Exhibit 10.14


SECURITIES PURCHASE
AGREEMENT





THIS SECURITIES PURCHASE
AGREEMENT (“Agreement”) is made and
entered into this 7th day
of April, 2009, by and among NATIONAL HOLDINGS CORPORATION,
a Delaware corporation (the “Company”) and FUND.COM INC., a Delaware
corporation, and/or its Affiliate (collectively, the “Investor”).





Recitals





A.           The
Company and the Investor are executing and delivering this Agreement and the
exhibits hereto, in order to provide working capital to the Company and the
Subsidiaries and to facilitate the expansion of the brokerage and investment
banking business of the Company and its Subsidiaries, as contemplated by Section
7.5 of this Agreement; and





B.           The
Investor wishes to purchase from the Company and the Company wishes to sell and
issue to the Investor, upon the terms and conditions stated in this Agreement,
the following securities of the Company (collectively, the “Securities”):




(i)           an
aggregate of 5,000 shares of Series C Preferred Stock, at a purchase price of
$1,000.00 per share, which is convertible (subject to adjustment) into 6,666,666
shares of the Company’s Common Stock, and which contains the rights,
designations and privileges as are set forth in the Series C Certificate of
Designations;





(ii)           the
Class A Warrant; and





(iii)           the
Class B Warrant; and




C.           Contemporaneous
with the sale of the Series C Preferred Stock and the Warrants, (i) the parties
hereto will execute and deliver the Registration Rights Agreement, and (ii) the
Investor, the Company, Leonard J. Sokolow and Mark Goldwasser will execute and
deliver the Voting Agreement.




NOW, THEREFORE, in
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:





1.           Definitions.  In
addition to those terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the meanings set
forth below:





“10%
Convertible Note Holder(s)” shall mean St. Cloud Capital Partners II,
L.P. or any subsequent holders of the 10% Convertible Notes.





“10%
Convertible Notes” shall mean the collective reference to the $3,000,000
principal of 10% senior subordinated convertible promissory notes of the
Company, dated March 31, 2008 and the $3,000,000 principal amount of 10% senior
subordinated convertible promissory notes of the Company dated June 30, 2008,
issued  to the 10% Convertible Note Holders, together with any
modifications, amendments or restatements thereof.




1




“50%
Threshold” shall mean, at any point in time, including, without
limitation, following the exercise of the Class A Warrant and/or the Class B
Warrant, the record ownership by the Investor or its Affiliates of such number
of shares of Series C Preferred Stock, Class B Warrant Shares and/or Common
Stock of the Company which if (a) owned outright as Common Stock, or (b) as to
Series C Preferred Stock (including, without limitation, Class A Warrant
Shares), was fully converted into Common Stock, would represent in the aggregate
fifty percent (50%) or more of the issued and outstanding shares of Common Stock
of the Company at such point in time.




“Affiliate”
means, with respect to any particular Person means any other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by or under common control with such Person.  For purposes of
this definition, “control” (including
the terms “ controlling,” “ controlled by ” and “
under common control
with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.




“Approved
Strategic Acquisition” shall mean any proposed Strategic Acquisition that
the Company or its Board of Directors desires to consummate, which by a date
that shall be not later than five (5) Business Days following the (a)
negotiation of definitive terms and conditions of the acquisition agreements
with representatives or Affiliates of any Strategic Acquisition being considered
by the Company during 2009, and (b) completion of the Company’s and the
Investor’s due diligence investigation of such potential Strategic Acquisition,
the Investor shall approve in writing and advise the Company of its desire to
have the Company consummate.





“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.




“Certificate
of Amendmentshall mean the amendment
to the certificate of incorporation of the Company which shall contain such
terms and conditions as are set forth in the form of Exhibit
H attached hereto and made a part hereof.




“Certificates
of Deposit”  shall mean the certificate(s) of deposit
aggregating $500,000 and maturing on April 30, 2009 issued by Grand Adirondack
Federal Credit Union in favor of the Company or its Significant Subsidiaries
(National Securities Corporation and vFinance Investments Inc.), representing
the consideration paid to the Company for the Limited Recourse
Note.




“Class A
Warrant” means the collective reference to: (a) the warrant expiring
December 31, 2009 (subject to extension to December 31, 2010 as provided
therein), entitling the Investor or any subsequent holder to purchase the Class
A Warrant Shares at the Class A Warrant Exercise Price, and containing such
other terms and conditions as are set forth in the form of Class A Warrant
attached hereto as Exhibit
B-1 and made a part hereof; and (b) upon consummation of the Class A
Warrant Exchange, the warrant expiring December 31, 2009 (subject to extension
to December 31, 2010, as provided therein), entitling the Investor or any
subsequent holder to purchase the Class A Warrant Shares in the form of Company
Common Stock at the Class A Warrant Exercise Price, and containing such other
terms and conditions as are set forth in the form attached hereto as Exhibit
B-2 and made a part hereof.




2




“Class A
Warrant Exchange” shall mean the exchange of the Class A Warrant in the
form of Exhibit
B-1 attached hereto for the Class A Warrant in the form of Exhibit
B-2 attached hereto, to be consummated within three (3) Business Days
following the date of filing of the Certificate of Amendment with the Secretary
of State of the State of Delaware, all as contemplated by Section 7.9 of this
Agreement.




“Class A
Warrant Exercise Price” means: (a) as to Class A Warrant in the form of
Exhibit
B-1 attached hereto, One Thousand Dollars ($1,000.00) per share of Series
C Preferred Stock, subject to adjustment as provided in the Series C Certificate
of Designations; and (b) upon consummation of the Class A Warrant Exchange, as
to the Class A Warrant in the form of Exhibit
B-2 attached hereto, Seventy-Five Cents ($0.75) per share of Company
Common Stock, subject to adjustment as provided in such Class A
Warrant.




“Class A
Warrant Shares” shall mean the collective reference to: (a) an aggregate
of Seventeen Thousand Five Hundred (17,500) shares of Series C Preferred Stock,
subject to adjustment as provided in the Series C Certificate of Designations,
that are issuable upon exercise of the Class A Warrant annexed hereto as Exhibit
B-1 and made a part hereof; and (b) upon consummation of the Class A
Class A Warrant Exchange, an aggregate of 23,333,333 shares of the Company’s
Common Stock, that are issuable upon exercise of in the Class A Warrant annexed
hereto as Exhibit
B-2 and made a part hereof, subject to adjustment as provided in such
Class A Warrant.




“Class B
Warrant” means the warrant expiring on a date which shall be three (3)
years from the Closing Date” (hereinafter defined), entitling the Investor or
any subsequent holder to purchase the Class B Warrant Shares at the Class B
Warrant Exercise Price, and containing such other terms and conditions as are
set forth in the form attached hereto as Exhibit
C and made a part hereof.




“Class B
Warrant Exercise Price” means Seventy-Five Cents ($0.75) per share of
Common Stock, subject to adjustment as provided in the Class B
Warrant.




“Class B
Warrant Shares” shall mean an aggregate of 2,000,000 shares of Company
Common Stock, subject to adjustment as provided in the Class B
Warrant.




“Closing
Date” means the date of the consummation of the transactions contemplated
by this Agreement and the sale by the Company and purchase by the Investor of
the Series C Preferred Stock and the Warrants.




“Common
Stock” means the authorized shares of common stock, $0.02 par value per
share, of the Company, together with any securities into which such common stock
may be reclassified.





“Company
SEC Filings” has the meaning as defined in Section 4.6 of this
Agreement.




3




“Company
Subsidiaries" means the collective
reference to (i) the Significant Subsidiaries and the other direct and indirect
subsidiaries of the Company listed on Schedule
4.1to this
Agreement, and (ii) any other Subsidiary of the Company to be formed following
the Closing Date to consummate a Strategic Acquisition.




“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.





“Conversion
Shares” means the shares of Common Stock issuable upon conversion of any
and all of the 22,500 shares of Series C Preferred Stock.





“Environmental
Laws” has the meaning set forth in Section 4.15
hereof.





“FINRA”
means the Financial Industry Regulatory Authority.




“Fully-Diluted
Common Stock” shall mean the aggregate number of issued and outstanding
shares of Common Stock of the Company as at the Closing Date or as of a
particular measuring date following the Closing, on a fully-diluted basis, after
giving effect to (a) the exercise of all warrants, stock options and other
rights to purchase Common Stock, (including the Class A Warrant and the Class B
Warrant) then issued and outstanding, and (b) the conversion into Common Stock
of all notes, debentures, preferred stock and other convertible securities of
the Company then issued and outstanding, including, without limitation, all
Common Stock issuable upon conversion of the 5,000 shares of Series C Preferred
Stock issued to the Investor on the Closing Date and all Common Stock issuable
upon conversion of the 17,500 additional shares of Series C Preferred Stock that
may be issuable upon exercise of the Class A Warrant.





“GAAP”
means United States generally accepted accounting principles applied on a
consistent basis.





“Intellectual
Property” has the meaning set forth in Section 4.14 hereof.





“Investor
Subsidiary” means Fund.com Capital Inc.




“Investor
Lock Up Agreement” means that certain agreement to be delivered by the
Investor at Closing pursuant to which it will agree not to sell or otherwise
transfer any Securities (except to an Affiliate) for a period commencing on the
Closing Date and expiring on the close of business on December 31,
2009.





“Investor
SEC Filings” has the meaning set forth in Section 5.12 of this
Agreement.





“Key
Employee(s)” means the individual or collective reference to Mark
Goldwasser, Leonard J. Sokolow and Christopher Dewey.




4




“Key
Employees Employment Agreements” shall have the meaning set forth in
Section 6.1(n) hereof.




“Knowledge”
means (a) as to the Key Employees, the actual knowledge of such Key Employee,
after due inquiry, and (b) as to the Company and its Significant Subsidiaries,
the actual knowledge of the executive officers (as defined in Rule 405
promulgated under the 1933 Act) of the Company and such Significant
Subsidiaries, after due inquiry.




“Limited
Recourse Note” means the Five Hundred Thousand Dollar ($500,000) limited
recourse non-interest bearing convertible note of the Company payable to the
Investor in the form of Exhibit
L annexed hereto and made a part hereof.




“Lock Up
Agreements” means those certain agreements to be delivered by the Key
Employees at Closing pursuant to which those Persons will agree not to sell or
otherwise transfer any Common Stock or other securities of the Company owned by
them, without the prior consent of the Investor, for a period of not less than
one year from the Closing.




“Material
Adverse Effect” means a material adverse effect on (a) the assets,
liabilities, results of operations, condition (financial or otherwise), business
or prospects of (i) the Company or any of its Significant Subsidiaries, whether
individually or taken as a consolidated whole, or (ii) the Company and all of
the Company Subsidiaries, when taken as a consolidated whole, or (b) the ability
of the Company to perform its obligations under the Transaction
Documents.




“Person”
means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.





“Purchase
Price” means Five Million ($5,000,000.00) Dollars.


.


“Registration
Statement” has the meaning set forth in the Registration Rights
Agreement.




“Registration
Rights Agreement” means the registration rights agreement, in the form
attached hereto as Exhibit
D, pursuant to which the Company will agree to provide certain
registration rights under the 1933 Act, and the rules and regulations
promulgated thereunder, and applicable state securities laws.




“Series A
Certificate of Designations” means the certificate of designations for
the Series A Preferred Stock, filed with the Secretary of State of the State of
Delaware on December 21, 2001, as amended or restated from time to time
thereafter.





“Series A
Preferred Holder(s)” means any one or more Persons who are holders of
Series A Preferred Stock.




“Series A
Preferred Stock” mean an aggregate of 50,000 authorized shares of Series
A redeemable convertible preferred stock of the Company, par value $0.01 per
share, that have been authorized for issuance pursuant to the Series A
Certificate of Designations, of which 42,957 shares are issued and outstanding
as of March 31, 2009.




5




“Series C
Preferred Stock”
means the aggregate of 22,500 shares of Series C convertible preferred stock of
the Company, par value $.01 per share and Stated Value of $1,000 per share, that
has been authorized for issuance to the Investor pursuant to the Series C
Certificate of Designations.





“Series C
Certificate of Designations” means the certificate of designations for
the Series C Preferred Stock which shall contain the rights, designations and
privileges as are set forth in the certificate of designations attached as Exhibit
A hereto and made a part hereof.





“Securities”
means the collective reference to the Series C Preferred Stock, the Warrants,
the Conversion Shares and the Warrant Shares.





“Stated
Value” shall mean the $1,000.00 per share price of each share of Series C
Preferred Stock.





“Stock
Option Plan” shall mean the 2009 stock option plan of the Company in the
form of Exhibit
I hereto and made a part hereof.




“Significant
Subsidiary” shall mean as at the date hereof, the individual or
collective reference to National Securities Corporation, vFinance Investments
Inc. and EquityStation Inc.





“Strategic
Acquisitions” shall have the meanings referred to in Section 7.5 of this
Agreement.




“Subsidiary”
of any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first Person.




“Transaction
Documents” means the collective reference to this Agreement, the Series C
Certificate of Designations, the Warrants, the Voting Agreement, the Certificate
of Amendment, the Registration Rights Agreement and the Lock-up
Agreement.




“Triggering
Event” means the first to occur of either (a) the exercise of the Class A
Warrant and the payment of not less than $10,000,000 of the applicable Class A
Warrant Exercise Price, or (b) the 50% Threshold having been attained or
exceeded.




“Voting
Agreement” means the voting agreement, in the form attached hereto as
Exhibit
E  and made a part hereof, to be executed on the Closing Date,
among the Investor, the Company, Leonard Sokolow, Mark Goldwasser and
Christopher Dewey.




6




“Waivers”
means the collective reference to:





(a)           the
written waiver duly executed by the 10% Convertible Note Holder(s) in the form
of Exhibit
F-1 hereto; and





(b)           the
written consent duly executed by holders of a majority of the Series A Preferred
Stock, in the form of Exhibit
F-2 hereto.




“Warrant”
or “Warrants”
means the individual or collective reference to the Class A Warrant (both in the
form of Exhibit
B-1 or Exhibit
B-2 attached hereto) and the Class B Warrant.




“Warrant
Shares” means the collective reference to the Class A Warrant Shares
issuable upon the exercise of the Class A Warrant and the Class B Warrant Shares
issuable upon the exercise of the Class B Warrant.





“1933
Act” means the Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.





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




2.           Purchase
and Sale of the Series C Preferred Stock and Warrants.  Subject
to the terms and conditions of this Agreement, on the Closing Date, the Investor
shall purchase from the Company, and the Company shall sell and issue to the
Investor, an aggregate of 5,000 shares of the Series C Preferred Stock and the
Warrants, in consideration for the payment by the Investor of the Purchase Price
as specified in Section 3below.





3.           Closing
and Closing Deliveries.




3.1           Closing.




(a)           The
Closing shall take place at the offices of Littman Krooks LLP, 655 Third Avenue,
20th Floor, New York, New York 10017 or at such place as may be mutually agreed
upon by the parties hereto (or remotely via the exchange of documents and
signatures) at 10:00 A.M. New York City time following the execution and
delivery of this Agreement, and on the first business day immediately following
the date on which the last of the conditions specified herein is fulfilled or
waived (other than conditions that by their nature are required to be performed
on the Closing Date, but subject to satisfaction of such conditions) but in any
event no later than April 30, 2009 (the “Closing
Date”) or at such other time and place and such other date as the Company
and the Investor mutually agree.  All events occurring at the Closing
will, unless otherwise specified, be deemed to have simultaneously
occurred.




(b)           In
the event that the Closing shall not have occurred by the Closing Date (or any
other date mutually agreed upon in writing by the Parties), then either the
Company or the Investor may, by written notice to the other party, terminate
this Agreement; in which event neither party hereto shall have any further
liability or obligation to the other.  Notwithstanding the foregoing
to the contrary, the foregoing termination shall not affect the respective
parties obligations pursuant to the Limited Recourse Note and Investor’s right
to terminate this Agreement shall be subject to the provisions of Section 3.1 of
the Limited Recourse Note in the event an Extension Period (as defined in the
Limited Recourse Note) is in effect.




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3.2           Closing
Deliveries.




(a)      At
the Closing, the Company (or the Key Employees if specified) shall deliver to
Investor:




(i)           one
or more stock certificates or instruments registered in the name of Investor and
representing 5,000 shares of Series C Preferred Stock, which certificates bear
the legend set forth in Section
5.8(a);




(ii)           the
Series C Certificate of Designation in the form of Exhibit
A, duly executed by the Company, and evidence of filing of such Series C
Certificate of Designation with the Secretary of State of the State of
Delaware;




(iii)           the
Class A Warrant in the form of Exhibit
B-1, duly executed by the Company;




(iv)           the
Class A Warrant in the form of Exhibit
B-2, duly executed by the Company, which form of Class A Warrant shall be
held in escrow by counsel to the Company pending the Class A Warrant
Exchange;




(v)           the
Class B Warrant in the form of Exhibit
C, duly executed by the Company;




(vi)           the
Registration Rights Agreement in the form of Exhibit
D, duly executed by the Company;




(vii)           the
certificates referred to in Section 6.1(g) and
6.1(h) of this Agreement;




(viii)           good
standing certificate of the Company dated within five (5) days of the Closing
Date;




(ix)           the
Voting Agreement in the form of Exhibit
E duly executed by each of Leonard Sokolow and Mark Goldwasser and
Christopher Dewey;




(x)           the
Certificate of Amendment in the form of Exhibit
H hereto;




(xi)           the
Stock Option Plan in the form of Exhibit
I hereto;




(xii)           the
Waivers, in the form of Exhibit
F-1 and Exhibit
F-2, duly executed by the 10% Convertible Note Holder(s) and the holders
of a majority of the Series A Preferred Stock;




(xiii)           the
Key-Employee Employment Agreements referred to in Section 6.1(n), in
the form of Exhibit
G-1 through Exhibit
G-3, duly executed by each of Mark Goldwasser, Leonard Sokolow and
Christopher Dewey, respectively.




8




(xiv)           a
binder or certificate of insurance for term Key Employee Insurance in the total
amount of $6,000,000 insuring the life of Mark Goldwasser, and naming the
Company and the 10% Convertible Note Holder(s) as beneficiaries, as their
interests may appear (the “Key Man
Insurance”); and




(xv)           the
Lock Up Agreements duly executed by the Key Employees.




(b)           At
the Closing, the Investor shall deliver to the Company:




(i)           the
Purchase Price, payable in accordance with the provisions of Section 3.2(c)
below;




(ii)           the
certificate referred to in Section 6.2(e) of
this Agreement;




(iii)           a
certified copy of each of the Investor’s and the Investor’s Subsidiary’s
certificate of incorporation, as amended;




(iv)           good
standing certificates dated within five (5) days of the Closing Date of the
Investor and the Investor Subsidiary;




(v)           the Registration Rights
Agreement, in the form attached hereto as Exhibit
D  and made a part hereof, duly executed by the
Investor;




(vi)the Voting Agreement in
the form of Exhibit
E, duly executed by the Investor;




(vii)           the
Investor Lock Up Agreement; and




(viii)           the
Limited Recourse Note, marked “cancelled.”




(c)           Payment
of the Purchase Price.                                                      On
the Closing Date, the Five Million Dollar ($5,000,000) Purchase Price shall be
paid by the Investor to the Company by one or more wire transfers of immediately
available funds to a bank account designated by the Company prior to the
Closing.  Such payment may be made either by:




(i)           one
wire transfer to the Company of Five Million Dollars ($5,000,000), against the
Company’s repayment in cash of the Limited Recourse Note or the Company’s
delivery to Global Asset Fund Limited of the Certificate(s) of Deposit, marked
“cancelled” and accompanied by such other instruments transferring title to
$500,000 in cash or a certificate of deposit of $500,000 back to Global Asset
Fund Limited; or




(ii)           a
wire transfer to the Company of Four Million Five Hundred Thousand Dollars
($4,500,000), and a simultaneous wire transfer to the Company from Grand
Adirondack Federal Credit Union of Five Hundred Thousand Dollars ($500,000),
representing the proceeds of the Certificates of Deposit, with interest thereon
and without deduction therefrom.




The
Investor and Amalphis (as that term is defined in Section 7.5(c) hereof) shall
advise the Company of the method by which such Five Million Dollar ($5,000,000)
Purchase Price shall be paid not later than three (3) Business Days prior to the
Closing Date.




9




4.           Representations
and Warranties of the Company.  The Company does hereby
represent and warrant to the Investor that, except as set forth in the schedules
delivered herewith (collectively, the “Disclosure
Schedules”):




4.1           Organization, Good Standing
and Qualification.  Each of the Company and the Company
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and to own its properties.  Each of the Company and the
Company Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property makes such qualification or
leasing necessary unless the failure to so qualify has not and could not
reasonably be expected to have a Material Adverse Effect.  The
Company’s Subsidiaries, including the Significant Subsidiaries, are listed on
Schedule 4.1
hereto.




4.2           Authorization.  The
Company has full power and authority and has taken all requisite action on the
part of such Person necessary for (i) the authorization, execution and delivery
of the Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder and (iii) the authorization,
issuance (or reservation for issuance) and delivery by the Company of the
Securities.  The Transaction Documents constitute the legal, valid and
binding obligations of the Company enforceable against such Persons in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally.




4.3           Capitalization.  Schedule 4.3 sets
forth the authorized capital stock of the Company and each of the Company
Subsidiaries on the date hereof.  All of the issued and outstanding
shares of the capital stock of the Company and each of the Company Subsidiaries
have been duly authorized and validly issued, fully paid, and
nonassessable.  Except as  described on Schedule 4.3, there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
the Company Subsidiaries is obligated to issue any equity securities of any
kind, or any rights to purchase equity securities.  Except as
described on Schedule
4.3, except for the Registration Rights Agreement, there are no
pre-emptive rights, voting agreements, buy-sell agreements, option or right of
first purchase agreements or other agreements of any kind that are binding upon
the Company, any of the Subsidiaries or and any of the securityholders of the
Company relating to the securities of the Company or any of the
Subsidiaries.  Except as described on Schedule 4.3, since
December 31, 2008, the Company has not granted any stock options or other rights
to purchase Common Stock.




4.4           Valid
Issuance.  The Series C Preferred Stock, the Conversion Shares
and the Warrant Shares have been duly and validly authorized.  Upon
payment of the Purchase Price, the Series C Preferred Stock will be validly
issued, fully paid and non-assessable, and shall be free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investor.  Upon the filing of the Certificate
of Amendment and due conversion of the Series C Preferred Stock, the Conversion
Shares will be validly issued, fully paid and non-assessable, and shall be free
and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws and except for permitted encumbrances that may be created by the
Investor.  Upon the due exercise of the Warrants, the Warrant Shares
will be validly issued, fully paid and non-assessable, and shall be free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for permitted encumbrances that may be created by the
Investor.




4.5           Consents.  Except
for the Waivers or as otherwise as set forth in Schedule 4.5, the
execution, delivery and performance by the Company and each of its Subsidiaries
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods.





4.6           Company SEC
Filings.




(a)           The
Company has made available to the Investor through the EDGAR system, true and
complete copies of all of the Company’s Form 10-K, Form 10-Q, Form 8-K, Form
14-A, Form 14-C and all other periodic filings with the SEC made by the Company
under the 34 Act (collectively, the “Company
SEC Filings”).




(b)           Except
as set forth on Schedule 4.6 to the
Disclosures Schedules, the Company has fully and timely filed in the Company SEC
Filings all annual, quarterly and periodic reports required to be filed by it
under the 34 Act.  The Company is a fully-reporting company under
Section 12(g) of the 34 Act.  There are no letters of comment or other
correspondence from the SEC currently issued or outstanding in connection with
any Company SEC Filings. The Company Common Stock is traded on the OTC Bulletin
Board under the symbol “NHLD”.  No stop order or notice of suspension
of trading of the Common Stock has been received from or threatened by any
Person.




(c)           The
information contained in the Company SEC Filings are complete and correct in all
material respects and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.




4.7           No Material Adverse
Change.  Since September 30, 2008, except as identified and
described in the Company SEC Filings, there has not been any change in the
consolidated assets, liabilities, financial condition or operating results of
the Company and the Company Subsidiaries from that reflected in the financial
statements included in the Company SEC Filings, except for changes in the
ordinary course of business which have not had and could not reasonably be
expected to have a Material Adverse Effect, individually or in the
aggregate.




4.8           No Investment
Company. Neither the Company nor any of its Subsidiaries is, and upon the
issuance and sale of the Securities as contemplated by this Agreement, will be
an “investment company” as defined under the Investment Company Act of 1940 (an
“Investment
Company”).  The Company is not controlled by an Investment
Company.




10




4.9           No Conflict, Breach,
Violation or Default.  Except as set forth in Schedule 4.9, the
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute a
default under (i) the Certificate of Incorporation or Bylaws of the Company or
any Company Subsidiaries, both as in effect on the date hereof (true and
complete copies of which have been made available to the Investor through the
EDGAR system), (ii) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Company, any Company Subsidiary or any of their respective assets or properties,
or (iii) any agreement or instrument to which the Company or any Company
Subsidiary is a party or by which the Company or a Company Subsidiary is bound
or to which any of their respective assets or properties is
subject.





4.10           Tax
Matters.  The Company and each Company Subsidiary has prepared
and filed all tax returns required to have been filed by the Company or such
Company Subsidiary with all appropriate governmental agencies and timely paid
all taxes shown thereon or otherwise owed by it.  The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any Company Subsidiary nor, to the
Company’s Knowledge, any basis for the assessment of any additional taxes,
penalties or interest for any fiscal period or audits by any federal, state or
local taxing authority except for any assessment which is not material to the
Company and the Company Subsidiaries, taken as a whole.  All taxes and
other assessments and levies that the Company or any Company Subsidiary is
required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party when
due.  There are no tax liens or claims pending or, to the Knowledge of
the Company and the Company Subsidiaries, threatened against the Company or any
Company Subsidiary or any of their respective assets or
property.  Except as described on Schedule 4.10, there
are no outstanding tax payments or tax sharing agreements or other such
arrangements between the Company and any Company Subsidiary or other corporation
or entity.




4.11           Title to
Properties.  Except as disclosed in the Company SEC Filings,
the Company and each Company Subsidiary has good and marketable title to all
properties and assets owned by it, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or currently planned to be made thereof by them; and
except as disclosed in the Company SEC Filings, the Company and each Company
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.




4.12           Certificates, Authorities
and Permits.  Except as disclosed in the Company SEC Filings,
the Company and each Company Subsidiary possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and, except as set forth
on Schedule
4.12 hereto, neither the Company nor any Company Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Company Subsidiary, could reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate.




11




4.13 Labor Matters; Brokers.


(a)           Neither the Company nor any Company Subsidiary (i) is a
party to or bound by any collective bargaining agreements or other agreements
with labor organizations, (ii) has violated in any material respect any laws,
regulations, orders or contract terms, affecting the collective bargaining
rights of employees, labor organizations or any laws, regulations or orders
affecting employment discrimination, equal opportunity employment, or employees’
health, safety, welfare, wages and hours.


(b)           The Company and each of the Company Subsidiaries is, and
at all times has been, in compliance in all material respects with all
applicable laws respecting employment (including laws relating to classification
of employees and independent contractors) and employment practices, terms and
conditions of employment, wages and hours, and immigration and
naturalization.


(c)           The Company has disclosed in writing to the Investor a
complete list and detailed description of all broker arbitration claims and
other cases pending against employees of or independent contractors to the
Company or any of the Company Subsidiaries.


4.14           Intellectual
Property. The Company and each of the Company Subsidiaries
(collectively, the “Corporations”) own or possess
the requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights (“Intellectual
Property”) necessary to enable it to conduct its business as now operated; there
is no claim or action by any Person pertaining to, or proceeding pending, or to
the Knowledge of the Company threatened, which challenges the right of the any
of the Corporations with respect to any Intellectual Property necessary to
enable it to conduct its business as now operated; to the Knowledge of the
Company none of the Corporations’ current services and business activities
infringe on any Intellectual Property or other rights held by any
Person.  Each of the Corporations possesses all Copyrights, Patents,
Trademarks, Copyright Licenses, Patent Licenses or Trademark Licenses, each as
defined herein that are necessary to conduct its business as now
operated.  As used in this Section 4.14:




“Copyrights” shall mean (i)
copyrights, whether registered or unregistered, held pursuant to the laws of the
United States, any State thereof, or any other country; (ii) registrations,
applications and recordings in the United States Copyright Office or in any
similar office or agency of the United States, any State thereof or any other
country; (iii) any continuations, renewals or extensions thereof; (iv) any
registrations to be issued in any pending applications; (v) prior versions of
works covered by copyright and all works based upon, derived from or
incorporating such works; (vi) income, royalties, damages, claims and payments
now and hereafter due and/or payable with respect to copyrights, including,
without limitation, damages, claims and recoveries for past, present or future
infringement; (vii) rights to sue for past, present and future infringements of
any copyright; (viii) any rights in any material which is copyrightable or which
is protected by common law, United States copyright laws or similar laws, or any
law of any State, and (ix) any other rights corresponding to any of the
foregoing rights throughout the world.




“Copyright License” shall mean
any agreement, written or oral, granting any right in or to any Copyright or
Copyright registration, including, without limitation, licenses for the
exclusive right to use a copyright owned by a third Person.




12




“Patents” shall mean (i)
letters patent of the United States or any other country, all registrations and
recordings thereof and all applications for letters patent of the United States,
or any other country, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, or any State thereof; (ii)
reissues, divisions, continuations, renewals, continuations in part or
extensions thereof; (iii) petty patents, divisionals and patents of addition;
(iv) patents to issue in any such applications; (v) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to
patents, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (vi) rights to sue for past, present and
future infringements of any patent.




“Patent License” shall mean any
agreement, whether written or oral, granting any right with respect to any
Patent.




“Trademarks” shall mean (i)
trademarks, tradenames, corporate names, company names, business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, registrations and recordings thereof and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the "Marks"); (ii) any
reissues, extensions or renewals thereof, (iii) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement and (v) rights to sue for past, present and
future infringements of the Marks.




“Trademark License” shall mean
any agreement, written or oral, granting any right in and to any Trademark or
Trademark registration.




4.15           Environmental
Matters.  Neither the Company nor any Company Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or
operates any real property contaminated with any substance that is subject to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Knowledge of the Company
and the Company Subsidiaries, threatened investigation that might lead to such a
claim.




13




4.16           Litigation.  Except
as described in the Company SEC Filings or as otherwise disclosed in writing to
the Investor, there are no pending actions, arbitrations, suits or proceedings
against or affecting the Company or any of its properties; and to the Knowledge
of the Company, no such actions, suits or proceedings are threatened or
contemplated.




4.17           Financial
Statements.  The financial statements included in each Company
SEC Filings present fairly, in all material respects, the consolidated financial
position of the Company and the Company Subsidiaries as of the dates shown and
its consolidated results of operations and cash flows for the periods shown, and
such financial statements have been prepared in conformity with GAAP (except as
may be disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934
Act).  Except as set forth in the financial statements of the Investor
included in the Company SEC Filings filed prior to the date hereof, neither the
Company nor any of the Company Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.




4.18           Insurance
Coverage.  The Company and each Company Subsidiary maintains in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Company Subsidiary, and the Company and the
Company Subsidiaries reasonably believe such insurance coverage to be adequate
against all liabilities, claims and risks against which it is customary for
comparably situated companies to insure.





4.19           Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Company Subsidiary or the Investor for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.




4.20           No Directed Selling Efforts
or General Solicitation.  Neither the Company nor any Person
acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.




4.21           Private
Placement.  Subject to the accuracy of the Investor’s
representations in Section 5 of this Agreement, the offer and sale of the
Securities to the Investor as contemplated hereby is exempt from the
registration requirements of the 1933 Act.




4.22           Broker-Dealer Representation
and Warranties.  The Company’s Significant Subsidiaries,
National Securities Corporation (“National
Securities”), vFinance Investments, Inc. (“vFinance”)
and EquityStation, Inc. (“Equity
Station”) severally, but not jointly, represent and warrant as
follows:  Each of National Securities, vFinance and Equity Station and, to
the extent legally required, their applicable Subsidiaries:




(a)           has
filed with FINRA true and complete copies of all forms, reports and other
documents required to be filed by it, except where the failure to make such
filings would not have a Material Adverse Effect on National Securities,
vFinance, or Equity Station or such Subsidiaries, respectively;




14




(b)           possesses
and is in substantial compliance with all SEC, FINRA and applicable state
governmental authorizations (collectively, “Governmental
and SRO Authorizations”) that are required to conduct their respective
broker-dealer businesses including, without limitation, all authorizations and
licenses issued to any principal, officer or employee of National Securities,
vFinance and Equity Station used in connection with the operations of their
respective businesses, except where the failure to obtain or comply with such
Governmental and SRO Authorization would not have a Material Adverse Effect on
National Securities, vFinance or Equity Station, as the case may
be;




(c)           as
at the date of its most recently filed Financial and Operational Combined
Uniform Single Report (“Focus
Report”), each of the Significant Subsidiaries was in compliance with its
net capital requirements as provided in SEC Rule 15c-3(1) and Rule 15c-3(3) and
in substantial compliance with the other provisions of Rule 15c-3.




4.23           Limited Recourse
Note. The Company hereby acknowledges receipt of the sum of Five
Hundred Thousand Dollars ($500,000), representing the proceeds of a $500,000
bridge loan heretofore made by the Investor to the Company as evidenced by the
Limited Recourse Note.





5.           Representations,
Warranties of the Investor.  The Investor hereby represents and
warrants to the Company that:




5.1           Organization and
Existence.  The Investor is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties and to invest in the
Securities pursuant to this Agreement and to perform its obligations pursuant to
the Transaction Documents.




5.2           Authorization.  The
execution, delivery and performance by the Investor of the Transaction Documents
to which Investor is a party have been duly authorized and will each constitute
the valid and legally binding obligation of Investor, enforceable against
Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors’ rights
generally.




5.3           No Conflict, Breach,
Violation or Default.  The
execution, delivery and performance of the Transaction Documents by the Investor
will not conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under (i) the Investor’s Certificate
of Incorporation or the Investor’s Bylaws, both as in effect on the date hereof
(true and complete copies of which have been made available to the Company
through the EDGAR system), or (ii)(a) any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Investor, any Subsidiary or any of their respective assets
or properties, or (b) any agreement or instrument to which the Investor is a
party or by which the Investor or a Subsidiary is bound or to which any of their
respective assets or properties is subject.




15




5.4           Purchase Entirely for Own
Account.  The Securities to be received by Investor hereunder
will be acquired for Investor’s own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the 1933 Act, and Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the 1933
Actwithout prejudice, however, to Investor’s
right at all times to sell or otherwise dispose of all or any part of such
Securities in compliance with applicable federal and state securities
laws.Except to the
extent provided in the Investor Lock Up Agreement, nothing contained herein shall be deemed a representation
or warranty by Investor to hold the Securities for any period of
time.


5.5           Investment
Experience.  Investor acknowledges that it can bear the
economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated
hereby.




5.6           Disclosure of
Information.  Investor has had an opportunity to receive all
information related to the Company and the Company Subsidiaries requested by it
and to ask questions of and receive answers from the Company regarding the
Company, the Company Subsidiaries and their respective businesses, and the terms
and conditions of the offering of the Securities.  Investor
acknowledges receipt of and has reviewed copies of the Company SEC Filings and
the Company Presentation.




5.7           Restricted
Securities.  Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.  Furthermore, Investor agrees that no
direct or indirect transfers of Series C Preferred Stock can be made by the
Investor prior to January 1, 2010.




5.8           Legends.  It
is understood that, except as provided below, certificates and instruments
evidencing the Securities will bear the following or any similar
legend:




(a)           NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE/CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  UNTIL MARCH __, 2010, THE TRANSFER OF
THESE SECURITIES IS ALSO SUBJECT TO THE TERMS AND CONDITIONS OF AN INVESTOR
LOCK-UP AGREEMENT, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE
CORPORATION.




16




(b)           If
required by the authorities of any state in connection with the issuance of sale
of the Securities, the legend required by such state authority.





5.8           Accredited
Investor.  Investor is an accredited Investor as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act.





5.9           No General
Solicitation.  Investor did not learn of the investment in the
Securities as a result of any public advertising or general
solicitation.




5.10           Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Company Subsidiary or Investor for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of Investor.




5.11           Prohibited
Transactions.  During the last thirty (30) days prior to the
date hereof, neither Investor nor any Affiliate of Investor which (x) had
knowledge of the transactions contemplated hereby, (y) has or shares discretion
relating to Investor’s investments or trading or information concerning
Investor’s investments, including in respect of the Securities, or (z) is
subject to Investor’s review or input concerning such Affiliate’s investments or
trading (collectively, “Trading
Affiliates”) has, directly or indirectly, effected or agreed to effect
(i) any purchase or long sale of the Company’s securities or (ii) any short
sale, whether or not against the box, established any “put equivalent position”
(as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common
Stock, granted any other right (including, without limitation, any put or call
option) with respect to the Common Stock or with respect to any security that
includes, relates to or derived any significant part of its value from the
Common Stock or otherwise sought to hedge its position in the Securities (each
of such transactions specified in this clause (ii), a “Prohibited
Transaction”).  Prior to the earliest to occur of (i) the
termination of this Agreement, (ii) the Effective Date or (iii) the
Effectiveness Deadline, such Investor shall not, and shall cause its Trading
Affiliates not to, engage, directly or indirectly, in a Prohibited
Transaction.  Investor acknowledges that the representations,
warranties and covenants contained in this Section 5.11 are
being made for the benefit of the Investor as well as the Company.




5.12           Investor SEC Filings.
At the time of filing thereof, the Investor’s periodic filings made with the SEC
(collectively, the “Investor
SEC Filings”) complied as to form in all material respects with the
requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.  The financial statements included in each
Investor SEC Filing present fairly, in all material respects, the consolidated
financial position of the Investor as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with GAAP (except as may be
disclosed therein or in the Notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934
Act).  Except as set forth in the financial statements of the Investor
included in the Investor SEC Filings filed prior to the date hereof, neither the
Company nor any of its subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.




17




5.13           Money Laundering,
etc.  Neither the Investor, its Affiliates, officers,
directors, members or managers is a Prohibited Person (as defined below), has
conducted any business or has engaged in any transaction or dealing with any
Prohibited Person (as defined below) or has engaged in any transaction relating
to any property or interests in property blocked pursuant to the Executive Order
(as defined below), has engaged in any transaction that evades or avoids any of
the requirements or prohibitions set forth in the Executive Order or the USA
PATRIOT Act (the “PATRIOT Act”).  Investor represents that it and its
officers, directors or managers are in compliance with all applicable orders,
rules and regulations issued by, and recommendations of, the U.S. Department of
the Treasury and OFAC (as defined below) pursuant to the International Emergency
Economic Powers Act, 50 U.S.C. §§ 1701 et seq. (“IEEPA”) and the PATRIOT
Act.  Investor represents that neither it nor any of the Investor
Subsidiaries is a “Prohibited Foreign Shell
Bank” (as defined in the PATRIOT Act), or is named on any available lists
of known or suspected terrorists, terrorist organizations or of other sanctioned
persons issued by the United States government and/orthe government(s) of
any jurisdiction(s) in which Investor is doing business; “Prohibited Person”
means any Person:  (a) listed in the Annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224 on Terrorist Financing,
effective September 24, 2001, and relating to Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(the “Executive
Order”); (b) that is owned or controlled by, or acting for or on behalf
of, any person or entity that is listed in the Annex to, or is otherwise subject
to the provisions of the Executive Order; (c) that commits, threatens or
conspires to commit or supports “terrorism” as defined in the Executive Order;
(d) that is named as a “specifically designated national (SDN)” on the most
current list published by the U.S. Treasury Department Office of Foreign Assets
Control (“OFAC”) at its official website, http://www.treas.gov.ofac/t1lsdn.pdf
or at any replacement website or other replacement official publication of such
list or is named on any other U.S. or foreign government or regulatory list
issued post-09/11/01; (e) that is covered by IEEPA, OFAC or any other law,
regulation or executive order relating to the imposition of economic sanctions
against any country, region or individual pursuant to United States law or
United Nations resolution; or (f) that is an affiliate (including any principal,
officer, immediate family member or close associate) of a person or entity
described in one or more of clauses (a) - (e) of this definition of Prohibited
Person.





6.           
Conditions
to Closing.




6.1           Conditions to the Investor’s
Obligations. The obligation of Investor to purchase the 5,000 shares of
Series C Preferred Stock and the Warrants at the Closing is subject to the
fulfillment to Investor’s satisfaction, on or prior to the Closing Date, of the
following conditions, any of which may be waived by the Investor:




(a)           All
of the representations and warranties set forth in Section 4 hereof shall be
true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date.




18




(b)           The
Company and the other parties to the Transaction Documents shall have performed
in all material respects all obligations and conditions herein required to be
performed or observed by it or them on or prior to the Closing
Date.





(c)           The
Company shall have made all of other the Closing Deliveries required pursuant to
Section 3.2(a)
of this Agreement.




(d)           The
Company and the Company Subsidiaries (as applicable) shall have obtained the
Waivers and any and all other consents, permits, approvals, registrations and
waivers necessary or appropriate for consummation of the sale of the Securities
and the consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.


(e)           No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.




(f)           No
event shall have occurred or shall have failed to occur which has had or could
reasonably be expected to have a Material Adverse Effect on the Company or any
of its Significant Subsidiaries.




(g)           The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a) through (f) of this Section
6.1.




(h)           The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents, and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation
and Bylaws of the Company and each of its Company Subsidiaries and certifying as
to the signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company and (as applicable) the Company
Subsidiaries.




(i)           The
Series C Certificate of Designation shall be filed with the Secretary of State
of the State of Delaware and the Investor shall receive a certified copy of such
filing.


(j)           The
Voting Agreement shall be duly executed and delivered by each of the Company,
Leonard J. Sokolow, Mark Goldwasser and Christopher Dewey.





(k)           The
Company shall deliver to the Investor the Stock Option Plan.




19




(l)           The
Company shall issue and deliver to the Investor, certificate(s) evidencing the
5,000 shares of Series C Preferred Stock, and a duly executed Class A Warrant
and Class B Warrant.





(m)           The
Company shall execute and deliver to the Investor the Registration Rights
Agreement.




(n)           The
Company shall have entered into agreements with Mark Goldwasser and Leonard J.
Sokolow extending the terms of their respective employment agreements through
the fifth anniversary of the Closing Date and the Company shall have entered an
employment agreement with Christopher C. Dewey expiring on the fifth anniversary
of the Closing Date and containing the respective terms and conditions set forth
on Exhibits
G-1 through Exhibit
G-3 annexed hereto and made a part hereof (collectively, the “Key Employee Employment
Agreements”)




(o)           The
Investor shall have received a duly executed copy of the requisite notification
given by the Company to FINRA of a change in control pursuant to Rule 1017 of
the FINRA Regulations, together with copies of all Company correspondence to
FINRA and FINRA responses thereto.




(p)           The
Investor shall have received an opinion of counsel to the Company substantially
in the form attached hereto as Exhibit
J-1 and a separate opinion of special Delaware counsel to the Company in
the form attached hereto as Exhibit
J-2.




6.2           Conditions to Obligations of
the Company. The Company's obligation to sell and issue the Series C
Preferred Stock and the Warrants at the Closing is subject to the fulfillment to
the satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:




(a)           The
representations and warranties made by the Investor in Section 5 hereof, other
than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7 and 5.8 (the “Investment Representations”),
shall be true and correct in all material respects when made, and shall be true
and correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.  The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.  The
Investor shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by them on or prior to
the Closing Date.




(b)           The
Investor shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase of the Securities and the consummation of the other transactions
contemplated by the Transaction Documents, all of which shall be in full force
and effect.




(c)           No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.




20




(d)           The
Investor shall have made all of the Closing Deliveries required pursuant to
Section 3.2(b)
of this Agreement.


(e)           The
Investor shall have delivered a Certificate, executed on behalf of the Investor
by its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (c) and (d) of this Section 6.2.




(f)           the
Company shall have received an opinion of counsel to the Investor substantially
in the form attached hereto as Exhibit
K.





7.           Covenants
and Agreements of the Parties.




7.1           Reservation of Common
Stock.  Subject to the next succeeding sentence, the Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of providing for the Conversion
Shares, the Class B Warrant Shares, such number of shares of Common Stock as
shall from time to time equal the number of shares sufficient to permit the
issuance of the Conversion Shares and the Class B Warrant Shares pursuant to the
Transaction Documents in accordance with their respective
terms.  Notwithstanding the foregoing, the Company does not currently
have sufficient authorized Common Stock to issue Common Stock to the Investor to
the extent of the full issuance of the Conversion Shares and Class B Warrant
Shares.




7.2           Certificate of Amendment;
Shareholder Approval Covenant.




(a)           Promptly
following the Closing Date, the Company will file with the SEC  a Form
14A Proxy Statement under the 1934 Act. Upon obtaining the requisite stockholder
vote and approval at the Company stockholders’ meeting called for pursuant to
the Proxy Statement, the Company will file with the Secretary of State of the
State of Delaware the Certificate of Amendment, in order to, among other things,
authorize for issuance 150,000,000 shares of Company Common Stock, and
10,000,000 shares of Company preferred stock containing such rights, preferences
and designations as the board of directors of the Company may, from time to time
designate (including the Series A Preferred Stock and Series C Preferred
Stock).  The Company shall cause such Certificate of Amendment to be
filed with the Secretary of State of the State of Delaware by not later than
October 31, 2009.




(b)           Each
of the Investor and the Key Employees do hereby covenant and agree to vote or
execute written consents with respect to all of their shares of Common Stock and
shares of Series C Preferred Stock in favor
of the Certificate of Amendment.




(c)           The
Company’s failure or refusal to obtain the requisite shareholder approvals
referred to in Section
7.2(a) (except to the extent of a breach by the Investor under Section 7.2(b)
above), or its failure to file with the Secretary of State of the State of
Delaware the Certificate of Amendment by October 31, 2009, shall constitute a
material breach by the Company of the terms and conditions of this Agreement and
the other Transaction Documents.




21




7.3           Compliance with
Laws.  The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities.




7.4           Use of Proceeds. The
Company will use the proceeds from the sale of the Series C Preferred Stock for
general corporate and working capital purposes, including, without limitation,
capital contributions of $1,000,000 into each of the Company’s Significant
Subsidiaries for net capital purposes and other working capital.





7.5           Working Capital and
Strategic Acquisitions.




(a)           The
Parties hereto do hereby mutually acknowledge and agree that their collective
intention and the purpose of entering into this Agreement and consummating the
Transactions contemplated hereby and by the other Transaction Documents, is for
(i) the Investor or its Affiliates to provide working capital for the Company
and the existing Company Subsidiaries through its payment of the Purchase Price
for the 5,000 shares of Series C Preferred Stock to be issued to such Person(s)
on the Closing Date, and (ii) following the Closing Date and during 2009 and
thereafter, through its full or partial exercise of the Class A Warrant, for the
Investor or its Affiliates to facilitate the expansion of the Company’s
brokerage and investment banking business by providing additional equity capital
to the Company to enable the Company or an existing or newly formed Company
Subsidiary to consummate one or more Strategic Acquisitions (as defined
below).




(b)           The
Parties hereto do hereby intend that the Company or one or more existing or
newly formed Company Subsidiaries shall seek to acquire control of one or more
companies engaged in the securities brokerage, investment banking and related
businesses, whether by merger, consolidation, or purchase of substantially all
of the assets or securities of such Persons (collectively, “Strategic Acquisitions”). Each
of the Company, the Company Subsidiaries and the Investor do hereby mutually
agree to cooperate with each other in good faith in connection with the
negotiation, due diligence, documentation and potential closing(s) of any
potential Strategic Acquisitions; provided,
that neither the Company, any Company Subsidiary nor the Investor shall be
obligate in any respect as at the date hereof or as at the Closing Date to
consummate any Strategic Acquisition.




(c)            By
its execution of this Agreement, the Company does hereby covenant and agree
that, at all times on or before the expiration date of the Class A Warrant
(December 31, 2009, subject to extension to December 31, 2010, in accordance
with its terms to the earlier of (i) December 31, 2010, or (ii) the date in
which the full exercise of the Class A Warrant may occur), the Investor and its
Affiliates shall possess the sole, exclusive and absolute right (but not the
obligation) to provide the Company or any Company Subsidiary with all of the
capital to enable the Company or such Company Subsidiary to consummate one or
more Strategic Acquisitions subject to the provisions of this Section
7.5(c).  The Investor has advised the Company that Amalphis
Group, Inc. (“Amalphis”),
an Affiliate of the Investor, has indicated a willingness to undertake, directly
or through its Affiliates or associates, to provide the Investor with additional
funding to enable the Investor to exercise the Class A Warrant for the Class A
Warrant Exercise Price, in an amount sufficient to finance the purchase price of
one or more Approved Strategic Acquisitions.




22




(d)           Notwithstanding
the foregoing, in the event that: (i) the Investor (through its Board member
designees or otherwise) has indicated in writing that it is not in favor of the
Company pursuing or consummating a particular Strategic Acquisition, (ii) the
Investor fails to timely notify the Company of its intention to exercise the
Class A Warrant in whole or in part to finance an Approved Strategic
Acquisition, or (iii) the Investor (whether directly, through Amalphis, its
Affiliates or associates or otherwise) commits a “Warrant Default” (as that term
is defined in the Series C Certificate of Designation and the Class A Warrant),
the Company and its Subsidiaries shall have the immediate right to obtain debt
or equity financing for any such Strategic Acquisition from any source or
Person, other than the Investor or its Affiliates.




(e)           
In the event that the Company fails to proceed with the consummation of any
proposed Strategic Acquisition (a “Rejected Strategic
Acquisition”), then following the Board’s deliberations in which it has
elected not to proceed with such Rejected Strategic Acquisition, the Investor or
its Affiliates or associates will have the right in its sole and exclusive
discretion to pursue the Rejected Strategic Acquisition.




(f)        
    Notwithstanding the foregoing or any other provisions
contained in this Section 7.5 or elsewhere in this Agreement nothing herein or
in any other Transaction Document shall in any manner prohibit the Investor,
Amalphis or any other Affiliate or associate of the Investor from pursing for
its or their own account any one or more acquisitions of, or joint ventures or
other business transactions with, any other Person, including any Person engaged
in the securities, investment banking or brokerage businesses, and such
activities shall not, in any manner, be deemed or construed to be a
misappropriation of any corporate opportunity for the Company; provided,
however, that neither the Investor, Amalphis nor any other Affiliate or
associate of the Investor shall unilaterally pursue any Strategic Acquisition(s)
that was initiated by management of the Company, until such time as the same has
become a Rejected Strategic Acquisition.




(g)             (i)           At
all times on or before the expiration date of the Class A Warrant (December 31,
2009, subject to extension to December 31, 2010, in accordance with its terms to
the earlier of (x) December 31, 2010, or (y) the date in which the full exercise
of the Class A Warrant may occur), in the event that the Company shall determine
to seek a third party for, or solicit interest from third parties with respect
to, any financing for the Company or any of its Subsidiaries, other than a
financing to fund a Strategic Acquisition (a “Working Capital Financing”),
then prior to initiating any marketing or soliciting or entering into
negotiations with any third parties with respect to such Working Capital
Financing, the Company shall give written notice (the “Working Capital Financing Request
Notice”) of such determination to the Investor (including the dollar
amount of Working Capital Financing being sought).  The Investor shall
have the right, exercisable within five (5) Business Days following delivery of
the Working Capital Financing Request Notice, to advise the Company in writing
(the “”Negotiation
Notice”) whether or not the Investor or its Affiliates or associates are
interested in provide such Working Capital Financing.  If the Investor
desires to exercise such right of first offer and proceed with such Working
Capital Financing, the Investor and the Company will negotiate in good faith
during a period of ten (10) Business Days following the date of the Negotiation
Notice (the “Negotiation
Period”) as to the terms and conditions of such Working Capital
Financing.   On or before the expiration of the Negotiation
Period, the Investor shall submit to the Company its written final offer of the
terms and conditions (including price, structure, consideration and other
substantive economic terms) on which the Investor would be willing to provide
such Working Capital Financing (the “Investor Final
Offer”).  A failure by the Investor to give the Investor Final
Offer by the expiration of the Negotiation Period shall be deemed to constitute
a waiver of the Investor’s right of first offer with respect to such Working
Capital Financing.




23




(ii)           Upon
receipt of the Investor Final Offer, the Company shall give written notice (the
“Company Notice”) to the
Investor within five (5) days after receipt of such Investor Final Offer stating
whether or not the Company determines accept or reject the Investor Final Offer
regarding a Working Capital Financing on the terms set forth in the Investor
Final Offer.  A failure by the Company to give the Company Notice shall be
deemed to constitute a decision by the Company not to pursue a Working Capital
Financing with the Investor.




(iii)           If
the Company determines to accept the Investor Final Offer regarding a Working
Capital Financing, the Parties shall use diligent, good faith efforts to enter
into a binding agreement with respect to such Working Capital Financing,
consistent with the terms and conditions contained in the Investor Final Offer
within ten (10) Business Days after the Investor’s receipt of the Company
Notice, and to consummate such Working Capital Financing as promptly as
commercially practicable thereafter.




(iv)           In
the event that: (A) the Investor fails to timely deliver a Negotiation Notice
following receipt of a Working Capital Financing Request Notice, or does not
deliver the Investor Final Offer within the allowed period of time, or (B) the
Parties are unable to consummate such Working Capital Financing within thirty
(30) days of receipt of the Company Notice accepting the Investor Final Offer,
the Company shall thereafter have the right to pursue a Working Capital
Financing with any other Person; provided,
however, that if the Company shall be unable, within the next succeeding
thirty (30) days, to obtain substantially the same amount of Working Capital
Financing from any Person who is not an Affiliate of the Investor on terms and
conditions that, in the aggregate, are more favorable to the Company than those
contained in the Investor Final Offer, the Company shall provide the Investor
with all of the terms and conditions of any offer(s) received from such
unaffiliated Person(s), and the Investor shall have five (5) Business Days to
match any such third party offer(s).







7.6           Board Composition and
Voting.  At or promptly following the Closing, the
composition of the Board of Directors of the Company shall be constituted in the
manner set forth in the Voting Agreement, and the requisite majority of the
members of such Board of Directors to approve, ratify or consent to actions by
the Company and/or any Subsidiary of the Company shall be as set forth in the
Voting Agreement.





7.7           Stock Option
Plan.  The Company and the Investor do hereby agree that the
Stock Option Plan, by its terms shall provide, inter alia,that for so long as the Investor and/or its or their Affiliates own at
least 1,250 shares of Series C Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and the like):




24




(a)           the
maximum number of options (the “Stock Options”) that may be
issued under the Stock Option Plan shall not exceed 19,333,333 shares of Common
Stock, (inclusive of the approximately 6.5 million outstanding stock options as
at the date hereof), or such other number of shares of Common Stock as shall
represent twenty-five percent (25%) of the Fully-Diluted Common Stock of the
Company at the Closing Date (the “Option Shares”);




(b)           in
the event and to the extent that the Investor shall not fully exercise the Class
A Warrant and the Class B Warrant providing the Investor with ownership of or
the right to receive an aggregate of 32,000,000 shares of Company Fully-Diluted
Common Stock, the aggregate number of Option Shares available for issuance under
the Stock Option Plan shall be appropriately reduced to an amount equal to (25%)
of the Fully-Diluted Common Stock of the Company, as so proportionately reduced
and calculated after giving effect to the unexercised portions of the Class A
Warrant and the Class B Warrant  as of the expiration dates
thereof;




(c)           Stock
Options may be granted only to directors and employees of or consultants to the
Company or any of the Company Subsidiaries;




(d)           all
Stock Options (other than holders of the approximately 6.5 million issued Stock
Options) shall vest and may be exercised over a period of not less than four
years, in equal annual installments, commencing on the first anniversary of the
Closing Date;




(e)           except
for the approximately 6.5 million currently issued Stock Options, no new Stock
Options granted under the Stock Option Plan shall vest prior to the first
anniversary of the Closing Date;




(f)           the
exercise price of all Stock Options shall be not less than 100% of the closing
price of the Company’s Common Stock, as traded on the OTC Bulletin Board or any
other national securities exchange, as at the date of grant of the applicable
Stock Options;




(g)           the
Key Employees may not be granted in the aggregate more than 50% of the total
number of Stock Options available for grant under the Stock Option
Plan;




(h)           if
any holder of a Stock Option shall leave the employ of the Company or any
Company Subsidiary, shall cease rending consulting services to the Company or
any Company Subsidiary, or such employment or services shall be terminated, all
unvested Stock Option shall immediately terminate and vested Stock Options, if
any, must be exercised within ninety (90) days of the termination of employment
or such consulting services or such other period as is set forth in employment
or other similar agreements or arrangements existing as of the Closing
Date;





(i)           vested
Stock Options and Option Shares may be registered for resale pursuant to a Form
S-8 Registration Statement; and





(j)           Stock
Options shall not contain “cashless exercise” provisions.




25




7.8           Key Employee
Insurance.  On or following the Closing Date, in addition to
the insurance on the life of Mark Goldwasser referred to in Section 3.2(a)(xv)
above, upon the written request of the Investor, the Company shall use its
commercially reasonable efforts to obtain and maintain in force key Person life
insurance policies of $5,000,000 (or such lesser amount as the Investor may
request) on the lives of each of Leonard Sokolow and Christopher Dewey, with the
Company designated as beneficiary under each such policy (the “Key
Employee Insurance”).





7.9           Class A Warrant Exchange
Procedure.




(a)           On
a date which shall be not later than three (3) Business Days after the filing of
the Certificate of Amendment with the Secretary of State of the State of
Delaware (the “Class A
Warrant Exchange Date”), the Investor shall deliver to counsel to the
Company, the Class A Warrant, in the form of Exhibit
B-1 attached hereto (the “Preferred
Class A Warrant”) and any shares of Class C Preferred Stock previously
issued upon the prior exercise of such Preferred Class A Warrant, and receive in
exchange therefore the duly executed Class A Warrant in the form of Exhibit
B-2 attached hereto (the “Common
Class A Warrant”) and the shares of Common Stock set forth in Section 7.9(b) below;
at which time, the Preferred Class A Warrant, or the unexercised portion
thereof, shall be destroyed and thereafter deemed to be null and void, ab
initio.




(b)           In
the event and to the extent that, prior to the Class A Warrant Exchange Date,
the Preferred Class A Warrant shall have been fully or partially exercised, than
and in such event, on such Class A Warrant Exchange Date, the escrow agent shall
deliver to the holder(s) of such Preferred Class A Warrant:




(i)           if
as a result of a partial exercise of the Preferred Class A Warrant, a Common
Class A Warrant, entitling the holder(s) to purchase that number of shares of
Common Stock equal to (x) the aggregate number of Warrant Shares that would have
been issuable upon the full exercise of the Common Class A Warrant immediately
prior to the Class A Warrant Exchange Date, had such Common Class A Warrant not
been previously exercised, less (y) the number of shares of Common Stock to be
delivered pursuant to clause (ii) below; plus




(ii)           an
applicable number of shares of Common Stock of the Company that would have been
issuable to such holder(s) of the Common Class A Warrant, if such Common Class A
Warrant had been held by the holder(s) at the time of exercise of the Preferred
Class A Warrant.





8.
            No
      Violation of Voting Agreement or Changes in Transaction
      Documents.




8.1           Standstill.  The
Investor agrees that during the period commencing on the Closing Date and ending
on the third anniversary of the date hereof,  neither the Investor nor
any of its Affiliates or any Person acting at its or their direction, initiate,
propose or otherwise “solicit” (as such term is used in the proxy rules of the
SEC) shareholders of the Company for the approval of any shareholder proposals
whether made pursuant to Rule 14a-8 or Rule 14a-4 under the Exchange Act,
or otherwise, or cause or encourage or attempt to cause or encourage any other
Person to initiate any such shareholder proposal; otherwise communicate with the
Company’s shareholders or others pursuant to Rule 14a-1(l)(2)(iv) under the
Exchange Act; or participate in, or take any action pursuant to, any
“shareholder access” proposal which may be adopted by the SEC, whether in
accordance with proposed Rule 14a-11 or otherwise or otherwise initiate,
take, or solicit, cause or encourage others to take, any action inconsistent
with any of the foregoing.




26




8.2           Voting
Agreement.  The Investor does hereby covenant and agree that
neither it nor any of its Affiliates shall take any action that would violate
any of the provisions of the Voting Agreement.  In such connection,
neither the Investor nor any of its Affiliates shall, in connection with any
annual or special meeting of the stockholders of the Company, or pursuant to a
written consent of the holders of a majority of the voting capital stock of the
Company and a related Rule 14C Information Statement, make any changes or seek
to make any change in either:





(a)           the
Board of Directors of the Company or any Company Subsidiary that would violate
the terms of the Voting Agreement, or




(b)           the
executive officers or senior management of the Company or any of its
Subsidiaries (absent a breach by any Key Employee or any other executive
employee of a Company Subsidiary of the terms of their individual employment
agreements or their fiduciary duties and obligations to the Company or such
Company Subsidiary); it being understood that the sole and exclusive right to
make any such management changes shall be vested solely in the Board of
Directors of the Company and the applicable Company Subsidiary.





Any
breach by the Investor of the provisions of Section 8.1 or 8.2 shall constitute
a material breach by the Investor of the terms and conditions of this Agreement
and the other Transaction Documents.




8.3           Neither
the Company nor the Board of Directors of the Company shall amend, modify or
otherwise change any of the Transaction Documents (except to the extent
otherwise provided in the applicable Transaction Document), without the express
prior written consent of the Investor, which consent may be withheld of any
reason or no reason.





Any
breach by the Company or the Board of Directors of the provisions of Section 8.3
shall constitute a material breach by the Company of the terms and conditions of
this Agreement and the other Transaction Documents.





9.           Survival
and Indemnification.




9.1  Survival.  The
respective representations and warranties of the parties hereto contained in
this Agreement shall survive the Closing of the transactions contemplated by
this Agreement; provided, however, that the representations and warranties
contained in this Agreement shall expire on the laterto
occur of (a) twelve (12) months after the Closing Date, or (b) six (6) months
after a Triggering Event.




27




9.2  Indemnification.





(a)           Subject
to the provisions of Section 9.1, the
Company and the Company Subsidiaries severally agree to indemnify and hold
harmless Investor and its Affiliates and their respective directors, officers,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses,(including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof (collectively, “Losses”) to which such Person
may become subject as a result of any breach of any representation or warranty
made by the Company or any Company Subsidiary under the Transaction Documents,
and will reimburse any such Person for all such amounts as they are incurred by
such Person.





(b)           Subject
to the provisions of Section 9.1, the
Investor agrees to indemnify and hold harmless the Company and its Subsidiaries
and their respective directors, officers, employees and agents from and against
any and all Losses to which such Person may become subject as a result of any
breach of representation or warranty made by the Investor under the Transaction
Documents, and will reimburse any such Person for all such amounts as they are
incurred by such Person.





(c)           In
the event that at any time, the Company shall:





(i)           fail
or refuse to file the Certificate of Amendment with the Secretary of State of
the State of Delaware and consummate the Warrant Exchange by 5:00 p.m. (East
coast time) on October 31, 2009 (except to the extent caused by a breach by the
Investor under Section
7.2(b) hereto); or




(ii)           default
in the performance of or compliance with any covenant or agreement on Company’s
part to be performed or complied with as provided in Section 7 and such
default has not been cured for twenty (20) Business Days after the earlier of
(i) the Company obtained Knowledge of such default and (ii) written notice of
default is given to the Company by the Investor; or






(iii)           default
in the performance of or compliance with any agreement or covenant on the
Company’s part to be performed or complied with contained in any of the
Transaction Documents, and such default has not been cured for twenty (20)
Business Days after the earlier of (i) a Key Employee or the Company obtained
Knowledge of such default and (ii) written notice of default is given to the
Company by the Investor;







the
Investor and/or other holders of Series C Preferred Stock or Warrants may
proceed to protect and enforce the rights of such holder by an action at law for
monetary damages, or by a suit or other appropriate proceeding in equity,
including seeking specific performance of the Company’s covenants and agreements
contained herein or in any other Transaction Document, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law or
otherwise.





(d)           In
the event that at any time, the Investor or any of its Affiliates
shall:




(i)           default
in the performance of or compliance with any covenant or agreement on Investor’s
part to be performed or complied with as provided in Section 7 or in Sections 8.1 or 8.2
and such default has not been cured for twenty (20) Business Days after the
earlier of (i) the Investor obtained Knowledge of such default and (ii) written
notice of default is given to the Investor by the Company; or




28




(ii)           default
in the performance of or compliance with any agreement or covenant on the
Investor’s part to be performed or complied with contained in any of the
Transaction Documents, and such default has not been cured for twenty (20)
Business Days after the earlier of (i) a Key Employee or the Company obtained
Knowledge of such default and (ii) written notice of default is given to the
Company by the Investor;




the
Company may proceed to protect and enforce its rights by an action at law for
monetary damages, or by a suit or other appropriate proceeding in equity,
including seeking specific performance of the Investor’s covenants and
agreements contained herein or in any other Transaction Document, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or
otherwise.





9.3  Conduct of Indemnification
Proceedings.Promptly
after any one or more Person entitled to indemnification under this Section 9
(each an “Indemnified
Person”) becoming aware of any demand, claim or circumstances which would
or might give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to Section 9.2, such
Indemnified Person shall promptly notify the indemnifying Person(s) (each an
“Indemnifying Person”)
in writing and the Indemnifying Person shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however,that the failure of any
Indemnified Person so to notify the Indemnifying Person shall not relieve the
Indemnifying Person of its obligations hereunder except to the extent that the
Indemnifying Person is materially prejudiced by such failure to
notify.  In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless: (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such Indemnified
Person representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them.  The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, but if settled with such consent, or if there be a final judgment for
the plaintiff, the Indemnifying Person shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.  Without the prior
written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Indemnifying Person shall not effect any settlement
of any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such proceeding.




29




9.4  Indemnity Basket; Maximum
Liability.  Notwithstanding anything to the contrary contained
in this Agreement:




(a)           the
Company shall only be liable for Losses indemnified under this Section 9 in the
event that the aggregate amount of such Losses shall exceed the sum of $150,000
(the “Indemnity
Basket”); provided, that if the aggregate amount of any such Losses
incurred shall exceed $150,000, there shall be no Indemnity Basket;
and




(b)           except
only for acts or omissions by the Company or Company Subsidiaries constituting
securities fraud or common law fraud in the inducement, in no event shall the
indemnification obligations of the Company and the Company Subsidiaries under
this Section 9 in respect of Losses exceed the aggregate amount of the cash
investment made by the Investor in the Company or any Company Subsidiary in
respect of the payment of the Purchase Price, the full or partial exercise of
the Class A Warrant and/or Class B Warrant and any Working Capital Financing
provided by the Investor.





9.5  No Waivers or Election of
Remedies, Expenses, Etc.  No course of dealing and no delay on
the part of any Indemnified Person in exercising any right, power or remedy
shall operate as a waiver thereof or otherwise prejudice such holder's rights,
powers or remedies. No right, power or remedy conferred by this Agreement or any
other Transaction Document upon any Indemnified Person shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of any Indemnifying Person under this Section 9, the Indemnifying
Persons(s) will pay to the Indemnified Person(s) on demand such further amount
as shall be sufficient to cover all costs and expenses of such Indemnified
Person(s) incurred in any enforcement or collection under this Section 9,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements.





10.           Miscellaneous.





10.1           Successors and
Assigns.




(a)           This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investor, as applicable, provided, however, that,
without the prior written consent of the Company (i) the Investor may assign its
rights and delegate its duties hereunder in whole or in part to any Affiliate,
and (ii) may assign or transfer less than a majority of the Securities to any
third Person not an Affiliate in any public offering or public sale or in
private transaction, subject in either or both cases to such assignee’s specific
written assumption of the specific obligations and duties of the Investor set
forth herein and in any of the other Transaction Documents and in all cases to
the provisions of the applicable securities laws.




(b)           Notwithstanding
the provisions of Section 10.1(a), except for (i) the pledge of this Agreement,
the Limited Recourse Note and the Common Stock issuable upon conversion of such
Limited Recourse Note to Global Asset Fund Limited, as at the date of execution
of this Agreement and (ii) the pledge of all of the Securities, this Agreement
and the other Transaction Documents to Amalphis to secure financing from
Amalphis to enable the Company to pay the Purchase Price on the Closing Date,
without the prior written consent of the Company, the Investor shall not sell,
pledge, hypothecate, assign or otherwise transfer, directly or indirectly, any
of the Securities or any of its rights or obligations under any of the
Transaction Documents until the earlier of (i) December 31, 2009, or (ii) the
occurrence of a Triggering Event.




30




(c)           The
provisions 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.




10.2           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 (including a financing signature page)
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, 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 facsimile or “.pdf” signature page were an original
thereof.




10.3           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.




10.4           Notices.  Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or telecopier, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the earlier
of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by
an internationally recognized overnight air courier, then such notice shall be
deemed given one Business Day after delivery to such carrier.  All
notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:





If to the Company:





National
Holdings Corporation


120
Broadway, 27th
Floor


New York,
NY 10271


Attention:  Mark
Goldwasser, CEO


Fax:  (212)
417-8010





With a copy to:





Littman
Krooks LLP


655 Third
Avenue, 20th
Floor


New York,
NY  10017


Attention:  Mitchell
C. Littman, Esq.


Fax:  (212)
490-2990




31





If to the Investor:





Fund.Com Inc.


14 Wall Street, 20th
Floor


New York, NY 10005


Attention: Gregory Webster,
CEO


Fax: (212) 618-1705





With copies to:






Pillsbury
      Winthrop Shaw Pittman LLP
            Hodgson Russ
      LLP1540
      Broadway
            1540
      BroadwayNew York, NY
      10036-4039
            New York, NY
      10036Attention:
      Ronald A. Fleming, Esq.
            Attention:  Stephen
      A. Weiss, EsqFax: (212)
      298-9931
            Fax: (212)
      751-0928





10.5           Expenses.  The
parties hereto shall pay their own costs and expenses in connection herewith,
except that, in the event of a Closing, the Company shall pay the reasonable
fees and expenses of Investorand its Affiliates,
includingAmalphis,
in an amount not to exceed $75,000. Such expenses shall be paid by the Company
only at the Closing.




10.6           Amendments and
Waivers.  Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor.  Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.




10.7           Publicity.  Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investor
without the prior consent of the Company (in the case of a release or
announcement by the Investor) or the Investor (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investor, as the case may be, shall allow the
Investor or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance.  In addition, the Company and Investor will
make such other filings and notices in the manner and time required by the
SEC.




10.8           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 provision hereof prohibited or unenforceable in any
respect.




32





10.9           Entire
Agreement.  This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof, other than any written confidentiality agreement between the Company
and Investor, which shall continue in full force and effect.




10.10           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.




10.11           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 the choice of law principles thereof.  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.




10.12           Confidentiality.  Each
party hereto agrees that, except with the prior written permission of the
other party or as required by applicable  federal or state securities
law, it shall at all times keep confidential and not divulge, furnish or make
accessible to anyone any confidential information, knowledge or data concerning
or relating to the business or financial affairs of the other parties to which
such party has been or shall become privy by reason of this Agreement,
discussions or negotiations relating to this Agreement, the performance of
its obligations hereunder or the ownership of the Securities purchased
hereunder.  The provisions of this Section 10.12 shall be in addition
to, and not in substitution for, the provisions of any separate nondisclosure
agreement executed by the parties hereto with respect to the transactions
contemplated hereby.





[SIGNATURE PAGE
FOLLOWS]




33






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


Chairman
and Chief Executive Officer





The
Company Significant Subsidiaries


As
to Section 4.22 only:





NATIONAL SECURITIES
CORPORATION








By: /s/ Mark
Goldwasser_________________


Mark Goldwasser


Chairman
and Chief Executive Officer





vFINANCE INVESTMENTS,
INC.








By: /s/
Leonard J. Sokolow________________


Leonard J. Sokolow,


Chairman





EQUITYSTATION, INC.








By: /s/
William Groeneveld________________


William Groeneveld,


President







The
Investor:                                                                           FUND.COM
INC.









By: /s/Gregory
Webster________________


Gregory Webster


Chief Executive Officer




34




EXHIBIT
A





FORM
OF CERTIFICATE OF DESIGNATION,


PREFERENCES
AND RIGHTS


of


SERIES
C CONVERTIBLE REDEEMABLE PREFERRED STOCK


of


NATIONAL
HOLDINGS CORPORATION


(Pursuant
to Section 151 of the


Delaware
General Corporation Law)





NATIONAL HOLDINGS CORPORATION,
a corporation organized and existing under the laws of the State of Delaware
(the "Corporation"), the
certificate of incorporation of which was filed in the office of the Secretary
of State of Delaware on ___________ and amended on ______________ , hereby
certifies that the Board of Directors of the Corporation (the "Board of Directors"
or the "Board"), pursuant to
authority of the Board of Directors as required by Section 151 of the Delaware
General Corporation Law, and in accordance with the provisions of its
Certificate of Incorporation and Bylaws, each as amended and restated through
the date hereof, has and hereby authorizes a series of the Corporation's
previously authorized ________ shares of preferred stock, par value $0.01 per
share (the "Preferred
Stock"), and hereby states the designation and number of shares, and
fixes the relative rights, preferences, privileges, powers and restrictions
thereof, as follows:





I.
DESIGNATION AND AMOUNT




The
designation of this series, which consists of up to Twenty Two Thousand Five
Hundred (22,500) shares of Preferred Stock, is the Series C Preferred Stock (the
"Series C Preferred
Stock") and the stated value amount shall be One Thousand Dollars
($1,000.00) per share (the "Stated Value
").





II.
CERTAIN DEFINITIONS




Unless otherwise defined in this
Certificate of Designations, all capitalized terms, when used herein, shall have
the same meaning as is defined in the Purchase Agreement.  For
purposes of this Certificate of Designation, in addition to the other terms
defined herein, the following terms shall have the following
meanings:





A           “Affiliates” of any particular Person means any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by or under common control with such Person. 
For purposes of this definition, “control” (including the terms “controlling,” “controlled
by” and “under
common control with”)
means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.




B.           “Approved Business
Combination” means any Business Combination or Sale of Control that has
been previously approved in writing by the Majority Holders and by the Board of
Directors of the Corporation prior to the consummation thereof.




C.           “Bloomberg” shall mean
Bloomberg, L.P. (or any successor to its function of reporting stock
prices).




35




D.           "Business Day" means
any day, other than a Saturday or Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.




E.           “Business Combination”
means any merger, consolidation or combination of the Corporation or any Company
Subsidiary with or into any other corporation or entity, or any acquisition by
the Corporation or any Company Subsidiary of all or substantially all the assets
or securities of, or majority voting or economic interest in, any other
corporation or other entity, or whether by merger, tender offer, asset purchase,
stock purchase, or like combination or consolidation; provided, that such
transaction shall not constitute a Sale of Control.





F.           “Class A Warrant”
shall have the alternative meanings as are defined in the Purchase
Agreement.




G.           “Common Stock” means
the common stock of the Corporation, par value $0.02 per share, together with
any securities into which the common stock may be reclassified.




H.           “Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of the Options, as of the date of such issuance or
grant of such Options, if any, and (y) the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.




I.           "Conversion Date"
means, for any Conversion, the date specified in the notice of conversion in the
form attached hereto (the "Notice of
Conversion"), so long as a copy of the Notice of Conversion is faxed,
emailed or delivered by other means resulting in notice to the Corporation
before 11:59 p.m., New York City time, on the Conversion Date indicated in the
Notice of Conversion; provided, however,that if
the Notice ofConversion is not so faxed, emailed or otherwise delivered before such
time, then the Conversion Date shall be the date the Holder faxes or otherwise
delivers the Notice of Conversion to the Corporation.





J.           “Convertible
Securities” shall have the meaning as defined in Article VIII, Section
F(ii) of this Certificate of Designations.





K.           “Conversion Shares”
means such number of shares of Common Stock as shall be determined by dividing
(i) the $1,000 Stated Value per share of Series C Preferred Stock, by (ii) the
Series C Conversion Price per share, then in effect.




L.           “Dilutive Issuance”
shall have the meaning as defined in Article VIII, Section E of this Certificate
of Designations.




M.            “Due Cause” shall
mean, in respect of determining whether a Warrant Default shall have occurred
prior to consummation of any Approved Business Combination: (i) a material
adverse change in the business, financial condition or prospects of any Person
who is a party to such Approved Business Combination, or (ii) prior to
consummation of an Approved Business Combination, a breach by any Person who is
a party to such Approved Business Combination, of such Person’s representations,
warranties, covenants or agreements contained in any purchase or related
agreement evidencing the terms of such Approved Business Combination, including,
without limitation, the failure of such Person to perform any covenant and
agreement on its part to be performed under such agreement prior to the
consummation of such Approved Business Combination.




36




N.            “Fully-Diluted Common
Stock” shall mean, at any point in time, the aggregate number of issued
and outstanding shares of Common Stock of the Corporation, on a fully-diluted
basis, after giving effect to (a) the exercise of all warrants, stock options
and other rights to purchase Common Stock, (including the Class A Warrants and
the Class B Warrants) then issued and outstanding, and (b) the conversion into
Common Stock of all notes, debentures, preferred stock and other convertible
securities of the Corporation then issued and outstanding, including, without
limitation, all Common Stock issuable upon conversion of the 5,000 shares of
Series C Preferred Stock issued to the Investor on the Closing Date and all
Common Stock issuable upon conversion of the (i) 17,500 additional shares of
Series C Preferred Stock that may be issuable upon exercise of the Class A
Warrants, and (ii) shares of Series A Preferred Stock that are then issued and
outstanding.





O.            “Holder” shall mean
the collective reference to the Investor, its Affiliates or any one or more
holder(s) of shares of Series C Preferred Stock.




P.            “Investor” shall mean
Fund.com Inc., a Delaware corporation or its Affiliate who shall purchase 5,000
shares of the Series C Preferred Stock and receive the Class A Warrants and
Class B Warrants being issued pursuant to the Purchase Agreement.




Q.           “Issuance Date" means
one (1) Business Day following the filing of this Series C Certificate of
Designation with the Secretary of State of the State of Delaware.





R.           "Majority Holders"
means the Holders of a majority of the then outstanding shares of Series C
Preferred Stock.




S.           “Market Price” means,
as of any Trading Day, (i) the average of the last reported sale prices for the
shares of Common Stock on a national securities exchange which is the principal
trading market for the Common Stock for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg or (ii) if no national securities
exchange is the principal trading market for the shares of Common Stock, the
average of the last reported sale prices on the principal trading market for the
Common Stock during the same period as reported by Bloomberg, or (iii) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Market Price shall be the fair market value as reasonably determined in good
faith by (A) the Board of Directors of the Corporation, or (B) at the option of
a majority-in-interest of the holders of the outstanding Series C Preferred
Stocks by an independent investment bank of nationally recognized standing in
the valuation of businesses similar to the business of the
Corporation.  The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.




T.           “National Securities
Exchange” means any one of the New York Stock Exchange, the NYSE
Alternext Exchange, the NASDAQ Capital Market, the OTC Bulletin Board or any
other national securities exchange in the United States where the Corporation’s
Common Stock may trade.





U.           “Original Issue Price”
means the sum of $1,000.00, representing the aggregate purchase price for each
share of Series C Preferred Stock at the Stated Value.





V.           “Options” shall have
the meaning as defined in Article VIII, Section F(i) of this Certificate of
Designations.




37




W.           “Purchase Agreement”
shall mean that certain Securities Purchase Agreement, dated as of April 4,
2009, by and among the Corporation, the Investor and the other Parties thereto,
pursuant to which, on the Issuance Date, the Corporation issued, and such
Investor purchased, inter alia, 5,000 shares of Series C Preferred Stock for
$5,000,000 and the Warrants, all upon the terms and conditions stated
therein.





X.           “Sale of Control”
shall mean the sale or transfer of all or substantially all of the assets or
securities of the Corporation or any Company Subsidiary, whether by stock sale,
asset sale, merger, consolidation or like combination, in any one or more series
of transactions whereby control of the Board of Directors of the Corporation or
any Company Subsidiary shall no longer be vested in the Persons who served as
members of such Boards of Directors immediately prior to such
transaction.





Y.           “Series C Conversion
Price” means Seventy-Five Cents ($0.75), or such other dollar amount (or
fraction thereof) into which such Series C Conversion Price may be adjusted
pursuant to Article VIII of this Certificate.





Z.           “Stated Value” means
One Thousand Dollars ($1,000.00) per share of Series C Preferred
Stock.




AA.           “Trading Day” shall
mean any day on which the Common Stock is traded for any period on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.




BB.           “Triggering Event”
shall mean the first to occur of either (a) the exercise of the Class A Warrant
and the payment of not less than $10,000,000 of the applicable Class A Warrant
Exercise Price, or (b) the 50% Threshold having been attained or
exceeded.





CC.           “Voting Agreement”
means the voting agreement, dated as of the Issuance Date, by and among the
Corporation, the Investor and the “Management Shareholders” (as defined
therein).





DD.           “Warrant Default”
means the failure or refusal, without Due Cause, of the Holder and/or other
holders of the Class A Warrant to exercise the Class A Warrant in an amount
sufficient to finance all or part of the purchase price of an Approved Business
Combination, after (a)
having approved such Approved Business Combination, and (b) having notified the
Corporation in writing of its or their intention to exercise the Class A Warrant
in an amount sufficient to finance all or part of the purchase price of such
Approved Business Combination.





EE.           “Warrant Shares” shall
mean the collective reference to (a) the 17,500 shares of Series C Preferred
Stock issuable upon full exercise of the Class A Warrants, (b) the 23,333,333
shares of Common Stock issuable upon full exercise of Class A Warrants that are
exchanged for the Class A Warrants referred to in clause (a) hereof, and as
provided in the Purchase Agreement, and (c) the 2,000,000 shares of Common Stock
issuable upon full exercise of the Class B Warrants, as such securities may be
adjusted pursuant to the terms of such Warrants.




FF.           “Warrants” shall mean
the Class A Warrant and the Class B Warrant of the Corporation issued to the
initial Holder(s) of the Series C Preferred Stock or to be issued on the Class A
Warrant Exchange Date (as defined in the Purchase Agreement).




GG.           “50% Threshold” shall
mean, at any point in time, including, without limitation, following the
exercise of the Class A Warrant and/or Class B Warrant, the record ownership by
the Holder(s) or its Affiliates of such number of shares of Series C Preferred
Stock, Warrant Shares and/or Common Stock of the Corporation, which if (a) owned
of record as Common Stock by such Persons, and (b) as to Series C Preferred
Stock (including without limitation Class A Warrant Shares) had been fully
converted into Common Stock, would represent in the aggregate fifty percent
(50%) of the issued and outstanding Common Stock of the Corporation at such
point in time.




38




III.
DIVIDENDS




A           Holders
of Series C Preferred Stock shall be entitled to receive dividends when, as and
if declared by the Board of Directors of the Corporation.  No cash
dividends or distributions shall be declared or paid or set apart for payment on
the Common Stock unless such cash dividend or distribution is likewise declared,
paid or set apart for payment on the Series C Preferred Stock in an amount equal
to the dividend or distribution that would be payable if all of the issued and
outstanding shares of the Series C Preferred Stock had been fully converted into
Common Stock on the day immediately prior to the date which shall be the
earliest to occur of the declaration, payment, or distribution or such
dividend.




B.           No
dividends or distributions shall be declared or paid or set apart for payment on
the Series C Preferred Stock unless full and (if applicable) cumulative
dividends have been or are contemporaneously declared, paid or set apart for
payment on all Senior Securities (as hereinafter defined) in accordance with the
respective terms of the Certificates of Designations for such Senior
Securities.




C.           Dividends
on the Series C Preferred Stock are prior and in preference to any declaration
or payment of any dividend or other distribution (as defined below) on any
outstanding shares of Junior Securities (as hereinafter defined).





IV.
CONVERSION





A.            Optional and Automatic
Conversion




(i)           Optional
Conversion.  Holders of Series C Preferred Stock may at their option
convert all or any portion of their shares of Series C Preferred Stock into
Common Stock of the Corporation at any time or from time to time (an “Optional
Conversion”).




(ii)           Automatic
Conversion.  Unless previously converted into Common Stock, all
shares of Series C Preferred Stock that are outstanding on a date which shall be
the earlier to occur of (A) the date of the approval of such conversion (by vote
or written consent as provided by law) by the Holders of two-thirds (66-2/3%) of
the then issued and outstanding shares of Series C Preferred Stock, or (B) three
(3) years from the Issuance Date, shall, without any further action on the part
of the Holder or the Corporation, be automatically converted into shares of
Common Stock of the Corporation (a “Automatic
Conversion”).




(iii)           In
the event of any one or more Optional Conversions or any Automatic Conversion
pursuant to this Article IV(A) (each a "Conversion") each
share of Series C Preferred Stock shall be convertible into a number of fully
paid and non-assessable shares of Common Stock determined in accordance with the
following formula:




39




The Original Issue
Price


Series C
Conversion Price then in effect




B.           Mechanics of
Conversion. In order to effect an Conversion, a Holder of shares of
Series C Preferred Stock shall: (i) fax (or otherwise deliver) a copy of the
fully executed Notice of Conversion to the Corporation (Attention: Secretary)
and (ii) surrender or cause to be surrendered the original certificates
representing the Series C Preferred Stock being converted (the "Series C Preferred Stock
Certificates"), duly endorsed, along with a copy of the Notice of
Conversion as soon as practicable thereafter to the Corporation.  Upon
receipt by the Corporation of a facsimile copy of a Notice of Conversion from a
Holder, the Corporation shall promptly send, via facsimile, a confirmation to
such Holder stating that the Notice of Conversion has been received, the date
upon which the Corporation expects to deliver the Common Stock issuable upon
such conversion and the name and telephone number of a contact person at the
Corporation regarding the conversion.  The Corporation shall not be
obligated to issue shares of Common Stock upon a conversion unless either the
Series C Preferred Stock Certificates are delivered to the Corporation as
provided above, or the Holder notifies the Corporation that such Series C
Preferred Stock Certificates have been lost, stolen or destroyed and delivers
the documentation to the Corporation required by Article XII. B
hereof.





(i)           Delivery of Common Stock
Upon Conversion. Upon the surrender of Series C Preferred Stock
Certificates accompanied by a Notice of Conversion, the Corporation (itself, or
through its transfer agent, as appropriate) shall, no later than the later of
(a) the fifth (5th) Business Day following the Conversion Date and (b) the
Business Day immediately following the date of such surrender (or, in the case
of lost, stolen or destroyed certificates, after provision of indemnity pursuant
to Article XI B) (the "Delivery Period"),
issue and deliver (i.e., deposit with a nationally recognized overnight courier
service portage prepaid) to the Holder or its nominee (x) that number of shares
of Common Stock issuable upon conversion of such shares of Series C Preferred
Stock being converted and (y) a certificate representing the number of shares of
Series C Preferred Stock not being converted, if any.  Notwithstanding
the foregoing, the Holder of Series C Preferred Stock shall, for all purposes,
be deemed to be a record owner of that number of shares of Common Stock issuable
upon conversion of those shares of Series C Preferred Stock set forth in the
Conversion Notice as at the date of such Conversion Notice.  In
addition, if the Corporation's transfer agent is participating in the Depository
Trust Corporation ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend (pursuant to the terms of the Securities Purchase Agreement) and
the Holder thereof is not then required to return such certificate for the
placement of a legend thereon (pursuant to the terms of the Securities Purchase
Agreement), the Corporation shall cause its transfer agent to promptly
electronically transmit the Common Stock issuable upon conversion to the Holder
by crediting the account of the Holder or its nominee with DTC through its
Deposit Withdrawal Agent Commission system ("DTC
Transfer").  If the aforementioned conditions to a DTC Transfer
are not satisfied, the Corporation shall deliver as provided above to the Holder
physical certificates representing the Common Stock issuable upon conversion.
Further, a Holder may instruct the Corporation to deliver to the Holder physical
certificates representing the Common Stock issuable upon conversion in lieu of
delivering such shares by way of DTC Transfer.





(ii)            Taxes.  The
Corporation shall pay any and all taxes that may be imposed upon it respect to
the issuance and delivery of the shares of Common Stock upon the conversion of
the Series C Preferred Stock.





(iii)            No Fractional
Shares.  If any conversion of Series C Preferred Stock would
result in the issuance of a fractional share of Common Stock (aggregating all
shares of Series C Preferred Stock being converted pursuant to a given Notice of
Conversion), such fractional share shall be payable in cash based upon the
Series C Series C Conversion Price per share, and the number of shares of Common
Stock issuable upon conversion of the Series C Preferred Stock shall be the next
lower whole number of shares.  If the Corporation elects not to, or is
unable to, make such a cash payment, the Holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common
Stock.




40




(iv)            Conversion
Disputes.   In the case of any dispute with respect to a
conversion, the Corporation shall promptly issue such number of shares of Common
Stock in accordance with subparagraph (i) above as are not disputed. If such
dispute involves the calculation of the Series C Series C Conversion Price, and
such dispute is not promptly resolved by discussion between the relevant Holder
and the Corporation, the Corporation and the Holder shall submit their disputed
calculations to an independent outside accountant via facsimile within three
Business Days of receipt of the Notice of Conversion. The accountant, at the
Corporation's sole expense, shall promptly audit the calculations and notify the
Corporation and the Holder of the results no later than three Business Days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive, absent manifest error. The Corporation shall then
issue the appropriate number of shares of Common Stock in accordance with
subparagraph (i) above.





(v)           Payment of Accrued
Amounts.  Upon conversion of any shares of Series C Preferred
Stock, all amounts then accrued or payable on such shares under this Certificate
of Designation (including, without limitation, all Dividends, if any) through
and including the Conversion Date shall be paid by the Corporation in cash. In
the event that the Corporation elects to effect a payment-in-kind, the number of
fully paid and non-assessable shares of Common Stock due shall be determined in
accordance with the following formula:





All Amounts Accrued or
Payable


Series
C Conversion Price





V.
RESERVATION OF SHARES OF COMMON STOCK





A.           Reserved
Amount.   Immediately following the Corporation’s filing
of an Amendment to its Certificate of Incorporation authorizing an increase to
its authorized Common Stock,  the Corporation shall reserve not less
than 30,000,000 shares of its authorized but unissued shares of Common Stock for
issuance upon conversion of the Series C Preferred Stock (including any shares
that may be issuable in connection with the adjustment provisions of this
Certificate of Designations), and, thereafter, the number of authorized but
unissued shares of Common Stock so reserved (the "Reserved Amount")
shall at all times be sufficient to provide for the full conversion of all of
the Series C Preferred Stock (including any shares that may be issuable in
connection with the adjustment provisions of this Certificate of Designations)
outstanding or issuable upon conversion of the Class A Warrant Shares, at the
current Series C Series C Conversion Price thereof, and any anticipated
adjustments to such Series C Series C Conversion Price.





B.           Increases to Reserved
Amount. During the period that the Corporation’s Common Stock is not
listed on any recognized stock exchange in the United States or abroad or the
OTC Bulletin Board, the Corporation shall, twice annually, review the Reserved
Amount for any stock splits, or adjustments on the Series C Preferred Stock, or
similar situations to determine whether the Reserved Amount needs to be
increased.





VI.
RANK





All
shares of the Series C Preferred Stock shall rank (i) senior to
the Corporation's Common Stock and any other class of securities which is
specifically designated as junior to the Series C Preferred Stock (collectively,
with the Common Stock, the "Junior Securities");
(ii) pari
passuwith
any other class or series of Preferred Stock of the Corporation hereafter
created specifically ranking, by its terms, on parity with the Series C
Preferred Stock (the "Pari Passu
Securities"); and (iii) junior to
the Corporation’s 50,000 authorized shares of Series A Convertible Preferred
Stock (the “Series A
Preferred Stock”) and any class or series of capital stock of the
Corporation hereafter created (with the written consent of the Majority Holders
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series C Preferred Stock (collectively, the "Senior Securities"),
in each case as to distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary.




41




VII.
LIQUIDATION PREFERENCE





A.           In
the event of any liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary, distributions to the stockholders of the
Corporation shall be made in the following manner:





(i)           After
payment or provision for payment of any distribution on any Senior Securities,
the Holders of the Series C Preferred Stock shall be entitled to receive, on a
pari passu basis with the holders of the Pari Passu Securities, and
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Common Stock by reason of their
ownership of such stock, an amount equal to the sum of (x) $0.02 for each share
of Series C Preferred Stock then held by them (the "Initial Series C Liquidation
Preference Price"), and (y) an amount equal to all unpaid dividends on
the Series C Preferred Stock, if any.  If upon the occurrence of a
liquidation, dissolution or winding up of the Corporation the assets and funds
thus distributed among the holders of the Series C Preferred Stock and the Pari Passu Securities
shall be insufficient to permit the payment to such holders of the full
liquidation preference amount based on the Initial Series C Liquidation
Preference Price, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series C Preferred Stock and the Pari Passu Securities in
proportion to the preferential amount each such holder is otherwise entitled to
receive.





(ii)           After
setting apart or paying in full the preferential amounts due pursuant to Section VII (A)(i)
above, the remaining assets of the Corporation available for distribution to
stockholders, if any, shall be distributed to the holders of the Series C
Preferred Stock, the Series A Preferred Stock and  the Common Stock on
a pro rata basis, based on the number of shares of Common Stock then held by
each Holder, as though all shares of Series C Preferred Stock and Series A
Preferred Stock had been converted into Common Stock immediately prior to the
date of such distribution.





VIII.
ADJUSTMENTS




The Series C Conversion
Price and the number of Conversion Shares shall be subject to adjustment as
follows:




A.           Subdivision or Combination
of Common Stock.  If the Corporation at any time subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a greater number of shares, then, after the date of record for effecting
such subdivision, the Conversion Shares issuable upon conversion of the Series C
Preferred Stock will be proportionately increased and the Series C Conversion
Price in effect immediately prior to such subdivision will be proportionately
reduced.  If the Corporation at any time combines (by any reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination,  the
Conversion Shares issuable upon conversion of the Series C Preferred Stock will
be proportionately reduced and the Series C Conversion Price in effect
immediately prior to such combination will be proportionately
increased.




B.           [Intentionally
Omitted].




C.           Consolidation, Merger or
Sale.  In case of any consolidation of the Corporation with, or
merger of the Corporation into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the Holder of the Series C Preferred Stock will
have the right to acquire and receive upon conversion of the Series C Preferred
Stock in lieu of the shares of Common Stock immediately theretofore acquirable
upon the conversion of the Series C Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon conversion of the Series C Preferred Stock had such
consolidation, merger or sale or conveyance not taken place.  In any
such case, the Corporation will make appropriate provision to insure that the
provisions of this Article VIII Section C hereof will thereafter be applicable
as nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the conversion of the Series C Preferred Stock.  The
Corporation will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than the Corporation) assumes by written instrument the obligations under this
Article VIII Section C and the obligations to deliver to the Holder of the
Series C Preferred Stock such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
acquire.




42




D.           Distribution of
Assets.  In case the Corporation shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution (on an “as converted” basis, as though all Series C Preferred Stock
had been converted into Common Stock immediately prior to the dividend
declaration date), the Holder of the Series C Preferred Stock shall be entitled
upon conversion of the Series C Preferred Stock for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the Holder had the Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.




E.           Adjustment Due to Dilutive
Issuance.  If, at any time when any shares of Series C
Preferred Stock are issued and outstanding, the Corporation issues or sells, or
in accordance with this Article VIII is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Series C
Conversion Price in effect on the date of such issuance (or deemed issuance) of
such shares of Common Stock (a “Dilutive Issuance”),
then immediately upon the Dilutive Issuance, the Series C Conversion Price will
be reduced to the price determined by multiplying the Series C Conversion Price
in effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock Deemed Outstanding immediately prior to the Dilutive Issuance, plus
(y) the quotient of the aggregate consideration, calculated as set forth in
Article VIII, received by the Corporation upon such Dilutive Issuance divided by
the Series C Conversion Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the Common Stock Deemed
Outstanding immediately after the Dilutive Issuance; provided that only one
adjustment will be made for each Dilutive Issuance.  No adjustment to
the Series C Conversion Price shall have the effect of increasing the Series C
Conversion Price above the Series C Conversion Price in effect immediately prior
to such adjustment.




F.           Effect on Series C
Conversion Price of Certain Events.  For purposes of
determining the adjusted Series C Conversion Price, the following will be
applicable:




(i)           Issuance of Rights or
Options.  If the Corporation in any manner issues or grants any
warrants (other than the Warrants issued pursuant to the Purchase Agreement),
rights or options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock or Convertible Securities (such warrants, rights and
options to purchase Common Stock or Convertible Securities are hereinafter
collectively referred to in this Article VIII as “Options”) and the
price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Series C Conversion Price on the date of issuance or
grant of such Options, then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options will, as of the date of the
issuance or grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per share.  For
purposes of the preceding sentence, the “price per share for which Common Stock
is issuable upon the exercise of such Options” is determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as consideration
for the issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation upon the
exercise of all such Options, plus, in the case of Convertible Securities (as
hereinafter defined) issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion or exchange of Convertible Securities, if applicable).  No
further adjustment to the Series C Conversion Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of such
Options.




43




(ii)           Issuance of Convertible
Securities.  If the Corporation in any manner issues or sells
any other series or classes of Preferred Stock (other than the Series C
Preferred Stock) or other securities that are convertible into or exchangeable
for Common Stock (“Convertible
Securities”), whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Series C Conversion Price on the date of issuance, then the maximum total number
of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share.  For the purposes of the
preceding sentence, the “price per share for which Common Stock is issuable upon
such conversion or exchange” is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.  No further adjustment to the Series C Conversion Price
will be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.




(iii)           Change in Option Price or
Conversion Rate.  If there is a change at any time in (i) the
amount of additional consideration payable to the Corporation upon the exercise
of any Options; (ii) the amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Series C Conversion Price in effect
at the time of such change will be readjusted to the Series C Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.




(iv)           Treatment of Expired Options
and Unexercised Convertible Securities.  If, in any case, the
total number of shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Series C Conversion
Price then in effect will be readjusted to the Series C Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination (other than in respect of the actual number of
shares of Common Stock issued upon exercise or conversion thereof), never been
issued.




(v)           Calculation of Consideration
Received.  If any Common Stock, Options or Convertible
Securities are issued, granted or sold for cash, the consideration received
therefor for purposes hereof will be the amount received by the Corporation
therefor, before deduction of reasonable commissions, underwriting discounts or
allowances or other reasonable expenses paid or incurred by the Corporation in
connection with such issuance, grant or sale.  In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Corporation will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation will be the Market
Price thereof as of the date of receipt.  In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Corporation is the surviving corporation,
the amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.  The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Corporation.




44




(G)           Exceptions to
Adjustments.  Notwithstanding anything contained to the
contrary in this Article VIII, no adjustment to the Series C Conversion Price or
Conversion Shares pursuant to Section (E) of this Article VIII will be
made:




(i)           upon
the issuance of shares of Common Stock or Options or Convertible Securities to
eligible Persons pursuant to any stock or option plan duly adopted by the Board
of Directors of the Corporation, subject to compliance with the terms of the
Stock Option Plan referred to in the Purchase Agreement, including the
limitations on Options issued or issuable to the “Key Employees” as defined in
the Purchase Agreement; or




(ii)           upon
the issuance of shares of Common Stock issuable upon the exercise of Options or
conversion of Convertible Securities that are outstanding as of the date of
filing of this Certificate of Designations, including, without limitation, those
securities issued pursuant to the Purchase Agreement; or




(iii)           the
issuance of shares of Series A Preferred Stock as pay-in-kind dividends with
respect to the Series A Preferred Stock;




(iv)           the
issuance (not for capital raising purposes) of shares of Common Stock,
Convertible Securities or Options to financial institutions, lessors or vendors
in connection with commercial credit or service arrangements, equipment
financings or similar transactions, all approved by the Board of Directors of
the Corporation; or




(v)           the
issuance of shares of Common Stock, Convertible Securities or Options to provide
financing to consummate any Approved Business Combination; or




(vi)           following the occurrence and during the
continuation of a Warrant Default that has not been cured in a manner deemed
satisfactory by the Corporation to facilitate the timely financing of an
Approved Business Combination, the issuance of shares of Common Stock,
Convertible Securities or Options to provide financing in order to consummate
such Approved Business Combination.




(H)           Notice of
Adjustment.  Upon the occurrence of any event which requires
any adjustment of the Series C Conversion Price, then, and in each such case,
the Corporation shall give notice thereof to the Holder of the Series C
Preferred Stock, which notice shall state the Series C Conversion Price
resulting from such adjustment and the increase or decrease in the number of
Conversion Shares purchasable at such price upon exercise, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.  Such calculation shall be certified by the
Chief Financial Officer of the Corporation.




45




(I)           Minimum Adjustment of Series
C Conversion Price.  No adjustment of the Series C Conversion
Price shall be made in an amount of less than 1% of the Series C Conversion
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such Series
C Conversion Price.




(J)           No Fractional
Shares.  No fractional shares of Common Stock are to be issued
upon the conversion of the Series C Preferred Stock, but the Corporation shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the average Market Price
per share of the Common Stock for the five (5) Trading Days immediately prior to
the date of such exercise.




(K)           Other
Notices.  In case at any time:




(i)           the
Corporation shall declare any dividend upon the Common Stock payable in shares
of stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;




(ii)           the
Corporation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;




(iii)           there
shall be any capital reorganization of the Corporation, or reclassification of
the Common Stock, or consolidation or merger of the Corporation with or into, or
sale of all or substantially all its assets to, another corporation or
entity;




(iv)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;




then, in
each such case, the Corporation shall give to the Holder of the Series C
Preferred Stock (a) notice of the date on which the books of the Corporation
shall close or a record shall be taken for determining the holders of Common
Stock entitled to receive any such dividend, distribution, or subscription
rights or for determining the holders of Common Stock entitled to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up of the Corporation, notice of the date (or, if not
then known, a reasonable approximation thereof by the Corporation) when the same
shall take place.  Such notice shall also specify the date on which
the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be.  Such notice shall be given at least
thirty (30) days prior to the record date or the date on which the Corporation’s
books are closed in respect thereto.  Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.





IX.
VOTING RIGHTS





A.           Class Voting
Rights.  Holders of the Series C Preferred Stock shall vote together
as a separate class on all matters which impact the rights, value or conversion
terms, or ranking of the Series C Preferred Stock, as provided
herein.




46




B.           General Voting Rights with
Common Stock.  Subject at all times to the provisions of this
Article IX (including paragraph C hereof), exceptas otherwise required
by law or as set forth herein, the Holder of each share of Series C Preferred
Stock shall be entitled to cast, at any regular or special meeting of
stockholders of the Corporation or in connection with the solicitation of any
written consent of stockholders of the Corporation, that number of votes as
shall be equal to the number of shares of Common Stock into which such share of
Series C Preferred Stock could be converted at the record date for determination
of the stockholders entitled to vote on such matters, or, if no such record date
is established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all other
shares of stock of the Corporation having general voting power and not counted
separately as a class.  Holders of Series C Preferred Stock shall be
entitled to notice of any stockholders' meeting in the same manner and at the
same time as holders of Common Stock, and in accordance with the Bylaws of the
Corporation.




C.           Super-Majority Voting
Rights.  Notwithstanding the provisions of Section B of this
Article IX, and in lieu thereof, until the earlier to occur of (i) December 31,
2009, or (ii) a Triggering Event, on all matters to be voted on by the
stockholders of the Corporation (except as otherwise required under the General
Corporation Law of the State of Delaware), the Holder(s) of the Series C
Preferred Stock shall be entitled to cast, at any regular or special meeting of
stockholders of the Corporation or in connection with the solicitation of any
written consent of stockholders of the Corporation, that number of votes, with
respect to any matters as to which stockholders of the Corporation may vote or
consent to,  as shall be equal to the sum
of:




(a)           one
hundred (100%) percent of the number of votes that may be cast by all of the
issued and outstanding shares of the Corporation’s Common Stock and any other
shares of capital stock of the Corporation entitled to vote on the matter, on
the record date for the determination of the stockholders entitled to vote on
such matter, plus




(b)           one
(1) additional vote.




Notwithstanding
the foregoing, during the period in which super-majority voting rights are in
effect, the  holders of Series C Preferred Stock shall have no rights
to initiate, propose or otherwise “solicit” (as such term is used in the proxy
rules of the SEC) shareholders of the Corporation for the approval of
shareholder proposals whether made pursuant to Rule 14a-8 or Rule 14a-4
under the Exchange Act, or otherwise, or cause or encourage or attempt to cause
or encourage any other Person to initiate any such shareholder proposal;
otherwise communicate with the Corporation’s shareholders or others pursuant to
Rule 14a-1(l)(2)(iv) under the Exchange Act; or participate in, or take any
action pursuant to, any “shareholder access” proposal which may be adopted by
the SEC, whether in accordance with proposed Rule 14a-11 or otherwise, or
otherwise initiate, take, or solicit, cause or encourage others to take, any
action inconsistent with any of the foregoing.




D.           Right to Designate
Directors.  For so long as the Voting Agreement shall remain in
full force and effect:




(a)           Subject
to the next succeeding sentence in this clause (a) of this Section D, for so
long thereafter as the Holder(s) of Series C Preferred Stock and/or its or their
Affiliates own at least 1,250 shares (as adjusted for stock splits, stock
dividends, recapitalizations and the like) of Series C Preferred Stock, the
Majority Holder(s) and/or its or their Affiliates shall be entitled to nominate
and elect two (2) members to the Board of Directors of the Corporation, and
(subject to FINRA regulations or other limitations on the activities or
registered broker/dealers) one (1) member to the Board of Directors of each of
the Company Subsidiaries.  In the event that a Triggering Event has
occurred on or before December 31, 2009, and for so long thereafter as the
Holder(s) of Series C Preferred Stock and/or its or their Affiliates own at
least 1,250 shares of Series C Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and the like), the Majority Holder(s) and/or
its or their Affiliates shall be entitled to nominate and elect fifty (50%)
percent of  all of the members of the Board of Directors of the
Corporation, and (subject to FINRA regulations or other limitations on the
activities or registered broker/dealers) one (1) member to the Board of
Directors of each of the Company Subsidiaries.  Such Persons nominated
and elected by the Majority Holder(s) and/or its or their Affiliates are
referred to herein as the “Series C
Directors”.




47




(b)           If
the Boards of Directors of the Corporation is to vote to fill any vacancies on
such Board(s) of Directors resulting from the death, resignation, retirement,
disqualification, removal or other cause of any of the Series C Directors, then
for so long as the Holder(s) of Series C Preferred Stock and/or its or their
Affiliates own at least 1,250 shares (as adjusted for stock splits, stock
dividends, recapitalizations and the like) of Series C Preferred Stock, the
Majority Holders and/or its or their Affiliates shall be entitled to nominate
the applicable number of candidates as Series C Directors as are specified in
clause (a) above of this Section D for election to the Board of Directors to
fill such vacancies.




(c)           At
all times, the Board of Directors of the Corporation shall, as a whole, satisfy
the applicable “independence” requirements that may be applicable to the
Corporation under the rules of the stock exchange or other trading market in
which the Corporation’s Common Stock may trade and shall maintain the requisite
number of independent directors, as required under the Sarbanes Oxley Act of
2002 and the stock exchange on which the Corporation’s Common Stock shall then
trade (the “Independent
Directors”).  In addition, the provisions of this Section D of
Article IX shall not be applicable in the event and to the extent that the
implementation thereof would cause the Corporation to be in violation of any
rule, regulation or policy of the FINRA, any National Securities Exchange or the
SEC.




(d)           In
the event that a Triggering Event shall have occurred prior to December 31,
2009, and for so long thereafter as the Holder(s) of Series C Preferred Stock
and/or their Affiliates shall own at least 1,250 shares of Series C Preferred
Stock (as adjusted for stock splits, stock dividends, recapitalizations and the
like), not less than fifty percent (50%) of the Independent Directors nominated
for election to the Board of Directors of the Corporation shall be Persons who
are acceptable to the Majority Holders of the Series C Preferred Stock (or
Common Stock issuable upon conversion thereof).





X.
PROTECTION PROVISIONS





A.              General.               For
so long as 1,250 shares (as adjusted for stock splits, stock dividends,
recapitalizations and the like) of Series C Preferred Stock are held of record
by the Holder(s) of Series C Preferred Stock, the Corporation shall not, nor
shall it permit any Subsidiary, to take any of the following corporate actions
(whether by merger, consolidation or otherwise) without first obtaining (i) the
affirmative vote or written consent of the Majority Holders, voting or
consenting as a separate class, given in person or by proxy, or (ii) if such
matter may, under applicable Delaware Corporate Law, be validly enacted and
adopted by the Board(s) of Directors of the Corporation, the affirmative vote or
written consent of a majority of the Series C Directors:





(a)           make
any amendment or modification of the Corporation’s Certificate of Incorporation
or by-laws in any manner which has or could reasonably be expected to have, an
adverse effect on the rights, privileges and designations of the Series C
Preferred Stock;





(b)           issue
any additional shares of Series C Preferred Stock, other than upon exercise of
the Class A Warrants;





(c)           amend
or modify in any manner this Series C Certificate of Designation;





(d)           creating
or issuing any additional Senior Securities or Pari Passu Securities;
or




48




(e)           repricing
or changing any prepayment, redemption rights or other material terms and
conditions of any of the Corporation’s Series A Preferred Stock or other
outstanding convertible or derivative securities or Options as of the Issuance
Date (including, without limitation, the 10% Convertible Notes), other than as a
result of adjustments for stock dividends, subdivisions, combinations or
consolidations of Common Stock and similar corporate events.





B.          Major
Transactions.                                Until
the earlier to occur of (a) December 31, 2009 or (b) the occurrence of a
Triggering Event, for so long as 1,250 shares (as adjusted for stock splits,
stock dividends, recapitalizations and the like) of Series C Preferred Stock are
held of record by the Holder(s) of Series C Preferred Stock (i) the affirmative
vote or written consent of the Majority Holders, voting or consenting as a
separate class, given in person or by proxy, or (ii) if such matter may, under
applicable Delaware Corporate Law, be validly enacted and adopted by the
Board(s) of Directors of the Corporation or any of its Subsidiaries, the
affirmative vote or written consent of a majority of the Series C Directors,
shall be necessary for authorizing, approving, effecting or validating any of
the following (each a Major
Transaction”):




1.  any
Business Combination involving consideration or other expenditures with a value
equal to or greater than $500,000 or involving the issuance of securities of the
Corporation having value greater than $500,000;




2.  the
issuance or sale of any securities of any Company Subsidiary, except to the
extent provided in the schedules to the Purchase Agreement;




3.  any
change the fundamental nature of the business of the Corporation and its Company
Subsidiaries;




4.  except
for the payment of cash or pay-in-kind dividends on Series A Preferred Stock and
scheduled redemption of Series A Preferred Stock, the redemption, repurchase or
other acquisition for value (or payment or setting aside of a sinking fund for
such purpose), or the declaration of setting aside of funds for the payment of
any dividend with respect to, any shares of capital stock of the Corporation or
any Company Subsidiary, except for repurchases of shares of Common Stock from
employees, officers, directors or consultants pursuant to agreements currently
in force in which the Corporation has the right to repurchase such shares, such
as termination of employment;




5.  the sale,
assignment, license, lease or other disposal of all or substantially all of the
assets of the Corporation or any Company Subsidiaries, or the consent to any
liquidation, dissolution or winding up of the Corporation or any Company
Subsidiaries, except that any wholly-owned Company Subsidiary may merge into or
consolidate with any other wholly-owned Company Subsidiary or transfer assets to
any other wholly-owned Company Subsidiary and any wholly-owned Company
Subsidiary may transfer assets to the Corporation,




6.  any
change in the number of Persons constituting all of the members of the Board of
Directors of the Corporation,




7.  the
pledge of any assets of the Corporation or any Company Subsidiaries to secured
indebtedness in excess of $500,000, except in the ordinary course of business of
entities engaged in the securities brokerage industry;




8.  except
for (a) indebtedness incurred in connection with capital lease and/or real
estate lease obligations incurred in the ordinary course of business, (b)
indebtedness existing as at the date hereof, (c) short-term indebtedness
incurred in connection with providing temporary net capital to underwrite on a
firm commitment basis any public offering of securities of an issuer other than
the Corporation or a Company Subsidiary, (d) indebtedness incurred from clearing
firms from time to time to facilitate the maintenance of net capital
requirements (collectively, “Excluded
Indebtedness”), the creation, incurrence, assumption, guarantee or
otherwise becoming liable or obligated with respect to any indebtedness on
behalf of the Corporation and any Company Subsidiaries in an amount greater than
$500,000, except in the ordinary course of business of the Corporation or the
Company Subsidiaries engaged in the securities brokerage industry; provided,
that, except for Excluded Indebtedness, the aggregate of all such indebtedness
outstanding at any one time shall not exceed an aggregate of $5,000,000, without
the prior approval of a majority of the Series C Directors;




49




9.  the sale,
transfer, conveyance or disposal of assets in excess of $100,000, except the
transfer of securities in the ordinary course of business of entities engaged in
the securities brokerage industry;




10.  any Sale
of Control; or




11.           any
amendment or modification to the Stock Option Plan or the adoption of any new
stock incentive or other equity based compensation plan or program.





XI.
MISCELLANEOUS





A.           Cancellation of Series C
Preferred Stock If any shares of Series C Preferred Stock are converted
pursuant to this Series C Certificate of Designations, the shares so converted
or redeemed shall be canceled, shall return to the status of authorized, but
unissued Series C Preferred Stock of no designated series, and shall not be
issuable by the Corporation as Series C Preferred Stock.





B.           Lost or Stolen
Certificates. Upon receipt by the Corporation of (i) evidence of the
lost, theft, destruction or mutilation of any Series C Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, indemnity
(without any bond or other security) reasonably satisfactory to the Corporation,
or (z) in the case of mutilation, the Series C Preferred Stock Certificate(s)
(surrendered for cancellation), the Corporation shall execute and deliver new
Series C Preferred Stock Certificate(s) of like tenor and
date.  However, the Corporation shall not be obligated to reissue such
lost, stolen, destroyed or mutilated Series C Preferred Stock Certificate(s) if
the Holder contemporaneously requests the Corporation to convert such Series C
Preferred Stock.





C           Waiver
Notwithstanding any provision in this Certificate of Designation to the
contrary, any provision contained herein and any right of the Holders of Series
C Preferred Stock granted hereunder may be waived as to all shares of Series C
Preferred Stock (and the Holders thereof) upon the written consent of the
Majority Holders, unless a higher percentage is required by applicable law, in
which case the written consent of the Holders of not less than such higher
percentage of shares of Series C Preferred Stock shall be required.


D.             Information Rights So
long as shares of Series C Preferred Stock are outstanding, the Corporation will
deliver to each Holder of Series C Preferred Stock (i) audited annual financial
statements to the Holders of Series C Preferred Stock within 90 days after the
end of each fiscal year; (ii) and unaudited quarterly financial statements
within 45 days of the end of each fiscal quarter.  To the extent that
such information is electronically available on the Corporation's Form 10-K
Annual Reports, Form 10-Q Quarterly Reports, Form 8-K Periodic Reports and
Annual Reports to Shareholders, the Corporation need not separately furnish such
documents to Holders of the Series C Preferred Stock.




E            Notices. Any notices
required or permitted to be given under the terms hereof shall be sent by
certified or registered mail (return receipt requested) or delivered personally,
by nationally recognized overnight carries or by confirmed facsimile
transmission, and shall be effective five days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or by
nationally recognized overnight carrier or confirmed facsimile transmission, in
each case addressed to a party. The addresses for such communications are (i) if
to the Corporation to National Holdings Corporation, 120 Broadway, 27th
floor, New York, New York 10271, attn: Chief Executive Officer; and (ii) if to
any Holder to the address set forth in the Purchase Agreement, or such other
address as may be designated in writing hereafter, in the same manner, by such
person.




[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]




50




IN WITNESS WHEREOF, the
undersigned declares under penalty of perjury under the laws of the State of
Delaware that he has read the foregoing Certificate of Designation and knows the
contents thereof, and that he is duly authorized to execute the same on behalf
of the Corporation, this _ day of March 2009.





NATIONAL HOLDINGS
CORPORATION








By:
      ______________________________


Name:
            Mark
      Goldwasser


Title:
            Chief
      Executive Officer







51




NOTICE OF
CONVERSION









(To be
Executed by the Registered Holder


in order
to Convert the Series C Preferred Stock)





The
undersigned hereby irrevocably elects to convert __________ shares of Series C
Convertible Preferred Stock (the "Conversion"), represented by Stock Certificate
No(s). ______________ (the "Series C Preferred Stock Certificates"), into shares
of common stock ("Common Stock") of National Holdings Corporation (the
"Corporation") according to the conditions of the Certificate of Designation,
Preferences and Rights of Series C Preferred Stock (the "Certificate of
Designation"), as of the date written below.   If securities are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.  No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any
Each Series C Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).





Except as
may be provided below, the Corporation shall electronically transmit the Common
Stock issuable pursuant to this Notice of Conversion to the account of the
undersigned or its nominee (which is) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC Transfer").





In the
event of partial exercise, please reissue a new stock certificate for the number
of shares of Series C Preferred Stock which shall not have been
converted


.


The
undersigned acknowledges and agrees that all offers and sales by the undersigned
of the securities issuable to the undersigned upon conversion of Series C
Preferred Stock have been or will be made only pursuant to an effective
registration of the transfer of the Common Stock under the Securities Act of
1933, as amended (the "Act"), or pursuant to an exemption from registration
under the Act.





In lieu
of receiving the shares of Common Stock issuable pursuant to this Notice of
Conversion by way of DTC Transfer, the undersigned hereby requests that the
Corporation issue and deliver to the undersigned physical certificates
representing such shares of Common Stock.




Date
      of Conversion:


Applicable
      Series C Conversion
  Price:  $________




Signature:Name:Address:






52





EXHIBIT
B-1





THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTIONS OR VOLUME
LIMITATIONS PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.





THIS
WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 31, 2009, SUBJECT
TO EXTENSION TO 5:00 P.M. EASTERN TIME ON DECEMBER 31, 2010, AS HEREIN
PROVIDED.





No.
___







NATIONAL
HOLDINGS CORPORATION


WARRANT
TO PURCHASE 17,500 SHARES OF


SERIES
C PREFERRED STOCK, PAR VALUE $0.01 PER SHARE





FOR VALUE RECEIVED, Fund.Com, Inc. or its
Affiliates (the “Warrant Holder”), is
entitled to purchase, subject to the terms and condition of this Class A
Warrant, from National Holdings
Corporation, a Delaware corporation (the “Corporation”), at any
time or from time to time from and the “Initial Exercise
Date” (as hereinafter defined) and not later than 5:00 P.M., Eastern
time, on the “Warrant
Expiration Date” (as hereinafter defined), an aggregate
of  17,500 shares (the “Warrant Shares”) of
the Corporation’s Series C Preferred Stock (as hereinafter defined), at an
exercise price per Warrant Share equal to $1,000.00 (the “Exercise
Price”).  The Series C Preferred Stock is convertible at any
time at the option of the Warrant Holder into Conversion Shares at the Series C
Conversion Price.  The number of Conversion Shares issuable upon
conversion of the Series C Preferred Stock and the Series C Conversion Price
shall be subject to adjustment from time to time as described in the Series C
Certificate of Designation.





This Warrant is the “Class A Warrant”
referred to, and issued pursuant to, that certain Securities Purchase Agreement,
dated as of April 4, 2009, by and between the Corporation, the Warrant Holder
and certain other Persons (the “Purchase
Agreement”).  This Warrant is subject to exchange upon
consummation of the Class A Warrant Exchange as provided in Section 7.9 of the
Purchase Agreement.





The Corporation shall maintain books
for the transfer and registration of the Warrant.  Upon the initial
issuance of this Class A Warrant, the Corporation shall issue and register the
Warrant in the name of the Warrant Holder.





Section
1.                Definitions.  Unless
otherwise separately defined in this Class A Warrant, all capitalized terms when
used herein shall have the same meaning as they are defined in the Purchase
Agreement.  As used in this Class A Warrant, the following terms shall
have the meanings set forth below.





A           “Affiliate” of any particular Person means any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by or under common control with such Person. 
For purposes of this definition, “control” (including the terms “controlling,” “controlled
by” and “under
common control with”)
means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.




B.           "Business Day" means
any day, other than a Saturday or Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.





C.           “Common Stock” means
the common stock of the Corporation, par value $0.02 per share, together with
any securities into which the common stock may be reclassified.





D.           “Conversion Shares”
means, following the full or partial conversion exercise of this Class A
Warrant, such number of shares of Common Stock of the Corporation as shall be
determined by dividing (a) the $1,000 Stated Value per share of the Warrant
Shares so issued upon such exercise, by (b) the Series C Conversion Price per
share, then in effect.





E.           “Dilutive Issuance”
shall have the same meaning as that term is defined in Section 4(e) of the Class
A Warrant to be issued to the Holder(s) of this Warrant upon the occurrence of
the Class A Warrant Exchange.





F.           "Exercise Date" means,
for any one or more exercises of this Class A Warrant, the date specified in the
notice of exercise in the form attached hereto (the "Notice of Exercise"),
so long as a copy of the Notice of Exercise is faxed, emailed or delivered by
other means resulting in receipt by the Corporation before 11:59 p.m., New York
City time, on the Warrant Expiration Date.





G.           "Exercise Price" means
One Thousand Dollars ($1,000.00) per Warrant Share, or such other dollar amount
into which such Exercise Price may be adjusted pursuant to Section 4 of this
Class A Warrant.




H.            “Initial Exercise
Date” shall mean the date of this Warrant.





I.            “Investor” shall mean
Funds.com Inc., a Delaware corporation and/or any Affiliate of Funds.com Inc.
who shall purchase 5,000 shares of the Series C Preferred Stock and receive this
Class A Warrant and Class B Warrants being issued pursuant to the Purchase
Agreement.





J.           "Registration Rights
Agreement" means the Registration Rights Agreement, dated as of the
Issuance Date, by and among the Corporation and the initial Warrant Holders of
Series C Preferred Stock.





K.           “Series C Certificate of
Designations” shall mean the certificate of designations of the rights,
privileges and preferences of the Series C Preferred Stock, as filed with the
Secretary of State of the State of Delaware on the date hereof, as the same may
hereafter be amended or modified.





L.           “Series C Conversion
Price” shall mean initially $0.75, or such other dollar amount into which
such Series C Conversion Price may be adjusted pursuant to Article VIII of the
Series C Certificate of Designations.





M.           “Series C Preferred
Stock” shall mean the shares of Series C convertible redeemable preferred
stock of the Corporation, $0.01 par value per share, authorized for issuance
pursuant to the Series C Certificate of Designations.





N.           “Voting Agreement”
means the shareholders agreement, dated as of the Issuance Date, by and among
the Corporation, the Investor and the “Management Shareholders” (as defined
therein).




53




O.           
“50% Threshold”
shall mean, at any point in time, including, without limitation, following the
exercise of the Class A Warrant and/or the Class B Warrant, the record ownership
by the Holder(s) or its Affiliates of such number of shares of Series C
Preferred Stock, Warrant Shares and/or Common Stock of the Corporation, which if
(a) owned of record as Common Stock by such Persons, and (b) as to Series C
Preferred Stock (including without limitation Class A Warrant Shares) had been
fully converted into Common Stock, would represent in the aggregate fifty
percent (50%) of the issued and outstanding Common Stock of the Corporation at
such point in time.





P.           “Warrants” shall mean
the collective reference to (i) this Class A Warrant of the Corporation issued
to the initial Warrant Holder(s) the Initial Exercise Date or to be issued on
the Class A Warrant Exchange Date (as defined in the Purchase Agreement), and
(ii) the Class B Warrant.





Q.            “Warrant Expiration
Date” shall mean 5:00 p.m. (Eastern time) on December 31, 2009; provided,
however, that in the event that the Warrant Holder shall exercise this
Class A Warrant prior to 5:00 p.m. (Eastern time) on December 31, 2009 and
purchase not less than 10,000 Warrant Shares at the Exercise Price, the
expiration date of this Class A Warrant shall automatically be extended to
December 31, 2010.





R.            Warrant Holder” shall
mean the collective reference to the Investor, its Affiliates or any one or more
holder(s) of this Class A Warrant.





S.           
“Warrant
Shares” shall mean the 17,500 shares of Series C Preferred Stock issuable
upon full exercise of this Class A Warrant, as such shares may be adjusted
pursuant to the terms of this Class A Warrant.





Section
2.                      Transfers.  As
provided herein, and subject to Section 10(b) of the Purchase Agreement, this
Class A Warrant may be transferred only pursuant to a registration statement
filed under the Securities Act of 1933, as amended (the “Securities Act”), or an
exemption from such registration.  Furthermore, this Class A Warrant
and the Warrant Shares are subject to a lockup agreement executed by the Warrant
Holder as of even date herewith.  Subject to such restrictions, the
Corporation shall transfer this Class A Warrant from time to time upon the books
to be maintained by the Corporation for that purpose, upon surrender thereof for
transfer properly endorsed or  accompanied by appropriate instructions
for transfer and such other documents as may be reasonably required by the
Corporation, including, if required by the Corporation, an opinion of its
counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act, to establish that such transfer is being
made in accordance with the terms hereof, and a new Warrant shall be issued to
the transferee and the surrendered Warrant shall be canceled by the
Corporation.





Section
3.                      Exercise of Warrant;
Limitation on Exercise.





(a)           Subject
to the provisions hereof, the Warrant Holder may, in the exercise of its sole
and absolute discretion, exercise this Class A Warrant in whole or in part up to
and including reaching the 50% Threshold, at any time or from time to time
during the period (the “Exercise Period”)
commencing from and after the Initial Exercise Date and ending not later than
5:00 P.M., Eastern time, on the Warrant Expiration Date.





(b)           Except
as otherwise provided in Section 3(c) below,
in the event and to the extent that the exercise of this Class A Warrant would
result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, the Warrant Holder may only exercise this Class A Warrant
prior to the Warrant Expiration Date on or after any date in which the Board of
Directors of the Corporation shall permit the Warrant Holder to exercise this
Class A Warrant.




54




(c)           Notwithstanding
the provisions of Section 3(b) above,
even if such exercise shall result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, no consent or approval of the Board of Directors of the
Corporation shall be required for the Warrant Holder to exercise this Class A
Warrant to provide financing for the Corporation or any Company Subsidiary in an
amount deemed necessary by the Board of Directors of the Corporation to
consummate any Strategic Acquisition approved by the Board of Directors of the
Corporation and by the Investor prior to the Warrant Expiration
Date.




(d)           On
each occasion that the Warrant Holder shall exercise this Class A Warrant, such
Warrant Holder shall (i) surrender this Class A Warrant to the Corporation, (ii)
deliver to the Corporation a duly executed Warrant exercise form attached hereto
as Appendix A
(the “Exercise
Form”), and (iii) pay to the Corporation by cash, certified check or wire
transfer of funds for the aggregate Exercise Price for that number of Warrant
Shares then being purchased.  Such exercise of this Class A Warrant
may be made at any time, as aforesaid, during normal business hours on any
business day at the Corporation’s principal executive offices (or such other
office or agency of the Corporation as it may designate by notice to the Warrant
Holder).




(e)           The
Warrant Shares so purchased shall be deemed to be issued to the Warrant Holder
or the Warrant Holder’s permitted designee, as the record owner of such Warrant
Shares, as of the close of business on the date on which this Class A Warrant
shall have been duly surrendered (or evidence of loss, theft or destruction
thereof and security or indemnity reasonably satisfactory to the Corporation),
the Exercise Price shall have been paid and the completed Exercise Form shall
have been delivered.  Certificates for the Warrant Shares so
purchased, representing the aggregate number of Warrant Shares specified in the
Exercise Form, shall be delivered promptly (and in no event later than three (3)
Business Days following delivery and payment of the Warrant Exercise Price) to
the Warrant Holder after this Class A Warrant shall have been so
exercised.  The certificates so delivered shall be in such
denominations as may be requested by the Warrant Holder and shall be registered
in the name of the Warrant Holder or such other name as shall be designated by
the Warrant Holder, subject to the provisions of Section 10.1 of the Purchaser
Agreement.




(f)           If
this Class A Warrant shall have been exercised only in part, then, unless this
Class A Warrant has expired, the Corporation shall, at its expense, at the time
of delivery of such certificates, deliver to the Warrant Holder a new Class A
Warrant representing the number of the Warrant Shares with respect to which this
Class A Warrant shall not then have been exercised.




(g)           Each
exercise hereof shall constitute the re-affirmation by the Warrant Holder that
the representations and warranties contained in Section 5 of the Purchase
Agreement are true and correct in all material respects with respect to the
Warrant Holder as of the time of such exercise.




Section
4.                  Adjustments.  The
number of Warrant Shares issuable upon exercise of this Class A Warrant and the
Exercise Price shall be subject to adjustment as follows:




(a)           Subdivision or Combination
of Series C Preferred Stock.  If the Corporation at any time,
with the consent of the Majority Holder(s) of such Series C Preferred Stock,
subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Series C Preferred
Stock issuable hereunder into a greater number of shares, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced.  If the Corporation at any time, with the consent of the
Majority Holder(s) of such Series C Preferred Stock, combines (by any reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Series C Preferred Stock issuable hereunder into a smaller number
of shares, then, after the date of record for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased.




55




(b)           Adjustment in Number of
Warrant Shares.  Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 4, the number of Warrant Shares
issuable upon exercise of this Class A Warrant shall be adjusted, all as
provided in the Series C Certificate of Designations.




(c)           Consolidation, Merger or
Sale.  In case of any consolidation of the Corporation with, or
merger of the Corporation into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the Warrant Holder of the this Class A Warrant
will have the right to acquire and receive upon exercise of this Class A Warrant
in lieu of the Warrant Shares immediately theretofore acquirable upon the
exercise of this Class A Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Warrant Shares immediately theretofore acquirable and receivable upon exercise
of this Class A Warrant had such consolidation, merger or sale or conveyance not
taken place.  In any such case, the Corporation will make appropriate
provision to insure that the provisions of this Section 4 hereof will thereafter
be applicable as nearly as may be in relation to any shares of stock or
securities thereafter deliverable upon the exercise of this Class A
Warrant.  The Corporation will not effect any consolidation, merger or
sale or conveyance unless prior to the consummation thereof, the successor
corporation (if other than the Corporation) assumes by written instrument the
obligations under this Section 4 and the obligations to deliver to the Warrant
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Warrant Holder may be entitled to
acquire.




(d)           Distribution of
Assets.  In case the Corporation shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, the Warrant Holder shall be entitled upon exercise of this Class A
Warrant, to receive the amount of such assets which would have been payable to
the Warrant Holder had the Warrant Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such distribution (on an “as exercised” and “as converted” basis, as though
this Class A Warrant had been fully exercised for Warrant Shares and all such
Warrant Shares had been fully converted into Common Stock at the Series C
Conversion Price then in effect immediately prior to the dividend or
distribution declaration date).




(e)           Dilutive
Issuances.  In the event that, at any time following the issuance
date of this Class A Warrant and prior to the issuance to the Holder(s) of the
Class A Warrant to purchase shares of Common Stock of the Corporation to be
delivered to such Holder(s) upon consummation of the Class A Warrant Exchange
(the “Exchange
Warrants”), there shall have occurred one or more Dilutive Issuances,
then and in such event, the Exercise Price of the Exchange Warrants shall, for
all purposes, be deemed to have been adjusted as a result of each such Dilutive
Issuance pursuant to Section 4(e) of such Exchange Warrant, as though such
Exchange Warrants had been issued immediately prior to the occurrence of initial
Dilutive Issuance.




(f)           Notice of
Adjustment.  Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the
Corporation shall give notice thereof to the Warrant Holder, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Class A Conversion Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.  Such calculation
shall be certified by the Chief Financial Officer of the
Corporation.




(g)           Minimum Adjustment of
Exercise Price.  No adjustment of the Exercise Price shall be
made in an amount of less than 1% of the Exercise Price in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.




56




(h)           No Fractional
Shares.  No fractional shares of Common Stock are to be issued
upon the exercise of this Class A Warrant, but the Corporation shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the average Market Price per share of
the Common Stock for the five (5) Trading Days immediately prior to the date of
such exercise.




(i)           Other
Notices.  In case at any time:




(i)           the
Corporation shall declare any dividend upon the Common Stock payable in shares
of stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;




(ii)           the
Corporation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;




(iii)           there
shall be any capital reorganization of the Corporation, or reclassification of
the Common Stock, or consolidation or merger of the Corporation with or into, or
sale of all or substantially all its assets to, another corporation or
entity;




(iv)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;




then, in
each such case, the Corporation shall give to the Warrant Holder (a) notice of
the date on which the books of the Corporation shall close or a record shall be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other
Fundamental Change, notice of the date (or, if not then known, a reasonable
approximation thereof by the Corporation) when the same shall take
place.  Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be.  Such notice shall be given at least thirty (30) days
prior to the record date or the date on which the Corporation’s books are closed
in respect thereto.  Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.




(j)           Certain
Definition.






“Common Stock,” for
purposes of this Section 4, includes the Common Stock, without par value per
share, and any additional class of stock of the Corporation having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to the this Class A Warrant shall include only shares of
Common Stock, $0.02 par value per share, in respect of which the this Class A
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or Business Combination, the stock or other securities or
property provided for in such Section.




57





Section
5.                      Compliance with the
Securities Act of 1933.  The Corporation may cause the legend set
forth on the first page of this Class A Warrant to be set forth on each Warrant
or similar legend on any security issued or issuable upon exercise of this Class
A Warrant, unless counsel for the Corporation is of the opinion as to any such
security that such legend is unnecessary.





Section
6.                      Payment of
Taxes.  The Corporation will pay any documentary stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Corporation shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrant Holder in respect of which such shares are
issued, and in such case, the Corporation shall not be required to issue or
deliver any certificate for Warrant Shares or any Warrant until the person
requesting the same has paid to the Corporation the amount of such tax or has
established to the Corporation’s reasonable satisfaction that such tax has been
paid.  The Warrant Holder shall be responsible for income taxes due
under federal, state or other law, if any such tax is due.





Section
7.                      Mutilated or Missing
Warrants.  In case this Class A Warrant shall be mutilated,
lost, stolen, or destroyed, the Corporation shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Corporation of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Corporation.





Section
8.                      Reservation of Series C
Preferred Stock.  The Corporation hereby represents and
warrants that there have been reserved, and the Corporation shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 8, out of the authorized and unissued shares of Series C Preferred
Stock, sufficient shares to provide for the exercise of the rights of purchase
represented by this Class A Warrant.  The Corporation agrees that all
Warrant Shares issued upon due exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized, validly
issued, fully paid and non-assessable shares of this Series C Preferred Stock of
the Corporation.





Section
9.                      Fractional
Interest.  The Corporation shall not be required to issue
fractions of Warrant Shares upon the exercise of this Class A
Warrant.  If any fractional share of this Class A Warrant would,
except for the provisions of the first sentence of this Section 9, be
deliverable upon such exercise, the Corporation, in lieu of delivering such
fractional share, shall pay to the exercising Warrant Holder an amount in cash
equal to the Fair Market Value of such fractional share of this Class A Warrant
on the date of exercise.





Section
10.                      Registration Rights.
The Warrant Holder shall be entitled to the rights set forth under the
Registration Rights Agreement dated as of even date herewith to allow for the
registration of the resale of the Common Stock issuable upon exercise of Warrant
Shares under the Securities Act of 1933, as amended.





Section
11.                      Benefits.  Nothing
in this Class A Warrant shall be construed to give any person, firm or
corporation (other than the Corporation and the Warrant Holder) any legal or
equitable right, remedy or claim, it being agreed that this Class A Warrant
shall be for the sole and exclusive benefit of the Corporation and the Warrant
Holder.





Section
12.                      Notices to Warrant
Holder.  Upon the happening of any event requiring an
adjustment of the Exercise Price, the Corporation shall promptly give written
notice thereof to the Warrant Holder at the address appearing in the records of
the Corporation, stating the adjusted Exercise Price and the adjusted number of
Warrant Shares resulting from such event and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is
based.  Failure to give such notice to the Warrant Holder or any
defect therein shall not affect the legality or validity of the subject
adjustment.




58





Section
13.                      Identity of Transfer
Agent.  The Corporation does not maintain a separate transfer
agent for the this Class A Warrant.  Upon the appointment of a
transfer agent for the this Class A Warrant or other shares of the Corporation’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant, the Corporation will mail to the Warrant Holder a statement
setting forth the name and address of such transfer agent.





Section
14.                      Notices.  Unless
otherwise provided, any notice required or permitted under this Class A Warrant
shall be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or facsimile, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the seventh
day after such notice is deposited in first class mail, postage prepaid, and
(iv) if given by an nationally recognized overnight air courier, then such
notice shall be deemed given upon delivery to the intended
recipient.  All notices shall be addressed as follows: if to the
Warrant Holder, at its address as set forth in the Corporation’s books and
records and, if to the Corporation, at the address as follows, or at such other
address as the Warrant Holder or the Corporation may designate by ten days’
advance written notice to the other:





If to the Corporation:





National
Holdings Corporation


120
Broadway, 27th
Floor


New York,
NY 10271


Attention:  Mark
Goldwasser, CEO


Fax:  (212)
417-8010





With a copy to:





Littman
Krooks LLP


655 Third
Avenue, 20th
Floor


New York,
NY  10017


Attention:  Mitchell
C. Littman, Esq.


Fax:  (212)
490-2990





Section
15.                      Successors.  All the covenants and provisions hereof by or for
the benefit of the Warrant Holder shall bind and inure to the benefit of its
respective successors and permitted assigns hereunder.





Section
16.                      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 the choice of law principles thereof.  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.




59





Section
17.                      No Rights as
Stockholder.  Prior to the exercise of this Class A Warrant in
accordance with Section 3 hereof, the Warrant Holder shall not have or exercise
any rights as a stockholder of the Corporation by virtue of its ownership of
this Class A Warrant.





Section
18.                      Amendment;
Waiver.  Any term of this Class A Warrant may be amended and
the observance of any term of this Class A Warrant may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with the written consent of the Warrant Holder and the
Corporation.  Any amendment or waiver effected in accordance with this
Section 18 shall be binding upon the Warrant Holder (and of any securities into
which this Class A Warrant is convertible), each future holder of all such
securities, and the Corporation.





Section
19.                      Section
Headings.  The section headings in this Class A Warrant are for
the convenience of the Corporation and the Warrant Holder and in no way alter,
modify, amend, limit or restrict the provisions hereof.





[balance
of this page intentionally left blank – signature page follows]




60




IN WITNESS WHEREOF, the Corporation has
caused this Class A Warrant to be duly executed, as of the __ day of April,
2009.





NATIONAL
HOLDINGS CORPORATION











By:__________________________________


Mark Goldwasser


Chief Executive Officer




61




APPENDIX
A


NATIONAL
HOLDINGS CORPORATION


WARRANT
EXERCISE FORM FOR “CLASS A WARRANT”





To
National Holdings Corporation:




The undersigned, pursuant to the
provisions set forth in the attached Warrant, hereby irrevocably elects to
purchase ________ shares of the Series C Preferred Stock covered by such Warrant
and herewith makes payment of $ _________, representing the full purchase price
for such shares at the price per share provided for in such
Warrant.




As of the date hereof (prior to
exercise of this Class A Warrant), the undersigned certifies that is
Warrant Holder Ownership (as defined in Section 3(b) consists of the following
equity securities of the Corporation:





(a)
            ______________
      shares of Series C Preferred Stock, which consists of 5,000 shares
      purchased pursuant to the Purchase Agreement and __________ shares that
      were previously issued upon exercise of this Class A
      Warrant.   The foregoing shares of C Preferred Stock are
      currently convertible into _________ shares of Common Stock on an
      as-converted to Common Stock basis.





(b)
            _______________
      shares of Common Stock, which includes _____ shares of Common Stock that
      have been issued upon exercise of the Class B Warrant issued pursuant to
      the Purchase Agreement.




Please issue a certificate or
certificates representing ________ shares in the name of the undersigned or in
such other name or names as are specified below:








_______________________________


Name


________________________________


Address


________________________________





and, if
the number of Warrant Shares shall not be all the Warrant Shares purchasable
upon exercise of the Warrant, that a new Warrant for the balance of the Warrant
Shares purchasable upon exercise of this Class A Warrant be registered in the
name of the undersigned Warrant Holder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.





The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.




62







Dated:
___________________, ____





Note:  The
signature must correspond with


the name
of the Warrant Holder as
written                                                                                     Signature:______________________


on the
first page of the Warrant in
every                                                                           ______________________________


particular,
without alteration or
enlargement                                                                                     Name
(please print)


or any
change whatever, unless the Warrant


has been
assigned.                                                                         
   ______________________________


______________________________


Address


______________________________


Federal Identification or


Social Security No.




63





EXHIBIT
B





FORM OF
ASSIGNMENT




(To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)




For Value
Received, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to:




Name: (Please
Print)








Address: (Please
Print)







Dated:  __________,
20__





Warrant
Holder’s


Signature:





Warrant
Holder’s


Address:








NOTE:  The signature
to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change
whatever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.





64





EXHIBIT
B-2





THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTIONS OR VOLUME
LIMITATIONS PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.





THIS
WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON DECEMBER 31, 2009, SUBJECT
TO EXTENSION TO 5:00 P.M. EASTERN TIME ON DECEMBER 31, 2010, AS PROVIDED
HEREIN.





No.
___








NATIONAL HOLDINGS
CORPORATION





WARRANT TO PURCHASE 23,333,333
SHARES OF


COMMON STOCK, PAR VALUE $0.02 PER
SHARE




FOR VALUE RECEIVED, Fund.Com, Inc. or its
Affiliates (the “Warrant Holder”), is
entitled to purchase, subject to the terms and condition of this Class A
Warrant, from National Holdings
Corporation, a Delaware corporation (the “Corporation”), at any
time or from time to time from and the “Initial Exercise
Date” (as hereinafter defined) and not later than 5:00 P.M., Eastern
time, on the “Warrant
Expiration Date” (as hereinafter defined), an aggregate
of  23,333,333 shares (the “Warrant Shares”) of
the Corporation’s Common Stock (as hereinafter defined), at an exercise price
per Warrant Share equal to $0.75 (the “Exercise
Price”).  The number of Warrant Shares issuable upon exercise
of this Class A Warrant and the Exercise Price shall be subject to adjustment
from time to time as described herein.





This Warrant is the “Class A Warrant”
constituting Exhibit
B-2, referred to, and issued on the Class A Warrant Exchange Date
pursuant to Section 7.9 of that certain Securities Purchase Agreement, dated as
of April 4, 2009, by and between the Corporation, the Warrant Holder and certain
other Persons (the “Purchase
Agreement”).  As used herein, the term “Class A Warrant”
shall mean and include both this Class A Warrant and the form of Class A Warrant
exercisable for shares of Series C Preferred Stock, constituting Exhibit B-1 to the
Purchase Agreement.





The Corporation shall maintain books
for the transfer and registration of the Warrant.  Upon the initial
issuance of this Class A Warrant, the Corporation shall issue and register the
Warrant in the name of the Warrant Holder.





Section
1.                      Definitions.                      Unless
otherwise separately defined in this Class A Warrant, all capitalized terms when
used herein shall have the same meaning as they are defined in the Purchase
Agreement.  As used in this Class A Warrant, the following terms shall
have the meanings set forth below.





A           “Affiliate” of any particular Person means any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by or under common control with such Person. 
For purposes of this definition, “control” (including the terms “controlling,” “controlled
by” and “under
common control with”)
means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.




65




B.           "Business Day" means
any day, other than a Saturday or Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.





C.           “Common Stock” means
the common stock of the Corporation, par value $0.02 per share, together with
any securities into which the common stock may be reclassified.





D.           "Exercise Date" means,
for any one or more exercises of this Class A Warrant, the date specified in the
notice of exercise in the form attached hereto (the "Notice of Exercise"),
so long as a copy of the Notice of Exercise is faxed, emailed or delivered by
other means resulting in receipt by the Corporation before 11:59 p.m, New York
City time, on the Warrant Expiration Date.




E.           "Exercise Price" means
initially Seventy-Five Cents ($0.75) per Warrant Share, or such other amount
into which such Exercise Price may be adjusted pursuant to Section 4 of this
Class A Warrant.




F.            “Initial Exercise
Date” shall mean the date of this Warrant.





G.            “Investor” shall mean
Funds.com Inc., a Delaware corporation and/or its Affiliate who purchased 5,000
shares of the Series C Preferred Stock and received this Class A Warrant and the
Class B Warrant issued pursuant to the Purchase Agreement.





H.           "Registration Rights
Agreement" means the Registration Rights Agreement, dated as of the
Issuance Date, by and among the Corporation and the initial Warrant Holders of
Series C Preferred Stock.





I.           “Series C Preferred
Stock” shall mean the shares of Series C convertible redeemable preferred
stock of the Corporation, $0.01 par value per share, authorized for issuance
pursuant to the Series C Certificate of Designations.





J.           “Voting Agreement”
means the shareholders agreement, dated as of the Issuance Date, by and among
the Corporation, the Investor and the “Management Shareholders” (as defined
therein).




K.           “50% Threshold” shall
mean, at any point in time, including, without limitation, following the
exercise of the Class A Warrant and/or Class B Warrant, the record ownership by
the Holder(s) of such number of shares of Series C Preferred Stock, Warrant
Shares and/or Common Stock of the Corporation, which if (a) owned of record as
Common Stock by such Persons, and (b) as to Series C Preferred Stock (including
without limitation Class A Warrant Shares) had been fully converted into Common
Stock, would represent in the aggregate fifty percent (50%) or more of the
issued and outstanding Common Stock of the Corporation at such point in
time.





L.           “Warrants” shall mean
the collective reference to (i) this Class A Warrant of the Corporation issued
to the initial Warrant Holder(s) on the Initial Exercise Date or to be issued on
the Class A Warrant Exchange Date (as defined in the Purchase Agreement), and
(ii) the Class B Warrant.





M.            “Warrant Expiration
Date” shall mean 5:00 p.m. (Eastern time) on December 31, 2009; provided,
however, that in the event that the Warrant Holder shall, on any one or
more occasion prior to 5:00 p.m. (Eastern time) on December 31, 2009, exercise
this Class A Warrant in part and purchase Warrant Shares for Exercise Price(s)
(inclusive of all prior exercises of this Class A Warrant) aggregating
$10,000,000 or more, then and in such event, expiration date of this Class A
Warrant shall automatically be extended to 5:00 p.m. (Eastern time) on December
31, 2010.




66




N.            Warrant Holder” shall
mean the collective reference to the Investor, its Affiliates or any one or more
holder(s) of this Class A Warrant.





O.           
“Warrant
Shares” shall mean the shares of Common Stock issuable upon the full or
partial exercise of this Class A Warrant, as such shares may be adjusted
pursuant to the terms of this Class A Warrant.





Section
2.                      Transfers.  As
provided herein, and subject to Section 10.1(b) of the Purchase Agreement, this
Class A Warrant may be transferred only pursuant to a registration statement
filed under the Securities Act of 1933, as amended (the “Securities Act”), or an
exemption from such registration.  Furthermore, this Class A Warrant
and the Warrant Shares are subject to a lockup agreement executed by the Warrant
Holder as of even date herewith.  Subject to such restrictions, the
Corporation shall transfer this Class A Warrant from time to time upon the books
to be maintained by the Corporation for that purpose, upon surrender thereof for
transfer properly endorsed or  accompanied by appropriate instructions
for transfer and such other documents as may be reasonably required by the
Corporation, including, if required by the Corporation, an opinion of its
counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act, to establish that such transfer is being
made in accordance with the terms hereof, and a new Warrant shall be issued to
the transferee and the surrendered Warrant shall be canceled by the
Corporation.





Section
3.                      Exercise of Warrant;
Limitation on Exercise.




(a)           Subject
to the provisions hereof, the Warrant Holder may, in the exercise of its sole
and absolute discretion, exercise this Class A Warrant in whole or in part up to
and including reaching the 50% Threshold, at any time or from time to time
during the period (the “Exercise Period”)
commencing from and after the Initial Exercise Date and ending not later than
5:00 P.M., Eastern time, on the Warrant Expiration Date.




(b)           Except
as otherwise provided in Section 3(c) below,
in the event and to the extent that the exercise of this Class A Warrant would
result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, the Warrant Holder may only exercise this Class A Warrant
prior to the Warrant Expiration Date on or after any date in which the Board of
Directors of the Corporation shall permit the Warrant Holder to exercise this
Class A Warrant.




(c)           Notwithstanding
the provisions of Section 3(b) above,
even if such exercise shall result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, no consent or approval of the Board of Directors of the
Corporation shall be required for the Warrant Holder to exercise this Class A
Warrant to provide financing for the Corporation or any Company Subsidiary in an
amount deemed necessary by the Board of Directors of the Corporation to
consummate any Strategic Acquisition approved by the Board of Directors of the
Corporation and by the Investor prior to the Warrant Expiration
Date.




(d)           On
each occasion that the Warrant Holder shall exercise this Class A Warrant, such
Warrant Holder shall (i) surrender this Class A Warrant to the Corporation, (ii)
deliver to the Corporation a duly executed Warrant exercise form attached hereto
as Appendix A
(the “Exercise
Form”), and (iii) pay to the Corporation by cash, certified check or wire
transfer of funds for the aggregate Exercise Price for that number of Warrant
Shares then being purchased.  Such exercise of this Class A Warrant
may be made at any time, as aforesaid, during normal business hours on any
business day at the Corporation’s principal executive offices (or such other
office or agency of the Corporation as it may designate by notice to the Warrant
Holder).




67




(e)           The
Warrant Shares so purchased shall be deemed to be issued to the Warrant Holder
or the Warrant Holder’s permitted designee, as the record owner of such Warrant
Shares, as of the close of business on the date on which this Class A Warrant
shall have been duly surrendered (or evidence of loss, theft or destruction
thereof and security or indemnity reasonably satisfactory to the Corporation),
the Exercise Price shall have been paid and the completed Exercise Form shall
have been delivered.  Certificates for the Warrant Shares so
purchased, representing the aggregate number of Warrant Shares specified in the
Exercise Form, shall be delivered promptly (and in no event later than three (3)
Business Days following delivery and payment of the Warrant Exercise Price) to
the Warrant Holder after this Class A Warrant shall have been so
exercised.  The certificates so delivered shall be in such
denominations as may be requested by the Warrant Holder and shall be registered
in the name of the Warrant Holder or such other name as shall be designated by
the Warrant Holder, subject to the provisions of Section 10.1 of the Purchase
Agreement.




(f)           If
this Class A Warrant shall have been exercised only in part, then, unless this
Class A Warrant has expired, the Corporation shall, at its expense, at the time
of delivery of such certificates, deliver to the Warrant Holder a new Class B
Warrant representing the number of the Warrant Shares with respect to which this
Class A Warrant shall not then have been exercised.




(g)           Each
exercise hereof shall constitute the re-affirmation by the Warrant Holder that
the representations and warranties contained in Section 5 of the Purchase
Agreement are true and correct in all material respects with respect to the
Warrant Holder as of the time of such exercise.




Section
4.                      Adjustments.  The
number of Warrant Shares issuable upon exercise of this Class A Warrant and the
Exercise Price shall be subject to adjustment as follows:




(a)           Subdivision or Combination
of Common Stock.  If the Corporation at any time subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a greater number of shares, then, after the date of record for effecting
such subdivision, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced.  If the Corporation at
any time combines (by any reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.




(b)           Adjustment in Number of
Warrant Shares.  Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 4, the number of Warrant Shares
issuable upon exercise of this Class A Warrant shall be adjusted by multiplying
a number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this Class
A Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.




(c)           Consolidation, Merger or
Sale.  In case of any consolidation of the Corporation with, or
merger of the Corporation into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the Warrant Holder of the this Class A Warrant
will have the right to acquire and receive upon exercise of this Class A Warrant
in lieu of the Warrant Shares immediately theretofore acquirable upon the
exercise of this Class A Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Warrant Shares immediately theretofore acquirable and receivable upon exercise
of this Class A Warrant had such consolidation, merger or sale or conveyance not
taken place.  In any such case, the Corporation will make appropriate
provision to insure that the provisions of this Section 4 hereof will thereafter
be applicable as nearly as may be in relation to any shares of stock or
securities thereafter deliverable upon the exercise of this Class A
Warrant.  The Corporation will not effect any consolidation, merger or
sale or conveyance unless prior to the consummation thereof, the successor
corporation (if other than the Corporation) assumes by written instrument the
obligations under this Section 4 and the obligations to deliver to the Warrant
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Warrant Holder may be entitled to
acquire.




68




(d)           Distribution of
Assets.  In case the Corporation shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, the Warrant Holder shall be entitled upon exercise of this Class A
Warrant, to receive the amount of such assets which would have been payable to
the Warrant Holder had the Warrant Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such distribution (on an “as exercised” and “as converted” basis, as though
this Class A Warrant had been fully exercised for Warrant Shares and all such
Warrant Shares had been fully converted into Common Stock at the Exercise Price
then in effect immediately prior to the dividend or distribution declaration
date).




(e)           Adjustment Due to Dilutive
Issuance.  If, at any time when any portion of this Class A
Warrant is issued and outstanding, the Corporation issues or sells, or in
accordance with this Section 4 is deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) that is lessthan
the Exercise Price Price in effect on the date of such issuance (or deemed
issuance) of such shares of Common Stock (a “Dilutive Issuance”),
then immediately upon the Dilutive Issuance, the Exercise Price will be reduced
to the price determined by multiplying the Exercise Price in effect immediately
prior to the Dilutive Issuance by a fraction, (i) the numerator of which is an
amount equal to the sum of (x) the number of shares of Common Stock Deemed
Outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient of
the aggregate consideration, calculated as set forth in Section 4, received by
the Corporation upon such Dilutive Issuance divided by the Exercise Price in
effect immediately prior to the Dilutive Issuance, and (ii) the denominator of
which is the Common Stock Deemed Outstanding (as defined below) immediately
after the Dilutive Issuance; provided that only one adjustment will be made for
each Dilutive Issuance.  The term “Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (i) the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (ii) the maximum total number of shares of Common
Stock issuable upon conversion or exchange of Convertible Securities, as of the
date of issuance of such Convertible Securities, if any.  No
adjustment to the Exercise Price shall have the effect of increasing the
Exercise Price above the Exercise Price in effect immediately prior to such
adjustment.




(f)           Effect on Exercise Price of
Certain Events.  For purposes of determining the adjusted
Exercise Price, the following will be applicable:




(i)           Issuance of Rights or
Options.  If the Corporation in any manner issues or grants any
warrants (including the Warrants issued pursuant to the Purchase Agreement),
rights or options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter collectively referred to in this
Section 4 as “Options”) and the
price per share for which Common Stock is issuable upon the exercise of such
Options less than the Exercise Price on the date of issuance or grant of such
Options, then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance or grant
of such Options, be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share.  For purposes of the
preceding sentence, the “price per share for which Common Stock is issuable upon
the exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Options, plus, in the case of Convertible Securities (as hereinafter defined)
issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange thereof at the
time such Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of Convertible
Securities, if applicable).  No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.




69




(ii)           Issuance of Convertible
Securities.  If the Corporation in any manner issues or sells
any other series or classes of Preferred Stock (other than the Series A
Preferred Stock) or other securities that are convertible into or exchangeable
for Common Stock (“Convertible
Securities”), whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price on the date of issuance, then the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Corporation
for such price per share.  For the purposes of the preceding sentence,
the “price per share for which Common Stock is issuable upon such conversion or
exchange” is determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or sale of all
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.  No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.




(iii)           Change in Option Price or
Conversion Rate.  If there is a change at any time in (i) the
amount of additional consideration payable to the Corporation upon the exercise
of any Options; (ii) the amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time
of such change will be readjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.




(iv)           Treatment of Expired Options
and Unexercised Convertible Securities.  If, in any case, the
total number of shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.




70




(v)           Calculation of Consideration
Received.  If any Common Stock, Options or Convertible
Securities are issued, granted or sold for cash, the consideration received
therefor will be the amount received by the Corporation therefor, before
deduction of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Corporation in connection with
such issuance, grant or sale.  In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration other than cash
received by the Corporation will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Corporation will be the Market Price thereof as of
the date of receipt.  In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Corporation is the surviving corporation, the amount
of consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may
be.  The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the
Corporation.




(g)           Exceptions to
Adjustments.  No adjustment to the Exercise Price or Warrant
Shares will be made;




(i)           upon
the issuance of shares of Common Stock or Options or Convertible Securities to
employees of the Corporation pursuant to any stock or option plan duly adopted
by the Board of Directors of the Corporation, subject to compliance with the
terms of the Stock Option Plan referred to in the Purchase Agreement, including
the limitations on Options issued or issuable to the “Key Employees” as defined
in the Purchase Agreement; or




(ii)           upon
the issuance of shares of Common Stock issuable upon the exercise of Options or
conversion of Convertible Securities that are outstanding as of the date of
filing of this Certificate of Designations, including, without limitation, those
securities issued pursuant to the Purchase Agreement; or




(iii)           the
issuance (not for capital raising purposes) of shares of Common Stock,
Convertible Securities or Options to financial institutions, lessors or vendors
in connection with commercial credit or service arrangements, equipment
financings or similar transactions, all approved by the Board of Directors of
the Corporation; or




(iv)           the
issuance of shares of Common Stock, Convertible Securities or Options to
providing financing to consummate any Approved Business Combination (as that
term is defined in the Series C Certificate of Designations);




(v)           the
issuance of shares of Series A Preferred Stock as pay-in-kind dividends with
respect to the Series A Preferred Stock; or




(vi)           following
the occurrence and during the continuation of a Warrant Default that has not
been cured in a manner deemed satisfactory by the Corporation to facilitate the
timely financing of an Approved Business Combination (as that term is defined in
the Series C Certificate of Designations), the issuance of shares of Common
Stock, Convertible Securities or Options to providing financing to consummate
such Approved Business Combination.




(h)           Notice of
Adjustment.  Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the
Corporation shall give notice thereof to the Warrant Holder, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Class B Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.  Such calculation shall be
certified by the Chief Financial Officer of the Corporation.




71




(i)           Minimum Adjustment of
Exercise Price.  No adjustment of the Exercise Price shall be
made in an amount of less than 1% of the Exercise Price in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.




(j)           No Fractional
Shares.  No fractional shares of Common Stock are to be issued
upon the exercise of this Class A Warrant, but the Corporation shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the average Market Price per share of
the Common Stock for the five (5) Trading Days immediately prior to the date of
such exercise.




(k)           Other
Notices.  In case at any time:




(i)           the
Corporation shall declare any dividend upon the Common Stock payable in shares
of stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;




(ii)           the
Corporation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;




(iii)           there
shall be any capital reorganization of the Corporation, or reclassification of
the Common Stock, or consolidation or merger of the Corporation with or into, or
sale of all or substantially all its assets to, another corporation or
entity;




(iv)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;




then, in
each such case, the Corporation shall give to the Warrant Holder (a) notice of
the date on which the books of the Corporation shall close or a record shall be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other
Fundamental Change, notice of the date (or, if not then known, a reasonable
approximation thereof by the Corporation) when the same shall take
place.  Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be.  Such notice shall be given at least thirty (30) days
prior to the record date or the date on which the Corporation’s books are closed
in respect thereto.  Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.




(l)           Certain
Definitions.




“Bloomberg” shall mean
Bloomberg, L.P. (or any successor to its function of reporting stock
prices).




72




“Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of the Options, as of the date of such issuance or
grant of such Options, if any, and (y) the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.




“Market Price” means,
as of any Trading Day, (i) ) the average of the last reported sale prices for
the shares of Common Stock on a national securities exchange which is the
principal trading market for the Common Stock for the five (5) Trading Days
immediately preceding such date as reported by Bloomberg or (ii) if no national
securities exchange is the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the fair market value as reasonably
determined in good faith by (A) the Board of Directors of the Corporation, or
(B) at the option of a majority-in-interest of the holders of the outstanding
this Class A Warrants by an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business of the
Corporation.  The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.




“Common Stock,” for
purposes of this Section 4, includes the Common Stock, without par value per
share, and any additional class of stock of the Corporation having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to the this Class A Warrant shall include only shares of
Common Stock, $0.02 par value per share, in respect of which the this Class A
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or Business Combination, the stock or other securities or
property provided for in such Section.




“Trading Day” shall
mean any day on which the Common Stock is traded for any period on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.





Section
5.                      Compliance with the
Securities Act of 1933. The Corporation may cause the legend set forth on
the first page of this Class A Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this Class A
Warrant, unless counsel for the Corporation is of the opinion as to any such
security that such legend is unnecessary.





Section
6.                      Payment of
Taxes.  The Corporation will pay any documentary stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Corporation shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrant Holder in respect of which such shares are
issued, and in such case, the Corporation shall not be required to issue or
deliver any certificate for Warrant Shares or any Warrant until the person
requesting the same has paid to the Corporation the amount of such tax or has
established to the Corporation’s reasonable satisfaction that such tax has been
paid.  The Warrant Holder shall be responsible for income taxes due
under federal, state or other law, if any such tax is due.




73




Section
7.                      Mutilated or Missing
Warrants.  In case this Class A Warrant shall be mutilated,
lost, stolen, or destroyed, the Corporation shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Corporation of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Corporation.





Section
8.                      Reservation of this Common
Stock.  The Corporation hereby represents and warrants that
there have been reserved, and the Corporation shall at all applicable times keep
reserved until issued (if necessary) as contemplated by this Section 8, out of
its authorized and unissued shares of Common Stock, sufficient shares of Common
Stock to provide for the exercise of the rights of purchase represented by this
Class A Warrant.  The Corporation agrees that all Warrant Shares
issued upon due exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of the Corporation.





Section
9.                      Fractional
Interest.  The Corporation shall not be required to issue
fractions of Warrant Shares upon the exercise of this Class A
Warrant.  If any fractional share of this Class A Warrant would,
except for the provisions of the first sentence of this Section 9, be
deliverable upon such exercise, the Corporation, in lieu of delivering such
fractional share, shall pay to the exercising Warrant Holder an amount in cash
equal to the Fair Market Value of such fractional share of this Class A Warrant
on the date of exercise.





Section
10.                      Registration Rights.
The Warrant Holder shall be entitled to the rights set forth under the
Registration Rights Agreement dated as of even date herewith to allow for the
registration of the resale of the Common Stock issuable upon exercise of Warrant
Shares under the Securities Act of 1933, as amended.





Section
11.                      Benefits.  Nothing
in this Class A Warrant shall be construed to give any person, firm or
corporation (other than the Corporation and the Warrant Holder) any legal or
equitable right, remedy or claim, it being agreed that this Class A Warrant
shall be for the sole and exclusive benefit of the Corporation and the Warrant
Holder.





Section
12.                      Notices to Warrant
Holder.  Upon the happening of any event requiring an
adjustment of the Exercise Price, the Corporation shall promptly give written
notice thereof to the Warrant Holder at the address appearing in the records of
the Corporation, stating the adjusted Exercise Price and the adjusted number of
Warrant Shares resulting from such event and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is
based.  Failure to give such notice to the Warrant Holder or any
defect therein shall not affect the legality or validity of the subject
adjustment.





Section
13.                      Identity of Transfer
Agent.  The Corporation does not maintain a separate transfer
agent for the this Class A Warrant.  Upon the appointment of a
transfer agent for the this Class A Warrant or other shares of the Corporation’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant, the Corporation will mail to the Warrant Holder a statement
setting forth the name and address of such transfer agent.





Section
14.                      Notices.  Unless
otherwise provided, any notice required or permitted under this Class A Warrant
shall be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or facsimile, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the seventh
day after such notice is deposited in first class mail, postage prepaid, and
(iv) if given by an nationally recognized overnight air courier, then such
notice shall be deemed given upon delivery to the intended
recipient.  All notices shall be addressed as follows: if to the
Warrant Holder, at its address as set forth in the Corporation’s books and
records and, if to the Corporation, at the address as follows, or at such other
address as the Warrant Holder or the Corporation may designate by ten days’
advance written notice to the other:




74




If to the Corporation:





National
Holdings Corporation


120
Broadway, 27th
Floor


New York,
NY 10271


Attention:  Mark
Goldwasser, CEO


Fax:  (212)
417-8010





With a copy to:





Littman
Krooks LLP


655 Third
Avenue, 20th
Floor


New York,
NY  10017


Attention:  Mitchell
C. Littman, Esq.


Fax:  (212)
490-2990





Section
15.                      Successors.  All the covenants and provisions hereof by or for
the benefit of the Warrant Holder shall bind and inure to the benefit of its
respective permitted successors and assigns hereunder.





Section
16.                      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 the choice of law principles thereof.  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.





Section
17.                      No Rights as
Stockholder.  Prior to the exercise of this Class A Warrant in
accordance with Section 3 hereof, the Warrant Holder shall not have or exercise
any rights as a stockholder of the Corporation by virtue of its ownership of
this Class A Warrant.





Section
18.                      Amendment;
Waiver.  Any term of this Class A Warrant may be amended and
the observance of any term of this Class A Warrant may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with the written consent of the Warrant Holder and the
Corporation.  Any amendment or waiver effected in accordance with this
Section 18 shall be binding upon the Warrant Holder (and of any securities into
which this Class A Warrant is convertible), each future holder of all such
securities, and the Corporation.





Section
19.                      Section
Headings.  The section headings in this Class A Warrant are for
the convenience of the Corporation and the Warrant Holder and in no way alter,
modify, amend, limit or restrict the provisions hereof.





[balance
of this page intentionally left blank – signature page follows]




75




IN WITNESS WHEREOF, the Corporation has
caused this Class A Warrant to be duly executed, as of the __ day of April,
2009.





NATIONAL
HOLDINGS CORPORATION











By:__________________________________


Mark Goldwasser


Chief Executive Officer




76





APPENDIX
A


NATIONAL
HOLDINGS CORPORATION


WARRANT
EXERCISE FORM FOR “A WARRANT”





To
National Holdings Corporation:




The undersigned, pursuant to the
provisions set forth in the attached Warrant, hereby irrevocably elects to
purchase ________ shares of the Series C Preferred Stock covered by such Warrant
and herewith makes payment of $ _________, representing the full purchase price
for such shares at the price per share provided for in such
Warrant.




As of the date hereof (prior to
exercise of this A Warrant), the undersigned certifies that is Warrant
Holder Ownership (as defined in Section 3(b) consists of the following equity
securities of the Corporation:





(c)
            ______________
      shares of C Preferred Stock, which consists of 5,000 shares purchased
      pursuant to the Purchase Agreement and __________ shares that were
      previously issued upon exercise of this “A Warrant”.   The
      foregoing shares of C Preferred Stock are currently convertible into
      _________ shares of Common Stock on an as-converted to Common Stock
      basis.





(d)
            _______________
      shares of Common Stock, which includes _____ shares of Common Stock that
      have been issued upon exercise of the B Warrant issued pursuant to the
      Purchase Agreement.





Please issue a certificate or
certificates representing ________ shares in the name of the undersigned or in
such other name or names as are specified below:








_______________________________


Name


________________________________


Address


________________________________





and, if
the number of Warrant Shares shall not be all the Warrant Shares purchasable
upon exercise of the Warrant, that a new Warrant for the balance of the Warrant
Shares purchasable upon exercise of this Class A Warrant be registered in the
name of the undersigned Warrant Holder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.





The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.








Dated:
___________________, ____





Note:  The
signature must correspond with


the name
of the Warrant Holder as
written                                                                                     Signature:______________________


on the
first page of the Warrant in
every                                                                           ______________________________


particular,
without alteration or
enlargement                                                                                     Name
(please print)


or any
change whatever, unless the Warrant


has been
assigned.                                                                    
         ______________________________


______________________________


Address


______________________________


Federal Identification or


Social Security No.







77




EXHIBIT
B





FORM OF
ASSIGNMENT




(To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)




For Value
Received, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to:


Name: (Please
Print)
 
 
 Address:                                                                        
( Please
Print)
 
 
 Dated:  __________,
20__
 Warrant
Holder’s
 Signature:
 
 Warrant
Holder’s
 Address:





NOTE:  The signature
to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change
whatever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.






78




EXHIBIT
C





THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD WITHOUT RESTRICTIONS OR VOLUME
LIMITATIONS PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.





THIS
WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON APRIL __,
2012.





No.
___





NATIONAL
HOLDINGS CORPORATION




WARRANT
TO PURCHASE 2,000,000 SHARES OF


COMMON
STOCK, PAR VALUE $0.02 PER SHARE





FOR VALUE RECEIVED, Fund.Com, Inc. or its
Affiliates (the “Warrant Holder”), is
entitled to purchase, subject to the terms and condition of this Class B
Warrant, from National Holdings
Corporation, a Delaware corporation (the “Corporation”), at any
time or from time to time from the “Initial Exercise
Date” (as hereinafter defined) and not later than 5:00 P.M., Eastern
time, on the “Warrant
Expiration Date” (as hereinafter defined), an aggregate
of  2,000,000 shares (the “Warrant Shares”) of
the Corporation’s Common Stock (as hereinafter defined), at an exercise price
per Warrant Share equal to $0.75 (the “Exercise
Price”).  The number of Warrant Shares issuable upon exercise
of this Class B Warrant and the Exercise Price shall be subject to adjustment
from time to time as described herein.




This Warrant is the “Class B Warrant”
referred to, and issued pursuant to, that certain Securities Purchase Agreement,
dated as of April 4, 2009, by and between the Corporation, the Warrant Holder
and certain other Persons (the “Purchase
Agreement”).




The Corporation shall maintain books
for the transfer and registration of the Warrant.  Upon the initial
issuance of this Class B Warrant, the Corporation shall issue and register the
Warrant in the name of the Warrant Holder.


Section
1.                      Definitions.  Unless
otherwise separately defined in this Class B Warrant, all capitalized terms when
used herein shall have the same meaning as they are defined in the Purchase
Agreement.  As used in this Class B Warrant, the following terms shall
have the meanings set forth below.




A           “Affiliate” of any particular Person means any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by or under common control with such Person. 
For purposes of this definition, “control” (including the terms “controlling,” “controlled
by” and “under
common control with”)
means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.


79




B.           "Business Day" means
any day, other than a Saturday or Sunday, or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.


C.           “Common Stock” means
the common stock of the Corporation, par value $0.02 per share, together with
any securities into which the common stock may be reclassified.




D.           "Exercise Date" means,
for any one or more exercises of this Class B Warrant, the date specified in the
notice of exercise in the form attached hereto (the "Notice of Exercise"),
so long as a copy of the Notice of Exercise is faxed, emailed or delivered by
other means resulting in receipt by the Corporation before 11:59 p.m., New York
City time, on the Warrant Expiration Date.


E.           "Exercise Price" means
initially Seventy-Five Cents ($0.75) per Warrant Share, or such other amount
into which such Exercise Price may be adjusted pursuant to Section 4 of this
Class B Warrant.




F.            
Initial Exercise
Date” shall mean the date of this Warrant.





G.            “Investor” shall mean
Funds.Com Inc., a Delaware corporation, and/or its Affiliate who shall purchase
5,000 shares of the Series C Preferred Stock and receive this Class B Warrant
and Class B Warrants being issued pursuant to the Purchase
Agreement.





H.           "Registration Rights
Agreement" means the Registration Rights Agreement, dated as of the
Issuance Date, by and among the Corporation and the initial Warrant
Holders.





I.           “Series C Preferred
Stock” shall mean the shares of Series C convertible preferred stock of
the Corporation, $0.01 par value per share, authorized for issuance pursuant to
the Series C Certificate of Designations.





J.           “Voting Agreement”
means the shareholders agreement, dated as of the Issuance Date, by and among
the Corporation, the Investor and the “Management Shareholders” (as defined
therein).




K.           “50% Threshold” shall
mean, at any point in time, including, without limitation, following the
exercise of the Class A Warrant and/or Class B Warrant, the record ownership by
the Warrant Holder(s) of such number of shares of Series C Preferred Stock,
Warrant Shares and/or Common Stock of the Corporation, which if (a) owned of
record as Common Stock by such Persons, and (b) as to Series C Preferred Stock
(including without limitation Class A Warrant Shares) had been fully converted
into Common Stock, would represent in the aggregate fifty percent (50%) or more
of the issued and outstanding Common Stock of the Corporation at such point in
time.





L.           “Warrants” shall mean
the collective reference to this Class B Warrant and the Class A Warrant of the
Corporation issued to the initial Warrant Holder(s) or to be issued on the Class
A Warrant Exchange Date (as defined in the Purchase Agreement).





M.            “Warrant Expiration
Date” shall mean 5:00 p.m. (Eastern time) on April __, 2012.





N.            Warrant Holder” shall
mean the collective reference to the Investor, its Affiliates or any one or more
holder(s) of this Class B Warrant.





O.           
“Warrant
Shares” shall mean the shares of Common Stock issuable upon the full or
partial exercise of this Class B Warrant, as such shares may be adjusted
pursuant to the terms of this Class B Warrant.




80




Section
2.                      Transfers.  As
provided herein and subject to Section 10.1(b) of the Purchase Agreement, this
Class B Warrant may be transferred only pursuant to a registration statement
filed under the Securities Act of 1933, as amended (the “Securities Act”), or an
exemption from such registration.  Furthermore, this Class B Warrant
and the Warrant Shares are subject to a lockup agreement executed by the Warrant
Holder as of even date herewith.  Subject to such restrictions, the
Corporation shall transfer this Class B Warrant from time to time upon the books
to be maintained by the Corporation for that purpose, upon surrender thereof for
transfer properly endorsed or  accompanied by appropriate instructions
for transfer and such other documents as may be reasonably required by the
Corporation, including, if required by the Corporation, an opinion of its
counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act, to establish that such transfer is being
made in accordance with the terms hereof, and a new Warrant shall be issued to
the transferee and the surrendered Warrant shall be canceled by the
Corporation.





Section
3.                      Exercise of Warrant;
Limitation on Exercise.




(a)           Subject
to the provisions hereof, the Warrant Holder may, in the exercise of its sole
and absolute discretion, exercise this Class B Warrant in whole or in part up to
and including reaching the 50% Threshold, at any time or from time to time
during the period (the “Exercise Period”)
commencing from and after the Initial Exercise Date and ending not later than
5:00 P.M., Eastern time, on the Warrant Expiration Date.




(b)           Except
as otherwise provided in Section 3(c) below,
in the event and to the extent that the exercise of this Class B Warrant would
result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, the Warrant Holder may only exercise this Class B Warrant
prior to the Warrant Expiration Date on or after any date in which the Board of
Directors of the Corporation shall permit the Warrant Holder to exercise this
Class B Warrant.




(c)           Notwithstanding
the provisions of Section 3(b) above,
even if such exercise shall result in the Warrant Holder or its Affiliates exceeding
the 50% Threshold, no consent or approval of the Board of Directors of the
Corporation shall be required for the Warrant Holder to exercise this Class B
Warrant to provide financing for the Corporation or any Company Subsidiary in an
amount deemed necessary by the Board of Directors of the Corporation to
consummate any Strategic Acquisition approved by the Board of Directors of the
Corporation and by the Investor prior to the Warrant Expiration
Date.




(d)           On
each occasion that the Warrant Holder shall exercise this Class B Warrant, such
Warrant Holder shall (i) surrender this Class B Warrant to the Corporation, (ii)
deliver to the Corporation a duly executed Warrant exercise form attached hereto
as Appendix A
(the “Exercise
Form”), and (iii) pay to the Corporation by cash, certified check or wire
transfer of funds for the aggregate Exercise Price for that number of Warrant
Shares then being purchased.  Such exercise of this Class B Warrant
may be made at any time, as aforesaid, during normal business hours on any
business day at the Corporation’s principal executive offices (or such other
office or agency of the Corporation as it may designate by notice to the Warrant
Holder).




(e)           The
Warrant Shares so purchased shall be deemed to be issued to the Warrant Holder
or the Warrant Holder’s permitted designee, as the record owner of such Warrant
Shares, as of the close of business on the date on which this Class B Warrant
shall have been duly surrendered (or evidence of loss, theft or destruction
thereof and security or indemnity reasonably satisfactory to the Corporation),
the Exercise Price shall have been paid and the completed Exercise Form shall
have been delivered.  Certificates for the Warrant Shares so
purchased, representing the aggregate number of Warrant Shares specified in the
Exercise Form, shall be delivered promptly (and in no event later than three (3)
Business Days following delivery and payment of the Warrant Exercise Price) to
the Warrant Holder after this Class B Warrant shall have been so
exercised.  The certificates so delivered shall be in such
denominations as may be requested by the Warrant Holder and shall be registered
in the name of the Warrant Holder or such other name as shall be designated by
the Warrant Holder, subject to the provisions of Section 10.1 of the Purchase
Agreement.




81




(f)           If
this Class B Warrant shall have been exercised only in part, then, unless this
Class B Warrant has expired, the Corporation shall, at its expense, at the time
of delivery of such certificates, deliver to the Warrant Holder a new Class B
Warrant representing the number of the Warrant Shares with respect to which this
Class B Warrant shall not then have been exercised.




(g)           Each
exercise hereof shall constitute the re-affirmation by the Warrant Holder that
the representations and warranties contained in Section 5 of the Purchase
Agreement are true and correct in all material respects with respect to the
Warrant Holder as of the time of such exercise.




Section
4.                      Adjustments.  The
number of Warrant Shares issuable upon exercise of this Class B Warrant and the
Exercise Price shall be subject to adjustment as follows:




(a)           Subdivision or Combination
of Common Stock.  If the Corporation at any time subdivides (by
any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a greater number of shares, then, after the date of record for effecting
such subdivision, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced.  If the Corporation at
any time combines (by any reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.




(b)           Adjustment in Number of
Warrant Shares.  Upon each adjustment of the Exercise Price
pursuant to the provisions of this Section 4, the number of Warrant Shares
issuable upon exercise of this Class B Warrant shall be adjusted by multiplying
a number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this Class
B Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.




(c)           Consolidation, Merger or
Sale.  In case of any consolidation of the Corporation with, or
merger of the Corporation into any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the Warrant Holder of the this Class B Warrant
will have the right to acquire and receive upon exercise of this Class B Warrant
in lieu of the Warrant Shares immediately theretofore acquirable upon the
exercise of this Class B Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for the number of
Warrant Shares immediately theretofore acquirable and receivable upon exercise
of this Class B Warrant had such consolidation, merger or sale or conveyance not
taken place.  In any such case, the Corporation will make appropriate
provision to insure that the provisions of this Section 4 hereof will thereafter
be applicable as nearly as may be in relation to any shares of stock or
securities thereafter deliverable upon the exercise of this Class B
Warrant.  The Corporation will not effect any consolidation, merger or
sale or conveyance unless prior to the consummation thereof, the successor
corporation (if other than the Corporation) assumes by written instrument the
obligations under this Section 4 and the obligations to deliver to the Warrant
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Warrant Holder may be entitled to
acquire.




82




(d)           Distribution of
Assets.  In case the Corporation shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, the Warrant Holder shall be entitled upon exercise of this Class B
Warrant, to receive the amount of such assets which would have been payable to
the Warrant Holder had the Warrant Holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such distribution (on an “as exercised” and “as converted” basis, as though
this Class B Warrant had been fully exercised for Warrant Shares and all such
Warrant Shares had been fully converted into Common Stock at the Exercise Price
then in effect immediately prior to the dividend or distribution declaration
date).




(e)           Adjustment Due to Dilutive
Issuance.  If, at any time when any portion of this Class B
Warrant is issued and outstanding, the Corporation issues or sells, or in
accordance with this Section 4 is deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) less than the Exercise Price in effect on
the date of such issuance (or deemed issuance) of such shares of Common Stock (a
“Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to the price determined by multiplying the Exercise Price
in effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock Deemed Outstanding immediately prior to the Dilutive Issuance, plus
(y) the quotient of the aggregate consideration, calculated as set forth in
Section 4, received by the Corporation upon such Dilutive Issuance divided by
the Exercise Price in effect immediately prior to the Dilutive Issuance, and
(ii) the denominator of which is the Common Stock Deemed Outstanding immediately
after the Dilutive Issuance; provided that only one adjustment will be made for
each Dilutive Issuance.  The term “Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (i) the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (ii) the maximum total number of shares of Common
Stock issuable upon conversion or exchange of Convertible Securities, as of the
date of issuance of such Convertible Securities, if any.  No
adjustment to the Exercise Price shall have the effect of increasing the
Exercise Price above the Exercise Price in effect immediately prior to such
adjustment.




(f)           Effect on Exercise Price of
Certain Events.  For purposes of determining the adjusted
Exercise Price, the following will be applicable:




(i)           Issuance of Rights or
Options.  If the Corporation in any manner issues or grants any
warrants (including the Warrants issued pursuant to the Purchase Agreement),
rights or options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter collectively referred to in this
Section 4 as “Options”) and the
price per share for which Common Stock is issuable upon the exercise of such
Options less than the Exercise Price on the date of issuance or grant of such
Options, then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Options will, as of the date of the issuance or grant
of such Options, be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share.  For purposes of the
preceding sentence, the “price per share for which Common Stock is issuable upon
the exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Options, plus, in the case of Convertible Securities (as hereinafter defined)
issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange thereof at the
time such Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of Convertible
Securities, if applicable).  No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.




83




(ii)           Issuance of Convertible
Securities.  If the Corporation in any manner issues or sells
any other series or classes of Preferred Stock (other than the Series A
Preferred Stock) or other securities that are convertible into or exchangeable
for Common Stock (“Convertible
Securities”), whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price on the date of issuance, then the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Corporation
for such price per share.  For the purposes of the preceding sentence,
the “price per share for which Common Stock is issuable upon such conversion or
exchange” is determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or sale of all
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities.  No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.




(iii)           Change in Option Price or
Conversion Rate.  If there is a change at any time in (i) the
amount of additional consideration payable to the Corporation upon the exercise
of any Options; (ii) the amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange of any Convertible Securities;
or (iii) the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time
of such change will be readjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.




(iv)           Treatment of Expired Options
and Unexercised Convertible Securities.  If, in any case, the
total number of shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.




(v)           Calculation of Consideration
Received.  If any Common Stock, Options or Convertible
Securities are issued, granted or sold for cash, the consideration received
therefor will be the amount received by the Corporation therefor, before
deduction of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Corporation in connection with
such issuance, grant or sale.  In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration other than cash
received by the Corporation will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Corporation will be the Market Price thereof as of
the date of receipt.  In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Corporation is the surviving corporation, the amount
of consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may
be.  The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the
Corporation.




84




(g)           Exceptions to
Adjustments.  No adjustment to the Exercise Price or Warrant
Shares will be made;




(i)           upon
the issuance of shares of Common Stock or Options or Convertible Securities to
employees of the Corporation pursuant to any stock or option plan duly adopted
by the Board of Directors of the Corporation, subject to compliance with the
terms of the Stock Option Plan referred to in the Purchase Agreement, including
the limitations on Options issued or issuable to the “Key Employees” as defined
in the Purchase Agreement; or




(ii)           upon
the issuance of shares of Common Stock issuable upon the exercise of Options or
conversion of Convertible Securities that are outstanding as of the date of
filing of this Certificate of Designations, including, without limitation, those
securities issued pursuant to the Purchase Agreement; or




(iii)           the
issuance (not for capital raising purposes) of shares of Common Stock,
Convertible Securities or Options to financial institutions, lessors or vendors
in connection with commercial credit or service arrangements, equipment
financings or similar transactions, all approved by the Board of Directors of
the Corporation; or




(iv)           the
issuance of shares of Common Stock, Convertible Securities or Options to provide
financing to consummate any Approved Business Combination (as that term is
defined in the Series C Certificate of Designations);




(v)           the
issuance of shares of Series A Preferred Stock as pay-in-kind dividends with
respect to the Series A Preferred Stock; or




(vi)           following
the occurrence and during the continuation of a Warrant Default that has not
been cured in a manner deemed satisfactory by the Corporation to facilitate the
timely financing of an Approved Business Combination (as that term is defined in
the Series C Certificate of Designations), the issuance of shares of Common
Stock, Convertible Securities or Options to providing financing to consummate
such Approved Business Combination.




(h)           Notice of
Adjustment.  Upon the occurrence of any event which requires
any adjustment of the Exercise Price, then, and in each such case, the
Corporation shall give notice thereof to the Warrant Holder, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease in the number of Class B Conversion Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.  Such calculation
shall be certified by the Chief Financial Officer of the
Corporation.




(i)           Minimum Adjustment of
Exercise Price.  No adjustment of the Exercise Price shall be
made in an amount of less than 1% of the Exercise Price in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 1% of such Exercise Price.




85




(j)           No Fractional
Shares.  No fractional shares of Common Stock are to be issued
upon the exercise of this Class B Warrant, but the Corporation shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the average Market Price per share of
the Common Stock for the five (5) Trading Days immediately prior to the date of
such exercise.




(k)           Other
Notices.  In case at any time:




(i)           the
Corporation shall declare any dividend upon the Common Stock payable in shares
of stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;




(ii)           the
Corporation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;




(iii)           there
shall be any capital reorganization of the Corporation, or reclassification of
the Common Stock, or consolidation or merger of the Corporation with or into, or
sale of all or substantially all its assets to, another corporation or entity;
or




(iv)           there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation;




then, in
each such case, the Corporation shall give to the Warrant Holder (a) notice of
the date on which the books of the Corporation shall close or a record shall be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, or other
Fundamental Change, notice of the date (or, if not then known, a reasonable
approximation thereof by the Corporation) when the same shall take
place.  Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be.  Such notice shall be given at least thirty (30) days
prior to the record date or the date on which the Corporation’s books are closed
in respect thereto.  Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.




(l)           Certain
Definitions.




“Bloomberg” shall mean
Bloomberg, L.P. (or any successor to its function of reporting stock
prices).




“Common Stock Deemed
Outstanding” shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the treasury of the
Corporation), plus (x) the maximum total number of shares of Common Stock
issuable upon the exercise of the Options, as of the date of such issuance or
grant of such Options, if any, and (y) the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.




86




“Market Price” means,
as of any Trading Day, (i) ) the average of the last reported sale prices for
the shares of Common Stock on a national securities exchange which is the
principal trading market for the Common Stock for the five (5) Trading Days
immediately preceding such date as reported by Bloomberg or (ii) if no national
securities exchange is the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the fair market value as reasonably
determined in good faith by (A) the Board of Directors of the Corporation, or
(B) at the option of a majority-in-interest of the holders of the outstanding
this Class B Warrants by an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business of the
Corporation.  The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.




“Common Stock,” for
purposes of this Section 4, includes the Common Stock, $0.02 par value per
share, and any additional class of stock of the Corporation having no preference
as to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to the this Class B Warrant shall include only shares of
Common Stock, $0.02 par value per share, in respect of which the this Class B
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or Business Combination, the stock or other securities or
property provided for in such Section.




“Trading Day” shall
mean any day on which the Common Stock is traded for any period on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.





Section
5.                      Compliance with the
Securities Act of 1933. The Corporation may cause the legend set forth on
the first page of this Class B Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this Class B
Warrant, unless counsel for the Corporation is of the opinion as to any such
security that such legend is unnecessary.





Section
6.                      Payment of
Taxes.  The Corporation will pay any documentary stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Corporation shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Warrant Holder in respect of which such shares are
issued, and in such case, the Corporation shall not be required to issue or
deliver any certificate for Warrant Shares or any Warrant until the person
requesting the same has paid to the Corporation the amount of such tax or has
established to the Corporation’s reasonable satisfaction that such tax has been
paid.  The Warrant Holder shall be responsible for income taxes due
under federal, state or other law, if any such tax is due.





Section
7.                      Mutilated or Missing
Warrants.  In case this Class B Warrant shall be mutilated,
lost, stolen, or destroyed, the Corporation shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Corporation of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Corporation.




87




Section
8.                      Reservation of this Class B
Warrant.  The Corporation hereby represents and warrants that
there have been reserved, and the Corporation shall at all applicable times keep
reserved until issued (if necessary) as contemplated by this Section 8, out of
the authorized and unissued shares of this Class B Warrant, sufficient shares to
provide for the exercise of the rights of purchase represented by this Class B
Warrant.  The Corporation agrees that all Warrant Shares issued upon
due exercise of the Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares, duly authorized, validly issued, fully
paid and non-assessable shares of this Class B Warrant of the
Corporation.





Section
9.                      Fractional
Interest.  The Corporation shall not be required to issue
fractions of Warrant Shares upon the exercise of this Class B
Warrant.  If any fractional share of this Class B Warrant would,
except for the provisions of the first sentence of this Section 9, be
deliverable upon such exercise, the Corporation, in lieu of delivering such
fractional share, shall pay to the exercising Warrant Holder an amount in cash
equal to the Fair Market Value of such fractional share of this Class B Warrant
on the date of exercise.





Section
10.                      Registration Rights.
The Warrant Holder shall be entitled to the rights set forth under the
Registration Rights Agreement dated as of even date herewith to allow for the
registration of the resale of the Common Stock issuable upon exercise of Warrant
Shares under the Securities Act of 1933, as amended.





Section
11.                      Benefits.  Nothing
in this Class B Warrant shall be construed to give any person, firm or
corporation (other than the Corporation and the Warrant Holder) any legal or
equitable right, remedy or claim, it being agreed that this Class B Warrant
shall be for the sole and exclusive benefit of the Corporation and the Warrant
Holder.





Section
12.                      Notices to Warrant
Holder.  Upon the happening of any event requiring an
adjustment of the Exercise Price, the Corporation shall promptly give written
notice thereof to the Warrant Holder at the address appearing in the records of
the Corporation, stating the adjusted Exercise Price and the adjusted number of
Warrant Shares resulting from such event and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is
based.  Failure to give such notice to the Warrant Holder or any
defect therein shall not affect the legality or validity of the subject
adjustment.





Section
13.                      Identity of Transfer
Agent.  The Corporation does not maintain a separate transfer
agent for the this Class B Warrant.  Upon the appointment of a
transfer agent for the this Class B Warrant or other shares of the Corporation’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant, the Corporation will mail to the Warrant Holder a statement
setting forth the name and address of such transfer agent.





Section
14.                      Notices.  Unless
otherwise provided, any notice required or permitted under this Class B Warrant
shall be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or facsimile, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such notice shall be deemed given upon the seventh
day after such notice is deposited in first class mail, postage prepaid, and
(iv) if given by an nationally recognized overnight air courier, then such
notice shall be deemed given upon delivery to the intended
recipient.  All notices shall be addressed as follows: if to the
Warrant Holder, at its address as set forth in the Corporation’s books and
records and, if to the Corporation, at the address as follows, or at such other
address as the Warrant Holder or the Corporation may designate by ten days’
advance written notice to the other:




88




If to the Corporation:





National
Holdings Corporation


120
Broadway, 27th
Floor


New York,
NY 10271


Attention:  Mark
Goldwasser, CEO


Fax:  (212)
417-8010





With a copy to:





Littman
Krooks LLP


655 Third
Avenue, 20th
Floor


New York,
NY  10017


Attention:  Mitchell
C. Littman, Esq.


Fax:  (212)
490-2990





Section
15.                      Successors.  All the covenants and provisions hereof by or for
the benefit of the Warrant Holder shall bind and inure to the benefit of its
respective successors and permitted assigns hereunder.





Section
16.                      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 the choice of law principles thereof.  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.





Section
17.                      No Rights as
Stockholder.  Prior to the exercise of this Class B Warrant in
accordance with Section 3 hereof, the Warrant Holder shall not have or exercise
any rights as a stockholder of the Corporation by virtue of its ownership of
this Class B Warrant.





Section
18.                      Amendment;
Waiver.  Any term of this Class B Warrant may be amended and
the observance of any term of this Class B Warrant may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with the written consent of the Warrant Holder and the
Corporation.  Any amendment or waiver effected in accordance with this
Section 18 shall be binding upon the Warrant Holder (and of any securities into
which this Class B Warrant is convertible), each future holder of all such
securities, and the Corporation.





Section
19.                      Section
Headings.  The section headings in this Class B Warrant are for
the convenience of the Corporation and the Warrant Holder and in no way alter,
modify, amend, limit or restrict the provisions hereof.




89





IN WITNESS WHEREOF, the Corporation has
caused this Class B Warrant to be duly executed, as of the __ day of April,
2009.





NATIONAL
HOLDINGS CORPORATION











By:__________________________________


Mark Goldwasser


Chief Executive Officer




90





APPENDIX
A





NATIONAL
HOLDINGS CORPORATION


WARRANT
EXERCISE FORM FOR “A WARRANT”





To
National Holdings Corporation:




The undersigned, pursuant to the
provisions set forth in the attached Warrant, hereby irrevocably elects to
purchase ________ shares of the Series C Preferred Stock covered by such Warrant
and herewith makes payment of $ _________, representing the full purchase price
for such shares at the price per share provided for in such
Warrant.




As of the date hereof (prior to
exercise of this A Warrant), the undersigned certifies that is Warrant
Holder Ownership (as defined in Section 3(b) consists of the following equity
securities of the Corporation:





(e)
            ______________
      shares of C Preferred Stock, which consists of 5,000 shares purchased
      pursuant to the Purchase Agreement and __________ shares that were
      previously issued upon exercise of this “A Warrant”.   The
      foregoing shares of C Preferred Stock are currently convertible into
      _________ shares of Common Stock on an as-converted to Common Stock
      basis.





(f)
            _______________
      shares of Common Stock, which includes _____ shares of Common Stock that
      have been issued upon exercise of the B Warrant issued pursuant to the
      Purchase Agreement.





Please issue a certificate or
certificates representing ________ shares in the name of the undersigned or in
such other name or names as are specified below:





_______________________________


Name


________________________________


Address


________________________________





and, if
the number of Warrant Shares shall not be all the Warrant Shares purchasable
upon exercise of the Warrant, that a new Warrant for the balance of the Warrant
Shares purchasable upon exercise of this Class B Warrant be registered in the
name of the undersigned Warrant Holder or the undersigned’s Assignee as below
indicated and delivered to the address stated below.





The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.





Dated:
___________________, ____


Note:  The
signature must correspond with


the name
of the Warrant Holder as
written                                                                                     Signature:______________________


on the
first page of the Warrant in
every                                                                           ______________________________


particular,
without alteration or
enlargement                                                                                     Name
(please print)


or any
change whatever, unless the Warrant


has been
assigned.                                                                             
______________________________


______________________________


Address


______________________________


Federal Identification or


Social Security No.




91




EXHIBIT
B


FORM OF
ASSIGNMENT




(To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)




For Value
Received, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to:




Name: (Please
Print)








Address:                                                                        
( Please
Print)








Dated:  __________,
20__


Warrant
Holder’s


Signature:





Warrant
Holder’s


Address:








NOTE:  The signature
to this Form of Assignment must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change
whatever.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.




92




EXHIBIT D





REGISTRATION RIGHTS
AGREEMENT





This
Registration Rights
Agreement (the “Agreement”) is made and entered into as of this ____ day
of _________, 2009 by and among National Holdings Corporation,
a Delaware corporation (the “Company”), and Fund.Com, Inc., a Delaware
corporation (the “Investor”).





WHEREAS, the Company has
agreed to issue and sell to the Investor, and the Investor has agreed to
purchase from the Company, (i) 5,000 shares of Series C Preferred Stock (the
“Series C Stock”), initially convertible into 6,666,666 shares of the Company’s
common stock, $0.02 par value per share (the “Common Stock”), (ii) a warrant to
purchase 17,500 shares of Series C Stock which would initially convert into
23,333,333 shares of Common Stock (the “A Warrant”), and (iii) a warrant to
purchase 2,000,000 shares of Common Stock (the “B Warrant”), pursuant to the
terms and conditions set forth in that certain Securities Purchase Agreement of
even date herewith, by and between the Company and the Investor (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 Investor 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.





“Amendment” means an
amendment to the Company’s certificate of incorporation that increases the
number of authorized shares of Common Stock from 50,000,000 to
150,000,000.





“Authorized Share
Approval” means (i) the vote by the stockholders of the Company to
approve the Amendment and (ii) the filing by the Company of the Amendment with
the Secretary of State of the State of Delaware and the acceptance of the
Amendment by the Secretary of State of the State of Delaware.





“Authorized Share
Approval Date” means the date
that the Authorized Share Approval is obtained by the Company.





“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.




93




“Class A Warrant”
shall have the meaning as defined in the recitals.





“Class B Warrant”
shall have the meaning as defined in the recitals.





“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 issuable upon conversion of the Series C
Stock.





“Effectiveness Period”
as defined in Section 6(b) hereto.





“Fund.com Registrable
Securities ” means (i) all Conversion Shares originally issued,
directly or indirectly, to Investor or any of its Affiliates, (ii) all Warrant
Shares originally issued, directly or indirectly, to Investor or any of its
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 Fund.com
Registrable Securities, such securities shall cease to be Fund.com Registrable
Securities when they have been (a) distributed to the public pursuant to an
offering registered under the Securities Act, or (b) sold in compliance
with Rule 144.





“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 Fund.com 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 Investor 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.




94




“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.





“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
Securities 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.





“Warrant Shares” means
the shares of Common Stock issuable upon (i) the conversion of the Series C
Stock issuable upon the exercise of the A Warrant and (ii) the exercise of the B
Warrant.





95




2.           Demand
Registrations.




(a)  
Requests for
Registration.  At any time following the later of (i) January 1,
2010 and the Authorized Share Approval, the holders of at least 33 1/3% of the
Fund.com Registrable Securities, or any lesser percentage if the aggregate
offering price of the securities to be registered exceeds $1,000,000, may
request registration under the Securities Act of all or any portion of such
Fund.com Registrable Securities as permitted by SEC Guidance on Form S-1 or
any similar long-form registration statement (“Long-Form Registration
”) or, if available, on Form S-3 or any similar short-form registration
statement (“Short-Form Registrations”). 
All registrations requested pursuant to this Section 2(a) are
referred to herein as “Demand
Registrations.”  Each Registration Statement filed pursuant to a
Demand Registration shall state that, in accordance with Rule 416 under the
Securities Act, it also covers such indeterminate number of additional Common
Stock as may become issuable upon exercise of the A and B Warrants to prevent
dilution resulting from stock splits, stock dividends or similar
transactions.  Each request for a Demand Registration shall specify the
approximate number of Fund.com Registrable Securities requested to be
registered.  The Company shall give prompt written notice (either
before or after the filing of the registration statement) of such requested
registration to all other holders of Registrable Securities and, subject to SEC
Guidance and Section 2(d)
 below, will include in such registration, in addition to the Fund.com
Registrable Securities that are requested to be registered pursuant hereto, all
St. Cloud Registrable Securities (to the extent they are entitled to participate
based upon SEC Guidance)with respect to which the Company has received written
requests for inclusion therein within 10 days after the sending by the Company
of the Company’s notice.




(b)  
Long-Form Registration. 
Subject to Section 2(a) above, the holders of at least 33 1/3% of the Fund.com
Registrable Securities shall be entitled to request two
Long-Form Registrations.  A registration shall not count as the
permitted Long-Form Registration until it has become
effective.





(c)  
Short-Form Registrations. 
In addition to the Long-Form Registration provided pursuant to Section 2(b) and
subject to Section 2(a) above, the holders of a majority of the Fund.com
Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations for offerings with aggregate proceeds of at least
$500,000.  Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form and if the
managing underwriters (if any) agree to the use of a
Short-Form Registration Statement.  The Company shall use commercially
reasonable efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities. 
Short-Form Registrations may be underwritten registrations, resale
registrations or “shelf registrations” pursuant to Rule 415 under the
Securities Act (“Shelf
Registrations”) or otherwise, in each case at the sole discretion of the
Company.





(d)  
Restrictions on Demand
Registrations.  Subject in all cases to SEC Guidance, the Company
will not be obligated to effect any Demand Registration within six months after
the effective date of a previous Long-Form Registration or
Short-Form Registration, as the case may be.  The Company may
postpone, for up to one hundred twenty (120) days (from the date of the
request), the filing or the effectiveness of a registration statement for a
Demand Registration if the Company is in possession of material non-public
information concerning it or its business and affairs and the Company’s board of
directors determines in good faith that (i) disclosure of such information
is legally required in connection with such registration; (ii) public
disclosure of such information in a registration statement would have a
materially detrimental effect on the Company; or (iii) if the Company's board of
directors determines that that Demand Registration would reasonably be expected
to have an adverse effect on any proposal or plan by the Company to engage in
any acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction; provided, that in
such event, the holders of the Fund.com Registrable Securities requesting such
Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder.




96




(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.    
Piggyback
Registrations.




(a)  
Right to
Piggyback.  Whenever the Company proposes to register any of its
equity securities under the 1933 Act (other than pursuant to a registration on
Form S-4 or S-8 or any successor or similar forms) and the registration
form to be used may be used for the registration of Registrable Securities (a
“Piggyback
Registration”), whether or not for sale for its own account, the Company
will give prompt written notice (either before or after the filing of the
registration statement) to all holders of Registrable Securities of its
intention to effect such a registration and, subject to SEC Guidance and Sections 3(b) and
3(c)
 below, will include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within seven (7) days after the sending by the Company of the Company’s
notice.




(b)  
Priority on Primary
Registrations. If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company and the holders of Registrable Securities that have requested inclusion
in such offering that, in their opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability, proposed offering price,
timing, distribution method or probability of success of such offering, then the
Company will include in such registration (i) first, the securities that
the Company proposes to sell, (ii) second, the St. Cloud Registrable
Securities requested to be included in such registration, which in the opinion
of such underwriters can be sold without adverse effect, pro rata among the
holders thereof on the basis of the number of St. Cloud Registrable Securities
owned by each such holder (ii) third, the Fund.com Registrable Securities
requested to be included in such registration, which in the opinion of such
underwriters can be sold without adverse effect, pro rata among the holders
thereof on the basis of the number of Registrable Securities owned by each such
holder, and (iii) fourth, any other securities requested to be included in
such registration which in the opinion of such underwriters can be sold without
adverse effect, pro rata among the holders thereof on the basis of the number of
such other securities owned by each such holder.




97




(c)  
Priority on Secondary
Registrations. If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company’s securities (it being
understood that Demand Registrations on behalf of holders of Registrable
Securities are addressed in Section 2 above
rather than in this Section 3(c)),
and the managing underwriters advise the Company and the holders of Registrable
Securities that have requested inclusion in such offering that, in their
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability, proposed offering price, timing, distribution
method or probability of success of such offering, the Company will include in
such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, (ii) second, the St. Cloud
Registrable Securities requested to be included in such registration, which in
the opinion of such underwriters can be sold without adverse effect, pro rata
among the holders thereof on the basis of the number of St. Cloud Registrable
Securities owned by each such holder, (ii) third, the Fund.com Registrable
Securities requested to be included in such registration, which in the opinion
of such underwriters can be sold without adverse effect, pro rata among the
holders thereof on the basis of the number of Registrable Securities owned by
each such holder, and (iii) fourth any other securities requested to be
included in such registration which in the opinion of such underwriters can be
sold without adverse effect, pro rata among the holders thereof on the basis of
the number of such other securities owned by each such holder.




(d)  
Selection of
Underwriters.  If any Piggyback Registration is an underwritten
offering, the selection of the investment banker(s) and manager(s) for
the offering, if any, shall be made by the Company in its sole
discretion.




(e)  
Withdrawal by
Company.  If, at any time after giving notice of its intention to
register any of its securities as set forth in Section 3(a)
 and before the effective date of such registration statement filed in
connection with such registration, the Company shall determine, for any reason,
not to register such securities, the Company shall give written notice of such
determination to each holder of Registrable Securities.




4.           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 Investor as
to its Fund.com Registrable Securities, the number of Fund.com Registrable
Securities to be registered on such Registration Statement will first be reduced
by Fund.com Registrable Securities represented by Warrant Shares (applied, in
the case that some Warrant Shares may be registered, to the Holders on a pro
rata basis based on the total number of unregistered Warrant Shares held by such
Holders), second by Fund.com Registrable Securities represented by Conversion
Shares (applied, in the case that some Conversion Shares may be registered, to
the Investor on a pro rata basis based on the total number of unregistered
Conversion Shares held by such Investor) and third by Fund.com Registrable
Securities represented by Common Stock (applied, in the case that some Common
Stock may be registered, to the Investor 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 Fund.com Registrable Securities
or St. Cloud Registrable Securities shall be reduced first before there is any
reduction to Fund.com 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 Fund.com 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 Investor at least 5 Trading Days prior written notice along with the
calculations as to such Investor’s allotment.




98




5.           Expenses.  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 Registrable Securities for sale
under applicable state securities laws, listing fees.  Investor 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 Registrable Securities being
sold.




6.           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 andprepare 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 Securities 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 therebyin accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;




99




(c)           furnish
to the Investor such number of copies of a Prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Investor 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;





(f)           prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investor and its 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 Investor 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(f), (ii) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for this Section
4(f), or (iii) file a general consent to service of process in any such
jurisdiction;




(g)           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;




(h)           immediately
notify the Investor, 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;




(i)           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;




100




(j)  
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;




(k)   
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;





(l)           With
a view to making available to the Investor 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 Investor 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; and
(iii) furnish to Investor upon request, as long as Investor owns 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 Investor of any rule or regulation of the SEC that
permits the selling of any such Registrable Securities without
registration.




7.           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 Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), all financial and
other records, all SEC Filings (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 Investor 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 Investor 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.




101





8.           Obligations of the
Investor.




(a)           Investor
shall furnish in writing to the Company such information regarding itself, the
Registrable Securities held by it, the intended method of disposition of the
Registrable Securities held by it and its beneficial ownership of the Company’s
securities, including who has the right to vote or dispose of such securities on
behalf of 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
Investor of the information the Company requires from Investor if Investor
elects to have any of the Registrable Securities included in the Registration
Statement.  Investor 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 Investor elects to have any of the Registrable
Securities included in the Registration Statement.




(b)           Investor,
by its 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 Investor
has notified the Company in writing of its election to exclude all of its
Registrable Securities from such Registration Statement.




(c)           Investor
agrees that, upon receipt of any notice from the Company of the happening of an
event pursuant to Section 4(h) hereof, Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities, until the 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, the 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 the Investor’s possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such
notice.




9.    
Participation in
Underwritten Registrations.




(a)  
No Person may participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person’s securities on the basis
provided in any underwriting arrangements approved by the Person or 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.




(b)  
Each Person 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 Section 4(e)
above, such Person will forthwith discontinue the disposition of its Registrable
Securities pursuant to the registration statement until such Person’s receipt of
the copies of a supplemented or amended prospectus as contemplated by such Section 4(e). 
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 Section 4(e)
 to and including the date when each seller of a Registrable Security
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 4(e)
..




102




10.           Indemnification.






(a)           Indemnification by the
Company.  The Company will indemnify and hold harmless Investor
and its officers, directors, members, employees and agents, successors and
assigns, and each other person, if any, who controls 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 Investor’s behalf and will reimburse
Investor, 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 Investor or any such controlling person
in writing specifically for use in such Registration Statement or
Prospectus.




(b)           Indemnification by the
Investor.  Investor agrees 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 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 Investor be greater in amount than the dollar amount of the proceeds (net of
all expense paid by Investor in connection with any claim relating to this
Section 7 and the amount of any damages Investor has otherwise been required to
pay by reason of such untrue statement or omission) received by Investor upon
the sale of the Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.




103




(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 7 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.




104




11.           Miscellaneous.






(a)           Amendments and
Waivers.  This Agreement may be amended only by a writing
signed by the Company and the Investor.  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 9.4 of the Purchase Agreement.




(c)           Assignments and Transfers by
Investor.  The provisions of this Agreement shall be binding
upon and inure to the benefit of the Investor and its successors and
assigns.  Investor 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 Investor to such person, provided that
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
the Investor, 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 Investor, after notice duly given by the Company to
Investor.




(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.




(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.




105




(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.




(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]




106




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:
___________________________________


Mark
Goldwasser


Chief
Executive Officer







The
Investor:




FUND.COM,
INC.









By:________________________________


Greg
Webster


Chief
Executive Officer







107





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.




108




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.





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.




109




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.




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.




110




EXHIBIT
E


VOTING
AGREEMENT







This
VOTING AGREEMENT (the
“Agreement”) is made and
entered into as of April __, 2009, by and among National Holdings Corporation,
a Delaware corporation (the “Company”), Mark Goldwasser
(“Goldwasser”), Leonard J.
Sokolow (“Sokolow”), Christopher C. Dewey (“Dewey,” and together with
Goldwasser and Sokolow, the “Management Stockholders”) and
Fund.Com, Inc., a
Delaware corporation or its Affiliate (the “Investor”).  The
Company, the Management Stockholders and the Investor are hereinafter sometimes
collectively referred to as the “Parties” and individually as a
“Party.”




RECITALS




WHEREAS, pursuant to a
Securities Purchase Agreement dated as of April 4, 2009 (the “Purchase Agreement”) by and
between the Company and the Investor, on the date of this Agreement, the
Investor purchased from the Company (the “Purchase”), and the Company
sold to the Investor, for $1,000 per share, an aggregate of 5,000 shares of
Series C Preferred Stock of the Company (the “Purchased Shares”), and the
Class A Warrant and Class B Warrant described below; and




WHEREAS, as a result of the
Purchase, the Investor is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of (a) the
Purchased Shares which are convertible (subject to adjustment) into 6,666,666
shares of the Company’s common stock, par value $0.02 per share (together with
any securities into which the common stock may be reclassified, the “Common Stock”), (b) a warrant
(i) initially entitling the holder to purchase an additional 17,500 shares of
Series C Preferred Stock at an exercise price equal to $1,000.00 per share, and
(ii) upon consummation of the Class A Warrant Exchange” (as defined in the
Purchase Agreement”), thereafter entitling the holder to purchase an aggregate
of 23,333,333 shares of Common Stock, in each case subject to adjustments as
provided therein (individually and collectively, the “Class A Warrant”), and (iii) a
warrant entitling the holder to purchase 2,000,000 shares of Common stock at an
exercise price equal to $0.75 per share (the “Class B Warrant”, and
together with the Class A Warrant, the “Warrants”); and





WHEREAS, as set forth in the
Series C Preferred Certificate of Designation, the Purchased Shares will vote
with the Common Stock together as a single class, with the Shares representing
the right to cast that number of votes equal to:




(a)           on
or prior to the earlier of (i) Expiration Date (as defined herein) or (ii) such
time, if any, as the 50% Threshold (as defined herein) has been attained, the
aggregate number of votes cast by 100% of the outstanding shares of Common Stock
entitled to vote as of the record date of the applicable vote, plus one (the
“Super-Majority Voting
Rights”) and (ii) following the earlier of the Expiration Date or
achievement of the 50% Threshold, as applicable, the aggregate number of whole
shares of Common Stock issuable upon conversion of such Purchased Shares in all
matters (the “As-Converted
Voting Rights”), except as otherwise provided under the Delaware General
Corporation Law; and




WHEREAS, in consideration of
the execution and performance of the covenants and agreements of the parties set
forth in the Purchase Agreement, the Parties hereto have agreed to execute and
deliver this Agreement.




111


NOW, THEREFORE, in
contemplation of the foregoing and in consideration of the mutual agreements,
covenants, representations and warranties contained herein and intending to be
legally bound hereby, the parties agree as follows:





1.  Definitions.




All capitalized terms herein not
otherwise defined in this Agreement, shall have the meaning ascribed to them in
the Purchase Agreement.  As used in this Agreement, the following
terms shall have the meanings defined below.




1.1                      “As-Converted Voting Rights”
shall mean the aggregate number of votes that may be cast by the Investor on all
matters as to which stockholders of the Company are entitled to vote or consent
to in respect of the shares of Series C Preferred Stock owned of record by the
Investor as though all such shares had been converted into shares of Common
Stock of the Company.




1.2                      “Class A Warrant Shares” shall
mean the individual and collective reference to (a) the 17,500 shares of Series
C Preferred Stock (subject to adjustment) that are issuable upon exercise of the
Class A Warrant initially issued pursuant to the Purchase Agreement, and (b)
following the Class A Warrant Exchange, the 23,333,333 shares of Common Stock
(subject to adjustment) that are issuable upon exercise of such Class A
Warrant.




1.3                      “Class A Warrant Exercise
Price” means (a) as to Class A Warrant in the form of Exhibit B-1 attached
to the Purchase Agreement, One Thousand Dollars ($1,000.00) per share of Series
C Preferred Stock, subject to adjustment as provided in the Series C Certificate
of Designations; and (b) upon consummation of the Class A Warrant Exchange, as
to the as to Class A Warrant in the form of Exhibit
B-2 attached to the Purchase Agreement, Seventy-Five Cents ($0.75) per
share of Company Common Stock, subject to adjustment as provided in such Class A
Warrant.




1.4                      “Class B Warrant Shares” shall
mean the 2,000,000 shares of Common Stock (subject to adjustment) that are
issuable upon exercise of the Class B Warrant.




1.5                      “Company Sale of Control” shall
mean any transaction or series of transactions involving the sale of a majority
of the voting securities or substantially all of the assets and businesses of
the Company and its consolidated Subsidiaries to any Person who is not an
Affiliate of the Company or the Shareholders (including the Investor and its
Affiliates), whether through sale of assets, merger, consolidation, tender offer
or other related transaction, as a result of which the power to elect a majority
of the members of the Board of Directors of the Company shall be vested in to
Persons who are not an Affiliate of the Company prior to such
transaction.




112




1.6                      “Designated Subsidiaries” shall
mean the Significant Subsidiaries and any one or more Subsidiary formed or
acquired in connection with any one or more Strategic Acquisition made during
the period that this Agreement shall remain in force and effect.





1.7                      “Expiration Date” shall mean
December 31, 2009.




1.8                      “50% Threshold” shall mean, at
any particular point in time, including, without limitation, following the
exercise of the Class A Warrant and/or Class B Warrant, the record ownership by
the Investor or its Affiliates of such number of shares of Series C Preferred
Stock, Class B Warrant Shares and/or Common Stock of the Company which if (a)
owned outright as Common Stock, or (b) as to Series C Preferred Stock
(including, without limitation, Class A Warrant Shares), was fully converted
into Common Stock, would represent in the aggregate fifty percent (50%) or more
of the issued and outstanding shares of Common Stock of the Company at such
point in time.


1.9                      “Fully-Diluted Common Stock”
shall mean the aggregate number of issued and outstanding shares of Common Stock
of the Company as at the Closing Date or as of a particular measuring date
following the Closing, on a fully-diluted basis, after giving effect to (a) the
exercise of all warrants, stock options and other rights to purchase Common
Stock, (including the Class A Warrant and the Class B Warrant) then issued and
outstanding, and (b) the conversion into Common Stock of all notes, debentures,
preferred stock and other convertible securities of the Company then issued and
outstanding, including, without limitation, all Common Stock issuable upon
conversion of the 5,000 shares of Series C Preferred Stock issued to the
Investor on the Closing Date and all Common Stock issuable upon conversion of
the 17,500 additional shares of Series C Preferred Stock that may be issuable
upon exercise of the Class A Warrant.




1.10                      “National Securities Exchange”
shall mean any one of the New York Stock Exchange, the NYSE Alternext Exchange,
the NASDAQ Capital Markets, or the FINRA Over-the-Counter Bulletin
Board.




1.11           “Purchased Shares” shall mean
the 5,000 shares of Series C Preferred Stock included in the Purchase which are
issued to the Investor on the Closing Date under the Purchase
Agreement.




1.12           “Securities” shall mean the
collective reference to: (a) all 22,500 shares of Series C Preferred Stock,
inclusive of the 5,000 Purchased Shares; (b) the Class A Warrant; (c) the Class
B Warrant; (d) the Class A Warrant Shares; (e) the Class B Warrant Shares; (f)
the shares of Common Stock that may be purchased upon conversion of any issued
and outstanding shares of Series C Preferred Stock (including the Purchased
Shares); and (g) any adjustments to the number of shares of Common Stock
issuable upon conversion of Series B Preferred Stock or exercise of the Warrants
pursuant to the anti-dilution provisions of such securities.




113




1.13           “Super Majority Voting Rights”
shall mean the right of the Investor or other holder(s) of the Series C
Preferred Stock to cast, at any regular or special meeting of stockholders of
the Company or in connection with the solicitation of any written consent of
stockholders of the Company, that number of votes, with respect to any matters
as to which stockholders of the Company may vote or consent to, as shall be
equal to the sum
of:




(a)           one
hundred (100%) percent of the number of votes that may be cast by all of the
issued and outstanding shares of the Company’s Common Stock and any other shares
of capital stock of the Company entitled to vote on the matter, on the record
date for the determination of the stockholders entitled to vote on such matter,
plus




(b)           
one (1) additional vote.




1.14           “Triggering Event” shall mean
the first to occur of either (a) the exercise of the Class A Warrant and the
payment of not less than $10,000,000 of the applicable Class A Warrant Exercise
Price, or (b) the 50% Threshold having been attained or exceeded.





2.  Agreements
Relating to the Purchased Shares.





2.1  Lock-Up, Transfer and
Encumbrance.


(a)           The
Investor acknowledges that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act only in certain limited
circumstances.


(b)           Except
for (i) the pledge of the Purchase Agreement, the Limited Recourse Note and the
Common Stock issuable upon conversion of such Limited Recourse Note to Global
Asset Fund Limited, as at the date of execution of this Agreement and (ii) the
pledge of all of the Securities, this Agreement and the other Transaction
Documents to Amalphis Group Limited (“Amalphis”) to secure financing
from Amalphis to enable the Company to pay the Purchase Price on the Closing
Date, without the prior written consent of the Company, the Investor shall not
sell, pledge, hypothecate, assign or otherwise transfer, (collectively, “Transfer”) directly or
indirectly, any of the Securities or any of its rights or obligations under any
of the Transaction Documents until the earlier of (i) December 31, 2009, or (ii)
the occurrence of a Triggering Event.  Investor further agrees, if
permitted by the Company, no Transfer of the Securities prior to the expiration
of the foregoing period shall be effective unless the transferee or assignee
shall have executed a written assumption of the specific obligations and duties
of the Investor set forth herein and in any of the other Transaction Documents
and in all cases to the provisions of the applicable securities
laws.




(c)           Each
of the Management Stockholders does hereby acknowledge and agree that no direct
or indirect Transfers of any Securities of the Company owned of record or
beneficially by any such Management Stockholder can be made by such Person or
Persons prior to 5:00 p.m. (Eastern Standard Time) on March 31, 2010 pursuant to
this Agreement and the Lock-Up Agreements.




114




2.2  New Purchased
Shares.  Investor agrees that any shares or securities of the
capital stock of the Company that the Investor or its Affiliates purchases or
with respect to which the Investor otherwise acquires beneficial ownership after
the date of this Agreement and prior to the Expiration Date (the “New Purchased Shares”), and
any and all other shares or securities of the Company issued, issuable,
exchanged or exchangeable in respect of any New Purchased Shares, shall be
subject to the terms and conditions of this Agreement to the same extent as if
they constituted Purchased Shares.





3.  Board of
Directors.




(a)                      The
Parties hereto agree that, subject at all times to the provisions of Section 3(b) below,
for so long as the Investor or its Affiliates shall own at least 1,250 shares of
Series C Preferred Stock (as adjusted for stock splits, stock dividends,
recapitalizations and the like), the entire Board of Directors of the Company
shall consist of nine (9) members, and that two (2) of such members shall be
persons who shall be designated by the Investor and who are reasonably
acceptable to a majority of the members of the Board of Directors (the “Investor
Designees”).  In addition, if permitted under applicable FINRA
regulations and other limitations on the activities of registered
broker/dealers, one of such Investor Designees shall serve as a member of the
board of directors of each of the Designated Subsidiaries.  The
Parties hereto acknowledge that Gregory Webster and Michael Hlavsa have been
appointed to serve on the Board of Directors of the Company as the Initial
Investor Designees and Gregory Webster shall serve as the initial Investor
Designee on each of the Designated Subsidiaries; all of which Persons are deemed
to be acceptable to the Company.




(b)                      In
the event that a Triggering Event has occurred on or before the December 31,
2009 Expiration Date, and for so long thereafter as the Investor or its
Affiliates shall own at least 1,250 shares of Series C Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and the like), the
size of the entire Board of Directors of the Company shall be increased to no
less than ten (10) members and that the Investor shall have the right to
designate no less than five (5) of the ten (10) members of such Board of
Directors, or such other number of directors so that Investor Designees shall at
all times represent not less than fifty (50%) percent of all of the members of
the Board of Directors of the Company.  In addition, in the event that
a Triggering Event has occurred on or before the December 31, 2009 Expiration
Date, and for so long thereafter as the Investor or its Affiliates shall own at
least 1,250 shares of Series C Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and the like), if permitted under applicable
FINRA regulations and other limitations on the activities of registered
broker/dealers, one of such Investor Designees shall serve as a member of the
board of directors of each of the Designated Subsidiaries.


(c)                      If
the Boards of Directors of the Company or any Designated Subsidiary is to vote
to fill any vacancies on such Board(s) of Directors resulting from the death,
resignation, retirement, disqualification, removal or other cause of any of the
Investor Designees, then for so long as the Investor or its Affiliates own at
least 1,250 shares of Series C Preferred Stock (as adjusted for stock splits,
stock dividends, recapitalizations and the like), the Investor and/or its
Affiliates shall be entitled to nominate the applicable number of candidates as
Investor Designees as are specified in Section 3(a) or Section 3(b)
above.




115




(d)                      At
all times, the Board of Directors of the Company shall, as a whole, satisfy the
applicable “independence” requirements that may be applicable to the Company
under the rules of the stock exchange or other trading market in which the
Company’s Common Stock may trade and shall maintain the requisite number of
independent directors, as required under the Sarbanes Oxley Act of 2002 and the
stock exchange on which the Company’s Common Stock shall then trade (the “Independent
Directors”).  In addition, the provisions of this Section 3
shall not be applicable in the event and to the extent that the implementation
thereof would cause the Company to be in violation of any rule, regulation or
policy of the FINRA, and National Securities Exchange on which the Company’s
Common Stock then trades, or the SEC.




(e)                      In
the event a Triggering Event has occurred prior to the December 31, 2009
Expiration Date, and for so long thereafter as the Investor or its Affiliates
own at least 1,250 shares of Series C Preferred Stock (as adjusted for stock
splits, stock dividends, recapitalizations and the like), not less than fifty
percent (50%) of the Independent Directors of the Company nominated for election
to the Board of Directors shall be Persons who are acceptable to the Investor or
its Affiliates.




(f)                      To
the extent not already established, following the date of this Agreement, the
Board of Directors of the Company shall establish certain committees, including
(i) a three member Audit Committee, (ii) a three member Compensation Committee,
and (iii) a three member Business Development Committee.   One of
the Investor Designees shall be entitled to be a member of each of the Audit
Committee and the Compensation Committee, and two of the Investor Designees
shall be entitled to serve as members of the Business Development
Committee.  The Business Development Committee shall consider and
recommend to the Board of Directors of the Company, potential mergers and
acquisitions, joint ventures and/or the purchase of businesses or assets by the
Company or any Designated Subsidiary (including, without limitation, the
potential Strategic Acquisitions described in Section 7.5 of the
Purchase Agreement) or any transaction that may involve a Company Sale of
Control.





(g)                      Notwithstanding
the foregoing provisions of this Section 3, if in
connection with an Approved Strategic Acquisition, the parties to such
transaction require representation on the Board of Directors of the Company,
this Section 3
shall be amended in a manner that is acceptable to the Company and the Investor
taking into account their then current Board representation
percentages.





4.  Voting.





(a)                      Series C Preferred Stock
Voting Rights.  The Parties hereto acknowledge that, pursuant to the
Series C Certificate of Designation, the Series C Preferred Stock shall, voting
together with the Common Stock of the Company a single class, possess Super
Majority Voting Rights at all times on or prior to the earlier to occur of (i)
the Expiration Date, or (ii) the occurrence of a Triggering
Event.  Following the earlier to occur of the Expiration Date or a
Triggering Event, the Series C Preferred Stock shall, voting together with the
Common Stock of the Company a single class, possess As Converted Voting
Rights.




116




(b)                      Board of
Directors.   Except in connection with a Company Sale of
Control, at every meeting of the stockholders of the Company called with respect
to the election of directors of the Company, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of the
Company with respect to such matter:




(i)                      for
a period equal to the earlier to occur of (A) three (3) years from the date
hereof, or (B) two (2) years from the date on which a Triggering Event
shall have occurred, the Investor agrees to vote all shares of Series C
Preferred Stock and all shares of Common Stock owned of record by the such
Investor or its Affiliates in favor
of the election to the Board of Directors of the Company of those directors of
the Company who shall be current members of the Board of Directors of the
Company as of the date hereof or their respective successors as designated by
the remaining directors; provided,
that, such Persons (A) are willing and capable of serving as members of
such Board of Directors, (B) if employees of the Company or any Designated
Subsidiary, are not terminated for cause (as defined in any employment agreement
applicable to such employee or as determined by a court of competent
jurisdiction from which no appeal has or can be taken), and (C) are not found by
a court of competent jurisdiction from which no appeal has or can be taken to
have breached their fiduciary duties as directors of the Company;
and




(ii)                      at
such time and for so long as Investor Designees shall constitute fifty percent
(50%) of all of the members of the Boards of Directors of the Company (as
contemplated by Section 3(b) above),
the Investor agrees to vote all shares of Series C Preferred Stock and all
shares of Common Stock owned of record by such Investor or its Affiliates in favor
of the election to the Board of Directors of the Company of the remaining fifty
percent (50%) of all of the members of the Boards of Directors of the Company of
such Persons who shall consist of: (A) as to the Company, (x) the three
Management Stockholders (assuming such Persons are willing and capable of
service as members of such Boards of Directors), (y) the two designees of
holders of Series A Preferred Stock, and (z) fifty percent (50%) of all
Independent Directors who shall be Persons acceptable to both the majority of
the Management Stockholders and the holders of Series A Preferred Stock; and (B)
as to each Designated Subsidiary, such Persons who shall be acceptable to the
Management Stockholders.




(c)                      Proxy.           
Except in connection with a Company Sale of Control, prior to the earlier to
occur of (i) three (3) years from the date hereof, or (ii) two (2) years from
the date on which a Triggering Event shall have occurred, the Investor will not
enter into any agreement or understanding with any person or entity to vote or
give instructions in any manner inconsistent with the provisions of Section 3 or
this Section 4.  Except as otherwise provided herein, the covenants
and agreements of the Investor set forth in Section 4(b) are
hereby deemed to be irrevocable and coupled with an interest, to the extent
provided in Section 212 of the Delaware General Corporation
Law.  In such connection, the Investor hereby appoints Goldwasser and
Sokolow, and each of them, as the Investor’s proxy and attorney in fact to vote
all of the shares of Common Stock and Series C Preferred Stock owned of record
by the Investor and exercise all of the voting rights then enjoyed by the
Investor whether they be Super-Majority Voting Rights or As-Converted Voting
Rights (collectively, the “Voting Rights”) to implement
the provisions of Section 3 and this Section 4.




117




(d)                      The
provisions of Section
4(c) above are intended to bind the Investor as a stockholder of the
Company only with respect to the voting for members of the Board of Directors of
the Company, and is not intended to affect the Voting Rights of then enjoyed by
the Investor, with respect to any other matters that are to be considered, voted
upon, approved ratified or consented to by the stockholders of the
Company.





5.  Actions
of the Board of Directors; Major Transactions.





(a)                      The
business of the Company and its Subsidiaries shall be conducted and managed in
the following manner:




(i)                      The
Management Stockholders acknowledge the provisions of Article X, Section B of
the Series C Certificate of Designations and do hereby covenant and agree that,
to the extent such provisions are applicable, they shall not, in their
capacities as directors of the Company or otherwise, cause the Company to
violate any of the provisions of Article X, Section B of the Series C
Certificate of Designations. Except for Major Transactions (as hereinafter
defined), the operation of the business of the Company and its Subsidiaries
shall be managed by the Board of Directors of the Company.




(ii)                      Notwithstanding
any other provision of this Agreement or the Company’s Series C Certificate of
Designations, except as otherwise prohibited by applicable law, for the period
set forth in Article X, Section B of the Series C Certificate of Designations,
if any action affecting the Company or a Company Subsidiary that constitutes a
Major Transaction shall, under the laws of the State of Delaware, require only
the approval, consent or action by the Board of Directors of the Company, the
affirmative vote, consent or approval of a majority of the Investor Designees
who serve as the members of such Boards of Directors shall be required to
approve, adopt or ratify such Major Transaction.  In addition, to the
items constituting Major Transactions in the Series C Certificate of
Designations, for the period specified in Article X, Section B of such Series C
Certificate of Designations, the following additional items shall also be deemed
to be Major Transactions under this Agreement, and shall require the prior
written consent or approval of a majority of the Investor
Designees:




(A)                      any
change to the compensation of any Key Employee, except to the extent
contemplated by compensation arrangements currently in effect;




(B)                      entering
into any new, or modifying any existing, commercial or financial agreement with
any Management Shareholder or any Affiliate of a Management Shareholder (other
than the Company);




(C)                      change
in the auditors for the Company and its Subsidiaries, unless such auditors shall
be a nationally recognized auditing firm or any other regional PBOC qualified
auditing firm that specializes in auditing registered broker/dealers or
investment banking firms.




(b)                      In
connection with a Major Transaction, in the event that any Investor Designee who
are listed on Schedule
A hereto fail or refuse to affirmatively vote or consent in connection
with any one or more Major Transactions at any regular or special meeting of the
Board of Directors of the Company or its Subsidiaries, then such Investor
Designee shall be deemed not to
have accepted and to have voted against implementation of such Major
Transaction.




118




(c)                      The
Investor shall have the right at any time by written notice to the Company, to
(i) remove or replace its Investor Designees listed on Schedule A to vote on
Major Transactions with a replacement designee selected by the Investor and
reasonably acceptable to a majority of the remaining members of the Board of
Directors, or (ii) to change the addresses for notices set forth on Schedule
A.




6.  Representations,
Warranties and Covenants of Investor.  The Investor hereby
represents, warrants and covenants to the Company and the Management
Stockholders that:





6.1  Ownership. As of the
date hereof, the Investor has good and marketable title to, and is the sole
legal and beneficial owner of the Securities, in each case free and clear of all
liens or encumbrances.  As of the date hereof, the Investor does not
beneficially own any shares or securities of the capital stock of the Company
other than such Securities.





6.2  Authorization.  The
Investor has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and has sole
voting power and sole power of disposition, with respect to all of the
Securities with no restrictions on its voting rights or rights of disposition
pertaining thereto.  The Investor has duly executed and delivered this
Agreement and this Agreement is a legal, valid and binding agreement of the
Investor, enforceable against the Investor in accordance with its terms, except
as the enforceability thereof may be limited by (i) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect that affect the
enforcement of creditors’ rights generally or (ii) general principals of equity,
whether considered in a proceeding at law or in equity.





6.3  No
Violation.  Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) require the Investor to file or register with, or obtain any material
permit, authorization, consent or approval of, any governmental agency,
authority, administrative or regulatory body, court or other tribunal, foreign
or domestic, or any other entity, except in compliance with the provisions of
Section 16 and Section 13D of the Exchange Act; (ii) violate, or cause a
breach of or default (or an event which with notice or the lapse of time or both
would become a default) under, any contract, agreement or understanding to which
the Investor is a party, or, any statute or law, or any judgment, decree, order,
regulation or rule of any governmental agency, authority, administrative or
regulatory body, court or other tribunal, foreign or domestic, or any other
entity or any arbitration award binding upon the Investor; or (iii) cause the
acceleration of any obligation under or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrances on any property or asset of the Investor pursuant to any
provision of any indenture, mortgage, lien, lease, agreement, contract,
instrument, order, judgment, ordinance, regulation or decree to which the
Investor is subject or by which the Investor or any of the Investor’s properties
or assets are bound.  No proceedings are pending which, if adversely
determined, will have a material adverse effect on any ability to vote or
dispose of any of the Purchased Shares.  The Investor has not
previously assigned or sold any of the Securities to any third
party.




119




7.  Termination.  This
Agreement shall terminate on either (a) the earlier to occur of (i) three (3)
years from the date hereof, or (ii) two (2) years from the date on which a
Triggering Event shall have occurred, or (b) the occurrence of a Company Sale of
Control; provided
that nothing herein shall relieve any Party from liability hereof for breaches
of this Agreement prior to such termination.





8.  Miscellaneous.





8.1  Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, then the
remainder of this terms, provisions, covenants and restrictions  of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.





8.2  Binding Effect and
Assignment.  This Agreement and all of the provisions hereof
shall be binding upon and insure to the benefit of the parties hereto and their
respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without the prior written consent of the other; provided, however, that the
Investor may assign its rights hereunder if the assignee shall enter into a Lock
Up Agreement substantially in the same form as executed by the Investor and
reasonable acceptable to the Company.  Any purported assignment
without such consent shall be void.





8.3  Amendment and
Modification.  This Agreement may not be modified, amended,
altered or supplemented except by the execution and delivery of a written
agreement executed by the parties hereto.





8.4  Specific Performance;
Injunctive Relief.  The parties hereto acknowledge that the
Investor or the Company will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements set
forth herein given by the Company and Management Stockholders, on one hand, and
by the Investor, on the other hand.  Therefore, it is agreed that, in
addition to any other remedies that may be available to it or them upon such
violation, the non-breaching Party shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by any
other means available to it or them at law or in equity.





8.5  Resolution of
Disputes.  Subject only to the provisions of Section 8.4 above, any
dispute involving the interpretation or application of this Agreement which
cannot be resolved by negotiation among the Parties may be submitted by either
the Investor or the Company to final and binding arbitration before a panel of
three arbitrators selected in accordance with the then obtaining rules of the
American Arbitration Association in New York, New York (the AAA”).  The decision
and award of the arbitrators shall, absent manifest error, be final and binding
upon all of the Parties to this Agreement and may be enforced in any federal or
state court of competent jurisdiction in New York.




120


8.6  Notices.  All
notices that are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be sufficient in all respects if given
in writing and delivered by hand or national overnight courier service,
transmitted by telecopy or mailed by registered or certified mail, postage
prepaid (effective when delivered by hand or telecopy, one day after dispatch by
overnight courier, and three Business Days after dispatch by mail), as
follows:





(a)
            if
      to the Company or Proxy Holder, to:





National Holdings
Corporation


120 Broadway, 27th
Floor


New York, NY 10271


Facsimile: (212) 471-8010


Attention: Mark Goldwasser,
CEO





with a
copy to:





Littman Krooks LLP


655 Third
Avenue, 20th
Floor


New
York, NY 10017


Facsimile:
(212) 490-2990


Attention:
Mitchell C. Littman





(b)           if
to the Investor,





Fund.Com Inc.


14 Wall Street, 20th
Floor


New York, NY 10005


Attention: Gregory Webster,
CEO


Fax: (212) 618-1705





with
copies to:






Pillsbury
      Winthrop Shaw Pittman LLP
            Hodgson
      Russ LLP1540
      Broadway
            1540
      BroadwayNew York, NY
      10036-4039
            New York, New
      York 10036Attention:
      Ronald A. Fleming, Esq.
            Stephen A.
      Weiss, EsqFax: (212)
      298-9931
            Fax: (212)
      751-0928




121


8.7  Governing
Law.  This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to any choice or conflict of law provision, rule or principle
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.





8.8  Entire
Agreement.  This Agreement and the Purchase Agreement contain
the entire understanding of the parties in respect of the subject matter hereof,
and supersede all prior negotiations and understandings between the parties with
respect to such subject matters.





8.9  Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, and all of which together shall constitute one and the same
instrument.  In the event that any signature (including a financing
signature page) is delivered by facsimile transmission or by e-mail delivery of
a “.pdf” format data file, 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 facsimile or “.pdf”
signature page were an original thereof.





8.10  Effect of
Headings.  The section headings herein are for convenience only
and shall not affect the construction or interpretation of this
Agreement.





8.11  Jurisdiction.  Any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the state or federal court
of the State of New York located in the City of New York, and each of the
parties hereby consents to the jurisdiction of such court (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each Party agrees that
service of process on such Party as provided in this Section 8.10 shall be
deemed effective service of process on such Party.





8.12  Remedies Not
Exclusive.  All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity will be
cumulative and not alternative, and the exercise of any thereof by either Party
will not preclude the simultaneous or later exercise of any other such right,
power or remedy by such Party.





8.13  Waiver of Jury
Trial.  EACH PARTY
HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OT OF OR RELATED TO THIS AGREEMENT, THE PROXY OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.





8.14  Expenses.  If
any action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Proxy, the prevailing Party shall be entitled to
reasonable attorney’s fees, costs and necessary disbursements in addition to any
other relief to which such Party may be entitled.





8.15  Disclosure.  The
Investor hereby authorizes the Company to publish or disclose in any Company SEC
Reports, including, without limitation, a Schedule 13D, its identity and the
nature of its commitments, arrangements and understandings under this
Agreement.





8.16  Legend on Share
Certificates.  Each certificate representing any Securities
shall be endorsed by the Company with a legend reading substantially as
follows:




“THE RIGHT TO VOTE THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN
A SHAREHOLDERS AGREEMENT, A COPY OF WHICH IS ON FILE AT THE CORPORATION’S
PRINCIPAL PLACE OF BUSINESS.”





[balance
of this page left blank, signature page follows]




122




IN
WITNESS WHEREOF, the parties have caused this Voting Agreement to be duly
executed on the day and year first above written.








NATIONAL
HOLDINGS CORPORATION








By:


_____________________________________


Mark
Goldwasser, CEO








_____________________________________


Leonard
J. Sokolow








_____________________________________


Mark
Goldwasser








_____________________________________


Christopher
C. Dewey








FUND.COM,
INC.








By:


Gregory Webster,
CEO





Purchased
Shares beneficially owned:





5,000
shares of the Company’s Series C Preferred Stock, initially convertible in
6,666,666 shares of the Company’s Common Stock





Class A
Warrant to purchase 17,500 shares of the Company’s Series C Preferred Stock,
initially convertible in 23,333,333 shares of the Company’s Common
Stock.





Class B
Warrant to purchase 2,000,000 shares of the Company’s Common Stock.




123




SCHEDULE
      B





LIST
OF INVESTOR DESIGNEES








Name
      of Investor Designees
            Delivery
      of Notices___________________________
              
              
              
              
              
              
              ________________________
            ____________________
              ________________________
              ___________________
              Email:
              
              
              
              
              ____________________
              ________________________
              ___________________
              Email:
              
              Copies
      to:
              
              Pillsbury Winthrop Shaw Pittman
      LLP1540
      Broadway
              New York, NY
      10036-4039
              Attention: Ronald A. Fleming, Esq.Fax: (212) 298-9931
              Email:  ron.fleming@pillsburylaw.com
              
              Hodgson Russ LLP
              1540 Broadway
              New York, NY 10036
              Attention: Stephen A.
      Weiss, Esq.Fax: (212)
      751-0928
              Email:sweiss@hodgsonruss.com








124




EXHIBITF


WAIVER
AND AGREEMENT





WAIVER AND AGREEMENT (“Agreement”) dated as
of March 11, 2009 by and between St. Cloud Capital Partners II, L.P.
(“St. Cloud
II”) and National Holdings Corporation (the“Company”).





RECITALS:





WHEREAS, St. Cloud II and the Company
are parties to a Securities Purchase Agreement dated as of March 31, 2008 (the
“March SPA”);
and


WHEREAS, pursuant to the March SPA, the
Company issued to St. Cloud II (i) a 10% Senior Subordinated Convertible
Promissory Note in the principal amount of $3 million (the “March Note”) and (ii)
a warrant to purchase 375,000 shares of the Company’s Common Stock (the “March Warrant” and
with the March Note and the March SPA, the “March Agreements”);
and





WHEREAS, St. Cloud II and the Company
are parties to a Securities Purchase Agreement dated as of June 30, 2008 (the
“June SPA”);
and




WHEREAS, pursuant to the June SPA, the
Company issued to St. Cloud II (i) a 10% Senior Subordinated Convertible
Promissory Note in the principal amount of $3 million (the “June Note”) and (ii)
a warrant to purchase 468,750 shares of the Company’s Common Stock (the “June Warrant” and
with the June Note and the June SPA, the “June Agreements”);
and





WHEREAS, pursuant to a term sheet
between the Company and the investor identified therein (the “Investor”) dated
February 2, 2009 (“Term Sheet”), a copy
of which has been previously delivered to St. Cloud II, it is intended that
pursuant to definitive agreements between the Company and the Investor (the
“Investor
Agreements”), among other things, the Company will (i) create and issue a
new series of preferred stock (the “Series C
Stock”), which Series C Stock will, under certain circumstance, provide
the Investor the right to vote 50% of the total number of shares of Common
Stock, par value $0.02 per share (“Common Stock”) as of
the record date for any matter requiring a vote of Company stockholders, plus
one (1) (the “Series C
Super Voting Rights”), (ii) issue a warrant which, if exercised, will
entitle the Investor to acquire additional Series C Stock (or under certain
circumstances, Common Stock), as the result of which the Holder may become the
beneficial owner of 50% or more of the issued and outstanding Common Stock of
the Company (the “A
Warrant”),  (iii) extend and/or enter into new employment
agreements with senior management of the Company (collectively the “New Employment
Agreements”) and (iv)  establish a management option pool for
the benefit of the management of the Company (“Management Pool”);
and


WHEREAS, in order to have a sufficient
number of shares of Common Stock available for issuance upon conversion of the
Series C Stock, the Company will seek to increase its authorized Common Stock
from 50,000,000 to 100,000,000 shares (the “Charter
Amendment”);




125




WHEREAS, the Company’s Board of
Directors (“Board”) has created a
special committee of the Board compromised of independent directors (the “Special Committee”)
to, among other things, approve the terms and conditions of the New Employment
Agreements and the Management Pool; and


WHEREAS, the waivers requested from St.
Cloud II hereunder shall become effective if but only if the Investor Agreements
are actually entered into between the Company and the Investor and delivered and
the Investor purchases for $5,000,000, an aggregate of 5,000 shares of the
Series C Stock (the “Waiver Effective
Date”).




NOW THEREFORE, the parties hereto agree
as follows, as of the Waiver Effective Date:





1.           Waiver and Amendment of
Certain Rights and Provisions under the March Agreements.




(a)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Sections 7.10(l) and Section 7.10(m) of the March SPA with respect to
creation of the Class C Stock and the Charter Amendment;




(b)           Provided
that approval has been granted by the Special Committee, St. Cloud II hereby
permanently and irrevocably waives the provisions of Sections 7.10(d) and
Section 7.10(f) of the March SPA with respect to the New Employment Agreements
and the Management Pool;




(c)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Section 7(a) of the March Note providing for mandatory prepayment of the
Note due to the Series C Super Voting Rights; and





(d)           St.
Cloud II hereby permanently and irrevocably waives the ‘Change of Control’
provisions of Section 7(a) of the March Note providing for mandatory
prepayment of the Note due to the Investor or its affiliates owning, at any
point in time, 50% of more of the outstanding voting power of the Company by way
of any combination of ownership of (i) shares of Common Stock and/or shares of
Series C Shares and (ii) shares of Common Stock and/or shares of Series C Shares
issued pursuant to the exercise of the A Warrant (the “Investor 50%
Threshold”); and


(e)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Section 5(d) of the March Warrant providing for adequate provision to be
made under the March Warrant due to the Series C Super Voting Rights and the
occurrence of the Investor 50% Threshold; and







(f)           St.
Cloud II hereby agrees that the first sentence of Section 4 of the March Note is
hereby amended in its entirety to read as follows:




126




“At the
option of the Company, which may be exercised upon ten (10) business days notice
to the Holder (“Notice
of Redemption”) at any time or from time to time commencing March 31,
2009, this Note may be redeemed in whole or in part at redemption prices as
follows: (i) 115% of the Principal Amount of this Note plus accrued and unpaid
interest through the date of redemption if the Notice of Redemption is delivered
between March 31, 2009 and March 31, 2010, (ii) 135% of the Principal Amount of
this Note plus accrued and unpaid interest through the date of redemption if the
Notice of Redemption is delivered between March 31, 2010 and March 31, 2011,
(iii) 145% of the Principal Amount of this Note plus accrued and unpaid interest
through the date of redemption if the Notice of Redemption is delivered between
March 31, 2011 and March 31, 2012.”





2.           Waiver of Certain Rights
under the June Agreements




(a)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Sections 7.10(l) and Section 7.10(m) of the June SPA with respect to
creation of the Class C Stock and the Charter Amendment;




(b)           Provided
that approval has been granted by the Special Committee, St. Cloud II hereby
permanently and irrevocably waives the provisions of Sections 7.10(d) and
Section 7.10(f) of the June SPA with respect to the New Employment Agreements
and the Management Pool;




(c)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Section 7(a) of the June Note providing for mandatory prepayment of the
Note due to the Series C Super Voting Rights; and




(d)           St.
Cloud II hereby permanently and irrevocably waives the ‘Change of Control’
provisions of Section 7(a) of the June Note providing for mandatory
prepayment of the Note due to the occurrence of the Investor 50% Threshold;
and




(e)           St.
Cloud II hereby permanently and irrevocably waives the provisions of
Section 5(d) of the June Warrant providing for adequate provision to be
made under the June Warrant due to the Series C Super Voting Rights and the
occurrence of the Investor 50% Threshold; and





(f)           St.
Cloud II hereby agrees that the first sentence of Section 4 of the June Note is
hereby amended in its entirety to read as follows:





“At the
option of the Company, which may be exercised upon ten (10) business days notice
to the Holder (“Notice
of Redemption”) at any time or from time to time commencing June 30,
2009, this Note may be redeemed in whole or in part at redemption prices as
follows: (i) 115% of the Principal Amount of this Note plus accrued and unpaid
interest through the date of redemption if the Notice of Redemption is delivered
between June 30, 2009 and June 30, 2010, (ii) 135% of the Principal Amount of
this Note plus accrued and unpaid interest through the date of redemption if the
Notice of Redemption is delivered between June 30, 2010 and June 30, 2011, (iii)
155% of the Principal Amount of this Note plus accrued and unpaid interest
through the date of redemption if the Notice of Redemption is delivered between
June 30, 2011 and June 30, 2012.”




3.           No Other Waiver.Anything contained herein to the contrary notwithstanding, the parties
hereto expressly acknowledge and agree that the waivers granted by St. Cloud II
pursuant to Section 2 hereof are on a one-time basis, relate only to the
transactions contemplated by the Term Sheet and are not and should not be deemed
to be a waiver of any other rights under the March Agreements and the June
Agreements, all of which are expressly reserved.





4.           Warrant
Issuance.  In consideration for, and as a material inducement
to, St. Cloud II’s agreement to the waivers and amendments set forth herein, on
the Waiver Effective Date, the Company shall issue to St. Cloud II the following
warrants to purchase shares of the Company’s common stock:




(a)           A
five-year Warrant (the “First Warrant”) to
purchase 1,000,000 shares of Common Stock at an exercise price of $0.75 per
share (with both cash and cashless exercise provisions) in the form attached
hereto as Exhibit
A; and




(b)           A
Warrant exercisable until December 31, 2009 (subject to a one year extension if
the A Warrant issued to the Investor is extended to June 30, 2010 pursuant to
its terms) (the “Second Warrant”) to
purchase 3,000,000 shares of Common Stock at an exercise price of $0.75 per
share (without a cashless exercise right), exercisable, however, only on a pro
rata basis to the extent that the Class A Warrant is exercised during the term
of the Second Warrant, in the form attached hereto as Exhibit
B.





5.           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 contained herein.







6.           Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, and all of which together shall constitute one and the same
instrument.  In the event that any signature (including a financing
signature page) is delivered by facsimile transmission or by e-mail delivery of
a “.pdf” format data file, 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 facsimile or “.pdf”
signature page were an original thereof.




7.           Governing
Law.  This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware (without regard to choice of law
provisions thereof).




127




IN WITNESS WHEREOF, the parties have
caused this Waiver and Agreement to be executed as of the day and year first
above written.







NATIONAL
HOLDINGS CORPORATION








By:________________________________





Title:________________________________








ST. CLOUD
CAPITAL PARTNERS II, L.P.




Its:
General Partner









By:________________________________


Marshall S. Geller


Managing Member








128








FORM OF EMPLOYMENT
AGREEMENT




This
Employment Agreement (“Agreement”) is made and
entered into as of April ___, 2009, by and between National Holdings
Corporation, a Delaware corporation (the “Company”) and ____________
(the “Executive”).




Recitals




WHEREAS, the Company wishes to
employ the Executive, and Executive wishes to be so employed by the Company, on
the terms and conditions hereinafter set forth.




NOW, THEREFORE, in
consideration of the premises and mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
mutually acknowledged, the Company and the Executive hereby agree as
follows:




Agreement




Definitions.  When used in
this Agreement, the following terms shall have the following
meanings:




“Accrued
Obligations” shall mean:




any
accrued but unpaid salary through the Termination Date;




any
unpaid or unreimbursed expenses incurred in accordance with Company policy,
including amounts due under Section 5(a) hereof, to the extent incurred during
the Term of Employment;




any
benefits provided under the Company’s Executive benefit plans upon a termination
of 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 in accordance with the terms of such Equity Awards;




any
unpaid Bonus in respect to any completed fiscal year that has ended on or prior
to the end of the Term of Employment; and




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.




“Board”
shall mean the Board of Directors of the Company.




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




the
commission of a felony or other crime involving moral turpitude, or 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
customers or suppliers; or




129




breach of
fiduciary duty, willful misconduct or gross negligence with respect to the
Company or any Related Entity; or




substantial
and repeated failure to perform duties as reasonably directed by the Board;
provided, however, that
if any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to the Board’s reasonable
satisfaction within 30 calendar days of notice of such breach; or




material
breach of this Agreement; provided, however, that if
any such breach is subject to cure, Executive shall be entitled to written
notice of and an opportunity to cure such breach to the Board’s reasonable
satisfaction within 30 calendar days of notice of such breach; or




any
action taken against Executive by a regulatory body or self-regulatory
organization that materially impairs the Executive from performing his duty for
a period of more than 180 days; or




alcoholism
or drug addition which materially impairs the Executive’s ability to perform his
duties.




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.





“Change
in Control of the Company” shall mean:




consummation
of a reorganization, merger or consolidation, sale, disposition of all or
substantially all of the assets or stock of the Company or any other similar
corporate event (a “Business Combination”), in each case, unless, following such
Business Combination, all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the voting securities of the
Company entitled to vote generally in the election of directors immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries); or




approval
by the Board of Directors of the Company of a complete dissolution or
liquidation of the Company; or




any
“person” (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), is or becomes, after the Commencement Date, a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors of the Company.




130




Notwithstanding
the foregoing, for the purpose of this Agreement, a Change in Control of the
Company shall not apply to the transactions contemplated (the “Financing”) by
that certain Securities Purchase Agreement, dated March __, 2009 (the “Purchase
Agreement”), by and between the Company and Fund.Com, Inc., a Delaware
corporation, and Executive hereby permanently and irrevocably waives the right
to assert any claim under this Agreement that would otherwise be triggered by a
Change in Control of the Company as it relates to the Financing or any
transactions contemplated by the Financing, other than as relate to Strategic
Acquisitions, as defined in the Purchase Agreement.




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




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




“Commencement
Date” shall mean April ___, 2009.




“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 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.




“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.




“Draw”
shall mean a loan or advance versus a Base Salary or other forms of compensation
provided for in Section 4(a) hereof.




“Equity
Awards” shall mean any stock options, restricted stock, restricted stock
units, stock appreciation rights, phantom stock or other equity based awards
granted by the Company to the Executive.




“Excise
Tax” shall mean any excise tax imposed by Section 4999 of the Code,
together with any interest and penalties imposed with respect thereto, or any
interest or penalties incurred by the Executive with respect to any such excise
tax.




“Expiration
Date” shall mean the date on which the Term of Employment, including any
renewals thereof under Section 3(b) hereof, shall expire.




“Good
Reason” shall mean:




131




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 as contemplated by Section
2(b) hereof, or any other action by the Company that results in a material
diminution in such position, 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




any
material failure by the Company to comply with any of the provisions of Section
4 hereof, 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




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




any
decrease in salary or bonuses payable pursuant to the terms of this Agreement
without the Executive’s written consent.




“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 which the
Company or a subsidiary holds a substantial ownership interest, directly or
indirectly.




“Restricted
Period” shall be the Term of Employment and the twelve (12) month period
immediately following termination of the Term of Employment; provided, however,
that if the Company terminates the Executive’s employment for Cause, or
Executive terminates his employment without Good Reason, the twelve (12) month
period shall be extended to eighteen (18) months.




“Severance
Amount” shall mean (i) one hundred fifty percent (150%) of the
Executive’s annual Base Salary in the event of termination of employment without
Cause or with Good Reason and (ii) one hundred (100%) percent of the Executive’s
annual Base Salary for any other termination of employment.




“Severance
Term” shall mean the eighteen (18) month period following the Termination
Date.




“Stock Option
Plan”shall
mean the Stock Option Plan set forth in that certain Securities Purchase
Agreement, by and between the Company and Fund.Com, Inc., of even date
herewith.




Term of
Employment” shall mean the period during which the Executive shall be
employed by the Company pursuant to the terms of this Agreement.




“Termination
Date” shall mean the date on which the Term of Employment
ends.




132




“Vice
Chairman” shall
mean a Vice Chairman of the Board of Directors of the Company.




Employment.




Employment and
Term.  The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Company, during the Term of Employment
on the terms and conditions set forth herein.




Duties of
Executive.  During the Term of Employment, the Executive shall
be employed and serve as a ____________, and shall have such duties typically
associated with such title and shall exercise such power and authority as may
from time to time be delegated to him by the Board.  The Executive
shall devote no less than forty (40%) percent of his business time, attention
and efforts to the performance of his duties under this Agreement, render such
services to the best of his ability, and use his reasonable best efforts to
promote the interests of the Company.  The Executive shall not engage
in any other business or occupation during the Term of Employment that (i)
conflicts with the interests of the Company or its Related Entities, (ii)
interferes with the proper and efficient performance of his duties for the
Company, or (iii) interferes with the exercise of his judgment in the Company’s
best interests.  Notwithstanding the foregoing or any other provision
of this Agreement, it shall not be a breach or violation of this Agreement for
the Executive to (x) serve on corporate (subject to prior approval of the
Board), civic or charitable boards or committees, (y) deliver lectures, fulfill
speaking engagements or teach at educational institutions, or (z) manage
personal investments, so long as such activities do not significantly interfere
with or significantly detract from the performance of the Executive’s
responsibilities to the Company in accordance with this
Agreement.  The Executive represents he holds all licenses and
regulatory approvals necessary to perform these responsibilities, including
holding a Series 7, a Series 24 and a Series 63.  As of the date
hereof, the Executive is approved to be a member of the boards listed on Exhibit A attached
hereto.




Term.




Initial
Term.  The initial Term of Employment under this Agreement, and
the employment of the Executive hereunder, shall commence on the Commencement
Date and shall expire on the fifth anniversary of such Commencement Date, unless
sooner terminated in accordance with Section 6 hereof.




Renewal
Terms.  At the end of the Initial Term, the Term of Employment
automatically shall renew for successive one (1) year terms (subject to earlier
termination as provided in Section 6 hereof), unless the Company or the
Executive delivers written notice to the other at least ninety (90) days prior
to the Expiration Date of its or his election not to renew the Term of
Employment.




(c)           Release.  Upon
termination of this Agreement in accordance with the terms contained herein, as
a condition to receiving any payments or benefits to which he is entitled under
the terms of this Agreement, the Executive shall execute and deliver to the
Company a release in the form attached hereto as Exhibit B within
thirty (30) days following his termination of employment.  Such
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 hereunder, subject to the Executive continuing to
abide by the post-termination obligations and covenants contained
herein.




133




Compensation.




Base
Salary.  The Executive shall receive an initial base salary of
$________ per annum which shall increase five percent (5%) per annum beginning
on the first anniversary of the Commencement Date and each anniversary date
thereafter (the "Base Salary").  Such Base Salary shall be payable in
installments consistent with the Company’s normal payroll schedule, subject to
applicable withholding and other taxes.  The Base Salary and
Executive’s other forms of compensation shall be reviewed, at least annually,
and may, by action and in the discretion of the Board, be increased (but may not
be decreased) at any time or from time to time.  In no event shall the
Base Salary be deemed a Draw.




Bonuses.  During
the Term of Employment, the Executive swill be eligible to receive on a fiscal
year basis a cash bonus from the Company as the Board or Compensation Committee
may in its sole and absolute discretion determine based upon its assessment of
the performance of the Executive in the following areas:  (A) revenue
growth of the Company, (B) new business development, (C) investor relations, (D)
communication with the Board of Directors, and (E) special projects as assigned
by the Board of Directors.




Other
Compensation.  Subject to compliance with any and all
applicable SEC, FINRA, or other federal or state rules and regulations, and the
policies and procedures of the Company’s Broker Dealer subsidiaries, and the
general oversight of the Board or Compensation Committee, Executive shall have
the right to receive in his capacity as a registered representative of National
Securities Corporation, a fifty (50%) percent payout based on the applicable
investment banking grid in effect from time to time.  Such payout may
be in the form of sales commissions, fees, warrants and/or other compensation
received by National Securities Corporation in connection with corporate finance
activities.




Expense Reimbursement and
Other Benefits.




Reimbursement of
Expenses.  Upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from time
to time adopt with respect to the reimbursement of expenses of executive
personnel, the Company shall reimburse the Executive for all reasonable expenses
actually paid or incurred by the Executive during the Term of Employment in the
course of and pursuant to the business of the Company, including, without
limitation, expenses relating to his cell phone and his Blackberry or other
similar devices.  The Executive shall account to the Company in
writing for all expenses for which reimbursement is sought and shall supply to
the Company copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.




134




Compensation/Benefit
Programs.  During the Term of Employment, the Executive shall
be entitled to participate in all medical, dental, hospitalization, accidental
death and dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the Company to
its executive personnel, including savings, pension, profit-sharing and deferred
compensation plans, subject to the general eligibility and participation
provisions set forth in such plans.  The benefits currently provided
by the Company to its Executives are as stated in the Company’s Executive
handbook, which is subject to change.    In addition, during
the Term of Employment, the Company shall pay (at the “Buy-Up Premium” level)
all health insurance premiums required to be made on behalf of the Executive and
his dependents with respect to their participation in such health plans. Should
Executive not want to participate in the Company's health plan, the Company will
reimburse Executive for the expense incurred in participating in another plan in
an amount not to exceed the cost of participation of Executive and his
dependents in the Company’s health plan. Additionally, Executive shall be added
as an insured to any director and officer and errors and omissions insurance
policy that the Company or any of the Company’s subsidiaries or affiliates
hereafter procures.




Working
Facilities.  During the Term of Employment, the Company shall
furnish the Executive with an office, a personal assistant, other secretarial
help and such other facilities and services suitable to his position and
adequate for the performance of his duties hereunder.  The Company and
the Executive acknowledge and agree that the personal assistant or other
secretarial help assigned to the Executive shall also be responsible for
handling certain personal matters that may be assigned to them from time to time
by the Executive.




Automobile.  During
the Term of Employment, the Company shall provide the Executive with a
non-accountable automobile allowance (inclusive of parking) of $750.00 per
month.




Equity
Awards.  The Executive shall participate in the Stock Option
Plan pursuant to which the Company shall grant to Executive certain options
(“Options”) to purchase common stock of the Company upon such terms and
conditions set forth therein.  To the extent that any stock options
granted hereunder are not made pursuant to the Company’s 2008 Stock Option Plan
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, a Form
S-8 registration statement covering the shares of common stock issuable upon
exercise of the stock options.  In addition, the Executive shall be
eligible to be granted Equity Awards under (and therefore subject to all terms
and conditions of) the Company’s 2008 Stock Option Plan or such other plans or
programs as the Company may from time to time adopt, and subject to all rules of
regulation of the Securities and Exchange Commission applicable
thereto.  The number and type of Equity Awards, and the terms and
conditions thereof, shall be determined by the Compensation Committee of the
Board of the Company, in its discretion and pursuant to the plan or arrangement
pursuant to which they are granted.  Notwithstanding any other
provision in this Agreement, in the event of a Change in Control during the Term
of Employment, all Options granted to Executive shall immediately vest and be
exercisable.




Other
Benefits.  The Executive shall be entitled to five (5) weeks of
paid vacation each calendar year during the Term of Employment, to be taken at
such times as the Executive and the Company shall mutually determine and
provided that no vacation time shall significantly interfere with the duties
required to be rendered by the Executive hereunder.  Any vacation time
not taken by Executive during any calendar year may be carried forward into any
succeeding calendar year.  The Executive shall receive such additional
benefits, if any, as the Board shall from time to time determine.




135




Termination.




General.  The
Term of Employment shall terminate upon the earliest to occur of (i) the
Executive’s death, (ii) a termination by the Company by reason of the
Executive’s Disability, (iii) a termination by the Company with or without Cause
or (iv) a termination by Executive with or without Good Reason.  Upon
any termination of Executive’s employment for any reason, except as may
otherwise be requested by the Company in writing and agreed upon in writing by
Executive, the Executive shall resign from any and all directorships, committee
memberships or any other positions the Executive holds with the Company or any
of its Related Entities.  Upon termination of Executive’s employment
with the Company pursuant to this Section, all compensation and benefits shall
cease to accrue upon discharge of Executive and the Company shall have no
further obligations to the Executive or his heirs, administrators, or executors
with respect to compensation and benefits thereafter, except to pay the
Executive or his heirs, administrators or executors as set forth in this
Section.




Termination by
Company for Cause.  The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Term of Employment
for Cause.   For purposes of this Section 6(b), any good faith
determination by the Board of Cause shall be binding and conclusive on all
interested parties.  In the event that the Term of Employment is
terminated by the Company for Cause, the Executive shall be entitled only to the
Accrued Obligations, payable within a reasonable period following the
Termination Date.




Disability.  The
Company shall have the option to terminate the Term of Employment upon written
notice to the Executive, at any time during which the Executive is suffering
from a Disability.  In the event that the Term of Employment is
terminated due to the Executive’s Disability, the Executive shall be entitled
to:




the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;




the
Termination Year Bonus, payable within four (4) months after the last day of the
Bonus Period in which the Termination Date occurs;




the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month in
which the employment of Executive has been terminated;




continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date of
such termination with the Company paying all premiums relating thereto until the
earlier of:  (A) 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;
and




136




all
Options granted to Executive to purchase the Company’s common stock prior to or
after the date of this Agreement shall immediately vest and be exercisable for a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.




Death.  In the
event that the Term of Employment is terminated due to the Executive’s death,
the estate of the Executive shall be entitled to:




the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;




the
Termination Year Bonus, payable within four (4) months after the last day of the
Bonus Period in which the Termination Date occurs;




the
Severance Amount, payable in equal monthly installments during the Severance
Term commencing with the first calendar month immediately following the month in
which the employment of Executive has been terminated;




continuation
of the health benefits provided to the Executive’s covered dependents under the
Company health plans as in effect from time to time after the Executive’s death
with the Company paying all premiums relating thereto until eighteen (18) months
following the Termination Date; provided, however, that as a condition of
continuation of such benefits, the Company may require the covered dependents to
elect to continue such health insurance pursuant to COBRA; and




all
Options granted to Executive to purchase the Company’s common stock prior to or
after the date of this Agreement shall immediately vest and be exercisable for a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.




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




Accrued
Obligations, payable as soon as reasonably practicable following the Termination
Date;




the
Termination Year Bonus, payable within four (4) months after the last day of the
Bonus Period in which the Termination Date occurs;




137




the
Severance Amount, payable in equal installments during the Severance Period
commencing with the first business day in the first calendar month immediately
following the month in which the employment of Executive has been
terminated;




continuation
of the health benefits provided to the Executive and his covered dependents
under the Company health plans as in effect from time to time after the date of
such termination with the Company paying all premiums 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; and




all
Options granted to purchase the Company’s common stock prior to or after the
date of this Agreement shall immediately vest and be exercisable for a period of
nine (9) months from the date of the termination; provided, however, such period
of nine (9) months shall not exceed the earlier of the latest date upon which
such options could have expired by their original terms under any circumstances
or the tenth anniversary of the original date of grant of such
options.




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




Termination by
Executive Without Good Reason.  The Executive may terminate his
employment without Good Reason by providing the Company thirty (30) days’
written notice of such termination.  In the event of a termination of
employment by the Executive under this Section 6(g), the Executive shall be
entitled only to the Accrued Obligations.  In the event of termination
of the Executive’s employment under this Section 6(g), the Company may, in its
sole and absolute discretion, by written notice, accelerate such date of
termination and still have it treated as a termination without Good
Reason.




Termination Upon
Expiration Date.  In the event that Executive’s employment with
the Company terminates upon the expiration of the Term of Employment, the
Executive shall be entitled to only the Accrued Obligations, payable within a
reasonable period following the Termination Date.   In addition,
if the Term of Employment terminates either because the Company refused to
extend the Term of Employment without Cause (and other than by reason of the
Executive’s Disability), or the Executive refused to extend the Term for Good
Reason, the Company shall pay the Executive:




138




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




the
Termination Year Bonus, payable within 2 1/2 months after the last day of the
Bonus Period in which the Termination Date occurs;




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




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 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; and




all
Options granted to Executive to purchase the Company’s common stock prior to or
after the date of this Agreement shall immediately vest and be exercisable for a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.




Change in Control of the
Company.  If the Executive’s employment is terminated by the
Company without Cause or by the Executive for Good Reason during the six (6)
month period immediately following the Change in Control of the Company, then in
lieu of any amounts otherwise payable under Sections 6(e) or 6(f) hereof, the
Executive shall be entitled to:




the
Accrued Obligations, payable as soon as reasonably practicable following the
Termination Date;




the
Termination Year Bonus, payable within four (4) months after the last day of the
Bonus Period in which the Termination Date occurs;




the
Severance Amount, payable in equal monthly installments during the Severance
Period commencing with the first calendar month immediately following the month
in which the employment of Executive has been terminated;




continuation
of the health benefits provided to 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 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; and




all
Options granted to Executive to purchase the Company’s common stock prior to or
after the date of this Agreement shall immediately vest and be exercisable for a
period of nine (9) months from the date of the termination; provided, however,
such period of nine (9) months shall not exceed the earlier of the latest date
upon which such options could have expired by their original terms under any
circumstances or the tenth anniversary of the original date of grant of such
options.




139




Section
280G Additional Payments by the Company.




Anything
in this Agreement to the contrary notwithstanding, in the event that the
Executive shall become entitled to payments and/or benefits provided by this
Agreement or any other amounts in the “nature of compensation” (whether pursuant
to the terms of any plan, arrangement or agreement with the Company, any person
whose actions result in a change of ownership or effective control covered by
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) or any person
affiliated with the Company or such person) as a result of such change in
ownership or effective control (collectively, the “Company Payments”),
and such Company Payments will be subject to the tax (the “Excise Tax”) imposed
by Section 4999 of the Code (and any similar tax that may hereafter be imposed
by any taxing authority), the Company shall pay to the Executive at the time
specified in clause (iv) hereof an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Company Payments and any U.S. federal, state, and local income
or payroll tax upon the Gross-Up Payment provided for by this clause (i), but
before deduction for any U.S. federal, state, and local income or payroll tax on
the Company Payments, shall be equal to the Company Payment.




For
purposes of determining whether any of the Company Payments and Gross-Up Payment
(collectively, the “Total Payments”) will
be subject to the Excise Tax and the amount of such Excise Tax, (A) the Total
Payments shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “parachute payments” in excess of the “base
amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to any
change in ownership (as defined under Section 280G(b)(2) of the Code) or tax
counsel selected by such accountants or the Company (the “Accountants”) such
Total Payments (in whole or in part):  (1) do not constitute
“parachute payments,” (2) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess
of the “base amount” or (3) are otherwise not subject to the Excise Tax, and (B)
the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G
of the Code.  In the event that the Accountants are serving as
accountants or auditors for the individual, entity or group effecting the change
in control (within the meaning of Section 280G of the Code), the Executive may
appoint another nationally recognized accounting firm to make the determinations
hereunder (which accounting firm shall then be referred to as the “Accountants”
hereunder).  All determinations hereunder shall be made by the
Accountants which shall provide detailed supporting calculations both to the
Company and the Executive at such time as it is requested by the Company or the
Executive.  The determination of the Accountants shall be final and
binding upon the Company and the Executive.




140




For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay U.S. federal income taxes at the highest marginal rate of U.S.
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive’s residence for the calendar
year in which the Company Payments are to be made, net of the maximum reduction
in U.S. federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year.  In the event that the
Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-Up Payment is made,
the Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the prior Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-Up Payment being repaid by the Executive if
such repayment results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the
Code.  Notwithstanding the foregoing, in the event that any portion of
the Gross-Up Payment to be refunded to the Company has been paid to any U.S.
federal, state and local tax authority, repayment thereof (and related amounts)
shall not be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Company shall not exceed the
interest received or credited to the Executive by such tax authority for the
period it held such portion.  The Executive and the Company shall
mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if the Executive’s claim for refund or credit is
denied.  In the event that the Excise Tax is later determined by the
Accountants or the Internal Revenue Service (or other taxing authority) to
exceed the amount taken into account hereunder at the time the Gross-Up Payment
is made (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
or penalties payable with respect to such excess) promptly after the amount of
such excess is finally determined.




The
Gross-Up Payment or portion thereof provided for in clause (iii) shall be paid
not later than the thirtieth (30th) day following an event occurring which
subjects the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-Up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Accountants, of the minimum amount
of such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), subject to
further payments pursuant to clause (iii), as soon as the amount thereof can
reasonably be determined, but in no event later than the ninetieth (90th) day
after the occurrence of the event subjecting the Executive to the Excise
Tax.  Subject to clauses (iii) and (viii) hereof, in the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code).




141




In the
event of any controversy with the Internal Revenue Service (or other taxing
authority) with regard to the Excise Tax, the Executive shall permit the Company
to control issues related to the Excise Tax (at the Company’s expense), provided
that such issues do not potentially materially adversely affect the Executive,
but the Executive shall control any other issues.  In the event that
the issues are interrelated, the Executive and the Company shall in good faith
cooperate so as not to jeopardize resolution of either issue, but if the parties
cannot agree, the Executive shall make the final determination with regard to
the issues.  In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive shall permit the
representative of the Company to accompany the Executive, and the Executive and
the Executive’s representative shall cooperate with the Company and its
Representatives.




The
Company shall be responsible for all charges of the Accountants.




The
Company and the Executive shall promptly deliver to each other copies of any
written communications, and summaries of any verbal communications, with any
taxing authority regarding the Excise Tax covered by this Section
6(i).




Nothing
in this Section 6(i) is intended to violate the Sarbanes-Oxley Act of 2002 and
to the extent that any advance or repayment obligation hereunder would do so,
such obligation shall be modified so as to make the advance a nonrefundable
payment to the Executive and the repayment obligation null and
void.  The provisions of this Section 6(i) shall survive the
termination of the Executive’s employment with the Company for any
reason.




Cooperation.  Following
the Term of 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 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 6(k) 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
6(k).




Section
409A.




The
intent of the parties is that payments and benefits under this Agreement comply
with 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.  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.




142




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
last sentence of this Section 6(k)(ii)) 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 Section 6(k)(ii) (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.




Contact
Management Database Rights.  The
Company and the Executive each acknowledge and agree that the Executive has
developed and currently maintains a contact management database (the
“Database”), and the Company acknowledges and agrees that the Executive shall
have non-exclusive access to such Database at all times during the Term of
Employment and after the Termination Date of this Agreement for any reason not
in violation of Section 12 hereof.




Intentionally
Deleted.




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.




Assignment.  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 may hereafter merge or consolidate or to
which the Company may transfer 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.




143




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.




Arbitration.




Exclusive
Remedy.  The
parties recognize that litigation in federal or state courts or before federal
or state administrative agencies of disputes arising out of the Executive’s
employment with the Company or out of this Agreement, or the Executive’s
termination of employment or termination of this Agreement, may not be in the
best interests of either the Executive or the Company, and may result in
unnecessary costs, delays, complexities, and uncertainty.  Except as
otherwise provided in Section 12 hereof, the parties agree that any dispute
between the parties arising out of or relating to the Executive’s employment, or
to the negotiation, execution, performance or termination of this Agreement or
the Executive’s employment, including, but not limited to, any claim arising out
of this Agreement, claims 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, the Americans with Disabilities Act of 1990, Section 1981 of the Civil
Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive
Retirement Income Security Act, and any similar federal, state or local law,
statute, regulation, or any common law doctrine, whether that dispute arises
during or after employment shall be resolved by arbitration in the New York, New
York area, in accordance with the National Employment Arbitration Rules of the
American Arbitration Association, as modified by the provisions of this Section
11.  The parties each further agree that the arbitration provisions of
this Agreement shall provide each party with its exclusive remedy, and each
party expressly waives any right it might have to seek redress in any other
forum, except as otherwise expressly provided in this Agreement.  The
parties acknowledge and agree that their obligations under this arbitration
agreement survive the expiration or termination of this Agreement and continue
after the termination of the employment relationship between the Executive and
the Company.  Except as otherwise provided in Section 12 hereof, by
election of arbitration as the means for final settlement of all claims, the
parties hereby waive their respective rights to, and agree not to, sue each
other in any action in a federal, state or local court with respect to such
claims, but may seek to enforce in court an arbitration award rendered pursuant
to this Agreement.  The parties specifically agree to waive their
respective rights to a trial by jury, and further agree that no demand, request
or motion will be made for trial by jury.




Arbitration
Procedure and Arbitrator’s Authority.  In
the arbitration proceeding, each party shall be entitled to engage in any type
of discovery permitted by the Federal Rules of Civil Procedure, to retain its
own counsel, to present evidence and cross-examine witnesses, to purchase a
stenographic record of the proceedings, and to submit post-hearing
briefs.  In reaching his/her decision, the arbitrator shall have no
authority to add to, detract from, or otherwise modify any provision of this
Agreement.  The arbitrator shall submit with the award a written
opinion which shall include findings of fact and conclusions of
law.  Judgment upon the award rendered by the arbitrator may be
entered in any court having competent jurisdiction.




144




Effect
of Arbitrator’s Decision; Arbitrator’s Fees.  The
decision of the arbitrator shall be final and binding between the parties as to
all claims which were or could have been raised in connection with the dispute,
to the full extent permitted by law.  In all cases in which applicable
federal law precludes a waiver of judicial remedies, the parties agree that the
decision of the arbitrator shall be a condition precedent to the institution or
maintenance of any legal, equitable, administrative, or other formal proceeding
by the Executive in connection with the dispute, and that the decision and
opinion of the arbitrator may be presented in any other forum on the merits of
the dispute.  If the arbitrator finds that the Executive was
terminated in violation of law or this Agreement, the parties agree that the
arbitrator acting hereunder shall be empowered to provide the Executive with any
remedy available should the matter have been tried in a court, including
equitable and/or legal remedies, compensatory damages and back pay. The
arbitrator’s fees and expenses and all administrative fees and expenses
associated with the filing of the arbitration shall be borne by the
non-prevailing party.




Restrictive
Covenants.




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 in the Confidential Information. In
consideration of his 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 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 Executive
by the Group, is published or becomes part of the public domain through no fault
of Executive; which is known to Executive prior to disclosure thereof to him by
the Group as evidenced by his written records; or, after Executive is no longer
employed by the Group, which is thereafter disclosed to 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 6 shall continue in full force and effect
notwithstanding termination of Executive's employment under this Agreement or
otherwise.




(b)           Executive
agrees that if the Company has made and is continuing to make all required
payments to him upon and after termination of his employment, then during the
Restricted Period, 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 Company and/or Related Entities nor any of their
respective direct and/or indirect subsidiaries (collectively, the "Applicable
Entities"), nor (b) solicit any business with any prior (within twelve (12)
months of termination) or then current customer and/or client of the Applicable
Entities. 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 12. Given that this Agreement is providing
significant benefits to Executive, Executive hereby agrees that during the
Restricted Period, without the prior written consent of the Board, he will not,
directly or indirectly, either as principal, manager, agent, consultant,
officer, director, stockholder, partner, investor, lender or employee or in any
other capacity, carry on, be engaged in or have any financial interest in, any
business which is in competition with any business of the Applicable Entities.
For purposes of this section, a business shall be deemed to be in competition
with any business of the Applicable Entities if it is materially involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by any member of the Applicable Entities
within the same geographic area in which such member of the Applicable Entities
effects such purchases, sales or dealings or renders such services; provided, however, that for
the period commencing with the termination of Executive's employment, a business
shall be deemed to be in competition with any business of the Applicable
Entities only if it is materially involved in the retail brokerage business.
Notwithstanding the foregoing, Executive shall be allowed to make passive
investments in publicly held competitive businesses as long as his ownership is
less than 5% of such business.




145




(c)           Executive
acknowledges that the restrictive covenants (the "Restrictive Covenants")
contained in this Section 12 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 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 injunctive relief; it being acknowledged and
agreed to by Executive that any such breach or threatened breach would cause
irreparable and continuing injury to the Company and that money damages would
not provide an adequate remedy to the Company.




Entire
Agreement.  This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and arrangements, both oral and
written, between theExecutive and
the Company (or any of its affiliates) with respect to such subject
matter.  This Agreement may not be modified in any way unless by a
written instrument signed by both the Company and the Executive.




Survival.  The
respective rights and obligations of the parties hereunder shall survive any
termination of the Executive’s employment hereunder, including without
limitation, the Company’s obligations under Section 6, and the expiration of the
Term of Employment, to the extent necessary to the intended preservation of such
rights and obligations.




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, 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.




146




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.




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.




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.




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.




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.




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.




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, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.




147




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.




Indemnification.




Subject
to limitations imposed by law, 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, 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, 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, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.  The Company
also shall pay 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.




The
Company shall pay any 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 in this Section 24 in advance of the final disposition of
such action, suit or proceeding.  The Company shall promptly pay the
amount of such expenses 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 Section 24, together with a reasonable accounting of
such expenses.




The
Executive hereby undertakes and agrees to repay to the Company any advances made
pursuant to this Section 24 if and to the extent that it shall ultimately be
found that the Executive is not entitled to be indemnified by the Company for
such amounts.




The
Company shall make the advances contemplated by this Section 24 regardless of
the Executive’s financial ability to make repayment, and regardless whether
indemnification of the Indemnitee by the Company will ultimately be
required.  Any advances and undertakings to repay pursuant to this
Section 24 shall be unsecured and interest-free.




The
provisions of this Section 24 shall survive the termination of the Term of
Employment or expiration of the term of this Agreement.









148







IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.




COMPANY:





NATIONAL
HOLDINGS CORPORATION





By:________________________________


Name:______________________________


Title:_______________________________











EXECUTIVE:________________________________








149





EXHIBIT
A





CURRENT
BOARDS





None.





150





EXHIBIT
B





FORM OF
RELEASE









I, ________________, 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 as of April ___ 2009
(the “Agreement”), do
hereby release and forever discharge as of the date hereof 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 each
such Person’s respective successors and assigns) (collectively, the “Released Parties”) to
the extent provided below.




1.           I
understand that any payments or benefits paid or granted to me under Section
6  of the Agreement 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 payments and benefits specified in Section 6 of 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 the
Company from, (i) any obligation of the Company contained in the Agreement to be
performed after the date hereof or (ii) any vested or accrued benefits pursuant
to any employee benefit plan, program or policy of the Company.




151




3.           I
represent that I have made no assignment or transfer of any right, claim,
demand, cause of action, or other matter covered by paragraph 2
above.




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.  I acknowledge
and agree that my separation from employment with the Company in compliance with
the terms of the Agreement shall not serve as the basis for any claim or action
(including, without limitation, any claim under the Age Discrimination in
Employment Act of 1967).




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




6.           I
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 Company, any Released Party or myself of any improper or
unlawful conduct.




7.           I
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 I have consulted regarding the
meaning or effect hereof or as required by law, and I 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
me (or my 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, I hereby expressly re-affirm my
obligations under Section 12 under the
Agreement.




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.




152




“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.




BY
SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:




(a)           I
HAVE READ IT CAREFULLY;




(b)           I
UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM 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)           I
VOLUNTARILY CONSENT TO EVERYTHING IN IT;




(d)           I
HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY (VIA THE AGREEMENT AND THIS
RELEASE) BEFORE EXECUTING IT AND I 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;




153




(f)           THE
CHANGES TO THE AGREEMENT SINCE _______________ ___, _____ EITHER ARE NOT
MATERIAL OR WERE MADE AT MY REQUEST.




(g)           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;




(h)           I
HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE
OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND




(i)           I
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 THE COMPANY AND BY ME.




(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:
___________ __,
______                                                                                     ______________________________