NATIONAL HOLDINGS CORP (Form: 8-K/A, Received: 01/31/2013 16:22:43)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 24, 2013

National Holdings Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware	001-12629	36-4128138
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)


120 Broadway, 27 th Floor, New York, NY		10271
(Address of Principal Executive Offices)		(Zip Code)

(Registrant's Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On January 25, 2013, National Holding Corporation (the "Company") filed a Current Report on Form 8-K (the “Original Report”). The Original Report is hereby amended and restated in its entirety to correct several typographical and clerical errors that appear in the Original Report.

Item 1.01 Entry into a Material Definitive Agreement.

On January 24, 2013, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Purchasers") providing for the issuance and sale of 29,450,000 shares (the “Shares”) of the Company’s common stock, par value $0.02 per share (the “Common Stock”), for an aggregate purchase price of approximately $8.8 million (the “Purchase Price”). The Company anticipates that the closing of the sale of the Shares will occur on or about January 25, 2013 (the “Closing”). The Company will use the proceeds from the sale of the Shares (i) to repay certain outstanding indebtedness and (ii) for general corporate, working capital and net capital purposes and associated and reasonable costs and fees relating to the transaction.

In connection with the Purchase Agreement, on January 24, 2013, the Company and the Purchasers entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company has agreed to use its commercially reasonable efforts to (i) file with the Securities and Exchange Commission (the “SEC”) as soon as practicable but in no event later than 45 days of the date of the Closing, a registration statement covering the resale of all Shares and (ii) have the registration statement be declared effective under the Securities Act of 1933, as amended (the “Securities Act”), as soon as practicable but in no event later than the 90 days or if there is a review of the registration statement by the SEC, 120 days after the date of the Closing. In the event that (1) a registration statement is not declared effective by the SEC on or prior to its required effectiveness date, (2) after the date the registration statement is declared effective by the SEC, (a) a registration statement ceases for any reason, to remain continuously effective or (b) the Purchasers are not permitted to utilize the prospectus included in the registration statement therein to resell the Shares, in each case, for more than an aggregate of 20 consecutive days or 45 days during any 12-month period, or (3) the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1) under the Securities Act, it shall pay to each Purchaser an amount in cash equal to 1% of the Purchase Price attributed to the such Purchaser's Shares on the date the failure occurs and every 30 days thereafter, until cured subject to a maximum amount of up to 10% of the aggregate Purchase Price of the Shares.

The description of the Purchase Agreement and the Registration Rights Agreement are summaries and are qualified in their entirety by reference to the copies of the Purchase Agreement attached as hereto as Exhibit 10.1 and the Registration Rights Agreement attached hereto as Exhibit 10.2, each of which is incorporated herein by reference.

As previously reported, the Company issued and sold to certain accredited investors (the "Series D Holders") units comprised of (i) shares of Series D preferred stock, par value $0.02 per share (the “Series D Preferred Stock”), convertible into shares of Common Stock, and (ii) warrants exercisable for shares of Common Stock. On January 24, 2013, in connection with Purchase Agreement, the Company entered into a Conversion and Exchange Agreement (the "Series D Conversion and Exchange Agreement") with the Series D Holders pursuant to which, among other things, each Series D Holder will convert all of such Series D Holder's shares of Series D Preferred Stock into 6,000,000 shares of Common Stock in accordance with the terms and conditions of the Certificate of Designation, Preferences and Rights for the Series D Preferred Stock, dated September 29, 2010 (the "Series D Conversion"). The Company anticipates that the closing of the Series D Conversion will occur in conjunction with the Closing. Following the Series D Conversion, no shares of Series D Preferred Stock will be deemed outstanding and all rights of the Series D Holders with respect to the Series D Preferred Stock will terminate, except for the right to receive the number of whole shares of Common Stock issuable upon conversion of the Series D Preferred Stock.

As previously reported, the Company issued and sold to an accredited investor (the "Series E Holder") convertible notes in the aggregate initial principal amount of $5,000,000 (the "Notes”). The Notes are convertible into units of the Company consisting of (i) the Company’s Series E preferred stock, par value $0.01 per share (the “Series E Preferred Stock”), which are convertible into shares of Common Stock and (ii) a warrant exercisable for shares of Common Stock. In conjunction with the Purchase Agreement, on January 24, 2013, the Company entered into a Conversion and Exchange Agreement (the "Series E Conversion and Exchange Agreement") with the Series E Holder pursuant to which, among other things, (i) the Series E Holder will convert all of the Notes (and all accrued and unpaid interest thereon) into shares of Series E Preferred Stock in accordance with the terms and conditions of the Notes (the "Note Conversion"); and (ii) then the Series E Holder will convert all of its Series E Preferred Stock into 10,000,000 shares of Common Stock in accordance with the terms and conditions of the Certificate of Designation, Preferences and Rights for the Series E Preferred Stock, dated March 30, 2012 (the "Series E Conversion"). The Company anticipates that the closing of the Note Conversion and the Series E Conversion will occur in conjunction with the Closing. Following the Note Conversion and the Series E Conversion, no Notes or shares of Series E Preferred Stock will be deemed outstanding and all rights of the Series E Holder with respect to the Notes and the Series E Preferred Stock issuable to the Series E Holder upon conversion of the Notes will terminate, except for the right to receive the number of whole shares of Common Stock issuable upon conversion of the Series E Preferred Stock.

As previously reported, the Company previously issued warrants (the "Warrants") representing the right to purchase shares of Common Stock to certain investors (the "Warrantholders"), including, with limitation, the holders (the "Series C Holders") (as described more fully in Items 5.03 and 8.02 of this Current Report on Form 8-K) of shares of Series C preferred stock, par value $0.02 per share (the "Series C Preferred Stock"), the Series D Holders and the Series E Holders. In conjunction with the Purchase Agreement, on January 24, 2013, the Company entered into a Warrant Exchange Agreement (the "Warrant Exchange Agreement") with the Warrantholders pursuant to which, among other things, the Warrantholders will exchange certain of the Warrants for 12,951,196 shares of Common Stock (the "Warrant Exchange"). The Company anticipates that the closing of the Warrant Exchange will occur in conjunction with the Closing. Following the Warrant Exchange, all of the rights of the Warrantholders with respect to the Warrants will terminate, except for the right to receive the number of whole shares of Common Stock issuable upon exchange of the Warrants. Following the Warrant Exchange there will be warrants to purchase 1,990,505 shares of Common Stock issued and outstanding, which include warrants held by certain holders of Series C Preferred Stock.

The descriptions of the Series D Conversion and Exchange Agreement, the Series E Conversion and Exchange Agreement and the Warrant Exchange Agreement are summaries and are qualified in their entirety by reference to the copies of the Series D Conversion and Exchange Agreement attached as hereto as Exhibit 10.3, the Series E Conversion and Exchange Agreement attached hereto as Exhibit 10.4, and the Warrant Exchange Agreement attached hereto as Exhibit 10.5, each of which is incorporated herein by reference.

Item 3.02 Unregistered Sale of Equity Securities.

The Shares will not be registered under the Securities Act and may not be offered or sold in the United States absent a registration statement or an applicable exemption from registration requirements. The transactions contemplated by the Purchase Agreement are exempt from the registration requirements of the Securities Act, pursuant to Section 4(2) and Regulation D of the Securities Act. This Current Report in Form 8-K shall not constitute an offer to sell, the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.

Item 3.03 Material Modifications to Rights of Security Holders.

On January 24, 2013, the Company (the "Company") filed an Amended and Restated Certificate of Designation, Preference and Rights of the Series C Preferred Stock (the "Amended and Restated Series C Certificate of Designation") with the Secretary of State of the State of Delaware, which became effective upon the filing thereof with the Secretary of State. The Amended and Restated Certificate of Designation, describing the rights, privileges and preferences of the Series C Preferred Stock, is described more fully in Item 5.03 below of this Current Report on Form 8-K.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On January 24, 2013, the holders of a majority of the outstanding shares of Series C Preferred Stock approved the Amended and Restated Series C Certificate of Designation. The Amended and Restated Series C Certificate of Designation provides, among other things, that in the event the Company shall have raised at least $5 million through the sale of Common Stock at a purchase price no less than $.30 per share in a private placement transaction by March 31, 2013, all outstanding shares of Series C Preferred Stock shall automatically be converted into shares of Common Stock at the then effective conversion price of the Series C Preferred Stock.

On January 24, 2013, the Company filed the Amended and Restated Series C Certificate of Designation with the Secretary of State of the State of Delaware, which became effective upon the filing thereof with the Secretary of State.

The description of the Amended and Restated Series C Certificate of Designation is a summary and is qualified in its entirety by reference to the copy of the Amended and Restated Series C Certificate of Designation attached as hereto as Exhibit 3.1, which is incorporated herein by reference.

Item 8.01 Other Events.

The holders of more than 50% of the outstanding shares Series C Preferred Stock have consented pursuant to Section 228 of the General Corporation Law of the State of Delaware to the mandatory conversion of all outstanding shares of Series C Preferred Stock into Common Stock, provided that the Company shall have raised at least $5 million through the sale of Common Stock at a purchase price no less than $.30 per share in a private placement transaction by March 31, 2013. The Company anticipates that the mandatory conversion date will be January 25, 2013. On the mandatory conversion date, the holders of Series C Preferred Stock will be entitled to receive an aggregate of 3,416,692 shares of Common Stock. Cash will be paid in lieu of fractional shares of Common Stock. From and after the mandatory conversion date, no shares of Series C Preferred Stock will be deemed to be outstanding and all of the rights of the Series C Holders with respect to the Series C Preferred Stock will terminate, except for the right to receive the number of whole shares of Common Stock issuable upon conversion of the Series C Preferred Stock and cash in lieu of any fractional shares of Common Stock, as described above.

Item 9.01 Financial Statements and Exhibits.

3.1		Amended and Restated Certificate of Designation, Preference and Rights of the Series C Preferred Stock.

10.1		Securities Purchase Agreement, dated as of January 24, 2013, by and among the Company and the Purchasers.

10.2		Registration Rights Agreement, dated as of January 24, 2013, by and among the Company and the Purchasers.

10.3		Conversion and Exchange Agreement, dated as of January 24, 2013, by and among the Company and the Series D Holders.

10.4		Conversion and Exchange Agreement, dated as of January 24, 2013, by and between the Company and the Series E Holder.

10.5		Warrant Exchange Agreement, dated as of January 24, 2013, by and between the Company and the Warrantholders.

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: January 31, 2013	By:	/s/ Mark Klein
		Mark Klein
		Chief Executive Officer

Exhibit No.		Description

3.1		Amended and Restated Certificate of Designation, Preference and Rights of the Series C Preferred Stock.

10.1		Securities Purchase Agreement, dated as of January 24, 2013, by and among the Company and the Purchasers.

10.2		Registration Rights Agreement, dated as of January 24, 2013, by and among the Company and the Purchasers.

10.3		Conversion and Exchange Agreement, dated as of January 24, 2013, by and among the Company and the Series D Holders.

10.4		Conversion and Exchange Agreement, dated as of January 24, 2013, by and between the Company and the Series E Holder.

10.5		Warrant Exchange Agreement, dated as of January 24, 2013, by and between the Company and the Warrantholders.

AMENDED AND RESTATED

CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS

SERIES C CONVERTIBLE PREFERRED STOCK

NATIONAL HOLDINGS CORPORATION

(Pursuant to Section 151 of the

Delaware General Corporation Law)

NATIONAL HOLDINGS CORPORATION (the “ Corporation ”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), in accordance with the provisions of Section 151 thereof, DOES HEREBY CERTIFY THAT:

WHEREAS, in accordance with the provisions of Section 151 of the DGCL and pursuant to the authority under the Certificate of Incorporation of the Corporation, as amended (the “ Certificate of Incorporation ”), the Board of Directors “ Board of Directors ” or the “ Board ”) of the Corporation is authorized to issue from time to time shares of the Corporation’s Preferred Stock, par value $0.01 per share, in one or more series;

WHEREAS, the Board of Directors previously adopted a resolution authorizing the creation and issuance of a series of said Preferred Stock designated as the “Series C Convertible Preferred Stock” (the “ Series C Preferred Stock ”) and the Certificate of Designations, Preferences and Rights for the Series C Preferred Stock was filed with the Secretary of State of the State of Delaware on July 12, 2010;

WHEREAS, on January 23, 2012, the Board of Directors approved and adopted the following resolution (this “ Certificate of Designations ” or this “ Certificate ”) for purposes of amending and restated provisions of the Series C Preferred Stock; and

WHEREAS, on January 24, 2012, the holders of more than 50% of the shares of Series C Preferred Stock then outstanding approved the following resolution to amend and restated the Certificate of Designations for the Series C Preferred Stock.

NOW THEREFORE, BE IT RESOLVED that, pursuant to authority of the Board of Directors as required by Section 151 of the DGCL, 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 $.01 per share (the “ Preferred Stock ”), and hereby amends and restates 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 Thirty Four Thousand Five Hundred (34,500) shares of Preferred Stock, is the Series C Preferred Stock of the Corporation, par value $.01 per share (the “ Series C 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 IX, Section E 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 IX, 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 C Preferred Stock, by (ii) the Series C Conversion Price per share, then in effect.

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

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

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

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

"Mandatory Conversion Time " shall have the meaning as defined in Article V, Section A(i) of this Certificate of Designations

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

“ National Securities Exchange ” means any one of the New York Stock Exchange, the NYSE MKT, 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 C Preferred Stock at the Stated Value.

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

“ Purchase Agreement ” shall mean that certain Securities Purchase Agreement, dated as of July 12, 2010, by and among the Corporation and the Purchasers, pursuant to which, on the Issuance Date, the Corporation issued, and such Purchasers purchased, inter alia, the shares of Series C Preferred Stock and the Warrants, all upon the terms and conditions stated therein.

“ Purchaser ” shall mean each purchaser acquiring shares of the Series C 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 C Conversion Price ” means Fifty Cents ($0.50), or such other dollar amount (or fraction thereof) into which such Series C Conversion Price may be adjusted pursuant to Article IX of this Certificate of Designations.

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

“ Warrant Shares ” shall mean the shares of Common Stock issuable upon exercise of the Warrants, as such securities may be adjusted pursuant to the terms of such Warrants.

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

III. DIVIDENDS

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

IV. OPTIONAL CONVERSION

A. Optional Conversion

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

(ii) In the event of any one or more Conversions pursuant to this Article IV(A) (each a “ Conversion ”), each share of Series C 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 C Conversion Price then in effect

B. Mechanics of Conversion. In order to effect an Conversion, a Holder of shares of Series C Preferred Stock shall: (i) fax (or otherwise deliver, 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 C Preferred Stock being converted (the “ Series C Preferred Stock Certificates ”), duly endorsed, along with a copy of the Notice of Conversion as soon as practicable thereafter to the Corporation. Upon receipt by the Corporation of a facsimile copy 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 C Preferred Stock Certificates are delivered to the Corporation as provided above, or the Holder notifies the Corporation that such Series C Preferred Stock Certificates have been lost, stolen or destroyed and delivers the documentation to the Corporation required by Article XI. B hereof.

(i) Delivery of Common Stock Upon Conversion. Upon the surrender of Series C Preferred Stock Certificates accompanied by a Notice of Conversion, the Corporation (itself, or through its transfer agent, as appropriate) shall, no later than the later of (a) the 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 C Preferred Stock being converted and (y) a certificate representing the number of shares of Series C Preferred Stock not being converted, if any. Notwithstanding the foregoing, the Holder of Series C Preferred Stock shall, for all purposes, be deemed to be a record owner of that number of shares of Common Stock issuable upon conversion of those shares of Series C Preferred Stock set forth in the Conversion Notice as at the date of such Conversion Notice. In addition, if the Corporation's transfer agent is participating in the Depository Trust Corporation (“ DTC ”) Fast Automated Securities Transfer program, and so long as the certificates therefor do not bear a legend (pursuant to the 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 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 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 C Preferred Stock.

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

(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 C Series C Conversion Price, and such dispute is not promptly resolved by discussion between the relevant Holder and the Corporation, the Corporation and the Holder shall submit their disputed calculations to an independent, 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 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. MANDATORY CONVERSION

A. Mandatory Conversion

Trigger Event . Provided that the Company shall have raised at least $5 million in through the sale of common stock at a purchase price no less than thirty cents ($.30) per share in a private placement transaction by March 31, 2013, upon the date and time, or the occurrence of an event, specified by vote or written consent of the Majority Holders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “ Mandatory Conversion Time ”), (i) all outstanding shares of Series C Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Series C Conversion Price and (ii) such shares may not be reissued by the Corporation.

(i) Procedural Requirements . All holders of record of shares of Series C Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series C Preferred Stock pursuant to this Article V, Section A(i). Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series C Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. At the Mandatory Conversion Time, all outstanding shares of Series C Preferred Stock shall be deemed to have been converted into shares of Common Stock, which shall be deemed to be outstanding of record, and all rights with respect to the Series C Preferred Stock converted pursuant to Article V, Section A(i), including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this subsection (ii). As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Series C Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Article IV, Section B(iv), in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion. Such converted Series C Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly.

(ii) All certificates evidencing shares of Series C Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Mandatory Conversion Time, be deemed to have been retired and cancelled and the shares of Series C Preferred Stock represented thereby converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to the Mandatory Conversion Time.

VI. RESERVATION OF SHARES OF COMMON STOCK

A. Reserved Amount. The Corporation shall reserve not less than 4,000,000 shares of its authorized but unissued shares of Common Stock for issuance upon conversion of the Series C Preferred Stock (including any shares that may be issuable in connection with the adjustment provisions of this Certificate of Designations), and, thereafter, the number of authorized but unissued shares of Common Stock so reserved (the “ Reserved Amount ”) shall at all times be sufficient to provide for the full conversion of all of the Series C Preferred Stock (including any shares that may be issuable in connection with the adjustment provisions of this Certificate of Designations) outstanding, at the then current Series C Series C Conversion Price thereof, and any anticipated adjustments to such Series C Conversion Price.

VII. RANK

All shares of the Series C Preferred Stock shall rank (i) senior to (A) the Common Stock, (B) the Corporation’s authorized but unissued shares of Series B 10% cumulative convertible preferred stock (the “ Series B Preferred Stock ”), and (C) any other class of securities which is specifically designated as junior to the Series C Preferred Stock (collectively, with the Common Stock, the “ Junior Securities ”); (ii) pari 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 C Preferred Stock (the “ Pari Passu Securities ”); and (iii) junior to the Corporation’s 50,000 authorized shares of Series A Convertible Preferred Stock (the “ Series A Preferred Stock ”) and any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series C Preferred Stock (collectively, the “ Senior Securities ”), in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

VIII. LIQUIDATION PREFERENCE

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

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

IX. ADJUSTMENTS

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

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

B. 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 C 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 C 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 IX, Section B. with respect to the rights of the holders of the Series C Preferred Stock.

C. Adjustments for Reclassification, Exchange and Substitution . If the Common Stock issuable upon conversion of the Series C 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 C 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 C 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 C Preferred Stock will have the right to acquire and receive upon conversion of the Series C Preferred Stock in lieu of the shares of Common Stock immediately theretofore acquirable upon the conversion of the Series C Preferred Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon conversion of the Series C Preferred Stock had such consolidation, merger or sale or conveyance not taken place. In any such case, the Corporation will make appropriate provision to insure that the provisions of this Article IX 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 C Preferred Stock. The Corporation will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Corporation) assumes by written instrument the obligations under this Article IX Section D and the obligations to deliver to the Holder of the Series C Preferred Stock such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to acquire.

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 C Preferred Stock had been converted into Common Stock immediately prior to the dividend declaration date), the Holder of the Series C Preferred Stock shall be entitled upon conversion of the Series C Preferred Stock for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the Holder had the Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such distribution.

F. Adjustment Due to Dilutive Issuance . If, at any time when any shares of Series C Preferred Stock are issued and outstanding, the Corporation issues or sells, or in accordance with this Article IX is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Series C Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (such lower price, the “ Base Share Price ” and such issuances, a “ Dilutive Issuance ”), then immediately upon the Dilutive Issuance, the Series C Conversion Price will be reduced and only reduced to equal the Base Share Price; provided, however , that only one adjustment will be made for each Dilutive Issuance. No adjustment to the Series C Conversion Price shall have the effect of increasing the Series C Conversion Price above the Series C Conversion Price in effect immediately prior to such adjustment.

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

(i) Issuance of Rights or Options . If the Corporation in any manner issues or grants any warrants (other than the Warrants issued pursuant to the Purchase Agreement), rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or Convertible Securities (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter collectively referred to in this Article IX as “ Options ”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Series C Conversion Price on the date of issuance or grant of such Options, then the maximum total number of shares of Common Stock issuable upon the exercise of all such Options will, as of the date of the issuance or grant of such Options, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount 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 C Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii) Issuance of Convertible Securities . If the Corporation in any manner issues or sells any other series or classes of Preferred Stock (other than the Series C Preferred Stock, but including, without limitation, shares of Series B Preferred Stock ) or other securities that are convertible into or exchangeable for Common Stock (“ Convertible Securities ”), whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Series C Conversion Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount 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 C Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

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

(iv) 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 IX, no adjustment to the Series C Conversion Price or Conversion Shares pursuant to Section F of this Article IX 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 Convertible Securities that are outstanding as of the date of filing of this Certificate of Designations; or

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

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

(v) the issuance of shares of Common Stock, Convertible Securities or Options to provide financing to consummate any Business Combination, provided, in each instance and as a condition to such exception, that the holders of the Series C 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 C Conversion Price, then, and in each such case, the Corporation shall give notice thereof to the Holder of the Series C Preferred Stock, which notice shall state the Series C Conversion Price resulting from such adjustment and the increase or decrease in the number of Conversion Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the Chief Financial Officer of the Corporation.

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

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

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 or winding up of the Corporation;

then, in each such case, the Corporation shall give to the Holder of the Series C Preferred Stock (a) 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 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 Corporation, notice of the date (or, if not then known, a reasonable approximation thereof by the Corporation) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, 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 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.

X. VOTING RIGHTS

A. Class Voting Rights. Holders of the Series C Preferred Stock shall vote together as a separate class on all matters which impact the rights, value or conversion terms, or ranking of the Series C Preferred Stock, as provided herein. 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 C Preferred Stock shall be entitled to cast, at any regular or special meeting of stockholders of the Corporation or in connection with the solicitation of any written consent of stockholders of the Corporation, that number of votes as shall be equal to the difference between (i) the number of shares of Common Stock into which such share of Series C Preferred Stock could be converted at the record date for determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited 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 C Preferred Stock shall be entitled to notice of any stockholders' meeting in the same manner and at the same time as holders of Common Stock, and in accordance with the Bylaws of the Corporation.

XI. PROTECTION PROVISIONS

A. Negative Covenants. For so long as 25% of the shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Series C 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 C Preferred Stock; or

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

(c) alter or change the rights, preferences, privileges or restrictions of the shares of Series C 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 C 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 7.12 of the Purchase Agreement.

B. Affirmative Covenants. For so long as 25% of the shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Series C 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.

XII. MISCELLANEOUS

A. Cancellation of Series C Preferred Stock. If any shares of Series C Preferred Stock are converted pursuant to this Series C Certificate of Designations, the shares so converted 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 C Preferred Stock.

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

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

D. 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, 27th floor, New York, New York 10271, attn: Chief Executive Officer; and (ii) if to any Holder to the address set forth in the Purchase Agreement, or such other address as may be designated in writing hereafter, in the same manner, by such person.

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 24 th day of January, 2013.

	NATIONAL HOLDINGS CORPORATION


	By:	/s/ Mark Goldwasser
		Name: Mark Goldwasser T itle: Chief Execuitve Officer

NOTICE OF CONVERSION

(To be Executed by the Registered Holder

in order to Convert the Series C Preferred Stock)

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

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

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

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

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

Date of Conversion:

Applicable Series C Conversion Price: $________

Signature:

Name:

Address:

NATIONAL HOLDINGS CORPORTATION

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “ Agreement ”), dated as of January 24, 2013, is entered into by and among National Holdings Corporation, a Delaware corporation (the “ Company ”), and the individuals and entities listed on Exhibit A hereto under the heading “Purchasers” (the “ Purchasers ”) who become parties to this Agreement by executing and delivering a financing signature page in the form attached hereto as Exhibit B (the “ Financing Signature Page ”).

WHEREAS , the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the " Securities Act "), and Rule 506 of Regulation D (" Regulation D ") as promulgated by the United States Securities and Exchange Commission (the " SEC ") under the Securities Act;

WHEREAS , the Purchasers wish to purchase from the Company, and the Company wishes to sell and issue to the Purchasers, upon the terms and conditions stated in this Agreement an aggregate of up to 33,333,333 shares (the " Shares ") of the Company’s common stock, $0.02 par value per share (the “Common Stock”), at purchase price of $0.30 per Share, upon the terms and conditions set forth in this Agreement;

WHEREAS , the aggregate Purchase Price (as hereinafter defined) of this offering of Shares to all of the Purchasers shall be a minimum amount of $5,000,000 (the “ Minimum Offering Amount ”) and a maximum amount of $10,000,000 (the " Maximum Offering Amount " );

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement (the " Registration Rights Agreement ") pursuant to which the Company has agreed to provide certain registration rights with respect to the Shares under the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws; and

WHEREAS , the Company, National Securities Corporation and Signature Bank (the “ Escrow Agent ”) have executed and delivered an Escrow Agreement (the “ Escrow Agreement ”), pursuant to which the aggregate Purchase Price from the sale of the Shares shall be held in escrow pursuant to the terms thereof except that the Purchase Price for Shares that will be issued to a Purchaser that is a fund will not be held in escrow.

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; Sale of Shares.

1.1 Authorization . The Company has, or before the Closing (as defined in Section 2.2) will have, duly authorized the sale and issuance, pursuant to the terms of this Agreement, of the Shares.

1.2 Sale of the Shares. Subject to the terms and conditions of this Agreement, at the Closing, the Company will sell and each of the Purchasers will purchase, severally and not jointly, the Shares in the denominations set forth on Exhibit A attached hereto.

2. Purchase Price; Closing.

2.1 Payment of the Purchase Price. On or prior to the Closing Date, (i) the Company shall deliver to each Purchaser that is a fund certificates (the “ Certificates ”) representing such aggregate number of Shares either in person or to the address and in the manner as is set forth on such Purchaser’s signature page hereto, duly executed on behalf of the Company and registered in the name of such Purchaser in the manner as is set forth on such Purchaser’s signature page hereto and (ii) upon confirmation that the Certificates have been received by such Purchaser or such Purchaser’s custodian, such Purchaser shall pay its respective aggregate purchase price (the “ Purchase Price ”) for the Shares to be issued and sold to such Purchaser at the Closing, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions. The Purchase Price to be paid by the a Purchaser that is not a fund to the Company to acquire the Shares shall be held in escrow pursuant to the terms of the Escrow Agreement and disbursed in accordance therewith. A Purchaser that is not a fund may withdraw his Purchase Price and terminate this Agreement as to such Purchaser at any time after the execution and delivery of the applicable signature hereto and prior to the applicable Closing by providing written notice to the Company and the Escrow Agent. The aggregate purchase price to be paid by the Purchasers to the Company to acquire the Shares will not be less than the Minimum Offering Amount and not more than the Maximum Offering Amount.

2.2 The Closing. Subject to the terms and conditions of this Agreement, the closing (the “ Closing ”) of the sale and purchase of Shares under this Agreement will take place at the offices of Troutman Sanders LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 (or remotely via the exchange of documents and signatures) on the date of this Agreement (the “ Closing Date ”). At the Closing:

(a) the Company will deliver to each of the Purchasers such number of Shares set forth on the signature pages attached hereto, which will be reflected opposite such Investor’s name on Exhibit A attached hereto;

(b) the Company and each Purchaser will duly execute and deliver this Agreement and the Registration Rights Agreement;

(c) each Purchaser that is not a fund will have delivered to the Escrow Agent the Purchase Price for the Shares being purchased by such Purchaser and the Escrow Agent shall have delivered the Purchase Price to the Company by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company; and

(d) each Purchaser that is a fund will deliver the Purchase Price for the Shares being purchased by such Purchaser upon receipt of the its Certificate as set forth in Section 2.1

2.3 Escrow Arrangements . Upon execution hereof by each Purchaser that is not a fund pending the Closing hereunder, the aggregate proceeds of the sale of the Shares to such Purchaser pursuant hereto shall be deposited in a non-interest bearing escrow account with the Escrow Agent, pursuant to the terms the Escrow Agreement.

3. Representations of the Company. To induce the Purchasers to enter into this Agreement and to purchase the Shares, the Company hereby warrants, represents and covenants to the Purchasers 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 SEC, the Company represents and warrants to the Purchasers that as of the Closing Date:

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 (iii) the authority or ability of the Company to perform any of its obligations hereunder. Other than the Subsidiaries, the Company owns no interest, directly or indirectly, in any corporation, partnership, joint venture, limited liability company or other entity other than in the ordinary course of its business.

3.2 Power and Authority. The Company has the requisite corporate power and authority to execute and deliver this Agreement and the Shares 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.

3.3 Valid Issuance. The Shares have been duly and validly authorized. When issued and paid for in accordance with the terms hereof, the 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 those created by the 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, except for fees payable to National Securities Corporation.

3.5 Private Placement. Assuming the accuracy and completeness of the Purchasers' representations and warranties set forth in Section 4 hereof, the offer and issuance by the Company of the Shares is exempt from registration under the Securities Act.

3.6 No Conflict. The execution, delivery and performance of this Agreement and the Shares 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 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, 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.

3.7 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 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 Rule 5122 Filing with FINRA, (ii) a Form D with the SEC, (iii) any registration of the Shares pursuant to the Registration Rights Agreement, and (iv) 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 Closing have been obtained or effected on or prior to the Closing Date, 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.

3.8 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 Shares 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 any of the Shares 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 Shares is not and will not be integrated with other offerings of securities of the Company by the Company or any other person or entity.

3.9 Application of Takeover Protections. Other than the staggered board provisions contained in the Company’s By-Laws 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 any Purchaser as a result of the transactions contemplated by this Agreement.

3.10 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).

3.11 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 Closing will not be, Insolvent (as defined below). For purposes of this Section 3.11, “ 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.

3.12 No Undisclosed Events, Liabilities, Developments or Circumstances. 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.

3.13 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 of the Company or any of its Subsidiaries or Bylaws, 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.

3.14 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.

3.15 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.

3.16 Transactions With Affiliates. 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, consultants, 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.

3.17 Capitalization. The authorized and outstanding equity capitalization of the Company (including all options, warrants and other convertible or other securities of the Company or any Subsidiary) are as disclosed in the SEC Documents.

3.18 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation by any person or entity or before any Governmental Entity or by the SEC or FINRA involving the Company 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 reasonably be expected to have a Material Adverse Effect.

3.19 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.

3.20 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.

3.21 Tax Status. Each of the Company and its Subsidiaries (i) has timely made or filed all material 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.

3.22 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.

3.23 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.

3.24 Investment Company Status. The Company is not, and upon consummation of the sale of the Shares 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.

3.25 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.

3.26 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 the Purchasers. Each Purchaser severally represents and warrants to the Company as follows:

4.1 Existence and Power. In the event such Purchaser is an entity, such 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. In the event such Purchaser is an individual, such Purchaser has the legal capacity to execute, deliver and perform the obligations under this Agreement.

4.2 Authorization; No Contravention. The execution delivery and performance by each 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 such 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 such Purchaser or any requirement of law applicable to such Purchaser, and (d) do not violate any orders of any Governmental Entity against, or binding upon, such Purchaser.

4.3 Disclosure of Information. Such Purchaser acknowledges that it has received all the information that it has requested relating to the Company and the purchase of the Shares. Such 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 Shares.

4.4 Binding Effect. This Agreement has been duly executed and delivered by such Purchaser and constitute the legal, valid and binding obligations of such 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 Shares hereby acquired by such Purchaser pursuant to this Agreement are being acquired for such 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 such Purchaser should in the future decide to dispose of any of such Shares, such 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. Such Purchaser agrees to the imprinting, so long as required by law, of legends on certificates representing the 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. Such Purchaser understands that, other than as provided in the Registration Rights Agreement, the Shares 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 such Purchaser’s representations set forth herein.

4.7 Investment Representations. Such Purchaser (i) has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment, (ii) is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment, (iii) at the time such Purchaser was offered the Shares and at the date hereof it 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 Shares.

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 such 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, except for fees payable to National Securities Corporation.

4.9 Confidentiality Prior to the Date hereof. Other than to other persons party to this Agreement, such 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 No Governmental Review . Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

4.11 Reliance on Exemptions . Such Purchaser understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and such Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Shares.

4.12 General Solicitation . Such Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any general advertisement.

4.13 Residency . Such Purchaser is a resident of that jurisdiction specified on its Financing Signature Page.

4.14 Acknowledgement . Such Purchaser acknowledges and agrees that the foregoing representations, warranties, covenants and acknowledgments are made by it with the intention that they may be relied upon by the Company and its agents and legal counsel in determining its eligibility or (if applicable) the eligibility of others on whose behalf it is contracting hereunder to purchase the Shares under the applicable securities legislation. Such Purchaser further agrees that by accepting delivery of the Shares at the Closing, it shall be representing and warranting that the foregoing representations and warranties are true and correct as at the Closing with the same force and effect as if they had been made by such Purchaser at the Closing and that they shall survive the purchase by such Purchaser of the Shares and still continue in full force and effect notwithstanding any subsequent disposition by such Purchaser of the Shares. The Company and its counsel shall be entitled to rely on the representations and warranties of such Purchaser contained in this paragraph.

5. Conditions of Closing of the Purchasers. The obligations of the Purchasers to purchase their respective Shares being purchased at the Closing are subject to the fulfillment at or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Purchasers, which waiver will be at the sole discretion of such Purchasers:

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 each 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 Closing will have been performed or complied with by the Company prior to or at the Closing.

5.3 Consents, Etc. The Company will have secured and delivered to the Purchasers all consents and authorizations that will be necessary or required lawfully to consummate this Agreement and to issue the Shares to be purchased by each Purchaser at the Closing.

5.4 Delivery of Documents. All of the documents to be delivered by the Company pursuant to Section 2.2 will be in a form and substance reasonably satisfactory to the Purchasers and their counsel, and will have been executed and delivered to the Purchasers 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 and all documents and instruments incident to such transactions will be in a form and substance reasonably satisfactory to the Purchasers and their counsel, and the Purchasers and their counsel will have received all such counterpart originals or certified or other copies of such documents as the Purchasers or their counsel may reasonably request.

5.6 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.

5.7 Convertible/Exchangeable Securities . There shall be no securities of the Company outstanding which entitle the holder thereof to acquire Common Stock other than options to purchase Common Stock issued under the Company's option plans and as set forth on Schedule 5.7 hereto.

5.8 Securities Laws Disclosure; Publicity . On or before 9:00 A.M. Eastern Standard Time on the Closing Date, New York local time, the Company shall issue a press release or file a Form 8-K with the SEC announcing the signing of this Agreement and describing the terms of the transactions contemplated by this Agreement. From and after the issuance of such press release, no Purchaser shall be in possession of any material, non-public information received from the Company or any of its officers, directors, employees or agents, that is not disclosed in the press release. The Company shall not otherwise publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the SEC (other than in a Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency, without the prior written consent of such Purchaser, except to the extent such disclosure is required by law or regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure.

6. Conditions of Closing of the Company. The Company’s obligations to sell and issue the Shares at the Closing are subject to the fulfillment at or before the 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:

6.1 Representations and Warranties. The representations and warranties made by the Purchasers in this Agreement will have been true and correct in all respects as of the date when made and as of each 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).

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

6.3 Payment of Purchase Price. The Purchasers will have tendered or arranged to have tendered (either directly or through a designated escrow agent) the aggregate Purchase Price in exchange for the Shares being issued hereunder in accordance with Section 2.2 or 2.3, as applicable.

6.4 Delivery of Documents. All of the documents to be delivered by the Purchasers pursuant to Section 2.2 will be in a form and substance reasonably satisfactory to the Company and its counsel, and will have been executed and delivered to the Company by each of the other parties thereto.

7. Covenants and Agreements of the Parties.

7.1 Use of Proceeds. The Company will use the net proceeds from the sale of the Shares as follows:

(a) Approximately $2,800,000 will be used to repay certain indebtedness owing to St. Cloud Capital Partners II, L.P. ($1,800,000) and Bryant Riley ($1,000,000);

(b) The balance for general corporate, working capital and net capital purposes; and

7.2 Material Best Efforts . Each party shall use its material best efforts timely to satisfy each of the covenants and conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement.

8.1 Indemnification.

(a) Subject to the provisions of Section 8.5 below, in consideration of each Purchaser’s execution and delivery of this Agreement and acquiring the Shares and in addition to all of the Company’s other obligations hereunder and under the Shares, the Company will defend, protect, indemnify and hold harmless each Purchaser and all of their respective stockholders, partners, members, officers, directors, employees, direct or indirect Purchasers, 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 Shares or (ii) the status of such Purchaser as a Purchaser in the Company pursuant to the transactions contemplated by this Agreement and the Shares, except to the extent that the 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 8.1 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 8.1, 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 8.1, 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 8.1 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.

8.2 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.

8.3 Remedies. Each Purchaser will have all rights and remedies applicable to it which are set forth in this Agreement and in the Shares 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 Shares, any remedy at law may prove to be inadequate relief to the Purchasers. The Company therefore agrees that the Purchasers 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.

8.4 Successors and Assigns. This Agreement, and the rights and obligations of each Purchaser hereunder, may be assigned by such Purchaser to (a) any person or entity to which the Shares are transferred by such 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 such Purchaser, including, without limitation, any general partner, manager, officer or director of such 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, such Purchaser.

8.5 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 Closing Date. The Purchasers are entitled to rely, and the parties hereby acknowledge that the Purchasers have 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 Purchasers. 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 the Purchasers contained herein, irrespective of any independent investigation made by the Company.

8.6 Expenses. Each party hereto will pay its own expenses relating to the transactions contemplated by this Agreement.

8.7 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.

8.8 Governing Law; Venue. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York (without reference to the conflicts of law provisions thereof that would defer to the substantive laws of another 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.

8.9 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, NY10271, Attention: General Counsel, Fax Number: 212-553-2385, or at such other address as may have been furnished in writing by the Company to the other parties hereto, with a copy (which will not constitute notice) to Troutman Sanders, LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174, Attention: James Kaplan, Esq., Fax Number: (212) 704-8346.

(b) If to a Purchaser, at its address set forth on Exhibit A , or at such other address as may have been furnished in writing by such Purchaser to the other parties hereto.

(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 8.9.

8.10 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.

8.11 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 each of the Purchasers. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to any Purchaser without the written consent of such Purchaser unless such amendment, termination or waiver applies to all Purchasers in the same fashion. The Company will give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver. Any amendment, termination or waiver effected in accordance with this Section 8.11 will be binding on all parties hereto, even if they do not execute such consent. 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.

8.12 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.

8.13 Counterparts. This Agreement may be executed in any number of counterparts (including, in the case of the Purchasers, Financing Signature Pages), 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.

8.14 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.

8.15 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser are several and not joint with the obligations of any other Purchaser, and no Purchaser will be responsible in any way for the performance of the obligations of any other Purchaser. Nothing contained herein or in any other agreement or instrument contemplated hereby, and no action taken by any Purchaser pursuant hereto or thereto, will be deemed to constitute the Purchasers as, and the Company acknowledges that the Purchasers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated hereby or thereby or any matters, and the Company acknowledges that the Purchasers are not acting in concert or as a group, and the Company will not assert any such claim, with respect to such obligations or the transactions contemplated hereby or thereby. The decision of each Purchaser to purchase Shares has been made by such Purchaser independently of any other Purchaser. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with such Purchaser making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring such Purchaser’s investment in the Shares or enforcing its rights hereunder. The Company and each Purchaser confirms that each Purchaser has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser will be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or the Shares, and it will not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of the Shares contemplated hereby was solely in the control of the Company, not the action or decision of any Purchaser, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Purchaser. It is expressly understood and agreed that each provision contained in this Agreement and in the Shares is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

[Signature Page Follows]

IN WITNESS WHEREOF, each 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 Goldwasser _________________________

Name: Mark Goldwasser

Title: CEO

EXHIBIT A

PURCHASERS

Name	Number of Shares		Purchase Price
David Gage		100,000	$	30,000
Five Stones 1, LLC		166,667	$	50,000
Mitchell Katz		833,333	$	249,999.90
Michael Kramer		500,000	$	150,000
Lowell Kraft		900,000	$	270,000
Hudson Bay Master Fund Ltd.		1,666,667	$	500,000.10
Bill Veghte		500,000	$	150,000
Jeffrey Gould		333,333	$	100,000
Leonard Lichter		250,000	$	75,000
Stephen Nicholas		1,000,000	$	300,000
M Klein and Company		1,083,333	$	325,000
Leonard Potter		350,000		105,000
Kerry Propper		100,000	$	30,000
Richard Winiarski		1,000,000	$	300,000
Melby Lane Partners, LLC		333,333	$	100,000
Cutter Mill Partners LLC		1,333,333	$	400,000
David Wasserman		800,000	$	240,000
Hartz Capital Investments, LLC		500,000	$	150,000
Empery Asset Master, LTD		333,334	$	100,000.21
Iroquois Master Fund Ltd.		1,333,333	$	400,000
American Capital Management LLC		166,666	$	50,000
Scott Cohen		333,333	$	100,000
Richard Abbe as custodian for Talia Abbe UTMA/NY until age 21		55,556	$	16,667
Richard Abbe as custodian for Bennet Abbe UTMA/NY until age 21		55,556	$	16,667
Richard Abbe as custodian for Samantha Abbe UTMA/NY until age 21		55,556	$	16,667
Mark Goldwasser		66,666	$	20,000
Leonard Sokolow		33,333	$	10,000
Toby Fagenson Trust #1, Robert Fagenson, Trustee		166,667	$	50,000
Powers Private Equity LLC		1,666,666	$	500,000
Judd R. Marmon		100,000	$	30,000
Michael Gross		1,000,000	$	300,000
Moors and Mendon Master Fund LP		1,666,667	$	500,000
Brad Chase		1,666,666	$	500,000
Brian D. Gordon		1,000,000	$	300,000
Quaker Ridge Partners LLC		833,333	$	250,000
Stuart Lichter		833,333	$	250,000
William Groeneveld		25,000	$	7,500
Pyramis Small Capitalization Core Commingled Pool		4,332,860	$	1,299,858
Tucson Supplemental Retirement System		128,240	$	38,472
South Carolina Retirement System Investment Commission		1,390,490	$	417,147
Alan Levin		25,000	$	7,500
Jonathan C. Rich		50,000	$	15,000
Hany S. Awadalla		116,666	$	34,999.80
Gregory Fortunoff		100,000	$	30,000
JET Equity Partners, LP		166,666	$	50,000

FINANCING SIGNATURE PAGE

By execution and delivery of this signature page, the undersigned hereby agrees to become a Purchaser, as defined in that certain Securities Purchase Agreement (the “Purchase Agreement”) by and among National Holdings Corporation, a Delaware corporation (the “Company”), and the Purchasers (as defined in the Purchase Agreement), dated as of the Closing Date (as defined in the Purchase Agreement), acknowledges having read the representations in the Purchase Agreement section entitled “Representations of the Purchasers,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Purchaser. The undersigned further hereby agrees to be bound by the terms and conditions of the Purchase Agreement as a “Purchaser” thereunder and authorizes this signature page to be attached to the Purchase Agreement.

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ David Gage
	Name of Purchaser

By:

Title:

Date:	1/23/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Hany A. Awadalla
	Name of Purchaser

By:	Hany A. Awadalla

Title:

Date:	1/25/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Gregory Fortunoff
	Name of Purchaser

By:	Gregory Fortunoff

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ JET Equity Partners, LP
	Name of Purchaser

By:	/s/ Douglas S. Thomas

Title:

Date:	January 24, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Five Stones 1, LLC
	Name of Purchaser

By:	/s/ George M. Stone

Title:	Member

Date:	1/24/2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Mitchell Katz
	Name of Purchaser

By:	/s/ Mitchell Katz

Title:

Date:	1/10/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Michael Kramer
	Name of Purchaser

By:	/s/ Michael Kramer

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Lowell D. Kraff
	Name of Purchaser

By:	/s/ Lowell D. Kraff

Title:

Date:	1-24-13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Hudson Bay Master Fund LTD
	Name of Purchaser

By:	/s/ Yoav Roth

Title:	Authorized Signatory

Date:	January 24, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Bill Veghte
	Name of Purchaser

By:	/s/ Bill Veghte

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Jeffrey Gould
	Name of Purchaser

By:	/s/ Jeffrey Gould

Title:

Date:	1/18/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Leonard Lichter
	Name of Purchaser

By:

Title:

Date:	1-23-13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Stephen Nicholas
	Name of Purchaser

By:

Title:

Date:

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


M Klein and Company
	Name of Purchaser

By:	/s/ Mark Klein

Title:	Managing Member

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Leonard Potter
	Name of Purchaser

By:	Leonard Potter

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Kerry Propper
	Name of Purchaser

By:	/s/ Kerry Propper

Title:

Date:	January 24, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ Richard W. Winiarski
	Name of Purchaser

By:	Richard W. Winiarski

Title:

Date:	1-24-13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Melby Lane Partners, LLC
	Name of Purchaser

By:	/s/ Steven Shenfeld

Title:	Managing Member

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


Cutter Mill Partners LLC
	Name of Purchaser

By:	/s/ Steven Shenfeld

Title:	Member

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


/s/ David Wasserman
	Name of Purchaser

By:	David Wasserman

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Hartz Capital Investments, LLC
	By: Empery Asset Management, its authorized agent
	By: Empery AM GP, LLC, its General Partner

	Name of Purchaser

By:	/s/ Ryan M. Lane

Title:	Ryan M. Lane - Managing Member

Date:	January 24, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Empery Asset Master, LTD
	By: Empery Asset Management, its authorized agent
	By: Empery AM GP, LLC, its General Partner

	Name of Purchaser

By:	/s/ Ryan M. Lane

Title:	Managing Member

Date:	January 22, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Iroquois Master Fund Ltd.

	Name of Purchaser

By:	/s/ Joshua Silverman

Title:	Authorized Signatory

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	American Capital Management LLC

	Name of Purchaser

By:	/s/ Philip Mirabelli

Title:	Authorized Signatory

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Scot Cohen

	Name of Purchaser

By:	/s/ Scot Cohen

Title:	Individual

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Richard Abbe as custodian for Talia Abbe UTMA/NY until age 21

	Name of Purchaser

By:	/s/ Richard Abbe

Title:	Authorized Signatory

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Richard Abbe as custodian for Bennet Abbe UTMA/NY until age 21

	Name of Purchaser

By:	/s/ Richard Abbe

Title:	Authorized Signatory

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Richard Abbe as custodian for Samantha Abbe UTMA/NY until age 21

	Name of Purchaser

By:	/s/ Richard Abbe

Title:	Authorized Signatory

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Mark Goldwasser

	Name of Purchaser

By:	/s/ Mark Goldwasser

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Leonard Sokolow

	Name of Purchaser

By:	/s/ Leonard Sokolow

Title:

Date:	01/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Toby Fagenson Trust #1, Robert Fagenson, Trustee

	Name of Purchaser

By:	/s/ Robert Fagenson

Title:	Trustee

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Power Private Equity LLC

	Name of Purchaser

By:	/s/ Frederic Powers

Title:	Managing Director

Date:	1-23-13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	/s/ Judd R. Marmon

	Name of Purchaser

By:	Judd R. Marmon

Title:

Date:	01/23/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	/s/ Michael Gross

	Name of Purchaser

By:	Michael Gross

Title:

Date:	January 24, 2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Moors and Mendon Master Fund LLP

	Name of Purchaser

By:	/s/ Anton V. Schutz

Title:	Managing Member Mendon GP LLC, GP to the Moors and Mendon Fund LP

Date:	1/23/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	/s/ Brad Chase

	Name of Purchaser

By:	Brad Chase

Title:

Date:	1/23/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Brian D. Gordon

	Name of Purchaser

By:	/s/ Brian D. Gordon

Title:

Date:	1/23/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Quaker Ridge Partners LLC

	Name of Purchaser

By:	/s/ Larry Fehizenbaker

Title:

Date:	1/16/2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	/s/ Stuart Lichter

	Name of Purchaser

By:

Title:

Date:	1/22/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	William Groeneveld

	Name of Purchaser

By:	/s/ William Groenveld

Title:

Date:	1/23/2013

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Pyramis Small Capitalization Core Commingled Pool

	Name of Purchaser

By:	/s/ Louis Russo

Title:	Vice President

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Tucson Supplemental Retirement System

	Name of Purchaser

By:	/s/ Jeff Goretti

Title:	Vice President

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	South Carolina Retirement System Investment Commission

	Name of Purchaser

By:	/s/ Jeff Goretti

Title:	Vice President

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Alan B. Levin

	Name of Purchaser

By:	/s/ Alan B. Levin

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

EXHIBIT B

FINANCING SIGNATURE PAGE

Executed, in counterpart, as of the date set forth below.

PURCHASER:


	Jonathan C. Rich

	Name of Purchaser

By:	/s/ Jonathan C. Rich

Title:

Date:	1/24/13

Contact Person:

Address for Notice:



Jurisdiction of Domicile:

Number of Shares to be Purchased:

Purchase Price:		$

WARRANT/COMMON SHARE EQUIVALENTS	PER SHARE EXERCISE PRICE	EXPIRATION DATE
375,000	$2.50	03/31/13
468,750	$2.00	06/30/13
250,000	$0.50	06/04/15
250,000	$0.50	01/31/13*
646,755	$0.50	07/11/15

*Expires 01/31/13 assuming $1.8M St. Cloud Note is not prepaid before Note due date of 01/31/13

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (the " Agreement ") is made and entered into as of this 24th day of January, 2013 by and among National Holdings Corporation, a Delaware corporation (the " Company "), and those individuals signatory hereto (the " Investors ").

WHEREAS, the Company has agreed to issue and sell to the Investors, and the Investors have agreed to purchase from the Company, up to 33,333,333 shares (the " Shares ") of the Company’s common stock, $0.02 par value per share (the " Common Stock "), pursuant to the terms and conditions set forth in that certain Securities Purchase Agreement, dated January 24, 2013, by and among the Company and the Investors (the " Purchase Agreement "), and

WHEREAS, the terms of the Purchase Agreement provide that it shall be a condition precedent to the closing of the transactions thereunder for the Company and the Investors to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree as follows:

1. Certain Definitions.

As used in this Agreement, the following terms shall have the following meanings:

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

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

" Closing Date " means the earlier of (i) the date of the last Closing under the Purchase Agreement and (ii) March 31, 2013.

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

" Effectiveness Deadline " means (i) with respect to the initial Registration Statement required to be filed under Section 2(a), the date ninety (90) calendar days after the Closing Date, or if there is a review of the initial Registration Statement by the SEC, one hundred and twenty days (120) calendar days after the Closing Date and (ii) with respect to any Registration Statement required to be filed under Section 2(b), the date ninety (90) calendar days after the Filing Deadline for any Registration Statement required to be filed under Section 2(b), or if there is a review of any Registration Statement required to be filed under Section 2(b) by the SEC, one hundred and twenty days (120) calendar days after the Filing Deadline.

" Effectiveness Period " as defined in Section 3(b) hereto.

" Event Date " as defined in Section 2(f) hereto

" Filing Deadline " means (i) with respect to the initial Registration Statement required to be filed under Section 2(a), the date that is forty-five (45) calendar days after the Closing Date and (ii) with respect to any Registration Statement required to be filed under Section 2(b), (1) for the initial Registration Statement required to be filed under Section 2(b), the six-month anniversary of the Effective Date of the Registration Statement required to be filed under Section 2(a) and (2) for all subsequent Registration Statements required to be filed under Section 2(b), the six-month anniversary of the Effective Date of the immediately preceding Registration Statement required to be filed under Section 2(b).

" Liquidated Damages " as defined in Section 2(f) hereto

" 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 all Shares originally issued to Investors under the Purchase Agreement. As to any particular Registrable Securities, such securities shall cease to be 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 under Rule 144 without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act.

" Registration Statement " means the initial registration statement required to be filed in accordance with Section 2(a) and any additional registration statement(s) required to be filed under Section 2(b), including (in each case) the Prospectus, amendments and supplements to such registration statements or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference therein.

" 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 Comments " means written comments pertaining solely to Rule 415 which are received by the Company from the SEC to a filed Registration Statement which requires the Company to limit the amount of Registrable Securities which may be included therein to a number of Registrable Securities which is less than such amount sought to be included thereon as filed with the SEC.

" Shares " shall have the meaning as defined in the recitals.

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

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

2. Registration Rights.

(a) Mandatory Registration . The Company shall prepare, and, as soon as practicable but in no event later than the Filing Deadline, use its commercially reasonable efforts to file with the SEC the Registration Statement on Form S-1 covering the resale of the Registrable Securities. The Company shall use its commercially reasonable efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Effectiveness Deadline. In the event that the amount of shares of Common Stock which may be included in the Registration Statement filed pursuant to this Section 2(a) is limited due to SEC Comments, the cut back of the Shares shall be applied to the Investors pro-rata in accordance with the number of Shares purchased pursuant to the Purchase Agreement relative to all Shares purchased pursuant to the Purchase Agreement. No later than the second Business Day following the Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

(b) Additional Registrations . If all of the Registrable Securities cannot be included in the Registration Statement filed pursuant to Section 2(a) due to SEC Comments, then the Company shall prepare and file with the SEC by the Filing Deadline for such Registration Statement, such number of additional Registration Statements as may be necessary in order to ensure that all Registrable Securities are covered by an existing and effective Registration Statement. If an initial Registration Statement is filed under Section 2(a) and SEC Comments require shares of Common Stock to be removed for such newly filed Registration Statement under this Section 2(b), then the Company will prepare and file additional Registration Statements until such time as all such required Registrable Securities are covered by effective Registration Statements. Any Registration Statements to be filed under this Section 2(b) shall be on Form S-1 and shall cover the resale of such shares. The Company shall use its commercially reasonable efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than its Effectiveness Deadline. Any required cutbacks of the Shares shall be applied to the Investors pro-rata in accordance with the number of Shares purchased pursuant to the Purchase Agreement relative to all Shares purchased pursuant to the Purchase Agreement. No later than the second Business Day following the Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

(c) 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. Investors shall be responsible for all other expenses in connection with the registration, including fees and expenses of counsel, discounts, commissions, fees selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.

(d) Effectiveness.

(i) The Company shall notify the Investors by facsimile or e-mail as promptly as practicable after any Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.

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

(e) 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.

(f) If: (i) the Registration Statement is not declared effective by the SEC (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline or (ii) after the date the Registration Statement is declared effective by the SEC, (A) such Registration Statement ceases for any reason (including, without limitation, by reason of a stop order or the Company’s failure to update the Registration Statement), to remain continuously effective as to all Registrable Securities included in such Registration Statement or (B) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities for any reason (other than due to a change in the “Plan of Distribution” or the inaccuracy of any information regarding the Holders), in each case, for more than an aggregate of 20 consecutive calendar days or 45 calendar days (which need not be consecutive days) during any 12-month period, and (iii) the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1) as a result of which the Holders who are not affiliates are unable to sell Registrable Securities without restriction under Rule 144 (or any successor thereto), (any such failure or breach in clauses (i) through (iii) above being referred to as an “ Event ,” and, for purposes of clauses (i) or (iii), the date on which such Event occurs, or for purposes of clause (ii), the date on which such 20 or 45 calendar day period is exceeded, being referred to as an “ Event Date ”), then in addition to any other rights the Holders may have hereunder or under applicable law: (x) within five Business Days after an Event Date relating to a failure in clause (i) only, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement, for any Registrable Securities held by such Holder on such Event Date; and (y) on each 30-day anniversary (or pro rata portion thereof) following any Event Date (including, for the avoidance of doubt, a failure in clause (i), in which case each 30-day anniversary shall be measured commencing on the 31 st day following such Event Date) until the earlier of (1) the applicable Event is cured or (2) the Registrable Securities are eligible for resale pursuant to Rule 144 without manner of sale or volume restrictions, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement, for any unregistered Registrable Securities then held by such Holder. The amounts payable pursuant to the foregoing clauses (x) and (y) are referred to collectively as “ Liquidated Damages .” The parties agree that (1) notwithstanding anything to the contrary herein, no Liquidated Damages shall be payable with respect to any period after the expiration of the Effectiveness Period and in no event shall the aggregate amount of Liquidated Damages (excluding Liquidated Damages payable in respect of an Event described in Section 2(f)(iii) herein) payable to a Holder exceed, in the aggregate, 10% of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement and (2) in no event shall the Company be liable in any 30-day period for Liquidated Damages under this Agreement in excess of 1.5% of the aggregate purchase price paid by the Holders pursuant to the Purchase Agreement. If the Company fails to pay any Liquidated Damages pursuant to this Section 2(f) in full within five Business Days after the date payable, the Company will pay interest thereon at a rate of 1.5% per month (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such Liquidated Damages are due until such amounts, plus all such interest thereon, are paid in full. Unless otherwise specified in Section 2(f), the Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date. Notwithstanding the foregoing, nothing shall preclude any Holder from pursuing or obtaining any available remedies at law, specific performance or other equitable relief with respect to this Section 2(f) in accordance with applicable law. The Company shall not be liable for Liquidated Damages under this Agreement as to any Registrable Securities which are not permitted by the SEC to be included in a Registration Statement due solely to SEC Comments from the time that it is determined that such Registrable Securities are not permitted to be registered until such time as the provisions of this Agreement as to the Registration Statements required to be filed hereunder are triggered, in which case the provisions of this Section 2(f) shall once again apply, if applicable. In such case, the Liquidated Damages shall be calculated to only apply to the percentage of Registrable Securities which are permitted in accordance with SEC Guidance to be included in such Registration Statement. The Effectiveness Deadline for a Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on a timely basis results from the failure of a Holder to timely provide the Company with information requested by the Company and necessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which the Effectiveness Deadline would be extended with respect to Registrable Securities held by such Holder).

3. 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 as soon as reasonably practicable after the Closing Date (but in no event later than the Filing Deadline) a Registration Statement with respect to the Registrable Securities pursuant to Section 2(a) or 2(b) and thereafter use commercially reasonable efforts to cause such Registration Statement to become effective as soon as reasonably practicable after such filing (but in no event later than the Effectiveness Deadline) and to remain continuously effective during the Effectiveness Period (as hereinafter defined), and such Registration Statement shall include the plan of distribution attached hereto as Exhibit A ; provided , that, before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish a reasonable period of time prior to filing to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed, which documents will be furnished within a reasonable period of time prior to filing and will be subject to review of such counsel;

(b) notify each holder of Registrable Securities of the effectiveness of each registration statement filed hereunder and prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement may be sold without the requirement to be in compliance with Rule 144(c)(1), or (ii) 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(the " Effectiveness Period ");

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

(d) use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement and, (ii) if such order or suspension is issued, obtain the withdrawal of any such order or suspension at the earliest possible moment and notify each holder of Registrable Securities of the issuance of such order and the resolution thereof or its receipt of notice of the initiation of any proceeding such purpose;

(e) prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investors as shall be reasonably appropriate in the opinion of the Company and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(e), or (iii) file a general consent to service of process in any such jurisdiction; and provided further that (notwithstanding anything in this Agreement to the contrary with respect to the bearing of expenses) if any jurisdiction in which any of such Registrable Securities shall be qualified shall require that expenses incurred in connection with the qualification therein of any such Registrable Securities be borne by the selling Investors, then the selling Investors shall, to the extent required by such jurisdiction, pay their pro rata share of such qualification expenses;

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

(g) immediately notify the Investors, at any time when a Prospectus relating to Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such holder, promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(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 and take all such other actions as the holders of a majority of the Registrable Securities being sold 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 and any attorney, accountant, or other agent retained by any such seller, 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, attorney, accountant, or agent in connection with such registration statement; provided , however , that any such information furnished by the Company that is non-public shall be used in connection with such registration only, and shall be kept confidential by any of the foregoing recipients; and

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

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

5. Obligations of the Investors.

(a) Investors shall each furnish in writing to the Company such information regarding themselves, the Registrable Securities held by them, the intended method of disposition of the Registrable Securities held by them and their beneficial ownership of the Company’s securities, including who has the right to vote or dispose of such securities on behalf of Investor, if other than the Investor, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute and deliver such documents in connection with such registration as the Company may reasonably request. At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify Investors of the information the Company requires from Investors if Investors elect to have any of the Registrable Securities included in the Registration Statement. Investors shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if Investors elect to have any of the Registrable Securities included in the Registration Statement.

(b) Each Investor, by their acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of their election to exclude all of their Registrable Securities from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of an event pursuant to Section 3(g) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until such Investor’s receipt of the copies of the supplemented or amended prospectus filed with the SEC and until any related post-effective amendment is declared effective and, if so directed by the Company, each Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor’s possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice.

6. Indemnification.

(a) Indemnification by the Company. The Company will indemnify and hold harmless each Investor and their respective officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a " Blue Sky Application "); (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on such Investor’s behalf and will reimburse Investors, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

(b) Indemnification by the Investors . Each Investor agrees, severally and not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the liability of any Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

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

(d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 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.

7. Miscellaneous.

(a) Amendments and Waivers. This Agreement may be amended only by a writing signed by the Company and the Investors. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Investor.

(b) Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 8.9 of the Purchase Agreement.

(c) Assignments and Transfers by Investors. The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. Investors may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by Investors to such person, provided that each Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected.

(d) Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of 66 2/3% of the Investors, provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Investors, after notice duly given by the Company to Investors.

(e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(f) Electronic Delivery; Counterparts. This agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which shall constitute one and the same document. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" tif, .gif, . peg or similar attachment to electronic mail (any such delivery, an " Electronic Delivery "), such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such Electronic Delivery signature page were an original thereof. At the request of any party hereto, each other party hereto or thereto shall re-execute the original form of this Agreement and deliver such form to all other parties. No party hereto shall raise the use of Electronic Delivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of Electronic Delivery as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

(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 shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to conflicts of laws concepts which would apply the substantive law of some other jurisdiction, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.