Document:

Unassociated Document

     

    GUARANTY

     

    This
      Guaranty is made this 31st day of March, 2008, by such Guarantors listed on
      the
      signature pages hereof (collectively, jointly and severally, “Guarantors”,
      and
      each, individually, a “Guarantor”),
      in
      favor of _________________________ (together with its successors and assigns,
      “Buyer”).

     

    W
      I T N E S S E T H:

    

    WHEREAS,
      pursuant to that certain Securities Purchase Agreement dated as of March 31,
      2008 (as amended, restated, supplemented, or otherwise modified from time to
      time, including all schedules thereto, the “Purchase
      Agreement”)
      by and
      among GENEREX BIOTECHNOLOGY CORPORATION, a Delaware corporation (“Parent”),
      Buyer, and each of the other investors listed on the Schedule of Buyers attached
      thereto (together with Buyer, “Buyers”),
      Parent has agreed to sell, and Buyers have agreed to purchase, severally and
      not
      jointly, certain Notes and Warrants, and 

     

    WHEREAS,
      each
      Guarantor is a wholly-owned Subsidiary of Parent and will receive direct and
      substantial benefits from the purchase by Buyers of the Notes and Warrants,
      and

     

    WHEREAS,
      in
      order to induce Buyers to purchase, severally and not jointly, the Notes and
      Warrants as provided for in the Purchase Agreement, Guarantors have agreed
      to
      jointly and severally guaranty all of Parent’s obligations under and with
      respect to the Notes and the Purchase Agreement, and

     

    WHEREAS,
      in
      connection herewith, Guarantors, Parent and Buyers have entered into that
      certain Security Agreement dated of even date herewith (as amended, restated,
      supplemented, or otherwise modified from time to time, including all schedules
      thereto, the “Security
      Agreement”),
      pursuant to which Guarantors and Parent (Guarantors and Parent, collectively,
      “Obligors”
and
      each, individually, an “Obligor”)
      have
      granted Buyers continuing security interests in all assets of each Obligor,
      and

     

    NOW,
      THEREFORE,
      for and
      in consideration of the recitals made above and other good and valuable
      consideration, the receipt, sufficiency and adequacy of which are hereby
      acknowledged, each Guarantor hereby agrees as follows:

     

    Definitions.
      All terms defined in the Security Agreement that are not otherwise defined
      herein shall have the meanings given them in the Security
      Agreement.

     

    Guaranteed
      Obligations. Guarantors jointly and severally hereby irrevocably and
      unconditionally guaranty to Buyer the due and punctual payment in full of all
      of
      the present and future payment and performance obligations of each Obligor
      arising under the Purchase Agreement, any and all Notes payable to Buyer, the
      Security Agreement, and the other Purchase Documents, including, without
      duplication, reasonable attorneys’ fees and expenses and any interest, fees, or
      expenses that accrue after the filing of an Insolvency Proceeding, regardless
      of
      whether allowed or allowable in whole or in part as a claim in any Insolvency
      Proceeding (collectively, the “Guaranteed
      Obligations”).

     

    Guarantors’
      Representations and Warranties. Each Guarantor represents and warrants to
      Buyer that such Guarantor expects to derive substantial benefits from the
      purchase by Buyers of the Notes and Warrants and the other transactions
      contemplated hereby. Buyer may rely conclusively on a continuing warranty,
      hereby made, that each Guarantor continues to be benefited by this Guaranty
      and
      Buyer shall have no duty to inquire into or confirm the receipt of any such
      benefits, and this Guaranty shall be effective and enforceable by Buyer without
      regard to the receipt, nature or value of any such benefits.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Unconditional
      Nature. No act or thing need occur to establish any Guarantor’s liability
      hereunder, and no act or thing, except full payment and discharge of all of
      the
      Guaranteed Obligations, shall in any way exonerate any Guarantor hereunder
      or
      modify, reduce, limit or release any Guarantor’s liability hereunder. This is an
      absolute, unconditional and continuing guaranty of payment of the Guaranteed
      Obligations and shall continue to be in force and be binding upon each Guarantor
      until all of the Guaranteed Obligations are indefeasibly paid in full and
      discharged.

     

    Subrogation.
      No Guarantor will exercise or enforce any right of contribution, reimbursement,
      recourse or subrogation available to such Guarantor as to any of the Guaranteed
      Obligations, or against any Person liable therefor, or as to any collateral
      security therefor, unless and until all of the Guaranteed Obligations shall
      have
      been indefeasibly paid in full and discharged.

     

    Enforcement
      Expenses. Each Guarantor will pay or reimburse Buyer for all costs, expenses
      and attorneys’ fees paid or incurred by Buyer in endeavoring to collect and
      enforce the Guaranteed Obligations and in enforcing this Guaranty.

     

    Obligations
      Absolute. Each Guarantor agrees that its obligations hereunder are
      irrevocable, absolute, independent and unconditional and shall not be affected
      by any circumstance which constitutes a legal or equitable discharge of a
      guarantor or surety other than the indefeasible payment in full and discharge
      of
      the Guaranteed Obligations. In furtherance of the foregoing and without limiting
      the generality thereof, each Guarantor agrees that none of its obligations
      hereunder shall be affected or impaired by any of the following acts or things
      (which Buyer is expressly authorized to do, omit or suffer from time to time,
      without consent or approval by or notice to any Guarantor): (a) any
      acceptance of collateral security, guarantors, accommodation parties or sureties
      for any or all of the Guaranteed Obligations; (b) one or more extensions or
      renewals of the Guaranteed Obligations (whether or not for longer than the
      original period) or any modification of the interest rates, maturities, if
      any,
      or other contractual terms applicable to any of the Guaranteed Obligations
      or
      any amendment or modification of any of the terms or provisions of any of the
      Purchase Documents; (c) any waiver or indulgence granted to Parent or any
      other Obligor, any delay or lack of diligence in the enforcement of the
      Guaranteed Obligations, or any failure to institute proceedings, file a claim,
      give any required notices or otherwise protect any of the Guaranteed
      Obligations; (d) any full or partial release of, compromise or settlement
      with, or agreement not to sue, Parent, any other Obligor or any other Person
      liable in respect of any of the Guaranteed Obligations; (e) any release,
      surrender, cancellation or other discharge of any evidence of the Guaranteed
      Obligations or the acceptance of any instrument in renewal or substitution
      therefor; (f) any failure to obtain collateral security (including rights
      of setoff) for the Guaranteed Obligations, or to see to the proper or sufficient
      creation and perfection thereof, or to establish the priority thereof, or to
      preserve, protect, insure, care for, exercise or enforce any collateral
      security; or any modification, alteration, substitution, exchange, surrender,
      cancellation, termination, release or other change, impairment, limitation,
      loss
      or discharge of any collateral security; (g) any collection, sale, lease or
      disposition of, or any other foreclosure or enforcement of or realization on,
      any collateral security; (h) any assignment, pledge or other transfer of
      any of the Guaranteed Obligations or any evidence thereof; or (i) any
      manner, order or method of application of any payments or credits upon the
      Guaranteed Obligations. Each Guarantor waives any and all defenses and
      discharges available to a surety, guarantor or accommodation
      co-obligor.

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    Waivers
      by Guarantors. Each Guarantor waives any and all defenses, claims, setoffs
      and discharges of Parent, or any other Obligor or Person, pertaining to the
      Guaranteed Obligations, except the defense of discharge by indefeasible payment
      in full. Without limiting the generality of the foregoing, no Guarantor will
      assert, plead or enforce against any Buyer any defense of waiver, release,
      discharge or disallowance in any Insolvency Proceeding, statute of limitations,
      res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity,
      minority, usury, illegality or unenforceability which may be available to Parent
      or any other Person liable in respect of any of the Guaranteed Obligations,
      or
      any setoff available to any Buyer against Parent or any other such Person,
      whether or not on account of a related transaction. Each Guarantor expressly
      agrees that such Guarantor shall be and remain liable for any deficiency
      remaining after foreclosure of any mortgage or security interest securing the
      Guaranteed Obligations, whether or not the liability of Parent or any other
      Obligor or Person for such deficiency is discharged pursuant to statute or
      judicial decision. The liability of each Guarantor shall not be affected or
      impaired by any voluntary or involuntary liquidation, dissolution, sale or
      other
      disposition of all or substantially all of the assets, marshalling of assets
      and
      liabilities, receivership, insolvency, bankruptcy, assignment for the benefit
      of
      creditors, reorganization, arrangement, composition or readjustment of, or
      other
      similar event or proceeding affecting, Parent or any of its assets. No Guarantor
      will assert, plead or enforce against any Buyer any claim, defense or setoff
      available to such Guarantor against Parent. Each Guarantor waives presentment,
      demand for payment, notice of dishonor or nonpayment and protest of any
      instrument evidencing the Guaranteed Obligations. Buyer shall not be required
      first to resort for payment of the Guaranteed Obligations to Parent or any
      other
      Person, or their properties, or first to enforce, realize upon or exhaust any
      collateral security for the Guaranteed Obligations, before enforcing this
      Guaranty.

     

    If
      Payments Set Aside, etc. If any payment applied by Buyer to the Guaranteed
      Obligations is thereafter set aside, recovered, rescinded or required to be
      returned for any reason (including, without limitation, the bankruptcy,
      insolvency or reorganization of Parent or any other Obligor or Person), the
      Guaranteed Obligations to which such payment was applied shall for the purpose
      of this Guaranty be deemed to have continued in existence, notwithstanding
      such
      application, and this Guaranty shall be enforceable as to such Guaranteed
      Obligations as fully as if such application had never been made.

     

    Additional
      Obligation of Guarantors. Each Guarantor’s liability under this Guaranty is
      in addition to and shall be cumulative with all other liabilities of such
      Guarantor to Buyer as guarantor, surety, endorser, accommodation co-obligor
      or
      otherwise of any of the Guaranteed Obligations, without any limitation as to
      amount.

     

    No
      Duties Owed by Buyer. Each Guarantor acknowledges and agrees that Buyer
      (a) has not made any representations or warranties with respect to,
      (b) does not assume any responsibility to such Guarantor for, and
      (c) has no duty to provide information to such Guarantor regarding, the
      enforceability of any of the Guaranteed Obligations or the financial condition
      of Parent or any other Obligor or Person. Each Guarantor has independently
      determined the creditworthiness of Parent and the enforceability of the
      Guaranteed Obligations and until the Guaranteed Obligations are paid in full
      will independently and without reliance on Buyer continue to make such
      determinations.

     

    Miscellaneous

     

    (a) This
      Guaranty may be executed
      in any number of counterparts and by different parties on separate counterparts,
      each of which, when executed and delivered, shall be deemed to be an original,
      and all of which, when taken together, shall constitute but one and the same
      Guaranty. Delivery of an executed counterpart of this Guaranty by telefacsimile
      or other electronic method of transmission shall be equally as effective as
      delivery of an original executed counterpart of this Guaranty. Any party
      delivering an executed counterpart of this Guaranty by telefacsimile or other
      electronic method of transmission also shall deliver an original executed
      counterpart of this Guaranty but the failure to deliver an original executed
      counterpart shall not affect the validity, enforceability, and binding effect
      of
      this Guaranty.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (b) Any
      provision of this Guaranty which is prohibited or unenforceable shall be
      ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining provisions hereof in that jurisdiction or affecting
      the validity or enforceability of such provision in any other
      jurisdiction.

     

    (c) Headings
      used in this Guaranty are for convenience only and shall not be used in
      connection with the interpretation of any provision hereof.

     

    (d) The
      pronouns used herein shall include, when appropriate, either gender and both
      singular and plural, and the grammatical construction of sentences shall conform
      thereto.

     

    (e) Unless
      the context of this Guaranty or any other Purchase Document clearly requires
      otherwise, references to the plural include the singular, references to the
      singular include the plural, the terms “includes” and “including” are not
      limiting, and the term “or” has, except where otherwise indicated, the inclusive
      meaning represented by the phrase “and/or.” The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Guaranty or any other Purchase
      Document refer to this Guaranty or such other Purchase Document, as the case
      may
      be, as a whole and not to any particular provision of this Guaranty or such
      other Purchase Document, as the case may be. Section, subsection, clause,
      schedule, and exhibit references herein are to this Guaranty unless otherwise
      specified. Any reference in this Guaranty or in any other Purchase Document
      to
      any agreement, instrument, or document shall include all alterations,
      amendments, changes, extensions, modifications, renewals, replacements,
      substitutions, joinders, and supplements, thereto and thereof, as applicable
      (subject to any restrictions on such alterations, amendments, changes,
      extensions, modifications, renewals, replacements, substitutions, joinders,
      and
      supplements set forth herein). Any reference herein or in any other Purchase
      Document to the satisfaction or repayment in full of the Guaranteed Obligations
      shall mean the repayment in full in cash of all Guaranteed Obligations other
      than unasserted contingent indemnification Guaranteed Obligations. Any reference
      herein to any Person shall be construed to include such Person’s successors and
      assigns. 

     

    (f) This
      Guaranty shall be effective upon delivery to Buyer, without further act,
      condition or acceptance by Buyer, shall be binding upon each Guarantor and
      the
      successors and assigns of each Guarantor, and shall inure to the benefit of
      Buyer and its participants, successors and assigns. This Guaranty may not be
      waived, modified, amended, terminated, released or otherwise changed except
      by a
      writing signed by each Guarantor and Buyer.

     

    Notices.
      All notices and other communications provided for hereunder shall be given
      in
      the form and manner, and delivered to such addresses, as specified in the
      Security Agreement.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    Governing
      Law; Jurisdiction; Service of Process; Jury Trial. All questions concerning
      the construction, validity, enforcement and interpretation of this Guaranty
      shall be governed by the internal laws of the State of New York, without giving
      effect to any choice of law or conflict of law provision or rule (whether of
      the
      State of New York or any other jurisdictions) that would cause the application
      of the laws of any jurisdictions other than the State of New York. Each
      Guarantor hereby irrevocably submits to the exclusive jurisdiction of the state
      and federal courts sitting in The City of New York, Borough of Manhattan, for
      the adjudication of any dispute hereunder or in connection herewith or with
      any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper; provided, however, that
      any suit seeking enforcement of this Guaranty may be brought, at Buyer’s option,
      in the courts of any jurisdiction where Buyer elects to bring such action.
      Each
      Guarantor hereby irrevocably waives personal service of process and consents
      to
      process being served in any such suit, action or proceeding by mailing a copy
      thereof to such party at the address for such notices to it under this Guaranty
      and agrees that such service shall constitute good and sufficient service of
      process and notice thereof. Without limitation of the foregoing, each Guarantor
      hereby irrevocably appoints Parent as such Guarantor’s agent for purposes of
      receiving and accepting any service of process hereunder. Nothing contained
      herein shall be deemed to limit in any way any right to serve process in any
      manner permitted by law. EACH
      GUARANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, this Guaranty has been duly executed by each Guarantor as
      of
      the date set forth above.

     

     

     

    
      	 	ANTIGEN EXPRESS, INC., a
              Delaware
              corporation
	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

    

     

    
      
        	 	GENEREX PHARMACEUTICALS
                (USA) LLC,
                a North Carolina limited liability company
	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

      

    

     

    
      
        
          	 	GENEREX MARKETING &
                  DISTRIBUTION INC., an Ontario corporation
	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

        

      

    

     

    
      
        	 	GENEREX PHARMACEUTICALS
                INC., an
                Ontario corporation
	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

      

    

     

    
      
        
          	 	1097346 ONTARIO INC.,
                  an Ontario
                  corporation
	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

        

      

    

     

    
      
        
          	 	GENEREX (BERMUDA), INC.,
                  a
                  corporation existing pursuant to the Bermuda Companies Act
	 	 
	 	By:	 
	 	Name: 	 
	 	Title: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 THE FIFTH ANNIVERSARY
      OF
      THE INITIAL EXERCISE DATE (the “EXPIRATION DATE”).

    

    No.
      121

    

    NATIONAL
      HOLDINGS CORPORATION

    

    WARRANT
      TO PURCHASE 375,000 SHARES OF

    COMMON
      STOCK, PAR VALUE $0.02 PER SHARE

    

    For
      VALUE
      RECEIVED, St. Cloud Capital Partners II, L.P. (“Warrantholder”), is entitled to
      purchase, subject to the provisions of this Warrant, from National Holdings
      Corporation, a Delaware corporation (“Company”), at any time from and after
      March 31, 2008 (the “Initial Exercise Date”) and not later than 5:00 P.M.,
      Eastern time, on the Expiration Date, at an exercise price per share equal
      to
      $2.50 (the exercise price in effect being herein called the “Warrant Price”),
      375,000 shares (“Warrant Shares”) of the Company’s common stock, par value $0.02
      per share (“Common Stock”). The number of Warrant Shares purchasable upon
      exercise of this Warrant and the Warrant Price shall be subject to adjustment
      from time to time as described herein.

     

    This
      Warrant is issued pursuant to that certain Securities Purchase Agreement of
      even
      date herewith by and among the Company and the Warrantholder (the “Purchase
      Agreement”) that is being executed and delivered in connection with that certain
      private placement of a convertible promissory note (the “Note”) and this
      Warrant.

    

    Section
      1. Registration.
      The
      Company shall maintain books for the transfer and registration of the Warrant.
      Upon the initial issuance of this Warrant, the Company shall issue and register
      the Warrant in the name of the Warrantholder.

    

    Section
      2. Transfers.
      As
      provided herein, this 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. Subject to such restrictions, the
      Company shall transfer this Warrant from time to time upon the books to be
      maintained by the Company 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 Company, including,
      if
      required by the Company, 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 Company.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      3. Exercise
      of Warrant.
      Subject
      to the provisions hereof, the Warrantholder may exercise this Warrant in whole
      or in part at any time from and after the Initial Exercise Date and not later
      than 5:00 P.M., Eastern time, on the Expiration Date upon surrender of the
      Warrant, together with delivery of the duly executed Warrant exercise form
      attached hereto as Appendix
      A
      (the
“Exercise Form”) and payment by cash, certified check or wire transfer of funds
      for the aggregate Warrant Price for that number of Warrant Shares then being
      purchased, to the Company during normal business hours on any business day
      at
      the Company’s principal executive offices (or such other office or agency of the
      Company as it may designate by notice to the Warrantholder). The Warrant Shares
      so purchased shall be deemed to be issued to the Warrantholder or the
      Warrantholder’s designee, as the record owner of such shares, as of the close of
      business on the date on which this Warrant shall have been duly surrendered
      (or
      evidence of loss, theft or destruction thereof and security or indemnity
      satisfactory to the Company), the Warrant 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 shares specified
      in
      the Exercise Form, shall be delivered promptly to the Warrantholder after this
      Warrant shall have been so exercised. The certificates so delivered shall be
      in
      such denominations as may be requested by the Warrantholder and shall be
      registered in the name of the Warrantholder or such other name as shall be
      designated by the Warrantholder. If this Warrant shall have been exercised
      only
      in part, then, unless this Warrant has expired, the Company shall, at its
      expense, at the time of delivery of such certificates, deliver to the
      Warrantholder a new Warrant representing the number of shares with respect
      to
      which this Warrant shall not then have been exercised. As used herein, “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. Each exercise
      hereof shall constitute the re-affirmation by the Warrantholder 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 Warrantholder
      as of the time of such exercise.

    

    Section
      4. Net
      Issuance.
       In
      addition, the Warrantholder may at anytime during the Exercise Period, in its
      sole discretion, exercise all or any part of the Warrant in a “cashless” or
“net-issue” exercise by delivering to the Company (1) the Exercise Form and (2)
      the original Warrant, pursuant to which the Warrantholder shall surrender the
      right to receive upon exercise of this Warrant, a number of Warrant Shares
      calculated using the following formula:

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    
      	
              X
                

            	
              =

            	
              Y * (A - B)

            
	 	 	
              A

            

    

    

    
      	
              with:

            	
              X
                =
                

            	
              the
                number of Warrant Shares to be issued to the
                Warrantholder

            
	 	 	 
	 	
              Y
                =

            	
              the
                number of Warrant Shares with respect to which the Warrant is being
                exercised

            
	 	 	 
	 	
              A
                =

            	
              the
                fair value per share of Common Stock on the date of exercise of this
                Warrant

            
	 	 	 
	 	
              B
                =

            	
              the
                then-current Warrant Price of the
                Warrant

            

    

    

    Solely
      for the purposes of this paragraph, “fair value” per share of Common Stock shall
      mean (A) the average of the closing sales prices, as quoted on the primary
      national stock exchange or the Nasdaq Stock Market on which the Common Stock
      is
      listed, or, if not listed,
      the OTC
      Bulletin Board if quoted thereon, on the ten
      (10)
      trading days immediately preceding the date on which the Exercise Form is deemed
      to have been given to the Company pursuant to Section 15 hereof, or (B) if
      the
      Common Stock is not publicly traded as set forth above, as reasonably and in
      good faith determined by the Board of Directors of the Company as of the date
      which the Exercise Form is deemed to have been given to the
      Company.

    

    Section
      5. Adjustments
      to Conversion Price.
      For the
      purposes of this Section 5, the term Warrant Price shall mean the Warrant Price
      per share set forth on the first page of this Warrant as adjusted from time
      to
      time pursuant to the provisions of this Section 5. The number and kind of
      Warrant Shares (or any shares of stock or other securities which may be)
      issuable upon the exercise of this Warrant and the Warrant Price hereunder
      shall
      be subject to adjustment from time to time upon the happening of certain events,
      as follows:

    

    (a) Splits
      and Subdivisions.
      In the
      event the Company should at any time or from time to time fix a record date
      for
      the effectuation of a split or subdivision of the outstanding shares of Common
      Stock or the determination of the holders of Common Stock entitled to receive
      a
      dividend or other distribution payable in additional shares of Common Stock
      or
      other securities or rights convertible into, or entitling the holder thereof
      to
      receive directly or indirectly, additional shares of Common Stock (hereinafter
      referred to as the “Common Stock Equivalents”) without payment of any
      consideration by such holder for the additional shares of Common Stock or Common
      Stock Equivalents, then, as of such record date (or the date of such
      distribution, split or subdivision if no record date is fixed), the Warrant
      Price shall be appropriately decreased and the number of Warrant Shares for
      which this Warrant is exercisable shall be appropriately increased in proportion
      to such increase of outstanding shares.

    

    (b) Combination
      of Shares.
      If the
      number of shares of Common Stock outstanding at any time after the date hereof
      is decreased by a combination of the outstanding shares of Common Stock, the
      Warrant Price shall be appropriately increased and the number of Warrant Shares
      for which this Warrant is exercisable shall be appropriately decreased in
      proportion to such decrease in outstanding shares.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (c) Reclassification
      or Reorganization.
      If the
      Warrant Shares issuable upon the exercise of this Warrant shall be changed
      into
      the same or different number of shares of any class or classes of stock, whether
      by capital reorganization, reclassification or otherwise (other than a split,
      subdivision or stock dividend provided for in Section 5(a) above or a
      combination of shares provided for in Section 5(b) above, or a reorganization,
      merger or consolidation provided for in Section 5(d) below, then and in each
      such event the Warrantholder shall be entitled to receive upon the exercise
      of
      this Warrant the kind and amount of shares of stock and other securities and
      property receivable upon such reorganization, reclassification or other change,
      to which a holder of the number of Warrant Shares issuable upon the exercise
      of
      this Warrant would have received if this Warrant had been exercised immediately
      prior to such reorganization, reclassification or other change, all subject
      to
      further adjustment as provided herein.

    

    (d) Merger
      or Consolidation.
      If at
      any time or from time to time there shall be a capital reclassification or
      reorganization of the Warrant Shares or a Corporate Transaction (as defined
      herein, other than a subdivision, combination, reclassification or exchange
      of
      shares provided for elsewhere in this Section 5 and excluding the proposed
      merger with vFinance, Inc.) of the Company, then as a part of such
      reorganization or Corporate Transaction, adequate provision shall be made so
      that the Warrantholder shall thereafter be entitled to receive upon the exercise
      of this Warrant, the number of shares of stock or other securities or property
      of the Company, resulting from such reorganization, recapitalization or
      Corporate Transaction to which a holder of the number of Warrant Shares issuable
      upon the exercise of this Warrant would have received if this Warrant had been
      exercised immediately prior to such reorganization or Corporate Transaction.
      In
      any such case, the Company will make appropriate provision to insure that the
      provisions of this Section 5(d) 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 Warrant.
      The
      Company shall not effect any such Corporate Transaction unless prior to or
      simultaneously with the consummation thereof the successor corporation (if
      other
      than the Company) resulting from such Corporate Transaction or the corporation
      purchasing or acquiring such assets or other appropriate corporation or entity
      shall assume the obligation to deliver to the Warrantholder, at the last address
      of the Warrantholder appearing on the books of the Company, such shares of
      stock, securities or assets as, in accordance with the foregoing provisions,
      the
      Warrantholder may be entitled to purchase, and the other obligations under
      this
      Warrant. The provisions of this Section 5(d) shall similarly apply to successive
      reorganizations, reclassifications, or Corporate Transactions. 

    

    As
      used
      herein, the term “Corporate Transaction” shall mean (i) a sale, lease, transfer
      or conveyance of all or substantially all of the assets of the Company; (ii)
      a
      consolidation of the Company with, or merger of the Company with or into,
      another corporation or other business entity in which the stockholders of the
      Company immediately prior to such consolidation or merger own less than 50%
      of
      the voting power of the surviving entity immediately after such consolidation
      or
      merger; or (iii) any transaction or series of related transactions to which
      the
      Company is a party in which in excess of 50% of the Company’s voting power is
      transferred, excluding any consolidation or merger effected exclusively to
      change the domicile of the Company.

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    (e) Adjustment
      in Number of Warrant Shares.
      Upon
      each adjustment of the Warrant Price pursuant to the provisions of this Section
      5, the number of Warrant Shares issuable upon the exercise of this Warrant
      shall
      be adjusted to the nearest full amount by multiplying a number equal to the
      Warrant Price in effect immediately prior to such adjustment by the number
      of
      Warrant Shares issuable upon exercise of the Warrants immediately prior to
      such
      adjustment and dividing the product so obtained by the adjusted Warrant
      Price.

    

    (f) Cashless
      Exercise.
      Notwithstanding the provisions of Section 5(d), in the event that holders of
      Common Stock receive only cash for their shares of Common Stock as a result
      of
      any Corporate Transaction, not later than five (5) Business Days after the
      effective date of such Corporate Transaction, the Warrantholder shall be
      entitled to receive in full satisfaction of its rights under this Warrant an
      amount in cash (the “Spread”) equal to (x) the difference between (A) the per
      share cash to be received by holders of Common Stock in connection with such
      Corporate Transaction and (B) the Warrant Price in effect immediately prior
      to
      the effective date of such Corporate Transaction, multiplied by (y) the number
      of shares of Common Stock for which this Warrant is exercisable immediately
      prior to the effective date of such Corporate Transaction. Upon payment in
      full
      of the Spread to the Warrantholder as provided above, this Warrant shall expire
      and be of no further force and effect. In the event that the Spread is not
      a
      positive number, no amount shall be payable to the Warrantholder as a result
      of
      such Corporate Transaction, and this Warrant shall expire and be of no further
      force and effect as of the effective date of such Corporate
      Transaction.

    

    (g) No
      Adjustment of Warrant Price in Certain Cases.
      No
      adjustment of the Warrant Price shall be made:

    

    (i)
       Upon
      issuance or sale of the this Warrant or Warrant Shares, or the Notes, the shares
      of Common Stock issuable upon conversion of the Notes, other warrants and
      warrant shares issued in connection herewith pursuant to the Purchase Agreement,
      or shares of Common Stock issuable upon exercise of other options, warrants
      and
      convertible securities outstanding as of the date hereof.

     

    (ii) Upon
      the
      issuance or sale of any shares of capital stock, or the grant of options
      exercisable therefor, issued or issuable after the date of this Warrant, to
      directors, officers, employees, advisers and consultants of the Company or
      any
      subsidiary pursuant to any incentive or non-qualified stock option plan or
      agreement, stock purchase plan or agreement, stock restriction agreement or
      restricted stock plan, employee stock ownership plan (ESOP), consulting
      agreement, stock appreciation right (SAR), stock depreciation right (SDR),
      bonus
      stock arrangement, or such other similar compensatory options, issuances,
      arrangements, agreements or plans approved by the Board of Directors of the
      Company.

     

    (iii)
       Upon
      the
      issuance of any shares of capital stock or the grant of warrants or options
      (or
      the exercise thereof) as consideration for mergers, acquisitions, strategic
      alliances and other commercial transactions, including without limitation the
      proposed merger with vFinance, Inc., other than in connection with a financing
      transaction.

    

    (iv) If
      the
      amount of said adjustment shall be less than one cent ($0.01) per security
      issuable upon exercise of this Warrant; provided,
      however,
      that in
      such case any adjustment that would otherwise be required then to be made shall
      be carried forward and shall be made at the time of and together with the next
      subsequent adjustment which, together with any adjustment so carried forward,
      shall amount to at least one cent ($0.01) per security issuable upon exercise
      of
      this Warrant.

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    (h) Notice
      of Record Dates; Adjustments.
      In the
      event of a Corporate Transaction, the Company shall provide to the Warrantholder
      twenty (20) days advance written notice of such Corporate Transaction. The
      Company shall promptly notify the Warrantholder in writing of each adjustment
      or
      readjustment of the Warrant Price hereunder and the number of Warrant Shares
      issuable upon the exercise of this Warrant. Such notice shall state the
      adjustment or readjustment and show in reasonable detail the facts on which
      that
      adjustment or readjustment is based.

    

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

    

    Section
      7. Payment
      of Taxes.
      The
      Company 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 Company 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
      Warrantholder in respect of which such shares are issued, and in such case,
      the
      Company 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
      Company the amount of such tax or has established to the Company’s reasonable
      satisfaction that such tax has been paid. The Warrantholder shall be responsible
      for income taxes due under federal, state or other law, if any such tax is
      due.

    

    Section
      8. Mutilated
      or Missing Warrants.
      In case
      this Warrant shall be mutilated, lost, stolen, or destroyed, the Company 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
      Company 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 Company.

    

    Section
      9. Reservation
      of Common Stock.
      The
      Company hereby represents and warrants that there have been reserved, and the
      Company shall at all applicable times keep reserved until issued (if necessary)
      as contemplated by this Section 9, out of the authorized and unissued shares
      of
      Common Stock, sufficient shares to provide for the exercise of the rights of
      purchase represented by this Warrant. The Company 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 Company.

    

    Section
      10. Fractional
      Interest.
      The
      Company shall not be required to issue fractions of Warrant Shares upon the
      exercise of this Warrant. If any fractional share of Common Stock would, except
      for the provisions of the first sentence of this Section 10, be deliverable
      upon
      such exercise, the Company, in lieu of delivering such fractional share, shall
      pay to the exercising Warrantholder an amount in cash equal to the Fair Market
      Value of such fractional share of Common Stock on the date of
      exercise.

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    Section
      11. Registration
      Rights.
      The
      Warrantholder shall be entitled to the rights set forth under the Registration
      Rights Agreement dated as of March 31, 2008 to allow for the registration of
      the
      resale of the Warrant Shares under the Securities Act of 1933, as
      amended.

    

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

    

    Section
      13. Notices
      to Warrantholder.
      Upon
      the happening of any event requiring an adjustment of the Warrant Price, the
      Company shall promptly give written notice thereof to the Warrantholder at
      the
      address appearing in the records of the Company, stating the adjusted Warrant
      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
      Warrantholder or any defect therein shall not affect the legality or validity
      of
      the subject adjustment.

    

    Section
      14. Identity
      of Transfer Agent.
      The
      Transfer Agent for the Common Stock is Computershare Trust Company, Inc. Upon
      the appointment of any subsequent transfer agent for the Common Stock or other
      shares of the Company’s capital stock issuable upon the exercise of the rights
      of purchase represented by the Warrant, the Company will mail to the
      Warrantholder a statement setting forth the name and address of such transfer
      agent.

    

    Section
      15. Notices.
      Unless
      otherwise provided, any notice required or permitted under this 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 Warrantholder, at its address as set forth
      in
      the Company’s books and records and, if to the Company, at the address as
      follows, or at such other address as the Warrantholder or the Company may
      designate by ten days’ advance written notice to the other:

    

    If
      to the
      Company:

    

    National
      Holdings Corporation

    120
      Broadway, 27th
      Floor

    New
      York,
      NY 10271

    Attention:
      Mark Goldwasser, CEO

    Fax:
      (212) 417-8010

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    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
      16. 
      Successors.
      All the
      covenants and provisions hereof by or for the benefit of the Warrantholder
      shall
      bind and inure to the benefit of its respective successors and assigns
      hereunder. 

    

    Section
      17. 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
      18. No
      Rights as Stockholder.
      Prior
      to the exercise of this Warrant in accordance with Sections 3 or 4 hereof,
      the
      Warrantholder shall not have or exercise any rights as a stockholder of the
      Company by virtue of its ownership of this Warrant.

    

    Section
      19. Amendment;
      Waiver.
      Any
      term of this Warrant may be amended and the observance of any term of this
      Warrant may be waived (either generally or in a particular instance and either
      retroactively or prospectively) with the written consent of the Warrantholder
      and the Company. Any amendment or waiver effected in accordance with this
      Section 19 shall be binding upon the Warrantholder (and of any securities into
      which this Warrant is convertible), each future holder of all such securities,
      and the Company.

    

    Section
      20. Section
      Headings.
      The
      section headings in this Warrant are for the convenience of the Company and
      the
      Warrantholder and in no way alter, modify, amend, limit or restrict the
      provisions hereof.

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
      of
      the 31st
      day of
      March, 2008.

    

    
      	
              NATIONAL
                HOLDINGS CORPORATION

            
	 	 
	
              By:

            	
              /s/
                MARK GOLDWASSER

            
	 	
              Mark
                Goldwasser

            
	 	
              President
                and Chief Executive Officer

            

    

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    NATIONAL
      HOLDINGS CORPORATION

    WARRANT
      EXERCISE FORM

    

    To
      National Holdings Corporation:

    

    The
      undersigned, pursuant to the provisions set forth in the attached Warrant,
      hereby irrevocably elects to (a) purchase _____ shares of the Common 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, or (b) exercise such Warrant for _______ shares purchasable under
      the Warrant pursuant to the Net Issue Exercise provisions of Section 4 of such
      Warrant.

    

    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 Warrant be registered in the name
      of
      the undersigned Warrantholder 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 Warrantholder 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.

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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__

    

    Warrantholder’s

    
      	
              Signature:

            	 	 

    

     

    Warrantholder’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.

    

    
      
        
        

      

      
        11

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