Exhibit 1.1
LONDON SELECT ENTERPRISES, LTD.
c/o Zenith Management Corp. Ltd.
X.X. Xxx 00
Xxxxxx Xxxxx Xx. X00
Xxxxxxxxxxxxx
Xxxxx & Caicos Islands
December 1, 1997
Champion Financial Corporation
0000 Xxxx Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
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 Xxxxx
Xxxxxxxxx, 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. Xx. Xxxxxxxxx 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 Xx. Xxxxxxxxx from such gross proceeds the amounts to be paid to
Broker with respect thereto. In either event, Xx. Xxxxxxxxx shall thereupon make
appropriate payment hereunder to the Broker.
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:
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Date:
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