Exhibit 10.36
 
REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into as
of this 12th day of July 2010 by and among National Holdings Corporation, a
Delaware corporation (the “Company”), and those individuals signatory hereto
(the “Investors”).

WHEREAS, the Company has agreed to issue and sell to the Investors, and the
Investors have agreed to purchase from the Company, (i) 34,167 shares of Series
C Preferred Stock (the “Series C Stock”), initially convertible into 3,416,692
shares of the Company’s common stock, $0.02 par value per share (the “Common
Stock”), (ii) warrants to purchase 3,416,692 shares of Common Stock (the “Unit
Warrants”), pursuant to the terms and conditions set forth in that certain
Securities Purchase Agreement, dated July 12, 2010, by and between the Company
and the Investors (the “Purchase Agreement”), and
 
WHEREAS, the terms of the Purchase Agreement provide that it shall be a
condition precedent to the closing of the transactions thereunder for the
Company and the Investors to execute and deliver this Agreement.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

1.           Certain Definitions.
 
As used in this Agreement, the following terms shall have the following
meanings:

“Affiliate” means, with respect to any person, any other person which directly
or indirectly controls, is controlled by, or is under common control with, such
person.

“Allowed Delay” as defined in Section 2(d)(ii) hereto.

“Business Day” means a day, other than a Saturday, Sunday or holiday, on which
banks in New York City are open for the general transaction of business.

“Common Stock” shall have the meaning as defined in the recitals, and any
securities into which such shares may hereinafter be reclassified.

“Conversion Shares” means the shares of Common Stock or other securities
issuable upon conversion of the Series C Stock.

“Effectiveness Date” means, with respect to the Initial Registration Statement,
December 9, 2010 or if the Initial Registration Statement is not reviewed by the
SEC, then the date that is five (5) Business Days from the receipt by the
Company of oral or written notification from the SEC that there will not be a
review.
 
“Effectiveness Period” as defined in Section 4(b) hereto.

“Filing Date” means, with respect to the Initial Registration Statement, October
11, 2010.

 
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“Investors Registrable Securities ” means (i) all Conversion Shares originally
issued, directly or indirectly, to Investors or any of their Affiliates, (ii)
all Warrant Shares originally issued, directly or indirectly, to Investors or
any of their Affiliates, and (iii) all shares of Common Stock issued or
issuable, directly or indirectly, with respect to the Conversion Shares or
Warrant Shares upon exercise, conversion or exchange or by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.   As to any particular Investors
Registrable Securities, such securities shall cease to be Investors Registrable
Securities when they have been (a) distributed to the public pursuant to an
offering registered under the 1933 Act, (b) sold in compliance with Rule 144, or
(c) may be sold by such Investor under Rule 144 without any restriction.

“Prospectus” shall mean the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference or deemed to be incorporated by reference in such prospectus.

“Register,” “registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

“Registrable Securities” shall mean (i) the Investors Registrable Securities,
(ii) the St. Cloud Registrable Securities and (iii) any other securities issued
or issuable with respect to or in exchange for Registrable Securities; provided,
that, a security shall cease to be a Registrable Security upon (a) sale pursuant
to a Registration Statement or Rule 144 under the 1933 Act, or (b) such security
becoming eligible for resale by the Investors without restrictions pursuant to
Rule 144.

“Registration Statement” shall mean any registration statement of the Company
filed under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus and any amendments and supplements to such Registration Statement,
including pre- or post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed incorporated by reference in such
Registration Statement.

“Rule 144” shall mean Rule 144 promulgated by the SEC pursuant to the 1933 Act
and any successor or substitute rule, law or provision.
 
“Rule 415” means Rule 415 promulgated by the SEC pursuant to the 1933 Act, as
such Rule may be amended or interpreted from time to time, or any similar rule
or regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

“SEC” means the U.S. Securities and Exchange Commission.

 
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“SEC Guidance” means (i) any publicly-available written guidance, or rule of
general applicability of the SEC staff, (ii) written comments, requirements or
requests of the SEC staff to the Company in connection with the review of a
Registration Statement, or (iii) the 1933 Act.

“St. Cloud Registrable Securities” means (a) all of the shares of Common Stock
then held by St. Cloud Capital Partners II, L.P. or its affiliates, (b) all of
the shares of Common Stock issuable upon conversion in full of those certain 10%
Convertible Notes, dated March 31, 2008 and June 30, 2008 (the “St. Cloud
Notes”) (assuming on such date the St. Cloud Notes are converted in full), (c)
all shares of Common Stock then issuable upon exercise of those certain
warrants, dated March 31, 2008 and June 30, 2008 (the “St. Cloud Warrants”)
(assuming on such date the St. Cloud Warrants are exercised in full), (d) any
additional shares of Common Stock issuable in connection with any anti-dilution
provisions in the St. Cloud Notes or the St. Cloud Warrants and (e) any
securities issued or then issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing;
provided, that, a security shall cease to be a St. Cloud Registrable Security
upon (a) sale pursuant to a Registration Statement or Rule 144 under the 1933
Act, or (b) such security becoming eligible for resale without restrictions
pursuant to Rule 144.

“1933 Act” means the 1933 Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

“Unit Warrants” shall have the meaning as defined in the recitals.

“Warrant Shares” means the shares of Common Stock or other securities issuable
upon the exercise of the Unit Warrants.

2.           Registration.
 
(a)           Filing of Initial Registration Statement.  Subject to the terms
and conditions of this Agreement, the Company shall prepare and file with the
SEC, no later than the Filing Date, a Registration Statement under the 1933 Act
on any form for which the Company then qualifies (the “Initial Registration
Statement”) for the resale by the Investors of the Investors Registrable
Securities.  The Company shall have the right to include in such Initial
Registration Statement the St. Cloud Registrable Securities, which shall have
priority over the Investors Registrable Securities.  Such Initial Registration
Statement shall include the plan of distribution attached hereto as Exhibit
A.  The Initial Registration Statement (and each amendment thereto) shall be
provided to the Investors prior to its filing or other submission in accordance
with Section 4(a) hereof.
 
(b)             Additional Registration Statements.  If during the Effectiveness
Period, subject to Section 2(d)(ii) and SEC Guidance, the number of Investors
Registrable Securities at any time exceeds 100% of the number of Investors
Registrable Securities then registered for resale in the Initial Registration
Statement, then the Company shall file as soon as reasonably practicable an
additional Registration Statement covering the resale by the Investors of not
less than the number of such unregistered Investors Registrable Securities.
 
 
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(c)             Expenses.  Except as set forth in Section 4(e), the Company will
pay all expenses associated with each registration, including filing and
printing fees, the Company’s counsel and accounting fees and expenses, costs
associated with clearing the Investors Registrable Securities for sale under
applicable state securities laws and listing fees.  Investors shall be
responsible for all other expenses in connection with the registration,
including fees and expenses of counsel, discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Investors Registrable Securities being sold.
 
(d)           Effectiveness.
 
(i)           Subject to the terms and conditions of this Agreement, the Company
shall use commercially reasonable efforts to have the Initial Registration
Statement declared effective by the Effectiveness Date.  The Company shall
notify the Investors by facsimile or e-mail as promptly as practicable after any
Registration Statement is declared effective and shall simultaneously provide
the Investors with copies of any related Prospectus to be used in connection
with the sale or other disposition of the securities covered thereby.
 
(ii)           For not more than twenty (20) consecutive days or for a total of
not more than sixty (60) days in any twelve (12) month period, the Company may
delay the disclosure of material non-public information concerning the Company,
by suspending the use of any Prospectus included in any Registration Statement
contemplated hereunder containing such information, the disclosure of which at
the time is not, in the good faith opinion of the Company, in the best interests
of the Company (an “Allowed Delay”); provided, that the Company shall promptly
(a) notify the Investors in writing of the existence of (but in no event,
without the prior written consent of an Investor, shall the Company disclose to
such Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b) advise the Investors in writing
to cease all sales under the Registration Statement until the end of the Allowed
Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable.
 
(e)           Other Registration Rights Agreements. Nothing in this Agreement
shall limit the Company’s right to grant registration rights, including, without
limitation, demand or “piggyback” registration rights, to any other person.
 
3.           Cut-Backs due to SEC Guidance.  Notwithstanding any other provision
of this Agreement, if any SEC Guidance sets forth a limitation on the number of
Registrable Securities permitted to be registered on a particular Registration
Statement (and notwithstanding that the Company used diligent efforts to
advocate with the Commission for the registration of all or a greater portion of
Registrable Securities), unless otherwise directed in writing by the Investors
as to their Investors Registrable Securities, the number of Investors
Registrable Securities to be registered on such Registration Statement will
first be reduced by Investors Registrable Securities represented by Warrant
Shares (applied, in the case that some Warrant Shares may be registered, to the
Investors on a pro rata basis based on the total number of unregistered Warrant
Shares held by such Investors), second by Investors Registrable Securities
represented by Conversion Shares (applied, in the case that some Conversion
Shares may be registered, to the Investors on a pro rata basis based on the
total number of unregistered Conversion Shares held by such Investor) and third
by Investors Registrable Securities represented by Common Stock (applied, in the
case that some Common Stock may be registered, to the Investors on a pro rata
basis based on the total number of unregistered Common Stock held by the
Investor).   Notwithstanding the foregoing, (i) prior to any reduction in the
number of Registrable Securities included in a Registration Statement, all
Registrable Securities other than Investors Registrable Securities or St. Cloud
Registrable Securities shall be reduced first before there is any reduction to
Investors Registrable Securities or St. Cloud Registrable Securities and (ii)
prior to any reduction in the number of Registrable Securities included in a
Registration Statement, all Investors Registrable Securities shall be reduced
first before there is any reduction to St. Cloud Registrable Securities (to the
extent they are entitled to participate based upon SEC Guidance).  In the event
of a cutback hereunder, the Company shall give the Investors at least 5 Trading
Days prior written notice along with the calculations as to such Investor’s
allotment.

 
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4.           Company Obligations.  In connection with the Company’s obligations
under this Agreement to file a Registration Statement with the SEC and to use
its commercially reasonable efforts to cause a Registration Statement to become
effective in accordance with the terms hereof, the Company will, as
expeditiously as possible:
 
(a)           prepare and file with the Securities and Exchange Commission a
Registration Statement with respect to such Registrable Securities and
thereafter use commercially reasonable efforts to cause such Registration
Statement to become effective and to remain continuously effective, and such
Registration Statement shall include the plan of distribution attached hereto as
Exhibit A; provided, that, before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company will furnish a reasonable
period of time prior to filing to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
furnished within a reasonable period of time prior to filing and will be subject
to review of such counsel;
 
(b)           notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the SEC
such amendments and post-effective amendments to the Registration Statement and
the Prospectus as may be necessary to keep the Registration Statement effective
for a period that will terminate upon the earlier of (i) six months in the case
of underwritten registrations, (ii) 36 months in the case of shelf
registrations, (iii) the date on which all Registrable Securities covered by
such Registration Statement may be sold without restriction pursuant to Rule
144, or (iv) in any event, when all of the securities covered by such
Registration Statement during such period have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement (but, in any event, not before the
expiration of any longer period required under the 1933 Act, or, if such
registration statement relates to an underwritten offering, such longer period
as in the opinion of counsel for the underwriters a prospectus is required by
law to be delivered in connection with sales of Registrable Securities by an
underwriter or dealer (the “Effectiveness Period”) and to comply with the
provisions of the 1933 Act and the 1934 Act with respect to the distribution of
all of the Registrable Securities covered thereby in accordance with the
intended methods of disposition by the sellers thereof set forth in such
Registration Statement;
 
 
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(c)           furnish to the Investors such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as Investors may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by Investors that
are covered by the related Registration Statement;
 
(d)           use commercially reasonable efforts to (i) prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement
and, (ii) if such order or suspension is issued, obtain the withdrawal of any
such order or suspension at the earliest possible moment and notify each holder
of Registrable Securities of the issuance of such order and the resolution
thereof or its receipt of notice of the initiation of any proceeding such
purpose;

(e)           prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
Investors and their counsel in connection with the registration or qualification
of such Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions requested by the Investors as shall be reasonably
appropriate in the opinion of the Company and do any and all other commercially
reasonable acts or things necessary or advisable to enable the distribution in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (i) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 4(e), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 4(e), or (iii)
file a general consent to service of process in any such jurisdiction; and
provided further that (notwithstanding anything in this Agreement to the
contrary with respect to the bearing of expenses) if any jurisdiction in which
any of such Registrable Securities shall be qualified shall require that
expenses incurred in connection with the qualification therein of any such
Registrable Securities be borne by the selling Investors, then the selling
Investors shall, to the extent required by such jurisdiction, pay their pro rata
share of such qualification expenses;

(f)           use commercially reasonable efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;
 
(g)           immediately notify the Investors, at any time when a Prospectus
relating to Registrable Securities is required to be delivered under the 1933
Act, upon discovery that, or upon the happening of any event as a result of
which, the Prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and at the request
of any such holder, promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing;
 
 
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(h)           otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder;
 
(i)   enter into such customary agreements (including underwriting agreements in
customary form) and take all such other actions as the holders of a majority of
the Registrable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities;
 
(j)    make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant, or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate and
business documents and properties of the Company as shall be necessary to enable
them to exercise their due diligence responsibility, and cause the Company’s
officers, directors, employees, agents, representatives, and independent
accountants to supply all such information reasonably requested by any such
seller, underwriter, attorney, accountant, or agent in connection with such
registration statement; provided, however, that any such information furnished
by the Company that is non-public shall be used in connection with such
registration only, and shall be kept confidential by any of the foregoing
recipients; and

(k)           With a view to making available to the Investors the benefits of
Rule 144 (or its successor rule) and any other rule or regulation of the SEC
that may at any time permit the Investors to sell shares of Common Stock to the
public without registration, the Company covenants and agrees to use
commercially reasonable efforts to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144; (ii) file with
the SEC in a timely manner all reports and other documents required of the
Company under the 1934 Act; (iii) furnish to Investors upon request, as long as
Investors own any Registrable Securities, (A) a written statement by the Company
that it has complied with the reporting requirements of the 1934 Act, (B) a copy
of the Company’s most recent annual or quarterly report, and (C) such other
information as may be reasonably requested in order to avail Investors of any
rule or regulation of the SEC that permits the selling of any such Registrable
Securities without registration; and (iv) reasonably assist and cooperate with
any Investor (including coordination with the Company’s transfer agent and
procuring appropriate legal opinions) in such Investor’s efforts to sell shares
of Common Stock included as part of such Investor’s the Registrable Securities
under Rule 144 (or its successor rule).

5.           Due Diligence Review; Information.  The Company shall make
available, during normal business hours, for inspection and review by the
Investor, advisors to and representatives of the Investors (who may or may not
be affiliated with the Investors and who are reasonably acceptable to the
Company), all financial and other records, all SEC Documents (as defined in the
Purchase Agreement) and other filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement.
 
 
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6.           Obligations of the Investors.

(a)           Investors shall each furnish in writing to the Company such
information regarding themselves, the Registrable Securities held by them, the
intended method of disposition of the Registrable Securities held by them and
their beneficial ownership of the Company’s securities, including who has the
right to vote or dispose of such securities on behalf of Investor, if other than
the Investor, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute and deliver such documents in
connection with such registration as the Company may reasonably request.  At
least five (5) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify Investors of the information
the Company requires from Investors if Investors elect to have any of the
Registrable Securities included in the Registration Statement.  Investors shall
provide such information to the Company at least two (2) Business Days prior to
the first anticipated filing date of such Registration Statement if Investors
elect to have any of the Registrable Securities included in the Registration
Statement.
 
(b)           Each Investor, by their acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Investor has notified the Company in writing of their
election to exclude all of their Registrable Securities from such Registration
Statement.
 
(c)           Each Investor agrees that, upon receipt of any notice from the
Company of the happening of an event pursuant to Section 4(h) hereof, such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities,
until such Investor’s receipt of the copies of the supplemented or amended
prospectus filed with the SEC and until any related post-effective amendment is
declared effective and, if so directed by the Company, each Investor shall
deliver to the Company (at the expense of the Company) or destroy (and deliver
to the Company a certificate of destruction) all copies in such Investor’s
possession of the Prospectus covering the Registrable Securities current at the
time of receipt of such notice.
 
7.           Participation in Underwritten Registrations.
 
(a)   No Investor may participate in any registration hereunder which is
underwritten unless such Investor (i) agrees to sell such Investor’s securities
on the basis provided in any underwriting arrangements approved by the Investor
or other persons entitled hereunder to approve such arrangements (including,
without limitation, pursuant to the terms of any over-allotment or “green shoe”
option requested by the managing underwriter(s); provided, that no holder of
Registrable Securities will be required to sell more than the number of
Registrable Securities that such holder has requested the Company to include in
any registration), and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, and other documents reasonably
required under the terms of such underwriting arrangements.
 
 
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(b)   Each Investor that is participating in any registration hereunder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Sections 4(d) or (g) above, such Investor will
forthwith discontinue the disposition of its Registrable Securities pursuant to
the registration statement until receipt of the notification set forth in
Section 4(d) or copies of a supplemented or amended prospectus as contemplated
by such Section 4(e), as applicable.  In the event that the Company shall give
any such notice, the applicable time period mentioned in Section 4(b) during
which a Registration Statement is to remain effective shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Sections 4(d) or (g) to and including the date when each
seller of a Registrable Security covered by such registration statement shall
have received the notice contemplated by Section 4(d) or copies of the
supplemented or amended prospectus contemplated by Section 4(e) .

8.           Indemnification.
 
(a)           Indemnification by the Company.  The Company will indemnify and
hold harmless each Investor and their respective officers, directors, members,
employees and agents, successors and assigns, and each other person, if any, who
controls such Investor within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which they may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof; (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a “Blue Sky Application”); (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the 1933 Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration;
or (v) any failure to register or qualify the Registrable Securities included in
any such Registration in any state where the Company or its agents has
affirmatively undertaken or agreed in writing that the Company will undertake
such registration or qualification on such Investor’s behalf and will reimburse
Investors, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by such
Investor or any such controlling person in writing specifically for use in such
Registration Statement or Prospectus.
 
 
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(b)           Indemnification by the Investors.  Each Investor agrees, severally
and not jointly, to indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors, officers, employees, stockholders and each
person who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from any untrue statement of a material fact or any omission of
a material fact required to be stated in the Registration Statement or
Prospectus or preliminary prospectus or amendment or supplement thereto or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information furnished in writing by such Investor to the Company specifically
for inclusion in such Registration Statement or Prospectus or amendment or
supplement thereto.  In no event shall the liability of any Investor be greater
in amount than the dollar amount of the proceeds (net of all expense paid by
such Investor in connection with any claim relating to this Section 8 and the
amount of any damages such Investor has otherwise been required to pay by reason
of such untrue statement or omission) received by such Investor upon the sale of
the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.
 
(c)           Conduct of Indemnification Proceedings.  Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation.  It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties.  No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation.
 
(d)           Contribution.  If for any reason the indemnification provided for
in the preceding paragraphs (a) and (b) is unavailable to an indemnified party
or insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations.  No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent
misrepresentation.  In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 8 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.
 
 
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9.           Miscellaneous.
 
(a)           Amendments and Waivers.  This Agreement may be amended only by a
writing signed by the Company and the Investors.  The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Investor.
 
(b)           Notices.  All notices and other communications provided for or
permitted hereunder shall be made as set forth in Section 7.10 of the Purchase
Agreement.
 
(c)           Assignments and Transfers by Investors.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the Investors and
their respective successors and assigns.  Investors may transfer or assign, in
whole or from time to time in part, to one or more persons its rights hereunder
in connection with the transfer of Registrable Securities by Investors to such
person, provided that each Investor complies with all laws applicable thereto
and provides written notice of assignment to the Company promptly after such
assignment is effected.
 
(d)           Assignments and Transfers by the Company.  This Agreement may not
be assigned by the Company (whether by operation of law or otherwise) without
the prior written consent of 66 2/3% of the Investors, provided, however, that
the Company may assign its rights and delegate its duties hereunder to any
surviving or successor corporation in connection with a merger or consolidation
of the Company with another corporation, or a sale, transfer or other
disposition of all or substantially all of the Company’s assets to another
corporation, without the prior written consent of the Investors, after notice
duly given by the Company to Investors.
 
(e)           Benefits of the Agreement.  The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.  Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
 
(f)           Electronic Delivery; Counterparts.  This agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
and all of which shall constitute one and the same document.  In the event that
any signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” tif, .gif, .peg or similar attachment to electronic mail (any such
delivery, an “Electronic Delivery”), such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such Electronic Delivery
signature page were an original thereof.  At the request of any party hereto,
each other party hereto or thereto shall re-execute the original form of this
Agreement and deliver such form to all other parties.  No party hereto shall
raise the use of Electronic Delivery to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of Electronic Delivery as a defense to the formation of a contract, and each
such party forever waives any such defense, except to the extent such defense
relates to lack of authenticity.
 
 
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(g)           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
 
(h)           Severability.  Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect.
 
(i)           Further Assurances.  The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
 
(j)           Entire Agreement.  This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
 
 
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(k)           Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial.  This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to conflicts of laws
concepts which would apply the substantive law of some other jurisdiction, and
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors or assigns.  Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby.  Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement.  Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court.  Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
 

[Signature page to follow]

 
 
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.
 

 
The Company:

NATIONAL HOLDINGS CORPORATION

By: /S/ MARK
GOLDWASSER                                                                
      Mark Goldwasser
      Chief Executive Officer

The Investors:

/S/ FRANK S.
PLIMPTON                                                                           

/S/ CHRISTOPHER C.
DEWEY                                                                

/S/ MARK KLIEN                                                                

/S/ LEONARD J.
SOKOLOW                                                                

/S/ STEPHEN
JONES                                                                

LINDEN GROWTH PARTNERS MASTER FUND

By: /S/ PAUL COVIELLO, MANAGER

TELLURIDE ACQUISITION, INC.

By: /S/ DIANE CHILLEMI, PRESIDENT
 
ST. CLOUD CAPITAL PARTNERS, L.P.
 

 
By: /S/ ROBERT LAUTZ, MANAGING DIRECTOR

 
 
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Exhibit A

Plan of Distribution
 
The selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

The selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:

- ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

- block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

- purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

- an exchange distribution in accordance with the rules of the applicable
exchange;

- privately negotiated transactions;

- short sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the SEC;

- through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

- broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;

- a combination of any such methods of sale; and

- any other method permitted pursuant to applicable law.

The selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the 1933 Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.  The selling stockholders also
may transfer the shares of common stock in other circumstances, in which case
the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 
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In connection with the sale of our common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.  The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any.  Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents.  We will not receive any of the proceeds from this offering.
Upon any exercise of the Warrant by payment of cash, however, we will receive
the exercise price of the Warrant.

The selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the 1933 Act, provided that
they meet the criteria and conform to the requirements of that rule.

The selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the 1933 Act.  Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the 1933
Act.  Selling stockholders who are "underwriters" within the meaning of Section
2(11) of the 1933 Act will be subject to the prospectus delivery requirements of
the 1933 Act.

To the extent required, the shares of our common stock to be sold, the names of
the selling stockholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers.  In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.

 
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We have advised the selling stockholders that the anti-manipulation rules of
Regulation M under the 1934 Act may apply to sales of shares in the market and
to the activities of the selling stockholders and their Affiliates.  In
addition, we will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling stockholders for the purpose
of satisfying the prospectus delivery requirements of the 1933 Act.  The selling
stockholders may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the 1933 Act.

We have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the 1933 Act and state securities laws, relating to
the registration of the shares offered by this prospectus.
 
We have agreed with the selling stockholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of (1)
such time as all of the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or (2) the date on
which the shares may be sold without restriction pursuant to Rule 144 of the
1933 Act.

 
 
 
 
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