NATIONAL HOLDINGS CORP (Form: 8-K, Received: 04/04/2012 15:15:28)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM 8-K

_____________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 30, 2012

National Holdings Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

001-12629

(Commission File Number)

36-4128138

(IRS Employer Identification No.)

120 Broadway, 27th Floor, New York, NY 10271

(Address of Principal Executive Offices)

(212) 417-8000

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act.

Soliciting material pursuant to Rule 14a-12 under the Exchange Act.

Pre-commencement communications pursuant to Rule 14d-2b under the Exchange Act.

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.

Item 1.01 Entry into a Material Definitive Agreement.

On March 30, 2012, National Holdings Corporation (the “Company,” “we” or “us”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and between the Company and National Securities Growth Partners LLC (the “Investor”), pursuant to which the Company issued and sold to the Investor a 6% Convertible Subordinated Promissory Note in the original principal amount of $3.3 million (the “First Note”). The issuance and sale of the Note was the first step of a three-step private placement of the Company’s securities. The second step of the private placement involved the issuance and sale to the Investor of an additional 6% Convertible Subordinated Promissory Note in the original principal amount of $700,000 on April 4, 2012 (the “Second Note,” with both the First Note and the Second Note each a “Note,” and together, the “Notes,” with the sale of the Notes being referred to as the “Debt Sale”). The third and final step of the private placement will involve the issuance and sale to the Investor of an aggregate of 120,000 shares of our newly created Series E Convertible Preferred Stock, par value $0.01 per share (the “Series E Preferred Stock”) at a purchase price of $50.00 per share, and a warrant (the “Equity Warrant”) to purchase an aggregate of 12,000,000 shares of our common stock, par value $0.02 per share (the “Common Stock”), at an exercise price of $0.50 per share, for an aggregate purchase price of $6,000,000 (the “Equity Sale”). The Equity Sale is expected to occur upon receipt of approval of the private placement by the Financial Industry Regulatory Authority, Inc.

The proceeds of the First Note were used to satisfy outstanding indebtedness held by affiliates of St. Cloud Partners, L.P. (“St. Cloud”) evidenced by the 10% senior subordinated convertible promissory note in the principal amount of $3,000,000 issued pursuant to that certain Purchase Agreement, dated as of March 31, 2008, by and between the Company and St. Cloud. The remaining proceeds and the proceeds from the sale of the Second Note will be used for general corporate purposes. As part of this transaction, the Board of Directors of the Company (the “Board”) voted to expand the size of the Board to nine members. Also, Jorge A. Ortega and Paul J. Coviello resigned as directors of the Company and Mark Klein (as a Class II director with a term expiring in 2015) and Robert Fagenson (as a Class I director with a term expiring in 2014) were named to fill their vacancies, and Bryant Riley was named to fill the vacancy created by the expansion of the Board (as a Class I director with a term expiring in 2014). In addition, upon payment on March 30, 2012 of the indebtedness to St. Cloud with the proceeds of the First Note, Kacy R. Rozelle resigned as a director of the Company. The Investor is entitled to appoint a fourth director to fill the existing vacancy on the Board. Each of these four new directors are designated as the Investor’s nominees pursuant to the terms of the Purchase Agreement. In addition, the Company agreed that the Board (recently expanded from eight members to nine members) would remain at nine members (unless otherwise agreed to by the Investor).

The Notes

The aggregate principal amount of the First Note issued in the private placement was $3.3 million. The aggregate principal amount of the Second Note was $700,000. Each Note bears interest at 6% per annum payable upon maturity or upon conversion and are unsecured and subordinated to existing senior indebtedness of the Company. Each Note matures on the earlier to occur of (i) 10 business days after delivery by the holder thereof of a notice of maturity (which notice of maturity may not be issued prior to December 31, 2012), or (ii) March 31, 2015; provided that upon completion of a restructuring of the capital of the Company in a manner satisfactory to the holder, in its sole discretion, the maturity date shall be March 31, 2015.

-2-

Each Note is convertible into units of the Company (the “Units”) consisting of (a) Series E Preferred Stock, (b) a warrant exercisable at $0.50 for shares of Common Stock equal to 100% of the shares of Common Stock underlying the Series E Preferred Stock issuable upon conversion of the Notes (the “Debt Warrants,” and together with the Equity Warrant, the “Warrants”). The number of Units to be issued upon such conversion will be equal to the quotient obtained by dividing (i) the principal amount plus accrued interest of the Note being converted by (ii) the price per share of Series E Preferred Stock being sold in the Equity Sale (hereinafter referred to as the “Conversion Price”).

Purchase Agreement

Pursuant to the terms of the Purchase Agreement, the Company agreed that (1) beginning as of the Debt Sale and continuing until the Equity Sale, for so long as any principal remains outstanding under the Notes and, (2) beginning as of the Equity Sale, for so long as (A) at least 100,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of the Series E Preferred Stock are outstanding or (B) the Investor holds an amount of capital stock of the Company equal to at least 30% of the original number of shares of Common Stock issuable upon conversion of the Series E Preferred Stock purchased pursuant to the Purchase Agreement, four directors would be nominated by the stockholders of Series E Preferred Stock to serve on the Board of Directors of the Company.

Series E Preferred Stock

In connection with the private placement, the Company designated 200,000 shares of its blank check preferred stock as Series E Preferred Stock by filing a Certificate of Designation (the “Certificate of Designation”) with the Secretary of State of Delaware establishing the Series E Preferred Stock. A total of 120,000 shares of Series E Preferred Stock will be issued at $50.00 per share (the “Series E Preferred Stock Price”) at the closing of the Equity Sale.

Each share of Series E Preferred Stock is convertible, at the option of the holder thereof, at any time after the date of issuance, into such number of shares of Common Stock as is determined by dividing the Series E Preferred Stock Price by the conversion price of the Series E Preferred Stock, which is initially $0.50 ( i.e. , each share is convertible into approximately 100 shares of Common Stock). Accordingly, the 120,000 shares of Series E Preferred Stock to be issued and sold in the Equity Sale will initially be convertible into a total of 12,000,000 shares of Common Stock. From the date of the Purchase Agreement until December 30, 2012, the conversion price of the Series E Preferred Stock is subject to full-ratchet price protection (subject to a minimum of $0.10) in the event the Company issues or sells, or is deemed to have issued or sold, subject to certain standard exceptions, any shares of its Common Stock for consideration per share less than the conversion price of the Series E Preferred Stock then in effect. In addition, the Series E Conversion Price may be adjusted to reflect subdivisions or combinations of our Common Stock such as through stock splits, dividends, distributions and similar adjustments to our capital stock.

-3-

During the nine month period following the Equity Sale, the Investor will have a right of co-sale in the event the Company enters into an equity or equity-linked capital raising transaction with a third party in excess of $3 million. In such an event, the Investor will have the right to sell its shares of Series E Preferred Stock (or any Common Stock received upon conversion thereof) to such third party up to the number of shares covered by such capital raising transaction. The holders of Series E Preferred Stock also have the right to purchase their pro-rata share of securities from the Company if the Company proposes to issue or sell any new equity securities (subject to certain exceptions).

The holders of Series E Preferred Stock generally have the right to vote on any matter with the holders of Common Stock, the Company’s Series C Preferred Stock and the Company’s Series D Preferred Stock on an “as converted” basis (less one share of Common Stock) and are entitled to certain protective provisions pursuant to which the majority of the Series E Preferred Stock have the right to approve certain actions as further described in the Certificate of Designation. The shares of Series E Preferred Stock are not entitled to receive any dividends.

Warrants

In connection with the Equity Sale, the Company will issue an Equity Warrant to purchase a total of 12,000,000 shares of Common Stock. The Equity Warrant will have an exercise price of $0.50 per share and vest 33% on the date of grant and 33% on each of the first and second anniversaries of the date of grant. Each tranche of warrants expires five years from the date of vesting. The exercise price of the Equity Warrant is subject to full-ratchet price protection (subject to a minimum of $0.10) in the event the Company issues or sells, or is deemed to have issued or sold, subject to certain standard exceptions, any shares of its Common Stock for consideration per share less that the exercise price of the Equity Warrant then in effect. In addition, the number of shares of Common Stock subject to the Equity Warrant is subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. The terms and conditions of the Debt Warrants will be substantially similar to the Equity Warrant.

-4-

Registration Rights Agreement

As a condition to the purchase of the First Note, the Company and the Investor also entered into a Registration Rights Agreement on March 30, 2012 (the “Registration Rights Agreement”) in connection with the private placement granting the Investor certain rights to request that the Company register for resale the shares of Common Stock receivable by the Investor upon the complete conversion of the Notes, the Series E Preferred Stock and the Warrants.

Pursuant to the terms of the Registration Rights Agreement, in the event that the Company receives a written request from the Investor of the registrable securities then outstanding, calling upon the Company to effect a registration on Form S-1 or S-3, the Company has agreed to use its best efforts to promptly register such securities. In addition, we have granted the Investor certain “piggy-back” registration rights, subject to previously granted registration rights. There are no liquidated damages or penalties for failure to register the securities.

The description of the Notes, Purchase Agreement, the Registration Rights Agreement, the Certificate of Designation and the terms of the Series E Preferred Stock and Warrants above is a summary and is qualified in its entirety by reference to the copies of the Certificate of Designation attached as Exhibit 3.1 hereto, the Notes attached as Exhibits 4.1 and 4.2 hereto, the form of Warrant attached as Exhibit 4.3 hereto, the Purchase Agreement attached as Exhibit 10.1 hereto and the Registration Rights Agreement attached hereto as Exhibit 10.2 hereto, each of which is incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 hereof is incorporated herein by reference.

The issuance and sale of the securities in the private placement is exempt from registration under the Securities Act of 1933 pursuant to Regulation D and Rule 506 promulgated thereunder. We have furnished certain information to the Investors as required by Regulation D, and the Investors have provided certain representations to us evidencing that it is an “accredited investor” as defined in Regulation D. We have not engaged in general solicitation or advertising with regard to the private placement and have not offered securities to the public in connection with the private placement.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

As part of this transaction, the Board voted to expand the size of the Board to nine members. Also, Jorge A. Ortega and Paul J. Coviello resigned as directors of the Company and Mark Klein (as a Class II director with a term expiring in 2015) and Robert Fagenson (as a Class I director with a term expiring in 2014) were named to fill their vacancies, and Bryant Riley was named to fill the vacancy created by the expansion of the Board (as a Class I director with a term expiring in 2014). In addition, upon payment on March 30, 2012 of the indebtedness to St. Cloud with the proceeds of the First Note, Kacy R. Rozelle resigned as a director of the Company. The Investor is entitled to appoint a fourth director to fill the existing vacancy on the Board. Each of these four new directors are designated as the Investor’s nominees pursuant to the terms of the Purchase Agreement. In addition, the Company agreed that the Board would remain at nine members (unless otherwise agreed to by the Investor). The Company has not yet appointed Messrs. Klein, Fagenson and Riley to any Board committees.

-5-

Mark D. Klein has served as a member of the board of directors of GSV Capital Corp. since 2011. Mr. Klein also served as a director of New University Holdings Corp., a capital pool company listed on the TSX Venture Exchange, since its inception in 2010 through August 2011, when NUH merged with ePals, Inc., the world’s largest K-12 learning network provider. In addition, from April 2010 until May 2011, Mr. Klein served as the Chief Executive Officer, President and a Director of 57th Street General Acquisition Corp, a special purpose acquisition company, until it completed a merger with Crumbs Bake Shop. Mr. Klein continues to serve as a Director of Crumbs. Between 2007 and 2009, Mr. Klein served as the Chief Executive Officer, President and a Director of Alternative Asset Management Acquisition Corporation, a special purpose acquisition company he helped form in 2007, and which completed a merger with Great American Group LLC. Mr. Klein continues to serve on the Board of Directors of Great American Group. From 2007 until 2008, Mr. Klein served as the Chief Executive Officer of Hanover Group US LLC, an indirect US subsidiary of the Hanover Group. Prior to joining Hanover in 2007, Mr. Klein served as Chairman of Ladenburg Thalmann & Co. Inc. From March 2005 to September 2006, he was Chief Executive Officer and President of Ladenburg Thalmann Financial Services, Inc., the parent of Ladenburg Thalmann & Co. Inc., and Chief Executive Officer of Ladenburg Thalmann Asset Management Inc., a subsidiary of Ladenburg Financial Services, Inc. Prior to joining Ladenburg Thalmann, from June 2000 to March 2005, Mr. Klein served as the Chief Executive Officer and President of NBGI Asset Management, Inc. and NBGI Securities, which were the US subsidiaries of the National Bank of Greece. Mr. Klein has been a portfolio manager of the LTAM Titan Fund, a fund of funds hedge fund, since 2004. Mr. Klein is also a Managing Member and Majority Partner of M. Klein & Company, LLC, which owns the Klein Group, LLC, a registered broker dealer. Mr. Klein also maintains registration with the Klein Group, LLC as a registered representative and Principal. Mr. Klein is a graduate of the J.L. Kellogg Graduate School of Management at Northwestern University, with a Masters of Management Degree, and also received a Bachelors of Business Administration Degree with high distinction from Emory University. Our board of directors has concluded that Mr. Klein’s extensive familiarity with the financial and investment banking industries and experience as a director of other publicly-traded companies provides our board of directors with valuable insight and perspective, and that therefore he is qualified to serve as a member of our board of directors.

Robert Fagenson spent the majority of his career at the New York Stock Exchange, where he was Managing Partner of one of largest specialist firms operating on the exchange trading floor. Having sold his firm and subsequently retired from that business in 2007, he has been CEO of Fagenson. & Co., Inc., a 50 year old broker dealer that engaged in institutional brokerage as well as investment banking and money management. On March 1, 2012, Fagenson transferred its brokerage operation, accounts and personnel to National Securities and operates as a branch office of that firm. During his career as a member of the New York Stock Exchange beginning in 1973, he has served as a Governor on the trading floor and was elected to the NYSE Board of Directors in 1993, where he served for six years, eventually becoming Vice Chairman of the Board in 1998 and 1999. He returned to the Board in 2003 and served until the Board was reconstituted with only non-industry directors in 2004. Mr. Fagenson has served on the boards of a number of public companies and presently is the Non-Executive Chairman of Document Security Systems, Inc. (NYSE/Alternext - DMC) and a member of the Board of Cash Technologies Corp. He is also a Director of the National Organization of Investment Professionals (NOIP). In addition to his business related activities, Mr. Fagenson, serves as Vice President and a Director of New York Services for the Handicapped, Treasurer and Director of the Centurion Foundation, Director of the Federal Law Enforcement Officers Association Foundation, Treasurer and Director of the New York City Police Museum and as a Member of the Board of the Sports and Arts in Schools Foundation. He is a Member of the alumni boards of both the Whitman School of Business and the Athletic Department at Syracuse University. He also serves in a voluntary capacity on the boards and committees of many civic, social and community organizations. Mr. Fagenson received his B.S. degree in Transportation Sciences & Finance from Syracuse University in 1970. His wife of 40 years, Margaret, is also a 1970 graduate of Syracuse receiving her B.A. from the School of Art & Sciences. They are lifelong residents of Manhattan and have two adult daughters, Stephanie Fagenson & Jennifer Fagenson Young and one granddaughter.

-6-

Bryant R. Riley is Chairman of B. Riley & Co., LLC, a Southern California-based brokerage firm which he founded in 1997. The full service investment bank provides research and trading ideas primarily to institutional investors. Its Corporate Finance Group services the capital raising needs of both public and private companies and has completed over 350 engagements with more than $16 billion in aggregate transaction value, as well as numerous merger and acquisition advisory assignments. Mr. Riley also is founder and Managing Member of Riley Investment Management LLC, an investment advisor which provides investment management services. Mr. Riley serves on the board of directors of DDi Corporation, Great American Group, Strasbaugh and Trans World Entertainment. Prior to 1997, Mr. Riley held a variety of positions in the brokerage industry, primarily as an institutional salesman and trader. From October 1993 to January 1997 he was a co-head of Equity at Dabney-Resnick, Inc., a Los Angeles-based brokerage firm. From 1991 to 1993 he was a co-founder of Huberman-Riley, a Texas-based brokerage firm. Mr. Riley graduated from Lehigh University in 1989 with a B.S. in finance.

Robert Fagenson, a newly appointed director of the Company, is a party to an Independent Contractor Agreement, dated February 27, 2012, with the Company’s parent, National Securities Corporation (“NSC”), whereby in exchange for establishing and maintaining a branch office of NSC in New York, New York (the “Branch”), Mr. Fagenson is to receive 50% of any net income accrued at the Branch and his daughter, Stephanie Fagenson, is to receive an annual salary of $72,000.

-7-

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are filed as part of this report:

Exhibit Number		Description
3.1		Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock of National Holdings Corporation, dated March 30, 2012.
4.1		6% Convertible Subordinated Promissory Note, dated March 30, 2012.
4.2		6% Convertible Subordinated Promissory Note, dated April 4, 2012.
4.3		Form of Warrant.
10.1		Securities Purchase Agreement by and between National Holdings Corporation and National Securities Growth Partners LLC, dated March 30, 2012.
10.2		Registration Rights Agreement by and between National Holdings Corporation and National Securities Growth Partners LLC, dated March 30, 2012.

-8-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	National Holdings Corporation (Registrant)

Date: April 4, 2012	By:	/s/ Mark Goldwasser
		Mark Goldwasser
		Chief Executive Officer

-9-

INDEX TO EXHIBITS

Exhibit Number		Description
3.1		Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock of National Holdings Corporation, dated March 30, 2012.
4.1		6% Convertible Subordinated Promissory Note, dated March 30, 2012.
4.2		6% Convertible Subordinated Promissory Note, dated April 4, 2012.
4.3		Form of Warrant.
10.1		Securities Purchase Agreement by and between National Holdings Corporation and National Securities Growth Partners LLC, dated March 30, 2012.
10.2		Registration Rights Agreement by and between National Holdings Corporation and National Securities Growth Partners LLC, dated March 30, 2012.

-10-

Exhibit 3.1

CERTIFICATE OF DESIGNATION,

PREFERENCES AND RIGHTS

SERIES E CONVERTIBLE PREFERRED STOCK

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 ”), 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 10,000,000 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 of such series, as follows:

I. DESIGNATION AND AMOUNT

The designation of this series, which consists of two hundred thousand (200,000) shares of Preferred Stock, is the Series E Preferred Stock of the Corporation, par value $0.01 per share (the “ Series E Preferred Stock ”) and the stated value amount shall be Fifty Dollars ($50.00) 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:

“ 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.

“ Base Share Price ” shall have the meaning as defined in Article VIII, Section F of this Certificate of Designations.

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

“ 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.

“ Business Combination ” means any merger, consolidation or combination of the Corporation with or into any other corporation or entity, or any acquisition by the Corporation 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.

“ 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.

“ 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, e-mailed 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 of Conversion is not so faxed, e-mailed or otherwise delivered before such time, then the Conversion Date shall be the date the Holder faxes, e-mails or otherwise delivers the Notice of Conversion to the Corporation.

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

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

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

“ Holder ” shall mean the Purchaser, its respective Affiliates or any one or more holder(s) of shares of Series E Preferred Stock.

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

“ Majority Holders ” means the Holders of a majority of the then outstanding shares of Series E Preferred Stock.

“ 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 E 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.

“ National Securities Exchange ” means any one of the New York Stock Exchange, the NYSE, AMEX, any market of the NASDAQ Stock Market, the OTC Bulletin Board or any other national securities exchange in the United States where the Common Stock may trade or be listed for quotation.

“ Original Issue Price ” means the sum of $50.00, representing the aggregate purchase price for each share of Series E Preferred Stock at the Stated Value.

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

“ Purchase Agreement ” shall mean that certain Securities Purchase Agreement, dated as of March 30, 2012, by and among the Corporation and the Purchaser, pursuant to which, inter alia , on the Issuance Date, the Corporation issued, and the Purchaser purchased, the shares of Series E Preferred Stock and the Warrants, all upon the terms and conditions stated therein.

“ Purchaser ” shall mean the purchaser acquiring shares of the Series E Preferred Stock and Warrants being issued pursuant to the Purchase Agreement.

“ Registration Rights Agreement ” shall mean that certain registration rights agreement contemplated by the Purchase Agreement.

“ Series E Conversion Price ” means Fifty Cents ($0.50), or such other dollar amount (or fraction thereof) into which such Series E Conversion Price may be adjusted pursuant to Article VIII of this Certificate of Designations.

“ Stated Value ” means Fifty Dollars ($50.00) per share of Series E Preferred Stock.

“ 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.

“ Warrants ” shall mean the Warrants of the Corporation issued to the Purchaser of the Series E Preferred Stock pursuant to the Purchase Agreement.

III. DIVIDENDS

A. Holders of Series E Preferred Stock shall not be entitled to receive dividends with respect to their shares of Series E Preferred Stock.

IV. CONVERSION

A. Optional Conversion

(i) Holders of Series E Preferred Stock may, at their option at any time or from time to time, convert all or any portion of their shares of Series E Preferred Stock into shares of Common Stock on the terms set forth herein (an “ Optional Conversion ”).

(ii) In the event of any one or more Optional Conversions pursuant to this Article IV.A (each a “ Conversion ”), each share of Series E Preferred Stock shall be converted into a number of fully paid and non-assessable shares of Common Stock determined in accordance with the following formula:

The Original Issue Price

Series E Conversion Price then in effect

B. Mechanics of Conversion . In order to effect a Conversion, a Holder of shares of Series E Preferred Stock shall: (i) fax (or otherwise deliver, including via e-email/.pdf transmission) 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 E Preferred Stock being converted (the “ Series E 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 or other delivery of a Notice of Conversion from a Holder, the Corporation shall promptly send, via facsimile or e-mail transmission (to the fax number or e-mail address from which the Notice of Conversion was sent), 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 E Preferred Stock Certificates are delivered to the Corporation as provided above, or the Holder notifies the Corporation that such Series E Preferred Stock Certificates have been lost, stolen or destroyed and delivers the documentation to the Corporation required by Article XI.B hereof.

(i) Delivery of Common Stock Upon Conversion. Upon the surrender of Series E 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 third (3rd) 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 E Preferred Stock being converted and (y) a certificate representing the number of shares of Series E Preferred Stock not being converted, if any. Notwithstanding the foregoing, the Holder of Series E 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 E Preferred Stock set forth in the Notice of Conversion as at the date of such Notice of Conversion. 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 Registration Rights Agreement) and the Holder thereof is not then required to return such certificate for the placement of a legend thereon (pursuant to the Registration Rights 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 to the Holder as provided above un-legended and unrestricted physical certificate(s) representing the Common Stock issuable upon conversion (to the extent so registered pursuant to the Registration Rights Agreement). Further, a Holder may instruct the Corporation to deliver to the Holder physical certificate(s) representing the Common Stock issuable upon conversion in lieu of delivering such shares by way of DTC Transfer.

(ii) Company’s Failure to Timely Deliver Securities . If, and only if, in the event that the Conversion Shares are registered under the Securities Act of 1933, as amended, the Company shall fail, for any reason or for no reason, to issue to the Holder within the later of three (3) Trading Days after receipt of the applicable Notice of Conversion (the “ Share Delivery Deadline ” ), a certificate for the number of Conversion Shares to which the Holder is entitled and register such Conversion Shares on the Company’s share register or to credit the Holder’s balance account with DTC for such number of Conversion Shares to which the Holder is entitled upon a Conversion (as the case may be), and if on or after the conclusion of the Delivery Period the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Conversion Shares issuable upon such Conversion that the Holder anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver such certificate or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue such Conversion Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Conversion Shares or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock times (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the date of the applicable Notice of Conversion.

(iii) 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 E Preferred Stock.

(iv) No Fractional Shares. If any conversion of Series E Preferred Stock would result in the issuance of a fractional share of Common Stock (aggregating all shares of Series E Preferred Stock being converted pursuant to a given Notice of Conversion), such fractional share shall be payable in cash based upon the Series E Conversion Price per share, and the number of shares of Common Stock issuable upon conversion of the Series E 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.

(v) 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 E 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, reputable outside accountant jointly determined by the Corporation and the relevant Holder via facsimile within three (3) 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 (3) 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. RESERVATION OF SHARES OF COMMON STOCK

A. Reserved Amount. The Corporation shall reserve not less than 23,000,000 shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Series E 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 E Preferred Stock (including any shares that may be issuable in connection with the adjustment provisions of this Certificate of Designations) outstanding, at the then current Series E Conversion Price thereof, and any anticipated adjustments to such Series E Conversion Price.

VI. RANK

All shares of the Series E Preferred Stock shall rank (i) senior to (A) the Common Stock, (B) the Corporation’s 34,500 authorized shares of Series C Preferred Stock (the “ Series C Preferred Stock ”), (C) the Corporation’s 100,000 authorized shares of Series D Preferred Stock (the “ Series D Preferred Stock ”) and (D) any other class of securities which is specifically designated as junior to the Series E Preferred Stock (collectively, with the Common Stock, the “ Junior Securities ”); and (ii) pari passu with any other class or series of Preferred Stock of the Corporation hereafter created specifically ranking, by its terms, on parity with the Series E Preferred Stock (the “ Pari Passu Securities ”).

VII. LIQUIDATION PREFERENCE; PREEMPTIVE RIGHTS

A. In the event of any liquidation, dissolution, winding up of the Corporation or Deemed Liquidation Event (as defined below), either voluntary or involuntary, distributions to the stockholders of the Corporation shall be made in the following manner:

(i) Preferential Liquidation Payments.

(a) The Holders of the Series E 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 Junior Securities by reason of their ownership of such stock, an amount equal to the Original Issue Price for each share of Series E Preferred Stock then held by them (the “ Initial Series E Liquidation Preference Price ”). If upon the occurrence of a liquidation, dissolution, winding up of the Corporation or Deemed Liquidation Event the assets and funds thus distributed among the holders of the Series E Preferred Stock and the Pari Passu Securities are insufficient to permit the payment to such holders of the full liquidation preference amount based on the Initial Series E Liquidation Preference Price, then the assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series E Preferred Stock and the Pari Passu Securities in proportion to the preferential amount each such holder is otherwise entitled to receive.

(b) Each of the following events shall be considered a “Deemed Liquidation Event” unless the Majority Holders elect otherwise by written notice to the Corporation at least ten (10) days prior to the effective date of any such event:

(1) a merger, reorganization, recapitalization or consolidation in which,

(I) the Corporation is a constituent party, or

(II) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger, reorganization, recapitalization or consolidation,

except any such transaction involving the Corporation or a subsidiary in which the stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for stock or other securities that represent, immediately following such transaction, at least a majority, by voting power, of (1) the surviving or resulting corporation or entity or (2) if the surviving or resulting corporation or entity is a wholly owned subsidiary of another corporation or entity immediately following such merger or consolidation, the parent corporation or entity of such surviving or resulting corporation or entity ( provided , that for the purpose of this Article VII.A(i), all shares of Common Stock issuable upon exercise of options outstanding immediately prior to such merger or consolidation or upon conversion of the convertible preferred stock of the Corporation outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

(2) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation or to the stockholders of the Corporation substantially in the proportion to the shares of Common Stock (determined as if all capital stock of the Corporation convertible into Common Stock and all capital stock of any other corporation or entity directly or indirectly convertible into Common Stock were in fact converted to Common Stock immediately prior to such sale, lease, transfer, exclusive license or other disposition) held by them.

B. Issuance of New Shares.

(i) Purchase Rights. If at any time after the date of this Agreement the Company proposes to issue or sell any Common Stock, rights, warrants, options, Convertible Securities, exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock or securities convertible into equity securities of the Company, whether at the time of issuance or upon the passage of time or the occurrence of some future event (collectively, “ New Shares ”), the Company shall first offer to sell to each Holder a portion of each type of such New Shares equal to the quotient determined by dividing (x) the number of Convertible Securities held or beneficially owned by such Holder (on an as converted basis), by (y) the total number of Convertible Securities (on an as converted basis) outstanding immediately prior to such issuance or sale. A Holder shall be entitled to purchase all or any portion of its respective portion (as determined in the immediately preceding sentence) of such New Shares at the most favorable price and on the most favorable terms as such New Shares are to be offered. The holders of Convertible Securities shall further have a right of over-allotment such that to the extent a Holder (a “ Rejecting Holder ”) does not exercise its right to purchase any of the New Shares, or exercises its rights for less than all of its pro rata share of the New Shares (as determined above), then each other Holder may elect to purchase its pro rata share (as determined above) of such New Shares which the Rejecting Holder does not elect to purchase.

(ii) Offer Period. In order to exercise its purchase rights hereunder, each Holder must, within 15 days after receipt of written notice from the Company, as applicable, describing in reasonable detail the New Shares being offered, the purchase price thereof, the payment terms, the percentage of the New Shares initially available to such holder pursuant to Article VII.B(i) and the over-allotment right available in connection therewith, deliver a written notice to the Company describing its election to exercise its purchase rights hereunder.

(iii) Expiration of Offer Period. Upon the expiration of the offering period described above, the Company shall be entitled to sell such New Shares which the Holders have not elected to purchase during the 120 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to the Holders pursuant to Article VII.B(i). Any New Shares to be sold by the Company after such 120-day period must be reoffered to the Holders pursuant to the terms of this Article VII.B.

(iv) Exceptions to Purchase Rights. The provisions of this Article VII.B will not apply to the following issuances of New Shares:

(1) upon the issuance of shares of Common Stock or Options pursuant to any bona fide employee stock or option plan duly adopted by the Board of Directors of the Corporation; or

(2) upon the issuance of shares of Common Stock issuable upon the exercise of Options or the Warrants or conversion of the Corporation’s Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or any Convertible Securities that are outstanding as of the date of filing of this Certificate of Designations; or

(3) 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

(4) the issuance of shares of Common Stock, Convertible Securities or Options to provide financing to consummate any Business Combination, provided, in each instance and as a condition to such exception, that the holders of the Series E Preferred Stock shall have been afforded their rights hereunder upon the occurrence of a Business Combination.

VIII. ADJUSTMENTS

The Series E 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 E Preferred Stock will be proportionately increased and the Series E 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 E Preferred Stock will be proportionately reduced and the Series E Conversion Price in effect immediately prior to such combination will be proportionately increased.

B. Adjustments for Other Distributions . In the event the Corporation at any time or from time to time makes, or files a record date for the determination of holders of Common Stock entitled to receive any distribution payable in securities or assets of the Corporation other than shares of Common Stock, then and in each such event, provision shall be made so that the holders of Series E Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or assets of the Corporation which they would have received had their Series E Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities or assets receivable by them as aforesaid during such period, subject to all other adjustment called for during such period under this Article VIII, Section B with respect to the rights of the holders of the Series E Preferred Stock.

C. Adjustments for Reclassification, Exchange and Substitution . If the Common Stock issuable upon conversion of the Series E Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then and in each such event the holder of each share of Series E Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization or reclassification or other change by holders of the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series E Preferred Stock immediately before that change, all subject to further adjustment as provided herein.

D. Consolidation, Merger or Sale . In case of any consolidation of the Corporation with, or merger of the Corporation with or into one or more other corporations or entities, 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 E Preferred Stock will have the right to acquire and receive upon conversion of the Series E Preferred Stock in lieu of the shares of Common Stock immediately theretofore acquirable upon the conversion of the Series E 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 E 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 D 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 E 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 D and the obligations to deliver to the Holder of the Series E Preferred Stock such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire.

E. 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 E Preferred Stock had been converted into Common Stock immediately prior to the dividend declaration date), the Holder of the Series E Preferred Stock shall be entitled upon conversion of the Series E 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.

F. Adjustment Due to Dilutive Issuance . If, at any time prior to the nine (9) month anniversary of the date hereof 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 E Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (such lower price, the “ Base Share Price ” and such issuances, a “ Dilutive Issuance ”), then immediately upon the Dilutive Issuance, the Series E Conversion Price will be reduced and only reduced to equal the greater of (i) the Base Share Price and (ii) $0.10; provided, however , that only one adjustment will be made for each Dilutive Issuance. No adjustment to the Series E Conversion Price shall have the effect of increasing the Series E Conversion Price above the Series E Conversion Price in effect immediately prior to such adjustment.

G. Effect on Series E Conversion Price of Certain Events . For purposes of determining the adjusted Series E Conversion Price pursuant to Article VIII Section F, 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 E 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 of cash, 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 E 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.

(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 E 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 E 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 of cash, 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 E 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 E Conversion Price in effect at the time of such change will be readjusted to the Series E 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) 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.

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

(i) upon the issuance of shares of Common Stock or Options pursuant to any bona fide stock or option plan duly adopted by the Board of Directors of the Corporation; or

(ii) upon the issuance of shares of Common Stock issuable upon the exercise of Options or the Warrants or conversion of the Corporation’s Series C Preferred Stock, Series D Preferred Stock or any Convertible Securities that are outstanding as of the date of filing of this Certificate of Designations; 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 Business Combination, provided, in each instance and as a condition to such exception, that the holders of the Series E Preferred Stock shall have been afforded their rights hereunder upon the occurrence of a Business Combination.

I. Notice of Adjustment . Upon the occurrence of any event which requires any adjustment of the Series E Conversion Price, then, and in each such case, the Corporation shall give notice thereof to the Holder of the Series E Preferred Stock, which notice shall state the Series E 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.

J. Minimum Adjustment of Series E Conversion Price . No adjustment of the Series E Conversion Price shall be made in an amount of less than 1% of the Series E 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 E Conversion Price.

K. No Fractional Shares . No fractional shares of Common Stock are to be issued upon the conversion of the Series E 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.

L 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, or Business Combination with or into one or more other corporations or entities;

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

then, in each such case, the Corporation shall give to the Holder of the Series E Preferred Stock (a) written 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, winding-up or Deemed Liquidation Event and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, Business Combination, liquidation, winding-up of the Corporation or Deemed Liquidation Event, 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, Business Combination liquidation, winding-up of the Corporation or Deemed Liquidation Event, 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 E 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 E Preferred Stock, as provided herein. The vote or approval of the Majority Holders shall be required to pass any such matters.

B. General Voting Rights with Common Stock. Except as otherwise required by law, the Holder of each share of Series E 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 difference between (i) the number of shares of Common Stock into which such share of Series E 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 and (ii) one (1), 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 E 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.

X. PROTECTION PROVISIONS

A. Negative Covenants. For so long as 25% of the authorized shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Series E Preferred Stock are outstanding, the Corporation shall not take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the affirmative vote or written consent of the Majority Holders, voting or consenting as a separate class, given in person or by proxy:

(a) issue any additional shares of Series E Preferred Stock; or

(b) amend or modify in any manner this Series E Certificate of Designation; or

(c) alter or change the rights, preferences, privileges or restrictions of the shares of Series E Preferred Stock so as to affect adversely the shares of such series, whether by amendment or modification to the Corporation’s Certificate of Incorporation, Bylaws or otherwise provided, however, that (i) no such amendment by its express terms shall adversely affect any Holder differently than it affects all other Holders, unless such Holder consents thereto, and (ii) no such amendment concerning the number of Conversion Shares or Series E Conversion Price shall be made unless any Holder who will be affected by such amendment consents thereto; or

(d) amend or modify in any manner the Co-Sale rights as set forth in Section 7.3 of the Purchase Agreement;

(e) enter into any material transactions with Affiliates not on arms-length terms, or

(f) at any time prior to the nine (9) month anniversary of the consummation of the transactions contemplated by the Purchase Agreement, make or agree to make any Dilutive Issuance that would result in a Base Share Price of $0.10 or less.

B. Affirmative Covenants. For so long as 25% of the authorized shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Series E Preferred Stock are outstanding, the Corporation (on behalf of itself and its subsidiaries) shall:

(a) take the necessary steps to preserve its corporate existence and its right to conduct business under the laws, rules and regulations of the United State and all states or other jurisdictions and all self regulatory organizations in which the nature of its business requires qualification to do business; provided, however, that the foregoing shall not prohibit the Corporation from engaging in a Business Combination;

(b) keep its books of account in accordance with good accounting practices; and

(c) comply in all material respects with all applicable laws, rules or regulations, or determinations of any arbitrator or a court or other governmental authority, in each case applicable to or binding upon the Corporation or any of its or its subsidiaries property or to which each the Corporation or any of its or its subsidiaries property is subject.

XI. MISCELLANEOUS

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

B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any Series E 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 E Preferred Stock Certificate(s) (surrendered for cancellation), the Corporation shall execute and deliver new Series E 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 E Preferred Stock Certificate(s) if the Holder contemporaneously requests the Corporation to convert such Series E 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 E Preferred Stock granted hereunder may be waived as to all shares of Series E 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 E Preferred Stock shall be required.

D. 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 or e-mail 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 or e-mail 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, 27 th 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.

E. Headings . Section headings in this Certificate of Designations are for convenience only, and shall not be used in the construction of this Certificate of Designations.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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 30 th day of March 2012.

	NATIONAL HOLDINGS CORPORATION

	By:	/s/ Mark H. Goldwasser
	Name:	Mark H. Goldwasser
	Title:	Chief Executive Officer

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert the Series E Preferred Stock)

The undersigned hereby irrevocably elects to convert __________ shares of Series E Convertible Preferred Stock (the “Conversion”), represented by Stock Certificate No(s). ______________ (the “Series E 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 E 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 E 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 E 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 E 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 E Conversion Price: $________

Signature:

Name:

Address:

Exhibit 4.1

THIS PROMISSORY NOTE AND THE SECURITIES OBTAINABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 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.

6% CONVERTIBLE SUBORDINATED PROMISSORY NOTE

	March 30, 2012
U.S. $3,300,000

FOR VALUE RECEIVED, the undersigned, National Holdings Corporation, a Delaware corporation (the “Company”), hereby unconditionally promises to pay National Securities Growth Partners LLC (the “Holder”), on the Maturity Date (as defined in Section 1 hereof) to the order of the Holder, in lawful money of the United States of America and in immediately available funds, the principal amount of THREE MILLION THREE HUNDRED THOUSAND AND 00/100 UNITED STATES DOLLARS ($3,300,000) (the “Principal Amount”). Simple interest shall accrue and be payable under this Note at the Maturity Date or upon conversion at the rate of 6% per annum (“Interest”).

This Note shall be binding upon the Company and its successors and permitted assigns and shall inure to the benefit of the Holder and its successors and assigns. The Company may not assign or delegate any of its duties or obligations under this Note without the written consent of the Holder.

This Note is a 6% convertible subordinated promissory note made by the Company in favor of the Holder (the “Note”) and issued pursuant to that certain Securities Purchase Agreement by and between the Company and the Holder, of even date herewith (the “Securities Purchase Agreement”).

1. Maturity . Unless otherwise converted into the Units (as hereinafter defined) in accordance with Section 2 hereof, this Note shall mature on the earlier to occur of (i) 10 business days after delivery by the Holder of a notice of maturity (the “Maturity Notice”); provided that the Holder shall not be entitled to issue a Maturity Notice prior to December 30, 2012, or (ii) March 30, 2015, unless, in each case, such date shall be otherwise extended in writing by the Holder in the Holder’s sole and absolute discretion (such date, the “Maturity Date”); provided that upon completion of a restructuring of the capital of the Company in a manner satisfactory to the Holder, in its sole discretion (a “Company Restructuring”), the Maturity Date shall be March 30, 2015, unless extended in accordance with this paragraph 1; provided further for the avoidance of doubt, that upon a Company Restructuring, the Holder shall not be entitled to deliver a Maturity Notice prior to March 30, 2015, unless otherwise agreed in writing by the Company and the Holder. On the Maturity Date, unless, and to the extent, converted into Units in accordance with the provisions hereof or unless an Event of Default (as defined below) shall be in effect, any and all outstanding Principal and accrued Interest due and owing under the Note shall be immediately paid by the Company.

2. Conversion .

(a) Conversion Price and Optional Conversion . The Holder shall have the right, at its option at any time prior to the Maturity Date, to convert all or a portion of the Principal Amount of this Note then outstanding, together with any accrued but unpaid interest, into units of the Company (the “Units”) consisting of (a) a newly created class of Series E Preferred Stock of the Company (the “Preferred Stock”) convertible into shares of the Company’s common stock, $0.02 par value per share at a purchase price of $50.00 per share of Series E Preferred Stock (the “Common Stock”) and (b) a warrant exercisable for shares of Common Stock equal to 100% of the shares of Common Stock underlying the Preferred Stock at a exercise price of $0.50 per share (subject to adjustment) (the “Unit Warrant”). The number of Units to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the principal amount of this Note being converted by (ii) the price per Unit being sold in the Equity Financing (hereinafter referred to as the “Conversion Price”). Any fraction of a Unit resulting from this calculation shall be rounded upward to the next whole Unit. The Company covenants to cause the Preferred Stock, the Unit Warrant and the shares of Common Stock underlying the Preferred Stock and the Unit Warrant, when issued pursuant to this Section 2(a) or the terms of the Preferred Stock and the Unit Warrant, to be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof, other than any taxes, liens or charges not caused by the Company.

(b) Mechanics and Effect of Conversion . To exercise the conversion privilege, the Holder shall surrender this Note, together with a written conversion notice, (a “Written Election to Convert”) in the form attached hereto as Exhibit A , to the Company at its principal office within 10 business days of its receipt of notice by the Company at any time. Following the Company’s receipt of the Written Election to Convert, the Holder, or the nominee or nominees of such Holder, shall be treated for all purposes as the record holder of the Units and the securities thereunder deliverable upon such conversion as of the close of business on such date. At its expense, the Company shall, within 5 days after receipt of the Written Election to Convert, issue and deliver to such Holder, at such Holder’s principal office, a certificate or certificates for the number of Units, Preferred Stock and Unit Warrants to which such Holder is entitled upon such conversion, together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note. Upon conversion of this Note, the Company will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the Principal Amount and accrued Interest being converted including without limitation the obligation to pay such portion of the Principal Amount and accrued Interest.

(c) Equity Closing. The Holder and the Company shall undertake their good faith best efforts to consummate the equity financing (the “Equity Financing”) pursuant to the Securities Purchase Agreement, including, without limitation, satisfying all conditions to the Equity Closing (as defined in the Securities Purchase Agreement). For the period beginning on the date hereof and ending on the earlier of the Maturity Date and the Equity Closing, without the prior written consent of the Holder, not to be unreasonably withheld or delayed, neither the Company nor any Subsidiary shall consummate, or enter into or continue (and shall immediate cease) any discussions with any person or entity relating to, any equity or equity-linked financing of the Company or any Subsidiary that is not consistent with the terms and conditions of the Equity Financing unless, as liquidated damages, and not as a penalty, the Company (i) pays to the Holder in cash an amount equal to the price per Unit as set forth in the Securities Purchase Agreement as if the Holder had actually converted the Note into the Preferred Stock and (ii) issues the Holder the Unit Warrants.

(d) Indebtedness . The Company will not, prior to the Maturity Date, issue or otherwise become obligated to pay, create, incur, assume or suffer to exist any indebtedness, other than customary indebtedness incurred in the ordinary course of business, without the prior written consent of the Holder.

3. Events of Default . Subject to the subordination provisions herein, the entire unpaid Principal Amount and accrued Interest under this Note shall immediately become and be due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company, if any one or more of the following events (herein called “Events of Default”) shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing:

(a) the Company shall default in the performance of, or violate any of the covenants and agreements contained in this Note, including without limitation, the failure to pay amounts due under this Note on its Maturity Date, or any of the other Notes on their Maturity Date;

(b) the Company shall default in the performance of, or violate any of the covenants and agreements, or breach in any material respect its representations and warranties contained in the Securities Purchase Agreement;

(c) there shall be a dissolution, termination of existence, suspension or discontinuance of the Company’s or any of its Subsidiaries’ (as defined in the Securities Purchase Agreement) business for a continuous period of 10 days or it ceases to operate as going concern;

(d) the Company or any Subsidiary shall have received:

(i) any oral or written notice from the SEC, FINRA (as defined in the Securities Purchase Agreement) or any state securities regulatory authority of any pending or threatened action or proceeding relating to the revocation or modification of any registration or qualification of the Company’s broker-dealer Subsidiaries as broker-dealers (it being agreed by the Company that it shall immediately notify the Holder of any such occurrence); or

(ii) a final, non-appealable denying appeal order from FINRA of the Form 1017 application (or any similar application, if required) in connection with the transactions contemplated by the Securities Purchase Agreement;

(e) if the Company or any Subsidiary of the Company shall:

(i) admit in writing its inability to pay its debts generally as they become due;

(ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act;

(iii) convey any material portion of the assets of the Company to a trustee, mortgage or liquidating agent or make an assignment for the benefit of creditors;

(iv) consent to the appointment of a receiver, trustee, custodian or similar official, for the Company or any material portion of the property or assets of the Company; or

(v) on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or

(vi) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof;

(f) if a court of competent jurisdiction shall enter an order, judgment, or decree appointing, without the consent of the Company or the applicable Subsidiary of the Company, a receiver of the whole or any substantial part of the Company’s or any Subsidiary’s assets;

(g) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the whole or any substantial part of the Company’s or any of its Subsidiaries assets; or

(h) if an event of default or acceleration of the stated maturity occurs under the Senior Indebtedness (as defined below).

4. Remedies . In case any one or more of the Events of Default specified in Section 3 hereof shall have occurred and be continuing, the Holder may proceed to protect and enforce the Holder’s rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note or in aid of the exercise of any power granted in this Note, or the Holder may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the Holder.

5. Subordination . The indebtedness evidenced by this Note is subordinated and junior in right of payment to all Senior Indebtedness (as defined below) to the extent and in the manner set forth in this Section 5 . In the event of (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, debt readjustment or composition or other similar proceeding relative to the Company, (ii) any proceeding for voluntary liquidation, dissolution or other winding up of the Company or (iii) any assignment for the benefit of creditors or any other marshaling of the assets of the Company, then and in any such event the holders of all Senior Indebtedness shall first be paid in full the principal thereof and prepayment charges, if any, and interest at the time due thereon before any payment or distribution of any character, whether in cash, securities or other property, shall be made on account of this Note. Unless and until all Senior Indebtedness has been fully paid and satisfied in cash, the Holder of this Note shall not (i) accept or receive, by setoff or in any other manner, from the Company the whole or any part of any sums which may now or hereafter be owing to the Holder by the Company, (ii) declare or in any other manner find or hold the Company in default, or (iii) commence, prosecute or participate in any administrative, legal or equitable action against the Company concerning this Note. For purposes hereof, the term “Senior Indebtedness” shall mean the principal, premium (if any), unpaid interest and other obligations arising out of (i) that certain note, in the principal amount of Three Million ($3,000,000) Dollars, dated June 30, 2008, issued to St. Cloud Capital Partners II, L.P. and (ii) up to $1,000,000 of other senior indebtedness that may be incurred by the Company after the date hereof in favor of St. Cloud Capital Partners II, L.P., all of which shall rank senior to this Note.

6. Prepayment . This Note shall be payable at the option of the Company at any time on or after March 30, 2015 and without prepayment penalty upon thirty (30) days notice. Upon the occurrence of a Change of Control, this Note shall be automatically due and payable. In the event of a Change of Control or any prepayment, whether partial or in full, the Company will give the Holder not less than fifteen (15) calendar days prior written notice, and during such fifteen (15) day period, Holder shall be entitled to exercise it optional conversion feature. “Change of Control” shall be deemed to mean (i) any transaction or series of related transactions (including any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding voting power of the Company, or (ii) a sale of all or substantially all of the assets of the Company to another person.

7. Registration Rights . The Holder shall be entitled to the rights set forth under that certain registration rights agreement dated as of March 30, 2012, by and between the Holder and the Company, to allow for, among other things, the registration of the resale of the Common Stock issuable upon conversion of this Note under the Securities Act of 1933, as amended.

8. Amendments and Waivers . The terms of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) with the Holder’s consent.

9. Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Securities Purchase Agreement.

10. Severability . The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable.

11. Governing Law; Venue . This Note shall be governed by and construed under the laws of the State of New York applicable to agreements made and to be performed entirely within such jurisdiction. The Company 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, 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. The Company 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 Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE.

12. Waivers . The nonexercise by either party of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

13. Costs . If an action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action.

14. Successors and Assigns . This Note shall be binding upon the successors or assigns of the Company and shall inure to the benefit of the successors and assigns of the Holder.

IN WITNESS WHEREOF, the Company has have caused its duly authorized officers to execute this Note as of the date first written above.

COMPANY:

NATIONAL HOLDINGS CORPORATION

By: /s/ Mark H. Goldwasser

Name: Mark H. Goldwasser

Title: Chief Executive Officer

[SIGNATURE PAGE TO CONVERTIBLE NOTE]

EXHIBIT A

WRITTEN ELECTION TO CONVERT

National Securities Growth Partners LLC, the registered holder of this 6% Convertible Subordinated Promissory Note, issued March 30, 2012 hereby gives notice of the conversion of $3,300,000 of Principal Amount, together with accrued interest into Units of National Holdings Corporation at the applicable Conversion Price.

Signature of Holder:

NATIONAL SECURITIES GROWTH PARTNERS LLC

By: ______________________________________________

Name:

Title:

Exhibit 4.2

Execution Version

6% CONVERTIBLE SUBORDINATED PROMISSORY NOTE

	April 4, 2012
U.S. $ 700,000

FOR VALUE RECEIVED, the undersigned, National Holdings Corporation, a Delaware corporation (the “Company”), hereby unconditionally promises to pay National Securities Growth Partners LLC (the “Holder”), on the Maturity Date (as defined in Section 1 hereof) to the order of the Holder, in lawful money of the United States of America and in immediately available funds, the principal amount of SEVEN HUNDRED THOUSAND AND 00/100 UNITED STATES DOLLARS ($700,000) (the “Principal Amount”). Simple interest shall accrue and be payable under this Note at the Maturity Date or upon conversion at the rate of 6% per annum (“Interest”).

1. Maturity . Unless otherwise converted into the Units (as hereinafter defined) in accordance with Section 2 hereof, this Note shall mature on the earlier to occur of (i) 10 business days after delivery by the Holder of a notice of maturity (the “Maturity Notice”); provided that the Holder shall not be entitled to issue a Maturity Notice prior to December 31, 2012, or (ii) March 31, 2015, unless, in each case, such date shall be otherwise extended in writing by the Holder in the Holder’s sole and absolute discretion (such date, the “Maturity Date”); provided that upon completion of a restructuring of the capital of the Company in a manner satisfactory to the Holder, in its sole discretion (a “Company Restructuring”), the Maturity Date shall be March 31, 2015, unless extended in accordance with this paragraph 1; provided further for the avoidance of doubt, that upon a Company Restructuring, the Holder shall not be entitled to deliver a Maturity Notice prior to March 31, 2015, unless otherwise agreed in writing by the Company and the Holder. On the Maturity Date, unless, and to the extent, converted into Units in accordance with the provisions hereof or unless an Event of Default (as defined below) shall be in effect, any and all outstanding Principal and accrued Interest due and owing under the Note shall be immediately paid by the Company.

2. Conversion .

(d) the Company or any Subsidiary shall have received:

(e) if the Company or any Subsidiary of the Company shall:

(i) admit in writing its inability to pay its debts generally as they become due;

(ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act;

(iii) convey any material portion of the assets of the Company to a trustee, mortgage or liquidating agent or make an assignment for the benefit of creditors;

(iv) consent to the appointment of a receiver, trustee, custodian or similar official, for the Company or any material portion of the property or assets of the Company; or

(v) on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or

(h) if an event of default or acceleration of the stated maturity occurs under the Senior Indebtedness (as defined below).

6. Prepayment . This Note shall be payable at the option of the Company at any time on or after March 31, 2015 and without prepayment penalty upon thirty (30) days notice. Upon the occurrence of a Change of Control, this Note shall be automatically due and payable. In the event of a Change of Control or any prepayment, whether partial or in full, the Company will give the Holder not less than fifteen (15) calendar days prior written notice, and during such fifteen (15) day period, Holder shall be entitled to exercise it optional conversion feature. “Change of Control” shall be deemed to mean (i) any transaction or series of related transactions (including any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding voting power of the Company, or (ii) a sale of all or substantially all of the assets of the Company to another person.

12. Waivers . The nonexercise by either party of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

13. Costs . If an action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action.

14. Successors and Assigns . This Note shall be binding upon the successors or assigns of the Company and shall inure to the benefit of the successors and assigns of the Holder.

IN WITNESS WHEREOF, the Company has have caused its duly authorized officers to execute this Note as of the date first written above.

	COMPANY: NATIONAL HOLDINGS CORPORATION

	By:	/s/ Mark H. Goldwasser
	Name: Mark H. Goldwasser Title: Chief Executive Officer

[SIGNATURE PAGE TO CONVERTIBLE NOTE]

EXHIBIT A

WRITTEN ELECTION TO CONVERT

National Securities Growth Partners LLC, the registered holder of this 6% Convertible Subordinated Promissory Note, issued April 6, 2012 hereby gives notice of the conversion of $700,000 of Principal Amount, together with accrued interest into Units of National Holdings Corporation at the applicable Conversion Price.

	Signature of Holder: NATIONAL SECURITIES GROWTH PARTNERS LLC

	By:
		Name:
		Title:

Exhibit 4.3

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

NATIONAL HOLDINGS CORPORATION

WARRANT TO PURCHASE COMMON STOCK

Warrant No. Series E-2012-1B

Dated: [●], 2012

NATIONAL HOLDINGS CORPORATION, a Delaware corporation (the “ Company ”), hereby certifies that, for value received, National Securities Growth Partners LLC or his, her or its Permitted Transferees (as hereinafter defined) (the “ Holder ”), is entitled to purchase from the Company up to a total of [●] shares of common stock, par value $0.02 per share (the “ Common Stock ”), of the Company (each such share, a “ Warrant Share ” and all such shares issuable under the warrants, the “ Warrant Shares ”) at an exercise price of $0.50 (as adjusted from time to time as provided in Section 9 , the “ Exercise Price ”), subject to the terms and conditions contained herein.

This Warrant (“ Warrant ”) is being issued pursuant to that certain Securities Purchase Agreement by and between the Company and the Holder dated as of March 31, 2012 (the “ Purchase Agreement ”), pursuant to which the Company has issued a 6% convertible subordinated promissory note which is convertible into units (the “ Units ”) consisting of shares of Series E Convertible Preferred Stock (“ Series E Preferred Stock ”) and this Warrant. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement. All warrants that are included in the Units are referred to herein, collectively, as the “ Warrants ” and the holders of the Warrants (as well as any subsequent Permitted Transferee) along with the Holder named herein, the “ Holders .”

1. Vesting.

(a) Vesting; Exercise Period . Subject to the terms and conditions of this Warrant Certificate, the Warrants shall vest upon the date first written above (“ Issuance Date ”) and the first and second anniversary date (each an “Anniversary”) of the Issuance Date (each a “ Vesting Date ”) and shall be exercisable for a period of five years following such vesting (“ Exercise Period ”), in each case in accordance with the following schedule:

Vesting Date	Incremental Vesting	Total Vested	Exercise Period
[●], 2012	33 1/3%	33 1/3%	●.●.12 –●.●.17
[●], 2013	33 1/3%	66 2/3%	●.●.13 –●.●.18
[●], 2014	33 1/3%	100%	●.●.14 –●.●.19

provided, however that effective five (5) Business Days immediately prior to the record date of a Business Combination (as defined herein) all unvested amounts of the Warrants shall immediately vest and constitute vested Warrants and the Holder accordingly shall have the right to exercise all or any portion of the entire Warrant immediately on or after such date and prior to or after the closing of the Business Combination and the Exercise Period for such Warrants shall end the earlier of (i) the latest date shown under “Exercise Period” in the above table or (ii) five (5) years from the closing of the Business Combination. A “Business Combination” means any merger, consolidation or combination of the Corporation with or into any other corporation or entity, or any acquisition by the Corporation 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.

2. Registration of Warrant . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3. Registration of Transfers . To the extent that the Company approves a transfer of this Warrant, the Company shall register the transfer and/or assignment of any portion of this Warrant (a “ Permitted Transferee ”) in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company’s transfer agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the Permitted Transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the Permitted Transferee thereof shall be deemed the acceptance by such Permitted Transferee of all of the rights and obligations of a holder of a Warrant. The following persons or entities shall be deemed Permitted Transferees without the requirement of any prior or other approval of the Company: (a) in the case of a Holder that is an individual (i) a transferee receiving this Warrant by inter vivos gift or transfer or estate or tax planning purposes, or death by will or intestacy, in either case, to the Holder’s immediate family or to a trust, the beneficiaries of which are exclusively the Holder and a member or members of the Holder’s immediate family or (ii) a transferee which is any entity controlled by the Holder or (b) in the case of a Holder that is an entity, a transferee that is a successor via any transaction to all or substantially all of such Holder’s assets.

4. Exercise and Duration of Warrants .

(a) This Warrant shall be exercisable by the registered Holder at any time and from time to time during the applicable Exercise Period set forth in Section 1(a) of this Warrant (the final date of the applicable Exercise Period, the “ Expiration Date ”). At 5:00 p.m., (New York City time) on the Expiration Date, the applicable portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and no longer be outstanding.

(b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “ Exercise Notice ”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “Cashless Exercise” if so indicated in the Exercise Notice pursuant to Section 10 below), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .”

(c) Exercise Disputes . In the case of any dispute with respect to the number of shares to be issued upon exercise of this Warrant, the Company shall promptly issue such number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the Holder via fax (or, if the Holder has not provided the Company with a fax number, by overnight courier) within three (3) Business Days of receipt of the Holder’s election to purchase Warrant Shares. If the Holder and the Company are unable to agree as to the determination of the Exercise Price within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall in accordance with this Section, submit via facsimile the disputed determination to an independent, reputable outside accountant jointly determined by the Company and the Holder. The Company shall cause such accountant to perform the determinations or calculations and notify the Company and the Holder of the results promptly, in writing and in sufficient detail to give the Holder and the Company a clear understanding of the issue. The determination by such accountant shall be binding upon all parties absent manifest error. The Company shall then on the next Business Day instruct its transfer agent to issue certificate(s) (or issue by electronic means through Depository Trust Corporation (“ DTC ”) or another established clearing corporation performing similar functions, if available) representing the appropriate number of Warrant Shares of Common Stock in accordance with such accountant’s determination and this Section. The prevailing party shall be entitled to reimbursement of all fees and expenses of such determination and calculation.

5. Delivery of Warrant Shares .

(a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares to which the Holder is entitled upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable pursuant to Rule 144 under the Securities Act. To the extent the Warrant Shares may be issued free of restrictive legends as set forth above, upon request of the Holder, the Company shall use its best efforts to deliver Warrant Shares hereunder electronically through DTC or another established clearing corporation performing similar functions. For the purposes hereof, the term “ Trading Day ” means (a) any day on which the Common Stock is listed or quoted and traded on its primary trading market and/or quotation system, as the case may be, (b) if the Common Stock is not then listed or quoted and traded on any trading market, then a day on which trading occurs on the Nasdaq Capital Market (or any successor thereto), or (c) if trading ceases to occur on the Nasdaq Capital Market (or any successor thereto), any Business Day.

(b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

(c) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

(d) Company’s Failure to Timely Deliver Securities . If, and only if, in the event that the Warrant Shares are registered under the Securities Act of 1933, as amended, the Company shall fail, for any reason or for no reason, to issue to the Holder within the later of three (3) Trading Days after receipt of the applicable Exercise Notice (the “ Share Delivery Deadline ” ), a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be), and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock times (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice.

6. Charges, Taxes and Expenses . Issuance and delivery of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided , however , that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7. Replacement of Warrant . If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe.

8. Reservation of Warrant Shares . The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (after giving effect to the adjustments and restrictions of Section 9 , if any). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

9. Certain Adjustments . The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9 .

(a) Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding, 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 Warrant Shares issuable upon exercise of this Warrant will be proportionately increased and the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company 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 Warrant Shares issuable upon exercise of this Warrant will be proportionately reduced and the Exercise Price in effect immediately prior to such combination will be proportionately increased.

(b) Adjustments for Other Distributions . In the event the Company at any time or from time to time makes, or files a record date for the determination of holders of Common Stock entitled to receive any distribution payable in securities or assets of the Company other than shares of Common Stock, then and in each such event, provision shall be made so that the holder of this Warrant shall receive upon exercise thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities or assets of the Company which they would have received had their Warrant been exercised into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the date of conversion, retained such securities or assets receivable by them as aforesaid during such period, subject to all other adjustment called for during such period under this Section 9(b) with respect to the rights of the holders of the Warrants.

(c) Adjustments for Reclassification, Exchange and Substitution . If the Common Stock issuable upon exercise of this Warrant shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then and in each such event the holder of this Warrant shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization or reclassification or other change by holders of the number of shares of Common Stock that would have been subject to receipt by the holder upon exercise of this Warrant immediately before that change, all subject to further adjustment as provided herein.

(d) Consolidation, Merger or Sale . In case of any consolidation of the Company with, or merger of the Company with or into one or more other corporations or entities, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the Holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, 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 exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 9(d) 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 will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Section 9(d) and the obligations to deliver to the Holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire.

(e) Distribution of Assets . In case the Company 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 Warrants had been converted into Common Stock immediately prior to the dividend declaration date), the Holder of this Warrant shall be entitled upon exercise of this Warrant 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.

(f) Additional Issuances of Equity Securities . If the Company, at any time from the date of issuance of this Warrant and for so long as this Warrant is outstanding, shall issue or sell any Equity Securities (as defined below) for no consideration or at an effective price per share less than the then effective Exercise Price (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive Issuance ”), as adjusted hereunder (if the holder of the Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the then effective Exercise Price, such issuance shall be deemed to have occurred for less than the then effective Exercise Price on such date of the Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced to equal the greater of (i) Base Share Price and (ii) $0.10. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 9(f) in respect of Exempt Issuances (as defined below). The Company shall notify the Holder in writing as promptly as reasonably possible following the issuance of any Equity Securities subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 9(f), upon the occurrence of any Dilutive Issuance while this Warrant is outstanding, after the date of such Dilutive Issuance the Holder is entitled to the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Exercise Notice.

For purposes of this Section 9(b), the following definitions shall apply:

“ Common Stock Equivalents ” means any securities of the Company or its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“ Equity Securities ” means (i) Common Stock and (ii) Common Stock Equivalents.

“ Exempt Issuance ” means an issuance of Equity Securities in the manner contemplated by Section (H) of Article VIII of the Series E Certificate of Designation.

(g) 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 Company 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 Section 9(g) as “ Options ”) and the price per share for which Common Stock is issuable upon the exercise of such Options is 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 Company 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 of cash, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company 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 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.

(ii) Issuance of Convertible Securities . If the Company in any manner issues or sells any other series or classes of Preferred Stock (other than the Series E Preferred Stock, but including, without limitation, shares of Series C Preferred Stock and Series D 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 Company 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 of cash, if any, received or receivable by the Company 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 Company 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 E 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 Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company 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) 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 Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company 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 Company 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 Company will be the Market Price (as defined in Article II of the Series E Certificate of Designation) 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 Company 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 Company.

(h) The Company will not by reorganization, transfer of assets, consolidation, merger, dissolution, or otherwise, avoid or seek to avoid observance or performance of any of the terms of this Section 9 , but will at all times in good faith assist in the carrying out and performance of all provisions of this Section 9 in order to protect the rights of the Holder against impairment.

(i) Number of Warrant Shares . Simultaneously with any adjustment to the Exercise Price pursuant to this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, as applicable, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased, as applicable, number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(j) Calculations . All calculations under this Section 9 shall be made to the nearest cent or the nearest share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(k) Notice of Adjustments . Upon the occurrence of each adjustment pursuant to this Section 9 , the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s Transfer Agent.

(l) 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.

(m) No Fractional Shares . No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company 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.

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

(i) the Company 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 Company 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 Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all its assets to, or business combination with or into one or more other corporations or entities;

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

then, in each such case, the Company shall give to the Holder of this Warrant (a) written notice of the date on which the books of the Company 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, business combination, liquidation or winding-up of the Company, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) 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, business combination 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 Company’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.

10. Payment of Exercise Price . The Holder shall pay the Exercise Price in immediately available funds (a “ Cash Exercise ”); or the Holder may satisfy its obligation to pay the Exercise Price through a “ Cashless Exercise ,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

	X = Y [(A-B)/A]
where:
	X = the number of Warrant Shares to be issued to the Holder.

	Y = the number of Warrant Shares with respect to which this Warrant is being exercised (prior to cashless exercise).

	A = the average of the Closing Prices for the five (5) Trading Days immediately prior to (but not including) the Exercise Date.

	B = the Exercise Price.

For purposes of this Section 10, “ Closing Prices ” for any date, shall mean the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary trading market on which the Common Stock is then listed or quoted.

11. Registration Rights . The Holder shall be entitled to the rights set forth under that certain registration rights agreement dated as of March 30, 2012, by and between the Holder and the Company, to allow for the registration of the resale of the Warrant Shares under the Securities Act of 1933, as amended.

12. Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay the Holder entitled to such fractional Warrant Share a sum in cash equal to such fraction (calculated to the nearest 1/100 th of a Warrant Share) multiplied by the then effective Exercise Price.

13. Notices . Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered in accordance with the notice provisions of the Purchase Agreement prior to 5:00 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered in accordance with the notice provisions of the Purchase Agreement on a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices or communications shall be as set forth in the Purchase Agreement.

14. Warrant Agent . The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation and/or other entity into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

15. Miscellaneous .

(a) Subject to the restrictions on transfer set forth on the first page hereof, this Warrant may be transferred or assigned by the Holder to a Permitted Transferee pursuant to Section 3, provided that, among other things, the Permitted Transferee covenants to be bound by the terms hereof. This Warrant may not be assigned by the Company, except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.

(b) The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, seek to call or redeem this Warrant or avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares, free from all taxes, liens, security interests, encumbrances, preemptive or similar rights and charges of stockholders (other than those imposed by the Holders), on the exercise of the Warrant, and (iii) will not close its stockholder books or records in any manner which interferes with the timely exercise of this Warrant.

(c) Remedies; Specific Performance . The Company acknowledges and agrees that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by the Holder hereof in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

(d) Amendments and Waivers . The Company may, without the consent of the Holder (but with written notice to the Holder), by supplemental agreement or otherwise, (i) make any changes or corrections in this Agreement that are required to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein or (ii) add to the covenants and agreements of the Company for the benefit of the Holder (including, without limitation, reduce the Exercise Price or extend the Expiration Date), or surrender any rights or power reserved to or conferred upon the Company in this Agreement; provided that, in the case of (i) or (ii), such changes or corrections shall not adversely affect the interests of the Holder of then outstanding Warrants in any material respect. This Warrant may also be amended or waived with the consent of the Company and the Holder. If a new warrant agent is appointed by the Company, it shall at the request of the Company, and without need of independent inquiry as to whether such supplemental agreement is permitted by the terms of this Section 15(d), join with the Company in the execution and delivery of any such supplemental agreements, but shall not be required to join in such execution and delivery for such supplemental agreement to become effective.

(e) Governing Law; Venue; Waiver of Jury Trial . This Warrant shall be governed by and construed exclusively in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to, arising out of or under this Warrant, shall be brought solely and exclusively in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereby expressly covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York City. The parties hereto expressly and irrevocably waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding (including, but not limited to, any motions made), the party prevailing therein shall be entitled to payment from the other party hereto of its reasonable counsel fees and disbursements. The Company and Holders hereby waive all rights to a trial by jury.

(f) Headings . The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(g) Partial Invalidity . In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

IN WITNESS WHEREOF , the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.


	NATIONAL HOLDINGS CORPORATION


	By:
		Name: Mark H. Goldwasser
		Title: Chief Executive Officer

[SIGNATURE PAGE TO SERIES E FIRST WARRANT]

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To: NATIONAL HOLDINGS CORPORATION

The undersigned is the Holder of Warrant No. _______ (the “ Warrant ”) issued by National Holdings Corporation, a Delaware corporation (the “ Company ”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

(a)

The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

(b)

The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

(c)

The holder shall make payment of the Exercise Price as follows (check one):

_______________ “Cash Exercise” under Section 10.

_______________ “Cashless Exercise” under Section 10.

(d)

If the holder is making a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

(e)

Pursuant to this exercise, the Company shall deliver to the holder ______________ Warrant Shares in accordance with the terms of the Warrant.

(f)

Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

(g)

Notwithstanding anything to the contrary contained herein, this Exercise Notice shall constitute a representation by the Holder that, after giving effect to the exercise provided for in this Exercise Notice, the Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 11 of the Warrant.

(h)

The Holder represents that, as of the date of exercise:

the Warrant Shares being purchased pursuant to this Exercise Notice are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

ii.

the Holder is an “ accredited investor ” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the U.S. Securities and Exchange Commission under the Securities Act.

(i)

If the Holder cannot make the representations required in Section (h)(ii) above because it is factually incorrect, it shall be a condition to the exercise of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the issuance of securities upon exercise of this Warrant shall not violate any United States or other applicable securities laws.

Dated: ______________,	Name of Holder: _____________________
		(Print)

	By:
	Name:
	Title:
		(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of National Holdings Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of National Holdings Corporation with full power of substitution in the premises.

The undersigned transferee agrees to be bound by the covenants of the Warrant Holder during the term of the Warrant.

The undersigned transferee agrees represents and warrants that:

the Warrant Shares being purchased pursuant to this Assignment are being acquired solely for the transferee’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

ii.

the undersigned transferee is an “ accredited investor ” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act.

If the undersigned transferee cannot make the representations required in clause (ii) above because it is factually incorrect, it shall be a condition to the transfer of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the transfer this Warrant shall not violate any United States or other applicable securities laws.

Dated: _____________, ____

	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)


	Address of Transferee




In the presence of:
________________________________________________	Signature of Transferee

Exhibit 10.1

NATIONAL HOLDINGS CORPORATION

SECURITIES PURCHASE AGREEMENT

DATED AS OF

March 30, 2012

with respect to

SALE OF

CONVERTIBLE NOTE, SERIES E PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 30, 2012, is entered into by and among National Holdings Corporation, a Delaware corporation (the “Company”) and the entity listed on Exhibit A hereto under the heading “Purchaser” (“Purchaser”).

WHEREAS, Purchaser wishes to purchase from the Company, and the Company wishes to sell and issue to Purchaser, upon the terms and conditions stated in this Agreement and the Convertible Notes (defined below), two 6% convertible subordinated promissory notes in substantially the form attached hereto as Exhibits B-1 and B-2 having aggregate principal amounts of $3,300,000 and $700,000, respectively (the “$3,300,000 Convertible Note” and the “$700,000 Convertible Note” and collectively the “Convertible Notes”), which Convertible Notes shall be convertible into (a) Shares of Series E Preferred Stock convertible into Common Stock and (b) warrants substantially in the forms attached hereto as Exhibit C , exercisable for 6,600,000 and 1,400,000 shares of Common Stock, respectively (the “6,600,000 Warrant” and the “1,400,000 Warrant” and, collectively, the “First Warrants”), at an exercise price of $0.50 per share (subject to adjustment) “First Warrant Shares”), in each case, in amounts contemplated by the Convertible Notes at the applicable Conversion Price (as defined in the Convertible Note) ((a) and (b) together, the “Conversion Units”);

WHEREAS, Purchaser wishes to purchase from the Company, and the Company wishes to sell and issue to Purchaser, upon the terms and conditions stated in this Agreement, (i) an aggregate of up to 120,000 shares (each, a “Share” and together, the “Shares”) of a newly created class of Series E Preferred Stock (the “Series E Preferred Stock”) convertible into shares of the Company’s common stock, $0.02 par value per share (the “Common Stock”), at a purchase price of $50.00 per Share and (ii) a warrant substantially in the form attached hereto as Exhibit D (the “Second Warrant”, and together with the First Warrants, the “Warrants”) to purchase an aggregate of up to 12,000,000 shares of Common Stock (subject to adjustment) (the Second Warrant Shares, and together with the First Warrant Shares, the “Warrant Shares”), at an exercise price of $0.50 per share (subject to adjustment), upon the terms and conditions set forth in this Agreement ((a) and (b) together, the “Equity Units”); and

WHEREAS , the Shares, the Warrants, the Warrant Shares and the Conversion Units issued pursuant to this Agreement are collectively referred to herein as the “Units.”

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

1. Authorization; Issuance of Convertible Note; Sale of Units .

1.1 Authorization . The Company has, or before each Debt Closing and the Equity Closing (as defined in Sections 2.3 and 2.4, respectively) will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of the Units.

1.2 Issuance of Convertible Notes . Subject to the terms and conditions of this Agreement, at the First Debt Closing, the Company will sell and Purchaser will purchase the $3,300,000 Convertible Note having an aggregate principal amount of $3,300,000. Subject to the terms and conditions of this Agreement, at the Second Debt Closing, the Company will sell and Purchaser will purchase the $700,000 Convertible Note having an aggregate principal amount of $700,000.

1.3 Sale of Units . Subject to the terms and conditions of this Agreement, at the Equity Closing, the Company will sell and Purchaser will purchase the Equity Units in the denominations set forth on Exhibit A attached hereto. The rights, designations and privileges of the Series E Preferred Stock are forth in the certificate of designations (“Series E Certificate of Designations”), in substantially the form as attached hereto as Exhibit E . The form of the Warrants are attached hereto as Exhibit C and Exhibit D .

1.4 Use of Proceeds . In accordance with the directions of the board of directors of the Company (the “Board”), as it shall be constituted in accordance with this Agreement on and as of the First Debt Closing Date (as defined below), the Company will use a portion of the proceeds from the sale of the $3,300,000 Convertible Note for satisfaction of outstanding indebtedness held by affiliates of St. Cloud Partners, L.P. (“St. Cloud”) evidenced by the 10% senior subordinated convertible promissory note in the principal amount of $3,000,000 (the “March St. Cloud Note”) issued pursuant to that certain Securities Purchase Agreement, dated as of March 31, 2008, by and between the Company and St. Cloud (the “March St. Cloud SPA”), and, at the option of Purchaser or the Board, a portion of the proceeds from the sale of the Equity Units for satisfaction of outstanding indebtedness held by affiliates of St. Cloud evidenced by the 10% senior subordinated convertible promissory note in the principal amount of $3,000,000 (the “June St. Cloud Note”) issued pursuant to that certain Securities Purchase Agreement, dated as of June 30, 2008, by and between the Company and St. Cloud (the “June St. Cloud SPA”), and any remaining proceeds for general corporate purposes.

2. Purchase Price; Closing.

2.1 Payment of the Debt Purchase Price. The aggregate purchase price to be paid by Purchaser to the Company to acquire the $3,300,000 Convertible Note will be $3,300,000 (the “First Debt Purchase Price”). The aggregate purchase price to be paid by Purchaser to the Company to acquire the $700,000 Convertible Note will be $700,000 (the “Second Debt Purchase Price”).

2.2 Payment of the Equity Purchase Price . The aggregate purchase price to be paid by Purchaser to the Company to acquire the Equity Units will be $6,000,000 (the “Equity Purchase Price”).

2.3 Debt Closings . Subject to the terms and conditions of this Agreement, the closing of the sale and purchase of the Convertible Notes under this Agreement (the “First Debt Closing” and the “Second Debt Closing”, respectively, and each a “Debt Closing”) will take place at the offices of Weil, Gotshal and Manges LLP, 100 Federal St., 34 th Floor, Boston, Massachusetts 02110 (or remotely via the exchange of documents and signatures) (i) with respect to the $3,300,000 Convertible Note, on the later to occur of: (A) March 30, 2012, or (ii) the third business day after the satisfaction or waiver by the applicable party hereto for whose benefit such condition exists of the conditions set forth in Section 5 and Section 6 (excluding conditions that, by their terms, cannot be satisfied until the First Debt Closing, but subject to the satisfaction or, where permitted, waiver of those conditions as of the First Debt Closing by the applicable party hereto for whose benefit such conditions exist), or such other date as agreed in writing by the parties hereto (the “First Debt Closing Date”) and (ii) with respect to the $700,000 Convertible Note, on the later to occur of: (A) April 6, 2012, or (ii) the third business day after the satisfaction or waiver by the applicable party hereto for whose benefit such condition exists of the conditions set forth in Section 5 and Section 6 (excluding conditions that, by their terms, cannot be satisfied until the Second Debt Closing, but subject to the satisfaction or, where permitted, waiver of those conditions as of the Second Debt Closing by the applicable party hereto for whose benefit such conditions exist), or such other date as agreed in writing by the parties hereto (the “Second Debt Closing Date” and together with the First Debt Closing Date, each a “Debt Closing Date”). At the First Debt Closing:

(a) the Company shall deliver to Purchaser, the $3,300,000 Convertible Note duly executed by the Company; and

(b) the Company shall deliver to Purchaser the registration rights agreement substantially in the form attached hereto as Exhibit F duly executed by the Company; and

(c) Purchaser shall pay directly to the Company, by wire transfer of immediately available funds, the First Debt Purchase Price for the $3,300,000 Convertible Note being purchased by Purchaser.

At the Second Debt Closing:

(x) the Company shall deliver to Purchaser, the $700,000 Convertible Note duly executed by the Company; and

(y) Purchaser shall pay directly to the Company, by wire transfer of immediately available funds, the Second Debt Purchase Price for the $700,000 Convertible Note being purchased by Purchaser; and

(z) the Company shall deliver to Purchaser, evidence reasonably satisfactory to Purchaser, in its sole discretion, effecting the dissolution of the OPN Joint Venture (as defined below).

2.4 Equity Closing Date . Subject to the terms and conditions of this Agreement, the closing of the sale and purchase of the Equity Units under this Agreement (the “Equity Closing”) will take place at the offices of Weil, Gotshal and Manges LLP, 100 Federal St., 34th Floor, Boston, Massachusetts 02110 (or remotely via the exchange of documents and signatures) on the third business day after the satisfaction or waiver by the applicable party hereto for whose benefit such condition exists of the conditions set forth in Section 7 and Section 8 (excluding conditions that, by their terms, cannot be satisfied until the Equity Closing, but subject to the satisfaction or, where permitted, waiver of those conditions as of the Equity Closing by the applicable party hereto for whose benefit such conditions exist) or such other date as agreed in writing by the parties hereto (the “Equity Closing Date”). At the Equity Closing, Purchaser shall pay directly to the Company, by wire transfer of immediately available funds, the Equity Purchase Price for the Equity Units being purchased by Purchaser.

For the avoidance of doubt, nothing contained in Section 2.3 or this Section 2.4 shall in any way limit the rights of the Purchaser to convert the Convertible Notes at any time following the applicable Debt Closing Date in accordance with the terms of such Convertible Note.

3. R epresentations of the Company . To induce Purchaser to enter into this Agreement and to purchase the Units, the Company hereby warrants, represents and covenants to Purchaser as set forth below in this Section 3. Except as set forth in the SEC Documents (as defined below) filed by the Company with the Securities and Exchange Commission (the “SEC”) from the date that is two (2) years prior to the date hereof or in the Disclosure Schedule attached hereto as Exhibit G , the Company represents and warrants to Purchaser that as of the applicable Debt Closing Date and as of the Equity Closing Date, as applicable:

3.1 Due Organization and Qualification . Each of the Company and its Subsidiaries (which for purposes of this Agreement is defined as the subsidiaries of the Company listed on Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011) is an entity duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is formed, and has the requisite power and authorization to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects (to the extent disclosed in the SEC Documents) of the Company or any Subsidiary, either individually or taken as a whole, (ii) the transactions contemplated hereby or by the Convertible Notes or (iii) the authority or ability of the Company to perform any of its obligations hereunder or under the Convertible Note. Other than the Subsidiaries, the Company owns no interest, directly or indirectly, in any corporation, partnership, joint venture (other than the OPN Joint Venture as defined herein), limited liability company or other entity. The Company has furnished to the Purchaser true, correct and complete copies of the Company’s articles of incorporation and bylaws as amended through the date of this Agreement.

3.2 Power and Authority . The Company has the requisite corporate power and authority to execute and deliver this Agreement, the Convertible Notes and the Units and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Company. This Agreement has been duly executed and delivered by the Company and is the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium, insolvency, reorganization or other similar laws now or hereafter in effect generally affecting the enforcement of creditors’ rights, specific performance, injunctive or other equitable remedies. No other corporate proceedings are necessary for the execution, issuance and delivery by the Company of this Agreement and the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated hereby.

3.3 Valid Issuance . The Convertible Note, the Series E Preferred Stock, the Warrants, the shares of Common Stock issuable upon conversion of the Series E Preferred Stock (“Conversion Shares”) and the Warrant Shares have been duly and validly authorized. When issued, the Series E Preferred Stock will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for those created by Purchaser. Upon due conversion of the Series E Preferred Stock, the Conversion Shares will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for permitted encumbrances that may be created by Purchaser. Upon the due exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable, and will be free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth herein or imposed by applicable securities laws and except for permitted encumbrances that may be created by Purchaser.

3.4 Brokers . Neither the Company nor any of Company’s officers, directors, employees or stockholders has employed any broker or finder in connection with the transactions contemplated by this Agreement and no fee is or will be due and owing to any broker or finder in connection with the transactions contemplated by this Agreement.

3.5 Private Placement . Assuming the accuracy of the Purchaser representations and warranties set forth in Section 4 hereof, no registration under the Securities Act of 1933, as amended (“Securities Act”) is required for the offer and sale of the Units by the Company.

3.6 Material Contracts . Neither the Company or any Subsidiary is in material default under any Material Contract, nor, to the knowledge of the Company, is any other party to any such Material Contract in material breach of or default thereunder, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a material breach or default on the Company or any Subsidiary or any other party thereunder under any Material Contract. “Material Contract” shall mean, any contract of the Company or any Subsidiary that (i) is or would be required to be filed by the Company as a “material contract” with the SEC pursuant to Item 601(b)(10) of Regulation S-K or disclosed by the Company on Form 8-K, (ii) relates to the formation, creation, operation, management or control of any partnership or joint venture that is material to the business of the Company and its Subsidiaries, taken as a whole, (iii) relates to the incurrence of indebtedness for borrowed money in the principal amount of $100,000 or more, or to mortgaging, pledging or otherwise placing a lien on any material portion of the assets of the Company and its Subsidiaries, (iv) guarantees any obligation of an unrelated third party for borrowed money in excess of $100,000, (v) grants any Person a right of first refusal, right of first offer or similar right with respect to any material properties, assets or business of the Company and its Subsidiaries, or (vi) involves the purchase or sale of assets outside the ordinary course of business or relates to an acquisition, divestiture, merger or similar transaction and contains representations, covenants, indemnities or other obligations (including payment, indemnification, purchase price adjustment, “earn-out” or other obligations) of the Company or any of its Subsidiaries that are still in effect.

3.7 No Conflict . The execution, delivery and performance of this Agreement, including, without limitation, the issuance of the Convertible Notes or the Units by the Company and the consummation by the Company of the transactions contemplated hereby and thereby does not and will not (i) result in a violation of the Company’s certificate of incorporation (including, without limitation, any certificates of designations contained therein) or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company, or the Company’s or any Subsidiaries bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement (including any Material Contract), indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, federal and state securities laws and regulations and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and including all applicable federal laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations do not or could not reasonably be expected to have a Material Adverse Effect.

3.8 Consents . Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, arbitrational tribunal, administrative agency or commission or other governmental or self regulatory authority or agency (including, without limitation, FINRA and the SEC) (each of the foregoing is hereafter referred to as a “Governmental Entity”) or any other person (any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity, a “Person”) or entity in order for it to execute, deliver or perform any of its obligations under, or contemplated by, this Agreement, in each case, in accordance with the terms hereof or thereof, except (i) a filing pursuant to NASD Membership and Registration Rule 1017 with FINRA and approval thereof by FINRA, (ii) a Form D with the SEC and (iii) blue sky filings in various states. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the applicable Debt Closing or the Equity Closing have been obtained or effected on or prior to the applicable Debt Closing Date or the Equity Closing Date, as applicable, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated hereby, except to the extent failure to obtain such consents do not or could not reasonably be expected to have a Material Adverse Effect.

3.9 No Integrated Offering . None of the Company, its Subsidiaries or any of their affiliates, nor any Person or entity acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offer and sale of the Convertible Notes or the Units to require approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of FINRA. None of the Company, its Subsidiaries, their affiliates nor any Person or entity acting on their behalf has taken nor will they take any action or steps that would cause the offer and sale of the Convertible Notes or any of the Units to be integrated with other offerings of securities of the Company by the Company or any other Person or entity. The offer and sale of the Convertible Notes and the Units is not and will not be integrated with other offerings of securities of the Company by the Company or any other Person or entity.

3.10 Application of Takeover Protections . Other than the staggered board provisions contained in the Company’s bylaws and power and authority to issue ‘blank check’ preferred stock, the Company and its board of directors (the “Board”) have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation, bylaws or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Purchaser as a result of the transactions contemplated by this Agreement.

3.11 SEC Documents; Financial Statements . During the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company and its Subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate).

3.12 Absence of Certain Changes . Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition (financial or otherwise) or prospects (to the extent disclosed in the SEC Documents) of the Company or any of its Subsidiaries. Except as set forth in the SEC Documents, since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any actual knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company and its Subsidiaries, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the applicable Debt Closing or the Equity Closing will not be, Insolvent (as defined below). For purposes of this Section 3.12, “Insolvent” means, (a) with respect to the Company and its Subsidiaries, on a consolidated basis, (i) the Company and its Subsidiaries are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (ii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond their ability to pay as such debts mature; and (b) with respect to the Company and each Subsidiary, individually, (i) the Company or such Subsidiary (as the case may be) is unable to pay its respective debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured or (ii) the Company or such Subsidiary (as the case may be) intends to incur or believes that it will incur debts that would be beyond its respective ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s remaining assets constitute unreasonably small capital.

3.13 No Undisclosed Events, Liabilities, Developments or Circumstances . Except as described in Schedule 3.13, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects (to the extent disclosed in the SEC Documents), operations (including results thereof) or condition (financial or otherwise) that (i) would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its securities and which has not been publicly announced, (ii) could have a material adverse effect on any Purchaser’s investment hereunder or (iii) could have a Material Adverse Effect.

3.14 Conduct of Business; Regulatory Permits . Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its certificate of incorporation, bylaws, any certificate of designation, or preferences or rights of any other outstanding series of preferred stock of the Company or any of its Subsidiaries, respectively. Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities (including, without limitation, FINRA) necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit, which if so initiated and adjudicated against the Company would be reasonably expected to have a Material Adverse Effect. None of the Subsidiaries has received any notice of termination from one of their respective clearing brokers regarding such Subsidiaries’ relationship with such clearing broker.

3.15 Foreign Corrupt Practices . Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee or other Person or entity acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

3.16 Sarbanes-Oxley Act . The Company and each Subsidiary is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

3.17 Transactions With Affiliates . Except with respect to Purchaser, none of the officers, directors or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation, partnership, trust or other Person or entity in which any such officer, director or employee has a substantial interest or is an employee, officer, director, trustee or partner.

3.18 Capitalization .

(a) The authorized capital stock of the Company consists of 150,000,000 shares of Common Stock par value $0.02 and 10,000,000 shares of preferred stock, par value $0.01 (the “Preferred Stock”). As of the date hereof, there are 26,100,151 shares of Common Stock issued and outstanding, 34,167 shares of Series C Preferred Stock issued and outstanding, 60,000 shares of Series D Preferred Stock issued and outstanding, 0 shares of Common Stock are held by the Company as treasury stock and 0 shares of Preferred Stock are held by the Company as treasury stock. All of the issued and outstanding shares of Common Stock were duly authorized for issuance and are validly issued, fully paid and non-assessable and were not issued in violation of any purchase or call option, right of first refusal, subscription right, preemptive right or any similar rights. All of the outstanding shares of Common Stock and Preferred Stock are owned of record by the holders or in street name and in the respective amounts as are set forth on Schedule 3.18(a).

(b) Schedule 3.18(b) sets forth the holders of options to purchase shares of Common Stock (“Company Options”) and the respective number of shares of Common Stock subject to each outstanding Company Option, and the applicable exercise price, expiration date and vesting date. Except as set forth on Schedule 3.18(b), there is no existing option, warrant, call, right or Contract to which any Selling Stockholder or the Company is a party requiring, and there are no securities of the Company outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional shares of capital stock or other equity securities of the Company or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase shares of capital stock or other equity securities of the Company. Except as set forth in Schedule 3.18(b), there are no obligations, contingent or otherwise, of the Company or any Subsidiary to (i) repurchase, redeem or otherwise acquire any shares of Common Stock or the capital stock or other equity interests of any Subsidiary, or (ii) provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any Person. Except as set forth on Schedule 3.18(b), there are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to the Company or any of the Subsidiaries. There are no bonds, debentures, notes or other indebtedness of the Company or the Subsidiaries having the right to vote or consent (or, convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which stockholders (or other equityholders) of the Company of the Subsidiaries may vote. There are no voting trusts, irrevocable proxies or other Contracts or understandings to which the Company or any Subsidiary or any Selling Stockholder is a party or is bound with respect to the voting or consent of any shares of Common Stock or the equity interests of any Subsidiary.

3.19 Absence of Litigation . Except as described in Schedule 3.19, there is no action, suit, claim (including counterclaim), proceeding, inquiry or investigation by any Person or entity (a “Legal Proceeding”) or before any Governmental Entity pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or their respective officers or directors which individually or in the aggregate has or would reasonable be expected to have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC or FINRA involving the Company, any of its Subsidiaries or any current or former director or officer of the Company or any of its Subsidiaries. Neither the Company nor any Subsidiary is subject to any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Body (an “Order”), and neither the Company nor any Subsidiary is in breach or violation of any Order. Neither the Company nor any Subsidiary is engaged in any legal action to recover monies due it or for damages sustained by it. There are no Legal Proceedings pending, or, to the knowledge of the Company, threatened against the Company or to which the Company is otherwise a party relating to this Agreement or the transactions contemplated hereby or thereby.

3.20 Insurance . The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

3.21 Subsidiary Rights . The Company or one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

3.22 Tax Status . Each of the Company and its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim.

3.23 Internal Accounting and Disclosure Controls . Each of the Company and its Subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant or other Person or entity relating to any potential material weakness or significant deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries.

3.24 Off Balance Sheet Arrangements . There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

3.25 Investment Company Status . The Company is not, and upon consummation of the sale of the Convertible Notes and the Units will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

3.26 Money Laundering . The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

3.27 Management . During the past five year period, no current director or executive officer of the Company or any of its Subsidiaries has been the subject of:

(a) a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person or entity, or any partnership in which such Person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such Person was an executive officer at or within two years before the time of the filing of such petition or such appointment;

(b) a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations that do not relate to driving while intoxicated or driving under the influence);

(c) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such Person from, or otherwise limiting, the following activities:

(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other Person regulated by the United States Commodity Futures Trading Commission or an associated Person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii) Engaging in any type of business practice; or

(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;

(d) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than 60 days the right of any such Person to engage in any activity described in the preceding sub paragraph, or to be associated with Persons engaged in any such activity;

(e) a finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently reversed, suspended or vacated; or

(f) a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.

4. Representations of Purchaser . Purchaser represents and warrants to the Company as follows:

4.1 Existence and Power . Purchaser (a) is duly organized and validly existing and (b) has the requisite power and authority to execute, deliver and perform its obligations under this Agreement.

4.2 Authorization; No Contravention . The execution delivery and performance by Purchaser of this Agreement and the transactions contemplated hereby, (a) have been duly authorized by all necessary action, (b) do not contravene the terms of Purchaser’s organizational documents, or any amendment thereof, and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any lien under, any material contractual obligation of Purchaser or any requirement of law applicable to Purchaser, and (d) do not violate any orders of any Governmental Entity against, or binding upon, Purchaser.

4.3 Disclosure of Information . Purchaser acknowledges that it has received all the information that it has requested relating to the Company and the purchase of the Units. Purchaser further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Units.

4.4 Binding Effect . This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligations of Purchaser, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to granting a decree ordering specific performance or other equitable remedies.

4.5 Purchase for Own Account . The Convertible Notes and the Units hereby acquired by Purchaser pursuant to this Agreement are being acquired for Purchaser’s own account and with no intention of distributing or reselling such securities in any transaction that would be in violation of the securities laws of the United States of America or any state, without prejudice. If Purchaser should in the future decide to dispose of the Convertible Notes or any of the Units, Purchaser understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect. Purchaser agrees to the imprinting, so long as required by law, of legends on the Convertible Notes, the certificates representing the Series E Preferred Stock and Warrants, and, upon conversion, on the Conversion Shares and Warrant Shares, as follows:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

4.6 Restricted Securities . Purchaser understands the Convertible Note, the Units, the Series E Preferred Stock, Warrants and the shares of Common Stock underlying the Series E Preferred Stock and Warrants will not be registered at the time of their issuance under the Securities Act since they are being acquired from the Company in a transaction exempt from the registration requirements of the Securities Act and that the reliance of the Company on such exemption is predicated in part on Purchaser’s representations set forth herein.

4.7 Investment Representations . Purchaser (i) has such knowledge and experience in financial and business affairs that it is capable of evaluating the merits and risks involved in purchasing the Units, (ii) is able to bear the economic risks involving in purchasing the Units, (iii) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and (iv) has had the opportunity to ask questions of, and receive answers from, Company and Persons acting on Company’s behalf concerning Company’s business, management, and financial affairs and the terms and conditions of the Units.

4.8 Brokers . There is no broker, investment banker, financial advisor, finder or other Person who has been retained by or is authorized to act on behalf of Purchaser who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.

4.9 Short Sales and Confidentiality Prior to the Date Hereof . Other than the transactions contemplated hereunder, the Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, executed any disposition, including short sales, in the securities of the Company during the period commencing from the time that the Purchaser first received an indication of interest (written or oral) from the Company or any other Person setting forth the material terms of the transactions contemplated hereunder until the date hereof. Other than to other Persons party to this Agreement or as consented to by the Company, the Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

4.10 Money Laundering . The Purchaser and each Person owning directly at least 25% of the equity interests in the Purchaser are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

5. Conditions to Closing of Purchaser . The obligations of Purchaser to purchase the Convertible Notes being purchased at the First Debt Closing or Second Debt Closing are subject to the fulfillment at or before the First Debt Closing and Second Debt Closing, as applicable, of the following conditions precedent, any one or more of which may be waived in whole or in part by Purchaser, which waiver will be at the sole discretion of Purchaser:

5.1 Representations and Warranties . The representations and warranties made by the Company in this Agreement will have been true and correct in all respects as of the date when made and as of the applicable Debt Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

5.2 Agreements . All agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the applicable Debt Closing will have been performed or complied with by the Company prior to or at the applicable Debt Closing.

5.3 Consents, Etc.

(a) The Company will have secured and delivered to Purchaser all consents and authorizations that will be necessary or required lawfully to consummate this Agreement and to issue the Convertible Note to be purchased by Purchaser at the applicable Debt Closing, other than any consents or authorizations required by FINRA, which shall only be required in connection with the Equity Closing.

(b) The Company will have secured and delivered to Purchaser all necessary consents and authorizations from the holders of Series C Preferred Shares and the Series D Preferred Shares of the Company to enter into this Agreement, and consummate the transactions contemplated by this Agreement solely in connection with the applicable Debt Closing.

5.4 Delivery of Documents . All of the documents to be delivered by the Company pursuant to Section 2.3 will be in a form and substance reasonably satisfactory to Purchaser and its counsel, and will have been executed and delivered to Purchaser by each of the other parties thereto.

5.5 Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated by this Agreement solely in connection with the applicable Debt Closing and all documents and instruments incident to such transactions will be in a form and substance reasonably satisfactory to Purchaser and its counsel, and Purchaser and its counsel will have received all such counterpart originals or certified or other copies of such documents as Purchaser or its counsel may reasonably request.

5.6 Board Appointments . The Company shall have taken all corporate actions necessary to constitute the Company’s Board and any committees of the Board as set forth in accordance with Section 7.6 of this Agreement, including, without limitation, (i) increasing the size of the Board to nine (9) individuals, (ii) appointing the Series E Representatives and (iii) procuring the resignation of Michael S. Weiss, Paul S. Coviello and Jorge A. Ortega.

5.7 Broker-Dealer Matters . Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from the SEC, FINRA or any state securities regulatory authority of any pending or threatened action or proceeding relating to the revocation or modification of any registration or qualification of the Company’s broker-dealer Subsidiaries as broker-dealers. Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from any of their clearing brokers of any pending or threatened revocation, modification or cancellation of their clearing relationship with the Company’s broker-dealer Subsidiaries.

5.8 Certain Indebtedness . Any indebtedness of the Company held by St. Cloud as of the date hereof, including, for the avoidance of doubt, the March St. Cloud Note and the June St. Cloud Note, shall, as of immediately prior to the First Debt Closing Date and Second Debt Closing Date, as applicable (to the extent still outstanding, including as modified in any manner, substituted or otherwise replaced by any newly issued indebtedness) be held by St. Cloud; provided, however that with respect to the Second Debt Closing Date, if the March St. Cloud Note shall have been paid off prior to the Second Debt Closing Date, only the June St. Cloud Note shall be held by St. Cloud..

5.9 Board Composition . Upon repayment of the March St. Cloud Note in accordance with Section 1.4 and effective as of the First Debt Closing, the Company shall have appointed a director to the Board in accordance with the first proviso in Section 9.5(a)(i)(C), which director shall be reasonably acceptable to Purchaser.

6. Conditions to Debt Closings of the Company . The Company’s obligations to sell and issue the Convertible Notes at the First and Second Debt Closings are subject to the fulfillment at or before the applicable Debt Closings of the following conditions (as applicable), which conditions may be waived in whole or in part by the Company, and which waiver will be at the sole discretion of the Company:

6.1 Representations and Warranties . The representations and warranties made by Purchaser in this Agreement will have been true and correct in all respects as of the date when made and as of the First Debt Closing Date and the Second Debt Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

(a) Agreements . All agreements, and conditions contained in this Agreement to be performed or complied with by Purchaser prior to the First Debt Closing or Second Debt Closing, as applicable, will have been performed or complied with by the Company prior to or at the First Debt Closing or Second Debt Closing, as applicable.

(b) Payment of Debt Purchase Price . Purchaser will have tendered (either directly or through a designated escrow agent) the First Debt Purchase Price in exchange for the $3,300,000 Convertible Note being issued hereunder or the Second Debt Purchase Price in exchange for the $700,000 Convertible Note being issued hereunder, as applicable.

7. Conditions to Equity Closing of Purchaser . The obligations of Purchaser to purchase the Units (including, if applicable, the Conversion Units) being purchased at the Equity Closing are subject to the fulfillment at or before the Equity Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by Purchaser, which waiver will be at the sole discretion of Purchaser:

7.1 Representations and Warranties . The representations and warranties made by the Company in this Agreement will have been true and correct in all respects as of the date when made and as of the Equity Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

7.2 Agreements . All agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Equity Closing will have been performed or complied with by the Company prior to or at the Equity Closing.

7.3 Consents, Etc .

(a) The Company will have secured and delivered to Purchaser all consents and authorizations that will be necessary or required lawfully to consummate this Agreement and to issue the Units (including, if applicable, the Conversion Units) to be purchased by Purchaser at the Equity Closing, including, without limitation any consents or authorizations required by FINRA, that shall be specifically required in connection with the Equity Closing.

(b) The Company will have secured and delivered to Purchaser all necessary consents and authorizations from the holders of Series C Preferred Shares and Series D Preferred Shares of the Company and St. Cloud to consummate the transactions contemplated by this Agreement and the issuance of the Equity Units, including, without limitation (i) the conditions to the Debt Closing set forth in Section 5 and (ii) with respect to St. Cloud, (a) confirmation that the rights of St. Cloud set forth in Sections 7.7 and 7.8 of the March St. Cloud SPA shall terminate and be of no further force and effect upon full repayment by the Company of the March St. Cloud Note, (b) a waiver of the rights of first offer of St. Cloud set forth in each of Section 7.9 of the March St. Cloud SPA and Section 7.9 of the June St. Cloud SPA with respect to the transactions contemplated by this Agreement and (c) confirmation by St. Cloud of the provisions set forth in Section 9.5(a)(i)(C).

7.4 Delivery of Documents . To the extent not previously received by Purchaser, the Company shall deliver to Purchaser, evidence reasonably satisfactory to Purchaser, in its sole discretion, effecting the dissolution of the OPN Joint Venture (as defined below).

7.5 Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions will be in a form and substance reasonably satisfactory to Purchaser and its counsel, and Purchaser and its counsel will have received all such counterpart originals or certified or other copies of such documents as Purchaser or its counsel may reasonably request.

7.6 Board Appointments . Except with the prior written consent of the Purchaser, the Company shall not have taken any corporate actions since the Debt Closing to reconstitute the Board and any committees of the Board in a manner other than as set forth in Section 9.5 of this Agreement.

7.7 Certificate of Designation . The Certificate of Designation shall have been filed with and received by the Secretary of State of the State of Delaware.

7.8 Broker-Dealer Matters . Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from the SEC, FINRA or any state securities regulatory authority of any pending or threatened action or proceeding relating to the revocation or modification of any registration or qualification of the Company’s broker-dealer Subsidiaries as broker-dealers. Neither the Company nor any of its Affiliates or Subsidiaries has received any oral or written notice from any of their clearing brokers of any pending or threatened revocation, modification or cancellation of their clearing relationship with the Company’s broker-dealer Subsidiaries.

7.9 Litigation . No Legal Proceeding shall have been instituted or threatened before a court or other Governmental Entity to restrain or prohibit or materially delay any of the transactions contemplated hereby, and the Company shall have delivered to Purchaser a certificate from the Secretary of the Company, dated the Equity Closing Date, to such effect. No law or Order of any kind shall have been enacted, entered, promulgated or enforced by any court or Governmental Entity which would prohibit or materially delay the consummation of the transactions contemplated by this Agreement or has the effect of making them illegal.

7.10 Certain Indebtedness . Any indebtedness of the Company held by St. Cloud as of the date hereof, including, for the avoidance of doubt, the March St. Cloud Note and the June St. Cloud Note, shall, as of immediately prior to the Equity Closing Date (to the extent still outstanding, including as modified in any manner, substituted or otherwise replaced by any newly issued indebtedness) be held by St. Cloud.

8. Conditions to Equity Closing of the Company . The Company’s obligations to sell and issue the Units (including, if applicable, the Conversion Units) at the Equity Closing are subject to the fulfillment at or before the Equity Closing of the following conditions, which conditions may be waived in whole or in part by the Company, and which waiver will be at the sole discretion of the Company:

8.1 Representations and Warranties . The representations and warranties made by Purchaser in this Agreement will have been true and correct in all respects as of the date when made and as of the Equity Closing Date, except for the representations and warranties that are expressly made as of a particular date (which will remain true and correct as of such date).

8.2 Agreements. All agreements, and conditions contained in this Agreement to be performed or complied with by Purchaser prior to the Equity Closing will have been performed or complied with by the Company prior to or at the Equity Closing.

8.3 Payment of Equity Purchase Price . Purchaser will have tendered (either directly or through a designated escrow agent) the Equity Purchase Price in exchange for the Equity Units being issued hereunder.

9. Covenants and Agreements of the Parties .

9.1 Reservation of Common Stock . The Company will 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 of the Shares and the exercise of the Warrants, such number of shares of Common Stock as will from time to time equal the number of shares sufficient to permit the issuance of the shares of Common Stock underlying the Shares and the Warrants pursuant to the terms thereof.

9.2 Co-Sale Rights .

(a) Certain Definitions :

“Counter Party” shall mean a bona fide third party engaging in a Triggering Transaction with the Company during the Participation Period.

“Participation Period” shall mean the period commencing from the date of this Agreement and ending on the day that is nine months from the Equity Closing Date.

“Triggering Transaction” shall mean a bona fide equity or equity linked capital raising transaction by the Company with a Counter Party in which $3 million or more is invested into the Company, either in one or a series of related transactions.

(b) From and after the date hereof through the expiration of the Participation Period, if the Company seeks to effectuate a Triggering Transaction, then no less than twenty (20) days prior to the anticipated date of the closing of the Triggering Transaction (the “Co-Sale Closing Date”), the Company will provide written notice to Purchaser (a “Co-Sale Notice”). Pursuant to the Co-Sale Notice, Purchaser will have the right (but not the obligation) to require the Counter Party to purchase, for cash, shares of Series E Preferred Stock (or to the extent previously converted, the Conversion Shares) then owned by Purchaser up to the number of shares covered by the Triggering Transaction (the “Participation Securities”). Upon the proper delivery of the Co-Sale Notice in accordance with subsection (c) below, if Purchaser so elects, Purchaser will be obligated to sell to the Counter Party, and the Counter Party will be obligated to purchase from Purchaser, all of the Participation Securities held by Purchaser in accordance with the provisions set forth in this Section 9.2 (the “Co-Sale Right”). The Company covenants and agrees that as a condition to the consummation of the Triggering Transaction, the Company will require the Counter Party to abide by the provisions of this Section 9.2.

(c) In order to exercise the Co-Sale Right, Purchaser will deliver a written notice indicating Purchaser’s election to sell the Participation Securities (“Co-Sale Notice”) to the Company, which will be delivered to the Company at least five (5) days prior to the Co-Sale Closing Date. Upon receipt of such Co-Sale Notice, the Company will promptly, but in any event within two (2) days thereafter, deliver to the Counter Party written notice (the “Counter Party Notice”) indicating that the Co-Sale Right has been exercised and setting forth the per share consideration as contemplated by the Triggering Transaction applicable to Purchaser.

(d) The purchase of the Participation Securities will take place at a single closing at the offices of the Company on the Co-Sale Closing Date or such other date agreed to in writing by the Company and the Purchaser. At the closing, Purchaser will deliver to the Counter Party the certificate(s) evidencing the Participation Securities, a duly executed stock power, medallion guaranteed (if required) and an applicable instrument acknowledging the purchase of such Participation Securities by the Counter Party, which will include a certification that Purchaser has good and marketable title to such Participation Securities, free and clear of all liens, claims and encumbrances and the Counter Party will pay to Purchaser the same per-share consideration as contemplated by the Triggering Transaction for Purchaser’s Participation Securities in cash.

(e) If (A) Purchaser declines the opportunity to exercise the Co-Sale Right or (B) Purchaser fails to timely deliver a Co-Sale Notice to the Company, then the Co-Sale Right with respect to Purchaser will irrevocably expire and be of no further force and effect, provided , however, that if the proposed Triggering Transaction is not consummated, then the Co-Sale Rights will once again be reinstated for Purchaser.

9.3 Confidentiality . Each party to this Agreement shall hold, and shall cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a Governmental Entity is necessary or appropriate in connection with any necessary regulatory approval or unless compelled to disclose by judicial or administrative process or, in the written opinion of its counsel, by other requirement of law or the applicable requirements of any Governmental Entity, all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such Information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other Person, except its auditors, attorneys, financial advisors, other consultants and advisors.

9.4 Conduct of the Business . Prior to the earlier of the Equity Closing Date and the termination of this Agreement, the Company shall, and, shall cause each Subsidiary of the Company to: (a) use commercially reasonable efforts to carry on its business in the ordinary course of business and use reasonable best efforts to maintain and preserve its and such Subsidiary’s business (including its relationships with customers, strategic partners, suppliers, distributors and others having business dealings with it); provided , that nothing in this clause (a) shall limit or require any actions that the Board may, in good faith, determine to be inconsistent with their duties or the Company’s obligations under applicable law or imposed by any Governmental Entity, (b) if the Company shall (1) declare or pay any dividend or distribution (other than ordinary cash dividends consistent with past practices) on any shares of Company capital stock, or (2) take any action that would require any adjustment to be made under the terms of the Units as if such Units were issued on the date of this Agreement, make appropriate adjustments with respect to the Purchaser such that the Purchaser shall receive the benefit of such transaction as if the Equity Units to be issued to the Purchaser at the Equity Closing had been outstanding as of the date of such action and (c) to the extent reasonably practicable, shall consult with the Purchaser prior to taking any material actions outside of the ordinary course of business.

9.5 Board of Directors; Board Committees .

(a) (1) Beginning as of the First Debt Closing Date and continuing until the Equity Closing Date, for so long as any principal remains outstanding under the Convertible Note and, (2) beginning as of the Equity Closing Date, for so long as (A) at least 100,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of the Series E Preferred Stock are outstanding or (B) Purchaser holds an amount of capital stock of the Company equal to at least 30% of the original number of Conversion Shares purchased pursuant to this Agreement, subject to applicable law and the Board’s fiduciary duty to its shareholders:

(i) the Board shall take such corporate actions as necessary (i) to fix the number of directors of the Board at nine (9) (or such greater number approved by Purchaser), and (ii) to elect and thereafter to continue in office as a director of the Company the following:

(A)

four (4) directors nominated by the stockholders of Series E Preferred Stock (collectively, the “Series E Representatives”), and the Company undertake to include such nominee in its proxy statement for the first annual meeting of the Company following the Debt Closing; provided , that one (1) of the Series E Representatives shall, at all times, be designated as the non-executive chairman and three (3) of the Series E Representatives must be Independent); provided further, that the initial Series E Representatives shall be Robert B. Fagenson, Mark D. Klein, Bryant R. Riley and one director to be specified by Purchaser at a later date;

(B)

the then current Chief Executive Officer of the Company and the then current President of the Company; provided, however, that if Michael Weiss has not resigned from the Board by April 14, 2012, the Chief Executive Officer of the Company will resign from the Board;

(C)

as long as required by the March St. Cloud SPA and the June St. Cloud SPA, two (2) directors nominated by St. Cloud (collectively, the “St. Cloud Representatives”); provided , that at such time as St. Cloud has a contractual right pursuant to the St. Cloud Agreements to nominate only one (1) director, the nominating and governance committee shall nominate and approve one (1) director and St. Cloud shall nominate one (1) director at such time; provided further that at such time as St. Cloud no longer has a contractual right pursuant to the March St. Cloud SPA and the June St. Cloud SPA to nominate a director, the nominating and governance committee shall instead nominate and approve two (2) directors, at least one of which shall be Independent; provided further that for the avoidance of doubt, St. Cloud shall have the contractual right pursuant to the March St. Cloud SPA and the June St. Cloud SPA to nominate only one (1) director at such time as all indebtedness under any one of the March St. Cloud Note or the June St. Cloud Note has been paid in full by the Company and at such time as there is no outstanding indebtedness held by St. Cloud and its affiliates (or any successor in interest to such indebtedness) pursuant to the March St. Cloud Note or the June St. Cloud Note (the “St. Cloud Debt”), St. Cloud (or any successor in interest) shall have no contractual rights pursuant to the March St. Cloud SPA, the June St. Cloud SPA or this Agreement to nominate directors and such directors shall instead be nominated by the nominating and governance committee.

(D)

Michael Weiss; provided however, that from and after the Second Debt Closing Date, Mr. Weiss will be replaced by one (1) Independent director nominated by the holders of a majority of the then outstanding Series C Preferred Stock (the “Series C Representative”).

For purposes of this Agreement, “Independent” shall mean, with respect to a director, that such director, in the reasonable opinion of the Board, would meet the standards to be an “Independent Director” as defined by Section 5605(a)(2) and IM-5605 of the Nasdaq Listing Rules and interpretative materials or any successor provisions.

(ii) If at any time the number of directors on the Board is increased to a number greater than nine (9) (which shall require the consent of the holders of a majority of the Series E Preferred Stock, the “Majority Holders”), any vacancies on the Board created by such expansion shall be filled by the nominating and governance committee. No Series E Representative may be removed (other than for cause) without the consent of the Majority Holders, provided, that in the event of a determination by the Board to remove a director, the Board shall take all action as may be necessary or appropriate, to effect the removal of such director.

(iii) The compensation committee, the audit committee, the nominating and corporate governance committee, and the Operating Committee (the “Approved Committees”) of the Board shall be composed so that the representation thereon by Purchaser shall be in the same proportion, as nearly as may be possible (subject to any requirements under applicable law and waiver by Purchaser), as the representation of such directors on the Board; provided , however , that no employee of the Company shall sit on the audit or compensation committee and provided further that the nominating and governance committee shall consist of one Independent Series E Representative and the Series C Representative and provided further that the Operating Committee (as defined below) shall be subject to the terms set forth in Section 9.5(a)(iv) below. The Board shall approve the appointment of individuals to the board of directors or board of managers of each Subsidiary of the Company and to the Approved Committees of each Subsidiary’s board of directors or board of managers, as applicable.

(iv) The Board shall create a committee (which shall not be deemed to be a committee of the Board) (the “Operating Committee”) to be comprised of members of management (who may be, but need not be, members of the Board) and/or members of the Board, which shall initially be comprised of the then current Chief Executive Officer of the Company, the then current President of the Company and a Series E Representative, who shall initially be Robert Fagenson, each to serve at the will of Board. The Board shall have the power at any time to increase or decrease the number of members of the Operating Committee (but in no event to less than three (3)), to fill vacancies thereon, to remove any member thereof, and to change the functions or terminate the existence thereof. During the intervals between meetings of the Board, and subject to such limitations as may be required by law or by resolution of the Board, the Operating Committee shall have and may exercise authority over the operations of the Company. The Operating Committee may also from time to time formulate and recommend to the Board for approval general policies regarding the management of the operations of the Company.

(v) The Company shall take all corporate actions as necessary to eliminate any committee other than the Approved Committees and to form any Approved Committees not currently constituted and requiring formation.

9.6 Corporate Finance Committee Designee . As long as the 50:50 joint venture arrangement between the Company and Opus Point Partners LLC (the “OPN Joint Venture”) is not dissolved in a manner satisfactory to Purchaser, the Company shall cause National Securities Corporation (“National Securities”) to appoint Robert Fagenson, or such other Person as directed by the holders of a majority of the Series E Preferred Stock from time to time, to the Corporate Finance Commitment Committee of National Securities (the “CFC Designee”). All decisions to approve the private or public placement through National Securities of any investment banking transaction (“Restricted Actions”) originating from the OPN Joint Venture shall be subject to the consent of the CFC Designee in his sole discretion. For the avoidance of doubt, any Restricted Actions requiring the consent of the Company or National Securities in connection with the OPN Joint Venture shall be approved by the CFC Designee and, if taken by the OPN Joint Venture without such approval, shall be null and void.

9.7 Movement of Funds . Without the prior written consent of the Board, (i) the Company shall not transfer funds, including, without limitation, regulatory net capital (“Restricted Funds”), except for payments of allocations of expenses in the ordinary course of business, to any Subsidiary and (ii) no Subsidiary shall transfer Restricted Funds to another Subsidiary, if such transfer of Restricted Funds is effected to satisfy capital requirements for the party receiving such Restricted Funds except for payments of allocations of expenses in the ordinary course of business. Any such transfers of Restricted Funds approved by the Board shall be appropriately recorded on the books and records of the parties to such transfer of Restricted Funds in accordance with applicable Laws.

9.8 Alternative Proposals; Superior Proposals .

(a) Certain Definitions:

“Alternative Proposal” shall mean (A) a bona fide proposal or offer for the acquisition, including by way of a tender offer, exchange offer, merger, consolidation, other business combination or other similar transaction, of (1) an equity interest representing a 10% or greater interest of the Common Stock (including Common Stock issuable upon conversion or exercise of any other security of the Company) of the Company then outstanding, or (2) direct or indirect acquisition of 10% or more of the consolidated assets of the Company and its Subsidiaries then outstanding, (B) a transaction or series of transactions in which any Person will acquire beneficial ownership or the right to acquire beneficial ownership or any group (as defined in Section 13(d) of the Exchange Act has been formed which beneficially owns or has the right to acquire beneficial ownership of, equity interests representing 10% or more of the voting power of the Company, or (C) any combination of the foregoing.

“Representatives” means, with respect to any Person, the respective directors, officers, employees, counsel, accountants, agents, advisors, financing sources and other representatives of such Person.

“Superior Proposal” shall mean a bona fide Alternative Proposal that the Board determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, (i) to be more favorable to the stockholders of the Company taking into account the various legal, financial and regulatory aspects of the proposal including the financing terms thereof, and the anticipated timing for consummating such transactions and (ii) is reasonably likely to be consummated.

(b) From and after the date hereof until the earlier of the Equity Closing Date and termination of this Agreement in accordance with its terms, in the event the Company and/or the Board receives, or participates in, any solicitation, offer, notice, initiation of discussions or negotiations, from or with any third party in respect of any Alternative Proposal or any such solicitation, offer, notice discussions or negotiations which are reasonably likely to lead to an Alternative Proposal, the Company shall immediately, and in any event not later than one (1) Business Day, following such event, notify and disclose to Purchaser the substance of all communications in connection with such Alternative Proposal and deliver to Purchaser copies of any documents exchanged or used in connection with such Alternative Proposal. If the Board determines in good faith, after consultation with outside counsel and its financial advisor, that a bona fide Alternative Proposal received prior to the Equity Closing Date by the Company constitutes, or could reasonably be expected to result in, a Superior Proposal, then, for a period of fifteen days after such determination, the Board may allow the Company or any of its Representatives to negotiate the terms of such Alternative Proposal and the Company’s obligations under the preceding sentence to notify and disclose to Purchaser the substance of any communications or to deliver copies of documents in connection with such Alternative Proposal shall not apply. If at the end of such fifteen-day negotiation period, the Board determines in good faith, after consultation with outside counsel and its financial advisor, that the failure to take any of the following actions could be inconsistent with the directors’ fiduciary duties under applicable Law, the Board may (A) allow the Company to enter into any letter of intent, acquisition agreement or any similar agreement or understanding (x) constituting a Superior Proposal or (y) requiring it to abandon, terminate or fail to consummate the transactions contemplated by this Agreement; or (B) effect any transaction contemplated by any Superior Proposal; provided, however, that the Company shall not be prohibited from terminating this Agreement in accordance with its terms. Notwithstanding anything in this Section 9.8(b) to the contrary, in the event the Board of Directors, during the fifteen-day period described above this clause (b), decides to take the actions described in clauses (A), (B) or (C) above in respect of a Superior Proposal, it may only take such actions if:

(i) the Company shall have provided prior written notice to Purchaser, at least four calendar days in advance, of its or the Board’s intention to take such actions, which notice shall specify the material terms of the Alternative Proposal received by the Company that constitutes, or could reasonably be expected to result in, a Superior Proposal;

(ii) after providing such notice and prior to taking such actions, the Company shall, and shall cause its Representatives to, negotiate with Purchaser in good faith (to the extent Purchaser desires to negotiate) during such four calendar day period to make such adjustments in the terms and conditions of this Agreement as would permit the Company or the Board not to take such actions;

(iii) the Board shall have considered in good faith any changes to this Agreement that may be offered in writing by Purchaser by 5:00 PM Eastern Time on the fourth day of such four day calendar day period in a manner that would form a binding contract if accepted by the Company and shall have determined that the Alternative Proposal received by the Company would continue to constitute, or would reasonably be expected to result in, a Superior Proposal if such changes offered in writing by Purchaser were given effect;

(iv) if the offer price of the Alternative Proposal is raised or the material terms thereof are modified, the Company shall provide prior written notice to Purchaser at least two calendar days in advance of its or the Board’s intention to accept such revised terms, which notice shall specify the material terms of the revised terms of the Superior Proposal; and

(v) after providing such notice and prior to taking such actions, the Company shall, and shall cause its Representatives to, negotiate with Purchaser in good faith (to the extent Purchaser desires to negotiate) during such two calendar day period to make such adjustments in the terms and conditions of this Agreement as would permit the Company or the Board not to take such actions.

(c) Nothing contained in this Section 9.8 will prohibit the Company (i) from taking and disclosing to the stockholders of the Company a position contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act (or any similar communication to shareholders in connection with the making or amendment of a tender offer or exchange offer) or (ii) from making any other disclosure to the stockholders of the Company if, in the good faith judgment of the Board (after consultation with outside legal counsel), failure to make such disclosure would be inconsistent with its obligations under applicable law.

9.9 Use of Proceeds . The Company shall use the proceeds from the consummation of the transactions contemplated by this Agreement for the satisfaction of the St. Cloud Debt, to the extent any amounts are outstanding as of the Equity Closing Date, and for general corporate purposes.

9.10 Conversion of Series E Preferred Stock . The Company and the Purchaser shall continue to negotiate in good faith regarding the conversion of the Series E Preferred Stock into Common Stock concurrent with the conversion of Series D Preferred Stock and Series C Stock into Common Stock; provided however that nothing in this Section 9.10 shall create any obligation to agree to , or otherwise convert the Series E Preferred Stock into Common Stock and each party hereto shall, in its sole discretion, have the right to cease negotiations regarding such conversion at any time.

10. Termination .

10.1 Termination Rights . This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Debt Closing Date and the Equity Closing Date, as applicable:

(a) by mutual agreement in writing of Purchaser and the Company; or

(b) by any party if any court of competent jurisdiction or other competent Governmental Entity shall have issued a statute, rule, regulation, Order, decree or injunction or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such statute, rule, regulation, Order, decree or injunction or other action shall have become final and non-appealable; or

(c) by the Company (if the Company is not then in breach of this Agreement in any material respect) pursuant to written notice to Purchaser, if Purchaser shall have breached in any material respect any of its representations or warranties or Purchaser fails to comply in any material respect with any of its covenants or agreements contained herein, which breach or failure to comply would give rise to the failure of a condition to the Debt Closing or the Equity Closing, in each case, only as applicable to such closing date hereunder (testing each such closing condition as it pertains to such breach as if the date of termination were the applicable closing date), and such breach or failure to comply is not cured within 30 days of the Company delivering written notice to Purchaser of such breach or failure to comply; or

(d) by Purchaser (if Purchaser is not then in breach of this Agreement in any material respect), pursuant to written notice to the Company, if the Company shall have breached in any material respect any of its representations or warranties or if the Company fails to comply in any material respect with any of its covenants or agreements contained herein, which breach or failure to comply would give rise to the failure of a condition to the Debt Closing or the Equity Closing, in each case, only as applicable to such closing date hereunder (testing each such closing condition as it pertains to such breach as if the date of termination were the applicable closing date), and such breach or failure to comply is not cured within 30 days of Purchaser delivering written notice to the Company of such breach or failure to comply; or

(e) by the Company if the Debt Closing does not occur on or before the date that is thirty (30) days from the date hereof (the “First Drop Dead Date”), unless the failure of the Debt Closing to occur by the First Drop Dead Date shall be due to the action or failure to act of the Company, which action or failure to act constitutes a breach of this Agreement; or

(f) by Purchaser if the Debt Closing does not occur on or before the First Drop Dead Date, unless the failure of the Debt Closing to occur by the First Drop Dead Date shall be due to the action or failure to act of Purchaser, which action or failure to act constitutes a breach of this Agreement; or

(g) by the Company if the Equity Closing does not occur on or before the date that is six (6) months from the date hereof (the “Second Drop Dead Date”), unless the failure of the Equity Closing to occur by the Second Drop Dead Date shall be due to the action or failure to act of the Company, which action or failure to act constitutes a breach of this Agreement; or

(h) by Purchaser if the Equity Closing does not occur on or before the Second Drop Dead Date, unless the failure of the Equity Closing to occur by the Second Drop Dead Date shall be due to the action or failure to act of Purchaser, which action or failure to act constitutes a breach of this Agreement.

In the event of the termination of this Agreement in accordance with this Section 10.1, this Agreement shall thereafter become void and have no effect, and no party shall have any liability to any other party hereto or their respective Affiliates, directors, officers or employees, other than liability for (i) fraud or (ii) any breach of its covenants and agreements under this Agreement occurring prior to such termination. For the avoidance of doubt, a termination that occurs after the Debt Closing shall not affect the validity and effectiveness of such Debt Closing. The provisions of Article 10 (including the related definitions) shall survive any termination of this Agreement.

11. Miscellaneous .

11.1 Indemnification .

(a) Subject to the provisions of Section 11.6 below, in consideration of Purchaser’s execution and delivery of this Agreement and acquiring the Units and in addition to all of the Company’s other obligations hereunder and under the Units, the Company will defend, protect, indemnify and hold harmless Purchaser and all of its respective stockholders, partners, members, officers, directors, employees, heirs, successors and assigns, and any agents or other representatives of any of the foregoing (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement, or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement or the Units or (ii) the status of Purchaser as a Purchaser in the Company pursuant to the transactions contemplated by this Agreement and the Units, except to the extent that Purchaser breached any of its representations and warranties contained in Section 4 hereof. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company will make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

(b) Promptly after receipt by an Indemnitee under this Section 11.1 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee will, if a claim in respect thereof is to be made against the Company under this Section 11.1, deliver to the Company a written notice of the commencement thereof, and the Company will have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided , however , that an Indemnitee will have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; (ii) the Company will have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee will have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, then the Company will not have the right to assume the defense thereof and such counsel will be at the expense of the Company); provided , further , that in the case of clause (iii) above the Company will not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee will reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and will furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company will keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company will not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company will not unreasonably withhold, delay or condition its consent. The Company will not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement will not include any admission as to fault on the part of the Indemnitee. Following indemnification as provided for hereunder, the Company will be subrogated to all rights of the Indemnitee with respect to all third parties, firms or entities relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action will not relieve the Company of any liability to the Indemnitee under this Section 11.1, except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.

(c) The indemnification required by this Section 11.1 will be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

(d) The indemnity agreement contained herein will be in addition to (i) any cause of action or similar right of the Indemnitee against the Company or others, and (ii) any liabilities the Company may be subject to pursuant to the law.

11.2 Intentionally Omitted .

11.3 No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

11.4 Remedies . Purchaser will have all rights and remedies applicable to it which are set forth in this Agreement and in the Units and all rights and remedies which such parties have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. The Company acknowledges and agrees that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement or the Units, any remedy at law may prove to be inadequate relief to Purchaser. The Company therefore agrees that Purchaser will be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.

11.5 Successors and Assigns . This Agreement, and the rights and obligations of Purchaser hereunder, may be assigned by Purchaser to (a) any Person or entity to which the Units are transferred by Purchaser, or (b) to any Affiliated Party (as hereinafter defined), and, in each case, such transferee will be deemed a “Purchaser” for purposes of this Agreement; provided that such assignment of rights will be contingent upon the transferee providing a written instrument to the Company notifying the Company of such transfer and assignment and agreeing in writing to be bound by the terms of this Agreement. The Company may not assign its rights under this Agreement. For purposes of this Agreement, “Affiliated Party” will mean, with respect to any Purchaser, any Person or entity which, directly or indirectly, controls, is controlled by or is under common control with Purchaser, including, without limitation, any general partner, manager, officer or director of Purchaser and any venture capital fund now or hereafter existing which is controlled by one or more general partners of, or shares the same management company as, Purchaser.

11.6 Survival of Representations and Warranties; Survival . All of the representations, warranties, covenants and agreements made herein will survive the execution and delivery of this Agreement for one (1) year from the Equity Closing Date. Purchaser is entitled to rely, and the parties hereby acknowledge that Purchaser has so relied, upon the truth, accuracy and completeness of each of the representations and warranties of the Company contained herein, irrespective of any independent investigation made by Purchaser. The Company is entitled to rely, and the parties hereby acknowledge that the Company has so relied, upon the truth, accuracy and completeness of each of the representations and warranties of Purchaser contained herein, irrespective of any independent investigation made by the Company. Notwithstanding the first sentence of this Section 11.6, the provisions of Sections 7.6 and 9.1 of this Agreement shall continue in full force and effect so long as the Series E Preferred Stock is outstanding or Purchaser holds an amount of capital stock of the Company equal to at least 20% of the original number of Conversion Shares and Warrant Shares purchased pursuant to this Agreement.

11.7 Expenses . Each party hereto will pay its own expenses relating to the transactions contemplated by this Agreement except that the Company will pay the reasonable fees and expenses of Purchaser not to exceed $50,000. Such expenses will be paid no later than the Equity Closing. Notwithstanding the foregoing, in the event Purchaser terminates this Agreement in accordance with Section 10.1, the Company shall promptly pay all reasonable out of pocket expenses incurred by Purchaser in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed pursuant hereto and any other costs and any other costs and expenses whatsoever and howsoever incurred, provided that all amounts payable under this sentence shall not exceed $200,000.

11.8 Severability . The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement.

11.9 Governing Law; Venue . This Agreement and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution, performance, validity, interpretation, construction and enforcement of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by the Laws of the State of New York (without giving effect to any choice or conflict of Law provision or rules (whether of the State of New York or otherwise) that would cause the application of Laws of any other jurisdiction). Each party 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. Each party 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 Agreement and agrees that such service will constitute good and sufficient service of process and notice thereof. Nothing contained herein will be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, 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 AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

11.10 Notices . All notices, requests, consents, and other communications under this Agreement will be in writing and will be deemed delivered (i) three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or (ii) one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day delivery or (iii) by facsimile transmission (with printed confirmation of receipt), in each case to the intended recipient as set forth below:

(a) If to the Company, at 120 Broadway, 27th Floor, New York, NY 10271, Attention: Mark Goldwasser, CEO, Fax Number: (212) 417-8159, or at such other address as may have been furnished in writing by the Company to the other parties hereto, with a copy to Jay Israel, General Counsel, 120 Broadway, 27th Floor, New York, NY 10271, Fax Number: (212) 553-2385.

(b) If to Purchaser, at its address set forth on Exhibit A , or at such other address as may have been furnished in writing by Purchaser to the other parties hereto, with a copy (which will not constitute notice) to Weil, Gotshal and Manges LLP, 100 Federal Street, Boston, MA 02110, Attention: Shayla Harlev, Esq., Fax Number: (617) 772-8333.

(c) Any party may give any notice, request, consent or other communication under this Agreement using commercially reasonable means (including, without limitation, personal delivery, messenger service, telecopy, first class mail or electronic mail), but no such notice, request, consent or other communication will be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Any party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth in this Section 11.10.

11.11 Complete Agreement . This Agreement (including its exhibits and schedules and any other agreement or instrument contemplated hereby) constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.

11.12 Amendments and Waivers . This Agreement may be amended or terminated and the observance of any term of this Agreement may be waived with respect to all parties to this Agreement (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and Purchaser. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, will be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

11.13 Pronouns . Whenever the context may require, any pronouns used in this Agreement will include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns will include the plural, and vice versa.

11.14 Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, and all of which will 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” format data file, such signature will 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.

11.15 Section Headings and References . The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. Any reference in this agreement to a particular section or subsection will refer to a section or subsection of this Agreement, unless specified otherwise.

[Signature Page Follows]

IN WITNESS WHEREOF, Purchaser and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.

COMPANY:

NATIONAL HOLDINGS CORPORATION

By: /s/ Mark H. Goldwasser

Name: Mark H. Goldwasser

Title: Chief Executive Officer

PURCHASER:

NATIONAL SECURITIES GROWTH PARTNERS LLC

By: /s/ Robert B. Fagenson

Name: Robert B. Fagenson

Title: President and Chief Executive Officer

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (the “ Agreement ”) is made and entered into as of this 30th day of March, 2012, by and between (i) National Holdings Corporation, a Delaware corporation (the “ Company ”), and (ii) National Securities Growth Partners LLC, a Delaware limited liability company (the “ Series E Investor ”).

WHEREAS , the Series E Investor has agreed to purchase from the Company, and the Company has agreed to sell and issue to the Series E Investor, two 6% convertible subordinated promissory notes having aggregate principal amounts of $3,300,000 and $700,000, respectively (the “ 3,300,000 Convertible Note ” and the “$ 700,000 Convertible Note ” and collectively the “ Convertible Notes ”), which shall be convertible into 6,600,000 and 1,400,000 shares of the Company’s common stock, $0.02 par value per share (the “ Common Stock ”), respectively, and warrants to purchase 6,600,000 and 1,400,000 shares of Common Stock, respectively (the “ 6,600,000 Warrant ” and the “ 1,400,000 Warrant ” and, collectively, the “ First Warrants ”), all upon the terms and conditions set forth in that certain Securities Purchase Agreement, dated March 30, 2012, by and between the Company and the Series E Investor (the “ Purchase Agreement ”) upon the First Debt Closing Date and Second Debt Closing Date, as applicable;

WHEREAS , the Company has agreed to issue and sell to the Series E Investor, and the Series E Investor has agreed to purchase from the Company, (i) an aggregate of up to 120,000 shares (each, a “ Share ” and together, the “ Shares ”) of a newly created class of Series E Preferred Stock (the “ Series E Stock ”) initially convertible into shares of the Company’s Common Stock, at a purchase price of $50.00 per Share and (ii) a warrant (the “ Second Warrant ”, and together with the First Warrants, the “ Warrants ”) to purchase an aggregate of up to 12,000,000 shares of Common Stock, in each case, pursuant to the terms and conditions set forth in the Purchase Agreement upon the Equity Closing Date;

WHEREAS , without any further action by the parties to this Agreement, upon the First Debt Closing Date, the Second Debt Closing Date and the Equity Closing Date, as applicable, the Series E Registrable Securities (as defined below) shall include all Conversion Shares and Warrant Shares underlying the Units issued to the Series E Investor on the First Debt Closing Date, the Second Debt Closing Date and Equity Closing Date, as applicable;

WHEREAS , the terms of the Purchase Agreement provide that it shall be a condition precedent to the First Debt Closing and the Second Debt Closing (and if not executed and delivered prior to the Equity Closing) such Equity Closing, respectively, that the Company and the Series E Investor execute and deliver this Agreement; and

WHEREAS , capitalized terms used herein but not defined shall have the meaning ascribed to such term in the Purchase 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:

“ 1933 Act ” means the U.S. 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.

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

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

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

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

“ Conversion Shares ” means the shares of Common Stock or other securities issuable upon conversion of the Series E Stock and Common Stock issuable upon conversion of the Convertible Notes.

“ Effectiveness Period ” as defined in Section 4(b) hereto.

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

“ July 2010 Registrable Securities ” means (a) all of the shares of Common Stock issuable upon conversion in full of those certain shares of Series C Preferred Stock, issued in July 2010 (the “ Series C Preferred Stock ”) (assuming on such date the Series C Preferred Stock is converted in full), (b) all shares of Common Stock then issuable upon exercise of those certain warrants, issued in July 2010 (the “ July 2010 Warrants ”) (assuming on such date the July 2010 Warrants are exercised in full), (c) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Series C Preferred Stock or July 2010 Warrants and (d) 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 July 2010 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.

“ 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 Series E Registrable Securities, (ii) the St. Cloud Registrable Securities, (iii) the July 2010 Registrable Securities, (iv) the September 2010 Registrable Securities and (v) 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 applicable Securityholder (as defined below) without restrictions pursuant to Rule 144.

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

“ Rule 144 ” shall mean Rule 144 promulgated by the SEC pursuant to the 1933 Act and any successor or substitute rule, law or provision.

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

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

“ 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.

“ Securityholders ” means the holders of the Series C Preferred Stock, Series D Preferred Stock and the Series E Investor.

“ September 2010 Registrable Securities ” means (a) all of the shares of Common Stock issuable upon conversion in full of those certain shares of Series D Preferred Stock, issued in September 2010 (the “ Series D Preferred Stock ”) (assuming on such date the Series D Preferred Stock is converted in full), (b) all shares of Common Stock then issuable upon exercise of those certain warrants, issued in September 2010 (the “ September 2010 Warrants ”) (assuming on such date the September 2010 Warrants are exercised in full), (c) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Series D Preferred Stock or September 2010 Warrants and (d) 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 September 2010 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.

“ Series E Registrable Securities ” means (i) all Conversion Shares originally issued, directly or indirectly, to the Series E Investor or any of its Affiliates, (ii) all Warrant Shares originally issued, directly or indirectly, to the Series E 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, including, for the avoidance of doubt, all Conversion Shares and Warrant Shares issued directly or indirectly to the Series E Investor upon the First Debt Closing Date, the Second Debt Closing Date and the Equity Closing Date, as applicable, pursuant to the Purchase Agreement. As to any particular Series E Registrable Securities, such securities shall cease to be Series E Registrable Securities when they have been (a) distributed to the public pursuant to an offering registered under the 1933 Act, (b) sold in compliance with Rule 144 , or (c) may be sold by the Series E Investor under Rule 144 without any restriction.

“ 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 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 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.

“ Underwritten Offering ” shall mean a sale of securities of the Company to an underwriter or underwriters for reoffering to the public.

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

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

2. Registration Rights .

(a) Right to Demand Registration . In the event that the Company receives a written request from the Series E Investor, calling upon the Company to effect a registration on Form S-1 or any similar long-form registration (a “ Long Form Registration ”), or on Form S-3 (including pursuant to Rule 415 under the 1933 Act) or any similar short-form registration (a “ Short Form Registration ” and together with the Long Form Registration, a “ Demand Registration ”), if available, the Company will:

(i) give written notice of the proposed registration within ten (10) days of notice thereof, and any related qualification or compliance, to all other Securityholders;

(ii) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of the Series E Investor’s Registrable Securities as are specified in such written request to the Company given within fifteen (15) days after receipt of such written notice from the Company; provided , however , that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2(a) if (i) the Series E Investor, together with any other Securityholders of the Company entitled to inclusion in such registration, if any, proposes to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $1,000,000; (ii) if the Company shall furnish to the Series E Investor a certificate signed by the President of the Company stating that, in the good faith judgment of the Board, it would be detrimental to the Company and its stockholders for such Demand Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Registration Statement for a period of not more than 120 days after receipt of the request of the Series E Investor under this Section 2(a) ( provided , however , that the Company shall not utilize this right more than once in any twelve (12) month period); (iii) if the Company has already effected three (3) Demand Registrations for the Series E Investor pursuant to this Section 2(a); or (iv) if the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance; and

(iii) Subject to the foregoing, the Company shall file a Registration Statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request of the Series E Investor.

Notwithstanding the foregoing, the Company shall use its reasonable best efforts to cause a Registration Statement to be registered on Form S-3 (or any successor form), and if the Company is not then eligible under the 1933 Act to use Form S-3, any Registration Statement shall be registered on a form for which the Company may qualify and the Company shall take all commercially reasonable steps to qualify for such form.

(b) Piggyback Registration . The Company agrees that if, at any time, and from time to time, after the date hereof, the Board shall authorize the filing of a Registration Statement under the 1933 Act (other than a Registration Statement on Form S-8, Form S-4 or any other form that does not include substantially the same information as would be required in a form for the general registration of securities) in connection with the proposed offer of any of its securities by it or any of its stockholders, the Company shall: (A) promptly notify the Series E Investor that such Registration Statement will be filed and that the Registrable Securities then held by the Series E Investor will be included in such Registration Statement at the Series E Investor’s request; (B) cause such Registration Statement to cover all of such Registrable Securities issued to the Series E Investor for which the Series E Investor requests inclusion; (C) use best efforts to cause such Registration Statement to become effective as soon as practicable; and (D) take all other reasonable action necessary under any Federal or state law or regulation of any governmental authority to permit all such Registrable Securities that have been issued to the Series E Investor to be sold or otherwise disposed of, and will maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for the Series E Investor to promptly effect the proposed sale or other disposition.

(c) Notwithstanding any other provision of this Section 2, the Company may at any time, abandon or delay any registration commenced by the Company. In the event of such an abandonment by the Company, the Company shall not be required to continue registration of shares requested by the Series E Investor for inclusion, the Series E Investor shall retain the right to request inclusion of shares as set forth above and the withdrawn registration shall not be deemed to be a registration request for the purposes of Section 2(d) below.

(d) The Series E Investor shall have the right to request inclusion of any of its Registrable Securities in a Registration Statement as described in this Section 2 up to two (2) times.

(e) Additional Registration Statements . If during the Effectiveness Period, subject to Section 2(g)(ii) and SEC Guidance, the Registrable Securities at any time exceeds 100% of the number of Registrable Securities then registered for resale in the Registration Statement, then the Company shall file as soon as reasonably practicable an additional Registration Statement covering the resale by the Series E Investor of not less than the number of such unregistered Registrable Securities.

(f) Expenses . Except as set forth in Section 3(e), the Company will pay all expenses associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws and listing fees. The Series E 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.

(g) Effectiveness .

(i) Subject to the terms and conditions of this Agreement, the Company shall use commercially reasonable efforts to have the Registration Statement declared effective. The Company shall notify the Series E Investor by facsimile or e-mail as promptly as practicable after any Registration Statement is declared effective and shall simultaneously provide the Series E Investor with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.

(ii) For not more than twenty (20) consecutive days or for a total of not more than sixty (60) days in any twelve (12) month period, the Company may delay the disclosure of material non-public information concerning the Company, by suspending the use of any Prospectus included in any Registration Statement contemplated hereunder containing such information, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an “ Allowed Delay ”); provided , that the Company shall promptly (a) notify the Series E Investor in writing of the existence of (but in no event, without the prior written consent of the Series E Investor, shall the Company disclose to the Series E Investor any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay, (b) advise the Series E Investor in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.

(h) Other Registration Rights Agreements . Nothing in this Agreement shall limit the Company’s right to grant registration rights, including, without limitation, demand or “piggyback” registration rights, to any other person.

3. Cut-Backs due to Underwriters or SEC Guidance . Notwithstanding any other provision of this Agreement, if any (i) managing underwriter gives the Company its written opinion that the total number or dollar amount of securities requested to be included in the registration exceeds the number or dollar amount of securities that can be sold or (ii) 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 Series E Investor as to its Series E Registrable Securities, the number of Series E Registrable Securities to be registered on such Registration Statement will first be reduced by Series E Registrable Securities represented by Warrant Shares, second by Series E Registrable Securities represented by Conversion Shares and third by Series E Registrable Securities represented by Common Stock.

4. Company Obligations . In connection with the Company’s obligations under this Agreement to file a Registration Statement with the SEC and to use its commercially reasonable efforts to cause a Registration Statement to become effective in accordance with the terms hereof, the Company will, as expeditiously as possible:

(a) prepare and file with the SEC 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 within 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 subject to review of such counsel ;

(b) notify each holder of Registrable Securities of the effectiveness of each Registration Statement filed hereunder and prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for a period that will terminate upon the earlier of (i) six months in the case of underwritten registrations, (ii) 36 months in the case of shelf registrations, (iii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction pursuant to Rule 144, or (iv) in any event, when all of the securities covered by such Registration Statement during such period have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such Registration Statement (but, in any event, not before the expiration of any longer period required under the 1933 Act, or, if such Registration Statement relates to an Underwritten Offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer (the “ Effectiveness Period ”) and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement;

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

(e) prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Series E 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 Series E 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(e), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 4(e), or (iii) file a general consent to service of process in any such jurisdiction; and provided further that (notwithstanding anything in this Agreement to the contrary with respect to the bearing of expenses) if any jurisdiction in which any of such Registrable Securities shall be qualified shall require that expenses incurred in connection with the qualification therein of any such Registrable Securities be borne by the selling Series E Investor, then the selling Series E Investor shall, to the extent required by such jurisdiction, pay its pro rata share of such qualification expenses ;

(f) use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

(g) immediately notify the Series E 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;

(h) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder;

(i) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;

(j) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant, or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate and business documents and properties of the Company as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors, employees, agents, representatives, and independent accountants to supply all such information reasonably requested by any such seller, underwriter, attorney, accountant, or agent in connection with such Registration Statement; provided , however , that any such information furnished by the Company that is non-public shall be used in connection with such registration only, and shall be kept confidential by any of the foregoing recipients; and

(k) With a view to making available to the Series E 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 Series E 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; (iii) furnish to the Series E Investor upon request, as long as the Series E 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 the Series E Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration; and (iv) reasonably assist and cooperate with the Series E Investor (including coordination with the Company’s transfer agent and procuring appropriate legal opinions) in the Series E Investor’s efforts to sell shares of Common Stock included as part of the Registrable Securities under Rule 144 (or its successor rule).

5. Due Diligence Review; Information . The Company shall make available, during normal business hours, for inspection and review by the Series E Investor, advisors to and representatives of the Series E Investor (who may or may not be affiliated with the Series E Investor and who are reasonably acceptable to the Company), all financial and other records, all SEC Documents (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Series E 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 Series E Investor and such representatives, advisors and underwriters and its respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement.

6. Obligations of the Series E Investor .

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

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

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

7. Participation in Underwritten Registrations .

(a) The Series E Investor may not participate in any Underwritten Offering unless the Series E Investor:

(i) agrees to sell the Series E Investor’s securities on the basis provided in any underwriting arrangements approved by the Series E Investor or other persons entitled hereunder to approve such arrangements (including, without limitation, pursuant to the terms of any over-allotment or “green shoe” option requested by the managing underwriter(s)); provided , that, no holder of Registrable Securities will be required to sell more than the number of Registrable Securities that such holder has requested the Company to include in any Underwritten Offering; 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) If the Series E Investor elects to participate in any registration hereunder, the Series E Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 4(d) or (g) above, the Series E Investor will forthwith discontinue the disposition of its Registrable Securities pursuant to the Registration Statement until receipt of the notification set forth in Section 4(d) or copies of a supplemented or amended prospectus as contemplated by such Section (e), as applicable. In the event that the Company shall give any such notice, the applicable time period mentioned in Section 4(b) during which a Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Sections (d) or (g) to and including the date when each seller of a Registrable Security covered by such Registration Statement shall have received the notice contemplated by Section 4(d) or copies of the supplemented or amended prospectus contemplated by Section 4(e).

8. Indemnification .

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

(b) Indemnification by the Series E Investor . The Series E 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 the Series E 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 the Series E Investor be greater in amount than the dollar amount of the proceeds (net of all expenses paid by the Series E Investor in connection with any claim relating to this Section 8 and the amount of any the Series E Investor has otherwise been required to pay by reason of such untrue statement or omission) received by the Series E Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

(c) Conduct of Indemnification Proceedings . Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided , that, any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided , further , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

(d) Contribution . If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 8 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

9. Miscellaneous .

(a) Amendments and Waivers . This Agreement may be amended only by a writing signed by the Company and the Series E 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 Series E Investor.

(b) Notices . All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 8.10 of the Purchase Agreement.

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

(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 and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution, performance, validity, interpretation, construction and enforcement of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by the Laws of the State of New York (without giving effect to any choice or conflict of Law provision or rules (whether of the State of New York or otherwise) that would cause the application of Laws of any other jurisdiction). 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 follows ]

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 H. Goldwasser ________

Name: Mark H. Goldwasser

Title: Chief Executive Officer

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

The Series E Investor:

NATIONAL SECURITIES GROWTH PARTNERS LLC

By: /s/ Robert B. Fagenson

Name: Robert B. Fagenson

Title: President and Chief Executive Officer

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

Exhibit A

Plan of Distribution

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

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

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

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

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

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

- privately negotiated transactions;

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

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

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

- a combination of any such methods of sale; and

- any other method permitted pursuant to applicable law.

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

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 Warrants by payment of cash, however, we will receive the exercise price of the Warrants.

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

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

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

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

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.