SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 1, 1997
Champion Financial Corporation
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(Exact name of registrant as specified in its charter)
UTAH 0-19499 88-0169547
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
9495 East San Salvador Drive, Scottsdale, Arizona 85258
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 614-4270
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19 Hillsyde Court, Cockeysville, Maryland 21030
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(Former name or former address, if changed since last report.)
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Item 9. Sales Of Equity Securities Pursuant To Regulation S.
On December 4, 1997, Champion Financial Corporation, a Utah corporation
(the "Company"), sold U.S. $4,000,000 aggregate principal amount of its 8%
Series A Senior Subordinated Convertible Redeemable Debentures due December 31,
1999 (the "Debt"). The Debt was sold in reliance upon Regulation S under the
United States Securities Act of 1933, as amended (the "Securities Act"). The
Notes were sold through London Select Enterprises, Ltd. ("Broker") to Non-U.S.
persons pursuant to a Letter Agreement between the Company and Broker dated
December 1, 1997 (the "Letter Agreement").
The Company has also granted the Broker warrants to purchase 1 share of
Common Stock for each $10.00 of face amount of Debt placed (i.e., warrants to
purchase an aggregate of 400,000 shares), at an exercise price per share of 110%
of the closing bid price on the date of the closing of the offering. The
warrants are excercisable at any time for a period of 5 years. Under the terms
of the Letter Agreement, the Company paid the Broker ten percent (10%) plus a
non-accountive expense of two percent (2%) of the gross proceeds paid pursuant
to any individual subscription Agreement.
The Debt is convertible into Common Stock, $.001 par value, of the
Company at any time after 45 days following the closing of the offering, unless
previously redeemed or repurchased, and is convertible at maturity (December 31,
1999) at the Company's option at a conversion price for each share of Common
Stock equal to the lower of (a) 75% of the closing bid price of the Common Stock
for the trading day immediately preceding the date of receipt by the Company of
notice of conversion or (b) 75% of the closing bid price of the Common Stock for
the five (5) days immediately preceding the date of subscription by the Holder,
as reported by the National Association of Securities Dealers Electronic
Bulletin Board.
The payment of principal, premium, if any, interest, and any other
amounts payable on or in respect of the Debt by the Company is on a subordinated
basis in accordance with the terms of the Debenture. The Debt and the Common
Stock issuable upon conversion of the Debt have not been registered under the
Securities Act, in reliance upon the exemption afforded by Regulation S under
the Securities Act. Accordingly, the Debt and the Common Stock issuable upon
conversion of the Debt was offered and sold only outside the United States to
non-United States investors in reliance upon Regulation S under the Securities
Act.
The foregoing summary of the Letter Agreement, the Debt, the Debenture
and the Offshore Securities Subscription Agreement does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Letter Agreement, the Debenture and the Offshore
Securities Subscription Agreement, forms of which are filed as Exhibits to this
Current Report on Form 8-K.
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EXHIBITS
Exhibit No.
1.1 Form of Letter Agreement between Champion Financial
Corporation and London Select Enterprises, Ltd. Dated December
1, 1997.
4.1 Form of Offshore Securities Subscription Agreement
4.2 Form of Debenture
4.3 Form of Warrant Certificate
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHAMPION FINANCIAL CORPORATION
Date December 10, 1997 By /s/ Paul F. Caliendo
--------------------------------------
Paul F. Caliendo
Its President and Chief Executive
Officer
Exhibit 1.1
LONDON SELECT ENTERPRISES, LTD.
c/o Zenith Management Corp. Ltd.
P.O. Box 64
Market Place No. C12
Provodincials
Turks & Caicos Islands
December 1, 1997
Champion Financial Corporation
9495 East San Salvador Drive
Scottsdale, Arizona 85258
Gentlemen:
This letter is to confirm our understanding and agreement regarding
compensation to be paid by Champion Financial Corporation (the "Company") to
London Select Enterprises, Ltd. (the "Broker"). Broker shall have the exclusive
right through December 8, 1997 to act as the Company's agent for the sole
purpose of placing up to $4,000,000 face amount of 8% two year convertible
debentures (together with the common stock that the debt is convertible into)
(the "Debt" or the "Securities"), of Company on a "best efforts" basis, in an
offering conducted in compliance with Regulation S promulgated under the
Securities Act of 1933 ("1933 Act").
The Debt shall be convertible at any time after 45 days into
common stock of the Company at the lower of (a) 25% below the average of the
closing bid prices of the common stock for the 5 trading days immediately
preceding the execution by the subscriber of each individual subscription or (b)
25% below the closing bid price of the common stock for the trading day
immediately preceding the date of conversion (the "conversion price"). Company
and Broker agree to make appropriate arrangements for escrow with Barry
Globerman, Esq., New York, New York, of all monies received in consideration of
such Debt. In consideration for Broker's and escrow services hereunder, at the
time of closing with respect to each individual subscription, Company will pay
Broker ten percent (10%) plus a non-accountive expense of 2% of the gross
proceeds paid pursuant to each individual subscription agreement. There may be
multiple closings of this offering and the 10% plus 2% will be paid upon each
closing. Mr. Globerman is authorized and is hereby directed to deduct from the
gross proceeds the amounts to be paid to Broker hereunder. If a purchaser shall
make payment directly to the Company of the gross proceeds, then Company agrees
to remit to Mr. Globerman from such gross proceeds the amounts to be paid to
Broker with respect thereto. In either event, Mr. Globerman shall thereupon make
appropriate payment hereunder to the Broker.
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In addition, Broker shall receive warrants to purchase 1 share
of Common Stock for each $10 of face amount of Debt placed at a price per share
of 110% of the closing bid price on the date of closing of the offering. The
Warrants shall be exercisable at any time for a period of 5 years.
It is agreed that no person shall become a purchaser in the
offering except upon Company's acceptance of an executed agreed upon
subscription agreement. Company reserves the right to accept or reject any
prospective subscriber in its sole discretion.
Company is familiar with Regulation S and will not take any
action or omit to take any action which has the effect of causing the offering
not to comply with Regulation S or any other applicable securities laws, rules
or regulations. Broker is familiar with Regulation S and will not take any
action which has the effect of causing the offering not to comply with
Regulation S or any other applicable securities laws, rules or regulations or
the laws, rules or regulations of any jurisdiction in which these securities are
offered or sold, in particular Broker and Company confirm their agreement to
comply with Rule 903(c)(2) of Regulation S. Broker, its affiliates and any
person acting at Broker's or any of its affiliates' direction, shall not
directly or indirectly engage in "short" selling of the Company's securities at
any time for a period of 6 months from the date of the last closing of sale of
Debt.
Broker will provide to each prospective subscriber all
disclosure materials designated by Company and Broker to be made available to
all prospective investors. Such materials include the Company's latest Annual
Report on Form 10-K and latest Quarterly Report on Form 10-Q.
Broker acknowledges that it is not authorized to and will not
give any information or make any representations other than as contained in the
disclosure materials approved in advance by Company. Broker agrees that it is
not authorized to and will not incur any obligation or enter into any agreement
on behalf of Company or otherwise bind Company in any manner. Broker is acting
at a broker's capacity and this Agreement shall not create any relationship of
agency, partnership or joint venture.
Broker agrees that all offers and sales by Broker will be made
only to persons outside the United States who are not "U.S. Persons" as defined
in Regulation S and all such offers and sales shall be in compliance with the
applicable laws of the jurisdictions in which such offers and sales are made.
Broker agrees that it and its affiliates and persons acting on
behalf of Broker and its affiliates will not engage in any "directed selling
efforts" as defined in Regulation S.
Broker agrees that, if prior to the expiration of the 40-day
restricted period referred to in Rule 903(c)(2) of Regulation S, Broker shall
sell the Debt to (i) a "distributor" (as
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defined in Regulation S), (ii) a "dealer" (as defined in Section 2(12) of the
1933 Act), or (iii) any person receiving a selling concession, fee or other
remuneration in respect of the Debt, Broker shall send a confirmation or other
notice to such purchaser stating that the purchase is subject to the same
restrictions on offers and sales that apply to "distributor" under Regulation S.
Broker agrees that all offers and sales prior to the
expiration of the 40-day restricted period referred to in Rule 903(c)(2) of
Regulation S shall be made only in accordance with the provisions of Section 903
and 904 of Regulation S as applicable; pursuant to registration of the
Securities under the 1933 Act, or pursuant to an available exemption from
registration under the 1933 Act.
Broker agrees that any offering materials or documents
distributed by it (except press releases) used in connection with offers and
sales prior to the expiration of the 40-day restricted period referred to in
Rule 903(c)(2) of Regulation S shall include statements to the effect that the
Securities have not been registered under the 1933 Act and may not be offered or
sold in the United States or to U.S. persons (other than "distributors" as
defined in Regulation S) unless the Securities are registered or an exemption
from the requirements of the 1933 Act is available. Such statements shall appear
on all materials as provided under Section 902(h)(2)(i), (ii) and (iii) of
Regulation S.
Company agrees that it will not engage in any offering of its
securities pursuant to Regulation S for a period of 90 days from the date of the
final closing of the offering contemplated hereby unless mutually agreed. In
addition, Broker shall have the right of first refusal for a 360-day period to
participate in any future financings on the same terms as any other brokers,
such right to be exercised within 10 days of written notice to Broker by Company
of its intent to engage in a financing.
Company agrees to maintain the confidentiality of Broker's
clients except to the extent disclosure thereof may be required by law. Such
clients are defined as individuals or institutions who invest in this private
placement. For two years from the date hereof, Company will not solicit such
clients directly for the sale of securities without the written permission of
Broker, which consent will not unreasonably be withheld.
Broker and Company each agree to indemnify and hold harmless
the others, their officers, directors, shareholders, representatives and
affiliates to the full extent lawful from and against any losses, claims,
expenses, damages or liabilities, including reasonable legal fees, related to or
arising out of any breach of or failure by the indemnifying party to comply with
its representations, warranties and agreements set forth in this letter.
This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof, and no waiver,
alteration or modification of any of the provisions hereof shall be binding
unless it is in writing and signed by each of the parties hereto.
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All representations, warranties, and agreements of the parties
hereto herein, and any indemnification agreements contained herein shall survive
the consummation of a sale or the termination of this Agreement.
Any controversy or claim relating to this Agreement
("Arbitrable Dispute") shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the "AAA")
as such rules may be modified herein or as otherwise agreed by the parties in
controversy. The forum for arbitration shall be New York, New York. Broker
agrees to submit to the jurisdiction of the New York Courts for purposes of
confirming any award.
This Agreement may be executed in multiple counterparts each
of which shall be deemed one and the same instrument. This Agreement shall not
be assignable by either party without the prior written consent of the other
party hereto. This Agreement shall be governed by the laws of the State of New
York (without regard to conflicts of law principles).
A copy has been provided for your records.
LONDON SELECT ENTERPRISES, LTD.
By:
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Approved and Agreed To:
CHAMPION FINANCIAL CORPORATION
By:
---------------------------
Date:
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Exhibit 4.1
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
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THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of
___________, 1997 (the "Agreement"), is executed in reliance upon the exemption
from registration afforded by Regulation S ("Regulation S") as promulgated by
the Securities and Exchange Commission ("SEC"), under the Securities Act of
1933, as amended. Capitalized terms used herein and not defined shall have the
meanings given to them in Regulation S.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 8% Series A Senior Subordinated
Convertible Redeemable Debentures of Champion Financial Corporation, a
corporation organized under the laws of Utah, with its principal executive
offices located at 9495 East San Salvador Drive, Scottsdale, AZ 85258
(hereinafter referred to as "Seller"). Buyer hereby represents and warrants to,
and agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER
(THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933 ACT) OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED
IN REGULATION S OF THE 1933 ACT) EXCEPT PURSUANT TO
REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
1. Agreement To Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for
and agrees to purchase a portion of the Seller's 8% Series A Senior Subordinated
Convertible Redeemable Debentures substantially in the form of the Debentures
attached as Exhibit A hereto and having an aggregate original principal face
amount of up to U.S. $4,000,000 (singly, a "Debenture," and collectively, the
"Debentures"), at an aggregate purchase price as set forth in subsection (b)
herein.
(b) Payment. The aggregate Purchase Price for the portion of
the Debentures purchased by the Buyer shall be __________________________ United
States Dollars (U.S. $___________) (the "Purchase Price"), which shall be
payable pursuant to paragraph C herein by delivering immediately available funds
in United States Dollars by wire transfer to the designated depository Barry B.
Globerman, Esq., as Escrow Agent ("Escrow Agent") for closing by delivery of
securities versus payment.
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(c) Closing. Subject to the satisfaction of the conditions set
forth in Sections 7 and 8 hereof, payments of the Purchase Price may be made
from time to time in denominations of not less than $10,000 but all payments
hereunder in any event must be completed on or before December 8, 1997, or such
earlier or later date as is mutually agreed to in writing by Buyer and Seller.
2. Buyer Representations and Covenants; Access to Information.
Offshore Transaction. In connection with the purchase and sale
of the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not
organized under the laws of any jurisdiction within the United
States, was not formed by a U.S. Person (as defined in Rule
902(o) of Regulation S) for the purpose of investing in
Regulation S securities and is not otherwise a U.S. Person.
Buyer is not, and on the closing date will not be, an
affiliate of Seller;
(ii) At the time the buy order was originated, Buyer
was outside the United States and is outside of the United
States as of the date of the execution and delivery of this
Agreement;
(iii) No offer to purchase the Debentures or the
common stock of Seller issuable upon conversion of the
Debentures (collectively, the "Securities"), was made by Buyer
in the United States;
(iv) Buyer is purchasing the Securities for its own
account and Buyer is qualified to purchase the Securities
under the laws of its jurisdiction of residence, and the offer
and sale of the Securities will not violate the securities or
other laws of such jurisdiction;
(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as
hereinafter defined) shall be made in compliance with any
applicable securities laws of any applicable jurisdiction and
in accordance with Rule 903 and 904, as applicable, of
Regulation S or pursuant to registration of securities under
the 1933 Act or pursuant to an exemption from registration. In
any case, none of the Securities have been or will be
encumbered, offered, sold or otherwise transferred by Buyer
to, or for the account or benefit of, a U.S. Person or within
the United States until after the end of the forty (40) day
period commencing on the later of (x) the date of closing of
the offering of the Securities or (y) the date of the first
offer of the Securities to persons other than distributors
(the "Restricted Period"), as calculated pursuant to
Regulation S and certified by Buyer to Seller and thereafter
only pursuant to a Registration Statement or an applicable
exemption from the registration provisions of the 1933 Act;
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(vi) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Buyer with a
purchaser located in the United States or a purchaser which is
a U.S. Person, and (b) are not and will not be part of a plan
or scheme by Buyer, to evade the registration provisions of
the 1933 Act;
(vii) Buyer understands that the Securities are not
registered under the 1933 Act and are being offered and sold
to it in reliance on specific exclusions from the registration
requirements of Federal and State securities laws, and that
Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine
the applicability of such exclusions and the suitability of
Buyer and any purchaser from Buyer to acquire the Securities;
(viii) Buyer shall take all reasonable steps to
ensure its compliance with Regulation S and shall promptly
send to each purchaser who acts as a distributor, dealer or a
person receiving a selling concession, fee or other
remuneration in respect of any of the Securities, who
purchases prior to the expiration of the Restricted Period
referred to in subparagraph (v) above, a confirmation or other
notice to the purchaser stating that the purchaser is subject
to the same restrictions on offers and sales as Buyer pursuant
to Rule 903(c)(2)(iv) of Regulation S;
(ix) Buyer has not conducted or permitted and shall
not conduct or permit on its behalf any "directed selling
efforts" as that term is defined in Rule 902(b) of Regulation
S; nor has Buyer conducted any general solicitation relating
to the offer and sale of any of the Securities in the United
States or elsewhere;
(x) Buyer has the full right, power and authority to
enter into this Agreement and to consummate the transaction
contemplated herein. This Agreement has been duly authorized,
validly executed and delivered on behalf of Buyer and is a
valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights
generally;
(xi) The execution and delivery of this Agreement and
the consummation of the purchase of the Securities, and the
transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by Buyer of any of the
terms of provisions of, or constitute a default under, the
articles of incorporation or by-laws (or similar constitutive
documents) of Buyer or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Buyer is a
party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of
the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court,
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Federal or State regulatory body, administrative agency or
other United States governmental body having jurisdiction over
Buyer or any of its properties or assets;
(xii) All invitation, offers and sales of or in
respect of, any of the Securities, by Buyer and any
distribution by Buyer of any documents relating to any offer
by it of any of the Securities will be in compliance with
applicable laws and regulations and will be made in such a
manner that no prospectus need be filed and no other filing
need be made by Seller with any regulatory authority or stock
exchange in any country or any political sub-division of any
country;
(xiii) Buyer will not make any offer or sale of the
Securities by any means which would not comply with the laws
and regulations of the territory in which such offer or sale
takes place or to which such offer or sale is subject or which
would in connection with any such offer or sale impose upon
Seller any obligation to satisfy any public filing or
registration requirement or provide or publish any information
of any kind whatsoever or otherwise undertake or become
obligated to do any act; and
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the
Restricted Period enter into any put option, short position or
other similar instrument or position with respect to any of
the Securities or securities of the same class as the
Securities.
(xv) Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax
advisors with respect to applicable resale restrictions and
applicable tax considerations and it (or others for whom it is
contracting hereunder) is solely responsible (and Seller is
not in any way responsible) for compliance with applicable
resale restrictions and applicable tax legislation.
(xvi) No Government Recommendation or Approval. Buyer
understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement
of the Securities.
(xvii) Current Public Information. Buyer acknowledges
that it and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of
Seller and all materials relating to the offer and sale of the
Securities which have been requested by Buyer, all of which
contain a legend as required under Section 10 hereof. Buyer
further acknowledges that it and its advisors, if any, have
received complete and satisfactory answers to such inquiries.
(xviii) Buyer's Sophistication. Buyer acknowledges
that the purchase of the Securities involves a high degree of
risk, including the total loss of Buyer's
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investment. Buyer has such knowledge and experience in
financial and business matters that it is capable of
evaluating the merits and risks of purchasing the Securities.
Buyer understands that the Securities are not being registered
under the 1933 Act, and therefore Buyer must bear the economic
risk of this investment for an indefinite period of time.
(xix) Tax Status. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code of 1986, as amended) of Seller.
3. Seller Representations and Covenants.
(a) Reporting Company Status. Seller is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller's Common Stock $0.001 par value
per share (the "Common Stock"), is listed and trades on the NASDAQ Electronic
Bulletin Board.
(b) Current Public Information. Seller has furnished Buyer
with copies of its most recent reports, as amended, filed under the Exchange Act
referred to in Section 2(xvii) above, and other publicly available documents
requested by Buyer.
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, any identifiable groups of U.S.
citizens abroad, or to any U.S. Person, as such terms are used in Regulation S.
(i) At the time the buy order was originated, Seller
and/or its agents reasonably believe the Buyer was outside of
the United States and was not a U.S. Person, based on the
representations of Buyer.
(ii) Seller and/or its agents reasonably believe that
the transaction has not been pre-arranged with a buyer in the
United States, based on the representations of Buyer.
(iii) No offer to buy or sell the Securities was or
will be made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to
this Agreement will be made in accordance with the provisions
and requirements of Regulation S provided that the
representations and warranties of Buyer in Section 2 hereof
are true and correct.
(v) The transactions contemplated by this Agreement
(a) have not been and will not be pre-arranged by Seller with
a purchaser located in the United States or a purchaser which
is a U.S. Person, and (b) are not and will not be part of a
plan
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or scheme by Seller to evade the registration provisions of
the 1933 Act.
(d) No Directed Selling Efforts. In regard to this
transaction, Seller has not conducted any "directed selling efforts" as that
term is defined in Rule 902 of Regulation S nor has Seller conducted any general
solicitation relating to the offer and sale of any of the Securities in the
United States or elsewhere.
(e) Concerning the Securities. The issuance, sale and delivery
of the Debentures have been duly authorized by all required corporate action on
the part of Seller, and when issued, sold and delivered in accordance with the
terms hereof and thereof for the consideration expressed herein and therein,
will be duly and validly issued, fully paid and non-assessable. The Common Stock
issuable upon conversion of the Debenture has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Debentures,
shall be duly and validly issued, fully paid, and non-assessable and will not
subject the holders thereof, if such persons are non-U.S. persons, to personal
liability by reason of being such holders. There are no pre-emptive rights of
any shareholder of Seller.
(f) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of the United States
or any State thereof or any applicable decree, judgment or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(h) Approvals. Seller is not aware of any authorization,
approval or consent of any U.S. governmental body which is legally required for
the issuance and sale of the Debentures and the Common Stock issuable upon
conversion thereof to persons who are non-U.S. Persons, as contemplated by this
Agreement. Seller is relying entirely upon Buyer and Distributor with respect to
foreign consents and approvals.
(i) Filings. Seller undertakes and agrees pursuant to the sale
of its securities under Regulation S to make all necessary filings in connection
with the sale of its securities as required by the laws and regulations of the
United States, including Form 8-K. Seller further agrees, with respect to the
filing of Form 8-K, that it will only identify Purchaser as an "accredited
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investor" as that term is defined in Regulation D and will not disclose
Purchaser's name in Form 8-K or otherwise unless such disclosure is required by
law.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
outside the United States pursuant to Regulation S.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the
holder thereof shall submit such Debenture together with a notice of conversion
to the Seller and the Seller shall instruct its transfer agent to issue one or
more Certificates representing that number of shares of Common Stock into which
the Debenture or Debentures are convertible in accordance with the provisions
regarding conversion set forth in Exhibit A hereto. The Seller shall act as
Debenture Registrar and shall maintain an appropriate ledger containing the
necessary information with respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon
the conversion of any Debenture up to the total of the "Conversion Amount" (as
defined in the Debenture) and 40 days after the issuance of any "Interest
Shares" (as defined in the Debenture) by a person who is a non-U.S. Person,
Seller shall instruct Seller's transfer agent to issue Stock Certificates up to
the total of the "Conversion Amount" (as defined in the Debenture) and 40 days
after the "Interest Shares " (as defined in the Debenture) without restrictive
legend in the name of Buyer (or its nominee (being a non-U.S. Person) or such
non-U.S. Persons as may be designated by Buyer prior to the closing) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable, provided, however,
that Buyer acknowledges that no transfers in the United States or to United
States persons may be made during the restricted period. Seller warrants that no
instructions other than these instructions and instructions to impose a "stop
transfer" instruction with respect to the certificates until the end of the
respective Restricted Period of the Conversion Shares and Interest Shares, if
any, have been given or will be given to the transfer agent and that the Common
Stock shall otherwise be freely transferable on the books and records of Seller.
Nothing in this Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreements to comply with all applicable securities
laws upon resale of the Securities and the restrictions on resale set forth in
Section 12.
(c) It shall be the Seller's responsibility to take all
necessary actions and to bear all such costs to issue the Certificate of Common
Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required, provided Buyer provides
such certificates and information as may be reasonably required to support that
opinion. The person in whose name the certificate of Common Stock is to be
registered shall be treated as a shareholder of record on and after the
conversion date. The Seller shall only be required to convert the debenture in
minimum amounts of $10,000. Upon surrender
-7-
<PAGE>
of any Debentures that are to be converted in part, the Company shall issue to
the Purchaser a new Debenture equal to the unconverted amount, if so requested
by Purchaser.
6. Registration. If upon conversion of the Debentures effected by the
Buyer pursuant to the terms of this Agreement or payment of interest pursuant to
the Debenture the Company fails to issue certificates for shares of Common Stock
issuable upon such conversion (the Underlying Shares or the Interest Shares to
the Buyer bearing no restrictive legend (after the applicable Restrictive Period
of the Conversion Shares or Interest Shares) for any reason other than the
Company's reasonable good faith belief that the representations and warranties
made by the Buyer in this Agreement or the Notice of Conversion were untrue when
made, or if the restricted period under Regulation S is extended, then the
Seller shall be required, at the request of the Buyer and at the Seller's
expense, to effect the registration of the Underlying Shares and/or Interest
Shares issuable upon conversion of the Debentures and payment of interest under
the Act and relevant Blue Sky laws as promptly as is practicable. The Seller and
the Buyer shall cooperate in good faith in connection with the furnishing of
information required for such registration and the taking of such other actions
as may be legally or commercially necessary in order to effect such
registration. Following such conversion, the Seller shall file such a
registration statement within 60 days of Buyer's demand therefor and shall use
its diligent efforts to cause such registration statement to become effective as
soon as practicable thereafter. Such diligent efforts shall include, but not be
limited to, promptly responding to all comments received from the staff of the
Securities and Exchange Commission, providing Buyer's counsel with a
contemporaneous copy of all written communications from and to the staff of the
Securities and Exchange Commission with respect to such registration statement
and promptly preparing and filing amendments to such registration statement
which are responsive to the comments received from the staff of the Securities
and Exchange Commission. Once declared effective by the Securities and Exchange
Commission, the Seller shall cause such registration statement to remain
effective until the earlier of (i) the sale by the Buyer of all Underlying
Shares registered or (ii) 120 days after the effective date of such registration
statement. In the event the Seller undertakes to file a Registration Statement,
except insofar as the right to sell may be suspended (for a period of not more
than 90 days) at the Seller's option based on material non public events or
business emergencies, in which case, the 120 days will be lengthened by the
number of days of suspension. The Seller shall include on the applicable
registration form the Buyer as a selling shareholder in connection with the
Common Stock and upon the effectiveness of such Registration, Buyer shall have
the option to sell the Common Stock pursuant thereto. The foregoing shall not in
any way limit Buyer's rights in connection with the Common Stock pursuant to
Regulation S.
7. Authorized and Issued Shares. The Seller shall at all times reserve
and have available all Common Stock necessary to meet conversion of the
Debentures by all purchasers of the entire amount of Debentures then
outstanding. If, at any time Buyer submits a Notice of Conversion and the Seller
does not have sufficient authorized but unissued shares of Common Stock
available to effect, in full, a conversion of the Debentures (a Conversion
Default, the date of such default being referred to herein as the Conversion
Default Date), the Company shall issue to the purchasers of the Debentures all
of the shares of Common Stock which are available, and the
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<PAGE>
Notice of Conversion as to any Debentures requested to be converted (the
Unconverted Debentures), upon Buyer's sole option, may be deemed null and void.
The Seller shall provide notice of such Conversion Default (Notice of Conversion
Default) to all existing purchasers of outstanding Debentures, by facsimile,
within one (1) business day of such default (with the original delivered by
overnight or two day courier), and each such purchaser shall give notice to the
Seller by facsimile within five business days of receipt of the original Notice
of Conversion Default (with the original delivered by overnight or two day
courier) of its election to either nullify or confirm the Notice of Conversion.
The Seller agrees to pay to all purchasers of outstanding
Debentures payments for a Conversion Default (Conversion Default Payments) in
the amount of (N/365) x (.24) x the initial issuance price of the outstanding
and/or tendered but not converted Debentures held by each Purchaser where N =
the number of days from the Conversion Default Date to the date (the
Authorization Date) that the Seller authorizes a sufficient number of shares of
Common Stock to effect conversion of all remaining Debentures. The Seller shall
send notice (Authorization Notice) to each Purchaser of outstanding Debentures
that additional shares of Common Stock have been authorized, the Authorization
Date and the amount of Purchaser's accrued Conversion Default Payments. The
accrued Conversion Default shall be paid in cash or shall be convertible into
Common Stock at the Conversion Rate, at the Buyer's option, payable as follows:
(i) in the event Buyer elects to take such payment in cash, cash payments shall
be made to such Buyer of outstanding Debentures by the fifth day of the
following calendar month, or (ii) in the event Buyer elects to take such payment
in stock, the Buyer may convert such payment amount into Common Stock at the
conversion rate set forth in section 5(d) at anytime after the 5th day of the
calendar month following the month in which the Authorization Notice was
received, until the maturity date.
8. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Escrow Agent at such time and place as shall be
mutually agreed by Seller and Buyer.
9. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement
executed by Buyer.
(b) Delivery into the closing depository of good funds by
Buyer as payment in full of the purchase price of the Debentures.
(c) All of the representations and warranties of the Buyer
contained in this Agreement shall be true and correct on the Payment Date with
the same force and effect as if made on and as of the Payment Date. The Buyer
shall have performed or complied with all agreements and satisfied all
conditions on its part to be performed, complied with or satisfied at or prior
to the Payment Date.
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<PAGE>
(d) No order asserting that the transactions contemplated by
this Agreement are subject to the registration requirements of the Act shall
have been issued, and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Company, be contemplated. No
stop order suspending the sale of the Debentures shall have been issued, and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, be contemplated.
(e) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency that would prevent the issuance of the Debentures. No
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction shall have been issued that would prevent the issuance
of the Debentures.
10. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of
this Agreement as evidenced by execution of this Agreement by the duly
authorized officer of Seller.
(b) Delivery of the Debentures to the Escrow Agent.
11. Offering Materials. All offering materials and documents used in
connection with offers and sales of the Securities prior to the expiration of
the Restricted Period referred to in Section 2(a)(v) hereof shall include
statements to the effect that the Securities have not been registered under the
1933 Act or applicable state securities laws, and that neither Buyer, nor any
direct or indirect purchaser of the Securities from Buyer, may directly or
indirectly offer or sell the Securities in the United States or to U.S. Persons
(other than distributors) unless that Securities are registered under the 1933
Act any applicable state securities laws, or any exemption from the registration
requirements of the 1933 Act or such state securities laws is available. Such
statements shall appear (1) on the cover of any prospectus or offering circular
used in connection with the offer or sale of the Securities, (2) in the
underwriting section of any prospectus or offering circular used in connection
with the offer or sale of the Securities, and (3) in any advertisement made or
issued by Seller, Buyer, any other distributor, any of their respective
affiliates, or any person acting on behalf of any of the foregoing.
12. No Shareholder Approval. Seller hereby agrees that from the Closing
Date until the issuance of Common Stock upon the conversion of the Debentures,
Seller will not take any action which would require Seller to seek shareholder
approval of such issuance unless such shareholder approval is required by law or
regulatory body (including but not limited to the Nasdaq Stock Market, Inc.) as
a result of the issuance of the Securities hereunder.
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<PAGE>
13. Miscellaneous.
(a) Except as specifically referenced herein or in the
Distribution Agreement, this Agreement constitutes the entire contract between
the parties, and neither party shall be liable or bound to the other in any
manner by any warranties, representations or covenants except as specifically
set forth herein. Any previous agreement among the parties related to the
transactions described herein is superseded hereby. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Agreement, express
or impled, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.
(b) Buyer is an independent contractor, and is not the agent
of Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller makes no representations or warranty with respect
to Seller, its finances, assets, business prospects or otherwise. Buyer will
advise each purchaser, if any, and potential purchaser of the Securities, of the
foregoing sentence, and that such purchaser is relying on its own investigation
with respect to all such matters, and that such purchaser will be given access
to any and all documents and Seller personnel as it may reasonably request for
such investigation.
(d) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(e) This Agreement shall be construed in accordance with the
laws of New York applicable to contracts made and wholly to be performed within
the State of New York and shall be binding upon the successors and assigns of
each party hereto. Buyer hereby waives trial by jury and consents to exclusive
jurisdiction and venue in the State of New York. This Agreement may be executed
in counterparts, and the facsimile transmission of an executed counterpart to
this Agreement shall be effective as an original.
(f) Any controversy or claim relating to this Agreement
("Arbitrable Dispute") shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the "AAA")
as such rules may be modified herein or as otherwise agreed by the parties in
controversy. The forum for arbitration shall be New York, New York. Broker
agrees to submit to the jurisdiction of the New York Courts for purposes of
confirming any award.
(g) Buyer agrees to indemnify and hold Seller harmless from
any and all claims, damages and liabilities arising from Buyer's breach of its
representations and/or covenants set forth herein.
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<PAGE>
AMOUNT SUBSCRIBED FOR
$
--------------------
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the date first set forth above.
Official Signatory of Seller:
-----------------------------
Champion Financial Corporation
By:
--------------------------------
Accepted this ____ day of ________, 1997 Title:
-----------------------------
Official Signatory of Buyer:
----------------------------
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
Address of Buyer:
-----------------------------------
-----------------------------------
-----------------------------------
Fax No.:
---------------------------
Tel No.:
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Exhibit 4.2
DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN
REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION
UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
No. _______ US $__________
CHAMPION FINANCIAL CORPORATION
8% SERIES A SENIOR SUBORDINATED CONVERTIBLE REDEEMABLE
DEBENTURE DUE DECEMBER 31, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Champion Financial Corporation, a corporation duly organized and existing under
the laws of Utah (the "Company") designated as its 8% Series A Senior
Subordinated Convertible Redeemable Debentures Due December 31, 1999, in an
aggregate principal face amount not exceeding Four Million Dollars (U.S.
$4,000,000).
FOR VALUE RECEIVED, the Company promises to pay to
______________________ the registered holder hereof and its successors and
assigns (the "Holder"), the principal face sum of ______________________ Dollars
(US $_________) on December 31, 1999 (the "Maturity Date"), and to pay interest
on the principal sum outstanding, at the rate of 8% per annum due and payable
quarterly commencing April 1, 1998 pursuant to paragraph 4(b) herein. Accrual of
interest shall commence on the date hereof and shall continue until payment in
full of the outstanding principal sum has been made or duly provided for. The
interest so payable will be paid to the person in whose name this Debenture (or
one or more predecessor Debentures) is registered on the records of the Company
regarding registration and transfers of the Debentures (the "Debenture
Register"); provided, however, that the Company's obligation to a transferee of
this Debenture arises only if such transfer, sale or other disposition is made
in accordance with the terms and conditions of the Offshore Securities
Subscription Agreement dated as of __________________ between the Company and
________________________________ (the "Subscription Agreement"). The principal
of, and interest (with the exception of the prepaid interest set forth in
Section 4(b) herein) on, this Debenture are payable in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts, at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal due upon this
Debenture before or on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Debenture no later than the tenth
(10th) day prior to the Maturity Date by check or on the
<PAGE>
Maturity Date by wire transfer and addressed to such Holder at the last address
appearing on the Debenture Register. The forwarding of such check or wire
transfer shall constitute a payment of outstanding principal hereunder and shall
satisfy and discharge the liability for principal on this Debenture to the
extent of the sum represented by such check or wire transfer plus any amounts so
deducted. Interest shall be payable in Common Stock (as defined below) pursuant
to paragraph 4(b) herein.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same but not less
than U.S. $10,000. No service charge will be made for such registration or
transfer or exchange, except that transferee shall pay any tax or other
governmental charges payable in connection therewith.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged in the U.S.
only in compliance with the Securities Act of 1933, as amended (the "Act") and
applicable state securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected or bound by notice to the
contrary. Any holder of this Debenture, electing to exercise the right of
conversion set forth in Section 4(a) hereof, in addition to the requirements set
forth in Section 4(a), and any prospective transferee of this Debenture, is also
required to give the Company (i) written confirmation that it is not a U.S.
Person and the Debenture is not being converted on behalf of a U.S. Person
("Notice of Conversion") or (ii) an opinion of U.S. counsel to the effect that
the Debenture and shares of common stock issuable upon conversion or transfer
thereof have been registered under the 1933 Act or are exempt from such
registration. In the event a Notice of Conversion or opinion of counsel is not
provided the Holder hereof will not be entitled to exercise the right to convert
or transfer the Debentures.
4. (a) The Holder of this Debenture is entitled, at its option, at any
time commencing 45 days after closing of the Offering hereof to convert all or
any amount over $10,000 of the principal face amount of this Debenture then
outstanding into shares of common stock, $0.001 par value per share, of the
Company (the "Common Stock"), at a conversion price for each share of Common
Stock equal to the lower of (a) 75% of the closing bid price of the Common Stock
for the trading day immediately preceding the date of receipt by the Company of
notice of conversion ("Conversion Shares") or (b) 75% of the closing bid price
of the Common Stock for the five (5) days immediately preceding the date of
subscription by the Holder as reported by the
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<PAGE>
National Association of Securities Dealers Electronic Bulletin Board ("NASDAQ")
(the "Conversion Price"). If the number of resultant Conversion Shares would as
a matter of law or pursuant to regulatory authority require the Company to seek
shareholder approval of such issuance, the Company shall, as soon as
practicable, take the necessary steps to seek such approval. If such approval is
not received within 30 days then Company shall be required to redeem the
Debenture pursuant to paragraph 4(c) herein. Such conversion shall be
effectuated by surrendering the Debentures to be converted (with a copy, by
facsimile or courier, to the Company) to the Company with the form of conversion
notice attached hereto as Exhibit I, executed by the Holder of this Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion (as above provided) hereof, and accompanied by proper assignment hereof
in blank. Accrued but unpaid interest shall be subject to conversion. No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The transferee or issuee shall execute such investment
representations or other documents as are respectively required by counsel in
order to ascertain the available registration exemption. The date on which
notice of conversion is given shall be deemed to be the date on which the Holder
has delivered this Debenture, with the assignment and conversion notice duly
executed, to the Company or, if earlier, the date set forth in such notice of
conversion if the Debenture is received by the Company within five (5) business
days thereafter. The transferee or issuee shall execute such investment
representations or other documents as are reasonably required by counsel in
order to ascertain the available registration exemption.
(b) Interest at the rate of 8% per annum shall be payable in
arrears, quarterly commencing April 1, 1998. The Company shall have the option
of paying interest in cash or by issuing Common Stock of the Company as follows:
Based on the closing bid prices of the Common Stock for the last 5 consecutive
trading days prior to issuance of this Debenture ("Market Price") the Company
shall issue to the Holder shares of Common Stock in an amount equal to the total
monthly interest accrued and due divided by 75% of the Market Price (the
"Interest Shares"). Common Stock issued pursuant hereto shall be issued pursuant
to Regulation S in accordance with the terms of the Subscription Agreement.
(c) Upon maturity, in the event this Debenture has not been
converted in full, to the extent it is unconverted, any outstanding principal
balance and accrued but unpaid interest thereon shall automatically convert as
if Notice of Conversion had been received on December 31, 1999 in accordance
with paragraph 4(a) herein.
5. No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the time, place, and rate, and in the coin
currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, and diligence in taking any
action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
-3-
<PAGE>
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur and continue for 30 days unless a different time frame is noted below:
(a) The Company shall default in the payment of principal
or interest on this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other written
statements heretofore or hereafter furnished by or on
behalf of the Company in connection with the
execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading
in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall
continue uncured for a period of thirty (30) days
after notice from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process, in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of fifteen (15)
days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
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<PAGE>
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days; or
(i) The Company shall have its Common Stock delisted from
the over-the-counter market; or
(j) The Company shall not deliver the Common Stock
pursuant to paragraph 4(a) herein without restrictive
legend within 3 business days of the date delivery is
required hereunder.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
(further) notice of any kind (other than notice of acceleration), all of which
are hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately, and
without expiration of any period of grace, enforce any and all of the Holder's
rights and remedies provided herein or any other rights or remedies afforded by
law.
9. This Debenture represents an unsecured obligation of the Company. No
recourse shall be had for the payment of the principal of, or the interest on,
this Debenture, or for any claim based hereon, or otherwise in respect hereof,
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon exercise thereof except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky law or similar laws
relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
12. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the Company
and the Holder with respect to the
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<PAGE>
subject hereof. Neither this Debenture nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the Company and the Holder.
13. This Debenture shall be governed by and construed in accordance
with the laws of New York. Holder hereby waives trial by jury and consents to
exclusive jurisdiction and venue in the State of New York.
14. As set forth herein, the Company shall use all reasonable efforts
to issue and deliver, within three business days after the Holder has fulfilled
all conditions and submitted all necessary documents duly executed and in proper
form required for conversion (the "Deadline"), to the Holder or any part
receiving a Debenture by transfer from the Holder (together, a "Holder"), at the
address of the Holder on the books of the Company, a certificate or certificates
for the number of Shares of Common Stock to which the Holder shall be entitled.
The Company understands that a delay in the issuance of the Shares of Common
Stock beyond the Deadline could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Company agrees to pay liquidated
damages to the Holder for late issuance of Shares upon conversion in accordance
with the following schedule (where "No. Business Days Late" is defined as the
number of business days beyond seven (7) business days from the date of receipt
by the Company of a Notice of Conversion and the transfer agent of all necessary
documentation duly executed and in proper form required for conversion,
including the original Debenture to be converted, all in accordance with the
Debenture, Subscription Agreement and the requirements of the transfer agent):
Liquidated Damages per
No. Business Days Late $100,000 of Debenture
---------------------- ---------------------
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
10 $5,000 + $1,000 each
Business Day Late beyond 10 days
The Company shall pay the Holder any liquidated damages incurred under
this Section by check upon the earlier to occur of (i) issuance of the Shares to
the Holder or (ii) each monthly anniversary of the receipt of the Company of
such Holder's Notice of Conversion. Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
shares of Common Stock to the Subscriber in accordance with the terms of the
Debenture.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:
------------------------
CHAMPION FINANCIAL CORP.
By:
-------------------------------------
Title:
----------------------------------
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<PAGE>
EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $______________ of
the above Debenture No. ___ into Shares of Common Stock of Champion Financial
Corporation (the "Company") according to the conditions set forth in such
Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person and the
representations contained in the Subscription Agreement are true. If Shares are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
Date of Conversion*
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Applicable Conversion Price
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Signature
-----------------------------------------------------------------------
[Print Name of Holder and Title of Signer]
Address:
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* This original Debenture and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
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Exhibit 4.3
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY, HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE 1933 ACT), AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933
ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT
ISSUED IN EXCHANGE FOR THIS WARRANT.
Warrant No.: Right to Purchase 300,000
--- Shares of Common Stock of
December __,1997 Champion Financial Corp.
VOID UNLESS EXERCISED BEFORE 5:00 P.M., EASTERN STANDARD TIME ON DECEMBER 31,
2002.
CHAMPION FINANCIAL CORP.
Series 1 Common Stock Purchase Warrant
Champion Financial Corp., a corporation (the "Company"), hereby
certifies that, for value received, London Select Enterprises, Ltd. or assigns,
is entitled, subject to the terms set forth below, to purchase from the Company,
commencing January 1, 1997, at any time or from time to time before 5:00 p.m.,
Eastern Standard Time, on or before December 31, 2002, 300,000 fully paid and
nonassessable shares of Common Stock $.001 par value, of the Company, at an
exercise price per share equal to $11.50. Such exercise price per share as
adjusted from time to time as herein provided is referred to herein as the
Exercise Price. The number and character of such shares of Common Stock and the
Exercise Price are subject to adjustment as provided herein.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Champion Financial Corp., a
corporation duly organized and existing under the laws of _________ ,
and any corporation which shall succeed or assume the obligations of
the Company hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized, (b) any other capital stock
of any class or classes (however designated) of the Company, authorized
on or after such date, the holders of which shall
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have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled
to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even though the right so to vote
has been suspended by the happening of such a contingency), (c) any
other securities into which or for which any of the securities
described in (a) or (b) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or
otherwise, or the conversion of promissory notes or other obligations
of the Company.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise
of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Other Securities pursuant to Sections 3 or 4 or
otherwise.
1. Exercise of Warrant.
1.1. Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Exercise Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Section 1.1
except that the amount payable by the holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by {b) the
Exercise Price then in effect. On any such partial exercise, the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
2. Delivery of Stock Certificates of Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
sixty (60) days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which
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such holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current market value of one full share, together
with any other Stock or other securities and property (including cash, where
applicable) to which such holder is entitled upon such exercise pursuant to
Section 1 or otherwise.
3. Adjustment for Reorganization Consolidation or Merger.
3.1. Reorganization, Consolidation or Merger. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its properties or assets to any other person under any
plan or arrangement contemplating the dissolution of the Company, then, in each
such case, the holder of the Warrant, on the exercise hereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable an such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 5.
3.2. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and Other Securities and
property receivable on the exercise of the Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant.
4. Adjustments for Stock Dividends and Stock Splits. In the event that
the Company shall (i) issue additional shares of Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stack, then, in each such
event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then prevailing Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event (calculated assuming the conversion
or exchange of all outstanding shares of convertible or exchangeable securities
of the Company which are convertible or exchangeable into, or exercisable for,
shares of Common Stock) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event (calculated
assuming the conversion or exchange of all outstanding shares of
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convertible or exchangeable securities of the Company which are convertible or
exchangeable into, or exercisable for, shares of Common Stock), and the product
so obtained shall thereafter be the Exercise Price then in effect. The Exercise
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The holder
of this Warrant shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 4) be issuable on such exercise, by a fraction of
which (i) the numerator is the Exercise Price which would otherwise (but for the
provisions of this Section 4) be in effect, and (ii) the denominator is the
Exercise Price in effect on the date of such exercise.
5. Adjustment for Dividends in Other Stock, Property and
Reclassifications. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which, in the case
of Common Stock, are provided for in Section 4), then and in each such case the
holder of this Warrant, on the exercise hereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and other
securities and property (including cash in the cases referred to in subdivision
(b) of this Section 5) which such holder would hold on the date of such exercise
if on the date of distribution of such other or additional stock or other
securities and property, or on the record date fixed for determining the
shareholders entitled to receive such other or additional stock or other
securities and property, such holder had been the holder of record of the number
of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date thereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivision (b) of this Section 5) receivable by such holder as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 3 and 4.
6. Notices of Record Date. In the event of
(a) any taking by the Company of a record of the holders of any class
or securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares
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of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of
all or substantially all the assets of the Company to or consolidation
or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then and in each such event the Company will mail or
cause to be mailed to the holder of this Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, and (ii) the date on
which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up
is to take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities)
for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at
least twenty (20) days prior to the date specified in such notice an
which any such action is to be taken.
7. Reservation of Stock Issuable on Exercise on Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant; the shares of Common
Stock which the holder of this Warrant shall receive upon exercise of the
Warrant will be duly authorized, validly issued, fully paid and non-assessable.
8. Exchange of Warrant. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Warrantholder Not Deemed Stockholder; Restrictions on Transfer.
This Warrant is issued upon the following terms, to all of which each holder or
owner hereof by the taking hereof consents and agrees:
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(a) No holder of this Warrant shall, as such, be deemed the holder of
Common Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon such holder, as such, any of the rights of
a stockholder of the Company until such holder shall have exercised the
Warrant and been issued shares of Common Stock in accordance with the
provisions hereof.
(b) Neither this Warrant nor any shares of Common Stock purchased
pursuant to this Warrant shall be registered under the Securities Act
of 1933 (the "Securities Act") and applicable state securities laws,
Therefore, the Company may require, as a condition of allowing the
transfer or exchange of this Warrant or such shares, that the holder or
transferee of this Warrant or such shares, as the case may be, furnish
to the Company an opinion of counsel acceptable to the Company to the
effect that such transfer or exchange may be made without registration
under the Securities Act and applicable state securities laws. The
certificates evidencing the shares of Common Stock issued on the
exercise of the Warrant shall bear a legend to the effect that the
shares evidenced by such certificates have not been registered under
the Securities Act and applicable state securities laws.
(c) This Warrant is not transferable or assignable to any party without
the prior written consent of the Company and an opinion of counsel
satisfactory to the Company that such transfer is permissible under
applicable law.
11. Notices. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
12. Lock-Up Agreement for Public Offering. In connection with any
public offering of equity securities of the Company, the Warrantholder agrees
not to sell, pledge, transfer or otherwise dispose of, or grant any option or
purchase right with respect to, any shares of capital stock then owned by him
and not otherwise offered in the public offering, or engage in any short sale,
hedging transaction or other derivative security transaction involving the
Common Stock, or other shares of Common Stock of the Company held by him, for
such period of time commencing 30 days prior to the proposed effective date of
such public offering until such period of time following the offering as the
Company and the managing underwriter of such public offering deem necessary in
order to ensure a stable and orderly trading market.
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant and the shares of Common Stock underlying this Warrant
shall be construed and enforced in accordance
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with and governed by the laws of the State of Delaware. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
14. Right To Call By Company. At any time after the date that the 5 day
average of the closing bid prices of the Common Stock is in excess of $3.60 and
the Warrant holder fails to exercise his rights under this Warrant within 3 days
of receipt of notice from Company, then any unexercised portion of this Warrant
shall be cancelled and of no further force and effect.
15. Expiration. The right to exercise this Warrant shall expire at 5:00
p.m., Eastern Standard Time, on December 31, 2002.
Dated: December __, 1997
ATTEST: CHAMPION FINANCIAL CORP.
By: By:
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Title: Title:
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To Champion Financial Corp.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, shares of
Common Stock of Champion Financial Corp., a corporation duly organized and
existing under the laws of _________, and herewith makes payment of $___________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________, whose address is ________________.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person and the
representations contained in the Subscription Agreement are true as of the date
hereof.
Dated: ----------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
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(Address)
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FORM OF ASSIGNMENT
(To be signed only on 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 Champion Financial Corp., a
corporation duly organized and existing under the laws of _________, to which
the within Warrant relates, and appoints _________________ Attorney to transfer
such right on the books of __________________ , a _________________ corporation,
with full power of substitution in the premises.
Dated: ----------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
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(Address)
Signed in the presence of:
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