exv10w2






Exhibit 10.2




WARRANT



NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN A MANNER
CONSISTENT WITH THE SECURITIES ACT IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.




SIGNATURE GROUP HOLDINGS, INC.




WARRANT



			
	Warrant No. SW-___
	 	Date of Original Issuance: June ___, 2010





Signature Group Holdings, Inc. (the “COMPANY”), hereby certifies that, for value received,
                                         or its registered assigns (the “HOLDER”), is entitled to purchase from
the Company up to a total of                      shares of common stock (the “COMMON STOCK”), of the
Company (each such share, a “WARRANT SHARE” and all such shares, the “WARRANT SHARES”) at an
exercise price equal to $1.03 per share (as adjusted from time to time as provided in Section 8,
the “EXERCISE PRICE”), at any time and from time to time from and after the date hereof and through
and including the date that is the tenth anniversary of the date hereof (the “EXPIRATION DATE”),
and subject to the following terms and conditions:



1. Registration of Warrant.



(a) Registration of Warrant. The Company shall register this Warrant, upon records to be maintained
by the Company for that purpose (the “WARRANT REGISTER”), in the name of the record Holder hereof
from time to time. The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.



(b) Registration of Transfers. The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Company at its address specified herein. Upon any
such registration or transfer, a new Warrant to purchase Common Stock, in substantially the






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form of this Warrant (any such new Warrant, a “NEW WARRANT”), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a Warrant.



2. Purchase Price. The purchase price for this Warrant shall be $0.02 per share payable in
installments corresponding to the vesting schedule in Section 3(a) below. The obligation to pay
each installment of the purchase price shall be contingent on, and concurrent with, the vesting of
each installment of Warrant Shares as set forth under Section 3(a).



3. Vesting; Exercise and Duration of Warrants.



(a) Reference is made to Signature Group Holdings, LLC’s Chapter 11 Fourth Amended Plan of
Reorganization of Fremont General Corporation, Joined by James McIntyre, dated May 24, 2010 (the
“Plan”). This warrant shall vest as to shares of underlying Common Stock according to the
following schedule: 20% of the Warrant Shares shall vest on the Effective Date (as defined in the
Plan), and 20% of the Warrant Shares shall vest in annual installments thereafter until this
Warrant is fully vested on the fourth anniversary of the Effective Date.



(b) This Warrant shall be exercisable by the registered Holder at any time and from time to time on
or after the date hereof to and including the Expiration Date. At 6:30 p.m., Pacific time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void
and of no value, provided, that if the closing sales price of the Common Stock on the Expiration
Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be
deemed to have been exercised in full (to the extent not previously exercised) on a “cashless
exercise” basis at 6:30 P.M. Pacific time on the Expiration Date. The Company may not call or
redeem all or any portion of this Warrant without the prior written consent of the Holder.



(c) Notwithstanding anything to the contrary herein, at the option of the Holder, the Expiration
Date may be extended for the number of Trading Days during any period occurring after the
Effectiveness Date in which (i) trading in the Common Stock is suspended by any Trading Market,
(ii) the Registration Statement is not effective, or (iii) the prospectus included in the
Registration Statement may not be used by the Holders for the resale of Registrable Securities
thereunder.



4. Delivery of Warrant Shares.



(a) To effect exercises hereunder, the Holder shall not be required to physically surrender this
Warrant unless the aggregate Warrant Shares represented by this Warrant is being exercised. Upon
delivery of the Exercise Notice to the Company (with the attached Warrant Shares Exercise Log) at
its address for notice set forth herein and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder, the Company shall promptly
(but in no event later than three Trading Days after the Date of Exercise (as defined herein))
issue and deliver to the Holder, a certificate for the Warrant Shares issuable upon such exercise,
which, unless otherwise required by the Purchase Agreement, shall be free of restrictive legends.
The Company shall, upon request of the Holder and subsequent to the date






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on which a registration statement covering the resale of the Warrant Shares has been declared
effective by the Securities and Exchange Commission, use its best efforts to deliver Warrant Shares
hereunder electronically through The Depository Trust Corporation or another established clearing
corporation performing similar functions, if available, provided, that, the Company may, but will
not be required to change its transfer agent if its current transfer agent cannot deliver Warrant
Shares electronically through the Depository Trust Corporation. A “DATE OF EXERCISE” means the date
on which the Holder shall have delivered to Company: (i) the Exercise Notice (with the Warrant
Exercise Log attached to it), appropriately completed and duly signed and (ii) if such Holder is
not utilizing the cashless exercise provisions set forth in this Warrant, payment of the Exercise
Price for the number of Warrant Shares so indicated by the Holder to be purchased.



(b) If by the third Trading Day after a Date of Exercise the Company fails to deliver the required
number of Warrant Shares in the manner required pursuant to Section 4(a), then the Holder will have
the right to rescind such exercise.



(c) If by the third Trading Day after a Date of Exercise the Company fails to deliver the required
number of Warrant Shares in the manner required pursuant to Section 4(a), and if after such third
Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a
“BUY-IN”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the exercise at issue by
(B) the closing bid price of the Common Stock at the time of the obligation giving rise to such
purchase obligation or (2) at the option of the Holder, either reinstate the portion of the Warrant
and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the Buy-In.



(d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to
enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of law by the Holder
or any other Person, and irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company’s failure to timely deliver certificates representing shares of
Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.







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5. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer
tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or
Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.



6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or
in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which may include a surety bond for any Holder other than the original Holder
of the Warrant), if requested. Applicants for a New Warrant under such circumstances shall also
comply with such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a
mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as
a condition precedent to the Company’s obligation to issue the New Warrant.



7. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and otherwise unreserved Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant
as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other contingent purchase
rights of persons other than the Holder (taking into account the adjustments and restrictions of
Section 8). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.



8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of
this Warrant are subject to adjustment from time to time as set forth in this Section 8.



(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i)
pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital
stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the record date for the determination of shareholders entitled
to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of
this paragraph shall become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment






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under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then
the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.



(b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding,
distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security
(other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or
warrants to subscribe for or purchase any security, or (iv) any other asset (in each case,
“DISTRIBUTED PROPERTY”), then, at the request of any Holder delivered before the 90th day after the
record date fixed for determination of shareholders entitled to receive such distribution, the
Company will deliver to such Holder, within five Trading Days after such request (or, if later, on
the effective date of such distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Warrant Shares for which such Holder’s Warrant could have
been exercised immediately prior to such record date. If such Distributed Property is not delivered
to a Holder pursuant to the preceding sentence, then upon any exercise of the Warrant that occurs
after such record date, such Holder shall be entitled to receive, in addition to the Warrant Shares
otherwise issuable upon such conversion, the Distributed Property that such Holder would have been
entitled to receive in respect of such number of Warrant Shares had the Holder been the record
holder of such Warrant Shares immediately prior to such record date. Notwithstanding the foregoing,
this Section 8(b) shall not apply to any distribution of rights or securities in respect of
adoption by the Company of a shareholder rights plan which events shall be covered by the
anti-dilution provisions of Section 8(a).



(c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (1) the Company
effects any merger or consolidation of the Company with or into another Person, (2) the Company
effects any sale of all or substantially all of its assets in one or a series of related
transactions, (3) any tender offer or exchange offer approved or authorized by the Board of
Directors of the Company (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for other securities, cash
or property, or (4) the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property, other than in connection with the transactions contemplated by
the Plan (in any such case, a “FUNDAMENTAL TRANSACTION”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant (the “ALTERNATE
CONSIDERATION”). For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
At the Holder’s request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new






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warrant substantially in the form of this Warrant and consistent with the foregoing provisions and
evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise
Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction
is effected shall include terms requiring any such successor or surviving entity to comply with the
provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.



(d) Subsequent Equity Sales.



(i) While any portion of this Warrant is outstanding, if the Company issues any shares of Common
Stock or the Company or any subsidiary thereof issues any rights, warrants, options or other
securities or debt that is convertible into, exchangeable for, exercisable into, or otherwise
entitling any Person to acquire shares of Common Stock (any such securities, “COMMON STOCK
EQUIVALENTS”), at a price per share less than the Exercise Price (if the holder of the Common Stock
or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such issuance, be entitled to receive
shares of Common Stock at a price less than the Exercise Price, such issuance shall be deemed to
have occurred for less than the Exercise Price), then the Exercise Price shall be adjusted to equal
the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents
(including any reset provisions thereof) at issue and which adjusted Exercise Price shall continue
for as long as this Warrants remain outstanding. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalent
subject to this section, indicating therein the applicable issuance price, or of applicable reset
price, exchange price, conversion price and other pricing terms.



(ii) For purposes of this subsection 8(d), the following subsections (d)(ii)(l) to (d)(ii)(6) shall
also be applicable:



(1) Issuance of Rights or Options. In case at any time the Company shall in any manner grant
(directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such warrants, rights or options being called
“OPTIONS” and such convertible or exchangeable stock or securities being called “CONVERTIBLE
SECURITIES”) whether or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common Stock is issuable
upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of
(x) the total amount, if any, received or receivable by the Company as consideration for the
granting of such Options, plus (y) the aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus (z), in the case of such Options which relate
to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of






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Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options) shall be less than the
Exercise Price in effect immediately prior to the time of the granting of such Options, then the
total number of shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per share as of the
date of granting of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Exercise Price. Except as otherwise
provided in subsection 8(d)(ii)(3), no adjustment of the Exercise Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options
or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible
Securities.



(2) Issuance of Convertible Securities. In case the Company shall in any manner issue (directly and
not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total
amount received or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (ii) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be
less than the Exercise Price in effect immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such price per share as of the date
of the issue or sale of such Convertible Securities and thereafter shall be deemed to be
outstanding for purposes of adjusting the Exercise Price, provided that (a) except as otherwise
provided in subsection 8(d)(ii)(3), no adjustment of the Exercise Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and
(b) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of
Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for
which adjustments of the Exercise Price have been made pursuant to the other provisions of
subsection 8(d).



(3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option referred to in subsection 8(d)(ii)(l)
hereof, the additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 8(d)(ii)(l) or 8(d)(ii)(2), or the rate at which
Convertible Securities referred to in subsections 8(d)(ii)(l) or 8(d)(ii)(2) are convertible into
or exchangeable for Common Stock shall change at any time (including, but not limited to, changes
under or by reason of provisions designed to protect against dilution), the Exercise Price in
effect at the time of such event shall forthwith be readjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. On the termination of any Option for which
any adjustment was made pursuant to this subsection 8(d) or any right to convert or exchange
Convertible Securities for which any adjustment was made pursuant to this subsection






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8(d) (including without limitation upon the redemption or purchase for consideration of such
Convertible Securities by the Company), the Exercise Price then in effect hereunder shall forthwith
be changed to the Exercise Price which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately prior to such
termination, never been issued.



(4) Stock Dividends. Subject to the provisions of this Section 8(d), in case the Company shall
declare a dividend or make any other distribution upon any stock of the Company (other than the
Common Stock) payable in Common Stock, Options or Convertible Securities, then any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.



(5) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, after deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection therewith. In case any
Options shall be issued in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the Company. If Common
Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection
therewith, other Options or Convertible Securities (the “ADDITIONAL RIGHTS”) are issued, then the
consideration received or deemed to be received by the Company shall be reduced by the fair market
value of the Additional Rights (as determined using the Black-Scholes option pricing model or
another method mutually agreed to by the Company and the Holder). The Board of Directors of the
Company shall respond promptly, in writing, to an inquiry by the Holders as to the fair market
value of the Additional Rights. In the event that the Board of Directors of the Company and the
Holders are unable to agree upon the fair market value of the Additional Rights, the Company and
the Holders shall jointly select an appraiser, who is experienced in such matters. The decision of
such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly
by the Company and the Holder.



(6) Record Date. In case the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of the issue or sale
of the shares of Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.







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(iii) Notwithstanding the foregoing, no adjustment will be made under this Section 8(d) as a result
of: (i) the issuance of securities upon the exercise or conversion of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement (but will apply to any amendments,
modifications and reissuances thereof), (ii) the grant of options or warrants, or the issuance of
additional securities, under any duly authorized company stock option, stock incentive plan,
restricted stock plan or stock purchase plan in existence on the Closing Date of the
Reorganization, or (iii) the issuance of Common Stock to Signature Group Holdings, LLC, the TOPrS
Group or their affiliates in connection with the Plan (each, an “EXEMPTED ISSUANCE”).



(e) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to
paragraph (a) of this Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the
same as the aggregate Exercise Price in effect immediately prior to such adjustment.



(f) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the
nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common Stock.



(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 8, the
Company at its expense will promptly compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable
upon exercise of this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to the Holder and to the
Company’s transfer agent.



(h) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of
cash, securities or other property in respect of its Common Stock, including without limitation any
granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits
shareholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such transaction, at least 20
calendar days prior to the applicable record or effective date on which a Person would need to hold
Common Stock in order to participate in or vote with respect to such transaction, and the Company
will take all steps reasonably necessary in order to insure that the Holder is given the practical
opportunity to exercise this Warrant prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to be described in
such notice.






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9. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following
manners:



(a) Cash Exercise. The Holder may deliver immediately available funds; or



(b) Cashless Exercise. The Holder may notify the Company in an Exercise Notice of its election to
utilize cashless exercise, in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows:



X = Y [(A-B)/A]



where:



X = the number of Warrant Shares to be issued to the Holder.



Y = the number of Warrant Shares with respect to which this Warrant is being exercised.



A = the average of the closing prices for the five Trading Days immediately prior to (but not
including) the Exercise Date.



B = the Exercise Price.



For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and
acknowledged 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.



10. No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with
any exercise of this Warrant. In lieu of any fractional shares which would, otherwise be issuable,
the Company shall pay cash equal to the product of such fraction multiplied by the closing price of
one Warrant Share as reported by the applicable Trading Market on the date of exercise.



11. Notices. Any and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m.
(Pacific time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 6:30 p.m. (Pacific time) on any Trading
Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The addresses for such communications shall be: (i) if to the Company, 175 N.
Riverview Drive, Anaheim, CA 92808 Attn: Chief Financial Officer, Fax: (714) 283-6767, or (ii) if
to the Holder, to the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in accordance with this
Section.






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12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days’
notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the
Company or any new warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any corporation to which the
Company or any new warrant agent transfers substantially all of its corporate trust or shareholders
services business shall be a successor warrant agent under this Warrant without any further act.
Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as
shown on the Warrant Register.



13. Miscellaneous.



(a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their
respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall
be construed to give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing
signed by the Company and the Holder and their successors and assigns.



(b) All questions concerning the construction, validity, enforcement and interpretation of this
Warrant shall be governed by and construed and enforced in accordance with the internal laws of the
State of California, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement and defense of this
Warrant and the transactions herein contemplated (“PROCEEDINGS”) (whether brought against a party
hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the Counties of Los Angeles or Orange, California (the
“CALIFORNIA COURTS”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the California Courts for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any California Court, or that such Proceeding has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of this
Warrant, then the prevailing party in such Proceeding shall be reimbursed by the other party for
its attorney’s fees and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.



(c) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.







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(d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining terms and provisions of this Warrant
shall not in any way be affected or impaired thereby and the parties will attempt in good faith to
agree upon a valid and enforceable provision which shall be a commercially reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.



(e) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Plan.




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]










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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized
officer as of the date first indicated above.




	 	 	 	 	 
	 	COMPANY



Signature Group Holdings, Inc.,

a Nevada Corporation
 	 
	 
	 	By:  	 	 
	 
	 	Name:  	Richard A. Sanchez	 
	 
	 	Title:  	Interim President and Interim

Chief Executive Officer	 
	 




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EXERCISE NOTICE




To Signature Group Holdings, Inc.:



The undersigned hereby irrevocably elects to purchase                                          shares of common stock, par
value $1.03 per share, of Signature Group Holdings, Inc. (“COMMON STOCK”), pursuant to Warrant No.
SW-                    , originally issued June                     , 2010 (the “WARRANT”), and, if such Holder is not utilizing the
cashless exercise provisions set forth in the Warrant, encloses herewith $                     in cash,
certified or official bank check or checks or other immediately available funds, which sum
represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Exercise Notice relates, together with any applicable taxes payable by
the undersigned pursuant to the Warrant.



The undersigned requests that certificates for the shares of Common Stock issuable upon this
exercise be issued in the name of




PLEASE INSERT SOCIAL SECURITY OR

TAX IDENTIFICATION NUMBER




(Please print name and address)



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FORM OF ASSIGNMENT



[To be completed and signed only upon transfer of Warrant]



FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ______
the right represented by the within Warrant to purchase ______shares of Common Stock of
Signature Group Holdings, Inc. to which the within Warrant relates and appoints ______
attorney to transfer said right on the books of the Company with full power of substitution in the
premises.




Dated:                                         ,                     




	 	 	 	 	 

	 

	 	 

(Signature must conform in all respects
	 	 
	 

	 	to name of holder as specified on the	 	 
	 

	 	face of the Warrant)	 	 






Address of Transferee



In the presence of:





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