AMENDMENT NO. 1 to AGREEMENT AND PLAN OF MERGER
AMENDMENT
NO. 1 to
THIS
IS
AMENDMENT NO. 1 to the AGREEMENT AND PLAN OF MERGER, dated March 1, 2007,
by and
among SFG Financial Corporation, a Delaware corporation ("SFG"), COESfx
Acquisition Corp., a New York , corporation and wholly-owned subsidiary of
SFG
("Merger Subsidiary"), and COESfx Holdings, Inc., a New York corporation
("COESfx") (the “Amendment Agreement”).
RECITALS
COESfx,
SFG and Merger Subsidiary have previously entered into an Agreement and Plan
of
Merger (the “Merger Agreement”) and wish to change one of the provisions of the
Merger Agreement.
NOW
THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged,
the
Parties, intending to be legally bound, agree as follows:
1. Section
1.3(b) of the Merger Agreement shall be amended to read in its entirety as
follows:
“(b)
All
stock options, warrants, convertible debt, other convertible securities or
other
rights to acquire COESfx Common Stock at an exercise or conversion, as
applicable, price of no less than $0.20 per share (collectively, the “COES
Convertible Securities”) and Non-Exempt COESfx Convertible Securities
outstanding at the Effective Time, whether or not vested (all of which are
listed on Schedule 1.3(b) hereto), shall remain outstanding following the
Effective Time but shall be assumed by SFG. Non-Exempt COESfx Convertible
Securities and COESfx Convertible Securities shall continue to have, and
be
subject to, the same terms and conditions as set forth in the documents
underlying such Non-Exempt COESfx Convertible Securities and COESfx Convertible
Securities. Non-Exempt COESfx Convertible Securities and COESfx Convertible
Securities will be convertible into SFG Shares at the rate of 8.0808554 SFG
Shares for each share of COESfx Common Stock to which they would otherwise
be
entitled, which shares shall be issued from a reserve set aside for such
purpose
from the Merger Consideration. COESfx Convertible Securities will be exercisable
or convertible, as appropriate, as set forth in the underlying documents
and
shall be an obligation of SFG without regard to the reserve set aside from
the
Merger Consideration. Notwithstanding anything else contained in this Agreement,
shares of COESfx Series A Participating Convertible Preferred Stock (the
“Preferred Stock”) shall remain issued and outstanding and registered and owned
by the holder thereof immediately prior to the Effective Time and shall not
be
considered “Non-Exempt COESfx Convertible Securities.”
2. Section
1.4(e) of the Merger Agreement shall be amended to read in its entirety as
follows:
“(e)
Immediately prior to the Effective Time, SFG will have no more than 5,513,856
shares of SFG common stock outstanding. Immediately prior to the Closing,
SFG
will have no stocks, options, warrants, convertible debt, other convertible
securities or other rights to acquire any equity of SFG shares outstanding
other
than rights granted to COESfx shareholders and Concord pursuant to this
Agreement, rights to receive SFG Shares upon conversion of the Preferred
Stock
described in Section 6.2(m), the irrevocable rights to Concord in Section
1.3(c), rights to Concord as described Section 6.2(m) upon completion of
the
Financing and warrants issued to Concord and SFG as described in Section
6.2(n).
Immediately after the Closing, there will be approximately 367,590,400 common
shares of SFG Shares issued and outstanding (including shares to be issued
under
the Irrevocable Rights) and the Concord rights described in Section 1.3(c)
exclusive of shares held in a reserve for issuance in connection with the
exercise or conversion, as appropriate, of the COESfx Convertible Securities,
the warrants issued pursuant to Section 6.2(n) and the Preferred Stock. In
addition, upon the filing of the Amend COI, additional shares will be issued
to
Concord pursuant to Section 6.2(m).”
3. Section
1.9 of the Merger Agreement shall be amended to read in its entirety as
follows:
“1.9
Amendments to SFG’s Articles of Incorporation. As soon as practicable after the
Effective Time, SFG shall amend its Articles of Incorporation to (i) change
its
name to XLFX Holdings Inc. (ii) increase its authorized capital stock from
100,000,000 to 500,000,000 common shares; and (iii) approve a 1 for 7.351808
reverse split of the issued and outstanding SFG shares outstanding immediately
after the Effective Time (“Reverse Split”). The Articles of Amendment to be
filed pursuant to this. Section 1.9 shall be substantially in the form of
Exhibit B attached hereto (the “Amended COI”).”
4. Section
3.6 of the Merger Agreement shall be amended to read in its entirety as
follows:
“3.6
Best
Efforts to Obtain Shareholder Approval. Each party shall promptly upon execution
of this Merger Agreement use its best efforts, to the extent required by
this
Agreement, to prepare all documents and prepare all filings necessary to
obtain
the approval of its respective shareholders of the transactions contemplated
by
this Agreement and the approval of the Amended COI. SFG shall promptly AFTER
THE
Effective Time prepare and file with the United States Securities and Exchange
Commission (“SEC”) a preliminary proxy statement with respect to seeking
approval of the shareholders of SFG of the Amended COI. Each party will as
soon
as possible hold a shareholders’ meeting of its respective shareholders to
approve the transactions and other requirements of each party contemplated
by
this Agreement.”
5. Section
4.3 of the Merger Agreement shall be amended to read in its entirety as
follows:
“4.3
Capitalization. The authorized capital stock of COESfx consists of (i)
100,000,000 shares of common stock, $0.001 par value, of which 43,478,874
shares
are issued and outstanding, and (ii) 5,071,816 shares to be issued upon the
exercise of outstanding warrants and options. No shares of COESfx preferred
stock have been issued. On or prior to the Closing Date it is anticipated
that
2,000 shares of Series A Participating Preferred Stock (“COESfx Preferred
Stock”) shall be outstanding. All of the issued and outstanding shares of COESfx
capital stock are duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights. At the Effective Time, all of the issued and
outstanding shares of COESfx Common Stock will be converted into the right
to
receive SFG Shares issued or issuable as part of the Merger Consideration.
Shares of COESfx Preferred Stock shall remain outstanding. There are no voting
trusts or any other agreements or understandings with respect to the voting
of
COESfx's capital stock except as contemplated in this Agreement.”
6. The
Initial paragraph of Section 5.3 of the Merger Agreement shall be amended
to
read in its entirety as follows:
5.3
Capitalization. (a) SFG's authorized capital stock consists of 100,000,000
shares of common stock, of which 5,513.856 shares are issued and outstanding.
As
soon as practicable after the Closing, SFG shall amend its Articles of
Incorporation by the filing of the Amended COI subject to compliance with
all
applicable Legal Requirements. Immediately prior to the Effective Time, SFG
will
have no more than 5,513,856 shares of SFG common stock outstanding. Immediately
prior to the Closing, SFG will have no stocks, options, warrants, convertible
debt, other convertible securities or other rights to acquire any equity
of SFG
outstanding, other than rights granted to COESfx shareholders pursuant to
this
Agreement, rights to issue common stock upon conversion of the Preferred
Stock
described in Section 6.2(m), the irrevocable rights issued to Concord as
described in Section 1.3(c), rights to Concord as described in Section 6.2(m)
upon completion of the Financing and warrants issued to Concord and SFG as
described in Section 6.2(n). Immediately after the Closing, there will be
approximately 367,590,400 common shares of SFG issued and outstanding (including
shares to be issued under the Irrevocable Rights, SFG Shares held in reserve
for
the exercise of Non-Exempt COES Convertible Securities and the Concord
irrevocable rights described in Section 1.3(c), exclusive of shares issuable
in
connection with the exercise or conversion, as appropriate, of the COES
Convertible Securities, the warrants issued pursuant to Section 6.2(n), the
Ppreferred Stock and SFG Shares issuable to Concord pursuant to Section
6.2(m).
7. Section
5.3(c) of the Merger Agreement shall be amended to read in its entirety as
follows:
“(c)
Except for SFG Shares to be issued upon the Merger and SFG Shares to be issued
on the filing of the Amended COI to COESfx shareholders, SFG Shares to be
issued
upon the exercise of the COESfx Convertible Securities, shares of common
stock
to be issued upon conversion of the Preferred Stock issued in the Financing
described in Section 6.2(m), the irrevocable rights issued to Concord as
described in Section 1.3(c) and warrants issued to Concord and SFG as described
in Section 6.2(n), there are no outstanding or authorized options, rights,
warrants, calls, convertible securities, rights to subscribe, conversion
rights,
or other agreements or commitments to which SFG is a party or which are binding
upon SFG providing for the issuance or transfer by SFG of additional shares
of
SFG's capital stock and SFG has not reserved any shares of its capital stock
for
issuance, nor are there any outstanding stock option rights, phantom equity
or
similar rights, contracts, arrangements or commitments to issue capital stock
of
SFG. There are no voting trusts or any other agreements or understandings
with
respect to the voting of SFG's capital stock. There are no obligations of
SFG to
repurchase, redeem, or otherwise re-acquire any shares of its capital stock
as
of the Closing.”
8. Section
6.1 (b) of the Merger Agreement shall be amended to read in its entirety
as
follows:
“(b)
At
or prior to the Closing, the Financing shall have been successfully completed
and COESfx shall receive proceeds from the Financing of no less than $1,800,000
in net cash free and clear of any Encumbrance.
9. Section
6.2 (m) of the Merger Agreement shall be amended to read in its entirety
as
follows:
“(m)
The
New Board will agree in writing that in the event that on or before the Closing
Date, Concord and/or parties affiliated with them (“Concord Affiliates”) provide
or arrange for the purchase of $2,000,000 of Preferred Stock of COESfx (on
terms
and conditions set forth in the form of Amendment to Certificate of
Incorporation attached hereto as Exhibit D)(the “Financing”), Concord or parties
designated by it, immediately after the filing of the Amended COI, will be
issued post reverse split shares of SFG Common Stock in a number which when
combined with the number of SFG Shares receivable upon conversion of the
Preferred Stock equals a total of 14,666,322 and paid a maximum of $200,000
in
cash. If any funding is provided after the Termination Date (as defined below),
the parties will mutually agree on the compensation to be paid to the Concord
Affiliates. For purposes of this section, the “Termination Date” shall be
defined as the date which is the earlier of (i) that date which is 60 days
after
the Closing or (ii) the closing date of any material non-recurring transaction
(such as a business combination transaction, merger, acquisition and/or
reorganization other than the Financing, but specifically excluding any internal
efforts resulting in sales growth) that materially increases the assets,
income
and/or equity value of SFG and/or COESfx.”
All
other
terms and conditions of the Merger Agreement remain in full force and effect,
without addition, deletion or modification.
IN
WITNESS WHEREOF, SFG and COESfx have executed, or caused to be executed by
their
duly authorized representatives, this Agreement as of March , 2007.
|
SFG
FINANCIAL CORPORATION
|
COESFX
HOLDINGS, INC.
|
|
A
Delaware corporation
|
A
New York corporation
|
|
By:
/s/ Xxxx X.
Xxxxx
|
By:
/s/ Xxxxxxx
Xxxx
|
|
Title:
Chairman
|
Title:
Chief Executive
Officer
|
COESFX
ACQUISITION CORP.
A
to be
Formed New York corporation
By:
/s/ Xxxxxxx
Xxxx
Title:
Chief Executive
Officer
