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 0000 Xxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxx; (hereinafter referred to as "SCMI"); and
VICTORY INVESTMENTS, LLC with an office located at 000 Xxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxx 00000; (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.
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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.
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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:
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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 Xxxxxx X. XxXxxxx, 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 Xxxxxx X. XxXxxxx, 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.
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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.
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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.
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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 Xxxxxx County, Atlanta,
Georgia.
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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.
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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: _______________
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX
If to VICTORY: Xxxxxx X. Xxxxx
VICTORY INVESTMENTS, LLC
000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have executed this Agreement.
VICTORY INVESTMENTS, LLC
_____________ By:________________________________
Date Xxxxxx X. Xxxxx, President
SYSTEMS COMMUNICATION, INC.
_____________ By:_______________________________
Date
