Contract
Exhibit
4.11
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF SEPTEMBER 8,
2006, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY
FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
SUCH ACT.
Right
to Purchase ______ Shares of Common Stock, no par value per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, AJW Qualified Partners, LLC or its registered
assigns, is entitled to purchase from Standard Management Corporation, an Indiana corporation (the
“Company”), at any time or from time to time during the period specified in Paragraph 2 hereof,
______ fully paid and nonassessable shares of the Company’s Common Stock, no par value per share
(the “Common Stock”), at an exercise price per share equal
to ___ (the “Exercise Price”). The
term “Warrant Shares,” as used herein, refers to the shares of Common Stock purchasable hereunder.
The Warrant Shares and the Exercise Price are subject to adjustment as provided in Paragraph 4
hereof. The term “Warrants” means this Warrant and the other warrants issued pursuant to that
certain Securities Purchase Agreement, dated September 8, 2006, by and among the Company and the
Buyers listed on the execution page thereof (the “Securities Purchase Agreement”).
This Warrant is subject to the following terms, provisions, and conditions:
| 1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the “Exercise Agreement”), to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the |
Company as it may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer for the account of the
Company of the Exercise Price for the Warrant Shares specified in the Exercise Agreement or (ii) if
the resale of the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the “Securities Act”),
delivery to the Company of a written notice of an election to effect a “Cashless Exercise” (as
defined in Section 11(c) below) for the Warrant Shares specified in the Exercise Agreement. The
Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder’s
designee, as the record owner of such shares, as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered,
and payment shall have been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding five (5)
business days, after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and shall be registered in
the name of such holder or such other name as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired, the Company shall,
at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not then have been
exercised. In addition to all other available remedies at law or in equity, if the Company fails
to deliver certificates for the Warrant Shares within five (5) business days after this Warrant is
exercised, then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal to 2%
of the number of Warrant Shares that the holder is entitled to multiplied by the Market Price (as
hereinafter defined) for each day that the Company fails to deliver certificates for the Warrant
Shares. For example, if the holder is entitled to 100,000 Warrant Shares and the Market Price is
$2.00, then the Company shall pay to the holder $4,000 for each day that the Company fails to
deliver certificates for the Warrant Shares. The Penalty shall be paid to the holder by the fifth
day of the month following the month in which it has accrued.
Notwithstanding anything in this Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof) in excess of the number
of Warrants (or portions thereof) upon exercise of which the sum of (i) the number of shares of
Common Stock beneficially owned by the holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company (including the Notes (as
defined in the Securities Purchase Agreement)) subject to a limitation on conversion or exercise
analogous to the limitation contained herein) and (ii) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portions thereof) with respect to which the
determination described herein is being made, would result in beneficial ownership by the holder
and its affiliates of more than 4.9% of the outstanding shares of Common Stock. For purposes of
the immediately preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (i) of the preceding sentence. Notwithstanding anything to
the contrary contained herein, the limitation on exercise of this Warrant set forth herein may not
be amended without (i) the written consent of the holder hereof and the Company and (ii) the
approval of a majority of shareholders of the Company.
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2. Period of Exercise. This Warrant is exercisable at any time or from time to time on
or after the date on which this Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 6:00 p.m., New York, New York time on the seventh
(7th) anniversary of the date of issuance (the “Exercise Period”).
3. Certain Agreements of the Company. The Company hereby covenants and agrees as
follows:
(a) Shares to be Fully Paid. Subject to Stockholder Approval (as such term is defined
in Section 4(n) of the Securities Purchase Agreement), all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and
free from all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. Subject to Stockholder Approval (as such term is defined
in Section 4(n) of the Securities Purchase Agreement),during the Exercise Period, the Company shall
at all times have authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of the shares of Common
Stock issuable upon exercise of the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time
issuable upon the exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment of its charter or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed by it hereunder, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in the taking of all
such action as may reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other impairment, consistent
with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any entity succeeding
to the Company by merger, consolidation, or acquisition of all or substantially all the Company’s
assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise Price and the number
of Warrant Shares shall be subject to adjustment from time to time as provided in this
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Paragraph 4.
Notwithstanding anything herein to the contrary, the antidilution provisions of this Paragraph 4
shall not apply to the issuance of any securities contemplated by the Securities Purchase
Agreement.
In the event that any adjustment of the Exercise Price as required herein results in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock.
Except as otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or after the
date of issuance of this Warrant, the Company issues or sells, or in accordance with Paragraph 4(b)
hereof 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 Market Price on the date of issuance
(a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be
reduced to a price determined by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal to the sum of (x)
the number of shares of Common Stock actually outstanding immediately prior to the Dilutive
Issuance, plus (y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance divided by the Market
Price in effect immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below) immediately after
the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of determining the
adjusted Exercise Price under Paragraph 4(a) hereof, the following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues or grants any
warrants, rights or options, whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or exchangeable for Common Stock
(“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price per share for which
Common Stock is issuable upon the exercise of such Options is less than the Market Price on the
date of issuance or grant of such Options, then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by the Company for such
price per share. For purposes of the preceding sentence, the “price per share for which Common
Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the issuance or granting
of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate amount of additional
consideration payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such
Options (assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock
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upon
the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells
any 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 Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the Company for such price per share.
For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable
upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change at any time in
(i) the amount of additional consideration payable to the Company upon the exercise of any Options;
(ii) the amount of additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time of such change will
be readjusted to the Exercise Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed additional consideration or
changed conversion rate, as the case may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. If, in any
case, the total number of shares of Common Stock issuable upon exercise of any Option or upon
conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would
have been in effect at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued, granted or sold for cash, the consideration received therefor
for purposes of this Warrant will be the amount received by the Company therefor, before deduction
of reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a
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consideration part or all of which shall be other than cash, the amount of the consideration other
than cash received by the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration received by the
Company will be the Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to the Exercise Price
will be made (i) upon the exercise of any warrants, options or convertible securities granted,
issued and outstanding on the date of issuance of this Warrant; (ii) upon the grant or exercise of
any stock or options which may hereafter be granted or exercised under any employee benefit plan,
stock option plan or restricted stock plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of the members of a
committee of independent directors established for such purpose; or (iii) upon the exercise of the
Warrants.
(c) Subdivision or Combination of Common Stock. If the Company at any time subdivides
(by any stock split, stock dividend, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any time combines (by
reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of
Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record
for effecting such combination, the Exercise Price in effect immediately prior to such combination
will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of this Paragraph 4, the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained
by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of the Company with,
or merger of the Company into any other corporation, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant will have the right
to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and receivable
upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken
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place.
In any such case, the Company will make appropriate provision to insure that the provisions of
this Paragraph 4 hereof will thereafter be applicable as nearly as may be in relation to any shares
of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will
not effect any consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by written instrument the
obligations under this Paragraph 4 and the obligations to deliver to the holder of this Warrant
such shares of stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or make any
distribution of its assets (including cash) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of distribution, the holder of
this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the
shares of Common Stock subject hereto, to receive the amount of such assets which would have been
payable to the holder had such holder been the holder of such shares of Common Stock on the record
date for the determination of shareholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which requires any
adjustment of the Exercise Price, then, and in each such case, the Company shall give notice
thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from
such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such
price upon exercise, setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. Such calculation shall be certified by the Chief Financial
Officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the Exercise Price shall
be made in an amount of less than 1% of the Exercise Price in effect at the time such adjustment is
otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any
fractional share which would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock payable in shares of stock of
any class or make any other distribution (including dividends or distributions payable in cash out
of retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any
additional shares of stock of any class or other rights;
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(iii) there shall be any capital reorganization of the Company, or reclassification of the
Common Stock, or consolidation or merger of the Company with or into, or sale of all or
substantially all its assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the
Company;
then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the
date on which the books of the Company shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights
or for determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place. Such notice shall
also specify the date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be
given at least 30 days prior to the record date or the date on which the Company’s books are closed
in respect thereto. Failure to give any such notice or any defect therein shall not affect the
validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
(k) Certain Events. If any event occurs of the type contemplated by the adjustment
provisions of this Paragraph 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the holder shall be
neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) “Common Stock Deemed Outstanding” shall mean the number of shares of Common Stock
actually outstanding (not including shares of Common Stock held in the treasury of the Company),
plus (x) pursuant to Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant of such Options, if
any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of Common
Stock issuable upon conversion or exchange of Convertible Securities, as of the date of issuance of
such Convertible Securities, if any.
(ii) “Market Price,” as of any date, (i) means the average of the last reported sale
prices for the shares of Common Stock on the OTCBB for the five (5) Trading Days immediately
preceding such date as reported by Bloomberg, or (ii) if the OTCBB is not 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 Company or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
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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.
(iii) “Common Stock,” for purposes of this Paragraph 4, includes the Common Stock, no
par value per share, and any additional class of stock of the Company having no preference as to
dividends or distributions on liquidation, provided that the shares purchasable pursuant to this
Warrant shall include only shares of Common Stock, no par value per share, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination of such Common
Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of
the character referred to in Paragraph 4(e) hereof, the stock or other securities or property
provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this
Warrant shall be made without charge to the holder of this Warrant or such shares for any
issuance tax or other costs in respect thereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Company. No provision of
this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant
Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall
give rise to any liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to the holder hereof
are transferable, in whole or in part, upon surrender of this Warrant, together with a properly
executed assignment in the form attached hereto, at the office or agency of the Company referred to
in Paragraph 7(e) below, provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Paragraph 7(f) hereof and to the applicable provisions of the Securities
Purchase Agreement. Until due presentment for registration of transfer on the books of the
Company, the Company may treat the registered holder hereof as the owner and holder hereof for all
purposes, and the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in Paragraph 8 are
assignable only in accordance with the provisions of that certain Registration Rights Agreement,
dated September 8, 2006, by and among the Company and the other signatories thereto (the
“Registration Rights Agreement”).
(b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable,
upon the surrender hereof by the holder hereof at the office or agency of the Company referred to
in Paragraph 7(e) below, for new Warrants of like tenor representing in the
aggregate the right to purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such number of shares as
shall be designated by the holder hereof at the time of such surrender.
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(c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in
connection with any transfer, exchange, or replacement as provided in this Paragraph 7, this
Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by
the holder or transferees) and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the holder hereof), a
register for this Warrant, in which the Company shall record the name and address of the person in
whose name this Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the surrender of
this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant
(or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered
under the Securities Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing such exercise,
transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be,
furnish to the Company a written opinion of counsel, which opinion and counsel are acceptable to
the Company, to the effect that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in
Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status
as an “accredited investor” shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act. The first holder of this Warrant, by taking and holding the same,
represents to the Company that such holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
8. Registration Rights. The initial holder of this Warrant (and certain assignees
thereof) is entitled to the benefit of such registration rights in respect of the Warrant
Shares as are set forth in Section 2 of the Registration Rights Agreement.
9. Notices. All notices, requests, and other communications required or permitted to be given or delivered
hereunder to the holder of this Warrant shall be in writing, and shall be personally delivered, or
shall be sent by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on the books of the
Company, or at such other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be
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personally delivered, or shall
be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid
and addressed, to the office of the Company at 00000 X. Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX
00000, Attention: Chief Executive Officer, or at such other address as shall have been furnished to
the holder of this Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be subsequently confirmed by a
writing personally delivered or sent by certified or registered mail or by recognized overnight
mail courier as provided above. All notices, requests, and other communications shall be deemed to
have been given either at the time of the receipt thereof by the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 9, or, if mailed by registered
or certified mail or with a recognized overnight mail courier upon deposit with the United States
Post Office or such overnight mail courier, if postage is prepaid and the mailing is properly
addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT,
THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER
PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT
A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE
PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE
FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several paragraphs of this
Warrant are inserted for purposes of reference only, and shall not affect the meaning or
construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained in this
Warrant, if the resale of the Warrant Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act, this Warrant may be exercised by
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presentation and surrender of this Warrant to the Company at its principal executive offices with a
written notice of the holder’s intention to effect a cashless exercise, including a calculation of
the number of shares of Common Stock to be issued upon such exercise in accordance with the terms
hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common
Stock determined by multiplying the number of Warrant Shares to which it would otherwise be
entitled by a fraction, the numerator of which shall be the difference between the then current
Market Price per share of the Common Stock and the Exercise Price, and the denominator of which
shall be the then current Market Price per share of Common Stock. For example, if the holder is
exercising 100,000 Warrants with a per Warrant exercise price of $0.75 per share through a cashless
exercise when the Common Stock’s current Market Price per share is $2.00 per share, then upon such
Cashless Exercise the holder will receive 62,500 shares of Common Stock.
(d) Remedies. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies at law or in equity, and in addition to
the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Warrant and to enforce specifically the terms and provisions thereof, without
the necessity of showing economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer.
| STANDARD MANAGEMENT CORPORATION | ||||||
| By: | /s/ Xxxxxx X. Xxxxxx | |||||
| Xxxxxx X. Xxxxxx | ||||||
| Chief Executive Officer | ||||||
Dated as of September 8, 2006
FORM OF EXERCISE AGREEMENT
Dated: , 200
To:
The undersigned, pursuant to the provisions set forth in the within Warrant, hereby agrees to
purchase
shares of Common Stock covered by such Warrant, and makes payment herewith in
full therefor at the price per share provided by such Warrant in cash or by certified or official
bank check in the amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the Securities Act of
1933, as amended, by surrender of securities issued by the Company (including a portion of the
Warrant) having a market value (in the case of a portion of this Warrant, determined in accordance
with Section 11(c) of the Warrant) equal to $ . Please issue a certificate or certificates
for such shares of Common Stock in the name of and pay any cash for any fractional share to:
| Name: | ||||||
| Signature: | ||||||
| Address: | ||||||
| Note: | The above signature should correspond exactly with the name on the face of the within Warrant, if applicable. |
and, if said number of shares of Common Stock shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned covering the balance
of the shares purchasable thereunder less any fraction of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares of Common Stock covered
thereby set forth hereinbelow, to:
Name of Assignee
|
Address | No of Shares |
, and hereby irrevocably constitutes and appoints as agent and
attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full
power of substitution in the premises.
Dated:
, 200
In the presence of:
|
||||||
| Name: | ||||||
| Signature: | ||||||
| Title of Signing Officer or Agent (if any): | ||||||
| Address: | ||||||
| Note: | The above signature should correspond exactly with the name on the face of the within Warrant, if applicable. |
