LIMITED RECOURSE CONVERTIBLE PROMISSORY NOTE

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF (THE “CONVERSION SHARES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THESE SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THIS NOTE OR CONVERSION SHARES OR (II) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT WHERE THE HOLDER HAS FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.

NATIONAL HOLDINGS CORPORATION , a Delaware corporation (the “ Company ”), for value received, hereby promises to pay to the order of   FUND.COM INC. , a Delaware corporation (the “ Holder ”), on April 30, 2009 (the “ Maturity Date”) , the principal sum of Five Hundred Thousand Dollars (US $500,000), with no interest accruing or payable thereon.

This Note is being issued by the Company pursuant to the terms of that certain Securities Purchase Agreement by and between the Company and the Holder, dated April 7, 2009 (the “ Securities Purchase Agreement ”).  Capitalized terms used herein not otherwise defined shall have the meanings ascribed to them in the Securities Purchase Agreement.

1.            Limited Recourse .     Except as otherwise expressly provided herein, (a) the obligations of the Company under this Note shall be limited solely to the conversion of this Note into shares of Common Stock or Series C Preferred Stock, as the case may be, and (b) the Company shall not be liable or have any personal liability in any other respect for the payment of any amount under this Note.

2.            Conversion into Series C Preferred Stock .

2.1           Conversion into Series C Preferred Stock .   The entire unpaid principal amount of this Note shall automatically be converted into five hundred (500) shares of Series C Preferred Stock with no further action required by either the Company or the Holder, in the event that on or before 5:00 PM, New York Time, on the Maturity Date, the Holder shall pay the Five Million Dollar (US $5,000,000) Purchase Price in accordance with the provisions of   Section 3.2(c) of the Securities Purchase Agreement, as a result of all of the conditions to closing of the transactions contemplated by the Securities Purchase Agreement required to be met or performed by both the Company and the Holder (including the execution, delivery and filing of all Transaction Documents and other documents, waivers and instruments required to be executed, delivered or filed in connection with the transactions contemplated by the Securities Purchase Agreement) having been met or performed by the Maturity Date by the Company and the Holder, respectively, or otherwise waived by the applicable party (the “ SPA Closing ”).

2.2           Effect of Conversion .  Upon conversion of this Note in the manner provided by this Section 2, this Note shall be deemed fully satisfied and cancelled.

2.3            Payment of Purchase Price .   Upon payment of the Purchase Price and consummation of the SPA Closing, the Purchase Price for all 5,000 shares of Series C Preferred Stock shall be deemed to have been paid in full.

3.            SPA Closing; Extension Period and Election of Remedies .

3.1            Extension Period .  In the event that for any reason by the Maturity Date:

(a)           all of the conditions to closing of the transactions contemplated by the Securities Purchase Agreement required to be met or performed by the Holder (including the execution, delivery and filing of all Transaction Documents and other documents, waivers and instruments required to be executed, delivered or filed in connection with the transactions contemplated by the Securities Purchase Agreement) shall have been met or performed by the Holder by the Maturity Date; and

(b)           all of the conditions to closing of the transactions contemplated by the Securities Purchase Agreement required to be met or performed by the Company (including the execution, delivery and filing of all Transaction Documents and other documents, waivers and instruments required to be executed, delivered or filed in connection with the transactions contemplated by the Securities Purchase Agreement) shall not have been met or performed by the Company by the Maturity Date, and, as a result, the SPA Closing shall not have occurred,

then, and in such event, the Company shall have a period not to exceed fifteen (15) days following the Maturity Date (the “ Extension Period ”) to meet or perform such closing condition(s).  In the event that the Com