UNITED STATES 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)
November 21, 1996
SYSTEMS COMMUNICATIONS, INC. ------------------------
- --
(Exact name of Registrant as specified in its
charter)
FLORIDA 000-26668
65-0036344
- -----------------------------------------------------
- -----------
(State or other jurisdiction Commission (I.R.S
Employer of incorporation or organization)
file Number)
Identification No.)
2575 ULMERTON ROAD, SUITE 300, CLEARWATER, FLORIDA
34622 -----------------------------------------------
- -----------------
(Address of principal executive offices)
(ZIP Code)
Registrant's telephone number, including area code
(813)571-1185
SYSTEMS COMMUNICATIONS, INC.
ITEM 5. OTHER EVENTS
On November 21, 1996 and November 26, 1996, the
Company issued $300,000 and $200,000, respectively,
of 10% Cumulative Convertible Debentures to RIC
Investment Fund, Ltd. and RANA Investment Company,
respectively. Each of these Debentures are due one
year from the date of issuance. On February 24,
1997, the Company issued a $1,120,000 4% Cumulative
Convertible Debenture due October, 1, 1998 to
Timboon, Ltd. All of these debentures are
collectively referred to herein as the "Debentures".
The issuance of the Debentures were made in reliance
on Regulation S pursuant to an Offshore Offering and
Distribution Agreement between the Company and
Victory Investments, LLC as placement agent.
The Debentures are convertible at any time into
shares of the Company's common stock. The conversion
price is equal to the lessor of (a) 70% of the
average closing bid price of the Company's common
stock for the five days preceding the conversion date
or (b) 80% of the average closing bid price of the
Company's common stock for the five days prior to
issuance of the Debentures.
In connection with the issuance of the Debentures,
the Company incurred placement fees and other costs
of approximately $183,000 and received net proceeds
of approximately $1,437,000.
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c)Exhibits
(4)11. Form of Offshore Offering Distribution
agreement by and
between Systems Communications, Inc. and
Victory Investments, LLC.
12. Form of 10% Cumulative Convertible Debentures
due
November 21, 1997 and November 26, 1997 in
the aggregate amount of $500,000.
13. Form of Offshore Securities Subscription
Agreement for
$500,000 10% Cumulative Convertible
Debentures.
14. Form of Offshore Securities Subscription
Agreement for
$1,120,000 4% Convertible Debentures.
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant
("SCI") has duly caused this report to be signed on
it's behalf by the undersigned thereunto duly
authorized.
SYSTEMS COMMUNICATIONS, INC.("SCI") Date: March
26, 1997
By: /s/ Edwin B. Salmon
- -------------------------------------
EDWIN B. SALMON, JR.
Chairman of the Board of Directors
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- ----------------------
(4) 11. Form of Offshore Offering Distribution
agreement by and between Systems Communications, Inc.
and Victory Investments, LLC.
12. Form of 10% Cumulative Convertible Debentures
due
November 21, 1997 and November 26, 1997 in the
aggregate amount
of $500,000.
13. Form of Offshore Securities Subscription
Agreement for
$500,000 10% Cumulative Convertible Debentures.
14. Form of Offshore Securities Subscription
Agreement for
$1,120,000 4% Convertible Debentures.
EXHIBIT 4.11
OFFSHORE OFFERING DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this ____ day of October, 1996 by and
between SYSTEMS COMMUNICATIONS, INC.., a ___________ Corporation,
whose main offices are located at 2575 Ulmerton Road, Suite 300,
Clearwater, Florida; (hereinafter referred to as "SCMI"); and
VICTORY INVESTMENTS, LLC with an office located at 505 Dorris
Road, Alpharetta, Georgia 30201; (hereinafter referred to
"VICTORY").
W I T N E S S E T H
WHEREAS, SCMI is a "reporting issuer" within the meaning of
Section 902(l) of Regulation S, 17 CFR Section 240,901 et seq.
promulgated under the Securities Act of 1933 ("Regulation S")
which files reports with the U.S. Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), and whose stock is traded on the Nasdaq Bulletin
Board (NASDAQ) under the symbol " SCMI ".
WHEREAS, VICTORY is acting as a "distributor" within the
meaning of Section 902(c) of Regulation S; and
WHEREAS, VICTORY desires to assist SCMI in obtaining equity
capital pursuant to an offering conducted in compliance with
Regulation S upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree as follows:
I. VICTORY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
VICTORY represents, warrants and covenants to SCMI as
follows:
1.01 VICTORY shall use its "best efforts" to offer and sell
$500,000 worth of SCMI Convertible Debentures (the "Debentures"),
in an offering conducted pursuant to Section 903 of Regulation S.
The Offering will consist of $500,000 of Debentures pursuant to
the terms set forth in a Subscription Agreement to be agreed upon
between the parties.
<PAGE> 2
1.02 VICTORY 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 the Debentures are offered or sold. In
particular VICTORY agrees to comply with Rule 903(c)(2) of
Regulation S. Neither VICTORY nor any person acting at its
direction, shall directly or indirectly engage in "short" selling
of SCMI's securities at any time for a period commencing on the
date hereof and ending on the earlier of (i) one (1) year from
the date hereof or (ii) the conversion of all the Debentures
placed by VICTORY.
1.03 VICTORY will provide to each prospective subscriber all
disclosure materials designated by SCMI and VICTORY to be made
available to all prospective investors. Such materials include
SCMI's latest Annual Report on Form 10-K and latest Quarterly
Report on Form 10-Q.
1.04 VICTORY 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 SCMI. VICTORY agrees that it is not authorized to and will
not incur any obligation or enter into any agreement on behalf of
SCMI or otherwise bind SCMI in any manner. VICTORY is acting
solely in a distributor's capacity and this Agreement shall not
create any relationship of agency, partnership or joint venture.
1.05 VICTORY understands that the Debentures have not been
and will not be registered under the Securities Act of 1933 (the
"Securities Act") and that, accordingly, such Debentures may not
be offered or sold directly or indirectly in the United States or
to any "U.S. Person" (as such term is defined in Regulation S) as
part of the distribution of the Debentures.
1.06 VICTORY agrees that all offers and sales by VICTORY
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.
Neither VICTORY nor any of its affiliates or persons acting on
behalf of VICTORY shall acquire any such Debentures for the
account of any "U.S. Person" as defined in Regulation S.
<PAGE> 3
1.07 VICTORY agrees that, if prior to the expiration of the
40-day restricted period referred to in Rule 903(c)(2) of
Regulation S, VICTORY sells the Debentures to (i) a "distributor"
(as defined in Regulation S), (ii) a "dealer" (as defined in
Section 2(12) of the Securities Act), or (iii) any person
receiving a selling concession, fee or other remuneration in
respect of the Debentures, VICTORY shall send a confirmation or
other notice to such purchaser stating that the purchaser is
subject to the same restrictions on offers and sales that apply
to a "distributor" under Regulation S.
1.08 VICTORY agrees that all offers and sales of the
Debentures prior to the expiration of the forty (40) day
restricted period specified in Section 903(c)(2) of Regulation S
shall be made only in accordance with the provisions of Section
903 or 904 of Regulation S as applicable, pursuant to
registration of the Debentures under the Securities Act, or
pursuant to an available exemption from registration under the
Securities Act.
1.09 VICTORY agrees that any offering materials or documents
(except Exchange Act filings and press releases) used in
connection with offers and sales of Debentures prior to the
expiration of the restricted period specified in Section
903(c)(2) of Regulation S shall include statements to the effect
that the Debentures have not been registered under the Securities
Act and may not be offered or sold in the United States or to
U.S. persons (other than distributors as that term is defined
under Section 902(c) of Regulation S) unless the Debentures are
registered under the Securities Act, or an exemption from the
registration requirements of the Securities Act is available.
Such statements shall appear on all materials as provided under
Section 902(h)(2)(i), (ii), and (iii) of Regulation S.
1.10 VICTORY shall insure that at the time the buy order is
originated for any of the Debentures covered by the Agreement,
the buyer is outside the United States.
1.11 VICTORY shall insure that no "directed selling
efforts", as defined in Regulation S, shall be made in the United
States by it, its affiliates, or any person acting on its behalf
in connection with the offer and sale of the Debentures during
the restricted period, including without limitation the placement
of an advertisement in a publication with a general circulation
in the United States that refers to the offering of the
Debentures.
II. SCMI'S REPRESENTATIONS, WARRANTIES AND COVENANTS
SCMI represents, warrants and covenants to VICTORY as
follows:
<PAGE> 4
2.01 SCMI shall be responsible to take all necessary
actions and to bear all such costs to issue the Common Stock
issuable upon conversion of the Debentures, including the
delivery of an opinion letter to the transfer agent, if one is
required.
2.02 SCMI shall maintain its status as a corporation in
good standing and a reporting issuer, operating in accordance
with its most recent reports filed under the Exchange Act and
provided to VICTORY.
2.03 SCMI shall promptly issue certificates representing the
Debentures upon notice by Escrow Agent (as identified below)
that payment has been received, pursuant to the terms of a
Subscription Agreement executed by SCMI and the offshore
purchaser.
2. 04 Upon conversion of the Debentures the Common Stock of
SCMI issuable upon such conversion will be unrestricted pursuant
to Regulation S, subject to compliance with Regulation S by SCMI
, VICTORY each purchaser of the Debentures and each subsequent
holder of the Debentures prior to the conversion.
III. COMPENSATION
3.01 In consideration for selling the Debentures, SCMI
hereby agrees that VICTORY shall receive a placement fee of 10%
of the gross proceeds raised in the offering. It is furthered
agreed that Joseph B. LaRocco, Esq. shall act as Escrow Agent and
shall withhold the placement fee at closing for disbursement to
VICTORY. In addition to the placement fee, VICTORY shall receive
Warrants for 40,000 shares in the aggregate of SCMI Common Stock
exercisable in whole or in part for two years at 110% of the
closing bid price for SCMI's Common Stock on the day of closing
(subject to reduction on a pro-rata basis if less than $500,000
in gross proceeds is received and accepted by SCMI).
3.02 All subscriptions proceeds will be directed to the
Attorney Trustee Account of Joseph B. LaRocco, Esq. as Escrow
Agent. Each time that SCMI delivers Debentures in accordance
with Regulation S, in the name of each subscriber, the proceeds
net of the placement fee, as defined in 3.01 above, will be
immediately wired to SCMI.
<PAGE> 5
IV. INDEMNIFICATION
4.01 VICTORY and SCMI agree to indemnify and hold harmless
the escrow agent from any and all claims, liabilities, losses,
actions, suits, or proceedings, at law or in equity, that it may
incur or with which it may be threatened by reason of its acting
as escrow agent as described herein (including but not limited to
expenses reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any
claim whatsoever); provided, however, that the provisions of this
paragraph shall not apply in the event of any claim, liability,
loss, action, suit, or proceeding resulting from the breach of
the escrow agent of any provision of this Agreement or from its
gross negligence or willful misconduct.
4.02 SCMI agrees to indemnify and hold harmless VICTORY, its
directors and each person, if any, who controls or is employed by
VICTORY within the meaning of Section 15 of the Securities Act as
follows:
a. Against any loss, liability, claim, damage, and
expense arising out of (including but not limited to
expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened,
or any claim whatsoever based upon) any breach by SCMI of
any representation, warranty or covenant made by SCMI
herein, any untrue or alleged untrue statement of a material
fact contained in the offering materials (as amended and
supplemented) furnished to VICTORY by SCMI, or the omission
or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was
made in reliance upon and in conformity with written
information furnished to SCMI by VICTORY expressly for use
in the offering materials or any amendment or supplement
thereof; and
b. Against any loss, liability, claim, damage, and expense
to the extent of the aggregate amount paid in settlement of
any litigation commenced or threatened, or of any claim
based upon any of the events referred to in Section 4.02(a)
(including but not limited to expenses reasonably incurred
in investigating, preparing or defending against any such
litigation or claim) if such settlement is effected with the
written consent of SCMI.
<PAGE> 6
4.03 VICTORY agrees to indemnify and hold harmless SCMI, its
directors, the attorney for SCMI who prepares the legal opinion
in connection with the Regulation S offering, and each person, if
any who controls or is employed by the Company within the meaning
of Section 15 of the Securities Act as follows:
a. Against any loss, liability, claim, damage and
expense arising out of (including but not limited to
expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened,
or any claim whatsoever based upon), any breach by VICTORY
of any representation, warranty or covenant made by VICTORY
herein, VICTORY's violation or alleged violation of
Regulation S or any other applicable law or any untrue or
alleged untrue statement of a material fact contained in the
offering materials (as amended and supplemented) prepared by
SCMI or VICTORY, or the omission or alleged omission
therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or
omission or alleged omission was made in the offering
materials or in any other offering documentation in reliance
upon and in conformity with written information furnished to
SCMI by VICTORY specifically for use in the preparation
thereof; and
b. Against loss, liability, claim, damage and expense
to the extent of the aggregate amount paid in settlement of
any litigation commenced or threatened, or of any claim
based upon any of the events referred to in Section 4.03(a)
(including but not limited to expenses reasonably incurred
in investigating, preparing or defending against any such
litigation or claim) if such settlement is effected with the
written consent of VICTORY.
4.04 The party seeking indemnification shall promptly notify
the indemnifying party by letter or telecopy or telegram,
confirmed by letter, of any claim, suit, action or proceeding
commenced or threatened to be commenced against such indemnified
party promptly after such indemnified party has received actual
notice thereof; provided, however that the failure by any
indemnified party to give such notice shall not relieve any
indemnifying party of its obligations hereunder except to the
extent of actual prejudice directly resulting from such failure.
<PAGE> 7
4.05 In the event of the assertion against any indemnified
party of any such claim or the commencement of any such suit,
action or proceeding, the indemnifying party will be entitled to
participate in such suit, action or proceeding, and in the
investigation of such claim, and, after written notice from the
indemnifying party to the indemnified party, to assume the
investigation or defense of such claim, suit, action or
proceeding with counsel of its choice at its expense; provided,
however, that such counsel shall be reasonably satisfactory to
the indemnified party;. Notwithstanding the election of the
indemnifying party to assume the defense or investigation of such
claim, suit, action or proceeding, the indemnified party will
have the right to employ separate counsel and to participate in
the defense or investigation of such claim, suit, action or
proceeding, and the indemnifying party shall bear the expense of
one such separate counsel if (i) counsel to the indemnified party
in good faith advises the indemnified party that use of counsel
chosen by the indemnifying party could give rise to a conflict of
interest and both are parties to the suit, (ii) the indemnifying
party has not employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of any such
litigation or proceeding; or (iii) the indemnifying party
authorizes the indemnified party to employ separate counsel at
the expense of the indemnifying party.
V. TERMINATION
5.01 This offering will terminate at 5:00 p.m. EST on
November ___, 1996.
VI. GOVERNING LAW
6.01 This Agreement is binding on all parties, as well on
their successors, assignees and representatives, and constitutes
the entire Agreement between the parties. This Agreement may be
modified or amended solely by a written consent by the parties
hereto, and may be executed in counterparts.
6.02 The parties shall resolve any dispute arising hereunder
before an arbitrator selected pursuant to the rules of the
American Arbitration Association and each party shall bear its
own attorney's fees and costs of such arbitration. Disputes
under this Agreement as well as all of the terms and conditions
of this Agreement shall be governed in accordance with and by the
laws of the State of Georgia (without regard to conflict of laws
principles) and the locale shall be Fulton County, Atlanta,
Georgia.
<PAGE> 8
VII. NON-CIRCUMVENTION
7.01 SCMI agrees that it will keep confidential the identity
of any Subscribers, unless disclosure is required by law, and
also agrees not to circumvent VICTORY as to any sale of the
Series ____ Debentures, in any way whatsoever.
VIII. EXCLUSIVITY
8.01 SCMI hereby agrees that VICTORY shall be an exclusive
distributor of the Series ____ Debentures until November ____,
1996, unless further extended by SCMI.
<PAGE> 12
8.02 During the next year, if any of VICTORY's clients who
have invested in this Regulation S offering, invest in a
subsequent Regulation S offering of SCMI, then in such event,
SCMI agrees to pay VICTORY the placement fee set forth in Section
III of this Agreement.
IX. NOTICES
9.01 All notices and communications regarding this Agreement
shall be sent to the following:
If to SCMI: _______________
2575 Ulmerton Road, Suite 300
Clearwater, FL
If to VICTORY: Arthur L. Vuley
VICTORY INVESTMENTS, LLC
505 Dorris Road
Alpharetta, GA 30201
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have executed this Agreement.
VICTORY INVESTMENTS, LLC
_____________ By:________________________________
Date Arthur L. Vuley, President
SYSTEMS COMMUNICATION, INC.
_____________ By:_______________________________
Date
EXHIBIT 4.12
FORM OF DEBENTURE
THIS DEBENTURE 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 OR TO OR FOR THE ACCOUNT OR
BENEFIT OF U.S. PERSONS (AS SUCH TERMS ARE DEFINED IN REGULATION
S UNDER THE 1933 ACT), FOR A PERIOD OF FORTY (40) DAYS AFTER
COMPLETION OF THE OFFERING PURSUANT TO WHICH THIS DEBENTURE WAS
ISSUED, AND THEREAFTER MAY ONLY BE OFFERED OR SOLD PURSUANT TO
REGISTRATION UNDER OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT.
10.0% CUMULATIVE CONVERTIBLE DEBENTURE DUE November _, 1997
$ November _, 1996
Number_____
FOR VALUE RECEIVED, SYSTEMS COMMUNICATIONS, INC., a Florida
corporation (the "Company"), hereby promises to pay to
________________ or registered assigns (the "Holder") on November
__, 1997 (the "Maturity Date"), the principal amount of
__________________________ Dollars($___,000) U.S., and to pay
interest on the principal amount hereof, in such amounts, at such
times and on such terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal
amount of this Debenture (the "Debenture") at the rate of Ten
Percent (10.0%) per year, payable at the time of each conversion
until the principal amount hereof is paid in full or has been
converted. Interest on this Debenture shall accrue from the most
recent date to which interest has been paid or, if no interest
has been paid, from November _, 1996. Interest shall be computed
on the basis of a 360 day year of 12, 30 day months. If the
Holder shall convert this Debenture during any quarter, the
Company shall pay to the Holder, upon conversion, the pro-rata
portion of accrued interest payable through the conversion date.
<PAGE> 2
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order
for the Holder to receive payment of the principal amount hereof.
The Company shall have the option of paying the interest on this
Debenture in United States dollars or in Common Stock upon
conversion pursuant to Article 3 hereof. The Company may draw a
check for the payment of interest to the order of the Holder of
this Debenture and mail it to the Holder's address as shown on
the Register (as defined in Section 7.2 below). Interest and
principal payments shall be subject to withholding under
applicable United States Federal Internal Revenue Service
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right, at
its option, to convert all, or part of the principal amount of
the Debenture as provided herein, into shares of common stock,
par value $0.001 per share, of the Company ("Common Stock") at
any time which is before the close of business on the Maturity
Date, except as set forth in Section 3.1(c) below. The number of
shares of Common Stock issuable upon the conversion of this
Debenture is determined by dividing the principal amount hereof
to be converted plus all accrued and unpaid interest thereon,
minus any required withholding, by the conversion price in effect
on the conversion date (as defined in paragraph (b) of this
Section 3.1 below) and rounding the result to the nearest whole
share.
(b) The conversion price and procedures are set forth in
Section 3.2.
(c) Less than all of the principal amount of this Debenture
may be converted into Common Stock if the portion converted is
$5,000 or a whole multiple of $5,000, and the provisions of this
Article 3 that apply to the conversion of all of the Debenture
shall also apply to the conversion of a portion of it. All
accrued and unpaid interest on this Debenture shall be added to
the amount converted if less than all of the principal amount of
this Debenture is converted and shall be deemed to be paid and
discharged thereby. This Debenture may not be converted,
whether in whole or in part, except in accordance with Section
3.2.
(d) In the event all or any portion of this Debenture
remains outstanding on the first anniversary of the date hereof,
the unconverted portion of such Debenture will automatically be
converted into shares of Common Stock on such date in the manner
set forth in this Section 3.2.
<PAGE> 3
Section 3.2. Conversion Procedure.
(a) Debentures. Upon the conversion of this
Debenture, the holder thereof shall submit such Debenture to
Seller, and Seller shall, within three (3) business day of
receipt of such Debenture, instruct Seller's transfer agent to
issue one or more Certificates representing that number of shares
of Common Stock into which the Debenture is convertible in
accordance with the provisions regarding conversion set forth in
Exhibit A hereto. The Seller's transfer agent or attorney 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 this Debenture and upon receipt
by the Company of a facsimile or original of Purchaser's signed
Notice of Conversion and Purchaser Representation Letter (See
Exhibits A and B attached hereto) Seller shall instruct Seller's
transfer agent to issue Stock Certificates without restrictive
legend or stop transfer instructions in the name of Purchaser (or
its nominee (being a non-U.S. Person) or such non-U.S. Persons as
may be designated by Purchaser 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. Seller warrants that no instructions other than
these instructions 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 3.2, however, shall affect in any way Purchaser's
or such nominee's obligations and agreements to comply with all
applicable securities laws upon resale of the Securities.
(c) The holder of the Debenture ("Holder") is
entitled, at its option, at any time commencing 45 days after
issue hereof to convert the original principal amount of the
Debenture 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 lesser of (a) seventy
percent (70%) of the five day average closing bid price of The
Company's Common Stock for the five (5) trading days immediately
preceding the Conversion Date (as defined below), or (b) eighty
percent (80%) of the five day average closing bid price of the
Company's Common Stock for the five (5) trading days prior to the
Closing Date (as defined below). The closing shall be deemed to
have occurred on the date the funds are received by the Company
(the "Closing Date"). Such conversion shall be effectuated by
surrendering to the Company, or its attorney, the original
Debenture to be converted together with a facsimile or original
of the signed Notice of Conversion and a facsimile or original of
the signed Purchaser Representation Letter, see Exhibits A and B
attached hereto, which evidences such Holder's intention to
<PAGE> 4
convert the Debenture or a specified portion thereof, and
accompanied by proper assignment, if applicable. No fractional
shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded
up or down, as the case may be, to the nearest whole share. The
date on which Notice of Conversion is effective ("Conversion
Date") shall be deemed to be the date on which the Holder has
delivered to the Company the original Debenture, a facsimile or
original of the signed Notice of Conversion and a facsimile or
original of the signed Purchaser Representation Letter. The
Debentures are subject to a mandatory, 12 month conversion
feature at the end of which all Debentures outstanding will be
automatically converted, upon the terms set forth in this
paragraph ("Mandatory Conversion Date").
(d) Nothing contained in this Debenture or paragraph
3.2(f) hereof, shall be deemed to establish or require the
payment of interest to the Purchaser at a rate in excess of the
maximum rate permitted by governing law. In the event that the
rate of interest required to be paid under the Debenture exceeds
the maximum rate permitted by governing law, the rate of interest
required to be paid thereunder shall be automatically reduced to
the maximum rate permitted under the governing and any amounts
collected in excess of the permissible amount shall be deemed a
payment of principal. To the extent that such excess amount
exceeds the aggregate principal amount of this Debenture, such
excess shall be returned with reasonable promptness by the Holder
to the Company.
(e) Within five (5) business days after receipt of the
documentation referred to above in Section 3.2(c), the Company
shall deliver a certificate, without stop transfer instructions,
for the number of shares of Common Stock issuable upon the
conversion ("Certificate of Common Stock"). It shall be the
Company'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. 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. No payment or
adjustment shall be made for accrued and unpaid interest until
the earlier of the Conversion Date or the Mandatory Conversion
Date. Upon surrender 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.
<PAGE> 5
(f) In the event the Company does not make delivery of
the Certificate of Common Stock, as instructed by Purchaser,
within 6 business days after the Conversion Date, then in such
event the Company shall pay to Purchaser an amount, in
immediately available funds in accordance with the following
schedule, wherein "No. Business Days Late" is defined as the
number of business days beyond the 6 business days delivery
period.
Late Payment for Each
$10,000 of Debenture
Principal Amount Being
No. Business Days Late Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Days Late Beyond 10 Days
To the extent that the failure of the Company to issue the
Certificate of Common Stock pursuant to this Section 3.2(f) is
due to the unavailability of authorized but unissued shares of
Common Stock, the provisions of this Section 3.2(f) shall not
apply but instead the provisions of Section 3.2(g) shall apply.
The Company shall pay any payments incurred under this
Section 3.2(f) in immediately available funds within three (3)
business days from the date of issuance of the Certificate of
applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's
failure to issue and deliver Common Stock to the Holder within 6
business days after the Conversion Date.
The Company recognizes the right of Purchaser to assign any
portion of the Debentures to another non-U.S. Person during the
40 day restricted period and to assign any portion of the
Debentures to another non-U.S. Person or U.S. person or entity
after the 40 day restricted period.
<PAGE> 6
(g) If, at any time Purchaser submits a Notice of
Conversion and the Company 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 Purchaser a
certificate representing all of the shares of Common Stock which
are available, and the Notice of Conversion as to any Debentures
requested to be converted but not converted (the "Unconverted
Debentures") shall become null and void. The Company 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). No
Holder may submit a Notice of Conversion after receipt of a
Notice of Conversion Default until the date additional shares of
Common Stock are authorized by the Company. The Company 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 Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to affect conversion of all
remaining Debentures. The Company 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 Holder's
accrued Conversion Default Payments. The accrued Conversion
Default shall be paid in immediately available funds, or shall be
convertible into Common Stock at the Conversion Rate, at the
Purchaser's option, payable as follows: (i) in the event
Purchaser elects to take such payment in immediately available
funds, payments shall be made to such Purchaser of outstanding
Debentures by the fifth day of the following calendar month, or
(ii) in the event Purchaser elects to take such payment in stock,
the Purchaser may convert such payment amount into common stock
at the Conversion Rate at anytime after the 5th day of the
calendar month following the month in which the Authorization
Notice was received, until the expiration of the Mandatory
Conversion Date.
Nothing herein shall limit the Purchaser's right to
pursue actual damages for the Company's failure to maintain a
sufficient number of authorized shares of common stock.
Section 3.3. Fractional Shares. The Company shall not
issue a fractional share of Common Stock upon the conversion of
this Debenture . Instead, the Company shall round up or down, as
the case may be, to the nearest whole share.
<PAGE> 7
Section 3.4. Taxes on Conversion. The Company shall pay
any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion of this
Debenture . However, the Holder shall pay any such tax which is
due because the shares are issued in a name other than its name.
Section 3.5. Company to Reserve Stock. The Company shall
reserve out of its authorized but unissued Common Stock or Common
Stock held in treasury a sufficient number of shares of Common
Stock to permit the conversion of this Debenture. All shares of
Common Stock which may be issued upon the conversion hereof shall
upon issuance be validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture and
the Common Stock issuable upon the conversion hereof have not
been registered under the Securities Act of 1933, as amended,
(the "Act") and have been sold pursuant to Regulation S under the
Act ("Regulation S"). The Debenture may not be transferred or
resold in the United States, or to a U.S. Person, or to, or for,
the account or benefit of a U.S. Person(as defined in Regulation
S) for a period of forty (40) days from the date hereof and
thereafter this Debenture and the Common Stock issuable upon the
conversion thereof may only be offered or sold pursuant to
registration under or an exemption from the regulation provision
of the Act.
Section 3.7. Mergers, Etc. If the Company merges or
consolidates with another corporation or sells or transfers all
or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common
Stock, then as a condition of such merger, consolidation, sale or
transfer, the Company and any such successor, purchaser or
transferee shall amend this Debenture to provide that it may
thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of
shares of Common Stock into which this Debenture might have been
converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable to adjustments provided for in
this Article 3.
<PAGE> 8
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer
all or substantially all of its assets to, any person, unless
such person assumes the obligations of the Company under this
Debenture and immediately after such transaction no Event of
Default exists. Any reference herein to the Company shall refer
to such surviving or transferee corporation and the obligations
of the Company shall terminate upon such assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as
shown on the Register a copy of any annual, quarterly or current
report that it files with the Securities and Exchange Commission
promptly after the filing thereof and a copy of any annual,
quarterly or other report or proxy statement that it gives to its
shareholders generally at the time such report or statement is
sent to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default"
occurs if (a) the Company does not make the payment of the
principal of this Debenture when the same becomes due and payable
at maturity, upon redemption or otherwise, (b) the Company does
not make a payment, other than a payment of principal, for a
period of 5 days thereafter, (c) the Company fails to comply with
any of its other agreements in this Debenture and such failure
continues for the period and after the notice specified below,
(d) the Company pursuant to or within the meaning of any
Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief
against it in an involuntary case; (iii) consents to the
appointment of a Custodian (as hereinafter defined) of it or for
all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of
competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains
unstayed and in effect for 60 days, (e) the Company shall have
its Common Stock delisted from an exchange or over-the-counter
market. As used in this Section 6.1, the term "Bankruptcy Law"
means Title 11 of the United States Code or any similar federal
or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law. A default under clause (c)
above is not an Event of Default until the holders of at least
25% of the aggregate principal amount of the Debentures
outstanding notify the Company of such default and the Company
<PAGE> 9
does not cure it within five (5) days after the receipt of such
notice, which must specify the default, demand that it be
remedies and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default occurs
and is continuing beyond the time to cause such event of default,
the Holder hereof by notice to the Company, may declare the
principal of, and accrued interest on, this Debenture to be due
and payable. Upon such declaration, the principal and interest
hereof shall be due and payable immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered
series of Debentures having an aggregate principal amount of
$500,000 which are identical except as to the name of Holder, the
principal amount and the date of issuance thereof and as to any
restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are
referred to herein collectively as the "Debentures". The
Debentures shall be issued in whole multiples of $10,000.
Section 7.2. Record Ownership. The Company, or its
attorney, shall maintain a register of the holders of the
Debentures (the "Register") showing their names and addresses and
the serial numbers and principal amounts of Debentures issued to
or transferred of record by them from time to time. The Register
may be maintained in electronic, magnetic or other computerized
form. The Company may treat the person named as the Holder of
this Debenture in the Register as the sole owner of this
Debenture. The Holder of this Debenture is the person
exclusively entitled to receive payments of interest on this
Debenture, receive notifications with respect to this Debenture,
convert this Debenture into Common Stock and otherwise exercise
all of the rights and powers as the absolute owner thereof.
Section 7.3. Registration of Transfer. Transfers of this
Debenture may be registered on the books of the Company
maintained for such purpose pursuant to Section 7.2 above (i.e.,
the Register). Transfers shall be registered when this Debenture
is presented to the Company with a request to register the
transfer hereof and the Debenture is duly endorsed by the
appropriate person, reasonable assurances are given that the
endorsements are genuine and effective, and the Company has
received evidence satisfactory to it that such transfer is
rightful and in compliance with all applicable laws, including
tax laws and state and federal securities laws. When this
Debenture is presented for transfer and duly transferred
hereunder, it shall be canceled and a new Debenture showing the
name of the transferee as the record holder thereof shall be
<PAGE> 10
issued in lieu hereof. When this Debenture is presented to the
Company with a reasonable request to exchange it for an equal
principal amount of Debentures of other denominations, the
Company shall make such exchange and shall cancel this Debenture
and issue in lieu thereof Debentures having a
total principal amount equal to this Debenture in the
denominations requested by the Holder. The Company may charge a
reasonable fee for any registration of transfer or exchange other
than one occasioned by a notice of redemption or the conversion
hereof. No transfer of this Debenture shall be made to any U.S.
Person as that term is defined in Regulation S.
Section 7.4. Worn or Lost Debentures. If this Debenture
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a new
Debenture in lieu hereof upon its surrender. Where the Holder of
this Debenture claims that the Debenture has been lost, destroyed
or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by
written notice to the Company actually received by the Company
before it is notified that the Debenture has been acquired by a
bona fide purchaser and the Holder has delivered to the Company
an indemnity bond in such amount and issued by such surety as the
Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction
or wrongful taking and such other information in such form with
such proof or verification as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the terms
of this Debenture shall be duly given if it is in writing and
delivered in person or mailed by first class mail, postage
prepaid and directed to the Holder of the Debenture at its
address as it appears on the Register or if to the Company to its
principal executive offices. The time when such notice is sent
shall be the time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of
money or the performance of a condition or obligation on a
Saturday or Sunday or a public holiday, or authorizes or requires
the payment of money or the performance of a condition or
obligation within, before or after a period of time computed from
a certain date, and such period of time ends on a Saturday or a
Sunday or a public holiday, such payment may be made or condition
or obligation performed on the next succeeding business day, and
if the period ends at a specified hour, such payment may be made
or condition performed, at or before the same hour of such next
succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Debenture.
<PAGE> 11
Where time is extended by virtue of the provisions of this
Article 9, such extended time shall not be included in the
computation of interest. A "business day" shall mean a day on
which the banks in Florida are not required or allowed to be
closed.
Article 10. Waivers
The holders of a majority in principal amount of the
Debentures may waive a default or rescind a Notice of Default or
the declaration of an Event of Default and its consequences
except for a default in the payment of principal of or interest
on any Debenture.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires,
words in the singular number include the plural, and in the
plural include the singular, and words of the masculine gender
include the feminine and the neuter, and when the sense so
indicates, words of the neuter gender may refer to any gender.
The numbers and titles of sections contained in the Debenture are
inserted for convenience of reference only, and they neither form
a part of this Debenture nor are they to be used in the
construction or interpretation hereof. Wherever, in this
Debenture, a determination of the Company is required or allowed,
such determination shall be made by a majority of the Board of
Directors of the Company and if it is made in good faith, it
shall be conclusive and binding upon the Company and the Holder
of this Debenture.
Article 12. Arbitration
The parties shall resolve any dispute arising hereunder
before a panel of three arbitrators selected pursuant to and run
in accordance with the rules of the American Arbitration
Association. The arbitration shall be held in New York, New
York. The winning party shall be entitled to an award of
reasonable attorney's fees and costs. Disputes under this
Debenture as well as all of the terms and conditions of this
Debenture shall be governed in accordance with and by the laws of
the State of Florida.
Article 13. Governing Law
The validity, terms, performance and enforcement of this
Debenture shall be governed and construed by the provisions
hereof and in accordance with the laws of the State of Florida
applicable to agreements that are negotiated, executed, delivered
and performed solely in the State of Florida.
<PAGE> 13
IN WITNESS WHEREOF, the Company has duly executed this
Debenture as of the date first written above.
SYSTEMS COMMUNICATIONS, INC.
By _____________________________
Name: Stephen Williams
Title: CEO
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert
the Debentures.)
The undersigned hereby irrevocably elects, as of
______________, 199_ to convert $_________________ of the
Debentures into Shares of Common Stock (the "Shares") of
SYSTEMS COMMUNICATIONS, INC. (the "Company") according to
the conditions set forth in the Subscription Agreement dated
___________,1996.
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
Debentures on behalf of any U.S. Person.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature_______________________________________
[Name]
Address_____________________________________________________
____________________________________________________________
Phone______________________ Fax___________________________
EXHIBIT B
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned __________________, has purchased
on _______________, 1996, ______________ Convertible
Debentures of SYSTEMS COMMUNICATIONS, INC. (the "Company")
in the amount of $________________, (the "Debentures"). In
connection with such purchase, the undersigned, has executed
and delivered a subscription agreement ("Subscription
Agreement") of your design. As the forty (40) day
transaction restriction period has expired, the undersigned
hereby requests that the Debentures be transferred into
"Street Name" of _________________________.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Debentures was made to it
outsideof the United States and the undersigned was, at the
time the Subscription Agreement was executed and delivered,
and is now, outside the United States;
(2) It is not a U.S. Person (as such term is defined in
Section 902(a) of Regulation S promulgated under the United
States Securities Act of 1933 (the "Securities Act"); and
it has purchased the Debentures for its own account and not
for the account or benefit of any U.S. person;
(3) All offers and sales by the undersigned of the
Debentures shall be made pursuant to an effective
registration statement under the Securities Act or pursuant
to and exemption from, or in a transaction not subject to
the registration requirements of, the Securities Act;
(4) It is familiar with and understands the terms,
conditions and requirements contained in Regulation S and
definitions of U.S. persons contained in Regulation S;
(5) The undersigned has not engaged in any "directed
selling efforts" (as such term is defined in Regulation S)
with respect to the Debentures or the Common Stock that is
issuable upon conversion; and
(6) The undersigned purchased its Debentures with
investment intent and at the time of the purchase of said
Debentures had no interest to sell, dispose of or otherwise
transfer the Debentures or the Common Stock that is issuable
upon conversion. The purpose for this request is to
facilitate the management of the undersigned's investment
accounts.
(7) The undersigned agrees to the provisions of Paragraph
2(a)(xiv) of the Offshore Securities
Subscription Agreement which is incorporated herein and made
a part hereof as if fully written.
<PAGE> 2
Dated this ___ day of the month of ___________________,
1996.
By:
_______________________________ ____________________________
Official Signature of Purchaser Title
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and
transfer(s) unto
________________________________________________
__ __________
(name, address and SSN or EIN of assignee)
_______________________________________Dollars
($ ) (principal amount of Debenture,$10,000 or
integral multiples of $10,000)
of principal amount of this Debenture together
with all accrued and unpaid interest hereon.
Date:____________ Signed:_______________________
____________ (Signature
must conform in all
respects to name of
Holder shown of face of
Debenture) Signature
Guaranteed:
EXHIBIT 4.13
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
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.
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of
October , 1996 (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 ___________________
as "Purchaser" in connection with the offshore offering of 10.0% Cumulative
Convertible Debentures of SYSTEMS COMMUNICATIONS, INC. ("SCMI"), a
corporation organized under the laws of the State of Florida, with its
principal executive offices located at Ulmerton Road, Suite 300,
Clearwater, FL. (herein-after referred to as "Seller" or "Company").
Purchaser hereby represents and warrants to, and agrees with Seller:
1. Agreement To Subscribe: Purchase Price.
(a) Subscription. The undersigned Purchaser hereby
subscribes for and agrees to purchase the Sellers 10.0%
Cumulative Convertible Debentures in the principal amount of
U.S. $______________ (singly, a Debenture", and
collectively, the "Debentures").
(b) Form of Payment. Purchaser shall pay the total
consideration by delivering good funds by wire transfer in United
States Dollars to the Escrow Agent, Joseph B. LaRocco, Esq. on or
before November , 1996 into the escrow account as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P.O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108 First Union Bank
Swift #: UTCIUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
<PAGE> 2
(c) Closing. Subject to the satisfaction of the conditions
set forth in Sections 8 and 9 hereof, the closing of the
transactions contemplated by this Agreement shall occur from time
to time on or before November , 1996.
2. Purchaser Representations Access to Information.
(a) Offshore Transaction. In connection with the
purchase and sale of the Debentures, Purchaser represents and
warrants to, and covenants and agrees with Seller as follows:
(i) Purchaser 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 Section 902(o) of Regulation S) for the
purpose of investing in Regulation S securities and is
not otherwise a U.S. Person. Purchaser is not, and on
the closing date will not be, an affiliate of Seller;
(ii) At the time the buy order was
originated, Purchaser 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 Purchaser in the United States;
(iv) Purchaser is purchasing the Securities
for its own account and Purchaser 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 Purchaser 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
offered or sold by Purchaser 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 date of closing of the offering of
the Securities or (the "Restricted Period"), which in
no event shall be later than _____________, 1996, when
this offering shall be closed to all Purchasers;
<PAGE> 3
(vi) The transactions contemplated by this
Agreement (a) have not been and will not be pre-
arranged by Purchaser 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 Purchaser, to evade the registration
provisions of the 1933 Act;
(vii) Purchaser understands that the Securities
are not registered under the 1933 Act and are being
offered and sold to it in reliance on specific
exemptions 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 Purchaser set
forth herein in order to determine the applicability of
such exemptions and the suitability of Purchaser to
acquire these Securities;
(viii) Purchaser 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
Purchaser pursuant to Section 904(c)(2)(iv) of
Regulation S;
(ix) Purchaser has not conducted and shall
not conduct any "directed selling efforts" as that term
is defined in Rule 902(b) of Regulation S; nor has
Purchaser conducted any general solicitation relating
to the offer and sale of any of the Securities in the
United State or elsewhere;
(x) This Agreement has been duly authorized,
validly executed and delivered on behalf of Purchaser
and is a valid and binding agreement in accordance with
its terms, subject to general principals of equity and
to bankruptcy or other laws affecting the enforcement
of creditors' rights generally;
<PAGE> 4
(xi) The execution and delivery of this Agreement
and the consummation of the purchase of the Securities,
and the transactions contemplated by the Agreement do
not and will not conflict with or result in a breach by
the Purchaser of any of the terms or provisions of, or
constitute a default under the articles of
incorporation or by-laws(or similar constitutive
documents) of the Purchaser, or any indenture,
mortgage, deed of trust, or other material agreement or
instrument to which Purchaser 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
decrees, judgment, or order of any Federal or State
court, Federal or State regulatory body, administrative
agency or other governmental body having jurisdiction
over the Purchaser or any of its properties or assets
(xii) All invitations, offers and sales of or in
respect of any of the Securities, by Purchaser and any
distribution by Purchaser 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 subdivision of any country;
(xiii) Purchaser will not make any offer or
sale of the Securities by any means which would not
comply with the laws and regulation(s) 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 Purchaser nor any of
its affiliates, agents or any other person or entities
at the direction of the Purchaser (collectively
referred to as "Purchaser and its Affiliates") has
entered, has the intention of entering, or will during
the Restricted Period or 30 days prior to 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 or common shares of the
Company.
<PAGE> 5
Furthermore, Purchaser and its Affiliates
will not, during the period they own the Debentures,
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 or common shares of the Company.
(XV) PURCHASER represents and warrants that it is an
"accredited investor" as that term is defined in
Regulation D.
(b) No Government Recommendation or Approval.
Purchaser understands that no Federal or State or foreign
government agency has passed on or made any recommendation or
endorsement of the Securities.
(c) Current Public Information. Purchaser acknowledges
that it and its advisors, if any, have had access to or 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
Purchaser. Purchaser further acknowledges that it and its
advisors, if any, have received complete and satisfactory answers
to such inquiries.
(d) Purchaser's Sophistication. Purchaser acknowledges
that the purchase of the Securities involves a high degree of
risk, including the total loss of Purchaser's investment.
Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and
risks of purchasing the Securities.
(e) Tax Status. Purchaser is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S.
Internal Revenue Code) of Seller.
3. Seller Representations.
(a) Reporting Company Status. Seller is a
"Reporting Issuer" as defined by Rule 902 of Regulation S.
Seller has registered its Common Stock, $0.001 par value per
share (the "Common Stock"), pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the Common Stock is listed and trades on the Nasdaq OTC
Electronic Bulletin Board ("NASDAQ"). Seller has filed all
material required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately
preceding the offer or sale of the Securities (or for such
shorter period that Seller has been required to file such
material).
<PAGE> 6
(b) Current Public Information. Seller has either
furnished Purchaser with copies of its most recent reports filed
under the Exchange Act referred to in Section 2(c) above, and
other publicly available documents or Purchaser has had access
thereto.
(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
believed the Purchaser was outside of the United States
and was not a U.S. person, based on the representations
of Purchaser.
(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 Purchaser.
(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
Purchaser in Section 2(a) 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 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.
<PAGE> 7
(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 and enforceable in accordance with
their terms, subject to the laws of bankruptcy and creditors'
rights generally. A sufficient number of shares of Common Stock
issuable upon conversion of the Debentures 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
preemptive rights of any shareholder of Seller, other than has
been disclosed in the Company's annual report(s).
(f) Authority to Enter 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 principals 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 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. Person, as contemplated by this Agreement.
(i) Prior Shares Issued Under Regulation S. Seller has
not issued any shares of stock under Regulation S since
_____________.
<PAGE> 8
(j) Use of Proceeds. Seller represents that the
intended use of the proceeds from this offering is for working
capital.
(k) Filings. ISSUER undertakes and agrees pursuant to
the sale of its securities under Reguation 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 and mandatory NASDAQ notification. ISSUER
further agrees, with respect to the filing of Form 8-K, that it
will only identify PURCHASER as an "accredited 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. Purchaser
understands that the offer and sale of the Securities are not
being registered under the 1933 Act. Seller and Purchaser 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 Debentures to
Seller, and Seller shall, within three (3) business days of
receipt of such Debentures, instruct Seller's 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's transfer
agent or attorney 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 Debentures and upon receipt
by the Company or its attorney of a facsimile or original of
Purchaser's signed Notice of Conversion and Purchaser
Representation Letter (See Exhibits A and B attached hereto)
Seller shall instruct Seller's transfer agent to issue Stock
Certificates without restrictive legend or stop transfer
instructions in the name of Purchaser (or its nominee (being a
non-U.S. Person) or such non-U.S. Persons as may be designated by
Purchaser 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.
Seller warrants that no instructions, other than these
instructions, 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
<PAGE> 9
Section 5, however, shall affect in any way Purchaser's or such
nominee's obligations and agreements to comply with all
applicable securities laws upon resale of the Securities.
(c) The holder of the Debenture ("Holder") is
entitled, at its option, at any time commencing 45 days after
issue hereof to convert the original principal amount of the
Debenture 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 lesser of (a) seventy
percent (70%) of the five day average closing bid price of the
Company's Common Stock for the five (5) trading days immediately
preceding the Conversion Date (as defined below) or (b) 80% of
the five day average closing bid price for the Company's Common
Stock for the five days immediately preceding the Closing Date
(as defined below). The closing shall be deemed to have occurred
on the date the funds are received by the Company (the "Closing
Date"). Such conversion shall be effectuated by surrendering to
the Company, or its attorney, the original Debenture to be
converted together with a facsimile or original of the signed
Notice of Conversion and a facsimile or original of the signed
Purchaser Representation Letter, see Exhibits A and B attached
hereto, which evidences such Holder's intention to convert the
Debenture or a specified portion thereof, and accompanied by
proper assignment, if applicable. No fractional shares or scrip
representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded up or down, as
the case may be, to the nearest whole share. The date on which
Notice of Conversion is effective ("Conversion Date") shall be
deemed to be the date on which the Holder has delivered to the
Company the original Debenture, a facsimile or original of the
signed Notice of Conversion and a facsimile or original of the
signed Purchaser Representation Letter. The Debentures are
subject to a mandatory, 12 month conversion feature at the end of
which all Debentures outstanding will be automatically converted,
upon the terms set forth in this paragraph ("Mandatory Conversion
Date").
(d) Nothing contained in the Debenture or paragraph
(f) hereof, shall be deemed to establish or require the payment
of interest to the Purchaser at a rate in excess of the maximum
rate permitted by governing law. In the event that the rate of
interest required to be paid under the Debenture exceeds the
maximum rate permitted by governing law, the rate of interest
required to be paid thereunder shall be automatically reduced to
the maximum rate permitted under the governing law and any
amounts collected in excess of the permissible amount shall be
deemed a payment of principal. To the extent that such excess
amount exceeds the aggregate principal amount of the Debenture,
such excess shall be returned with reasonable promptness by the
holder to the Company.
<PAGE> 10
(e) Within five (5) business days after receipt of the
documentation referred to above in Section 5(c), the Company
shall deliver a certificate, without stop transfer instructions,
representing the number of shares of Common Stock issuable upon
the conversion. It shall be the Company'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. 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. No
payment or adjustment shall be made for accrued and unpaid
interest until the earlier of the Conversion Date or the
Mandatory Conversion Date. Upon surrender 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.
(f) In the event the Company does not make delivery of
the Certificate of Common Stock, as instructed by Purchaser,
within 6 business days after the Conversion Date, then in such
event the Company shall pay to Purchaser an amount, in
immediately available funds in accordance with the following
schedule, wherein "No. Business Days Late" is defined as the
number of business days beyond the 6 business days after the
Conversion Date.
Late Payment for Each
$10,000 of Debenture
Principal Amount Being
No. Business Days Late Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each
Business Days Late Beyond 10 Days
<PAGE> 11
To the extent that the failure of the Company to issue the
Certificate of Common Stock pursuant to this Section 5(f) is due
to the unavailability of authorized but unissued shares of Common
Stock, the provisions of this Section 5(f) shall not apply but
instead the provisions of Section 5(g) shall apply.
The Company shall pay any payments incurred under this
Section 5(f) in immediately available funds within three (3)
business days from the date of issuance of the applicable
Certificates of Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's
failure to issue and deliver the applicable Certificate of Common
Stock to the Holder within 6 business days after the Conversion
Date.
The Company recognizes the right of Purchaser to assign any
portion of the Debentures to another non-U.S. Person during the
40 day restricted period and to assign any portion of the
Debentures to another non-U.S. Person or U.S. person or entity
after the 40 day restricted period.
(g) If, at any time Purchaser submits a Notice of
Conversion and the Company 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 Purchaser a
certificate representing all of the shares of Common Stock which
are available, and the Notice of Conversion as to any Debentures
requested to be converted but not converted (the "Unconverted
Debentures") shall become null and void. The Company 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). No
Holder may submit a Notice of Conversion after receipt of a
Notice of Conversion Default until the date additional shares of
Common Stock are authorized by the Company. The Company 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 Debentures held by each Purchaser where N = the
number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to affect conversion of all
remaining Debentures. The Company 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 Holder'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 Purchaser's option, payable
as follows: (i) in the event Purchaser elects to take such
payment in cash, cash payments shall be made to such Purchaser of
<PAGE> 12
outstanding Debentures by the fifth day of the following calendar
month, or (ii) in the event Purchaser elects to take such payment
in stock, the Purchaser may convert such payment amount into
common stock at the Conversion Rate at anytime after the 5th day
of the calendar month following the month in which the
Authorization Notice was received, until the expiration of the
mandatory 36 month conversion period.
Nothing herein shall limit the Purchaser's right to pursue actual
damages for the Company's failure to maintain a sufficient number
of authorized shares of common stock.
6. Closing Date and Escrow Agent. Closing shall
be affected through delivery of funds and Debentures to the
Escrow Agent. Purchaser shall forthwith deliver the necessary
funds as indicated in Paragraph 1 to the Escrow Agent. A
Debenture(s) will be delivered at the instructions of the Company
to the Escrow Agent: Joseph B. LaRocco, Esquire, 1055 Washington
Boulevard, Stamford, Connecticut 06901. Purchaser and the Company
agree that the Escrow Agent, in his capacity as Escrow Agent, has
no liability as a result of any fraudulent or unlawful conduct of
any party other than the Escrow Agent and agree to hold the
Escrow Agent harmless in such event. In the event the
Debenture(s) are not received by the Escrow Agent from the
Company within Five (5) Business Days of the date of receipt of
the Escrowed Funds, the Escrow Agent shall return the Escrowed
funds without interest to the Purchaser by wire transfer pursuant
to written instructions.
7. Delivery Instructions. The Debenture being
purchased hereunder shall be delivered to Joseph B. LaRocco,
Esq. as Escrow Agent, who will hold the Debenture in escrow until
funds have been wired to the Company less, placement fees, at
which time the Escrow attorney shall then have the Debenture
delivered to the Purchaser outside the United States.
8. Conditions To Seller's Obligation to Sell. Seller's
obligation to sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Purchaser of this
Agreement as evidenced by execution of this Agreement by
Purchaser.
(b) Delivery to the Escrow Agent, pursuant to
Paragraph 6 herein, of good funds by Purchaser as payment in full
of the purchase price of the Debentures.
9. Conditions To Purchaser's Obligation To Purchase.
Purchaser's obligation to purchase the Debentures is conditioned
upon:
<PAGE> 13
(a) The 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 as
described in Paragraph 6 herein.
10. 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
Purchaser, nor any direct or indirect purchaser of the Securities
from Purchaser, may directly or indirectly offer or sell the
Securities in the United States or to U.S. Persons (other than
distributors) unless the 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, Purchaser, any
other distributor,
any of their respective affiliates, or any person acting on
behalf of any of the foregoing.
11. No Shareholder Approval. Seller hereby agrees that
after the Closing Date it will take all appropriate action to
authorize the issuance of the Certificate of Common Stock upon
the conversion of the Debentures and that no shareholder approval
is required for such action. If an opinion of counsel is
required, Company shall arrange for such an opinion to be
provided at Company's sole cost and expense.
12. Lock-up/Right of First Refusal. During the three (3)
month period following the Closing Date, the Company agrees not
to conduct any further Regulation S offerings, unless such
offerings are conducted with Purchaser.
13. Change in Regulation S. During the twelve month period
following issuance of the Debentures, if there is any change in
Regulation S that would restrict the conversion of the Debentures
into Common Stock according to the terms and conditions set forth
in this Agreement, then in such event the Company shall
immediately seek registration by way of a Form S-3 filing. All
such action required by the Company to complete the registration
shall be done as soon as possible at the Company's sole cost and
expense.
<PAGE> 14
14. Independent Counsel. The undersigned acknowledge that
they have been advised to consult with their own attorneys and
financial advisors regarding this Agreement.
15. Arbitration. The parties shall resolve any dispute
arising hereunder before a panel of three arbitrators selected
pursuant to and run in accordance with the rules of the American
Arbitration Association. The arbitration shall be held in New
York, New York. The winning party shall be entitled to an award
of reasonable attorney's fees and costs. Disputes under this
Agreement as well as all of the terms and conditions of this
Agreement shall be governed in accordance with and by the laws of
the State of Florida.
16. Miscellaneous.
(a) Except as specifically referenced herein, 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, expressed or implied, 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 Agreements, except as
expressly provided herein.
(b) Purchaser is an independent contractor, and is not
the agent of Seller. Purchaser 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. Seller 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 Purchaser shall survive the closing
the transactions contemplated by this Agreement.
<PAGE> 15
(e) This Agreement shall be construed in accordance
with the internal laws of the State of Florida, and shall be
binding upon the successors and assigns of each party hereto.
This Agreement may be executed in counterparts,
and the facsimile transmission of an executed counterpart to this
Agreement shall be effective as an original. Wherever used, the
singular number shall include the plural, and the plural the
singular, and the use of any gender shall be applicable to all
genders.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first set forth above.
Official Signatory of Seller:
SYSTEMS COMMUNICATIONS, INC.
By: ______________________________
Stephen Williams
Title: CEO
Official Signatory of Purchaser: ________________________
By: ___________________________
Title: __________________________
______________________________
Country of Execution
Address of Purchaser: ________________________________
Phone ________________________________
Fax ________________________________
EXHIBIT A
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 principal amount of the above
Debenture
No. ___ into Shares of Common Stock of SYSTEMS
COMMUNICATIONS, INC. (the "Company") according to the
conditions hereof, 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 and is not converting the Debenture
on Behalf of any U.S. Person.
Date of Conversion*
__________________________________________________________
_________
Applicable Conversion Price
__________________________________________________________
_________
Signature
__________________________________________________________
_________
[Name]
Address:
__________________________________________________________
_________
__________________________________________________________
_________
* This original Debenture and Notice of Conversion must be
received by the Company by the fifth business date
following the Date of Conversion.
EXHIBIT B
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned __________________,
has purchased on _______________, 1996,
______________ Convertible Debentures of SYSTEMS
COMMUNICATIONS, INC. (the "Company") in the
amount of $________________, (the "Debentures").
In connection with such purchase, the
undersigned, has executed and delivered a
subscription agreement ("Subscription
Agreement") of your design. As the forty (40)
day transaction restriction period has expired,
the undersigned hereby requests that the
Debentures be transferred into "Street Name" of
_________________________.
The undersigned represents and warrants as
follows:
(1) The offer to purchase the Debentures was
made to it outsideof the United States and the
undersigned was, at the time the Subscription
Agreement was executed and delivered, and is
now, outside the United States;
(2) It is not a U.S. Person (as such term is
defined in Section 902(a) of Regulation S
promulgated under the United States Securities
Act of 1933 (the "Securities Act"); and it has
purchased the Debentures for its own account and
not for the account or benefit of any U.S.
person;
(3) All offers and sales by the undersigned of
the Debentures shall be made pursuant to an
effective registration statement under the
Securities Act or pursuant to and exemption
from, or in a transaction not subject to the
registration requirements of, the Securities
Act;
(4) It is familiar with and understands the
terms, conditions and requirements contained in
Regulation S and definitions of U.S. persons
contained in Regulation S;
(5) The undersigned has not engaged in any
"directed selling efforts" (as such term is
defined in Regulation S) with respect to the
Debentures or the Common Stock that is issuable
upon conversion; and
(6) The undersigned purchased its Debentures
with investment intent and at the time of the
purchase of said Debentures had no interest to
sell, dispose of or otherwise transfer the
Debentures or the Common Stock that is issuable
upon conversion. The purpose for this request is
to facilitate the management of the
undersigned's investment accounts.
(7) The undersigned agrees to the provisions of
Paragraph 2(a)(xiv) of the Offshore Securities
Subscription Agreement which is incorporated
herein and made a part hereof as if fully
written.
<PAGE> 2
Dated this ___ day of the month of
___________________, 1996.
By:
_______________________________
____________________________ Official Signature
of Purchaser Title
EXHIBIT 4.14
EXHIBIT A
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Securities Subscription Agreement
("Agreement") is executed in reliance upon the transaction
exemption afforded by Regulation S ("Regulation S") as
promulgated by the Securities and Exchange Commission ("SEC"),
under the Securities Act of 1933, as amended ("1933 Act").
This Agreement has been executed by the undersigned in
connection with the private placement of up to $1,120,000 4%
Convertible Debentures (hereinafter referred to as the
"Debentures") of Systems Communications, Inc., a corporation
organized and existing under the laws of the State of Florida,
U.S.A., NASDAQ Symbol "SCMI" (hereinafter referred to as the
"COMPANY"). The Debentures being sold pursuant to this
Agreement, and the Shares (as defined below), 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
such terms are defined in Regulation S), unless the Debentures or
the Shares, as the case may be, are registered under the 1933
Act, or an exemption from the registration provisions of the 1933
Act is available. The terms on which the Debentures may be
converted into common stock (the "Shares") and the other terms of
the Debentures are set forth in the pro forma Debenture in Annex
I annexed hereto. This subscription and, if accepted by the
COMPANY, the offer and sale of Debentures and the Shares issuable
upon conversion thereof (collectively the "Securities"), are
being made in reliance upon the provisions of Regulation S
("Regulation S") under the 1933 Act.
The undersigned
NAME: TIMBOOM LTD.
ADDRESS: 28 HAGVURA STREET
KARNI SHOMRON, ISRAEL
if applicable, a [Corporation][Partnership][Trust] organized
under the laws of Ireland, a non USA jurisdiction (hereinafter
referred to as the "PURCHASER")
hereby represents and warrants to, and agrees with, the COMPANY
as follows:
<PAGE> 2
1. Agreement to Subscribe.
a. Subscription Amount. The undersigned hereby subscribes
for $1,120,000 in principal amount of 4% Debentures.
b. Form of Payment. The PURCHASER shall pay the purchase
price for the Debentures by delivering immediately
available funds in United States Dollars to the escrow
agent identified in the Joint Escrow Instructions
attached hereto as Annex II (the "Escrow Agent").
Delivery of such funds to the COMPANY by the Escrow
Agent shall be made against delivery by the COMPANY of
one or more Debentures in accordance with this
Agreement. By signing this Agreement, the PURCHASER
and the COMPANY each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow
Instructions attached hereto as Annex II, all of the
provisions of which are incorporated herein by this
reference as if set forth in full.
c. Method of Payment. Payment of the purchase price for
the Debentures shall be made by wire transfer of funds
to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
for credit to the account of
Krieger & Prager, Attorneys
Escrow Account No. 637-1600033
Not later than three (3) business days after acceptance
and execution of this Agreement by the COMPANY, the
PURCHASER shall deposit with the Escrow Agent the
aggregate subscription price for the Debentures.
2. Subscriber Representations and Covenants; Access to
Information; Independent Investigation.
a. Offshore Transaction. PURCHASER represents,
warrants and covenants to COMPANY as follows:
(i) PURCHASER is not a U.S. Person as that term
is defined under Regulation S.
(ii) PURCHASER is outside the United States as of
the date of the execution and delivery of
this Agreement.
<PAGE> 3
(iii) PURCHASER is purchasing the Debentures
for its own account and not on behalf of any
U.S. Person, and PURCHASER is the sole
beneficial owner of the Debentures, and has
not pre-arranged any sale with any purchaser
or purchasers in the United States.
(iv) PURCHASER represents and warrants and hereby
agrees that all offers and sales of the
Debentures prior to the expiration of a
period commencing on the date of the receipt
of funds by the COMPANY and ending 40 days
thereafter (the "Restricted Period") shall
only be made in compliance with the safe
harbor contained in Regulation S, pursuant to
the registration provisions under the 1933
Act or pursuant to an exemption from
registration, and all offers and sales after
the expiration of the 40-day period shall be
made only pursuant to such registration or to
an exemption from registration.
(v) PURCHASER acknowledges that the purchase of
the Debentures involves a high degree of risk
, is aware of the risks and further
acknowledges that it can bear the economic
risk of the purchase of the Debentures,
including the total loss of its investment.
(vi) PURCHASER understands that the Debentures are
being offered and sold to it in reliance on
specific exemptions from the registration
requirements of U.S. securities laws and that
the COMPANY is relying upon the truth and
accuracy of the representations, warranties,
agreements, acknowledgements and
understandings of PURCHASER set forth herein
in order to determine the applicability of
such exemptions and the suitability of
PURCHASER to acquire the Debentures, and the
Shares issuable upon conversion thereof.
PURCHASER represents and warrants that the
information contained herein is complete and
accurate. PURCHASER further represents and
warrants that it will notify the COMPANY
immediately upon the occurrence of any
material change therein occurring prior to
the issuance of Shares upon conversion of the
Debenture.
<PAGE> 4
(vii) PURCHASER is sufficiently experienced in
financial and business matters to be capable
of evaluating the merits and risks of its
investments, and to make an informed decision
relating thereto.
(viii) In evaluating its investment, PURCHASER
has consulted its own investment and/or legal
and/or tax advisors. PURCHASER is not
relying on the COMPANY respecting the legal,
tax and other economic considerations of an
investment in the Debentures.
(ix) PURCHASER understands that in the view of the
SEC the statutory basis for the exemption
claimed for this transaction would not be
present if the offering of Debentures, and
the Shares issuable upon conversion thereof,
although in technical compliance with
Regulation S, is part of a plan or scheme to
evade the registration provisions of the 1933
Act. PURCHASER is acquiring the Debentures
for investment purposes and has no present
intention to sell the Debentures, or the
Shares issuable upon conversion thereof, in
the United States or to a U.S. Person or for
the account or benefit of a U.S. Person
either now or after the expiration of the
Restricted Period.
(x) PURCHASER is not an underwriter of, or dealer
in, the Securities, and PURCHASER is not
participating, pursuant to a contractual
agreement, in the distribution of the
Securities.
(xi) PURCHASER represents, warrants
and agrees, that PURCHASER, will not,
directly or indirectly, or through one or
more intermediaries, maintain any short
position in the Shares of the COMPANY during
the Restricted Period.
(xii) During the period commencing on the
Closing Date (as defined herein) and ending
on the 41st day following such date,
PURCHASER will not sell, commit or agree to
sell or pledge any shares of Common Stock of
the COMPANY or any other securities
convertible into or exercisable for shares of
Common Stock of the COMPANY.
<PAGE> 5
(xiii) PURCHASER has taken no action which
would give rise to any claim by any person
for brokerage commission, finders' fees or
the like relating to this Agreement or the
transactions contemplated hereby.
b. Current Public Information. PURCHASER
acknowledges that PURCHASER has been furnished
with or has acquired copies of the COMPANY's Form
10 filed with the SEC, and Forms 10-Q and 8-K
filed thereafter (collectively the "SEC Filings").
PURCHASER is not relying upon any representations
or other information (whether oral or written)
other than as set forth in the SEC filings or in
Annex V.
c. Independent Investigation; Access. PURCHASER
acknowledges that PURCHASER, in making the
decision to purchase the Debentures subscribed
for, has relied upon independent investigations
made by it and its representatives, if any, and
PURCHASER and such representatives, if any, have,
prior to any sale to it, been given access and the
opportunity to examine all material publicly
available, books and records of the COMPANY, all
material contracts and documents relating to this
offering and an opportunity to ask questions of,
and to receive answers from the COMPANY or any
person acting on its behalf concerning the terms
and conditions of this offering. PURCHASER and
its advisors, if any, have been furnished with
access to all publicly available materials
relating to the business, finances and operation
of the COMPANY and materials relating to the offer
and sale of the Debentures which have been
requested. PURCHASER and its advisors, if any,
have received complete and satisfactory answers to
any such inquiries.
d. No Government Recommendation or Approval.
PURCHASER understands that no federal or state
agency has passed on or made any recommendation or
endorsement of the Securities.
e. Entity Purchasers. If PURCHASER is a partnership,
limited liability company, limited liability
partnership, corporation, trust, or similar
entity, the person executing this Agreement on its
behalf represents and warrants that:
<PAGE> 6
(i) He or she has made due inquiry to determine
the truthfulness of the representations and
warranties made pursuant to this Agreement.
(ii) He or she is duly authorized to make this
investment and to enter into and execute this
Agreement on behalf of such entity.
f. Individual Purchasers. PURCHASER, if an
individual, represents that he or she has reached
the age of 21 and has adequate means for providing
for his or her current and anticipated financial
needs and possible contingencies for emergencies
and has no need for liquidity in the proposed
investment.
g. Binding Commitment. This Agreement constitutes a
legal, valid and binding obligation of the
PURCHASER. The PURCHASER has full power, right
and authority to enter into and perform this
Agreement. The execution and delivery and
performance of this Agreement will not violate or
be in conflict with any order, judgment,
injunction, agreement or controlling document to
which the PURCHASER is a party or by which it is
bound. If the PURCHASER is an entity, it was not
formed for the specific purpose of acquiring the
Debenture.
h. Foreign Laws. PURCHASER hereby covenants that it
will comply with all laws and regulations in each
foreign jurisdiction in which it purchases,
offers, sells or deliver the Securities, or has in
its possession or distributes any offering
material.
3. COMPANY Representations.
a. Reporting Company Status. The COMPANY is a
corporation duly organized, validly existing and
in good standing under the laws of the State of
Florida and is duly qualified as a foreign
corporation in all jurisdictions in which the
failure to so qualify would have a material
adverse effect on the COMPANY and its subsidiaries
taken as a whole. The COMPANY is a "Reporting
Issuer" as defined by Rule 902 of Regulation S.
The COMPANY has registered its Common Stock
pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and
the Common Stock trades on the NASD/Bulletin
Board, and has received no notice, either oral or
written, with respect to its continued eligibility
<PAGE> 7
for such listing. The COMPANY has filed all
material required to be filed pursuant to all
reporting obligations under either Section 13(a)
or 15(d) of the Exchange Act for a period of at
least twelve (12) months immediately preceding the
offer or sale of the Debentures, or such shorter
period as may be required by law.
b. Offshore Transaction. The COMPANY has not offered
or sold the Debentures to any person in the United
States, or, to the best knowledge of the COMPANY,
any identifiable groups of U.S. citizens abroad,
or any U.S. person as that term is defined in
Regulation S. At the time the buy order for the
Debentures was originated, the COMPANY and/or its
agents reasonably believed PURCHASER was outside
the United States and was not a U.S. Person.
c. No Directed Selling Efforts. In regard to this
transaction, the COMPANY has not conducted any
"direct selling efforts" as that term is defined
in Rule 902 of Regulation S nor has the COMPANY
conducted any general solicitation relating to the
offer and sale of the within securities to persons
resident within the United States or elsewhere.
d. Terms of Debentures. The COMPANY will issue the
Debentures in accordance with the terms of Annex I
attached hereto.
e. Legality. The COMPANY has the requisite corporate
power and authority to enter into this Agreement
and to sell and deliver the Debentures; this
Agreement and the issuance of the Debentures have
been duly and validly authorized by all necessary
corporate action by the COMPANY; this Agreement
has been duly and validly executed and delivered
by and on behalf of the COMPANY, and is a valid
and binding agreement of the COMPANY, enforceable
against it in accordance with its terms, except as
enforceability may be limited by general equitable
principles, bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other
laws affecting creditors rights generally.
f. Non-Contravention. The execution and delivery of
this Agreement and the consummation of the
issuance of the Debentures, other than the
conversion provision thereof, and the transactions
contemplated by this Agreement and the Debentures
do not and will not conflict with or result in a
<PAGE> 8
breach by the COMPANY of any of the terms or
provisions of, or constitute a default under, the
articles of incorporation or by-laws of the
COMPANY, or any indenture, mortgage, deed of
trust, or other material agreement or instrument
to which the COMPANY 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 of 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 the COMPANY or any of its
properties or assets.
g. Filings. The COMPANY undertakes and agrees to
make all necessary filings in connection with the
sale of the Debentures as required by United
States laws and regulations or any domestic
securities exchange or trading market.
h. Absence of Certain Changes. Since December 31,
1995, there has been no material adverse
development in the assets, liabilities, business,
properties, operations, financial condition or
results of operations of the COMPANY, except as
disclosed in the SEC Filings or in Annex V.
i. The COMPANY has legally available sufficient
authorized and unissued Shares as may be
reasonably necessary to effect the conversion of
the Debentures.
j. Litigation. There is no action, suit or
proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending
or, to the knowledge of the COMPANY, threatened,
against or affecting the COMPANY, or any of its
properties, which might result in any material
adverse change in the condition (financial or
otherwise) or in the earnings, business affairs or
business prospects of the COMPANY, or which might
materially and adversely affect the properties or
assets thereof.
k. No Default. Except as set forth in Annex V, the
COMPANY is not in default in the performance or
observance of any material obligation, agreement,
covenant or condition contained in any indenture,
mortgage, deed of trust or other material
<PAGE> 9
instrument or agreement to which it is a party or
by which it or its property may be bound, and
neither the execution, nor the delivery by the
COMPANY, nor the performance by the COMPANY of its
obligations under this Agreement or the
Debentures, other than the conversion provision
thereof, will conflict with or result in the
breach or violation of any of the terms or
provisions of, or constitute a default or result
in the creation or imposition of any lien or
charge on any assets or properties of the COMPANY
under, any material indenture, mortgage, deed of
trust or other material agreement or instrument to
which the COMPANY is a party or by which it is
bound or any statute or the Certificate of
Incorporation or By-Laws of the COMPANY, or any
decree, judgment, order, rule or regulation of any
court or governmental agency or body having
jurisdiction over the COMPANY or its properties.
l. SEC Filings. None of the SEC Filings with the
Securities and Exchange Commission since January
1, 1995 contained, at the time they were filed,
any untrue statement of a material fact or omit to
state any material fact required to be stated
therein or necessary to make the state therein in
light of the circumstances under which they were
made, not misleading. The COMPANY has since
January 1, 1995 timely filed all requisite forms,
reports and exhibits thereto with the Securities
and Exchange Commission.
m. Full Disclosure. There is no fact known to the
COMPANY (other than general economic conditions
known to the public generally) that has not been
disclosed in writing to the PURCHASER that (i)
could reasonably be expected to have a material
adverse effect on the condition (financial or
otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the
COMPANY or (ii) could reasonably be expected to
materially and adversely affect the ability of the
COMPANY to perform its obligations pursuant to
this Agreement.
n. Prior Issues. During the twelve (12) months
preceding the date hereof, the Company has not
issued any securities pursuant to Regulation S or
Regulation D under the Act, except as set forth in
Exhibit 3(m). The presently outstanding
[unconverted] principal amount of each such
issuance as at ______ , l9__ are set forth in
Exhibit.
<PAGE> 10
4. Transfer Agent Instructions.
a. Debentures. Upon the conversion of the
Debentures, the PURCHASER thereof shall submit
such Debenture and the COMPANY's Transfer Agent
shall, within two (2) business days of receipt of
such Debenture 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 Annex I hereto.
The COMPANY shall act as Debenture Registrar and
shall maintain an appropriate ledger containing
the necessary information with respect to each
Debenture.
b. Subject to the completeness and accuracy of the
PURCHASER's representations and warranties herein,
upon the conversion of any Debenture by a person
who is a non-U.S. Person, the COMPANY, shall, at
its expense, take all necessary action (including
the issuance of an opinion of counsel) to assure
that the COMPANY's transfer agent shall issue
stock certificates without restrictive legend or
stop orders in the name of PURCHASER (or its
nominee (being a non-U.S. Person) or such non-U.S.
Persons as may be designated by PURCHASER) and in
such denominations to be specified at conversion
representing the number of shares of Common Stock
issuable upon such conversion, as applicable. The
COMPANY warrants that no instructions other than
these instructions, instructions to impose a "stop
transfer" instruction with respect to the
Debenture until the end of the Restricted Period
have been or will be given to the transfer agent
and that the Shares will not be subject to any
transfer limitations other than those imposed by
applicable securities laws. Nothing in this
Section 4, however, shall affect in any way
PURCHASER's or such nominee's obligations and
agreement to comply with all applicable securities
laws upon resale of the Securities.
c. It will permit the PURCHASER to exercise its right
to convert the Debentures by telecopying an
executed and completed Notice of Conversion to the
COMPANY and delivering within three business days
thereafter, the original Notice of Conversion and
the Debenture representing the Shares to the
COMPANY by express courier. Each date on which a
Notice of Conversion is telecopied to and received
by the COMPANY in accordance with the provisions
<PAGE> 11
hereof shall be deemed a Conversion Date. The
COMPANY will transmit the certificates
representing the Shares of Common Stock issuable
upon conversion of any Debenture (together with
the Debentures representing the Shares not so
converted) to the PURCHASER via express courier,
by electronic transfer or otherwise, within three
business days after receipt by the COMPANY of the
original Notice of Conversion and the Debenture
representing the Shares to be converted (the
"Delivery Date").
c. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the
Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such
loss, the Company agrees to pay late payments to
the Buyer 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 five
(5) business days from Delivery Date:
Late Payment For Each
$10,000 of Debenture
No. Business Days Late Principal Amount
Being Converted
1 $50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
>10 $500 + $100 for each Business
Day Late beyond 10 days
<PAGE> 12
The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall
limit Buyer's right to pursue actual damages for the Company's
failure to issue and delivery Common Stock to the Buyer.
Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock
within five business days after the Delivery Date, the Buyer will
be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of
Conversion.
5. Exemption; Reliance on Representation.
(a) PURCHASER understands that the offer and sale of
the Debentures, and the Shares issuable upon conversion thereof,
is not being registered under the 1933 Act. The COMPANY is
relying on the rules governing offers and sales made outside the
United States pursuant to Regulation S. Rules 901 through 904 of
Regulation S govern this transaction.
(b) Notwithstanding the provisions hereof, in no event
(except with respect to an Event of Mandatory Conversion upon the
maturity of the Debenture) shall the holder be entitled to
convert any Debenture in excess of that number of shares upon
conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the PURCHASER and its affiliates
(other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted
portion of the Debenture), and (2) the number of shares of Common
Stock issuable upon the conversion of the Debenture with respect
to which the determination of this proviso is being made, would
result in beneficial ownership by the PURCHASER and its
affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise
provided in clause (1) of such proviso.
6. Closing Date and Escrow Agent. The date of the
issuance of the Debentures and the sale of the Debentures as
evidenced by receipt by the COMPANY from the Escrow Agent of
PURCHASER's purchase funds (the "Closing Date") shall be no later
than two (2) business days after execution hereof by all parties
or such other mutually agreed to time. PURCHASER shall, within
three (3) business days after acceptance and execution of this
Agreement by the COMPANY, deliver the necessary funds as
indicated in Paragraph 1 to the Escrow Agent. Debentures will be
delivered to the Escrow Agent at the instructions of the COMPANY.
<PAGE> 13
PURCHASER agrees that the Escrow Agent has no liability as a
result of any fraudulent or unlawful conduct of any other party,
and agrees to hold the Escrow Agent harmless.
7. Conditions to the COMPANY's Obligation to Sell.
PURCHASER understands that COMPANY's obligation to sell the
Debentures is conditioned upon:
a. Acceptance by PURCHASER of an Agreement for the
sale of Debentures;
b. Delivery to the Escrow Agent by each PURCHASER of
immediately available funds in United States
Dollars as payment in full for the purchase of the
Debentures; and
c. The accuracy on the Closing Date of the
representations and warranties of PURCHASER
contained in this Agreement and the performance by
PURCHASER on or before the Closing Date of all
covenants and agreements of PURCHASER required to
be performed on or before the Closing Date.
d. There shall not be in effect any law, rule or
regulation prohibiting or restricting the
transactions contemplated hereby, or requiring any
consent or approval which shall not have been
obtained.
8. Conditions to PURCHASER's Obligation to Purchase. The
COMPANY understands that PURCHASER's obligation to purchase the
Debentures is conditioned upon:
a. The receipt and acceptance by the COMPANY of this
Agreement as evidenced by execution of this
Agreement by the President or any Vice President
of the COMPANY. The acceptance of funds by the
COMPANY shall be deemed to be constructive
acceptance of this Agreement;
b. Delivery of Debentures to Escrow Agent as herein
set forth;
c. The accuracy on the Closing Date of the
representations and warranties of the COMPANY
contained in this Agreement and the performance by
the COMPANY on or before the Closing Date of all
covenants and agreements of the COMPANY required
to be performed on or before the Closing Date; and
<PAGE> 14
d. Delivery to the Escrow Agent of an opinion of
counsel for the COMPANY, dated the Closing Date
and addressed to PURCHASER, in the form attached
hereto as Annex III.
9. Registration of the Securities. After the expiration
of the Restricted Period, if the COMPANY fails to issue to the
PURCHASER or the PURCHASER's transferees certificates for shares
of Common Stock issuable upon conversion of the Debentures
bearing no restrictive legend and free of stop transfer
instructions for any reason other than the COMPANY's reasonable
good faith belief that the representations and warranties made by
the PURCHASER in this Agreement were untrue when made, then the
COMPANY shall be required, at the request of the PURCHASER and at
the COMPANY's expense, to effect the registration of such shares
of Common stock under the act, and relevant Blue Sky laws as
promptly as is practicable. The COMPANY and the PURCHASER 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. The COMPANY shall file a
registration statement within thirty (30) days of PURCHASER's
written demand therefor and shall use its best efforts to cause
such registration statement to become effective as soon as
practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from
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 COMPANY shall cause such
registration statement to remain effective until the earlier of
(i) the sale by the PURCHASER of all shares of Common Stock so
registered or (ii) 120 days after the effective date of such
registration statement. In the event that the COMPANY has not
effected the registration of such shares of Common Stock under
the Act and relevant Blue Sky laws within 120 days after the date
of the PURCHASER's demand therefor, the COMPANY shall pay to the
PURCHASER by wire transfer, as liquidated damages for such
failure and not as a penalty, an amount in cash equal to
$100,000. Such payment shall be made to the PURCHASER
immediately upon expiration of the 120-day period referenced in
the preceding sentence if the registration of such shares of
Common Stock is not effected by such date; provided, however,
that the payment of such liquidated damages shall not relieve the
COMPANY from its obligations to register such shares of Common
Stock pursuant to this Section 9.
<PAGE> 15
10. Certain Agreements. The COMPANY covenants and agrees
that it will not (i) enter into any subsequent or further offer
or sale of common stock or securities convertible into common
stock with any third party, which securities would be tradeable
free of restriction prior to one hundred eighty (180) days from
the Closing Date. However, clause 10(i) will not apply to (i)
the issuance of securities other than for cash in connection with
a merger, consolidation, sale of assets, disposition of a
business, product or license by the COMPANY, strategic alliance,
public offering, securities issued at the then current market
price, in exercise of options, or (ii) the exchange of the
capital stock of the COMPANY for assets, stock or other joint
venture interests.
11. Governing Law. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the Act, without
reference to principles of conflicts of law. Each of the parties
consents to the jurisdiction of the federal courts whose
districts encompass any part of the State of New York or the
state courts of the State of New York in connection with any
dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions. Each party hereby agrees
that if another party to this Agreement obtains a judgment
against it in such a proceeding, the party which obtained such
judgment may enforce same by summary judgment in the courts of
any country having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of
such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve
process in an other manner permitted by law.
12. Notices. Any notice required or permitted hereunder
shall be given in writing (unless otherwise specified herein) and
shall be deemed effectively given upon personal delivery or three
business days after deposit in the United States Postal Service,
by registered or certified mail with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may
designate by ten days advance written notice to each of the other
parties hereto.
<PAGE> 16
COMPANY: Systems Communications, Inc.
2575 Ulmerton Road 300
Clearwater, Florida 34622
ATTN: Mr. Robert Thompson
with a copy to:
PURCHASER: At the address set forth on the first page of this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
13. Survival of Representations and Warranties.
PURCHASER's representations and warranties shall survive the
execution and delivery hereof of this Agreement and the delivery
of the Debenture.
14. Confidentiality. Each of the COMPANY and the PURCHASER
agrees to keep confidential and not to disclose to or use for the
benefit of any third party the terms of this Agreement or any
other information which at any time is communicated by the other
party as being confidential without the prior written approval of
the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already
part of the public domain (except by breach of this Agreement)
and information which is required to be disclosed by law.
15. Indemnification. Each of the COMPANY and the PURCHASER
agrees to indemnify the other and to hold the other harmless from
and against any and all losses, damages, liabilities, costs and
expenses (including reasonable attorneys' fees) which the other
may sustain or incur in connection with the breach by the
indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
<PAGE> 17
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and correct and that it has caused
this Offshore Securities Subscription Agreement to be duly
executed on its behalf this ________ day of ___________________,
1997.
____________________________________
Printed Name of Subscriber
By:______________________________
(Signature of Authorized Person)
____________________________________
Printed Name and Title
Accepted this __________ day of the month of ___________________,
199___.
SYSTEMS COMMUNICATIONS, INC.
By: __________________________________________
Title: _______________________________
All correspondence and delivery of certificates and
confirmations should be addressed to the above named person and
sent by the COMPANY to his _____ business _____ home address
(check one).
Capacity of Subscriber (check one):
Individual __________
Corporation __________
Partnership __________
Other __________ (please specify)
Ownership of Debentures (check one):
Individual __________
Joint Tenants,with right of survivorship __________ *
Tenants in Common __________ *
Tenants in Entirety __________ *
Community Property __________ *
Country of Citizenship: ______________________________________________
Country of incorporation or formation: _________________________________
<PAGE> 18
* If you are purchasing Debentures with only your spouse as co-
owner, both you and your spouse must sign the signature
page. If any co-owner is not your spouse, all co-owners
must sign the signature page.
Name of PURCHASER Representative, if any: __________________________
Address: ___________________________________
___________________________________
Telephone: __________________________________
Full Name and Address of PURCHASER for Registration Purposes:
NAME:
_______________________________________________________________
ADDRESS:
______________________________________________________
______________________________________________________
______________________________________________________
TEL. NO.
_______________________________________________________________
FAX. NO.
_______________________________________________________________
CONTACT NAME:
_______________________________________________________________
<PAGE> 19
Delivery Instructions (if different from Registration Name):
NAME:
_______________________________________________________________
ADDRESS:
_______________________________________________________________
_________________________________________________________
_________________________________________________________
TEL. NO.
_______________________________________________________________
FAX. NO.
_______________________________________________________________
CONTACT NAME:
_______________________________________________________________
SPECIAL
INSTRUCTIONS:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV IRREVOCABLE INSTRUCTIONS
TO TRANSFER AGENT
ANNEX V COMPANY DISCLOSURE
ANNEX I
NEITHER THESE SECURITIES NOR THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE OR UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT
IN ACCORDANCE WITH REGULATION S UNDER THE
ACT, OR AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR EXEMPTION OR SAFE HARBOR
THEREFROM.
NNo. _________ US $1,120,000.00
SYSTEMS COMMUNICATIONS, INC.
4% CONVERTIBLE DEBENTURE DUE OCTOBER 1, 1998
THIS DEBENTURE is one of a duly authorized issue
of $1,120,000 in Debentures of SYSTEMS
COMMUNICATIONS, INC., a corporation duly organized
and existing under the laws of the
State of Florida (the "Company") designated as its 4%
Convertible Debenture Due October 1,1998.
FOR VALUE RECEIVED, the Company promises to pay
to TIMBOOM LTD., the registered holder hereof (the
"Holder"), the principal sum of One Million One
Hundred Twenty Thousand and 00/100 (US $1,120,000)
Dollars on October 1, 1998 (the "Maturity Date") and
to pay interest on the principal sum outstanding
from time to time in arrears on October 1, 1998
at the rate of 4% per annum accruing from the date
of initial issuance. Accrual of interest shall
commence on the first such business day to occur
after the date hereof until payment in full of the
principal sum has been made or duly provided for.
Subject to the provisions of 4 below, the
principal of, and interest on, this Debenture are
payable at the option of the Company, in shares of
Common Stock of the Company or in such coin or
currency of the United States of America as at the
time of payment is legal tender for payment of public
and private debts, at the address last appearing on
the Debenture Register of the Company as designated
in writing by the Holder from time to time. The
Company will pay the principal of and interest upon
this Debenture on the Maturity Date, less any
amounts required by law to be deducted, to the
registered holder of this Debenture as of the tenth
day prior to the Maturity Date and addressed to such
holder as the last address appearing on the Debenture
Register. The forwarding of such check shall
constitute a payment of interest hereunder and shall
satisfy and discharge the liability for principal
and interest on this Debenture to the extent of
the sum represented by such check plus any amounts so
deducted.
<PAGE> 2
This Debenture is subject to the following
additional provisions:
1. The Debentures are issuable in
denominations of Ten Thousand Dollars (US$
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. No service charge
will be made for such registration or transfer
or exchange.
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 laws or other applicable laws at the time of such
payments, and Holder shall execute and deliver all
required documentation in connection therewith.
3. This Debenture has been issued subject to
investment representations of the original
purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act
of 1933, as amended (the "Act"), and other applicable
state and foreign securities laws. In the event
of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new
Debenture in the name of such other person, that it
receive reasonable transfer documentation
including opinions that the issuance of the
Debenture in such other name does not and will
not cause a violation of the Act or any
applicable state or foreign 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 by notice to the contrary.
4. The Holder of this Debenture is
entitled, at its option, to convert at any time
(a) commencing forty-five (45) days after the
closing of sale of the debenture (the "Closing"), the
principal amount of this Debenture, provided
that the principal amount is at least US $10,000
(unless if at the time of such election to convert
the aggregate principal amount of all Debentures
registered to the Holder is less that Ten Thousand
Dollars (US $10,000), then the whole amount thereof)
into shares of Common Stock of the Company at a
conversion price for each share of Common Stock
equal to the lesser of (a) 80% of the Market
Price on the Closing, or (b) 70% the Market Price on
the Conversion Date. For purposes of this Section
4, the Market Price shall be the average closing
bid price of the Common Stock on the five (5) trading
days immediately preceding the Closing or Conversion
Date, as may be applicable, as reported by the
National Association of Securities Dealers, or the
closing bid price on the over-the-
counter market on such date or, in the event the Common Stock is listed
on a stock exchange, the Market Price shall be the closing price on the
exchange on such date, as reported in the Wall Street Journal.
<PAGE> 3
Conversion shall be effectuated by surrendering the
Debentures to be converted to the Company with the
form of conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this
Debenture or a specified portion (as above provided)
hereof, and accompanied, if required by the
Company, by proper assignment hereof in blank.
Interest accrued or accruing from the date of
issuance to the date of conversion shall, at the
option of the Company, be paid in cash or Common
Stock upon conversion. No fraction of 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 date on which notice of conversion is
given (the "Conversion Date") shall be deemed to be
the date on which the Holder has delivered this
Debenture, with the 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 three (3)
business days therefrom. Facsimile delivery of the
conversion notice shall be accepted by the Company
at telephone number
(____) _________________.
Certificates representing Common Stock upon
conversion will be delivered within two (2)
business days from the date the notice of conversion
is delivered to the Company.
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 or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter
issued of similar terms are direct obligations of the Company.
6. 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.
7. If the Company merges or consolidates with
another corporation or sells or transfers all or
substantially all of its assets to another person and
the holders of the Common Stock are entitled to
receive stock, securities or property in respect of
or in exchange for Common Stock, then as a
condition of such merger, consolidation, sale or
transfer, the Company and any such successor,
purchaser or transferee shall amend this Debenture
to provide that it may thereafter be converted on
the terms and subject to the conditions set
forth above into the kind and amount of stock,
securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the
number of shares of Common
<PAGE> 4
Stock into which this Debenture might have been
converted immediately before such merger,
consolidation, sale or transfer, subject to
adjustments which shall be as nearly equivalent as
may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or
substantially all of the assets of the Company (a
"Sale"), the Holder hereof shall have the right
to convert by delivering a Notice of Conversion
to the Company within fifteen (15) days of receipt
of notice of such Sale from the Company. In the
event the Holder hereof shall elect not to
convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture,
less all amounts required by law to be deducted,
upon which tender of payment following such notice,
the right of conversion shall terminate.
8. The Holder of the 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 conversion
thereof except under circumstances which will not
result in a violation of the Act or any applicable
state Blue Sky or foreign laws or similar laws
relating to the sale of securities.
9. This Debenture shall be governed by and
construed
in accordance with the laws of the State of New York.
Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part
of the City of New York or the state courts of the
State of New York sitting in the City of New York in
connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any
objection based on forum non coveniens, to the
bringing of any such proceeding in such
jurisdictions.
10. The following shall constitute an "Event of
Default":
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 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 written notice from the Holder of such
failure; or
<PAGE> 5
d. The Company shall (1) admit in
writing its
inability to pay its debts generally
as they mature; (2) make an assignment
for the benefit of creditors or
commence proceedings for its
dissolution; or (3) 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 sixty (60)
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 sixty (60) days thereafter; or
g. Any money judgment, writ or
warrant of attachment, or similar
process in excess of Two Hundred
Thousand ($200,000) 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 sixty(60)
days or in any event later than five
(5) days prior to the date of any
proposed sale thereunder; or
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 after such institution
or the Company shall by any action or
answer approve of, consent to, or
acquiesce in any such proceedings or
admit the material allegations of, or
default in answering a petition filed
in any such proceeding; or
i. The Company shall have its Common Stock
suspended or delisted from an exchange or over-
the-counter market from trading.
<PAGE> 6
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 notice of any
kinds, 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 enforce any and all of the
Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall
be construed as conferring upon the Holder the right
to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any
meeting of shareholders or any rights whatsoever as a
shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed
by an officer thereunto duly authorized.
Dated: __________________, 1997
SYSTEMS COMMUNICATIONS,INC.
By:____________________________________
____________________________________
(Print Name)
____________________________________
(Title)
ATTEST: _______________________________
EXHIBIT A
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 principal amount of the above
Debenture
No. ___ into Shares of Common Stock of SYSTEMS
COMMUNICATIONS, INC. (the "Company") according to the
conditions hereof, 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 and is not converting the Debenture
on Behalf of any U.S. Person.
Date of Conversion*
__________________________________________________________
_________
Applicable Conversion Price
__________________________________________________________
_________
Signature
__________________________________________________________
_________
[Name]
Address:
__________________________________________________________
_________
__________________________________________________________
_________
* This original Debenture and Notice of Conversion must be
received by the Company by the fifth business date
following the Date of Conversion.
[2/14/97]
ANNEX II
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the Offshore Securities Subscription
Agreement to
Which These Joint Escrow Instructions Are Attached
Krieger & Prager, P.A.
319 Fifth Avenue
New York, New York 10016
Attention: Samuel M. Krieger, Esq.
Dear Mr. Krieger:
As escrow agent for both Systems Communications, Inc., a
Florida corporation (the "Company"), and the Purchaser (the
"Purchaser") of 4% Convertible Debentures (the "Debentures") of
the Company, who is named in the Offshore Securities
Subscription Agreement between the Company and the Purchaser to
which a copy of these Joint Escrow Instructions is attached as
Annex II (the "Agreement"), you (hereafter, the "Escrow Agent")
are hereby authorized and directed to hold the documents and
funds (together with any interest thereon, the "Escrow Funds")
delivered to the Escrow Agent pursuant to the terms of the
Agreement in accordance with the following instructions:
1. The Escrow Agent shall, as promptly as feasible, notify
the Company of receipt of the purchase price from the Purchaser,
and notify the Purchaser (or such agent as the Purchaser may
designate in writing) of receipt of Debentures. As promptly as
feasible upon receipt of notice (whether oral or in written form)
from the Company and the Purchaser that the respective conditions
precedent to the purchase and sale have been satisfied (which
notice shall not be unreasonably withheld), the Escrow Agent
shall, after reduction by the amounts referred to in the next
succeeding sentence of this paragraph, release the Escrow Funds
to or upon the order of the Company, and shall release the
Debentures to the Purchaser. After receipt of such notice, an
amount equal to the fees due to the Distributor and $8,000 in
legal and escrow fees to the Escrow Agent shall be released to or
upon the order of Escrow Agent. If such Debentures are not
deposited with the Escrow Agent within ten (10) days after
receipt by the Company of notice of receipt by the Escrow Agent
of the funds from the Purchaser, Escrow Agent shall notify the
Purchaser and Purchaser shall be entitled to cancel the
subscription and demand repayment of the funds. If such funds
are not deposited with the Escrow Agent within ten (10) days
after receipt by the Purchaser of notice of receipt by the Escrow
Agent of the Debentures from the Company, Escrow Agent shall
notify the Company and the Company shall be entitled to cancel
the subscription and demand return of the Debentures. If the
Company or the Purchaser notifies the Escrow Agent that on the
Closing Date (as defined in the Agreement) the conditions
precedent to the obligations of the Company or the Purchaser, as
the case may be, under the Agreement were not satisfied or
waived, then the Escrow Agent shall return the Escrow Funds to
the Purchaser and shall return the Debentures to the Company.
Prior to return of the Escrow Funds to the Purchaser, the
Purchaser shall furnish such tax reporting or other information
as shall be appropriate for the Escrow Agent to comply with
applicable United States laws. The Escrow Agent shall deposit
all funds received hereunder in the Escrow Agent's attorney
escrow account at The Bank of New York.
<PAGE> 2
2. The Escrow Agent's duties hereunder may be
altered,
amended, modified or revoked only by a writing signed by the
Company, the Purchaser and the Escrow Agent.
3. The Escrow Agent shall be obligated only for
the
performance of such duties as are specifically set forth herein
and may rely and shall be protected in relying or refraining from
acting on any instrument reasonably believed by the Escrow Agent
to be genuine and to have been signed or presented by the proper
party or parties. The Escrow Agent shall not be personally
liable for any act the Escrow Agent may do or omit to do
hereunder as Escrow Agent while acting in good faith, and any act
done or omitted by the Escrow Agent pursuant to the advice of the
Escrow Agent's attorneys-at-law shall be conclusive evidence of
such good faith.
4. The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto
or by any other person or corporation, excepting only orders or
process of courts of law and is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court.
In case the Escrow Agent obeys or complies with any such order,
judgment or decree, the Escrow Agent shall not be liable to any
of the parties hereto or to any other person, firm or corporation
by reason of such decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered
without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on
account of the identity, authorities or rights of the parties
executing or delivering or purporting to execute or deliver the
Agreement or any documents or papers deposited or called for
hereunder.
6. The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary
properly to advise the Escrow Agent in connection with the Escrow
Agent's duties hereunder, may rely upon the advice of such
counsel, and may pay such counsel reasonable compensation
therefor. The Escrow Agent has acted as legal counsel for one or
more of the investors herein, and may continue to act as legal
counsel for one or more of the investors herein, from time to
time, notwithstanding its duties as Escrow Agent hereunder.
7. The Escrow Agent's responsibilities as Escrow Agent
hereunder shall terminate if the Escrow Agent shall resign by
written notice to the Company and the Purchaser. In the event of
any such resignation, the Purchaser and the Company shall appoint
a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or
further instruments in connection with these Joint Escrow
Instructions or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
9. It is understood and agreed that should any dispute
arise with respect to the delivery and/or ownership or right of
possession of the documents or Escrow Funds held by the Escrow
Agent hereunder, the Escrow Agent is authorized and directed in
the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of
said documents or Escrow Funds until such disputes shall have
been settled either by mutual written
<PAGE> 3
agreement of the parties concerned or by a final order, decree
or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the
Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings or (2) to deliver the Escrow
Funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having
competent subject matter jurisdiction and located in the State
and City of New York in accordance with the applicable procedure
therefor.
10. The Company and the Purchaser agree jointly and
severally to indemnify and hold harmless the Escrow Agent from
any and all claims, liabilities, costs or expenses in any way
arising from or relating to the duties or performance of the
Escrow Agent hereunder other than any such claim, liability, cost
or expense to the extent the same shall (a) have been tax
obligations in connection with Escrow Agent's fee hereunder, or
(b) have been determined by final, unappealable judgment of a
court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent, or (c) be a
liability, or arise from liability, to either the Company or the
Purchaser.
11. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be
deemed effectively given upon personal delivery or three business
days after deposit in the United States Postal Service, by
registered or certified mail with postage and fees prepaid (with
an advance copy by facsimile), addressed to each of the other
parties thereunto entitled at the following addresses, or at such
other addresses as a party may designate by ten days advance
written notice to each of the other parties hereto.
COMPANY: Systems Communications, Inc.
2575 Ulmerton Road 300
Clearwater, Florida 34622
ATT: Mr. Robert Thompson
with a copy to:
PURCHASER: At the address set forth on the first page of the
Agreement.
ESCROW AGENT: Krieger & Prager, P.A.
319 Fifth Avenue
New York, New York 10016
Telecopier No. (212) 213-2077
12. By signing these Joint Escrow Instructions, the Escrow
Agent becomes a party hereto only for the purpose of these Joint
Escrow Instructions; the Escrow Agent does not become a party to
the Agreement. The Company and the Purchaser have become parties
hereto by their execution and delivery of the Agreement, as
provided therein.
<PAGE> 4
13. This instrument shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors
and permitted assigns and shall be governed by the laws of the
State of New York without giving effect to principles governing
the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and
binding on all parties hereto.
14. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings provided in the
Agreement.
15. The rights and obligations of any party hereto are not
assignable without the written consent of the other parties
hereto. These Joint Escrow Instructions constitute the entire
agreement amongst the parties with respect to the subject matter
hereof.
SYSTEMS COMMUNICATIONS, INC.
By:
____________________________________________
Its_______________________________________
ACCEPTED BY ESCROW AGENT:
KRIEGER & PRAGER
By: _______________________________________
Date: _____________________________________
ANNEX III
________________,
1996
Purchasers of [Company] [Describe Securities]
c/o Krieger & Prager
319 Fifth Avenue
New York, New York 10016
Re: [Company]
Ladies and Gentlemen:
We have acted as counsel to [Company], a
corporation incorporated under the laws of the State
of________ (the "Company"), in connection with the
proposed issuance and sale of (the "Securities") pursuant
to the Distribution Agreement and the related Stock
Purchase Agreement (including all Exhibits and Appendices
thereto) (collectively the "Agreements") with
("Distributor"), dated_____ between the Company and the
Distributor.
In connection with rendering the opinions set forth
herein, we have examined drafts of the Agreement, the
Company's Certificate of Incorporation, and its Bylaws, as
amended to date [other documents - describe], the
proceedings of the Company's Board of Directors taken in
connection with entering into the Agreements, and such
other documents, agreements and records as we deemed
necessary to render the opinions set forth below.
In conducting our examination, we have assumed the
following: (i) that each of the Agreements has been
executed by each of the parties thereto in the same form
as the forms which we have examined, (ii) the genuineness
of all signatures, the legal capacity of natural persons,
the authenticity and accuracy of all documents submitted to
us as originals, and the conformity to originals of all
documents submitted to us as copies, (iii) that each of the
Agreements has been duly and validly authorized, executed,
and delivered by the party or parties thereto other than
the Company, and (iv) that each of the Agreements
constitutes the valid and binding agreement of the
party or parties thereto other than the Company,
enforceable against such party or parties in accordance
with the Agreements' terms.
Based upon and subject to the foregoing, we are
of the opinion that:
1. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of ________, is duly qualified to do
business as a foreign corporation and is in good standing
in all jurisdictions where the Company owns or leases
properties, maintains employees or conducts business, except
for jurisdictions in which the failure to so qualify would
not have a material adverse effect on the Company, and has
all requisite corporate power and authority to own its
properties and conduct its business;
<PAGE> 2
2. The authorized capital stock of the Company
consists of shares of Common Stock, _____________par value
per share, ("Common Stock") and shares of Preferred Stock,
par value$______ per share; [describe classes if applicable]
3. The Common Stock is registered pursuant to
Section
12(b) or Section 12(g) of the Securities Exchange Act of
1934, as amended and the Company has timely filed all
the material required to be filed pursuant to Sections
13(a) or 15(d) of such Act for a period of at least
twelve months preceding the date hereof;
4. When duly countersigned by the Company's transfer
agent and registrar, and delivered to you or upon your
order against payment of the agreed consideration therefor
in accordance with the provisions of the Agreements, the
Securities [and any Common Stock to be issued upon the
conversion of the Securities] as described in the
Agreements represented thereby will be duly authorized
and validly issued, fully paid and nonassessable;
5. The Company has the requisite corporate power
and
authority to enter into the Agreements and to sell and
deliver the Securities and the Common Stock to be
issued upon the conversion of the Securities as described
in the Agreements; each of the Agreements has been duly
and validly authorized by all necessary corporate action
by the Company to our knowledge, no approval of any
governmental or other body is required for the execution
and delivery of each of the Agreements by the Company or
the consummation of the transactions contemplated
thereby; each of the Agreements has been duly and validly
executed and delivered by and on behalf of the Company,
and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as
enforceability may be limited by general equitable
principles, bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting creditors
rights generally, and except as to compliance with federal,
state, and foreign securities laws, as to which no
opinion is expressed;
6. To the best of our knowledge, after due inquiry,
the
execution, delivery and performance of the Agreements by
the Company and the performance of its obligations
thereunder do not and will not constitute a breach or
violation of any of the terms and provisions of, or
constitute a default under or conflict with or violate any
provision of (i) the Company's Certificate of
Incorporation or By-Laws, (ii) any indenture, mortgage, deed
of
trust, agreement or other instrument to which the Company
is a party or by which it or any of its property is bound,
(iii) any applicable statute or regulation, (iv) or any
judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its
property.
7. The issuance of Common Stock upon conversion of
the
Securities in accordance with the terms and conditions of
the Agreements, will not violate the applicable listing
agreement between the Company and any securities exchange
or market on which the Company's securities are listed.
<PAGE> 3
8. To the best of our knowledge, after due inquiry,
there
is no pending or threatened litigation, investigation or
other proceedings against the Company [except as described
in Exhibit A hereto].
This opinion is rendered only with regard to the
matters set out in the numbered paragraphs above. No other
opinions are intended nor should they be inferred. This
opinion is based solely upon the laws of the United States
and the State of, ______ as currently in effect, and the
[General] Corporation Law of the State of and does not
include an interpretation or statement concerning the laws
of any other state or jurisdiction. Insofar as the
enforceability of the Agreements may be governed by the laws
of other states, we have assumed that such laws are
identical in all respects to the laws of the State of
______________.
The opinions expressed herein are given to you solely
for your use in connection with the transaction contemplated
by the Agreements and may not be relied upon by any other
person or entity or for any other purpose without our prior
consent.
Very truly yours,
By: _________________________________
ANNEX IV
SYSTEMS COMMUNICATIONS, INC. IRREVOCABLE INSTRUCTIONS
TO TRANSFER AGENT
These irrevocable instructions ("Irrevocable Instructions"),
dated as of , 1997, are given by Systems
Communications, Inc., a ___________ corporation (the "Company"),
to its registrar and transfer agent, American Securities Transfer
(Transfer Agent"), with respect to the following:
R E C I T A L S
A. The Company is offering to sell up to $1,120,000 of its
4% Convertible Debenture due October 1, 1998 (the "Debenture") of
the Company under the terms set forth in Debenture (the
"Debenture") and the "Offshore Securities Subscription Agreement"
(the "Subscription Agreement") executed by the Company and the
other signatories thereto (the "Subscribers").
B. Any Subscriber issued Debentures pursuant to a
Subscription Agreement is entitled to convert its Debentures into
shares of Common Stock of the Company, $.01 par value (the
"Converted Stock"), on the terms and conditions set forth in
Section 4 of the Debenture.
C. Assuming that each Subscriber warrants that the
representations and warranties made by the Subscriber in the
Subscription Agreement (except for those representations and
warranties in the Subscription Agreement which are not applicable
or material at the time of conversion), are true on the date the
Subscriber presents the Debenture for transfer, conversion or
legend removal, as applicable, including the fact that he, she or
it is not or was not engaged in a plan or scheme to evade the
registration provisions of the Securities Act of 1933, as
amended, and delivers to the Transfer Agent either a duly
executed Notice of Conversion, with a copy to Krieger & Prager,
Esqs., the Escrow Agents (in the case of conversion into shares
of unrestricted Conversion Stock) or a duly executed letter
requesting legend removal (together with evidence of a bona fide
pledge or intention to deposit in a margin account, if
applicable)(in the case of legend removal) then,
<PAGE> 2
(i) at any time beginning forty-five (45) days
following the Closing Date, any Subscriber issued
Debentures pursuant to a Subscription Agreement is
entitled to submit its Debentures held by such Holder
to the Transfer Agent to convert such Subscribers'
Debentures into shares of Converted Stock, the
certificates for which shall bear no Restrictive Legend (the
time beginning forty-five (45) days after the Closing
Date is referred to as the "Unrestricted Conversion
Period").
D. Any conversion of the Debenture shall be at the
conversion prices (the "Conversion Price") specified in Section 4
of the Debenture (which Section is set forth in this Irrevocable
Instructions Agreement at Exhibit A). Any such conversion shall
be accomplished by delivering the Debentures, duly executed for
transfer, to be converted along with the notice required by said
Section 5 ("Notice of Conversion") to the Transfer Agent, with a
copy to the Escrow Agent. The Debenture so delivered will be
converted into shares of Converted Stock.
E. The Company and Subscribers have agreed that Company
will provide the Transfer Agent with irrevocable instructions to
convert one or more of any Subscriber's Debenture into shares of
Converted Stock upon receipt of a Notice of Conversion from a
Subscriber and the Debenture, duly executed for transfer. The
number of shares of Converted Stock into which the Debenture may
be converted is hereinafter referred to as the "Conversion Rate"
for such Debenture.
F. The Transfer Agent has agreed to act as conversion
transfer agent on behalf of the Company on the terms and
conditions set forth in these Irrevocable Instructions;
NOW, THEREFORE, in consideration of the premises, the
Company and Transfer Agent agree and the Company irrevocably
instructs Transfer Agent as follows:
1. ISSUANCE OF UNRESTRICTED CONVERTED SHARES. Upon
receipt by the Transfer Agent of one or more Debentures, which
the Holder desires to convert into Common Stock of the Company,
duly executed for transfer, within the Unrestricted Conversion
Period as to such Debentures and a duly executed Notice of
Conversion, with a copy to the Escrow Agent, specifying the
number of shares of Converted Stock to which that Subscriber is
entitled (which number is determined by the formula in Section 4
of the Debenture which Section 4 is attached to this Irrevocable
Instructions Agreement as Exhibit A and by this reference is
incorporated in this document as though set forth in full herein)
<PAGE> 3
the Company irrevocably directs the Escrow Agent to (a) calculate
the number of shares of Converted Stock to which the Subscriber
is entitled (which number is determined by the provisions
contained in Section 4 of the Debenture), (b) notify the Company
in writing, by facsimile, including a facsimile of the conversion
documents presented to the Escrow Agent, within two (2) business
days after receipt of a facsimile of the Notice of Conversion, of
the number of shares of Converted Stock to be issued, and (c)
subject to the provisions of Section 4 hereof, direct the
Transfer Agent to issue and mail via express courier the
appropriate number of shares of Converted Stock directly to the
Subscriber within three (3) business days of the date of receipt
of the Notice of Conversion and the Debenture, duly executed for
transfer, to be converted in accordance with Section 4 of the
Debenture. The certificates representing the Converted Stock
issued in the name of the Subscriber (during the Unrestricted
Conversion Period as to the Debentures submitted for conversion)
shall not bear a Restrictive Legend.
2. DISPUTE AS TO NUMBER OF CONVERTED SHARES TO BE ISSUED.
In the event that the number of shares that the Escrow Agent
reasonably calculates to be due a particular Subscriber upon
conversion is different from the number of shares claimed by the
Subscriber, by virtue of the conversion price or other
information set forth in its Notice of Conversion, the Escrow
Agent shall nevertheless direct the Transfer Agent to issue and
deliver to the Subscriber a number of shares equal to the lesser
of the two numbers within two (2) business days, and, as to the
issuability of the remaining disputed number of shares of
Converted Stock, shall submit the dispute within two (2) business
days to the Company's usual outside accounting firm
("Accountant") for determination of the number of shares of
Converted Stock to be issued. In the event of such a dispute,
the Company agrees to instruct its Accountant, at the Company's
expense, to resolve any such dispute and notify the parties of
the result within three (3) business days after receipt of notice
of such dispute. Within two (2) business days of its receipt of
the Accountant's results, the Transfer Agent shall issue and
deliver to the Subscriber any additional shares to which the
Subscriber is entitled, based upon the Accountant's results. The
Transfer Agent is authorized to rely on the Accountant's results.
3. FEES. The Company hereby agrees to pay the Escrow
Agent and the Transfer Agent for all services rendered hereunder.
4. NOTICES. Any notice or demand to be given or that may
be given under this Agreement shall be in writing and shall be
(a) delivered by hand, or (b) delivered through or by expedited
mail or package service, or (c) transmitted by telecopy, in which
case with personal deliver acknowledged, addressed to the parties
<PAGE> 4
as follows:
As to the Company:
Systems Communications, Inc.
2575 Ulmerton Road 300 Clearwater, Florida 34622
ATT: Mr. Robert Thompson Tel:
Fax:
As to the Escrow Agent:
Samuel M. Krieger, Esq. Krieger & Prager
319 Fifth Avenue
New York, New York 10016 Tel: (212) 689-3322 Fax:
(212) 213-2077
As to the Transfer Agent:
American Securities Transfer
Tel:
Fax:
5. CANCELLATION OF DEBENTURES. Upon issuance of any
Converted Stock, the Company shall mark on the face of the
Debenture so converted the word "cancelled".
6. INDEMNIFICATION. The Company agrees to indemnify and
hold harmless the Escrow Agent, the Transfer Agent, each officer,
director, employee and agent of the Escrow Agent and the Transfer
Agent, and each person, if any, who controls the Escrow Agent and
the Transfer Agent within the meaning of the Securities Act of
1933, as amended (the "Act") or the Securities Exchange Act of
1934, as amended (the "Exchange Act") against any losses, claims,
damages or liabilities, joint or several, to which it, they or
any of them, or such controlling person, may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon the performance by the Escrow Agent and the
Transfer Agent of their duties pursuant to this Agreement; and
will reimburse the Escrow Agent and the Transfer Agent, and each
officer, director, employee and agent of the Escrow Agent and
Transfer Agent, and each such controlling person for any legal or
other expenses reasonably incurred by it or any of them in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any case if such loss, claim, damage or
liability arises out or is based upon any action not taken in
good faith, or any action or omission that constitutes gross
negligence or willful misconduct.
<PAGE> 5
If a claim is made against the Company under this
Section, then promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will notify the Company, in writing, of
the commencement thereof. The failure to so notify the Company
will relieve the Company from any liability under this Section as
to the particular item for which indemnification is then being
sought, but not from any other liability which it may have to any
indemnified party. In case any such action is brought against
any indemnified party, and it notifies the Company of the
commencement thereof, the Company will be entitled to participate
with the other indemnifying party, similarly notified, to assume
the defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after notice from
indemnifying party to such indemnified party under this Section
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation. The Company shall not be
liable to any such indemnified party on account of any settlement
of any claim of action effected without the consent of the
company.
7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York
without giving effect to conflicts of law provisions.
8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together
with the Exhibits hereto, the Subscription Agreement and the
Debentures constitute the full and entire understanding of the
parties with respect to the subject matter hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the
party against whom enforcement of such amendment, waiver
discharge or termination is sought. Each of the undersigned
acknowledges that Holders of Debentures are third party
beneficiaries to this Agreement and that, notwithstanding the
above, no provision herein that adversely affects the rights of
the Holders of Debentures or the Common Stock issuable upon
conversion of Debentures may be amended without the consent of
all Holders of the then outstanding Debentures.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement this ____ day of _______________, 1997.
SYSTEMS COMMUNICATIONS, INC.
By: ____________________________________
Title:______________________________
Date____________ Signed:________________________
________________________
<PAGE> 6
AMERICAN SECURITIES TRANSFER
By: ____________________________________
Title:__________________________________
Date ________________
Signed: ________________________
AGREED & ACCEPTED:
KRIEGER & PRAGER, ESQS.
Escrow Agent
By: ______________________________________
<PAGE> 81
ANNEX V
3.k. The Company is in default of the following agreements:
(i) Note payable to Telford Walker in the amount of
$200,000.00 due September 29, 1996, interest at
10%;
(ii) Demand note payable to James Gary May in the
amount of
$100,000.00;
(iii) Lease agreement for National Solutions
Corporation,
Sarasota Quay, Florida location; and
(iv) Other trade payables incurred in the ordinary
course of
business which do not exceed the amount of
approximately $500,000.00 in the aggregate.
397 8K 03/25/97 2:44 PM
<PAGE> 82
Exhibit 3(m)
1. During the period December 31,1995 to the date hereof,
the Company issued 3,406,076 shares of its common stock,
411,402 shares of which were issued for cash in private
placements, 44,040 shares of which were issued for services,
283,172 shares of which were issued in connection with
acquisitions, 2,443,117 shares of which were issued upon
conversion of preferred stock, 19,345 shares of which were
issued upon conversion of convertible debt and 205,000
shares of which were issued pursuant to Regulation S.
2. As of this date the Company has $200,000 of outstanding
10% convertible debentures issued pursuant to Regulation S.
