sfgfinancial8k110707ex4-1.htm


    
      

      

    

     

    NEITHER
      THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
      EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR
      OTHERWISE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH
      SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
      EFFECTIVE WITH REGARD THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A
      WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT
      REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES
      LAWS
      IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.

     

    SFG
      FINANCIAL CORPORATION

     

    COMMON
      STOCK PURCHASE WARRANT

     

    Warrant
      No.: W-2007-01

     

    Original
      Issue Date: November ____, 2007

     

    THIS
      CERTIFIES THAT, FOR VALUE RECEIVED, ___________ or his
      registered assigns (“Holder”) is entitled to purchase, on the
      terms and conditions hereinafter set forth, at any time or from time to time
      from the date hereof until 5:00 p.m., Eastern Time, on the tenth anniversary
      of
      the Original Issue Date set forth above, or if such date is not a day on which
      the Company (as hereinafter defined) is open for business, then the next
      succeeding day on which the Company is open for business (such date is the
      “Expiration Date”), but not thereafter, to purchase up to
      2,000,000 shares of the Common Stock, par value $.0001 per share (the
“Common Stock”), of SFG Financial Corporation, a Delaware
      corporation (the “Company”), at a purchase price of $0.0001 per
      share (the “Exercise Price”), such number of shares and
      Exercise Price being subject to adjustment upon the occurrence of the
      contingencies set forth in this Warrant.  Each share of Common Stock
      as to which this Warrant is exercisable is a “Warrant Share”
and all such shares are collectively referred to as the “Warrant
      Shares.” 

     

    
      	
               

            	
              Section
                1.

            	
              Exercise
                of Warrant; Conversion of
                Warrant. 

            


    

     

    (a)       This
      Warrant may, at the option of Holder, be exercised in whole or in part from
      time
      to time by delivery to the Company at its principal office, Attention:
      President, on or before 5:00 p.m., Eastern Time, on the Expiration Date,
      (i) a written notice of such Holder's election to exercise this Warrant
      (the “Exercise Notice”), which notice may be in the form of the
      Notice of Exercise attached hereto, properly executed and completed by Holder
      or
      an authorized officer thereof, (ii) payment for the Warrant Shares
      (“Payment”), as further described in Section 1(b), below,
and (iii) this Warrant (the items specified in
      (i), (ii), and (iii) are collectively the “Exercise
      Materials”). 

     

    (b)       Payment
      may be made by check payable to the order of the Company, in an amount equal
      to
      the product of the Exercise Price multiplied by the
      number of Warrant Shares specified in the Exercise Notice.

    


    (c)       Notwithstanding
      any provisions herein to the contrary, if the Fair Market Value (as defined
      below) of one share of Common Stock is greater than the Exercise Price (at
      the
      date of calculation as set forth below), to the extent the Holder does not
      elect
      to pay cash or by promissory note upon the deemed exercise of this Warrant,
      the
      Holder shall be deemed to have elected to receive shares equal to the value
      (as
      determined below) of this Warrant (or the portion thereof being cancelled)
      in
      which event the Company shall issue to the holder a number of shares of Common
      Stock computed using the following formula:

     

    X=Y
      (A-B)

    A

    


    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    


    Where  X=      
      the number of shares of Common Stock to be issued to the holder

    


    
      	
               

            	
              Y=

            	
              the
                number of shares of Common Stock deemed purchased under the Warrant
                for
                which the Holder is not paying cash

            


    

     

    
      	
               

            	
              A=

            	
              the
                Fair Market Value of one share of the Company’s Common Stock (at the date
                of such calculation)

            


    

     

    
      	
               

            	
              B=

            	
              Purchase
                Price (as adjusted to the date of such
                calculation)

            


    

     

     

    For
      purposes of Rule 144 promulgated under the 1933 Act, it is intended, subject
      to
      applicable interpretations of the Securities and Exchange Commission, that
      the
      Warrant Shares issued in a cashless exercise transaction shall be deemed to
      have
      been acquired by the Holder, and the holding period for the Warrant Shares
      shall
      be deemed to have commenced, on the date this Warrant was originally
      issued.

    


     

    Fair
      Market Value of a share of Common Stock as of a particular date (the
      "Determination Date") shall mean:

     

    (i)    
          If the Company's Common Stock is traded on an exchange
      or is quoted on the National Association of Securities Dealers, Inc. Automated
      Quotation ("Nasdaq") National Market System, the Nasdaq SmallCap Market or
      the
      American Stock Exchange, Inc., then the closing or last sale price,
      respectively, reported for the last business day immediately preceding the
      Determination Date;

     

    (ii)        If
      the Company's Common Stock is not traded on an exchange or on the Nasdaq
      National Market System, the Nasdaq SmallCap Market or the American Stock
      Exchange, Inc., but is traded in the over-the-counter market, then the average
      of the closing bid and ask prices reported for the last business day immediately
      preceding the Determination Date;

     

    (iii)       Except
      as provided in clause (iv) below, if the Company's Common Stock is not
      publicly traded, then as the Holder and the Company agree, or in the absence
      of
      such an agreement, by arbitration in accordance with the rules then standing
      of
      the American Arbitration Association, before a single arbitrator to be chosen
      from a panel of persons qualified by education and training to pass on the
      matter to be decided; or

     

    (iv)       If
      the Determination Date is the date of a liquidation, dissolution or winding
      up,
      or any event deemed to be a liquidation, dissolution or winding up pursuant
      to
      the Company's articles of incorporation , then all amounts to be payable per
      share to holders of the Common Stock pursuant to the articles of incorporation
      in the event of such liquidation, dissolution or winding up, plus all other
      amounts to be payable per share in respect of the Common Stock in liquidation
      under the articles of incorporation , assuming for the purposes of this clause
      (iv) that all of the shares of Common Stock then issuable upon exercise of
      all of the Warrants are outstanding at the Determination Date.

     

    


    


    


    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    


    (d)       As
      promptly as practicable after its receipt of the Exercise Materials, Company
      shall execute or cause to be executed and delivered to Holder a certificate
      or
      certificates representing the number of Warrant Shares specified in the Exercise
      Notice, together with cash in lieu of any fraction of a share, and if this
      Warrant is partially exercised, a new warrant on the same terms for the
      unexercised balance of the Warrant Shares.  The stock certificate or
      certificates shall be registered in the name of Holder or such other name or
      names as shall be designated in the Exercise Notice.  The date on
      which the Warrant shall be deemed to have been exercised (the “Effective
      Date”), and the date the person in whose name any certificate
      evidencing the Common Stock issued upon the exercise hereof is issued shall
      be
      deemed to have become the holder of record of such shares, shall be the date
      the
      Company receives the Exercise Materials, irrespective of the date of delivery
      of
      a certificate or certificates evidencing the Common Stock issued upon the
      exercise or conversion hereof, provided, however, that if the
      Exercise Materials are received by the Company on a date on which the stock
      transfer books of the Company are closed, the Effective Date shall be the next
      succeeding date on which the stock transfer books are open.  All shares of
      Common Stock issued upon the exercise or conversion of this Warrant will, upon
      issuance, be fully paid and nonassessable and free from all taxes, liens, and
      charges with respect thereto.

     

    
      	
               

            	
              Section
                2.

            	
              Adjustments
                to Warrant Shares.

            


    

     

    The
      number of Warrant Shares issuable upon the exercise hereof shall be subject
      to
      adjustment as follows:

     

    (a)    
         In the event the Company is a party to a consolidation, share
      exchange, or merger, or the sale of all or substantially all of the assets
      of
      the Company to, any person, or in the case of any consolidation or merger of
      another corporation into the Company in which the Company is the surviving
      corporation, and in which there is a reclassification or change of the shares
      of
      Common Stock of the Company, this Warrant shall after such consolidation, share
      exchange, merger, or sale be exercisable for the kind and number of securities
      or amount and kind of property of the Company or the corporation or other entity
      resulting from such share exchange, merger, or consolidation, or to which such
      sale shall be made, as the case may be (the “Successor
      Company”), to which a holder of the number of shares of Common Stock
      deliverable upon the exercise (immediately prior to the time of such
      consolidation, share exchange, merger, or sale) of this Warrant would have
      been
      entitled upon such consolidation, share exchange, merger, or sale; and in any
      such case appropriate adjustments shall be made in the application of the
      provisions set forth herein with respect to the rights and interests of Holder,
      such that the provisions set forth herein shall thereafter correspondingly
      be
      made applicable, as nearly as may reasonably be, in relation to the number
      and
      kind of securities or the type and amount of property thereafter deliverable
      upon the exercise of this Warrant.  The above provisions shall similarly
      apply to successive consolidations, share exchanges, mergers, and sales. 
Any adjustment required by this Section 2 (a) because of a consolidation, share
      exchange, merger, or sale shall be set forth in an undertaking delivered to
      Holder and executed by the Successor Company which provides that Holder shall
      have the right to exercise this Warrant for the kind and number of securities
      or
      amount and kind of property of the Successor Company or to which the holder
      of a
      number of shares of Common Stock deliverable upon exercise (immediately prior
      to
      the time of such consolidation, share exchange, merger, or sale) of this Warrant
      would have been entitled upon such consolidation, share exchange, merger, or
      sale.  Such undertaking shall also provide for future adjustments to the
      number of Warrant Shares and the Exercise Price in accordance with the
      provisions set forth in Section 2 hereof.

     

    (b)    
         In the event the Company should at any time, or from time to
      time after the Original Issue Date, fix a record date for the effectuation
      of a
      stock split or subdivision of the outstanding shares of Common Stock or the
      determination of holders of Common Stock entitled to receive a dividend or
      other
      distribution payable in additional shares of Common Stock, or securities or
      rights convertible into, or entitling the holder thereof to receive directly
      or
      indirectly, additional shares of Common Stock (hereinafter referred to as
“Common Stock Equivalents”) without payment of any
      consideration by such holder for the additional shares of Common Stock or the
      Common Stock Equivalents (including the additional shares of Common Stock
      issuable upon exercise or exercise thereof), then, as of such record date (or
      the date of such dividend, distribution, split, or subdivision if no record
      date
      is fixed), the number of Warrant Shares issuable upon the exercise hereof shall
      be proportionately increased and the Exercise Price shall be appropriately
      decreased by the same proportion as the increase in the number of outstanding
      Common Stock Equivalents of the Company resulting from the dividend,
      distribution, split, or subdivision.  Notwithstanding the preceding
      sentence, no adjustment shall be made to decrease the Exercise Price below
      $.001
      per Share.

    


    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    


     

    (c)        In
      the event the Company should at any time or from time to time after the Original
      Issue Date, fix a record date for the effectuation of a reverse stock split,
      or
      a transaction having a similar effect on the number of outstanding shares of
      Common Stock of the Company, then, as of such record date (or the date of such
      reverse stock split or similar transaction if no record date is fixed), the
      number of Warrant Shares issuable upon the exercise hereof shall be
      proportionately decreased and the Exercise Price shall be appropriately
      increased by the same proportion as the decrease of the number of outstanding
      Common Stock Equivalents resulting from the reverse stock split or similar
      transaction.

     

    (d)        In
      the event the Company should at any time or from time to time after the Original
      Issue Date, fix a record date for a reclassification of its Common Stock, then,
      as of such record date (or the date of the reclassification if no record date
      is
      set), this Warrant shall thereafter be convertible into such number and kind
      of
      securities as would have been issuable as the result of such reclassification
      to
      a holder of a number of shares of Common Stock equal to the number of Warrant
      Shares issuable upon exercise of this Warrant immediately prior to such
      reclassification, and the Exercise Price shall be unchanged.

     

    (e)       The
      Company will not, by amendment of its Certificate of Incorporation or through
      reorganization, consolidation, merger, dissolution, issue, or sale of
      securities, sale of assets or any other voluntary action, void or seek to avoid
      the observance or performance of any of the terms of the Warrant, but will
      at
      all times in good faith assist in the carrying out of all such terms and in
      the
      taking of all such actions as may be necessary or appropriate in order to
      protect the rights of Holder against dilution or other impairment.  Without
      limiting the generality of the foregoing, the Company (x) will not create a
      par
      value of any share of stock receivable upon the exercise of the Warrant above
      the amount payable therefor upon such exercise, and (y) will take all such
      action as may be necessary or appropriate in order that the Company may validly
      and legally issue fully paid and non-assessable shares upon the exercise of
      the
      Warrant.

     

    (f)       When
      any adjustment is required to be made in the number or kind of shares
      purchasable upon exercise of the Warrant, or in the Exercise Price, the Company
      shall promptly notify Holder of such event and of the number of shares of Common
      Stock or other securities or property thereafter purchasable upon exercise
      of
      the Warrants and of the Exercise Price, together with the computation resulting
      in such adjustment.

     

    (g)       The
      Company covenants and agrees that all Warrant Shares which may be issued will,
      upon issuance, be validly issued, fully paid, and non-assessable.  The
      Company further covenants and agrees that the Company will at all times have
      authorized and reserved, free from preemptive rights, a sufficient number of
      shares of its Common Stock to provide for the exercise of the Warrant in
      full.

    


    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

     

    
      	
               

            	
              Section
                3.

            	
              No
                Stockholder Rights.

            


    

     

    This
      Warrant shall not entitle Holder hereof to any voting rights or other rights
      as
      a stockholder of the Company.

     

    
      	
               

            	
              Section
                4.

            	
              Transfer
                of Securities.

            


    

     

    (a)       This
      Warrant and the Warrant Shares and any shares of capital stock received in
      respect thereof, whether by reason of a stock split or share reclassification
      thereof, a stock dividend thereon, or otherwise, shall not be transferable
      except upon compliance with the provisions of the Securities Act of 1933, as
      amended (the “Securities Act”) and applicable state securities
      laws with respect to the transfer of such securities.  The Holder, by
      acceptance of this Warrant, agrees to be bound by the provisions of
      Section 4 hereof and to indemnify and hold harmless the Company against any
      loss or liability arising from the disposition of this Warrant or the Warrant
      Shares issuable upon exercise hereof or any interest in either thereof in
      violation of the provisions of this Warrant.

     

    (b)       Each
      certificate for the Warrant Shares and any shares of capital stock received
      in
      respect thereof, whether by reason of a stock split or share reclassification
      thereof, a stock dividend thereon or otherwise, and each certificate for any
      such securities issued to subsequent transferees of any such certificate shall
      (unless otherwise permitted by the provisions hereof) be stamped or otherwise
      imprinted with a legend in substantially the following form:

     

    “NEITHER
      THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
      STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED UNTIL
      (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
      STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
      (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL
      ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES
      ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
      WITH
      SUCH PROPOSED TRANSFER.”

     

    
      	
               

            	
              Section
                5.

            	
              Miscellaneous. 

            


    

     

    (a)       The
      terms of this Warrant shall be binding upon and shall inure to the benefit
      of
      any successors or permitted assigns of the Company and Holder.

     

    (b)       Except
      as otherwise provided herein, this Warrant and all rights hereunder are
      transferable by the registered holder hereof in person or by duly authorized
      attorney on the books of the Company upon surrender of this Warrant, properly
      endorsed, to the Company.  The Company may deem and treat the registered
      holder of this Warrant at any time as the absolute owner hereof for all purposes
      and shall not be affected by any notice to the contrary.

     

    (c)       Notwithstanding
      any provision herein to the contrary, Holder may not exercise, sell, transfer,
      or otherwise assign this Warrant unless the Company is provided with an opinion
      of counsel satisfactory in form and substance to the Company, to the effect
      that
      such exercise, sale, transfer, or assignment would not violate the Securities
      Act or applicable state securities laws.

     

    (d)       This
      Warrant may be divided into separate warrants covering one share of Common
      Stock
      or any whole multiple thereof, for the total number of shares of Common Stock
      then subject to this Warrant at any time, or from time to time, upon the request
      of the registered holder of this Warrant and the surrender of the same to the
      Company for such purpose.  Such subdivided Warrants shall be issued
      promptly by the Company following any such request and shall be of the same
      form
      and tenor as this Warrant, except for any requested change in the name of the
      registered holder stated herein.

    


    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

     

    (e)       Any
      notices, consents, waivers, or other communications required or permitted to
      be
      given under the terms of this Warrant must be in writing and will be deemed
      to
      have been delivered (a) upon receipt, when delivered personally, (b) upon
      receipt, when sent by facsimile, provided a copy is
      mailed by U.S. certified mail, return receipt requested, (c) three (3) days
      after being sent by U.S. certified mail, return receipt requested, or (d) one
      (1) day after deposit with a nationally recognized overnight delivery service,
      in each case properly addressed to the party to receive the same.

     

    If
      to
      Holder, to the registered address of Holder appearing on the books of the
      Company.  Each party shall provide five (5) days prior written notice
      to the other party of any change in address, which change shall not be effective
      until actual receipt thereof

     

    (f)        The
      corporate laws of the State of Delaware shall govern all issues concerning
      the
      relative rights of the Company and its stockholders.  All other
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be governed by the internal laws of the State of Delaware,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of Delaware or any other jurisdictions) that would cause
      the application of the laws of any jurisdictions other than the State of
      Delaware.   If any provision of this Warrant shall be invalid or
      unenforceable in any jurisdiction, such invalidity or unenforceability shall
      not
      affect the validity or enforceability of the remainder of this Warrant in that
      jurisdiction or the validity or enforceability of any provision of this Warrant
      in any other jurisdiction.

     

    


     

    [Signatures
      on the following page]

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    


    SIGNATURE
      PAGE

    TO

    COMPANY

    COMMON
      STOCK PURCHASE WARRANT

     

     

    IN
      WITNESS WHEREOF, the Company, has caused this Warrant to be executed in its
      name
      by its duly authorized officers under seal, and to be dated as of the date
      first
      above written.

     

    


    
      	 	SFG
              Financial Corporation
	 	 	 
	 	 	 
	 	
              By:

            	                                                                   
                
	 	 	
              Name:

            	 
	 	 	
              Title:

            	 


    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    


    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

     

    ASSIGNMENT

     

    (To
      be
      Executed by the Registered Holder to effect a Transfer of the foregoing
      Warrant)

     

    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, and assigns and transfers unto
      ___________________________________________________________________________
      the
      foregoing Warrant and the rights represented thereto to purchase shares of
      Common Stock of SFG Financial Corporation in accordance with terms and
      conditions thereof, and does hereby irrevocably constitute and appoint
      ________________ Attorney to transfer the said Warrant on the books of the
      Company, with full power of substitution.

     

    Holder:

    _______________________________

     

    _______________________________


     

    Address

     

    Dated:
      __________________, 20__

     

    In
      the
      presence of:

     

    _______________________________

     

    


     

    


     

    


     

    


     

    


    


    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    


    EXERCISE
      OR CONVERSION NOTICE

     

     

    [To
      be
      signed only upon exercise of Warrant]

     

    To:       SFG
      Financial Corporation

     

    The
      undersigned Holder of the attached Warrant hereby irrevocably elects to exercise
      the Warrant for, and to purchase thereunder, _____ shares of Common Stock of
      SFG
      Financial Corporation, issuable upon exercise of said Warrant and hereby
      surrenders said Warrant.

     

    The
      undersigned herewith requests that the certificates for such shares be issued
      in
      the name of, and delivered to the undersigned, whose address is
      ________________________________.

     

    


    If
      electronic book entry transfer, complete the following:

     

    Account
      Number:
                                                                             

     

    Transaction
      Code
      Number:                                                                           

     

    Dated:
      ___________________

     

    Holder:

     

    ____________________________________

     

    ____________________________________

     

    By:                                                               

      Name:

      Title:

     

     

    NOTICE

     

    The
      signature above must correspond to the name as written upon the face of the
      within Warrant in every particular, without alteration or enlargement or any
      change whatsoever.

     

    
 

     

    9