Document:

EX-10.36 REGISTRATION RIGHTS AGREEMENT

 

Exhibit
10.36

REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of September 8, 2006, by and among
Standard Management Corporation, an Indiana corporation with its headquarters located at 10689 N.
Pennsylvania Street, Indianapolis, IN 46280 (the “Company”), and each of the undersigned (together
with their respective affiliates and any assignee or transferee of all of their respective rights
hereunder, the “Initial Investors”).

     WHEREAS:

     A. In connection with the Securities Purchase Agreement by and among the parties hereto of
even date herewith (the “Securities Purchase Agreement”), the Company has agreed, upon the terms
and subject to the conditions contained therein, to issue and sell to the Initial Investors (i)
secured convertible notes in the aggregate principal amount of up to Two Million Dollars
($2,000,000) (the “Notes”) that are convertible into shares of the Company’s common stock (the
“Common Stock”), upon the terms and subject to the limitations and conditions set forth in such
Notes and (ii) warrants (the “Warrants”) to acquire an aggregate of 3,000,000 shares of Common
Stock, upon the terms and conditions and subject to the limitations and conditions set forth in the
Warrants; and

     B. To induce the Initial Investors to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the “1933 Act”), and applicable state securities laws;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Initial Investors hereby agree as follows:

          1. DEFINITIONS.

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

                    (i) “Investors” means the Initial Investors and any transferee or assignee who agrees to
become bound by the provisions of this Agreement in accordance with Section 9 hereof.

                    (ii) “register,” “registered,” and “registration” refer to a registration effected by
preparing and filing a Registration Statement or Statements in compliance with the 1933 Act and
pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on
a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission (the “SEC”).

                    (iii) “Registrable Securities” means the Conversion Shares issued or issuable upon conversion
or otherwise pursuant to the Notes and Additional Notes (as

 

 

defined in the Securities Purchase Agreement) including, without limitation, Damages Shares
(as defined in the Notes) issued or issuable pursuant to the Notes, shares of Common Stock issued
or issuable in payment of the Standard Liquidated Damages Amount (as defined in the Securities
Purchase Agreement), shares issued or issuable in respect of interest or in redemption of the Notes
in accordance with the terms thereof) and any shares of capital stock issued or issuable as a
dividend on or in exchange for or otherwise with respect to any of the foregoing.

                    (iv) “Registration Statement” means a registration statement of the Company under the 1933
Act.

               b. Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement or the Convertible Note.

          2. REGISTRATION.

               a. Mandatory Registration. The Company shall prepare, and, on or prior to thirty (30)
days from the date of Closing (as defined in the Securities Purchase Agreement) (the “Filing
Date”), file with the SEC a Registration Statement on Form S-1 covering the resale of the
Registrable Securities underlying the Notes and Warrants issued or issuable pursuant to the
Securities Purchase Agreement, which Registration Statement, to the extent allowable under the 1933
Act and the rules and regulations promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of or otherwise pursuant to the Notes and exercise of
the Warrants to prevent dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially included in such Registration
Statement shall be no less than an amount equal to the sum of the number of Conversion Shares that
are then issuable upon conversion of the Notes and Additional Notes (based on the Variable
Conversion Price as would then be in effect and assuming the Variable Conversion Price is the
Conversion Price at such time), and the number of Warrant Shares that are then issuable upon
exercise of the Warrants, without regard to any limitation on the Investor’s ability to convert the
Notes or exercise the Warrants. The Company acknowledges that the number of shares initially
included in the Registration Statement represents a good faith estimate of the maximum number of
shares issuable upon conversion of the Notes and upon exercise of the Warrants.

               b. Underwritten Offering. If any offering pursuant to a Registration Statement
pursuant to Section 2(a) hereof involves an underwritten offering, the Investors who hold a
majority in interest of the Registrable Securities subject to such underwritten offering, with the
consent of a majority-in-interest of the Initial Investors, shall have the right to select an
investment banker or bankers to participate in the offering as an underwriter, which investment
banker or bankers shall be reasonably satisfactory to the Company.

               c. Payments by the Company. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the Registration
Statement(s) covering the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not filed by the Filing Date or declared effective by

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the SEC on or prior to one hundred and twenty (120) days from the date of Closing (as defined
in the Securities Purchase Agreement), or (ii) after the Registration Statement has been declared
effective by the SEC, sales of all of the Registrable Securities cannot be made pursuant to the
Registration Statement, or (iii) the Common Stock is not listed or included for trading on the
Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York
Stock Exchange (the “NYSE”) or the American Stock Exchange (the “AMEX”) after being so listed or
included for trading after the date hereof, or (iv) the Common Stock ceases to be quoted on the
Over-the-Counter Bulletin Board (the “OTCBB”) or the Pink Sheets or any equivalent replacement
quotation service prior to being listed or included for trading on one of the aforementioned
markets, then the Company will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the damages to the
Investors by reason of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of the Notes or Registrable Securities an amount
equal to the then outstanding principal amount of the Notes (and, in the case of holders of
Registrable Securities, the principal amount of Notes from which such Registrable Securities were
converted) (“Outstanding Principal Amount”), multiplied by the Applicable Percentage (as defined
below) times the sum of: (i) the number of months (prorated for partial months) after the Filing
Date or the end of the aforementioned one hundred and twenty (120) day period and prior to the date
the Registration Statement is declared effective by the SEC, provided, however, that there shall be
excluded from such period any delays which are solely attributable to changes required by the
Investors in the Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to Section 3(h) below in a
reasonably prompt manner; (ii) the number of months (prorated for partial months) that sales of all
of the Registrable Securities cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company’s failure to properly supplement or amend the prospectus
included therein in accordance with the terms of this Agreement, but excluding any days during an
Allowed Delay (as defined in Section 3(f)); and (iii) the number of months (prorated for partial
months) that the Common Stock is not listed or included for quotation on the OTCBB, the Pink
Sheets, Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term “Applicable Percentage” means two
hundredths (.02). (For example, if the Registration Statement becomes effective one (1) month
after the end of such one hundred and twenty (120) day period, the Company would pay $5,000 for
each $250,000 of Outstanding Principal Amount. If thereafter, sales could not be made pursuant to
the Registration Statement for an additional period of one (1) month, the Company would pay an
additional $5,000 for each $250,000 of Outstanding Principal Amount.) Such amounts shall be paid
in cash or, at the Company’s option, in shares of Common Stock priced at the Conversion Price (as
defined in the Notes) on such payment date.

               d. Piggy-Back Registrations. Subject to the last sentence of this Section 2(d), if at
any time prior to the expiration of the Registration Period (as hereinafter defined) the Company
shall determine to file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity securities (other than on
Form S-4 or Form S-8 or their then equivalents relating to equity

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securities to be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other bona fide,
employee benefit plans), the Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination and, if within fifteen (15)
days after the effective date of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the Registrable Securities
such Investor requests to be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the Registrable Securities with
respect to which such Investor has requested inclusion hereunder as the underwriter shall permit.
Any exclusion of Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable Securities sought to be
included by such Investors; provided, however, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable Securities; and provided,
further, however, that, after giving effect to the immediately preceding proviso,
any exclusion of Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other than holders of
securities entitled to inclusion of their securities in such Registration Statement by reason of
demand registration rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under this Section 2(d)
is an underwritten offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or underwriters and,
subject to the provisions of this Agreement, on the same terms and conditions as other shares of
Common Stock included in such underwritten offering. Notwithstanding anything to the contrary set
forth herein, the registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or maintain
effectiveness of any Registration Statement to be filed pursuant to Section 2(a) in accordance with
the terms of this Agreement.

               e. Eligibility for Form S-3, SB-2 or S-1; Conversion to Form S-3. The Company
represents and warrants that it meets the requirements for the use of Form S-1 for registration of
the sale by the Initial Investors and any other Investors of the Registrable Securities. The
Company agrees to file all reports required to be filed by the Company with the SEC in a timely
manner so as to remain eligible or become eligible, as the case may be, and thereafter to maintain
its eligibility, for the use of Form S-1. If the Company is not currently eligible to use Form
S-3, not later than five (5) business days after the Company first meets the registration
eligibility and transaction requirements for the use of Form S-3 (or any successor form) for
registration of the offer and sale by the Initial Investors and any other Investors of Registrable
Securities, the Company shall file a Registration Statement on Form S-3 (or such successor form)
with respect to the Registrable Securities covered by the Registration Statement on Form S-1, filed
pursuant to Section 2(a) (and include in such Registration Statement on Form

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S-3 the information required by Rule 429 under the 1933 Act) or convert the Registration
Statement on Form S-1, filed pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the
1933 Act and cause such Registration Statement (or such amendment) to be declared effective no
later than thirty (30) days after filing. In the event of a breach by the Company of the
provisions of this Section 2(e), the Company will be required to make payments pursuant to Section
2(c) hereof.

          3. OBLIGATIONS OF THE COMPANY. 

     In connection with the registration of the Registrable Securities, the Company shall have the
following obligations:

               a. The Company shall prepare promptly, and file with the SEC not later than the Filing Date, a
Registration Statement with respect to the number of Registrable Securities provided in Section
2(a), and thereafter use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible after such filing but in no event
later than one hundred and twenty (120) days from the date of Closing), and keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date on which the
Registrable Securities (in the opinion of counsel to the Initial Investors) may be immediately sold
to the public without registration or restriction (including, without limitation, as to volume by
each holder thereof) under the 1933 Act (the “Registration Period”), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained therein) shall not
contain any 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.

               b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statements and the prospectus used in connection
with the Registration Statements as may be necessary to keep the Registration Statements effective
at all times during the Registration Period, and, during such period, comply with the provisions of
the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statements until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in the Registration Statements. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities issued or issuable upon conversion of the Notes and exercise of the
Warrants, the Company shall amend the Registration Statement, or file a new Registration Statement
(on the short form available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event within fifteen (15)
days after the necessity therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within thirty (30) days (120 days in the
case of a new registration statement) after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor. The provisions of Section
2(c) above

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shall be applicable with respect to such obligation, with the one hundred and twenty (120)
days running from the day the Company reasonably first determines (or reasonably should have
determined) the need therefor.

               c. The Company shall furnish to each Investor whose Registrable Securities are included in a
Registration Statement and its legal counsel (i) promptly (but in no event more than two (2)
business days) after the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of each Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and, in the case of the
Registration Statement referred to in Section 2(a), each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other than any portion of
any thereof which contains information for which the Company has sought confidential treatment),
and (ii) promptly (but in no event more than five (5) business days) after the Registration
Statement is declared effective by the SEC, such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor. The Company will immediately notify each Investor by facsimile
of the effectiveness of each Registration Statement or any post-effective amendment. The Company
will promptly respond to any and all comments received from the SEC (which comments shall promptly
be made available to the Investors upon request), with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon as practicable,
shall promptly file an acceleration request as soon as practicable (but in no event more than two
(2) business days) following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that any such Registration Statement or any amendment thereto
will not be subject to review and shall, if required by SEC Rules, promptly file with the SEC a
final prospectus as soon as practicable (but in no event more than two (2) business days) following
receipt by the Company from the SEC of an order declaring the Registration Statement effective. In
the event of a breach by the Company of the provisions of this Section 3(c), the Company will be
required to make payments pursuant to Section 2(c) hereof.

               d. The Company shall use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statements under such other securities or “blue sky” laws of
such jurisdictions in the United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general consent to service
of process in any such jurisdiction, (d) provide any undertakings that cause the Company undue
expense or burden, or (e) make any change in its charter or bylaws, which in

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each case the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its shareholders.

               e. In the event Investors who hold a majority-in-interest of the Registrable Securities being
offered in the offering (with the approval of a majority-in-interest of the Initial Investors)
select underwriters for the offering, the Company shall enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the underwriters of such offering.

               f. As promptly as practicable after becoming aware of such event, the Company shall notify
each Investor of the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in any Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and use its best efforts promptly to
prepare a supplement or amendment to any Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to each Investor as
such Investor may reasonably request; provided that, for not more than sixty (60) consecutive
trading days (or a total of not more than 120 trading days in any twelve (12) month period), the
Company may delay the disclosure of material non-public information concerning the Company (as well
as prospectus or Registration Statement updating) 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, further, that the Company shall promptly (i) 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 and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon expiration of the
Allowed Delay, the Company shall again be bound by the first sentence of this Section 3(f) with
respect to the information giving rise thereto. The Registration Period shall be extended for an
additional number of business days equal to the number of business days during which the right to
sell shares was suspended pursuant to an Allowed Delay.

               g. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of any Registration Statement, and, if such an order is issued, to
obtain the withdrawal of such order at the earliest possible moment and to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof.

               h. The Company shall permit a single firm of counsel designated by the Initial Investors to
review such Registration Statement and all amendments and supplements thereto (as well as all
requests for acceleration or effectiveness thereof) a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel reasonably objects
and will not request acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with respect to the
Investors, the Investor’s beneficial ownership of securities of the

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Company or the Investors intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the Investors.

               i. The Company shall make generally available to its security holders as soon as practicable,
but not later than one hundred and twenty (120) days after the close of the period covered thereby,
an earnings statement (in form complying with the provisions of Rule 158 under the 1933 Act)
covering a twelve-month period beginning not later than the first day of the Company’s fiscal
quarter next following the effective date of the Registration Statement.

               j. At the request of any Investor, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter in connection with an underwritten offering (i) an
opinion, dated as of such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in an underwritten
public offering, addressed to the underwriters and the Investors and (ii) a letter, dated such
date, from the Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.

               k. The Company shall make available for inspection by (i) any Investor, (ii) any underwriter
participating in any disposition pursuant to a Registration Statement, (iii) one firm of attorneys
and one firm of accountants or other agents retained by the Initial Investors, (iv) one firm of
attorneys and one firm of accountants or other agents retained by all other Investors, and (v) one
firm of attorneys retained by all such underwriters (collectively, the “Inspectors”) all pertinent
financial and other records, and pertinent corporate documents and properties of the Company,
including without limitation, records of conversions by other holders of convertible securities
issued by the Company and the issuance of stock to such holders pursuant to the conversions
(collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may reasonably request for
purposes of such due diligence; provided, however, that each Inspector shall hold
in confidence and shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other order from a court or government
body of competent jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company

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and any Investor) shall be deemed to limit the Investor’s ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and regulations.

               l. The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The Company agrees that it
shall, upon learning that disclosure of such information concerning an Investor is sought in or by
a court or governmental body of competent jurisdiction or through other means, give prompt notice
to such Investor prior to making such disclosure, and allow the Investor, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such
information.

               m. The Company shall (i) cause all the Registrable Securities covered by the Registration
Statement to be listed on each national securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities exchange, secure the
designation and quotation, of all the Registrable Securities covered by the Registration Statement
on the OTCBB or the Pink Sheets and, without limiting the generality of the foregoing, to use its
best efforts to arrange for at least two market makers to register with the National Association of
Securities Dealers, Inc. (“NASD”) as such with respect to such Registrable Securities.

               n. The Company shall provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of the Registration Statement.

               o. The Company shall cooperate with the Investors who hold Registrable Securities being
offered and the managing underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may request, and, within three (3) business
days after a Registration Statement which includes Registrable Securities is ordered effective by
the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an instruction in the form
attached hereto as Exhibit 1 and an opinion of such counsel in the form attached hereto as Exhibit
2.

               p. At the request of the holders of a majority-in-interest of the Registrable Securities, the
Company shall prepare and file with the SEC such amendments

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(including post-effective amendments) and supplements to a Registration Statement and any
prospectus used in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

               q. From and after the date of this Agreement, the Company shall not, and shall not agree to,
allow the holders of any securities of the Company to include any of their securities, in excess of
250,000 shares of Common Stock, in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent of the holders of a
majority-in-interest of the Registrable Securities, which consent shall not be unreasonably
withheld.

               r. The Company shall take all other reasonable actions necessary to expedite and facilitate
disposition by the Investors of Registrable Securities pursuant to a Registration Statement.

          4. OBLIGATIONS OF THE INVESTORS.

     In connection with the registration of the Registrable Securities, the Investors shall have
the following obligations:

               a. It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of a particular
Investor that such Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor.

               b. Each Investor, by such Investor’s 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 the Registration Statements hereunder, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from the Registration Statements.

               c. In the event Investors holding a majority-in-interest of the Registrable Securities being
registered (with the approval of the Initial Investors) determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor’s obligations under an
underwriting agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the Company in writing
of such Investor’s election to exclude all of such Investor’s Registrable Securities from such
Registration Statement.

               d. Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(f) or 3(g), such

10

 

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 contemplated by Section 3(f) or 3(g) and, if so
directed by the Company, such 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 such Registrable Securities current at the time of receipt
of such notice.

               e. No Investor may participate in any underwritten registration hereunder unless such Investor
(i) agrees to sell such Investor’s Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.

          5. EXPENSES OF REGISTRATION.

     All reasonable expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualification fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of
one counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h) hereof shall be
borne by the Company and shall be included in the fees paid to counsel under the Securities
Purchase Agreement for purposes of counsel selected by the Initial Investors.

          6. INDEMNIFICATION. 

     In the event any Registrable Securities are included in a Registration Statement under this
Agreement:

               a. To the extent permitted by law, the Company will indemnify, hold harmless and defend (i)
each Investor who holds such Registrable Securities, (ii) the directors, officers, partners,
employees, agents and each person who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the “1934 Act”), if any, (iii) any underwriter (as
defined in the 1933 Act) for the Investors, and (iv) the directors, officers, partners, employees
and each person who controls any such underwriter within the meaning of the 1933 Act or the 1934
Act, if any (each, an “Indemnified Person”), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or inquiries by any
regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof,
“Claims”) to which any of them may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not misleading; (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary prospectus if used prior
to the effective date of such Registration

11

 

Statement, or contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or (iii) any violation
or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation thereunder relating to the
offer or sale of the Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, “Violations”). Subject to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, the Company shall reimburse the Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information furnished in writing to
the Company by any Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any preliminary prospectus, shall not inure to the benefit of
any Indemnified Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented, such corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section 9.

               b. In connection with any Registration Statement in which an Investor is participating, each
such Investor agrees severally and not jointly to indemnify, hold harmless and defend, to the same
extent and in the same manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act, any underwriter and any other shareholder
selling securities pursuant to the Registration Statement or any of its directors or officers or
any person who controls such shareholder or underwriter within the meaning of the 1933 Act or the
1934 Act (collectively and together with an Indemnified Person, an “Indemnified Party”), against
any Claim to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon any Violation by such Investor, in each case
to the extent (and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such Investor will
reimburse any legal or other expenses (promptly as such expenses are incurred and are due and
payable) reasonably incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts

12

 

paid in settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Agreement (including
this Section 6(b) and Section 7) for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement.
Such indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by
the Investors pursuant to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.

               c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action (including any governmental action), such Indemnified
Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such proceeding. The
indemnifying party shall pay for only one separate legal counsel for the Indemnified Persons or
the Indemnified Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action
shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is actually prejudiced
in its ability to defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the investigation or defense, as
such expense, loss, damage or liability is incurred and is due and payable.

13

 

          7. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that (i) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation, and
(iii) contribution (together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.

          8. REPORTS UNDER THE 1934 ACT.

     With a view to making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the
investors to sell securities of the Company to the public without registration (“Rule 144”), the
Company agrees to:

               a. make and keep public information available, as those terms are understood and defined in
Rule 144;

               b. file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit the Company’s obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

               c. furnish to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

          9. ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is restricted under the
1933

14

 

Act and applicable state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein, (v) such transfer
shall have been made in accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an “accredited investor” as that term defined in Rule
501 of Regulation D promulgated under the 1933 Act.

          10. AMENDMENT OF REGISTRATION RIGHTS. 

     Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with written
consent of the Company, each of the Initial Investors (to the extent such Initial Investor still
owns Registrable Securities) and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.

          11. MISCELLANEOUS.

               a. A person or entity is deemed to be a holder of Registrable Securities whenever such person
or entity owns of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.

               b. 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 or by courier
(including a recognized overnight delivery service) or by facsimile and shall be effective five
days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if
delivered personally or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such communications shall be:

If to the Company:

Standard Management Corporation

10689 N. Pennsylvania Street

Indianapolis, IN 46280

Attention: Chief Executive Officer

Telephone: (317) 574-6200

Facsimile: (317)

15

 

With a copy to:

Troutman Sanders LLP

Bank of America Plaza

600 Peachtree Street, N.W., Suite 5200

Atlanta, Georgia 30308

Attention: Marlon F. Starr, Esq.

Telephone: (404) 885-3287

Facsimile: (404) 962-6740

If to an Investor: to the address set forth immediately below such Investor’s name on the signature
pages to the Securities Purchase Agreement.

With a copy to:

Ballard Spahr Andrews & Ingersoll, LLP

1735 Market Street

51st Floor

Philadelphia, Pennsylvania 19103

Attention: Gerald J. Guarcini, Esq.

Telephone: 215-865-8625

Facsimile: 215-864-8999

               c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

               d. THIS AGREEMENT 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 NEW YORK, NEW YORK WITH RESPECT
TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, 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

16

 

ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES,
INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

               e. In the event that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

               f. This Agreement, the Notes, the Warrants and the Securities Purchase Agreement (including
all schedules and exhibits thereto) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and therein. This Agreement and
the Securities Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

               g. Subject to the requirements of Section 9 hereof, this Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.

               h. The headings in this Agreement are for convenience of reference only and shall not form
part of, or affect the interpretation of, this Agreement.

               i. This Agreement may be executed in two or more counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party. This Agreement,
once executed by a party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this Agreement.

               j. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.

               k. Except as otherwise provided herein, all consents and other determinations to be made by
the Investors pursuant to this Agreement shall be made by Investors holding a majority of the
Registrable Securities, determined as if the all of the Notes then outstanding have been converted
into for Registrable Securities.

               l. The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to each Investor by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for breach of
its obligations under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of any of the provisions under this Agreement, that each Investor
shall be entitled, in addition to all other available remedies in law or in equity,

17

 

and in addition to the penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Agreement and to enforce specifically the
terms and provisions hereof, without the necessity of showing economic loss and without any bond or
other security being required.

               m. 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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

18

 

     IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have caused this
Agreement to be duly executed as of the date first above written.

STANDARD MANAGEMENT CORPORATION

	 	 	 
	/s/ Ronald D. Hunter
 

	 	 
	Ronald D. Hunter
	 	 
	Chief Executive Officer
	 	 
	 
	 	 
	AJW PARTNERS, LLC
	 	 
	By: SMS Group, LLC
	 	 
	 
	 	 
	/s/ Corey Ribotsky
	 	 
	 

Corey S. Ribotsky

	 	 
	Manager
	 	 
	 
	 	 
	AJW OFFSHORE, LTD.
	 	 
	By: First Street Manager II, LLC
	 	 
	 
	 	 
	/s/ Corey Ribotsky
	 	 
	 

Corey S. Ribotsky

	 	 
	Manager
	 	 
	 
	 	 
	AJW QUALIFIED PARTNERS, LLC
	 	 
	By: AJW Manager, LLC
	 	 
	 
	 	 
	/s/ Corey Ribotsky
	 	 
	 

Corey S. Ribotsky

	 	 
	Manager
	 	 
	 
	 	 
	NEW MILLENNIUM CAPITAL PARTNERS, II, LLC
	 	 
	By: First Street Manager II, LLC
	 	 
	 
	 	 
	/s/ Corey Ribotsky
	 	 
	 

Corey S. Ribotsky

	 	 
	Manager
	 	 

19EX-10.1 Letter Agreement

 

Exhibit 10.1

LADENBURG THALMANN FINANCIAL SERVICES INC.

153 East 53rd Street

New York, New York 10022

September 14, 2006

Vector Group Ltd.

100 S.E. Second Street

Miami, Florida 33131

Attn.: Howard M. Lorber, President

Gentlemen:

     This letter agreement will confirm the understanding between Ladenburg Thalmann Financial
Services Inc. (“Company”), a Florida corporation with offices at 153 East 53rd Street,
New York, New York 10022, and Vector Group Ltd. (“VGL”), a Delaware corporation with offices at 100
S.E. Second Street, Miami, Florida 33131, under which VGL will provide certain services to the
Company.

          As reasonably requested by the Company, VGL will provide the following services (“Services”)
to the Company: (i) VGL will make available to the Company the services of Richard J. Lampen, VGL’s
Executive Vice President, to serve as the Company’s Chief Executive Officer; and (ii) VGL will
provide, upon request of the Company, such other financial and accounting resources, including
assistance in complying with Section 404 of the Sarbanes-Oxley Act of 2002.

          In consideration of the Services, the Company shall pay VGL an annual fee of $250,000, payable
in quarterly installments of $62,500 in advance, commencing September 1, 2006. Additionally, VGL
shall be entitled to recover all direct, out of pocket costs, fees and other expenses incurred by
VGL or Mr. Lampen in connection with the Services.

          The Company shall indemnify, defend and hold harmless VGL from and against any loss,
liability, claim, demand, action, suit, proceeding, judgment, penalty, government investigation or
expense (including reasonable attorneys’ fees), whether or not involving a third-party claim,
proceeding, demand, or liability of any kind, (collectively, “Damages”) arising, directly or
indirectly, or alleged to arise, directly or indirectly, in anyway out of the provision of services
by Mr. Lampen hereunder.

          VGL shall provide the Company with reasonably prompt written notice of a claim for any Damages
or the commencement of any claim, demand, proceeding, action or suit (collectively, “Proceeding”).
Any failure to notify the Company will not relieve the Company of its indemnification obligation
hereunder except to the extent that the Company demonstrates that the defense of a Proceeding by
the Company was materially prejudiced by failure or delay to give such notice. The Company shall
diligently assume the defense, including payment thereof, of any Proceeding through counsel
selected by the Company (and not reasonably objected to by VGL). The Company shall have the right
to compromise or settle such matters (and VGL shall not have such right) provided however, that no
compromise or settlement of any such Proceeding may be effected by the Company without the consent
of VGL, such consent not to be unreasonably withheld or delayed, unless (a) there is no finding or
admission of any violation of law by VGL and (b) the sole remedy provided thereunder is monetary
damages which will be paid in full by the Company and the Company demonstrates the capacity to do
so.

          Our
agreement will commence on September 6, 2006 and will terminate upon not less than 30
days’ prior written notice by either of us.

          Please indicate your acceptance by signing this letter in the space provided below.

LADENBURG THALMANN

FINANCIAL SERVICES INC.

 

 

	 	 	 	 	 
	 	 	 
	 	By:  	     /s/ Diane Chillemi
 	 
	 	 	Name:  	Diane Chillemi 	 
	 	 	Title:  	Vice President and
Chief Financial Officer 	 
	 

ACCEPTED AND AGREED TO:

VECTOR GROUP LTD.

	 	 	 	 	 
	By:

	 	/s/ Howard M. Lorber
	 	 
	 

	 	 	 	 
	 

	 	Name: Howard M. Lorber	 	 
	 

	 	Title: President and Chief Executive Officer

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