j)     THIS RELEASE SHALL REMAIN IN FULL FORCE AND EFFECT SO LONG AS THE
COMPANY IS IN COMPLIANCE WITH ITS OBLIGATIONS TO PAY SEVERANCE AND PROVIDE THE
OTHER POST-TERMINATION BENEFITS UNDER THE AGREEMENT, SUBJECT TO THE EXECUTIVE
CONTINUING TO ABIDE BY THE POST- TERMINATION OBLIGATIONS AND COVENANTS CONTAINED
IN THE AGREEMENT.

 

DATE:__________ __, ____     ____________________________

 

COMPANY:

 

NATIONAL HOLDINGS CORPORATION

By:___________________________________
Name:_________________________________
Title:__________________________________

 

EXECUTIVE:

_______________________________________
ROBERT B. FAGENSON

 

***

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