SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported): December 14, 1998

                           SIMS Communications, Inc.
             (Exact name of registrant as specified in its charter)


           Delaware                   0-25474            65-0287558
(State or other jurisdiction of     (Commission        (I.R.S. Employer
 incorporation or organization)       File Number)      Identification No.)

                            18001 Cowan, Suite C & D
                            Irvine, California 92614
                    (Address of principal executive offices)
                                   (Zip Code)

                                (949) 261-6665
            (Registrant's telephone number, including area code)


                                       N/A
              (Former name, former address and former fiscal year,
                           if changed since last report)

<PAGE>


Item 5.  Other Events

     On November 11, 1998,  the Company  completed a business  transaction  with
MedCard  Management  Systems,  Inc.  ("MedCard")  whereby the  Company  acquired
certain  assets of Medcard,  including the exclusive  rights to the MedCard name
and The MedCard System software and network. The MedCard System is an electronic
processing  system that  consolidates  insurance  eligibility  verification  and
processes  medical claims and approval of credit card/debit card payments within
30 seconds. Consideration for the transaction included cash of $450,000, 100,000
shares of restricted common stock,  options to purchase 350,000 shares of common
stock and royalties on future sales.

    In November and December 1998, the Company sold 1,500 shares of its Series C
Preferred Stock (the "Preferred  Stock") to a group of  institutional  investors
for  $1,500,000.  Each  Preferred  Shares  is  convertible  into  shares  of the
Company's  common  stock  equal in number to the amount  determined  by dividing
$1,000 by the lower of (i)  $1.31  (or $1.11 in the case of 750  shares  sold in
December),  or (ii) the average price of the Company's  common stock for any two
trading days during the twenty-two trading days preceding the conversion date.

    For each Series C Preferred Stock held by a preferred stockholder on certain
dates, (the "Warrant Valuation Dates") the Company will issue 50 warrants to the
preferred shareholder.

    The Warrant Valuation Dates are generally the following: (1)

                                  May 30, 1999
                                  June 30, 1999
                                  July 30, 1999
                                 August 30, 1999
                               September 30, 1999
                                October 30, 1999
                                November 30, 1999

(1) The Warrant  Valuations  Dates are  determined in reference to the dates the
    Series C Preferred  Shares were issued.  Since the Series C Preferred Shares
    were issued on  different  dates,  the actual  Warrant  Valuation  Dates are
    within seven days of the dates shown below.

    Each warrant will entitle the holder to purchase one additional share of the
Company's  common  stock  for $1.50 per share (or $1.27 per share in the case of
the 750 shares  sold in December  1998) at any time during a period  ending five
years after the Warrant Valuation Date. If none of the Series C Preferred Shares
are converted  into shares of the  Company's  common stock prior to November 30,
1999 the  Company  would be  required  to issue  warrants  which would allow the
holders of the Series C Preferred  Stock to purchase of up to 525,000  shares of
the Company's common stock.

<PAGE>
    The  Company  has the right to redeem the Series C  Preferred  Shares at any
time. Depending upon the date of redemption,  the Company is required to pay the
following amount for each Series C Preferred Share redeemed by the Company, plus
all accrued and unpaid dividends up to the Redemption Date.

If Redemption Date is after: (1)  Redemption Price per Series C Preferred Share

    November 30, 1998                             $1,100
    January 30, 1999                              $1,150
    March 1, 1999                                 $1,200
    April 1, 1999                                 $1,250 (2)

(1)  The dates  below are  determined  in  reference  to the dates the  Series C
     Preferred  Shares were  issued.  Since the Series C  Preferred  Shares were
     issued on different  dates,  the relevant  dates after which the Redemption
     Price changes are within seven days of the dates shown below.

(2)  If the Redemption  Date is after April 1, 1999 the Redemption  Price is the
     greater of (a) $1,250 or (b) the full  economic  benefit  the holder  would
     derive from  converting the Series C Preferred Stock and selling the common
     stock on the Redemption Date.

For each share of the Series C  Preferred  Stock  redeemed  by the  Company  the
Company has agreed to issue to the former holder of the redeemed shares warrants
which will  entitle the former  holder to purchase  200 shares of the  Company's
common stock at a price equal to 120% of the closing bid price of the  Company's
common  stock on the  date  prior  to the  Redemption  Date.  The  warrants  are
exercisable  during a period ending five years from the Redemption  Date. If all
1,500  shares of the Series C  Preferred  Stock are  redeemed by the Company the
Company would be required to issue warrants which would allow the former holders
to purchase up to 300,000 shares of the Company's common stock.

    The  following  condensed  pro  forma  balance  sheet of the  Company  as of
September  30, 1998  reflects  the issuance of the shares of common stock in the
MedCard transaction and the sale of the Company's Series C Preferred Stock:

                                                          September 30, 1998
                         September 30, 1998  Adjustments   (as adjusted)
ASSETS:

Cash and cash equivalents      $341,684     $1,440,000 (1) $1,781,684
Accounts receivables,
   less allowance for
   doubtful accounts            147,333                       147,333
Inventories                     440,905                       440,905

<PAGE>


                                                        September 30, 1998
                         September 30, 1998  Adjustments   (as adjusted)
ASSETS:

Prepaid expenses and
   other current assets
   196,512
Notes receivable,
   current portion              150,000                       150,000
Property and Equipment
net of accumulated 
depreciation                  2,668,337     120,000 (2)     2,668,337
Notes receivable                415,360                       415,360
Patents, net of accumulated
amortization                    382,665                       382,665
Goodwill                        935,939                       935,939
Other                           121,355                       121,355
                              ---------      ---------      ---------
   Total Assets              $5,800,090     $1,560,000     $7,360,090
                             ==========     ==========     ==========


LIABILITIES:

Accounts payable and
  Accrued Expenses           $1,085,686                     1,085,686
Bank Line of credit             250,000                       250,000
Current obligations
under capital lease              77,109                        77,109
Current maturities
  of long term debt             664,174                       664,174
Franchise deposits
  and deferred revenue          827,661                       827,661
Long term debt                  216,674                       216,674
Obligations under
  capital leases                392,010                       392,010
                                -------                       -------

          Total Liabilities   3,513,404                     3,513,404

STOCKHOLDERS' EQUITY
   Preferred Stock, Series A and B  125                           125
   Preferred Stock, Series C                      $150 (1)        150
   Common Stock                     917             10 (2)        927
Additional Paid in Capital   24,310,287      1,439,850     25,870,127
                                               119,990 (2)

Accumulated Deficit         (22,024,682)                  (22,024,682)
                            ------------                  ------------

Total Stockholders' Equity    2,286,686                     3,846,686
                              ---------                     ---------

Total Liabilities and
Stockholders' Equity         $5,800,090     $1,560,000     $7,360,090
                             ==========     ==========     ==========

<PAGE>


(1) Reflects  sale of 1,500 shares of Series C Preferred  Stock for  $1,500,000,
    less related offering expenses.

(2) Reflects  issuance of 100,000  shares of  Company's  common stock as partial
    payment of software, assets and other technology from Medcard.

Item 7.  Financial Statements and Exhibits

The following exhibits are filed with this report.

                   Exhibits                 Description
                   --------                 -------------
                     4              Designation  of  Series C  Preferred
                                    Stock (as amended)

                     10             Series C  Preferred  Stock  Purchase
                                    Agreement,     Escrow     Agreement,
                                    Registration  Rights  Agreement  and
                                    Form of Warrant


                                  SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

DATE: December 14, 1998
                                       SIMS COMMUNICATIONS, INC.

                                       By  /s/ Mark Bennett
                                        --------------------------------- 
                             
                                              Mark Bennett, President
<PAGE>


         
                                    EXHIBIT 4

<PAGE>

                                                                      EXHIBIT A
                                AMENDMENT TO THE

                           CERTIFICATE OF DESIGNATION

                                       of

                      SERIES C CONVERTIBLE PREFERRED STOCK

                                       of

                            SIMS COMMUNICATIONS, INC.

      (Pursuant to Section 151 of the Delaware General Corporation Law)


            SIMS  COMMUNICATIONS,  INC., a  corporation  organized  and existing
under the  General  Corporation  Law of the State of Delaware  (the  "Company"),
hereby  certifies  that the following  resolutions  were adopted by the Board of
Directors  of the Company as required by Section 151 of the General  Corporation
Law at a meeting of the Company's Board of Directors held on December , 1998:

            RESOLVED,  that pursuant to the  authority  granted to and vested in
the Board of  Directors  of the Company  (the  "Board") in  accordance  with the
provisions  of  the   Certificate  of   Incorporation   (the   "Certificate   of
Incorporation"),  the Board hereby amends the  Certificate of  Designation  (the
"Certificate  of  Designation")  which  created out of the  1,000,000  shares of
Preferred  Stock,  par value  $0.001 per share,  of the  Company  authorized  in
Article Four of the  Certificate of  Incorporation  (the "Preferred  Stock"),  a
series of the  Preferred  Stock of the  Company,  par value  $0.001  per  share,
designated  as Series C  Convertible  Preferred  Stock  and  hereby  amends  the
designation, relative rights, preferences, and limitations thereof as follows:

I. Designation and Amount. The shares of such series of Preferred Stock shall be
designated  as "Series C Convertible  Preferred  Stock" (the "Series C Preferred
Stock") and the number of shares constituting the Series C Preferred Stock shall
be 2,060.  The Series C Preferred  Stock shall have a stated  value (the "Stated
Value") of $1,000per share.

II.   Dividends.

      A. The holders of shares of Series C Preferred  Stock shall be entitled to
receive dividends, out of any assets legally available therefore,  prior to, and
in preference to, any declaration or payment of any dividend (payable other than
in Common Stock of this Company) on the Common Stock of this  Company,  at a per
share rate equal to six percent  per annum of the amount of the Stated  Value of
the Series C Preferred Stock, which is payable upon conversion (including Forced
Conversion)  as set  forth  below.  Dividends  shall  begin to  accrue as of the

<PAGE>

Issuance Date and are based upon a 365 calendar day year. Any dividends  payable
pursuant to the provisions of this paragraph shall, at the Company's  option, be
payable in cash, or  unrestricted  shares of Common Stock of the Company  within
five Business Days of when due. In the event the Company chooses to issue Common
Stock as payment of the  dividends,  but at such time such Common  Stock has not
been  included in an  effective  registration  statement,  the Company may delay
issuance of the Common Stock until such time as these shares of Common Stock are
subject to an effective registration  statement.  Dividends, as set forth above,
will  continue  to accrue  until  such  time as such  Common  Stock (as  payment
therefor)  is issued,  and the  Company  shall issue such  additional  number of
shares of Common Stock for such additional  dividends.  If the Company elects to
pay the  dividends in shares of Common Stock and if these shares of Common Stock
are not subject to an effective  registration statement within 180 calendar days
after the Issuance  Date,  the Company will pay to the holder,  on or before the
183rd  calendar day after the Issuance Date all accrued and unpaid  dividends in
immediately  available  funds. The number of shares of Common Stock to be issued
by the Company in lieu of a cash payment for  dividends  due as set forth herein
shall be equal to the number of shares of Common Stock  resulting  from dividing
the dollar amount of dividends owed by the  Conversion  Price (as defined below)
on such date as the  dividends  are payable (if such date is not a Trading  Day,
then the next Trading Day immediately thereafter).

      B. Such dividends  shall accrue on each share of Series C Preferred  Stock
from the Issuance  Date,  and shall accrue from day to day whether or not earned
or declared.  Such  dividends  shall be cumulative so that if such  dividends in
respect of any previous or current annual  dividend  period,  at the annual rate
specified  above,  shall not have been paid or declared and a sum sufficient for
the  payment  thereof set apart,  for all Series C  Preferred  Stock at the time
outstanding,  the  deficiency  shall first be fully paid before any  dividend or
other  distribution  shall be paid on or  declared or set apart for the Series C
Preferred Stock or Common Stock. Dividends on the Series C Preferred Stock shall
be  non-participating  and the holders of the Series C Preferred Stock shall not
be  entitled  to  participate  in any  other  dividends  beyond  the  cumulative
dividends specified herein.

III.  Liquidation, Dissolution or Winding Up.

      A. In the  event of any  liquidation,  dissolution  or  winding  up of the
Company,  whether voluntary or involuntary,  before any distribution may be made
with respect to the Company's Common Stock or any other series of capital stock,
holders of each share of Series C  Preferred  Stock shall be entitled to receive
out of the assets  available for  distribution to  shareholders  $1,000 plus six
percent per annum  thereon  from the  Issuance  Date (as  defined  below) to the
Trading  Day  (as  defined  below)   immediately   prior  to  such  liquidation,
dissolution or winding up of the Company ( the "Liquidation Amount").

      B. If the assets of the Company available for distribution to shareholders
shall be  insufficient  to pay the holders of shares of Series C Preferred Stock
the full  Liquidation  Amount to which  they  shall be  entitled,  then any such
distribution  of assets  of the  Company  shall be  distributed  ratably  to the
holders of shares of Series C Preferred Stock

<PAGE>

      C. After the  payment of the  Liquidation  Amount  shall have been made in
full to the holders of the Series C Preferred  Stock or funds necessary for such
payment  shall have been set aside by the  Company  in trust for the  account of
holders of the Series C Preferred Stock so as to be available for such payments,
the  holders of the Series C  Preferred  Stock  shall be  entitled to no further
participation  in  the  distribution  of the  assets  of the  Company,  and  the
remaining   assets  of  the  Company  legally   available  for  distribution  to
shareholders  shall be  distributed  among the  holders of Common  Stock and any
other  classes or series of Preferred  Stock of the Company in  accordance  with
their respective terms.

      IV.   Voting.  Holders of Series C Preferred  Stock shall have no voting
rights except as expressly required by law or as expressly provided herein.

      V.  Conversion  of  Series C  Preferred  Stock.  The  holders  of Series C
Preferred  Stock shall have the right, at such holder's  option,  to convert the
Series C Preferred Stock into shares of Common Stock, on the following terms and
conditions:

      A.  Subject to the  provisions  of the Forced  Conversion  and  Redemption
hereof, at any time or times, upon the earlier to occur of (i) the 90th calendar
day after the  Issuance  Date,  or (ii) the  Effective  Date,  any holder of the
Series C Preferred Stock shall be entitled to convert any whole number of shares
of Series C Preferred Stock into fully paid and  nonassessable  shares of Common
Stock,  which is determined (per share of Series C Preferred  Stock) by dividing
(x) $1,000,  by (y) the  Conversion  Price (as defined  below) (the  "Conversion
Rate").

      B. For purposes of this  Certificate of  Designation,  the following terms
shall have the following meanings:

            A  "Business  Day" shall be any day other than a  Saturday,  Sunday,
national holiday or a day on which the New York Stock Exchange is closed.

            The "Closing Bid Price" shall mean, for any security as of any date,
the last  closing  bid price for such  security  on the Nasdaq  Stock  Market as
reported by Bloomberg L.P. ("Bloomberg"),  or, if the Nasdaq Stock Market is not
the principal  trading market for such  security,  the last closing bid price of
such security on the principal  securities exchange or trading market where such
security is listed or traded as reported by  Bloomberg,  or if the  foregoing do
not apply,  the last closing bid price of such security in the  over-the-counter
market on the OTC  Electronic  Bulletin  board for such  security as reported by
Bloomberg,  or, the last  closing  trade  price of such  security as reported by
Bloomberg,  or,  if no last  closing  bid or trade  price is  reported  for such
security by Bloomberg, the closing bid price shall be determined by reference to
the  closing  bid  price as  reported  on the  Principal  Market,  and if not so
reported  shall be  determined  from the average of the bid prices of any market
makers for such  security  as  reported in the "pink  sheets"  published  by the
National  Quotation  Bureau,  Inc. If the Closing Bid Price cannot be calculated
for such  security on such date on any of the foregoing  bases,  the Closing Bid
Price of such  security on such date shall be the fair market  value as mutually
agreed by the Company and the holders of two thirds of the outstanding shares of
Series C Preferred Stock.

<PAGE>

            The  "Conversion  Price" shall mean, as of any  Conversion  Date (as
defined below) the lesser of (i) 105% of the Issuance  Price, or (ii) 80% of the
average of the two lowest  Closing Bid Prices of the Common  Stock during the 22
Trading Days (the "Lookback Period")  immediately  preceding the Conversion Date
(hereinafter referred to as the "Current Price"). Notwithstanding the foregoing,
in the event a Conversion Date occurs on or before  the120th  calendar day after
the Issuance Date,  then the Conversion  Price shall not be less than 50% of the
Closing Bid Price on the Trading Day immediately preceding the Issuance Date.

            "Effective  Date"  shall mean the date on which the  Securities  and
Exchange   Commission  (the  "SEC")  first  declares  effective  a  Registration
Statement  registering  the  resale of 200%  percent  of the number of shares of
Common Stock issuable  (irrespective  of any shareholder  approval  requirement)
upon  conversion  of all of the  Series C  Preferred  Stock  outstanding  on the
Trading Day immediately preceding the day such Registration Statement is filed.

            The "Issuance Date" shall mean, with respect to each share of Series
C Preferred  Stock,  the date of issuance  of the  applicable  share of Series C
Preferred Stock.

            The  "Issuance  Price"  shall mean 100% of the  average  Closing Bid
Price of the Common Stock for the five consecutive  Trading Day period ending on
the Trading Day immediately preceding the Issuance Date.

            A  "Trading  Day"  shall  mean a day on  which  the New  York  Stock
Exchange is open.

            The "Principal  Market" shall mean the Nasdaq National  Market,  the
Nasdaq Small Cap Stock Market,  the American Stock Exchange,  the OTC Electronic
Bulletin Board operated by the National Association of Securities Dealers, Inc.,
or the New York Stock Exchange,  whichever is at the time the principal  trading
exchange or market for the Common Stock.

      C. In the event the  Current  Price is greater  than 150% of the  Issuance
Price,  then  the  number  of  shares  of  Common  Stock to be  issued  upon the
conversion  of each share of Series C  Preferred  Stock  shall be reduced by the
number of shares of Common Stock derived from the following formula:

  ((1,000 x Current Price) / Issuance Price) - 1,000) / (Current Price x 2)

      D. Holders of Series C Preferred Stock may exercise their right to convert
the Series C Preferred Stock by telecopying an executed and completed  notice of
conversion (the "Notice of Conversion") to the Company and delivering to Company
the original Notice of Conversion and the certificate  representing the Series C
Preferred Stock being converted by reputable  overnight  courier.  Each Business
Day  (between  the hours of 7:00 a.m.  and 5:00  p.m.  Pacific  Time) on which a
Notice of  Conversion  is  telecopied  to and  received by the Company  shall be
deemed a "Conversion  Date". The Company will deliver,  or instruct its transfer
agent to deliver, the certificates  representing shares of Common Stock issuable
upon  conversion  of any share of Series C Preferred  Stock  (together  with the
certificates representing the share or shares of Series C Preferred Stock not so
converted) to the holder thereof via reputable  overnight courier, by electronic
transfer or  otherwise  within five  Business  Days after the  Conversion  Date,

<PAGE>

provided the Company has received the original Notice of Conversion and Series C
Preferred  Stock  certificate  being so  converted  on or  before  the  close of
business of the third Business Day after the Conversion Date. In addition to any
other  remedies  which may be  available  to the  holders  of shares of Series C
Preferred Stock, in the event that the Company fails to deliver,  such shares of
Common Stock within such five  Business Day period,  the holder will be entitled
to revoke the  relevant  Notice of  Conversion  by  delivering  a notice to such
effect to the  Company  whereupon  the  Company  and such  holder  shall each be
restored to their  respective  positions  immediately  prior to delivery of such
Notice of  Conversion.  The Notice of  Conversion  and Series C Preferred  Stock
certificates  representing the portion of the Series C Preferred Stock converted
shall be delivered as follows:

            To the Company:

                  Sims Communications, Inc.
                  18001 Cowan, Suite C & D
                  Irvine, California 92614
                  Attention:  President
                  Telephone:  (800) 241-1227
                  Facsimile:  (949) 261-0323

            In the event that shares representing the Common Stock issuable upon
conversion  of the Series C Preferred  Stock (the  "Conversion  Shares") are not
delivered by the Company within five Business Days after the Conversion Date, in
addition to all other available remedies which such holder may be entitled,  the
Company shall pay to the holders thereof,  in immediately  available funds, upon
demand,  as  liquidated  damages for such failure and not as a penalty,  on each
date after such fifth  Business Day (or fourth  Business Day if not delivered to
reputable  overnight  courier as set forth above) that  conversion is not timely
effected, an amount equal to 0.5% of the product of (a) the sum of the shares of
Common Stock not issued to the holder on a timely basis, as set forth above, and
to which such  holder is  entitled  and in the event the  Company  has failed to
deliver a Series C Preferred  Stock  certificate to the holder on a timely basis
as set  forth  above,  the  number  of shares  of  Common  Stock  issuable  upon
conversion of the shares of Series C Preferred Stock  represented by such Series
C Preferred Stock certificate, and (B) the Closing Bid Price of the Common Stock
on the last possible Trading Day which the Company could have issued such Common
Stock and  Series C  Preferred  Stock  certificate,  as the case may be, to such
holder without violating the delivery requirements set forth above. In the event
the Company fails to pay the  liquidated  damages as set forth above within five
Business Days of the date incurred, then such payment shall bear interest at the
rate of two percent per month (pro rated for partial months) until such payments
are made.  Any and all payments  required  pursuant to this  paragraph  shall be
payable only in cash.



<PAGE>


      E. If the  Common  Stock  issuable  upon the  conversion  of the  Series C
Preferred Stock shall be changed into the same or different  number of shares of
any  class  or   classes   of  stock,   whether   by   capital   reorganization,
reclassification  or  otherwise,  then and in each such  event,  the  holders of
Series C Preferred Stock shall have the right  thereafter to convert such shares
into the kind and amount of shares of stock and other  securities  and  property
receivable upon such capital  reorganization,  reclassification  or other change
which such  holders  would have  received had their shares of Series C Preferred
Stock  been  converted   immediately  prior  to  such  capital   reorganization,
reclassification or other change.

      F.  If at any  time  or  from  time  to  time  there  shall  be a  capital
reorganization  of the Common  Stock  (other  than a  subdivision,  combination,
reclassification  or exchange of shares  provided for elsewhere in this Section)
or a merger or consolidation of the Company with or into another corporation, or
the sale of all or substantially  all of the Company's  properties and assets to
any  other   person   (any  of  which   events  is  herein   referred  to  as  a
"Reorganization"),  then as a part of such  Reorganization,  provision  shall be
made so that the holders of the Series C Preferred  Stock  shall  thereafter  be
entitled to receive upon conversion of the Series C Preferred  Stock, the number
of shares of stock or other  securities  or property of the  Company,  or of the
successor corporation  resulting from such Reorganization,  to which such holder
would have been  entitled  if such holder had  converted  its shares of Series C
Preferred  Stock  immediately  prior to such  Reorganization.  In any such case,
appropriate  adjustment  shall be made in the  application  of the provisions of
this Section with respect to the rights of the holders of the Series C Preferred
Stock after the  Reorganization,  to the end that the provisions of this Section
(including  adjustment of the number of shares  issuable upon  conversion of the
Series C  Preferred  Stock)  shall be  applicable  after that event in as nearly
equivalent a manner as may be practicable.

      G.  Upon  the  occurrence  of  each  adjustment  or  readjustment  of  the
Conversion Price of Series C Preferred Stock, the Company, at its expense, shall
promptly  compute such  adjustment or  readjustment in accordance with the terms
hereof and prepare and furnish to each holder of such Series C Preferred Stock a
certificate  executed by the  president and chief  financial  officer (or in the
absence of a person designated as the chief financial officer, by the treasurer)
setting forth such  adjustment or  readjustment  and showing in detail the facts
upon which such adjustment or readjustment  are based.  The Company shall,  upon
written request at any time of any holder of Series C Preferred  Stock,  furnish
or cause to be  furnished  to such holder a  certificate  setting  forth (A) the
Conversion  Price at the time in effect,  and (B) the number or shares of Common
Stock and the  amount,  if any,  of other  property  which at the time  would be
received upon the conversion of a share of Series C Preferred Stock.

      H. Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of any Series C Preferred Stock  certificate(s),  and (in the case
of loss, theft or destruction) of indemnity or security reasonably  satisfactory
to the  Company,  and upon the  cancellation  of the  Series C  Preferred  Stock
certificate(s),  if  mutilated,  the  Company  shall  execute  and  deliver  new
certificates for Series C Preferred Stock of like tenure and date. However,  the
Company shall not be obligated to reissue such lost or stolen  certificates  for
shares of Series C Preferred Stock if the holder contemporaneously  requests the
Company to convert such shares of Series C Preferred Stock into Common Stock.

<PAGE>


      I. The Company  shall not issue any  fraction  of a share of Common  Stock
upon any conversion.  The Company shall round such fraction of a share of Common
Stock up to the nearest whole share.

      J. In the event some but not all of the shares of Series C Preferred Stock
represented  by a  certificate  or  certificates  surrendered  by a  holder  are
converted,  the  Company  shall  execute  and  deliver to or on the order of the
holder, at the expense of the Company, a new certificate representing the number
of shares of Series C Preferred Stock which were not converted.

      K. Each share of Series C Preferred  Stock  outstanding two years from the
Issuance Date shall automatically be converted into Common Stock on such date at
the  Conversion  Price and such date  shall be deemed the  Conversion  Date with
respect to such shares.

      L. The Company shall pay any and all original issue and/or  transfer taxes
which may be imposed upon it with respect to the issuance and delivery of Common
Stock upon conversion of the Series C Preferred Stock.

VI. No  Reissuance of Series C Preferred  Stock.  No share or shares of Series C
Preferred  Stock  acquired by the Company by reason of purchase,  conversion  or
otherwise shall be reissued, and all such shares shall be canceled,  retired and
eliminated  from the shares which the Company shall be authorized to issue.  The
Company may from time to time take such  appropriate  corporate action as may be
necessary  to reduce the  authorized  number of shares of the Series C Preferred
Stock accordingly.

VII.  Reservation of Shares.  The Company shall,  so long as any of the Series C
Preferred Stock are outstanding reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Series C Preferred  Stock,  such  number of shares of Common  Stock as shall
from time to time be sufficient to effect the  conversion of all of the Series C
Preferred Stock then  outstanding;  provided that the number of shares of Common
Stock so reserved  shall at no time be less than 200% of the number of shares of
Common Stock for which the Series C Preferred Stock are at any time  convertible
and if at any time the number of authorized but unissued  shares of Common Stock
shall not be sufficient  to maintain such number of shares of Common Stock,  the
Company  shall take such  corporate  action as may be  necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.

VIII. Restrictions and Limitations.

      A. Except as expressly  provided  herein or as required by law, so long as
any shares of Series C Preferred  Stock remain  outstanding,  the Company  shall
not,  without the approval by vote or written consent by the holders of at least
two thirds of the then outstanding shares of Series C Preferred Stock, voting as
a separate  class  take any  action  that  would  adversely  affect the  rights,
preferences or privileges of the holders of Series C Preferred Stock.



<PAGE>


      B. Without limiting the generality of the preceding paragraph, the Company
shall not so long as any shares of Series C Preferred  Stock remain  outstanding
amend its Articles of  Incorporation  without the approval by the holders of all
of the then  outstanding  shares of Series C Preferred  Stock if such  amendment
would:

            1.  create any other  class or series of capital  stock  entitled to
            seniority  as to the payment of dividends in relation to the holders
            of Series C Preferred Stock;

            2.  reduce the amount  payable to the  holders of Series C Preferred
            Stock upon the voluntary or involuntary liquidation,  dissolution or
            winding up of the Company,  or change the relative  seniority of the
            liquidation  preferences of the holders of Series C Preferred  Stock
            to the rights upon liquidation of the holders of other capital stock
            of the Company,

            3. cancel or modify the conversion rights of the holders of Series C
            Preferred Stock provided for in Section V herein;

            4.  cancel  or modify  the  rights of the  holders  of the  Series C
            Preferred Stock provided for in this Section.

IX. No  Dilution or  Impairment.  The Company  shall not,  by  amendment  of its
Articles of  Incorporation  or through any  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Certificate of Designation set forth herein,  but shall at all
times in good  faith  assist in the  carrying  out of all such  terms and in the
taking  of all such  actions  as may be  necessary  or  appropriate  in order to
protect  the  rights of the  holders  of the Series C  Preferred  Stock  against
dilution or other impairment.  Without limiting the generality of the foregoing,
the  Company  (a)  shall  not  establish  a par  value  of any  shares  of stock
receivable on the  conversion  of the Series C Preferred  Stock above the amount
payable  therefor on such  conversion,  (b) shall take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  shares of stock on the conversion of all Series C
Preferred  Stock from time to time  outstanding,  and (c) shall not  consolidate
with or merge  into any other  person or entity,  or permit  any such  person or
entity to consolidate  with or merge into the Company (if the Company is not the
surviving person),  unless such other person or entity shall expressly assume in
writing  and will be bound by all of the terms of the Series C  Preferred  Stock
set forth herein.

X. Notices of Record Date. In the event of:

               1. any taking by the  Company  of a record of the  holders of any
class of securities for the purpose of determining  the holders  thereof who are
entitled  to  receive  any  dividend  or  other  distribution,  or any  right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or



<PAGE>


               2.   any   capital    reorganization   of   the   Company,    any
reclassification or  recapitalization  of the capital stock of the Company,  any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or

               3. any  voluntary  or  involuntary  dissolution,  liquidation  or
winding up of the Company, then and in each such event the Company shall mail or
cause  to be  mailed  to each  holder  of  Series  C  Preferred  Stock a  notice
specifying  (i) the date on which any such record is to be taken for the purpose
of such  dividend,  distribution  or right and a description  of such  dividend,
distribution  or  right,  (ii)  the  date  on  which  any  such  reorganization,
reclassification,  recapitalization,  transfer, merger, dissolution, liquidation
or winding up is expected to become  effective  and (iii) the time, if any, that
is to be fixed,  as to when the  holders  of  record  of Common  Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities)   for   securities   or  other   property   deliverable   upon  such
reorganization,    reclassification,    recapitalization,    transfer,   merger,
dissolution, liquidation or winding up. Such notice shall be mailed at least ten
Business Days prior to the date specified in such notice on which such action is
to be taken.

XI. Forced Conversion.

      A. Subject to the other  provisions  of this  Section,  from and after the
Effective  Date,  the Company  shall have the right to force  conversion  by the
holders of the  Preferred  Stock of up to a  cumulative  aggregate of 75% of the
total number of shares of Preferred  Stock issued by the Company by  telecopying
written  notice of its  election to force  conversion  (the  "Forced  Conversion
Notice")  containing  the  information  set forth below to the holders under the
following circumstances:

                  1. In the  event,  at any  time and  from  time to  time,  the
            Closing  Bid Price of the Common  Stock is equal to or greater  than
            175% of the Issuance  Price for ten  consecutive  Trading Days,  the
            Company may force  conversion by the holder of up to a maximum of up
            to 50% of the total  number of shares of  Preferred  Stock issued by
            the  Company  to the  holders;  provided  that the  Company  may not
            initiate a forced  conversion  pursuant  to the  provisions  of this
            Subsection  more  than  once  every 30  calendar  days and no single
            forced  conversion shall exceed 15% of the total number of shares of
            Preferred Stock issued by the Company.

                  2. In the  event,  at any  time and  from  time to  time,  the
            Closing  Bid Price of the Common  Stock is equal to or greater  than
            200% of the Issuance  Price for ten  consecutive  Trading Days,  the
            Company may force  conversion by the holder of up to a maximum of up
            to 75% of the total  number of shares of  Preferred  Stock issued by
            the  Company  to the  holders;  provided  that the  Company  may not
            initiate a forced  conversion  pursuant  to the  provisions  of this
            Subsection

<PAGE>


                  more than once  every 30  calendar  days and no single  forced
            conversion  shall  exceed  15% of the  total  number  of  shares  of
            Preferred Stock issued by the Company.

                  3. In the event the Company causes a forced  conversion as set
            forth  herein  the  Accrual  Deduction  shall  not  apply.  A Forced
            Conversion  Notice shall not be deemed to affect or otherwise reduce
            the holders  conversion  rights as set forth herein as to the shares
            of Preferred Stock not subject to a Forced Conversion Notice.

      B. The Company shall effect such forced  conversions  pro rata amongst the
holders according to the number of shares of Preferred Stock held by each holder
of  Preferred  Stock.  The Forced  Conversion  Notice must be  delivered  by the
Company prior to 12:00 p.m.  Eastern Time on the first  Trading Day  immediately
following the  expiration  of the ten Trading Day period  referred to in Section
XI. A. I and 2 above. A Forced  Conversion  Notice shall be deemed  delivered on
(i) the  Trading  Day it is faxed by the  Company if such  notice is faxed (with
confirmation  that it was  received by the holder)  prior to 12:00 p.m.  Eastern
Time,  or (ii) the  immediately  succeeding  Trading  Day if it is  faxed  (with
confirmation  that it was received by the holder) after 12:00 p.m.  Eastern Time
on a Trading  Day or at any time on a day which is not a Trading  Day. No Forced
Conversion Notice may be deemed  delivered,  on a day that is not a Trading Day.
The Company must forward the original Forced Conversion Notice to the holder via
reputable  overnight  courier  for  delivery  on  the  Trading  Day  immediately
following  transmission of the Forced  Conversion  Notice via facsimile.  In the
event the  original  Forced  Conversion  Notice is not sent to the holder of the
Preferred Stock as set forth above, the Forced Conversion Notice shall be deemed
revoked  and  ineffective.  Once the Company  has  exercised  its right to force
conversion of the Preferred  Stock by giving a Forced  Conversion  Notice to the
holder as set forth above it shall be deemed  irrevocable.  Each  Trading Day on
which the Forced  Conversion  Notice is telecopied to and received by the holder
as set  forth  above  shall be  deemed a  Conversion  Date for the  purposes  of
completing the forced  conversion and calculating the number of shares of Common
Stock to be issued upon the forced conversion,  and shall also be referred to as
the  "Forced  Conversion  Date".  The  Company  will  deliver  the  certificates
representing  shares of Common Stock issuable  pursuant to the Forced Conversion
Notice  (together with the  certificates  representing  the remaining  shares of
Preferred Stock not being forced to convert, if any) to the holder via reputable
overnight courier, by electronic transfer or otherwise within five Business Days
after the Forced  Conversion Date. In the event the Company does not deliver the
shares of Common  Stock upon the forced  conversion  within five  Business  Days
after the Forced  Conversion  Date,  the holder shall be entitled to  liquidated
damages determined as set forth in Section V. D. above. In the event the Company
fails to comply  with the terms of the forced  conversion  in any manner on more
than two  separate  occasions,  it shall have waived its right to serve a Forced
Conversion Notice upon that particular holder at any time in the future.



<PAGE>


      C.  The  Forced  Conversion  Notice  shall  set  forth  (i) a  calculation
referencing the conversion formula contained herein showing the number of shares
of Common Stock being issued pursuant to the applicable forced  conversion,  and
(ii) a  statement  identifying  which  subsection  among XI A. 1 and 2, that the
Company is relying on to force  conversion,  and the  Closing  Bid Prices of the
Common Stock during the ten consecutive  Trading Days relied upon for the forced
conversion.

      D.  Upon  the  Company's  full  compliance  with  the  forced   conversion
provisions set forth in above,  the shares of Series C Preferred  Stock that are
the subject of a forced conversion shall be automatically canceled and converted
into a right to receive  shares of Common Stock,  and all rights of the Series C
Preferred  Stock which are the subject of the forced  conversion,  including the
right to conversion,  shall cease without  further  action,  provided the holder
receives  the  correct  number of shares  of  Common  Stock due upon the  forced
conversion.  Immediately  following receipt of the Forced Conversion  Notice, if
the holder  concurs with the  Company's  conversion  calculations  in the Forced
Conversion  Notice, the holder shall surrender their original shares of Series C
Preferred  Stock  which are the subject of the Forced  Conversion  Notice at the
office of the Company,  and the Company  shall send to the holder a new Series C
Preferred  Stock  certificate  for that  number of shares of Series C  Preferred
Stock which remains  outstanding,  if any,  within five Business Days after such
surrender  by the  holder.  If the  holder  does not concur  with the  Company's
conversion calculations in the Forced Conversion Notice, the holder shall notify
the Company in writing  within three  Business Days after the Forced  Conversion
Date of such fact.  Notwithstanding the foregoing, the Company remains obligated
to send those shares of Common Stock which are undisputed.

      E. The  number  of  shares  of  Common  Stock  issuable  upon  the  forced
conversion  of the Series C Preferred  Stock shall be adjusted in the manner and
under the circumstances as set forth herein.

      F. The Company may not serve a Forced Conversion Notice upon any holder if
such notice would result in such holder  holding,  at such time, more than 4.99%
of the number of shares of Common Stock then outstanding.

XII.  Redemption.

      A. For so long as the Company has not received a notice of conversion  for
such shares,  the Company may, at its option,  repay,  in whole or in part,  the
Series C Preferred Stock shares at the Redemption Price (as defined below).  The
Series C Preferred Stock is redeemable as a series,  in whole or in part, by the
Company by providing  written notice (the "Redemption  Notice") to the holder of
the Series C  Preferred  Stock via  facsimile  at his or her address as the same
shall appear on the books of the Company (the  Business Day between the hours of
9:00 a.m. and 5:00 Eastern Time the Redemption Notice is received by the holders
of the Series C Preferred  Stock via facsimile is defined to be the  "Redemption
Notice Date").  Within three Business Days after the Redemption  Notice Date the
Company  shall arrange  payment of the  Redemption  Price (as defined  below) in

<PAGE>

immediately  available  funds to the holder for the shares of Series C Preferred
Stock  which are the  subject  of the  Redemption  Notice  (such date of payment
referred  to as the  "Redemption  Date").  Partial  redemptions  shall  be in an
aggregate  principal  amount  of at least  $100,000.  If  fewer  than all of the
outstanding  shares of Series C Preferred Stock are to be redeemed,  the Company
will select those to be redeemed pro-rata amongst the then holders of the Series
C Preferred Stock.

      B. The "Redemption Price" shall be determined as follows:

                  1. If the Redemption Notice Date falls on or prior to the 60th
            calendar day after the Issuance Date, the Redemption Price per share
            of Series C Preferred Stock being redeemed shall be equal to 110% of
            the Stated Value, plus all accrued and unpaid dividends.
                  2. If the  Redemption  Notice  Date  falls  between  the  60th
            calendar day and the 90th calendar day after the Issuance  Date, the
            Redemption  Price  per  share of  Series  C  Preferred  Stock  being
            redeemed  shall  be  equal  to 115% of the  Stated  Value,  plus all
            accrued and unpaid dividends.

                  3. If the  Redemption  Notice  Date  falls  between  the  91st
            calendar day and the 120th calendar day after the Issuance Date, the
            Redemption  Price  per  share of  Series  C  Preferred  Stock  being
            redeemed  shall  be  equal  to 120% of the  Stated  Value,  plus all
            accrued and unpaid dividends.

                  4. If the Redemption  Notice Date occurs at any time after the
            121st calendar day after the Issuance Date, the Redemption Price per
            share of Series C Preferred  Stock being  redeemed shall be equal to
            the  greater of (a) 125% of the Stated  Value,  plus all accrued and
            unpaid  dividends,  or (b) the full  "economic  benefit"  the holder
            would  derive  from  converting  the  Series C  Preferred  Stock and
            selling the Common Stock on the Redemption Notice Date.

      C. The Notice of Redemption  shall set forth (i) the  Redemption  Date and
the place fixed for redemption, (ii) the Redemption Price, and (iii) a statement
that  dividends  on the shares of Series C Preferred  Stock to be redeemed  will
cease to accrue on such Redemption Date, and (iv) a statement of or reference to
the  conversion  right set forth  herein.  If fewer  than all the  shares of the
Series C  Preferred  Stock  owned by such  holder are then to be  redeemed,  the
notice shall  specify the number of shares  thereof that are to be redeemed and,
if practicable, the numbers of the certificates representing such shares. Within
ten  Trading  Days of the Notice of  Redemption  Date,  the  Company  shall wire
transfer  the  appropriate  amount  of  funds  to the  holders  of the  Series C
Preferred  Stock. If the Company fails to comply with the redemption  provisions
in any  manner  whatsoever,  it shall  waive its rights in the future to serve a
Redemption  Notice upon the holders of the Series C Preferred Stock at any time.
For the first five Trading Days after the Notice  Redemption  Date the holder of
the Series C Preferred  Stock will retain his or her right to convert the Series
C Preferred  Stock. In the event the  aforementioned  occurs and the Company has

<PAGE>

not complied with all of the redemption  provisions set forth herein the Company
must comply with the delivery  requirements upon conversion as set forth herein.
The holders shall send the shares of Series C Preferred  Stock being  redeemed
to the Company  within three  Business  Days after they have received good funds
for the Redemption Price of such shares.

      D. Subject to the occurrence of the wire transfer of the Redemption  Price
as  described  in above,  each share of Series C Preferred  Stock to be redeemed
shall be  automatically  canceled  and  converted  into a right to  receive  the
Redemption Price, and all rights of the Series C Preferred Stock,  including the
right to conversion shall cease without further action.

      E.  The  Redemption  Price  shall  be  adjusted  proportionally  upon  any
adjustment of the  Conversion  Price as provided  herein and in the event of any
stock dividend, stock split, combination of shares or similar event.

XIII.  4.99%  Limitation.  The  number of shares  of Common  Stock  which may be
acquired by any of holder upon conversion pursuant to the terms herein shall not
exceed the number of such shares which, when aggregated with all other shares of
Common Stock then owned by holder, inclusive of all other shares of Common Stock
or securities  convertible into Common Stock,  would result in any holder owning
more than 4.99% of the then issued and outstanding  Common Stock.  The preceding
shall not interfere with any holders right to convert  Preferred Stock over time
which in the aggregate totals more than 4.99% of the then outstanding  shares of
Common Stock so long as such  Investor  does not own more than 4.99% of the then
outstanding  Common Stock at any given time. The foregoing  limitation shall not
apply to the Automatic Conversion provision contained herein.


<PAGE>



RESOLVED,  FURTHER,  that the  appropriate  officers of the  Company  hereby are
authorized  to  execute  and  acknowledge  a  certificate  setting  forth  these
resolutions  and to cause  such  certificate  to be filed and  recorded,  all in
accordance with the  requirements of Section 151 of the General  Corporation Law
of the State of Delaware.

            IN WITNESS  WHEREOF,  Sims  Communications,  Inc.,  has caused  this
Certificate  to be signed by its  President,  and  attested to by its  Assistant
Secretary, this 7th day of December, 1998.

                                          SIMS COMMUNICATIONS, INC.



By:______________________________
Attest:                                               President


---------------------------
Assistant Secretary




<PAGE>


                                   EXHIBIT 10



<PAGE>

           SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                     between

                            Sims Communications, Inc.

                                       and


                          HSBC James Capel Canada, Inc.

                            Gilston Corporation, Ltd.

                               Augustine Fund, LP


                                December 7, 1998


<PAGE>


           SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT



      THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT,  dated as of
December 7, 1998 (the  "Agreement"),  between the entities  listed on Schedule A
attached  hereto  (collectively  referred  to as  the  "Investors"),  SETTONDOWN
CAPITAL  INTERNATIONAL  LTD. (the "Placement Agent") located at Charlotte House,
Charlotte Street,  P.O. Box N. 9204, Nassau,  Bahamas,  a corporation  organized
under  the  laws of  Bahamas,  and  SIMS  COMMUNICATIONS,  INC.,  a  corporation
organized and existing under the laws of the State of Delaware (the "Company").

      WHEREAS,  the  parties  desire  that,  upon the terms and  subject  to the
conditions  contained herein, the Company shall issue and sell to the Investors,
and the Investors  shall purchase up to (a) 2,000 shares of Preferred  Stock (as
defined  below),  and (b)  Warrants  to purchase  that number of Warrant  Shares
determined on each of the Warrant Valuation Dates as set forth below; and

      WHEREAS,  the Company shall issue to the  Placement  Agent (in addition to
the fees set forth in Section 12.7 below), in return for services  rendered,  an
aggregate  of 60  shares  of  Preferred  Stock,  and a Warrant  to  purchase  an
aggregate of 50,000 Warrant Shares; and

      WHEREAS,  such investments will be made in reliance upon the provisions of
Section 4(2) ("Section  4(2)") and  Regulation D ("Regulation  D") of the United
States  Securities  Act of 1933,  as amended,  and the  regulations  promulgated
thereunder  (the  "Securities  Act"),  and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.

      NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I

                               Certain Definitions

      Section  1.1  "Additional  Shares"  shall have that  meaning  set forth in
Section 2.5 below.

      Section 1.2 "Bid Price"  shall mean the closing bid price (as  reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.

      Section 1.3 "Business Day" means any day except  Saturday,  Sunday and any
day  which  shall  be  a  Federal  legal  holiday  or a  day  on  which  banking
institutions in the State of New York are authorized or required by law or other
government actions to close.

<PAGE>

      Section 1.4 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized,  having the
right to participate in the distribution of earnings and assets of the Company.

      Section  1.5  "Capital  Shares  Equivalents"  shall  mean any  securities,
rights,  or obligations that are convertible into or exchangeable for, or giving
any right to,  subscribe for any Capital  Shares of the Company or any warrants,
options or other rights to subscribe for or purchase  Capital Shares or any such
convertible or exchangeable securities.

      Section  1.6  "Certificate  of  Designation"   shall  mean  the  Company's
Certificate  of  Designation  setting  forth all of the rights,  privileges  and
preferences of the Preferred Stock, as annexed hereto as Exhibit A.

      Section 1.7  "Closing"  shall mean the  closings of a purchase and sale of
the Preferred Stock and Warrants pursuant to Article II below.

      Section 1.8 "Closing Date" shall mean the Subscription Date.

      Section 1.9 "Common Stock" shall mean the Company's  common stock,  $0.001
par value per share.

      Section 1.10  "Damages"  shall mean any loss,  claim,  damage,  liability,
costs and  expenses  which  shall  include,  but not be limited  to,  reasonable
attorney's  fees,  disbursements,  costs and  expenses of expert  witnesses  and
investigation.


      Section 1.11  "Effective  Date" shall mean the date on which the SEC first
declares effective a Registration  Statement  registering the resale of (i) 200%
of the number of Underlying Shares that would be required if the Preferred Stock
(including such shares of the Placement Agent) were converted on the Trading Day
immediately preceding the filing of the Registration  Statement,  plus (ii) 100%
of the number of Warrant Shares  (including such shares of the Placement  Agent)
issuable  assuming all of the Warrants had been issued  pursuant to the Purchase
Agreement.

      Section  1.12  "Escrow  Agent"  shall  mean  the law  firm  of  Goldstein,
Goldstein & Reis, LLP, pursuant to the terms of the Escrow Agreement attached as
Exhibit B.

      Section  1.13  "Exchange  Act" shall mean the  Securities  Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

      Section 1.14      "Forced  Conversion  Period" shall mean 10 consecutive
Trading Days.

      Section  1.15  "Legend"  shall have the meaning set forth in Article  VIII
below.

<PAGE>
      Section  1.16  "Material  Adverse  Effect"  shall  mean any  effect on the
business, operations, properties, Bid Price, trading volume of the Common Stock,
prospects, or financial condition of the Company that is material and adverse to
the Company and its  subsidiaries and affiliates,  taken as a whole,  and/or any
condition,  circumstance,  or situation  that would prohibit or otherwise in any
material  respect  interfere  with the  ability of the Company to enter into and
perform any of its obligations  under this Agreement,  the  Registration  Rights
Agreement,  the Escrow Agreement, the Certificate of Designation or the Warrants
in any material respect.

      Section  1.17 "NASD"  shall mean the National  Association  of  Securities
Dealers, Inc.

      Section 1.18  "Outstanding"  when used with  reference to shares of Common
Stock,  Preferred Stock, or Capital Shares  (collectively  the "Shares"),  shall
mean, at any date as of which the number of such Shares is to be determined, all
issued and  outstanding  Shares,  and shall include all such Shares  issuable in
respect  of  outstanding  scrip  or  any  certificates  representing  fractional
interests in such Shares; provided, however, that Outstanding shall not mean any
such Shares then directly or  indirectly  owned or held by or for the account of
the Company.

      Section  1.19  "Person"  shall  mean  an  individual,  a  corporation,   a
partnership,  an  association,  a limited  liability  company,  a trust or other
entity or  organization,  including a government or political  subdivision or an
agency or instrumentality thereof.

      Section 1.20 "Preferred Stock" shall mean the Company's Series C Preferred
Stock  with  the  rights,  privileges  and  preferences,  as  set  forth  in the
Certificate of Designation.

      Section 1.21 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small Cap Stock  Market,  the American  Stock  Exchange,  or the New York
Stock  Exchange,  whichever  is at the time the  principal  trading  exchange or
market for the Common Stock.

      Section 1.22 "Purchase Price" shall mean $2,000,000.

      Section 1.23 "Registrable  Securities"  shall mean the Underlying  Shares,
the  Additional  Shares,  the  Warrant  Shares,  (i) in  respect  of  which  the
Registration  Statement  (covering  these  securities)  has  not  been  declared
effective by the SEC,  (ii) which have not been sold under  circumstances  under
which all of the  applicable  conditions  of Rule 144 (or any similar  provision
then in force) under the  Securities  Act ("Rule 144") are met, (iii) which have
not been  otherwise  transferred  to holders who may trade such  shares  without
restriction under the Securities Act, or (iv) the sales of which, in the opinion
of counsel to the Company, are subject to any time, volume or manner limitations
pursuant  to Rule  144(k) (or any similar  provision  then in effect)  under the
Securities Act.

      Section 1.24  "Registration  Rights  Agreement"  shall mean the  agreement
regarding  the  filing  of the  Registration  Statement  for the  resale  of the
Registrable  Securities,  entered into between the Company, the Placement Agent,
and the Investors on the Subscription Date annexed hereto as Exhibit C.

      Section 1.25 "Registration  Statement" shall mean a registration statement
<PAGE>

on Form S-3 or Form SB-2,  for the  registration  of the resale by the Investors
and the Placement Agent of the Registrable Securities under the Securities Act.

      Section  1.26  "Regulation  D" shall  have the  meaning  set  forth in the
recitals of this Agreement.

      Section 1.27 "SEC" shall mean the Securities and Exchange Commission.

      Section  1.28  "Section  4(2)"  shall  have the  meaning  set forth in the
recitals of this Agreement.

      Section 1.29 "Securities" shall mean the Underlying Shares, the Additional
Shares, the Warrant Shares.

      Section  1.30  "Securities  Act" shall have the  meaning  set forth in the
recitals of this Agreement.

      Section 1.31 "SEC  Documents"  shall mean the  Company's  latest Form 10-K
(and all amendments  thereto) or 10-KSB (and all  amendments  thereto) as of the
time in question, all Form 10-Qs or 10-QSBs and Form 8-Ks filed thereafter,  the
Company's Form SB-2  registration  statement  filed on or about August 1998, and
the Proxy  Statement for its latest fiscal year as of the time in question until
such  time  as  the  Company  no  longer  has  an  obligation  to  maintain  the
effectiveness  of a  Registration  Statement  as set  forth in the  Registration
Rights Agreement.

      Section  1.32  "Subscription  Date"  shall  mean the  date on  which  this
Agreement and all Exhibits and attachments hereto, are executed and delivered by
the parties  hereto and all of the  conditions  relating to the  issuance of the
Preferred Stock shall have been fulfilled.

      Section  1.33  "Trading  Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

      Section 1.34 "Underlying  Shares" shall mean all shares of Common Stock or
other  securities  issued or issuable  pursuant to  conversion  of the Preferred
Stock.
      Section  1.35  "Warrants"  shall mean the Common  Stock  Purchase  Warrant
annexed hereto as Exhibit D.

      Section  1.36  "Warrant  Shares"  shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.

      Section 1.37 "Warrant Valuation Date" shall mean the Business Day in which
the Investors receive Warrants pursuant to Section 2.4 below.

                                   ARTICLE II

            Purchase and Sale of the Preferred Stock and Warrants
<PAGE>

      Section 2.1 Closing. The Company will sell, and the Investors will buy, on
the Closing Date, an aggregate of up to 2,000 shares of Preferred Stock based on
U.S.$1,000 per share,  and Warrants to purchase that number of Warrant Shares as
set forth in  Section  2.4 below for the  Purchase  Price  provided  each of the
conditions  set forth in  Section  2.7 below  have been  satisfied  or waived in
writing.

      Section 2.2 Form of Payment. The Investors shall pay the Purchase Price by
delivering  good funds in United  States  Dollars by wire transfer to Goldstein,
Goldstein  &  Reis,  LLP,  Escrow  Agent,   against  delivery  of  the  original
Securities.  The parties have entered into an Escrow Agreement annexed hereto as
Exhibit B.

      Section 2.3 Wire   Instructions.   Wire   instructions   for  Goldstein,
Goldstein & Reis, LLP are as follows:

            Chase Manhattan Bank, N.A.
            ABA No. 021000021
            For the Account of:
              United States Trust Company of New York
              Account No. 920-1-073195
            In favor of:
              Goldstein, Goldstein & Reis, LLP Attorney Escrow Account
              Account No. 59-01383

      Section 2.4 Warrants.  The Company will issue to the Investors  (pro rata)
on the  Warrant  Valuation  Dates (as set  forth  below)  Warrant's  exercisable
beginning on the applicable Warrant Valuation Date and then exercisable any time
over the five year period there following,  to purchase Warrant Shares.  On each
Warrant Valuation Date (as defined below) the Investors shall receive (pro rata)
Warrants to purchase that number of Warrant  Shares equal to five percent of the
product of the following  formula:  number of all of the  unconverted  shares of
Preferred  Stock  which the  Investors  are the legal  holder of starting on the
180th calendar day after the Closing Date (or the next Business Day  immediately
thereafter if such day is not a Business Day) and each  successive 30th calendar
day thereafter (or the next Business Day  immediately  thereafter if such day is
not a Business Day) until the 360th  calendar day after the Closing Date (or the
next Business Day  immediately  thereafter  if such day is not a Business  Day),
multiplied by the Stated Value (as defined in the  Certificate  of  Designation)
per share of Preferred  Stock.  Each of the 180th calendar day after the Closing
Date, and each successive 30th calendar day period  thereafter shall be referred
to as a "Warrant  Valuation  Date". On the  Subscription  Date the Company shall
issue to the  Placement  Agent a  Warrant  to  purchase  50,000  Warrant  Shares
exercisable beginning on the Closing Date and then exercisable any time over the
five year period  there  following.  The  Warrant's  shall be  delivered  by the
Company to the Escrow Agent,  and delivered to the Investors and Placement Agent
pursuant to the terms of this  Agreement  and the Escrow  Agreement.  All of the
aforementioned  Warrant  Shares shall be registered  for resale  pursuant to the
Registration Rights Agreement.  On each Warrant Valuation Date the Company shall
issue to each  Investor an  Officer's  certificate  stating that the Company has

<PAGE>

full authority to issue the Warrants and that the Company is in full  compliance
with the terms of this Agreement (including all Exhibits annexed hereto).

      The Company also agrees to issue to the Investors  upon the  completion of
any  Redemption  (as provided in the  Certificate  of  Designation)  Warrants to
purchase  that number of shares of Common  Stock equal to twenty  percent of the
sum of the following  formula in the case of a  Redemption:  number of shares of
Preferred  Stock which are subject to Redemption  multiplied by the Stated Value
(as defined in the Certificate of Designation) per share of Preferred Stock. The
terms of the warrants issued by the Company in connection with Redemption  shall
be identical to the Warrants but for the date of the warrant,  the  "Termination
Date"  and the  "Exercise  Price"  which  shall be 120% of the Bid  Price on the
Trading Day immediately  preceding the Redemption Notice Date (as defined in the
Certificate of Secretary).

      Section 2.5 Additional  Shares.  In the event that (a) within five Trading
Days after the date on which the Investors  and/or the  Placement  Agent receive
any of the  Securities  issued  hereunder  (provided such  Securities  have been
included  in a  registration  statement  that has been  declared  effective),  a
"blackout   period"  occurs  which  is  defined  as  any  period  in  which  the
effectiveness  of  the  Registration  Statement  is  suspended  for  any  reason
whatsoever,  and (b) the Bid Price on the Trading Day immediately preceding such
"blackout  period"  (the "Old Bid  Price") is greater  than the Bid Price on the
first Trading Day following  such "blackout  period" (the "New Bid Price"),  the
Company  shall issue to the Investors  and/or the Placement  Agent the number of
additional shares equal to the difference  between (y) the product of the number
of  Securities  held by the  Investors  and/or the  Placement  Agent during such
"blackout  period" that are or were not otherwise  freely  tradeable and the Old
Bid Price, divided by the New Bid Price and (z) the number of Securities held by
the Investors and/or the Placement Agent during such "blackout period" that were
not otherwise freely tradeable during such Blackout Period.

      Section 2.6 Liquidated  Damages.  In addition to any other  provisions for
liquidated damages in this Agreement or any Exhibit annexed hereto, in the event
that the Company does not deliver unlegended Common Stock in connection with the
sale of such Common Stock by the  Investor(s)  and/or the Placement Agent as set
forth in Article VIII below  within five (5)  Business  Days of surrender by the
Investor(s)  of the Common Stock  certificate  in accordance  with the terms and
conditions  set forth in Article VIII below (such date of receipt is referred to
as the "Receipt Date"), the Company shall pay to the Investor(s), in immediately
available funds, upon demand, as liquidated  damages for such failure and not as
a penalty, one percent of the Purchase Price of the Common Stock undelivered for
every  day  thereafter  for the  first  ten days and two  percent  for every day
thereafter that the unlegended  shares of Common Stock are not delivered,  which
liquidated damages shall run from the sixth Business Day after the Receipt Date.
The parties hereto  acknowledge  and agree that the sum payable  pursuant to the
Registration  Rights  Agreement  and as set forth above,  and the  obligation to
issue  Registrable   Securities  under  Section  2.5  above,   shall  constitute
liquidated damages and not penalties.  The parties further  acknowledge that the
amount of loss or damages  likely to be incurred is incapable or is difficult to

<PAGE>

precisely estimate,  and the parties are sophisticated business parties and have
been  represented  by  sophisticated  and able legal and  financial  counsel and
negotiated  this Agreement at arm's length.  Notwithstanding  the above,  in the
event that the Company does not deliver  unlegended  Common Stock in  connection
with the sale of such Common Stock by the Investor(s) and/or the Placement Agent
as set forth in Article  VIII below  within  five  Business  Days of the Receipt
Date), the Company shall also pay to the Investor(s),  in immediately  available
funds,  interest (at the then current  prime rate),  based upon the Bid Price of
the Common Stock on the Receipt Date,  undelivered for every day thereafter that
the unlegended  shares of Common Stock are not  delivered.  Any and all payments
required  pursuant  to this  paragraph  shall be payable  only in cash,  and any
payment  hereunder  shall not relieve the  Company of its  delivery  obligations
under this Section.

      Section  2.7  Preferred  Stock.  The right of the  Company to receive  the
Purchase Price from the Investors, and the right of the Investors to receive the
Preferred  Stock and  Warrants  (as set forth in Section  2.4) is subject to the
satisfaction  (or written  waiver) on the Closing Date, of each of the following
conditions:

            (i)  acceptance by the Company, and by all of the Investors, of this
                 Agreement  and  all  duly  executed   Exhibits  thereto  by  an
                 authorized officer of the Company;
            (ii) delivery  into escrow by the  Investors  of clear funds for the
                 Purchase Price (as more fully set forth in the Escrow Agreement
                 attached hereto as Exhibit B);
            (iii)all  representations and warranties of the Investors and of the
                 Company  contained  herein shall remain true and correct in all
                 material respects as of the Subscription Date;
            (iv) the Company shall have obtained all permits and  qualifications
                 required  by any state for the offer and sale of the  Preferred
                 Stock  and the  Warrants,  or shall  have the  availability  of
                 exemptions therefrom;
            (v)  the sale and issuance of the Preferred  Stock, and the proposed
                 issuance of the Underlying Shares,  Warrants and Warrant Shares
                 shall be legally permitted by all laws and regulations to which
                 the  Investors  and the  Company  are  subject;  and  all  duly
                 executed Exhibits hereto for the sale of the Securities;
            (vi) delivery of the original Preferred Stock as described herein;
            (vii)receipt  by the  Investors  of an  opinion  of  counsel  of the
                 Company  as  set  forth  in  Exhibit  E  attached   hereto  and
                 instructions  to the  Transfer  Agent as set forth in Exhibit F
                 annexed hereto;
            (viii) written proof that the  Certificate of  Designation  has been
                 filed with the Secretary of State of the State of Delaware; and
            (ix) payment of all fees as set forth in Section  12.7 below and the
                 Escrow Agreement.


<PAGE>



                                   ARTICLE III

               Representations and Warranties of the Investors

      Each of the Investors represents and warrants to the Company that:

      Section 3.1 Intent.  Each of the Investors is entering into this Agreement
for its own  account  and has no present  arrangement  (whether  or not  legally
binding)  at any time to sell the  Common  Stock to or  through  any  person  or
entity;  provided,  however,  that by making  the  representations  herein,  the
Investors  do not  agree to hold  the  Common  Stock  for any  minimum  or other
specific  term and reserves the right to dispose of the Common Stock at any time
in  accordance  with  federal  and  state  securities  laws  applicable  to such
disposition.

      Section  3.2  Sophisticated   Investors.   Each  of  the  Investors  is  a
sophisticated  investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and each of the
Investors  has such  experience  in business  and  financial  matters that it is
capable of evaluating  the merits and risks of an investment in the  Securities.
Each of the  Investors  acknowledges  that an  investment in the Common Stock is
speculative and involves a high degree of risk.

      Section 3.3 Authority. This Agreement has been duly authorized and validly
executed  and  delivered  by each of the  Investors  and is a valid and  binding
agreement of the Investors  enforceable  against each of them in accordance with
its terms,  subject  to  applicable  bankruptcy,  insolvency,  or  similar  laws
relating to, or affecting  generally the enforcement of,  creditors'  rights and
remedies or by other equitable principles of general application.

      Section  3.4  Not an  Affiliate.  None  of the  Investors  is an  officer,
director or  "affiliate"  (as that term is defined in Rule 405 of the Securities
Act) of the Company.

      Section 3.5  Organization  and  Standing.  Each of the  Investors  is duly
organized,  validly  existing,  and in  good  standing  under  the  laws  of the
countries and/or states of their incorporation or organization.

      Section 3.6  Absence of  Conflicts.  The  execution  and  delivery of this
Agreement and any other document or instrument executed in connection  herewith,
and the consummation of the transactions  contemplated  thereby,  and compliance
with the  requirements  thereof,  will not  violate any law,  rule,  regulation,
order, writ, judgment,  injunction, decree or award binding on Investors, or, to
the Investors knowledge, (a) violate any provision of any indenture,  instrument
or agreement  to which any of the  Investors  are a party or are subject,  or by
which any of the Investors or any of their assets is bound; (b) conflict with or
constitute  a  material  default  thereunder;  (c)  result  in the  creation  or
imposition of any lien pursuant to the terms of any such  indenture,  instrument
or agreement,  or constitute a breach of any fiduciary duty owed by Investors to
any third party; or (d) require the approval of any  third-party  (which has not
been

<PAGE>



      obtained)  pursuant  to  any  material  contract,  agreement,  instrument,
relationship or legal  obligation to which any of the Investors is subject or to
which any of their assets, operations or management may be subject.

      Section 3.7 Disclosure;  Access to Information.  Each of the Investors has
received all documents,  records, books and other information pertaining to each
Investor's  investment  in the Company that have been  requested  by  Investors,
including the opportunity to ask questions and receive  answers.  The Company is
subject to the periodic reporting  requirements of the Exchange Act, and each of
the Investors has reviewed or received copies of any such reports that have been
requested  by it. Each of the  Investors  represents  that it has  reviewed  the
Company's,  Form 10-KSB for the year ended December 31, 1997, Form 10-QSB's, and
Form 8-K's filed for the twelve months prior to the  Subscription  Date, and the
Company's Form SB-2 registration statement filed on or about August 1998.

      Section 3.8 Manner of Sale. At no time were any of the Investors presented
with or  solicited  by or  through  any  leaflet,  public  promotional  meeting,
television   advertisement  or  any  other  form  of  general   solicitation  or
advertising.

      Section 3.9 Registration or Exemption Requirements.  Each of the Investors
further acknowledges and understands that the Securities may not be transferred,
resold or otherwise  disposed of except in a  transaction  registered  under the
Securities Act and any applicable  state securities laws, or unless an exemption
from such registration is available.  Each of the Investors understands that the
certificate(s)  evidencing  the Preferred  Stock will be imprinted with a legend
that prohibits the transfer of these  Securities  unless (i) they are registered
or such registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration.

      Section 3.10 No Legal,  Tax or  Investment  Advice.  Each of the Investors
understands  that nothing in this Agreement or any other materials  presented to
the  Investors  in  connection  with the  purchase  and  sale of the  Securities
constitutes  legal, tax or investment  advice. The Investors have relied on, and
have consulted with, such legal,  tax and investment  advisors as they, in their
sole  discretion,  have deemed necessary or appropriate in connection with their
purchase of the Securities.

      Section 3.11 No Manipulation. Each of the Investors agree that it will not
enter into any position in the Common Stock that in any manner would  manipulate
the Bid Price of the Common Stock in  violation of the Exchange Act of 1934,  as
amended.

                                   ARTICLE IV

                Representations and Warranties of the Company

      The Company  represents  and warrants to the  Investors  and the Placement
Agent that:

      Section 4.1 Organization of the Company. The Company is a corporation duly
incorporated  and  existing  in good  standing  under  the laws of the  State of
Delaware and has all requisite  corporate authority to own its properties and to
carry on its  business as now being  conducted  except as  described  in the SEC
Documents. The Company is duly qualified as a foreign corporation to do business

<PAGE>

and is in good  standing  in every  jurisdiction  in  which  the  nature  of the
business conducted or property owned by it makes such  qualification  necessary,
other than those in which the  failure so to  qualify  would not  reasonably  be
expected to have a Material Adverse Effect.

      Section 4.2 Authority.  (i) The Company has the requisite  corporate power
and authority to enter into and perform its  obligations  under this  Agreement,
and all Exhibits  annexed hereto,  and to issue the Preferred  Stock,  Warrants,
Underlying Shares,  Additional Shares,  Preferred Stock, and the Warrant Shares,
(ii) the execution,  issuance and delivery of this  Agreement,  and all Exhibits
annexed hereto,  by the Company and the  consummation by it of the  transactions
contemplated  hereby have been duly authorized by all necessary corporate action
and no  further  consent  or  authorization  of the  Company  or  its  Board  of
Directors,  and (iii) this Agreement, and all Exhibits annexed hereto, have been
duly  executed  and  delivered by the Company and  constitute  valid and binding
obligations of the Company  enforceable  against the Company in accordance  with
their  terms,  except  as  such  enforceability  may be  limited  by  applicable
bankruptcy,  insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable  principles
of general  application.  Upon their  issuance  and  delivery  pursuant  to this
Agreement,  the securities will be validly issued,  fully paid and nonassessable
and will be free of any liens or encumbrances other than those created hereunder
or by the actions of the Investors;  provided,  however, that the securities are
subject to restrictions on transfer under state and/or federal  securities laws.
The  issuance  and sale of the  securities  hereunder  will not give rise to any
preemptive  right or right of first refusal or right of  participation on behalf
of any person.

      Section 4.3  Capitalization.  The authorized  capital stock of the Company
consists of 40,000,000  shares of Common Stock,  $0.001 par value per share,  of
which  9,430,356  shares are issued and  outstanding,  and  1,000,000  shares of
Preferred  Stock,  $0.001 par value per share,  of which  125,250 are issued and
outstanding.  All of the outstanding  shares of Common Stock and Preferred Stock
of the Company  have been duly and validly  authorized  and issued and are fully
paid and nonassessable.  No shares of Common Stock are entitled to preemptive or
similar rights. Except as specifically disclosed in the SEC Documents, there are
no outstanding options,  warrants,  rights to subscribe to, calls or commitments
of any character  whatsoever relating to, or, except as a result of the purchase
and  sale  of the  Preferred  Stock  and the  Warrants,  securities,  rights  or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings,  or  arrangements  by  which  the  Company  or any
subsidiary is or may become bound to issue additional  shares of Common Stock or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company,  no Person or group of Persons  beneficially  owns
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or has
the right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of five percent of the Common Stock.



<PAGE>



      Section 4.4 Common  Stock.  The Company has  registered  its Common  Stock
pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting  requirements  of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq Small Cap Stock Market.

      Section 4.5 SEC Documents.  The Company has delivered or made available to
the Investors true and complete copies of the SEC Documents filed by the Company
with  the  SEC  during  the  twelve  (12)  months   immediately   preceding  the
Subscription  Date  (including,   without  limitation,   proxy  information  and
solicitation  materials).  The Company has not provided to any of the  Investors
any information  that,  according to applicable law, rule or regulation,  should
have been disclosed publicly prior to the date hereof by the Company,  but which
has not been so  disclosed.  The SEC Documents  comply in all material  respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated  thereunder and none of the
SEC Documents  contained  any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  The financial  statements of the Company  included in the
SEC  Documents  comply  as to  form in all  material  respects  with  applicable
accounting  requirements  and the published  rules and regulations of the SEC or
other  applicable  rules and regulations  with respect  thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial  statements or the notes thereto
or (ii) in the case of unaudited interim statements,  to the extent they may not
include footnotes or may be condensed or summary  statements) and fairly present
in all material  respects the financial  position of the Company as of the dates
thereof and the results of operations  and cash flows for the periods then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).

      Section  4.6  Valid  Issuances.  When  issued  and  payment  has been made
therefor (in the case of the  Investors),  the Common  Stock,  Preferred  Stock,
Underlying Shares, Warrants,  Warrant Shares, and the Additional Shares, sold to
the Investors will be duly and validly  issued,  fully paid, and  nonassessable.
Neither the  issuance of,  Preferred  Stock,  Underlying  Shares,  Warrants,  or
Warrant Shares,  to the Placement Agent, nor the sale of the Additional  Shares,
the  Underlying  Shares,  the Warrants,  or the Warrant Shares to the Investors,
pursuant  to,  nor the  Company's  performance  of its  obligations  under  this
Agreement,  and all Exhibits  annexed  hereto will (i) result in the creation or
imposition by the Company of any liens,  charges,  claims or other  encumbrances
upon the Common Stock,  Preferred Stock,  Warrant Shares, or Underlying  Shares,
issued to the Placement Agent, the Additional  Shares,  the Preferred Stock, the
Underlying  Shares,  the Warrant Shares issued to the  Investors,  or any of the
assets of the Company, or (ii) entitle the holders of Outstanding Capital Shares
to preemptive  or other rights to subscribe to or acquire the Capital  Shares or
other securities of the Company.



<PAGE>



      Section  4.7 No  General  Solicitation  or  Advertising  in Regard to this
Transaction.  Neither the Company nor any of its affiliates nor any  distributor
or any person  acting on its or their  behalf (i) has  conducted or will conduct
any general  solicitation  (as that term is used in Rule 502(c) of Regulation D)
or  general  advertising  with  respect  to  any  of the  Preferred  Stock,  the
Additional Shares,  the Underlying Shares, the Warrants,  or the Warrant Shares,
or (ii) made any offers or sales of any security or solicited  any offers to buy
any security  under any  circumstances  that would require  registration  of the
Preferred Stock, the Additional Shares, the Underlying Shares, the Warrants,  or
the Warrant Shares under the Securities Act.

      Section  4.8  Corporate  Documents.  The  Company  has  furnished  or made
available  to each of the  Investors  true and correct  copies of the  Company's
Articles of Incorporation,  as amended and in effect on the date hereof, and the
Company's by-laws, as amended and in effect on the date hereof (the "By-Laws").

      Section 4.9 No Conflicts. The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby,  including  without  limitation the issuance of the Common
Stock, Preferred Stock, Underlying Shares,  Warrants, and Warrant Shares, do not
and  will  not  (i)  result  in  a  violation  of  the  Company's   Articles  of
Incorporation or By-Laws or (ii) conflict with, or constitute a material default
(or an event that with  notice or lapse of time or both would  become a default)
under, or give to others any rights of termination,  amendment,  acceleration or
cancellation of, any material agreement,  indenture, instrument or any "lock-up"
or similar  provision  of any  underwriting  or similar  agreement  to which the
Company is a party,  or (iii)  result in a violation  of any  federal,  state or
local law, rule,  regulation,  order,  judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
property  or asset of the  Company  is bound  or  affected,  nor is the  Company
otherwise  in  violation  of,  conflict  with  or in  default  under  any of the
foregoing as would not  reasonably be expected to have,  individually  or in the
aggregate,  a Material Adverse Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
entity,  except for possible  violations  that either singly or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.  The Company
is not required under federal,  state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute,  deliver or perform
any of its obligations  under this Agreement or issue and sell the Common Stock,
Preferred  Stock,  or Warrants,  in accordance  with the terms hereof;  provided
that, for purposes of the representation  made in this sentence,  the Company is
assuming  and relying  upon the  accuracy of the  relevant  representations  and
agreements of the Investors herein.

      Section 4.10 No Material Adverse Change.  Since June 30, 1998, no Material
Adverse  Effect has occurred or exists with  respect to the  Company,  except as
disclosed in the SEC Documents, or as publicly announced.



<PAGE>



      Section 4.11 No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material,  individually or in the aggregate,  that are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
set forth in the Company's  financial  statements or as incurred in the ordinary
course of the Company's businesses since June 30, 1998, and which,  individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.

      Section 4.12 No Undisclosed Events or Circumstances.  Since June 30, 1998,
no event or  circumstance  has occurred or exists with respect to the Company or
its businesses,  properties, prospects, operations or financial condition, that,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  prior to the date  hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.

      Section 4.13 No Integrated Offering.  To the Company's knowledge,  neither
the Company,  nor any of its  affiliates,  nor any person acting on its or their
behalf has, directly or indirectly,  made any offers or sales of any security or
solicited any offers to buy any security,  other than pursuant to this Agreement
or pursuant to the Company's existing employee benefit plan, under circumstances
that would require registration of the Common Stock under the Securities Act, or
cause the offering of the Securities pursuant to this Agreement to be integrated
with prior or future offerings by the Company for purposes of the Securities Act
or any applicable  stockholder approval  provisions,  except as set forth in the
SEC Documents.

      Section 4.14 Litigation and Other Proceedings.  Except as may be set forth
in the SEC  Documents,  there are no lawsuits or  proceedings  pending or to the
knowledge of the Company  threatened,  against the Company,  nor has the Company
received  any written or oral notice of any such  action,  suit,  proceeding  or
investigation,  which would  reasonably  be expected to have a Material  Adverse
Effect.  Except as set forth in the SEC  Documents,  no judgment,  order,  writ,
injunction  or decree or award has been  issued by or, so far as is known by the
Company,  requested of any court,  arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.

      Section  4.15  Accuracy  of Reports  and  Information.  The  Company is in
compliance,  to the extent  applicable,  with all  reporting  obligations  under
either Section 12(b), 12(g) or 15(d) of the 1934 Act. The Company has registered
its Common Stock  pursuant to Section 12 of the 1934 Act and the Common Stock is
listed and trades on the Nasdaq Small Cap Stock Market. The Company has complied
in all  material  respects  and to the  extent  applicable  with  all  reporting
obligations, under either Section 13(a) or 15(d) of the 1934 Act for a period of
at least  twelve (12)  months  immediately  preceding  the offer and sale of the
Securities  (or for such  shorter  period that the Company has been  required to
file such material).

     Section  4.16  Acknowledgment  of  Dilution.   The  Company  is  aware  and
acknowledges that issuance of Common Stock, upon the conversion of the Preferred
Stock and/or  exercise of the Warrants,  may result in may result in dilution of
the outstanding  shares of Common Stock, which dilution may be substantial under
certain market conditions.  The Company further acknowledges that its obligation
to issue Underlying Shares in accordance with the Certificate of Designation and
Warrant Shares in accordance

<PAGE>

with the Warrants is unconditional and absolute  regardless of the effect of any
such dilution.

      Section 4.17 Employee Relations.  The Company is not involved in any labor
dispute,  nor, to the knowledge of the Company,  is any such dispute  threatened
which could  reasonably be expected to have a Material  Adverse Effect.  None of
the Company's employees is a member of a union and the Company believes that its
relations with its employees are good.

      Section 4.18 Environmental Laws. The Company is (i) in compliance with any
and all foreign,  federal,  state and local laws and regulations relating to the
protection  of human health and safety,  the  environment  or hazardous or toxic
substances or wastes,  pollutants or contaminants  and which the Company know is
applicable  to them  ("Environmental  Laws"),  (ii) has  received  all  permits,
licenses or other  approvals  required under  applicable  Environmental  Laws to
conduct its business,  and (iii) is in compliance  with all terms and conditions
of any such permit, license or approval.

      Section 4.19  Insurance.  The Company is insured by insurers of recognized
financial  responsibility  against  such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the  Company is engaged.  The Company has no notice to believe  that it
will not be able to renew  its  existing  insurance  coverage  as and when  such
coverage  expires,  or obtain similar  coverage from similar  insurers as may be
necessary  to  continue  its  business at a cost that would not  materially  and
adversely  affect  the  condition,  financial  or  otherwise,  or the  earnings,
business or operation, of the Company.

      Section  4.20 Board  Approval.  The board of  directors of the Company has
concluded,  in its good  faith  business  judgment,  that the  issuances  of the
securities  of the Company in  connection  with this  Agreement  are in the best
interests of the Company.

      Section  4.21  Integration.  The Company  shall not and shall use its best
efforts to ensure that no affiliate shall sell, offer for sale or solicit offers
to buy or  otherwise  negotiate  in respect of any  security of the Company that
would be  integrated  with the offer or sale of the  Securities in a manner that
would require the registration  under the Securities Act of the issue,  offer or
sale of the  Securities to the  Investors.  The Securities are being offered and
sold pursuant to the terms hereunder,  are not being offered and sold as part of
a previously commenced private placement of securities.

      Section  4.22  Patents and  Trademarks.  The Company has, or has rights to
use, all  patents,  patent  applications,  trademarks,  trademark  applications,
service  marks,  trade  names,  copyrights,  licenses,  trade  secrets and other
intellectual  property rights which are necessary for use in connection with its
business  or which the failure to so have would have a Material  Adverse  Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company,  none of the Intellectual Property Rights infringe on any rights of any
other  Person,  and the Company  either owns or has duly  licensed or  otherwise
acquired all necessary rights with respect to the Intellectual  Property Rights.
The  Company  has not  received  any notice from any third party of any claim of
infringement by the Company of any of the Intellectual  Property Rights, and has

<PAGE>

no  reason  to  believe  there  is any  basis  for any such  claim.  To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.

      Section 4.23 Use of Proceeds. The Company represents that the net proceeds
from this offering will be used for working capital purposes.

      Section 4.24 Subsidiaries. Except as disclosed in the Reports, the Company
does not presently own or control,  directly or indirectly,  any interest in any
other corporation, partnership, association or other business entity.


                                    ARTICLE V
                           Covenants of the Investors

      Section 5.1 4.99%  Limitation.  The number of shares of Common Stock which
may be acquired by any of the Investors  pursuant to the terms of this Agreement
shall not exceed the number of such shares which, when aggregated with all other
shares of Common  Stock  then  owned by any of the  Investors,  beneficially  or
deemed beneficially owned by any of the Investors,  inclusive of Warrant Shares,
would result in any of the  Investors  owning more than 4.99% of the then issued
and outstanding Common Stock.

      The preceding  paragraph shall not interfere with any Investor's  right to
convert  Preferred Stock over time which in the aggregate totals more than 4.99%
of the then outstanding shares of Common Stock so long as such Investor does not
own more than 4.99% of the then outstanding  Common Stock at any given time. The
foregoing  limitation  shall not  apply to the  Automatic  Conversion  provision
contained in the Certificate of Designation.


                                   ARTICLE VI
                            Covenants of the Company

      Section 6.1 Registration  Rights. The Company shall cause the Registration
Rights  Agreement to remain in full force and effect so long as any  Registrable
Securities  remain  outstanding  and the Company  shall  comply in all  material
respects with the terms thereof.

      Section  6.2  Reservation  of Common  Stock.  As of the date  hereof,  the
Company has  authorized  and reserved and the Company shall  continue to reserve
and keep  available at all times,  free of preemptive  rights,  shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
the Additional Shares,  Underlying  Shares,  and Warrant Shares;  such amount of
shares  of  Common  Stock to be  reserved  shall be  calculated  based  upon the
Purchase Price therefor under the terms of this  Agreement,  the  Certificate of
Designation,  and Warrants.  The number of shares so reserved shall be increased
or  decreased  to reflect  potential  increases or decreases in the Common Stock
that  the  Company  may  thereafter  be so  obligated  to  issue  by  reason  of
adjustments to the Preferred Stock and the Warrants.


<PAGE>
            Section 6.3 Listing of Common Stock. The Company shall (a) not later
than the fifth Business Day following the Closing Date prepare and file with the
Nasdaq  Small  Cap  Stock  Market  (as  well as any  other  national  securities
exchange,  market or trading  facility on which the Common Stock is then listed)
an additional  shares listing  application  covering at least the sum of (i) two
times the number of Underlying  Shares as would be issuable upon a conversion in
full of (and as payment of  dividends  in  respect  of) the shares of  Preferred
Stock, assuming such conversion occurred on the Closing Date (whichever yields a
lower Conversion  Price),  and (ii) the Warrant Shares issuable upon exercise in
full of the Warrants,  (b) take all steps  necessary to cause the such shares to
be approved  for listing on the Nasdaq Small Cap Stock Market (as well as on any
other  national  securities  exchange,  market or trading  facility on which the
Common Stock is then listed) as soon as possible thereafter,  and (c) provide to
the  Investors  evidence of such  listing,  and the Company  shall  maintain the
listing of its Common Stock on such exchange or market.  In addition,  if at any
time the number of shares of Common  Stock  issuable on  conversion  of all then
outstanding  shares of  Preferred  Stock,  on  account  of  accrued  and  unpaid
dividends  thereon and upon exercise in full of the Warrants is greater than the
number of shares of Common  Stock  theretofore  listed with the Nasdaq Small Cap
Stock Market (and any such other national securities exchange, market or trading
facility),  the Company shall  promptly take such action  (including the actions
described  in the  preceding  sentence)  to file an  additional  shares  listing
application  with the Nasdaq Small Cap Stock Market (and any such other national
securities  exchange,  market or trading facility) covering at least a number of
shares  equal to the sum of (x) 200% of (A) the number of  Underlying  Shares as
would then be  issuable  upon a  conversion  in full of the shares of  Preferred
Stock,  and (B) the number of Underlying  Shares as would be issuable as payment
of  dividends  on the Shares  and (y) the  number of Warrant  Shares as would be
issuable upon exercise in full of the Warrants.  Except for the notice  attached
hereto as Annex I (which the Company  represents  it has  responded  to and been
notified  by the Nasdaq  Small Cap Stock  Market that the Company is now in full
compliance with the  requirements for such continued  listing),  the Company (i)
has not received any notice, oral or written, affecting its continued listing on
the  Nasdaq  Small Cap Stock  Market,  and (ii) is in full  compliance  with the
requirements  for continued  listing on the Nasdaq Small Cap Stock  Market.  The
Company  will take no  action  which  would  impact  its  continued  listing  or
eligibility of the Company for such listing (except as set forth in Section 6.11
below). The Company will comply with the listing and trading requirements of its
Common Stock on a Principal Market (including,  without limitation,  maintaining
sufficient  net  tangible  assets)  and will  comply  in all  respects  with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the Principal Market. In the event the Company receives notification from Nasdaq
or any other  controlling  entity  stating that the Company is not in compliance
with the listing  qualifications of such Principal Market, the Company will take
all action necessary to bring the Company within  compliance with all applicable
listing standards of the Principal Market.  Notwithstanding  the foregoing,  the
Company  shall only be required to include that number of shares of Common Stock
in the  aforementioned  listing  application as is allowable under the rules and
regulations of the Principal Market.

      Section 6.4  Exchange  Act  Registration.  The Company  will  maintain the
registration  of its Common  Stock under  Section 12 of the Exchange  Act,  will
comply in all  respects  with its  reporting  and filing  obligations  under the
Exchange Act, and will not take any action or file any document  (whether or not

<PAGE>

permitted by Exchange Act or the rules  thereunder) to terminate or suspend such
registration  or to terminate or suspend its  reporting  and filing  obligations
under said Act.

      Section 6.5 Legends.  The Securities to be sold by the Company pursuant to
this Agreement shall be free of legends, except as set forth in Article VIII.

      Section 6.6 Corporate  Existence.   The  Company  will  take  all  steps
necessary to preserve and continue the corporate existence of the Company.

      Section 6.7 Notice of Certain Events Affecting  Registration.  The Company
will  immediately  notify each of the Investors and the Placement Agent upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable  Securities:  (i)
receipt  of any  request  for  additional  information  by the SEC or any  other
federal or state  governmental  authority  during the period of effectiveness of
the  Registration  Statement for amendments or  supplements to the  Registration
Statement  or  related  prospectus;  (ii) the  issuance  by the SEC or any other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness of the Registration Statement or the initiation of any proceedings
for  that  purpose;  (iii)  receipt  of any  notification  with  respect  to the
suspension of the  qualification  or exemption from  qualification of any of the
Registrable  Securities  for  sale  in any  jurisdiction  or the  initiation  or
threatening of any proceeding for such purpose;  (iv) the happening of any event
that  makes  any  statement  made  in  the  Registration  Statement  or  related
prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration Statement,  related prospectus or documents so that,
in the case of the  Registration  Statement,  it will  not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein not misleading,  and
that in the case of the  related  prospectus,  it will not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading;  and (v) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate.  The Company will promptly make available to the
Investors any such supplement or amendment to the related prospectus.

      Section 6.8  Consolidation;  Merger.  The  Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the  Investors  and the Placement  Agent such shares of
stock and/or securities as the Investors and the Placement Agent are entitled to
receive pursuant to this Agreement.

      Section 6.9 Issuance of Underlying Shares and Warrant Shares. The issuance
of the  Underlying  Shares and the  Warrant  Shares  pursuant to exercise of the
Warrants, and the conversion of the Preferred Stock, shall be made in accordance
with the provisions and  requirements  of Section 4(2) of the Securities Act, or
Regulation D and any applicable state securities law.


<PAGE>

      Section  6.10 Legal  Opinion.  The  Company's  independent  counsel  shall
deliver to the Investors upon execution of this Agreement, and upon the issuance
of the  Warrants  as set forth in Section  2.4 above,  an opinion in the form of
Exhibit E annexed  hereto (as  conformed  for the issuance of the  Warrants,  as
applicable).  The Company will obtain for the Investors and the Placement Agent,
at the  Company's  expense,  any  and  all  opinions  of  counsel  which  may be
reasonably  required in order to convert the Preferred Stock and/or exercise the
Warrants,  including,  but not limited to,  obtaining  for the Investors and the
Placement  Agent an opinion of counsel,  subject  only to receipt of a notice of
conversion (the "Notice of Conversion") in the form of Exhibit G, and/or subject
only to a receipt of a notice of  exercise in the form  annexed to the  Warrant,
directing the Transfer Agent to remove the legend from the certificate.

      Section 6.11 20% Rule  Limitation.  If required by The Nasdaq Stock Market
or  otherwise on the market or exchange on which the  Company's  Common Stock is
then listed, the Company shall call a meeting of its shareholders, to be held no
later than 60 calendar days after the  Subscription  Date,  seeking  shareholder
approval of the below market issuances of shares of Common Stock (and securities
convertible  into and  exercisable  for Common  Stock) to the  Investors and the
Placement  Agent  of 20% or  more  of the  number  of  shares  of  Common  Stock
outstanding  as of  Subscription  Date.  In the  event  that the  aforementioned
proposal is not so approved with such 60 calendar day period,  the Company shall
seek a waiver from The Nasdaq Stock Market (or such other Principal  Market) for
such below  market  issuances.  In the event the Company  does not receive  such
waiver  within  the  earlier  of ten  calendar  days  after  the  aforementioned
shareholders  meeting,  or 70 calendar  days after the  Subscription  Date,  the
Company  shall  either  delist the Common Stock from The Nasdaq Stock Market and
immediately  (within two Trading Days  thereafter)  list the Common Stock on the
OTC Bulletin  Board, or the Company agrees that it will pay to the Investors the
Redemption Price (as defined and pursuant to the redemption provisions contained
in the  Certificate  of  Designation,  with  payment  due as if such  date was a
Redemption Date) for that number of shares of Preferred Stock which would result
in the  Company  issuing,  in the  aggregate,  of 20%or more of the  outstanding
Common Stock as of the Subscription Date.

      Section 6.12  Restrictions on Future  Financings.  Except for offerings by
the Company of which all of the proceeds are used to redeem the Preferred  Stock
pursuant to the terms of the Certificate of Designation, the Company agrees that
it will not,  without the prior written  consent of all of the Investors,  which
consent shall not be unreasonably withheld, enter into any subsequent or further
offer  or  sale  of  Common  Stock,  or  any  securities  or  other  instruments
convertible into shares of Common Stock,  until the  Registration  Statement has
been effective for 60 calendar days.  This  restriction  shall not apply to: (a)
the issuance of securities  (other than for cash) in  connection  with a merger,
consolidation, sale of assets, or other disposition, (b) the exchange of Capital
Shares for assets,  stock, or joint venture interest,  (c) an offering of any of
the  Company's  securities at then current  market prices with no repricing,  no
reset provisions, no attached warrants, or no securities convertible into shares
of Common Stock, or (d) any employee benefit plan; provided,  however,  that any
action  contemplated  under  this  Section  is  subject  to the  condition  that
registration  rights,  if any, in connection  with such action shall not require
the filing by the Company of a registration statement of such shares prior to 60
calendar days after the Effective Date.


<PAGE>

      Section 6.13  Conversion of Preferred  Stock.  The Company will permit the
Investors  and the  Placement  Agent to  exercise  their  right to  convert  the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company as is set forth in the Certificate of Designation.

      Section 6.14  Restriction  on Future  Issuances of  Preferred  Stock.  The
Company agrees that except as provided for in this Agreement,  it will not issue
any additional share or shares of the Preferred Stock.

      Section 6.15  Increase in Authorized  Shares.  At such time as the Company
would be, if a notice of  conversion or exercise (as the case may be) were to be
delivered on such date,  precluded from (a) converting in full all of the shares
of Preferred Stock that remain  unconverted at such date (and paying any accrued
but unpaid  dividends  in respect  thereof  in shares of Common  Stock),  or (b)
honoring the exercise in full of the Warrants,  due to the  unavailability  of a
sufficient  number of shares of authorized  but unissued or  re-acquired  Common
Stock,  the Board of Directors of the Company  shall  promptly  (and in any case
within 60 calendar days from such date) hold a shareholders meeting in which the
shareholders would vote for authorization to amend the Company's  certificate of
incorporation to increase the number of shares of Common Stock which the Company
is  authorized  to issue to at least a number of shares  equal to the sum of (i)
all shares of Common Stock then outstanding, (ii) the number of shares of Common
Stock issuable on account of all outstanding  warrants,  options and convertible
securities  (other than the Preferred  Stock and the Warrants) and on account of
all shares reserved under any stock option,  stock purchase,  warrant or similar
plan,  (iii) 200% of the number of  Underlying  Shares as would then be issuable
upon a conversion in full of the then outstanding  shares of Preferred Stock and
as  payment  of all  future  dividends  thereon  in shares  of  Common  Stock in
accordance  with the terms of this Agreement and the Certificate of Designation,
and (iv)  such  number of  Warrant  Shares as would  then be  issuable  upon the
exercise  in full  of the  Warrants.  In  connection  therewith,  the  Board  of
Directors  shall (x) adopt proper  resolutions  authorizing  such increase,  (y)
recommend  to and  otherwise  use its best  efforts to promptly  and duly obtain
shareholder  approval to carry out such resolutions and (z) within five Business
Days of obtaining such shareholder authorization,  file an appropriate amendment
to the Company's certificate of incorporation to evidence such increase.

      Section 6.16 Notice of Breaches.  Each of the Company on the one hand, and
the Investors on the other, shall give prompt written notice to the other of any
breach  by it of any  representation,  covenant,  warranty  or  other  agreement
contained in this Agreement or any Exhibit annexed hereto, as well as any events
or occurrences  arising after the date hereof,  which would reasonably be likely
to cause any  representation,  covenant,  or warranty or other agreement of such
party,  as the case may be,  contained in this Agreement or any Exhibit  annexed
hereto,  to be  incorrect  or  breached as of such  Closing  Date.  However,  no
disclosure by either party  pursuant to this Section shall be deemed to cure any
breach of any  representation,  warranty or other  agreement  contained  in this
Agreement or any Exhibit annexed hereto.  Notwithstanding  the generality of the
foregoing,  the Company  shall  promptly  notify each  Investor of any notice or
claim  (written or oral) that it receives  from any lender of the Company to the
effect that the consummation of the transactions  contemplated by this Agreement

<PAGE>

or any Exhibit annexed hereto,  violates or would violate any written  agreement
or  understanding  between  such lender and the Company,  and the Company  shall
promptly  furnish by facsimile to each Investor a copy of any written  statement
in support of or relating to such claim or notice.

      Section  6.17  Transfer of  Intellectual  Property  Rights.  Except in the
ordinary  course of the Company's  business  consistent with past practice or in
connection  with  the  sale of all or  substantially  all of the  assets  of the
Company,  the Company  shall not  transfer,  sell or  otherwise  dispose of, any
Intellectual  Property  Rights,  or allow the  Intellectual  Property  Rights to
become subject to any Liens, or fail to renew such Intellectual  Property Rights
(if renewable and would otherwise expire).

                                   ARTICLE VII

        Due Diligence Review; Non-Disclosure of Non-Public Information

      Section 7.1 Due Diligence  Review.  The Company shall make available for
inspection and review by the Investors,  advisors to and  representatives of the
Investors (who may or may not be affiliated with the Investors), any underwriter
participating in any disposition of the Registrable  Securities on behalf of the
Investors  pursuant  to  the  Registration  Statement,   any  such  registration
statement  or  amendment or  supplement  thereto or any blue sky,  NASD or other
filing,  all  financial and other  records,  all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be  reasonably  necessary  for the  purpose  of such  review,  and cause the
Company's  officers,  directors  and  employees  to supply all such  information
reasonably requested by any of the Investors or any such representative, advisor
or  underwriter  in  connection  with such  Registration  Statement  (including,
without limitation,  in response to all questions and other inquiries reasonably
made or  submitted  by any of them),  prior to and from  time to time  after the
filing and  effectiveness of the Registration  Statement for the sole purpose of
enabling the Investors and such  representatives,  advisors and underwriters and
their  respective  accountants  and attorneys to conduct initial and ongoing due
diligence  with  respect to the  Company and the  accuracy  of the  Registration
Statement.

      Section 7.2 Non-Disclosure of Non-Public Information

            (a) The Company  shall not disclose  non-public  information  to the
Investors,  advisors to, or  representatives  of, the Investors  unless prior to
disclosure of such information the Company  identifies such information as being
non-public  information  and  provides  each  Investor,  and  its  advisors  and
representatives  with the  opportunity  to  accept  or  refuse  to  accept  such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require each of the Investors advisors and
representatives  to enter into a  confidentiality  agreement in form  reasonably
satisfactory to the Company and the Investors.

            (b) Nothing herein shall require the Company to disclose  non-public
information  to any of the Investors or their advisors or  representatives,  and
the Company  represents that it does not disseminate  non-public  information to
any investors who purchase stock in the Company in a public  offering,  to money

<PAGE>

managers or to securities  analysts,  provided,  however,  that  notwithstanding
anything  herein to the contrary,  the Company will,  as  hereinabove  provided,
immediately  notify the advisors and  representatives  of the Investors  and, if
any,  underwriters,  of any event or the existence of any circumstance  (without
any  obligation  to disclose the  specific  event or  circumstance)  of which it
becomes aware,  constituting non-public information (whether or not requested of
the Company specifically or generally during the course of due diligence by such
persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made, not misleading.  Nothing contained in this Section shall be construed
to mean that such  persons or entities  other than the  Investors  (without  the
written  consent of the Investors prior to disclosure of such  information)  may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from  notifying the Company of their opinion that based
on such due  diligence  by such  persons  or  entities,  that  the  Registration
Statement  contains an untrue  statement of a material  fact or omits a material
fact  required to be stated in the  Registration  Statement or necessary to make
the statements  contained  therein,  in light of the circumstances in which they
were made, not misleading.

                                  ARTICLE VIII

                                     Legends

            Section 8.1 Legends. The Investors agree to the imprinting,  so long
as is required by this Section,  of the following legend (or such  substantially
similar legend as is acceptable to the Investors and their counsel,  the parties
agreeing that any unacceptable legended Securities shall be replaced promptly by
and at the Company's cost) on the Securities:

      [FOR SHARES PREFERRED STOCK AND WARRANTS] NEITHER THESE SECURITIES NOR THE
   SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]  [EXERCISABLE]  HAVE
   BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
   COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
   THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
   ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD  EXCEPT  PURSUANT  TO AN  EFFECTIVE
   REGISTRATION  STATEMENT  UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
   EXEMPTION  FROM,  OR  IN A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION
   REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
   SECURITIES LAWS.

      [ONLY FOR  UNDERLYING  SHARES AND WARRANT  SHARES TO THE EXTENT THE RESALE
   THEREOF IS NOT COVERED BY AN EFFECTIVE  REGISTRATION STATEMENT AT THE TIME OF
   CONVERSION,  ISSUANCE OR EXERCISE] THE SHARES REPRESENTED BY THIS CERTIFICATE
   HAVE NOT BEEN REGISTERED  WITH THE SECURITIES AND EXCHANGE  COMMISSION OR THE
   SECURITIES  COMMISSION  OF ANY  STATE  IN  RELIANCE  UPON AN  EXEMPTION  FROM
   
<PAGE>

   REGISTRATION  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES
   ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT  PURSUANT TO AN
   EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
   AVAILABLE   EXEMPTION   FROM,  OR  IN  A  TRANSACTION  NOT  SUBJECT  TO,  THE
   REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT  AND IN  ACCORDANCE  WITH
   APPLICABLE STATE SECURITIES LAWS.

      The  Underlying  Shares and/or Warrant Shares shall not contain the legend
set  forth  above or any  other  restrictive  legend  if the  conversion  of the
Preferred  Stock,  exercise of Warrants or other issuances of Underlying  Shares
and/or  Warrant  Shares,  as the  case  may  be,  occurs  at any  time  while  a
Registration  Statement is effective  under the Securities Act and in connection
with the resale of the shares of Common  Stock or, in the event  there is not an
effective  Registration  Statement at such time, if in the opinion of counsel to
the Company such legend is not required  under  applicable  requirements  of the
Securities Act (including judicial  interpretations and pronouncements issued by
the staff of the  Commission).  The  Company  agrees  that it will  provide  the
Investors,  upon  request,  with  a  certificate  or  certificates  representing
Underlying  Shares and/or Warrant Shares,  free from such legend at such time as
such  legend is no  longer  required  hereunder.  The  Company  may not make any
notation  on its  records  or give  instructions  to any  transfer  agent of the
Company which enlarge the restrictions of transfer set forth in this Section.

      Upon the  execution  and  delivery  hereof,  the Company is issuing to the
transfer  agent for its  Common  Stock  (and to any  substitute  or  replacement
transfer  agent for its Common Stock upon the Company's  appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto.  Such instructions shall be irrevocable by the Company from
and after the date  hereof or from and after the  issuance  thereof  to any such
substitute  or  replacement  transfer  agent,  as the  case  may be,  except  as
otherwise  expressly  provided in the Registration  Rights Agreement.  It is the
intent and purpose of such  instructions,  as provided  therein,  to require the
transfer  agent  for  the  Common  Stock  from  time to time  upon  transfer  of
Registrable  Securities  by  the  Investors  or the  Placement  Agent  to  issue
certificates  evidencing such  Registrable  Securities free of the Legend during
the  following  periods  and under the  following  circumstances  and  except as
provided below,  without  consultation by the transfer agent with the Company or
its  counsel  and without  the need for any  further  advice or  instruction  or
documentation to the transfer agent by or from the Company or its counsel or the
Investors:

            (a) at any time after the Effective  Date,  upon surrender of one or
more certificates evidencing the Warrants, Preferred Stock, Underlying Shares or
Warrant Shares that bear the aforementioned Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the  aforementioned
legend  to  replace  those  surrendered;  provided  that  (i)  the  Registration
Statement  shall then be effective;  (ii) the  Investor(s)  and/or the Placement
Agent  confirm  to the  transfer  agent that it has sold,  pledged or  otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona  fide  transaction  to a  third  party  that is not an  affiliate  of the
Company;  and  (iii) the  Investor(s)  and/or  Placement  Agent  confirm  to the
transfer agent that the  Investor(s)  and/or  Placement Agent have complied with
the prospectus delivery requirement.

<PAGE>

            (b) at any  time  upon  any  surrender  of one or more  certificates
evidencing Registrable  Securities,  that bear the aforementioned legend, to the
extent  accompanied by a notice requesting the issuance of new certificates free
of such legend to replace those surrendered and containing  representations that
(i) the  Investor(s)  and/or the Placement Agent is permitted to dispose of such
Registrable  Securities,  without  limitation  as to  amount  or  manner of sale
pursuant to Rule 144(k) under the Securities Act or (ii) the Investor(s)  and/or
Placement  Agent has sold,  pledged or otherwise  transferred or agreed to sell,
pledge or otherwise transfer such Registrable Securities, in a manner other than
pursuant to an effective registration  statement,  to a transferee who will upon
such transfer be entitled to freely tradeable securities. The Company shall have
counsel provide any and all opinions necessary for the sale under Rule 144.

      Any of the  notices  referred  to  above  in this  Section  may be sent by
facsimile to the Company's transfer agent.

      Section  8.2 No Other  Legend or Stock  Transfer  Restrictions.  No legend
other than the one  specified in this Article has been or shall be placed on the
share  certificates  representing the Common Stock, and no instructions or "stop
transfer   orders,"  so  called,   "stock  transfer   restrictions,"   or  other
restrictions  have been or shall be given to the Company's  transfer  agent with
respect thereto other than as expressly set forth in this Article.

      Section 8.3 Investor's Compliance. Nothing in this Article shall affect in
any way any of the Investors  obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.

                                   ARTICLE IX

                                  Choice of Law

      Section 9.1 Choice of Law;  Venue;  Jurisdiction.  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  Securities  Act,  without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive  jurisdiction  of the U.S.  District  Court  sitting  in the  Southern
District of the State of New York sitting in Manhattan  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 any other manner  permitted by law. Each party waives
its right to a trial by jury.

<PAGE>

                                    ARTICLE X

             Assignment; Entire Agreement, Amendment; Termination

      Section 10.1 Assignment.  Subject to Section 3.9the Investor's interest in
this Agreement and its ownership of Preferred Stock and Warrants may be assigned
or  transferred  at any time, in whole or in part, to any other person or entity
(including any affiliate of the  Investors)  who agrees to, and truthfully  can,
make the representations and warranties contained in Article III, and who agrees
to be bound by the  covenants  of Article V. The  provisions  of this  Agreement
shall inure to the benefit of, and be  enforceable  by, any transferee of any of
the shares of  Preferred  Stock  and/or  Warrants  purchased  or acquired by the
Investors hereunder with respect to the Common Stock held by such person.

      Section 10.2 Termination. This Agreement shall terminate upon the earliest
of (i) the date  that  all the  Registrable  Securities  have  been  sold by the
Investors  pursuant to the Registration  Statement;  (ii) the date the Investors
receive  an opinion  from  counsel to the  Company  that all of the  Registrable
Securities  may be sold  under  the  provisions  of  Rule  144,  without  volume
limitation; or (iii) three years after the Closing Date; provided, however, that
the provisions of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII herein,
and the registration  rights  provisions for the Registrable  Securities held by
the  Investors  and the  Placement  Agent set forth in this  Agreement,  and the
Registration Rights Agreement, shall survive the termination of this Agreement.

                                   ARTICLE XI

                                     Notices

      Section 11.1 Notices. All notices, demands, requests, consents, approvals,
and other  communications  required or permitted  hereunder  shall be in writing
and, unless otherwise  specified herein,  shall be (i) personally  served,  (ii)
deposited  in the mail,  registered  or  certified,  return  receipt  requested,
postage  prepaid,  (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other  address as such party shall have  specified
most recently by written notice. Any notice or other  communication  required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or  delivery  by  facsimile,   with  accurate  confirmation   generated  by  the
transmitting  facsimile  machine,  at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received),  or the first  Business Day following  such delivery (if delivered
other than on a Business Day during normal  business  hours where such notice is
to be received) or (b) on the second  Business Day following the date of mailing
by reputable courier service, fully prepaid,  addressed to such address, or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

      If to the Company:

                        Sims Communications, Inc.
                        18001 Cowan, Suite C & D
                        Irvine, CA 92614
                        Attention: President
                        Facsimile: (949) 261-0323
                        Telephone: (800) 241-1227

<PAGE>

      With a copy to:

                        Hart & Trinen, L.L.P.
                        1624 Washington Street
                        Denver, Colorado 80203
                        Attention: William Hart
                        Facsimile: (303) 839-0061
                        Telephone: (303) 839-5414

      If to the Investors, at the addresses listed on Schedule A.

      If to the Placement Agent, at the address listed on the first page of this
      Agreement.

      with a copy to:

                        Goldstein, Goldstein & Reis, LLP
                        65 Broadway, 10th Floor
                        New York, NY  10006
                        Attention: Scott H. Goldstein, Esq.
                        Telephone: (212) 809-4220
                        Facsimile: (212) 809-4228


      Either  party hereto may from time to time change its address or facsimile
number for notices under this Section 11.1 by giving at least ten calendar days'
prior written  notice of such changed  address or facsimile  number to the other
party hereto.

      Section 11.2  Indemnification.  The Company  agrees to indemnify  and hold
harmless each of the  Investors  and each officer,  director of the Investors or
person,  if any, who controls the Investors within the meaning of the Securities
Act against any losses, claims, damages or liabilities,  joint or several (which
shall, for all purposes of this Agreement,  include,  but not be limited to, all
costs of  defense  and  investigation  and all  attorneys'  fees),  to which the
Investors may become subject, under the Securities Act or otherwise,  insofar as
such losses,  claims,  damages or  liabilities  (or actions in respect  thereof)
arise out of or are based  upon the breach of any term of this  Agreement.  This
indemnity  agreement will be in addition to any liability  which the Company may
otherwise have.

      Each Investor agrees that it will indemnify and hold harmless the Company,
and each  officer,  director of the Company or person,  if any, who controls the
Company within the meaning of the Securities  Act,  against any losses,  claims,
damages  or  liabilities  (which  shall,  for all  purposes  of this  Agreement,
include,  but not be limited to, all costs of defense and  investigation and all
attorneys'  fees)  to  which  the  Company  or any  such  officer,  director  or

<PAGE> 

controlling  person may become  subject under the  Securities  Act or otherwise,
insofar as such losses  claims,  damages or  liabilities  (or actions in respect
thereof)  arise  out of or are  based  upon  the  breach  of any  term  of  this
Agreement.  This indemnity  agreement will be in addition to any liability which
the Investors or any subsequent assignee may otherwise have.

      Promptly  after  receipt by an  indemnified  party  under this  Section of
notice of the  commencement  of any action,  such  indemnified  party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section,  notify the  indemnifying  party of the commencement  thereof;  but the
omission so to notify the  indemnifying  party will not relieve the indemnifying
party from any liability  which it may have to any  indemnified  party otherwise
than as to the particular item as to which  indemnification is then being sought
solely pursuant to this Section.  In case any such action is brought against any
indemnified  party, and it notifies the  indemnifying  party of the commencement
thereof,  the indemnifying party will be entitled to participate in, and, to the
extent that it may wish,  jointly with any other  indemnifying  party  similarly
notified,  assume the defense thereof,  subject to the provisions  herein stated
and after notice from the indemnifying  party to such  indemnified  party of its
election so to assume the defense thereof,  the  indemnifying  party will not be
liable 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,  unless  the
indemnifying  party  shall not pursue the  action to its final  conclusion.  The
indemnified  party shall have the right to employ  separate  counsel in any such
action and to participate in the defense  thereof,  but the fees and expenses of
such  counsel  shall  not be at the  expense  of the  indemnifying  party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
one of the  Investors,  the fees and  expenses of such  counsel  shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically  authorized in writing by the indemnifying party, or (ii) the named
parties to any such action  (including any impleaded  parties)  include both the
Investors and the  indemnifying  party and the Investors shall have been advised
by such  counsel that there may be one or more legal  defenses  available to the
indemnifying  party  different from or in conflict with any legal defenses which
may be available to the  Investors (in which case the  indemnifying  party shall
not have the  right to  assume  the  defense  of such  action  on  behalf of the
Investors,  it being understood,  however, that the indemnifying party shall, in
connection  with any one such action or separate  but  substantially  similar or
related  actions  in the  same  jurisdiction  arising  out of the  same  general
allegations  or  circumstances,  be  liable  only  for the  reasonable  fees and
expenses of one separate firm of attorneys for the Investor(s), which firm shall
be  designated  in  writing by the  Investor(s)).  No  settlement  of any action
against an indemnified  party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.

      Section  11.3  Contribution.  In order to provide  for just and  equitable
contribution  under the Securities Act in any case in which (i) the  indemnified
party makes a claim for  indemnification  pursuant to Section 11.2 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case

<PAGE>

notwithstanding  the fact that the  express  provisions  of Section  11.2 hereof
provide  for  indemnification  in such  case,  or (ii)  contribution  under  the
Securities Act may be required on the part of any  indemnified  party,  then the
Company and the applicable  Investor shall  contribute to the aggregate  losses,
claims,  damages or liabilities  to which they may be subject (which shall,  for
all  purposes of this  Agreement,  include,  but not be limited to, all costs of
defense and  investigation  and all attorneys' fees), in either such case (after
contribution  from  others) on the basis of relative  fault as well as any other
relevant equitable considerations.  The amount paid or payable by an indemnified
party as a result of the losses,  claims,  damages or liabilities (or actions in
respect  thereof)  referred to above in Section  11.2 shall be deemed to include
any legal or other expenses  reasonably  incurred by such  indemnified  party in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to  contributions  from any person who was
not guilty of such fraudulent misrepresentation.

                                   ARTICLE XII

                                  Miscellaneous

      Section 12.1 Counterparts;  Facsimile;  Amendments.  This Agreement may be
executed  in multiple  counterparts,  each of which may be executed by less than
all of the parties and shall be deemed to be an original  instrument which shall
be enforceable  against the parties actually executing such counterparts and all
of which  together  shall  constitute  one and the same  instrument.  Except  as
otherwise  stated  herein,  in  lieu  of the  original  documents,  a  facsimile
transmission  or  copy of the  original  documents  shall  be as  effective  and
enforceable  as the  original.  This  Agreement may be amended only by a writing
executed  by the  Company  on the one hand,  and all of the  Investors,  and the
Placement Agent, on the other hand.

      Section 12.2 Entire Agreement. This Agreement, the Exhibits or Attachments
hereto,  which include,  but are not limited to the  Certificate of Designation,
the Warrant,  the Escrow Agreement,  and the Registration Rights Agreement,  set
forth the entire  agreement  and  understanding  of the parties  relating to the
subject matter hereof and supersedes all prior and  contemporaneous  agreements,
negotiations  and  understandings  between  the  parties,  both oral and written
relating to the subject matter hereof.  The terms and conditions of all Exhibits
and Attachments to this Agreement are incorporated  herein by this reference and
shall constitute part of this Agreement as is fully set forth herein.

      Section 12.3  Survival;  Severability.  The  representations,  warranties,
covenants  and  agreements  of the parties  hereto  shall  survive  each Closing
hereunder.  In the event  that any  provision  of this  Agreement  becomes or is
declared by a court of competent  jurisdiction to be illegal,  unenforceable  or
void,  this  Agreement  shall  continue  in full force and effect  without  said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.

      Section 12.4 Title and  Subtitles.  The titles and subtitles  used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

<PAGE>

      Section 12.5 Reporting  Entity for the Common Stock.  The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg,  L.P. or any successor thereto.  The written mutual
consent of the  Investors  and the Company shall be required to employ any other
reporting entity.

      Section 12.6  Replacement  of  Certificates.  Upon (i) receipt of evidence
reasonably  satisfactory  to the  Company  of the loss,  theft,  destruction  or
mutilation  of  a  certificate   representing  the  Preferred  Stock,  Warrants,
Underlying  Shares or  Warrant  Shares,  and (ii) in the case of any such  loss,
theft  or  destruction  of  such  certificate,  upon  delivery  of an  indemnity
agreement or security reasonably  satisfactory in form and amount to the Company
or (iii) in the case of any such  mutilation,  on surrender and  cancellation of
such certificate,  the Company at its expense will execute and deliver,  in lieu
thereof, a new certificate of like tenor.

      Section 12.7 Fees and Expenses. Each of the parties shall pay its own fees
and expenses  (including the fees of any attorneys,  accountants,  appraisers or
others  engaged  by such  party)  in  connection  with  this  Agreement  and the
transactions  contemplated  hereby,  except  that the  Company  shall pay on the
Subscription Date (i) the sum of one percent of the Purchase Price, in cash, out
of escrow, to Goldstein,  Goldstein & Reis, LLP for legal,  administrative,  and
escrow fees, and (ii) to the Placement  Agent (A) the sum equal to three percent
of the Purchase Price payable in cash out of escrow,  (B) 60 shares of Preferred
Stock,  and (C) Warrants to purchase 50,000 Warrant Shares,  for Placement Agent
fees.

      Section 12.8  Noncircumvention.  The Company and the Investors  agree that
they shall not  circumvent  this  Agreement and the Company's  obligation to pay
fees to the Placement  Agent,  and the Company,  the Investors and the Placement
Agent agree that they will not  circumvent  the  provisions of this Agreement or
the Escrow Agreement and the Company's obligation for the payment of fees to the
Escrow Agent.

      Section 12.9  Publicity.  The Company and the Investors shall consult with
each other in issuing any press releases or otherwise  making public  statements
with respect to the  transactions  contemplated  hereby and no party shall issue
any such press release or otherwise make any such public  statement  without the
prior  written  consent  of  the  other  parties,  which  consent  shall  not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such  disclosure is required by law, in which such case the disclosing  party
shall  provide the other  parties  with prior  notice of such public  statement.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of the Investors  without the prior written consent of the Investors,  except to
the  extent  required  by law,  in which  case the  Company  shall  provide  the
Investors with prior written notice of such public disclosure.

<PAGE>
                 [Remainder of page intentionally left blank]

                            [Signature page follows]



<PAGE>


      IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Series  C
Convertible   Preferred   Stock  Purchase   Agreement  to  be  executed  by  the
undersigned, thereunto duly authorized, as of the date first set forth above.



                                    SIMS COMMUNICATIONS, INC.


                                    By ____________________________
                                          Mark Bennett, President

                                    SETTONDOWN CAPITAL INTER-
                                    NATIONAL LTD., Placement Agent


                                    By_____________________________


                                    AUGUSTINE FUND, LP, Investor


                                    By_____________________________


                                    HSBC JAMES CAPEL CANADA, INC., Investor


                                    By_____________________________

                                    GILSTON CORPORATION, LTD., Investor


                                    By_____________________________

<PAGE>

                                   SCHEDULE A



INVESTORS:


1.    AUGUSTINE FUND, LP
      141 West Jackson Boulevard, Suite 2182
      Chicago, Illinois 60604
      Telephone: (312) 427-5457
      Facismile: (312) 427-5396
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250

2.    HSBC James Capel Canada, Inc.*
      105 Adelaide Street, Suite 1200
      Toronto, ON MSH 1P9
      Telephone: (416) 947-2700
      Facsimile: (416) 947-9450
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250
      * HSBC James Capel Canada, Inc. is not a party to the Escrow Agreement
      annexed hereto.

3.    Gilston Corporation, Ltd.
      Charlotte House, Charlotte Street
      P.O. Box N 9204
      Nassau, Bahamas
      Telephone: (242) 325-1033
      Facsimile: (242) 323-7918
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250




<PAGE>


                                                                     EXHIBIT B

                                ESCROW AGREEMENT

      THIS ESCROW  AGREEMENT is made as of the 7th day of December,  1998 by and
among SIMS COMMUNICATIONS, INC., with its principal office at 18001 Cowan, Suite
C & D, Irvine, CA 92614 (hereinafter the "Company"),  the "Investors"  specified
on Schedule A attached hereto  (excluding HSBC James Capel Canada,  Inc.),  with
their  respective  principal  offices at the  addresses set forth in Schedule A,
SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.,  (the  "Placement  Agent")  located at
Charlotte  House,  Charlotte  Street,  P.O. Box N. 9204,  Nassau,  Bahamas,  and
GOLDSTEIN,  GOLDSTEIN & REIS,  LLP, 65 Broadway,  10th Fl.,  New York,  NY 10006
(hereinafter the "Escrow Agent").

                             W I T N E S S E T H:

            WHEREAS,  the  Investors  will be  purchasing  Preferred  Stock  and
Warrants, from time to time from the Company at a purchase price as set forth in
the Series C Convertible  Preferred  Stock  Purchase  Agreement  (the  "Purchase
Agreement")  dated as of December 7, 1998, which will be issued as per the terms
contained herein and in the Agreement executed by the Company and Investors; and

            WHEREAS,   the  Company  will  be  issuing  Preferred  Stock,  and
Warrants to the Placement Agent pursuant to the Agreement; and

            WHEREAS, it is intended that the purchase of the Preferred Stock and
Warrants  be  consummated  in  accordance  with the  requirements  set  forth by
Regulation D promulgated under the Securities Act of 1933, as amended; and

            WHEREAS,  the Company has  requested  that the Escrow Agent hold the
Purchase  Price,  in escrow  until the Escrow  Agent has  received  the original
Preferred  Stock.  The  Escrow  Agent will then  immediately  wire  transfer  or
otherwise deliver at the Company's discretion immediately available funds to the
Company's  account  and  arrange  for  delivery  of the  Preferred  Stock to the
Investors,  and Preferred  Stock and Warrants to the Placement  Agent as per the
terms and conditions in the Agreement.


<PAGE>



                                ESCROW AGREEMENT

      THIS ESCROW  AGREEMENT is made as of the 7th day of December,  1998 by and
among SIMS COMMUNICATIONS, INC., with its principal office at 18001 Cowan, Suite
C & D, Irvine, CA 92614 (hereinafter the "Company"),  the "Investors"  specified
on Schedule A attached  hereto(excluding  HSBC James Capel Canada,  Inc.),  with
their  respective  principal  offices at the  addresses set forth in Schedule A,
SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.,  (the  "Placement  Agent")  located at
Charlotte  House,  Charlotte  Street,  P.O. Box N. 9204,  Nassau,  Bahamas,  and
GOLDSTEIN,  GOLDSTEIN & REIS,  LLP, 65 Broadway,  10th Fl.,  New York,  NY 10006
(hereinafter the "Escrow Agent").

                             W I T N E S S E T H:

            WHEREAS,  the  Investors  will be  purchasing  Preferred  Stock  and
Warrants, from time to time from the Company at a purchase price as set forth in
the Series C Convertible  Preferred  Stock  Purchase  Agreement  (the  "Purchase
Agreement")  dated as of December 7, 1998, which will be issued as per the terms
contained herein and in the Agreement executed by the Company and Investors; and

            WHEREAS,   the  Company  will  be  issuing  Preferred  Stock,  and
Warrants to the Placement Agent pursuant to the Agreement; and

            WHEREAS, it is intended that the purchase of the Preferred Stock and
Warrants  be  consummated  in  accordance  with the  requirements  set  forth by
Regulation D promulgated under the Securities Act of 1933, as amended; and

            WHEREAS,  the Company has  requested  that the Escrow Agent hold the
Purchase  Price,  in escrow  until the Escrow  Agent has  received  the original
Preferred  Stock.  The  Escrow  Agent will then  immediately  wire  transfer  or
otherwise deliver at the Company's discretion immediately available funds to the
Company's  account  and  arrange  for  delivery  of the  Preferred  Stock to the
Investors,  and Preferred  Stock and Warrants to the Placement  Agent as per the
terms and conditions in the Agreement.


<PAGE>


            NOW,  THEREFORE,  in  consideration  of  the  covenants  and  mutual
promises contained herein and other good and valuable consideration, the receipt
and legal  sufficiency  of which are hereby  acknowledged  and  intending  to be
legally bound hereby, the parties agree as follows:

                                    ARTICLE 1

                     TERMS OF THE ESCROW FOR THE SECURITIES

            1.1 The parties hereby agree to establish an escrow account with the
Escrow  Agent  whereby the Escrow Agent shall hold the funds for the purchase of
the Preferred Stock.

            1.2 Upon  Escrow  Agent's  receipt  of the  Purchase  Price into its
attorney  trustee  account,  it  shall  notify  the  Company,  or the  Company's
designated  attorney or agent,  of the amount of funds it has received  into its
account.

            1.3 The Company,  upon receipt of said notice and  acceptance of the
Agreement by all parties,  as evidenced by the  Company's  and the Investors and
Placement  Agent's  execution  thereof,  shall  deliver to the Escrow  Agent the
Preferred  Stock issued to the Investors,  and the Preferred  Stock and Warrants
issued to the Placement  Agent. The Escrow Agent shall then communicate with the
Company to confirm the validity of such issuances.

            1.4 Once Escrow  Agent  confirms the validity of the issuance of the
Preferred  Stock as set forth in Section  1.3  above,  the  Escrow  Agent  shall
immediately  wire that  amount of funds  necessary  to  purchase  such shares of
Preferred Stock per the written  instructions  of the Company.  The Company will
furnish the Escrow  Agent with a "Net  Letter"  directing  payment of  Placement
Agent fees,  and  administrative,  legal and escrow fees as per the terms of the
Purchase  Agreement,  such fees are to be  remitted to in  accordance  with wire
instructions  that will be sent to Escrow Agent from the  Company,  with the net
balance  payable to the  Company.  Once the funds (as set forth above) have been
received per the Company's instructions,  the Escrow Agent shall then arrange to
have the Preferred  Stock and Warrants  delivered as per  instructions  from the
Investors and the Placement Agent.


                                    ARTICLE 2

                                  MISCELLANEOUS

            2.1 No waiver or any  breach of any  covenant  or  provision  herein
contained  shall be  deemed a  waiver  of any  preceding  or  succeeding  breach
thereof, or of any other covenant or provision herein contained. No extension of
time for  performance  of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.



<PAGE>


            2.2 All  notices  or  other  communications  required  or  permitted
hereunder  shall be in  writing,  and shall be sent by fax,  overnight  courier,
registered or certified mail,  postage prepaid,  return receipt  requested,  and
shall be deemed received upon receipt thereof, as follows:


            (a)   Sims Communications, Inc.
                  18001 Cowan, Suite C & D
                  Irvine, CA 92614
                  Attention: President
                  Facsimile: (949) 261-0323
                  Telephone: (800) 241-1227

                  With a copy to:

                  Hart & Trinen, L.L.P.
                  1624 Washington Street
                  Denver, Colorado 80203
                  Attention: William Hart
                  Facsimile: (303) 839-0061
                  Telephone: (303) 839-5414

            (b) If to the  Investors,  at the  addresses set forth on Schedule A
hereto.

            (c)   Settondown Capital International Ltd.
                  Charlotte House, Charlotte Street
                  P.O. Box N. 9204
                  Nassau, Bahamas
                  Attention: Anthony L. M. Inder Riden
                  Telephone: (242) 325-1033
                  Facsimile: (242) 323-7918

            (d)   Goldstein, Goldstein & Reis, LLP
                  65 Broadway, 10th Fl.
                  New York, NY  10006
                  Attn:  Scott H. Goldstein, Esq.
                  Telephone: (212) 809-4220
                  Facsimile: (212) 809-4228

      or to such  other  person at such  other  place as shall  designated  in
writing;

            2.3 This  Agreement  shall be  binding  upon and shall  inure to the
benefit of the permitted successors and assigns of the parties hereto.



<PAGE>


            2.4 This  Agreement  is the final  expression  of, and  contains the
entire Agreement between,  the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto.

            2.5 Whenever required by the context of this Agreement, the singular
shall  include  the  plural and  masculine  shall  include  the  feminine.  This
Agreement  shall  not be  construed  as if it had  been  prepared  by one of the
parties,  but rather as if both parties had prepared the same.  Unless otherwise
indicated, all references to Articles are to this Agreement.

            2.6 The  Company  acknowledges  and  confirms  that it is not  being
represented in a legal  capacity by Goldstein,  Goldstein & Reis, LLP and it has
had the  opportunity to consult with its own legal advisors prior to the signing
of this Agreement.

            2.7 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  exclusive  jurisdiction  of the U.S.  District  Court
sitting in the Southern District 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 any other manner  permitted by law. Each party waives
its right to a trial by jury.

            2.8 This  Agreement  may be altered or amended only with the consent
of all of the parties  hereto.  Should the Company,  any of the Investors or the
Placement  Agent  attempt to change this  Agreement  in a manner  which,  in the
Escrow Agent's discretion,  shall be undesirable, the Escrow Agent may resign as
Escrow Agent by notifying the Company and the Investors in writing. The Company,
the  Investors  and the  Placement  agent may remove the Escrow  Agent as Escrow
Agent  in  writing  signed  by  each of the  foregoing,  which  writing  must be
delivered  to the Escrow  Agent via  reputable  overnight  courier  and shall be
effective  upon receipt by the Escrow Agent.  In the case of the Escrow  Agent's
resignation or removal  pursuant to the foregoing,  its only duty, until receipt
of notice  from the Company  and the  Investors  or their agent that a successor
escrow agent shall have been appointed, shall be to hold and preserve the funds.
Upon  receipt  by the  Escrow  Agent of said  notice  from the  Company  and the
Investors  of the  appointment  of a  successor  escrow  agent,  the  name  of a
successor escrow account and a direction to transfer the funds, the Escrow Agent
shall  promptly  thereafter  transfer  all of the funds  held in escrow  and all
Securities  and/or documents to said successor escrow agent.  Immediately  after
said transfer, the Escrow Agent shall furnish the Company and the Investors with

<PAGE>

proof of such transfer. The Escrow Agent is authorized to disregard any notices,
requests,  instructions  or  demands  received  by it from  the  Company  or the
Investors  after notice of resignation or removal shall have been given,  unless
the same shall be the  aforementioned  notice from the Company and the Investors
to  transfer  the funds to a  successor  escrow  agent or to return  same to the
respective parties.

            2.9 The Escrow  Agent  shall be  reimbursed  by the  Company and the
Investors for any reasonable  expenses incurred in the event there is a conflict
between  the  parties and the Escrow  Agent  shall deem it  necessary  to retain
counsel.

            2.10 The Escrow  Agent  shall not be liable for any action  taken or
omitted by it in good faith in accordance  with the advice of the Escrow Agent's
counsel;  and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.

            2.11 The  Company  and the  Investors  warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:

                  (i)   there is no  security  interest in the  Securities  or
                  any part thereof;

                  (ii) no financing  statement under the Uniform Commercial Code
                  is on file in any jurisdiction claiming a security interest or
                  in  describing   (whether   specifically   or  generally)  the
                  Securities or any part thereof; and

                  (iii) the Escrow  Agent  shall have no  responsibility  at any
                  time to ascertain  whether or not any security interest exists
                  in the Securities or any part thereof or to file any financing
                  statement  under the Uniform  Commercial  Code with respect to
                  the Securities or any part thereof.

            2.12 The  Escrow  Agent  in its  capacity  as such has no  liability
hereunder to either party other than to hold the funds and the Securities and to
deliver them under the terms  hereof.  Each party hereto agrees to indemnify and
hold  harmless the Escrow Agent in its capacity as such from and with respect to
any  suits,  claims,  actions  or  liabilities  arising  in any  way out of this
transaction including the obligation to defend any legal action brought which in
any way arises out of or is related to this Escrow.






                   [Remainder of page intentionally blank]

                            [Signature page follows]


<PAGE>


      IN WITNESS WHEREOF, the parties hereto have cause this Escrow Agreement to
be executed as of the date first written on the first page of this Agreement.

SIMS COMMUNICATIONS, INC.


By ____________________________
      Mark Bennett, President


                                      SETTONDOWN CAPITAL INTER-
                                      NATIONAL LTD., Placement Agent


                                    By_____________________________
            
                                    GOLDSTEIN, GOLDSTEIN & REIS, LLP,
                                    Escrow Agent


                                    By______________________________
                                         Scott H. Goldstein


                                    AUGUSTINE FUND, LP, Investor


                                    By_____________________________


                                    GILSTON CORPORATION, LTD., Investor


                                    By_____________________________




<PAGE>


                                                                       EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT


            THIS REGISTRATION  RIGHTS AGREEMENT,  dated the 7th day of December,
1998,  between the entities listed on Schedule A attached hereto (referred to as
a the  "Investors"),  SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.  (the  "Placement
Agent",  and together with the Investors is also hereinafter  referred to as the
"Holder" or "Holders") located at Charlotte House, Charlotte Street, P.O. Box N.
9204, Nassau,  Bahamas, a corporation  organized under the laws of Bahamas,  and
SIMS  COMMUNICATIONS,  INC., a  corporation  incorporated  under the laws of the
State of Delaware,  and having its  principle  place of business at 18001 Cowan,
Suite C & D, Irvine, CA 92614 (the "Company").

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to the Series
C Convertible  Preferred  Stock  Purchase  Agreement  dated the date hereof (the
"Purchase  Agreement"),  shares of  Preferred  Stock and  Warrants  (hereinafter
collectively  referred to as the  "Securities" of the Company);  All capitalized
terms not  hereinafter  defined shall have that meaning  assigned to them in the
Purchase Agreement; and

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement,  the Company shall issue Securities to the Placement Agent, in return
for services rendered,  from time to time as provided in the Purchase Agreement;
and

            WHEREAS,   the   Company   desires  to  grant  to  the  Holders  the
registration rights set forth herein with respect to the securities set forth in
the Purchase Agreement.

            NOW, THEREFORE, the parties hereto mutually agree as follows:

            Section  1.  Registrable   Securities.   As  used  herein  the  term
"Registrable  Security" means the Underlying  Shares, the Additional Shares, and
the Warrant  Shares;  provided,  however,  that with  respect to any  particular
Registrable  Security,  such security  shall cease to be a Registrable  Security
when, as of the date of  determination,  (i) it has been effectively  registered
under the  Securities  Act of 1933,  as amended (the "1933 Act") and disposed of
pursuant thereto, (ii) registration under the 1933 Act is no longer required for
the immediate public distribution of such security as a result of the provisions
of Rule 144  promulgated  under  the 1933  Act,  or  (iii) it has  ceased  to be
outstanding.  The term  "Registrable  Securities"  means any  and/or  all of the
securities falling within the foregoing definition of a Registrable Security. In
the event of any  merger,  reorganization,  consolidation,  recapitalization  or
other change in corporate  structure affecting the Common Stock, such adjustment
shall be made in the  definition of  Registrable  Security as is  appropriate in
order to prevent any dilution or enlargement  of the rights granted  pursuant to
this Section.


<PAGE>



                          REGISTRATION RIGHTS AGREEMENT


            THIS REGISTRATION  RIGHTS AGREEMENT,  dated the 7th day of December,
1998,  between the entities listed on Schedule A attached hereto (referred to as
a the  "Investors"),  SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.  (the  "Placement
Agent",  and together with the Investors is also hereinafter  referred to as the
"Holder" or "Holders") located at Charlotte House, Charlotte Street, P.O. Box N.
9204, Nassau,  Bahamas, a corporation  organized under the laws of Bahamas,  and
SIMS  COMMUNICATIONS,  INC., a  corporation  incorporated  under the laws of the
State of Delaware,  and having its  principle  place of business at 18001 Cowan,
Suite C & D, Irvine, CA 92614 (the "Company").

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to the Series
C Convertible  Preferred  Stock  Purchase  Agreement  dated the date hereof (the
"Purchase  Agreement"),  shares of  Preferred  Stock and  Warrants  (hereinafter
collectively  referred to as the  "Securities" of the Company);  All capitalized
terms not  hereinafter  defined shall have that meaning  assigned to them in the
Purchase Agreement; and

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement,  the Company shall issue Securities to the Placement Agent, in return
for services rendered,  from time to time as provided in the Purchase Agreement;
and

            WHEREAS,   the   Company   desires  to  grant  to  the  Holders  the
registration rights set forth herein with respect to the securities set forth in
the Purchase Agreement.

            NOW, THEREFORE, the parties hereto mutually agree as follows:

            Section  1.  Registrable   Securities.   As  used  herein  the  term
"Registrable  Security" means the Underlying  Shares, the Additional Shares, and
the Warrant  Shares;  provided,  however,  that with  respect to any  particular
Registrable  Security,  such security  shall cease to be a Registrable  Security
when, as of the date of  determination,  (i) it has been effectively  registered
under the  Securities  Act of 1933,  as amended (the "1933 Act") and disposed of
pursuant thereto, (ii) registration under the 1933 Act is no longer required for
the immediate public distribution of such security as a result of the provisions
of Rule 144  promulgated  under  the 1933  Act,  or  (iii) it has  ceased  to be
outstanding.  The term  "Registrable  Securities"  means any  and/or  all of the
securities falling within the foregoing definition of a Registrable Security. In
the event of any  merger,  reorganization,  consolidation,  recapitalization  or
other change in corporate  structure affecting the Common Stock, such adjustment
shall be made in the  definition of  Registrable  Security as is  appropriate in
order to prevent any dilution or enlargement  of the rights granted  pursuant to
this Section.



<PAGE>



            Section 2.  Restrictions  on Transfer.  The Holders  acknowledge and
understand  that prior to the  registration  of the  Registrable  Securities  as
provided herein,  the Registrable  Securities and the Securities are "restricted
securities"  as  defined  in Rule 144  promulgated  under the Act.  The  Holders
understand that no disposition or transfer of the Registrable  Securities or the
Securities  may be made by the  Holders  in the  absence  of (i) an  opinion  of
counsel to the Holders that such transfer may be made without registration under
the 1933 Act or (ii) such registration.

            Section 3.  Registration Rights.

                  (a) The Company  agrees that it will prepare and file with the
Securities and Exchange  Commission  ("SEC"),  within 60 calendar days after the
Closing  Date, a  registration  statement  (on Form SB-2,  or other  appropriate
registration  statement) under the 1933 Act (the "Registration  Statement"),  at
the sole expense of the Company (except as provided in Section 3(c) hereof),  in
respect  of all  holders  of  Registrable  Securities,  so as to permit a public
offering and sale of the Registrable Securities under the Act. The Company shall
use its best efforts to cause the  Registration  Statement  to become  effective
within 90 calendar  days from the Closing  Date.  The number of shares of Common
Stock  designated in the  Registration  Statement to be registered  shall be (i)
200% of the number of Underlying  Shares that would be required if the Preferred
Stock  (including  such shares of the  Placement  Agent) were  converted  on the
Trading Day immediately preceding the filing of the Registration Statement, plus
(ii)  100% of the  number  of  Warrant  Shares  (including  such  shares  of the
Placement Agent) issuable  assuming all of the Warrants had been issued pursuant
to the Purchase Agreement.

                  (b) The Company will maintain the Registration  Statement,  or
post-effective  amendment  filed under this Section 3 hereof  current  under the
1933  Act  until  the  earlier  of (i)  the  date  that  all of the  Registrable
Securities  have been sold pursuant to the  applicable  Registration  Statement,
(ii) the date the  holders  thereof  receive  an  opinion  of  counsel  that the
Registrable  Securities  may be sold under the  provisions  of Rule 144 or (iii)
five years after the Subscription Date for the Registration Statement.

                  (c) All fees,  disbursements  and  out-of-pocket  expenses and
costs incurred by the Company in connection  with the  preparation and filing of
the  Registration  Statement  under  subparagraph  3(a)  and in  complying  with
applicable  securities and blue sky laws  (including,  without  limitation,  all
attorneys' fees) shall be borne by the Company. The Holders shall bear the cost,
pro rata, of underwriting  discounts and commissions,  if any, applicable to the
Registrable  Securities  being  registered  and the  fees  and  expenses  of its
counsel. The Company shall qualify any of the securities for sale in such states
as such Holder reasonably  designates and shall furnish  indemnification  in the
manner provided in Section 6 hereof.  However, the Company shall not be required
to  qualify  in any state  which  will  require  an escrow or other  restriction
relating  to the Company  and/or the  sellers.  The Company at its expense  will
supply the Holders with copies of the Registration  Statement and the prospectus
or offering  circular  included  therein  and other  related  documents  in such
quantities as may be reasonably requested by the Holders.


<PAGE>


                  (d) The Company  shall not be  required  by this  Section 3 to
include a Holder's Registrable Securities in any Registration Statement which is
to be filed if, in the  opinion of counsel  for both the Holder and the  Company
(or,  should they not agree,  in the opinion of another  counsel  experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed  offering or other transfer as to which such  registration is requested
is exempt from applicable  federal and state securities laws and would result in
all purchasers or transferees  obtaining  securities  which are not  "restricted
securities", as defined in Rule 144 under the 1933 Act.

                  (e) In the event the Registration Statement to be filed by the
Company  pursuant  to Section  3(a) above is not filed with the SEC on or before
the 60th calendar day after the Closing Date and/or the  Registration  Statement
is not declared  effective by the SEC within 120 calendar  days from the Closing
Date,  then the Company  will pay the Holders (pro rated on a daily  basis),  as
liquidated  damages for such  failure  and not as a penalty,  two percent of the
purchase  price of the then  outstanding  Securities  for every 30 calendar  day
period  until  the  Registration   Statement  has  been  filed  and/or  declared
effective.  Such payment of the liquidated  damages shall be made to the Holders
in cash,  immediately upon demand,  provided,  however, that the payment of such
liquidated  damages  shall not  relieve  the  Company  from its  obligations  to
register the Underlying  Shares and Warrant Shares pursuant to this Section.  If
the  Company  does not remit the damages to the Holder as set forth  above,  the
Company will pay the Holders reasonable costs of collection, including attorneys
fees, in addition to the liquidated damages.  The registration of the Securities
pursuant to this  provision  shall not affect or limit  Holder's other rights or
remedies as set forth in this Agreement.

                  (f) No provision  contained  herein shall preclude the Company
from selling  securities  pursuant to any registration  statement in which it is
required to include Registrable Securities pursuant to this Section 3.

                  (g) The Company agrees that it shall declare the  Registration
Statement  effective  within three Business Days after being informed by the SEC
that it may do so.  The  Company  also  agrees  that  it  shall  respond  to any
questions  and/or  comments  from  the  SEC  which  relate  to the  Registration
Statement within ten Business Days of receipt of such question or comment.

            Section  4.  Cooperation  with  Company.  Each of the  Holders  will
cooperate  with the Company in all respects in connection  with this  Agreement,
including timely supplying all information  reasonably  requested by the Company
and executing and  returning  all documents  reasonably  requested in connection
with the registration and sale of the Registrable Securities.


<PAGE>



            Section 5. Registration  Procedures.  If and whenever the Company is
required by any of the provisions of this  Agreement to effect the  registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:

                  (a)  prepare  and  file  with  the  SEC  such  amendments  and
supplements to the registration statements and the prospectus used in connection
therewith as may be necessary to keep such registration  statement effective and
to  comply  with the  provisions  of the Act with  respect  to the sale or other
disposition of all securities  covered by such registration  statement  whenever
the Holder of such securities  shall desire to sell or otherwise  dispose of the
same (including  prospectus  supplements with respect to the sales of securities
from time to time in connection with a registration  statement  pursuant to Rule
415 promulgated under the Act);

                  (b) furnish to each Holder such numbers of copies of a summary
prospectus  or other  prospectus,  including  a  preliminary  prospectus  or any
amendment or supplement to any prospectus,  in conformity with the  requirements
of the Act, and such other documents,  as such Holder may reasonably  request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;

                  (c)  register  and  qualify  the  securities  covered  by  the
Registration  Statement  under  such other  securities  or blue sky laws of such
jurisdictions as the Holders shall reasonably request,  and do any and all other
acts and things  which may be  necessary  or  advisable to enable each Holder to
consummate  the public sale or other  disposition  in such  jurisdiction  of the
securities owned by such Holder,  except that the Company shall not for any such
purpose be required to qualify to do  business as a foreign  corporation  in any
jurisdiction  wherein it is not so  qualified  or to file  therein  any  general
consent to service of process;

                  (d) list such  securities on the NASDAQ Small Cap Stock Market
or other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such exchange or NASDAQ;

                  (e)  enter  into  and   perform  its   obligations   under  an
underwriting  agreement,  if the offering is an underwritten  offering, in usual
and  customary  form,  with the managing  underwriter  or  underwriters  of such
underwritten offering;

                  (f) notify each Holder of  Registrable  Securities  covered by
the Registration  Statement any time when a prospectus  relating thereto covered
by the Registration  Statement is required to be delivered under the Act, of the
happening  of any  event of  which it has  knowledge  as a result  of which  the
prospectus included in the Registration  Statement,  as then in effect, includes
an  untrue  statement  of a  material  fact or omits to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in the light of the circumstances then existing.


<PAGE>



            Section  6.  Information  by  Holder.  Each  Holder  of  Registrable
Securities  included in any registration  statement shall furnish to the Company
such  information  regarding such Holder and the  distribution  proposed by such
Holder as the  Company  may  request  in  writing  and as shall be  required  in
connection with any  registration,  qualification  or compliance  referred to in
this Section.

            Section 7.  Assignment.  The rights  granted the Holders  under this
Agreement  shall not be assigned  without the  written  consent of the  Company,
which consent shall not be unreasonably withheld. This Agreement is binding upon
and inures to the  benefit of the  parties  hereto and their  respective  heirs,
successors and permitted assigns.

            Section 8.  Termination of Registration  Rights.  The rights granted
pursuant to this  Agreement  shall  terminate as to each Investor (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:

                  (a)   all  such   Holder's   securities   subject   to  this
Agreement have been registered;

                  (b) all of such Holder's  securities subject to this Agreement
may be sold without such  registration  pursuant to Rule 144  promulgated by the
SEC pursuant to the Securities Act;

                  (c) all of such Holder's  securities subject to this Agreement
can be sold pursuant to Rule 144(k) without volume limitation; or

                  (d)            five   years   from  the   issuance   of  the
                     Registrable Securities.

            Section 9.  Indemnification.

                  (a) In the event of the filing of any  Registration  Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold  harmless the Holders and each person,  if any, who
controls the Holders  within the meaning of the  Securities  Act  ("Distributing
Holders") against any losses, claims,  damages or liabilities,  joint or several
(which shall,  for all purposes of this Agreement,  include,  but not be limited
to, all costs of defense and  investigation  and all attorneys'  fees), to which
the  Distributing  Holders  may  become  subject,  under the  Securities  Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of any  material  fact  contained  in any  such  Registration
Statement or any related  preliminary  prospectus,  final  prospectus,  offering
circular,  notification or amendment or supplement  thereto,  or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading;  provided,  however, that the Company will not be liable in any such
case to the extent that any such loss, claim,  damage or liability arises out of
or is based upon an untrue  statement or alleged untrue statement or omission or
alleged omission made in such Registration  Statement,  preliminary  prospectus,


<PAGE>

final  prospectus,  offering  circular,  notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information  furnished
to  the  Company  by  the  Distributing  Holders,  specifically  for  use in the
preparation  thereof.  This  indemnity  agreement  will  be in  addition  to any
liability which the Company may otherwise have.

                  (b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer,  director of the Company or person,
if any,  who  controls  the Company  within the meaning of the  Securities  Act,
against  any  losses,  claims,  damages or  liabilities  (which  shall,  for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and  investigation  and all  attorneys'  fees) to which the  Company or any such
officer,  director or controlling person may become subject under the Securities
Act or otherwise,  insofar as such losses  claims,  damages or  liabilities  (or
actions in respect thereof,  arise out of or are based upon any untrue statement
or alleged  untrue  statement of any material fact  contained in a  Registration
Statement,  requested by such Distributing  Holder,  or any related  preliminary
prospectus,  final prospectus,  offering circular,  notification or amendment or
supplement  thereto,  or arise  out of or are  based  upon the  omission  or the
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  but in each case
only to the extent that such untrue  statement  or alleged  untrue  statement or
omission  or  alleged  omission  was  made  in  such   Registration   Statement,
preliminary  prospectus,  final prospectus,  offering circular,  notification or
amendment  or  supplement  thereto in reliance  upon,  and in  conformity  with,
written  information  furnished  to the  Company  by such  Distributing  Holder,
specifically for use in the preparation  thereof.  This indemnity agreement will
be in addition to any  liability  which the  Distributing  Holders may otherwise
have.

                  (c) Promptly after receipt by an indemnified  party under this
Section of notice of the  commencement  of any action,  such  indemnified  party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section,  notify the indemnifying party of the commencement  thereof;
but the  omission  so to notify  the  indemnifying  party will not  relieve  the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the  particular  item as to which  indemnification  is then
being sought solely pursuant to this Section. In case any such action is brought
against any indemnified  party,  and it notifies the  indemnifying  party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish,  jointly with any other  indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof,  the indemnifying  party will not
be liable 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,  unless  the
indemnifying  party  shall not pursue the  action to its final  conclusion.  The
indemnified  party shall have the right to employ  separate  counsel in any such
action and to participate in the defense  thereof,  but the fees and expenses of
such  counsel  shall  not be at the  expense  of the  indemnifying  party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing  Holder,  the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically  authorized in writing by the indemnifying party, or (ii) the named
parties to any such action  (including any impleaded  parties)  include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such  counsel that there may be one or more legal  defenses

<PAGE>

available to the indemnifying party different from or in conflict with any legal
defenses  which may be available to the  Distributing  Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing  Holder,  it being understood,  however,  that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which  firm shall be  designated  in writing  by the  Distributing  Holder).  No
settlement of any action against an indemnified  party shall be made without the
prior  written  consent of the  indemnified  party,  which  consent shall not be
unreasonably withheld.

            Section 10. Contribution. In order to provide for just and equitable
contribution  under the Securities Act in any case in which (i) the Distributing
Holder  makes a claim for  indemnification  pursuant  to Section 9 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for  indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages  or  liabilities  to which  they may be subject  (which  shall,  for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and  investigation  and  all  attorneys'  fees),  in  either  such  case  (after
contribution  from  others) on the basis of relative  fault as well as any other
relevant  equitable  considerations.  The relative  fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged  omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing  Holder,  on the other  hand,  and the  parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or  omission.  The Company and the  Distributing  Holder agree that it
would not be just and  equitable if  contribution  pursuant to this Section were
determined by pro rata  allocation  or by any other method of  allocation  which
does  not take  account  of the  equitable  considerations  referred  to in this
Section.  The amount paid or payable by an indemnified  party as a result of the
losses,  claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other  expenses
reasonably  incurred by such indemnified party in connection with  investigating
or  defending  any  such  action  or  claim.  No  person  guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.


<PAGE>



            Section 11.  Notices.  Any notice  pursuant to this Agreement by the
Company  or by the Holder  shall be in writing  and shall be deemed to have been
duly given if  delivered  by (i) hand,  (ii) by  facsimile  and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:

            (a)   If to the Company:

                              Sims Communications, Inc.
                              18001 Cowan, Suite C & D
                              Irvine, CA 92614
                              Attention: President
                              Facsimile: (949) 261-0323
                              Telephone: (800) 241-1227

                  With a copy to:

                             Hart & Trinen, L.L.P.
                             1624 Washington Street
                             Denver, Colorado 80203
                             Attention: William Hart
                             Facsimile: (303) 839-0061
                             Telephone: (303) 839-5414

            (b) If to the Placement Agent:

                              Settondown Capital International Ltd.
                              Charlotte House, Charlotte Street
                              P.O. Box N. 9204
                              Nassau, Bahamas
                              Attention: Anthony L. M. Inder Riden
                              Telephone: (242) 325-1033
                              Facsimile: (242) 323-7918

            (c) If to the  Investors,  to their  address set forth on Schedule A
annexed to the Purchase Agreement.

      Notices shall be deemed given at the time they are delivered personally or
five  calendar  days after they are  mailed in the  manner set forth  above.  If
notice is delivered  by facsimile to the Company and followed by mail,  delivery
shall be deemed given two calendar days after such facsimile is sent.

            Section  12.  Counterparts.  This  Agreement  may be  executed  in
counterparts,  each of which  shall be  deemed an  original,  but all of which
together shall constitute one and the same instrument.

<PAGE>

            Section  13.  Headings.  The  headings in this  Agreement  are for
reference  purposes  only and  shall  not  affect  in any way the  meaning  or
interpretation of this Agreement.

            Section 14. Choice of Law; Venue; Jurisdiction.  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 Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive  jurisdiction  of the U.S.  District  Court  sitting  in the  Southern
District of the State of New York sitting in Manhattan  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 any other manner  permitted by law. Each party waives
its right to a trial by jury.

            Section 15.  Severability.  If any provision of this Agreement shall
for  any  reason  be  held  invalid  or   unenforceable,   such   invalidity  or
unenforceability  shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable  provision had never been
contained herein.



<PAGE>



      IN WITNESS  WHEREOF,  the parties  hereto  have  caused this  Registration
Rights Agreement to be duly executed, on the day and year first above written.


Attest:                            SIMS COMMUNICATIONS, INC.


By:_________________________       By:____________________________
    Name:                              Name: Mark Bennett
    Title:                             Title: President


                                     SETTONDOWN CAPITAL INTER-
                                      NATIONAL LTD., Placement Agent


                                    By_____________________________
      
                                    AUGUSTINE FUND, LP, Investor


                                    By_____________________________


                                    HSBC JAMES CAPEL CANADA, INC., Investor


                                    By_____________________________

                                    GILSTON CORPORATION, LTD., Investor
      

                                    By_____________________________


<PAGE>



                                                                       EXHIBIT D


THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES  SECURITIES AND
EXCHANGE  COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE  PURSUANT TO AN
EXEMPTION FROM REGISTRATION  UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT").  THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH  SUCH OFFER OR  SOLICITATION  WOULD BE  UNLAWFUL.  THE  SECURITIES  ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED  EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.


                          COMMON STOCK PURCHASE WARRANT

No. __

                 To Purchase ______ Shares of Common Stock of

                            SIMS COMMUNICATIONS, INC.


      THIS  CERTIFIES  that,  for  value  received,   ___________________   (the
"Investor"),  is  entitled,  upon  the  terms  and  subject  to  the  conditions
hereinafter  set forth,  at any time on or after the date hereof and on or prior
to ____________  (the "Termination  Date") but not thereafter,  to subscribe for
and  purchase  from SIMS  COMMUNICATIONS,  INC.,  a  Delaware  corporation  (the
"Company"),  ( ) shares of Common  Stock (the  "Warrant  Shares").  The purchase
price of one share of Common  Stock (the  "Exercise  Price")  under this Warrant
shall be _____  (which  shall be equal to 120% of the  closing  bid price of the
Common Stock on the Principal Market,  on the Trading Day immediately  preceding
the  Subscription  Date, as defined in the Series C Convertible  Preferred Stock
Purchase  Agreement).  The Exercise Price and the number of shares for which the
Warrant is exercisable  shall be subject to adjustment as provided herein.  This
Warrant is being issued in connection  with the Series C  Convertible  Preferred
Stock Purchase  Agreement dated December 7, 1998 (the "Agreement")  entered into
between  the  Company,  the  Investor  and  other  entities  not a party to this
Warrant.  In the event of any conflict between the terms of this Warrant and the
Agreement, the Agreement shall control.

            1. Title of Warrant.  Prior to the expiration  hereof and subject to
compliance  with  applicable  laws,  this Warrant and all rights  hereunder  are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized  attorney,  upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.


<PAGE>


            2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights  represented by this Warrant,  be duly
authorized,  validly  issued,  fully  paid and  nonassessable  and free from all
taxes,  liens and charges in respect of the issue  thereof  (other than taxes in
respect of any transfer occurring contemporaneously with such issue).

            3.  Exercise of Warrant.  The Holder may not  exercise  its purchase
rights granted hereunder until one of the following two events has occurred: (i)
the Company has obtained  shareholder  approval for the below market issuance of
more than 20% of the  outstanding  shares  of  Common  Stock as set forth in the
Agreement,  or (ii) the Common Stock is no longer traded on a Principal  Market.
In the event the  Common  Stock is traded on a  Principal  Market  that does not
mandate such shareholder approval, then the aforementioned exercise restrictions
shall not apply. In the event the Company fails to obtain  shareholder  approval
as set forth in (i) above,  the Company  agrees to  immediately  list the Common
Stock on the OTC Bulletin Board  (pursuant to the terms of the Agreement) and in
such case the  aforementioned  restrictions  shall not  apply.  Exercise  of the
purchase rights represented by this Warrant may be made at any time or times, in
whole or in part,  before the close of business on the Termination Date, or such
earlier  date on which this  Warrant may  terminate  as provided in paragraph 11
below,  assuming one of the aforementioned events has occurred, by the surrender
of this Warrant and the Subscription  Form annexed hereto duly executed,  at the
office of the Company  (or such other  office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such  holder  appearing  on the books of the  Company)  and upon  payment of the
Exercise  Price of the shares  thereby  purchased;  whereupon the holder of this
Warrant shall be entitled to receive a  certificate  for the number of shares of
Common Stock so purchased.  Certificates for shares purchased hereunder shall be
delivered to the holder hereof within five Business Days after the date on which
this Warrant  shall have been  exercised as  aforesaid.  Payment of the Exercise
Price of the  shares may be by  certified  check or  cashier's  check or by wire
transfer  (of same day  funds) to an  account  designated  by the  Company in an
amount  equal to the  Exercise  Price  multiplied  by the number of shares being
purchased.

            4. No  Fractional  Shares or Scrip.  No  fractional  shares or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.

            5. Charges, Taxes and Expenses.  Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant  shall be made without  charge
to the holder hereof for any issue or transfer tax or other  incidental  expense
in respect of the issuance of such certificate,  all of which taxes and expenses
shall be paid by the Company,  and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant;  provided,  however,  that in the event certificates for
shares of Common  Stock  are to be issued in a name  other  than the name of the
holder of this  Warrant,  this Warrant when  surrendered  for exercise  shall be
accompanied by the Assignment  Form attached  hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery  of any  certificates  for  shares of Common  Stock,  the  Company  may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.


<PAGE>

            6.  Closing  of  Books.  The  Company  will  at no  time  close  its
shareholder  books or  records in any manner  which  interferes  with the timely
exercise of this Warrant.

            7. No Rights as Shareholder  until  Exercise.  This Warrant does not
entitle the holder  hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise  thereof.  If, however,  at the time of the
surrender of this  Warrant and  purchase the holder  hereof shall be entitled to
exercise  this  Warrant,  the shares so  purchased  shall be and be deemed to be
issued to such  holder  as the  record  owner of such  shares as of the close of
business on the date on which this Warrant shall have been exercised.

            8. Assignment and Transfer of Warrant.  This Warrant may be assigned
by the  surrender of this Warrant and the  Assignment  Form annexed  hereto duly
executed  at the office of the  Company  (or such other  office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company);  provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction  registered  under the Securities Act, or (ii) in a transaction
pursuant to an exemption,  if available,  from such registration and whereby, if
requested by the Company,  an opinion of counsel reasonably  satisfactory to the
Company  is  obtained  by the  holder of this  Warrant  to the  effect  that the
transaction is so exempt.

            9. Loss,  Theft,  Destruction or Mutilation of Warrant.  The Company
represents and warrants that upon receipt by the Company of evidence  reasonably
satisfactory to it of the loss, theft,  destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto,  and upon surrender and cancellation
of such Warrant or stock  certificate,  if mutilated,  the Company will make and
deliver a new  Warrant or stock  certificate  of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.

            10. Saturdays,  Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the  expiration of any right required or granted
herein shall be a Saturday,  Sunday or a legal holiday,  then such action may be
taken or such  right may be  exercised  on the next  succeeding  day not a legal
holiday.

            11. Effect of Certain  Events.  If at any time the Company  proposes
(i) to sell or otherwise convey all or  substantially  all of its assets or (ii)
to effect a  transaction  (by merger or otherwise) in which more than 50% of the
voting  power of the  Company is disposed  of  (collectively,  a "Sale or Merger
Transaction"),  in which the  consideration to be received by the Company or its
shareholders  consists solely of cash, and in case the Company shall at any time
effect a Sale or Merger Transaction in which the consideration to be received by
the Company or its  shareholders  consists in part of  consideration  other than
cash, the holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate  Exercise  Price in effect
immediately  prior to such  action,  the kind and  amount  of  shares  and other
securities  and  property  which it would  have owned or have been  entitled  to
receive after the happening of such  transaction had this Warrant been exercised
immediately prior thereto.

<PAGE>

            12.  Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities  purchasable upon the exercise of this Warrant and
the  Exercise  Price shall be subject to  adjustment  from time to time upon the
happening of any of the following.

            In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution  in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its  outstanding  shares of Common Stock into a smaller  number of
shares  of Common  Stock or (iv)  issue any  shares  of its  capital  stock in a
reclassification  of the Common Stock, the number of Warrant Shares  purchasable
upon  exercise of this Warrant  immediately  prior  thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant  Shares or other  securities of the Company which he would have owned
or have been  entitled to receive had such  Warrant  been  exercised  in advance
thereof.  An adjustment made pursuant to this paragraph  shall become  effective
immediately  after the effective  date of such event  retroactive  to the record
date, if any, for such event.

            13.  Voluntary  Adjustment  by the  Company.  The Company may at its
option,  at any time during the term of this  Warrant,  reduce the then  current
Exercise  Price to any amount and for any period of time deemed  appropriate  by
the Board of Directors of the Company.

            14. Notice of  Adjustment.  Whenever the number of Warrant shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall promptly mail by registered or certified mail,  return receipt  requested,
to the holder of this Warrant notice of such  adjustment or adjustments  setting
forth  the  number  of  Warrant  Shares  (and  other   securities  or  property)
purchasable  upon the exercise of this  Warrant and the  Exercise  Price of such
Warrant  Shares after such  adjustment,  setting forth a brief  statement of the
facts  requiring  such  adjustment  and setting forth  computation by which such
adjustment  was made.  Such  notice,  in absence  of  manifest  error,  shall be
conclusive evidence of the correctness of such adjustment.

            15. Authorized  Shares. The Company covenants that during the period
the Warrant is  outstanding,  it will reserve from its  authorized  and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase  rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates to execute and issue the necessary  certificates  for shares of the
Company's  Common  Stock upon the  exercise of the  purchase  rights  under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any  applicable law or regulation,  or of any  requirements  of the
NASDAQ Small Cap Stock Market or any domestic securities exchange upon which the
Common Stock may be listed.



<PAGE>



            16.   Miscellaneous.

                  (a)  Issue  Date;  Choice  of Law;  Venue;  Jurisdiction.  The
provisions  of this Warrant  shall be construed and shall be given effect in all
respects  as if it had been  issued  and  delivered  by the  Company on the date
hereof.  This  Warrant  shall be binding upon any  successors  or assigns of the
Company.  This  Warrant 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  Securities  Act,  without  reference to principles of conflicts of law. The
parties consent to the exclusive jurisdiction of the U.S. District Court sitting
in the Southern District of the State of New York in connection with any dispute
arising under this Warrant 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 the other party to this Warrant 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  Warrant  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 any other
manner permitted by law. Each party waives its right to a trial by jury.

                  (b)  Restrictions.  The holder  hereof  acknowledges  that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered (or
if no exemption from  registration  exists),  will have restrictions upon resale
imposed by state and federal securities laws. Each certificate  representing the
Warrant  Shares issued to the Holder upon  exercise (if not  registered or if no
exemption from registration exists) will bear the following legend:


            "THE  SECURITIES   EVIDENCED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
      REGISTERED  UNDER  THE  U.S.  SECURITIES  ACT OF  1933,  AS  AMENDED  (THE
      "SECURITIES  ACT"), OR ANY OTHER APPLICABLE  SECURITIES LAWS AND HAVE BEEN
      ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
      THE SECURITIES ACT AND SUCH OTHER SECURITIES  LAWS.  NEITHER THIS SECURITY
      NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
      TRANSFERRED,  PLEDGED, ENCUMBERED,  HYPOTHECATED OR OTHERWISE DISPOSED OF,
      EXCEPT  PURSUANT  TO  AN  EFFECTIVE   REGISTRATION   STATEMENT  UNDER  THE
      SECURITIES  ACT OR PURSUANT TO A  TRANSACTION  THAT IS EXEMPT FROM, OR NOT
      SUBJECT TO, SUCH REGISTRATION".



<PAGE>


                  (c) Modification  and Waiver.  This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

                  (d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid,  to
each such  holder at its  address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.


<PAGE>



            IN  WITNESS  WHEREOF,  the  Company  has caused  this  Warrant to be
executed by its officers thereunto duly authorized.

Dated:

                                    SIMS COMMUNICATIONS, INC.


                                    By ______________________________
                                      Name:
                                     Title:



<PAGE>


                               NOTICE OF EXERCISE



To:   SIMS COMMUNICATIONS, INC.

(1) The undersigned hereby elects to purchase ________ shares of Common Stock of
SIMS  COMMUNICATIONS,  INC. pursuant to the terms of the attached  Warrant,  and
tenders  herewith  payment  of the  purchase  price in full,  together  with all
applicable transfer taxes, if any.

(2) Please  issue a  certificate  or  certificates  representing  said shares of
Common  Stock  in the  name  of the  undersigned  or in  such  other  name as is
specified below:

                  -------------------------------
                  (Name)

                  -------------------------------
                  (Address)
                  -------------------------------


Dated:

------------------------------
Signature




<PAGE>


1

                                 ASSIGNMENT FORM

                   (To  assign  the  foregoing  warrant,
                      execute  this form and
                      supply required information.
                Do not use this form to exercise the warrant.)



            FOR  VALUE  RECEIVED,   the  foregoing   Warrant  and  all  rights
evidenced thereby are hereby assigned to

_______________________________________________ whose address is

---------------------------------------------------------------.



---------------------------------------------------------------

                                          Dated:  ______________,


                  Holder's Signature:    _____________________________

                  Holder's Address:      _____________________________

                                         -----------------------------



Signature Guaranteed:  ___________________________________________




NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of  corporations  and  those  acting  in an  fiduciary  or other  representative
capacity  should  file  proper  evidence of  authority  to assign the  foregoing
Warrant.




<PAGE>


                                                                       
                                                                       EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL



<PAGE>

                                                                      
[Date]


Address

Re:   Series C Convertible  Preferred Stock Purchase  Agreement dated December
      7, 1998

Ladies and Gentlemen:

      This  opinion is  furnished  to you  pursuant to the Series C  Convertible
Preferred   Stock  Purchase   Agreement  by  and  between   Settondown   Capital
International,  Ltd. (the  "Placement  Agent"),  the entities (the  "Investors")
listed on Schedule  A, and Sims  Communications,  Inc.  (the  "Company"),  dated
December 7, 1998 (the "Purchase Agreement"),  which provides for the issuance of
Preferred Stock,  and, certain  additional shares upon the occurrence of certain
events as set forth thereof (the "Blackout  Shares"),  and a warrant to purchase
shares of Common Stock of the Company (the  "Warrant",  and the shares of Common
Stock  issued or issuable  pursuant to exercise  of the  Warrant,  the  "Warrant
Shares").  All terms  used  herein  have the  meanings  defined  for them in the
Purchase Agreement unless otherwise defined herein.

      We  have  acted  as  counsel  for  the  Company  in  connection  with  the
negotiation  of  the  Purchase  Agreement,   the  Warrant,  the  Certificate  of
Designation,  the Escrow  Agent,  and the  Registration  Rights  Agreement  (the
"Registration Rights Agreement") between the Investors, the Placement Agent, and
the  Company,  dated  December  7, 1998,  and the Escrow  Agreement  between the
Investors  (excluding HSBC James Capel Canada,  Inc.),  the Placement Agent, the
Company and the Escrow Agent,  dated  December 7, 1998 (the "Escrow  Agreement",
and together with the Purchase Agreement and the Registration  Rights Agreement,
the "Agreements").  As counsel, we have made such legal and factual examinations
and  inquires  as we have  deemed  advisable  or  necessary  for the  purpose of
rendering  this  opinion.  In addition,  we have  examined,  among other things,
originals or copies of such corporate  records of the Company,  certificates  of
public  officials and such other documents and questions of law that we consider
necessary  or  advisable  for the purpose of  rendering  this  opinion.  In such
examination  we have  assumed  the  genuineness  of all  signatures  on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery  of all  documents  (except as to due  execution  and  delivery  by the
Company)   where  due  execution  and  delivery  are  a   prerequisite   to  the
effectiveness thereof.

      As used in this opinion,  the expression "to our knowledge"  refers to the
current  actual  knowledge  of the  attorneys  of this  firm who have  worked on
matters for the Company solely in connection with the Agreements and the Warrant
and the transactions contemplated thereby.

      For purposes of this opinion,  we have assumed that you have all requisite
power and authority,  and have taken any and all necessary  corporate action, to
execute and deliver the Agreements, and we are assuming that the representations
and warranties  made by the Investor in the Agreements and pursuant  thereto are
true and correct.


<PAGE>

      The  opinions   hereinafter   expressed   are  subject  to  the  following
qualifications:

      Based upon and subject to the foregoing, we are of the opinion that:

      1. The Company is a corporation  duly organized,  validly  existing and in
good  standing  under the laws of the State of  Delaware  and has all  requisite
power and authority  (corporate  and other) to carry on its business and to own,
lease and operate its  properties  and assets as described in the  Company's SEC
Documents.  To our  knowledge,  the  Company  does not own or control  any other
business  entity.  The Company is duly qualified as a foreign  corporation to do
business and is in good standing in every jurisdiction in which the Company owns
or leases  property,  other than those in which the failure so to qualify  would
not have a Material Adverse Effect.

      2. The Company has the  requisite  corporate  power and authority to enter
into and  perform its  obligations  under the  Agreements,  the  Certificate  of
Designation,  and the Warrants and to issue the Preferred  Stock, the Additional
Shares, the Warrants, the Warrant Shares, the Underlying Shares and the Blackout
Shares.  The  execution  and  delivery  of the  Agreements,  and the  execution,
issuance and delivery of the Preferred Stock,  and the Warrants,  by the Company
and the  consummation by it of the transactions  contemplated  thereby have been
duly  authorized by all  necessary  corporate  action and no further  consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required.  Each of the Agreements has been duly executed and delivered,  and the
Warrants, and Preferred Stock has been duly executed,  issued and delivered,  by
the Company and each of the Agreements,  the Preferred  Stock,  and the Warrants
constitutes valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable  bankruptcy,  insolvency,  or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.

      3.  The  execution,  delivery  and  performance  of  the  Agreements,  the
Preferred  Stock,  and the Warrants by the Company and the  consummation  by the
Company of the transactions contemplated thereby, including, without limitation,
the issuance of the Additional  Shares,  the Warrants,  the Warrant Shares,  the
Preferred Stock, the Underlying Shares, and the Blackout Shares, do not and will
not (i) result in a violation of the Company's Articles or By-Laws;  (ii) to our
knowledge,  conflict  with, or  constitute a material  default (or an event that
with notice or lapse of time or both would become a default)  under,  or give to
others any rights of termination,  amendment,  acceleration or cancellation  of,
any  material  agreement,  indenture,  instrument  or any  "lock-up"  or similar
provision  of any  underwriting  or similar  agreement to which the Company is a
party,   except  for  such  conflicts,   defaults,   terminations,   amendments,
accelerations and cancellations as would not,  individually or in the aggregate,
have a Material Adverse Effect; or (iii) result in a violation of any federal or
state law, rule or regulation applicable to the Company or by which any property
or asset of the  Company is bound or  affected,  except for such  violations  as
would not, individually or in the aggregate,  have a Material Adverse Effect. To
our  knowledge,  the Company is not in violation of any terms of its Articles or
Bylaws.

<PAGE>


      4. The  issuance  of the  Additional  Shares,  the  Warrants,  the Warrant
Shares,  the Preferred Stock, the Underlying  Shares, and the Blackout Shares in
accordance with the Purchase  Agreement will be exempt from  registration  under
the  Securities  Act of 1933  and  will be in  compliance  with  Delaware  state
securities  laws.  When so issued,  subject to  sufficient  reserved  authorized
shares  of Common  Stock,  the  Additional  Shares,  the  Blackout  Shares,  the
Warrants,  the Warrant Shares,  the Preferred Stock,  and the Underlying  Stock,
will be duly and validly issued,  fully paid and nonassessable,  and free of any
liens,  encumbrances and preemptive or similar rights contained in the Company's
Articles of Incorporation  (the  "Articles") or Bylaws or, to our knowledge,  in
any agreement to which the Company is party.

      5. To our knowledge,  except as disclosed in the SEC Documents,  there are
no claims,  actions,  suits,  proceedings  or  investigations  that are  pending
against the Company or its properties, or against any officer or director of the
Company in his or her capacity as such, nor has the Company received any written
threat of any such claims, actions, suits, proceedings,  or investigations which
are required to be and have not been disclosed in the SEC Documents.

      6. To our knowledge,  there are no outstanding options, warrants, calls or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations  convertible  into or  exchangeable  for,  or  giving  any  right to
subscribe for or acquire any shares of Common Stock or  contracts,  commitments,
understanding,  or  arrangements  by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into  shares  of Common  Stock,  except  as  described  in the SEC
Documents.  To our  knowledge,  the  Company is not a party to or subject to the
provisions of any order,  writ,  injunction,  judgment or decree of any court or
government agency or instrumentality.

      7. The issuance of the Securities will not violate the applicable  listing
agreement between the Company and any securities exchange or market on which the
Company's securities are listed, subject to the NASD 20% Rule.

      8. As more  specifically  described in the SEC  Documents,  the authorized
capital stock of the Company consists of shares of Common Stock,  $___ par value
per share, and shares of Preferred Stock, par value $___ per shares.


      This  opinion is furnished to the  Investors  solely for their  benefit in
connection with the  transactions  described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.

                                          Very truly yours,




<PAGE>

                                                                       EXHIBIT F
                         INSTRUCTIONS TO TRANSFER AGENT
                            Sims Communications, Inc.


_______________, 1998
[Name and address of Transfer Agent]


Dear Sirs:

Reference is made to the Series C Convertible Preferred Stock Purchase Agreement
and all Exhibits and Attachments  thereto (the "Agreement") dated as of December
7, 1998,  between the  entities  referred  to on Schedule A annexed  hereto (the
"Investors"),  Settondown Capital International Ltd. (the "Placement Agent") and
Sims  Communications,  Inc.  (the  "Company").  Pursuant to the  Agreement,  and
subject to the terms and conditions  set forth in the  Agreement,  the Investors
have agreed to  purchase  from the Company and the Company has agreed to sell to
the  Investors  from time to time  during  the term of the  Agreement  shares of
Series C Preferred Stock of the Company, ___ par value per share (the "Preferred
Stock"), to issue to the Placement Agent shares of Preferred Stock, and (ii) the
Company  has  agreed  to  issue to the  Investors,  and to the  Placement  Agent
warrants  to  purchase  Common  Stock (the  "Warrant").  As a  condition  to the
effectiveness  of the Agreement,  the Company has agreed to issue to you, as the
transfer agent for the Common Stock (the "Transfer  Agent"),  these instructions
relating to the Preferred  Stock, and Warrants to be issued to the Investors and
the Placement Agent (or a permitted  assignee)  pursuant to the Agreement,  upon
conversion of the Preferred  Stock, or upon exercise of the Warrants.  All terms
used herein and not  otherwise  defined  shall have the meaning set forth in the
Agreement.

1.    ISSUANCE  OF COMMON STOCK

      Pursuant  to the  Agreement,  the  Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or  registration  statements  registering  the resale of the Common  Stock to be
acquired by the Investors  and the  Placement  Agent (i) under the Agreement and
(ii) upon exercise of the Warrants.  The Company will advise the Transfer  Agent
in writing of the effectiveness of any such registration statement promptly upon
its being  declared  effective.  The Transfer Agent shall be entitled to rely on
such  advice  and  shall  assume  that the  effectiveness  of such  registration
statement  remains in effect unless the Transfer  Agent is otherwise  advised in
writing by the Company and shall not be  required to  independently  confirm the
continued effectiveness of such registration statement. In the circumstances set
forth in the  following  paragraph,  the  Transfer  Agent  shall  deliver to the
Investors and the Placement  Agent  certificates  representing  Common Stock not
bearing the Legend without requiring further advice or instruction or additional
documentation from the Company or its counsel or the Investors or its counsel or
any other party (other than as described in such paragraphs).


<PAGE>

      At any  time  after  the  effective  date of the  applicable  registration
statement  (provided  that the Company has not informed  the  Transfer  Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates which bear the Legend, to the extent accompanied by (i)
a notice  requesting  the  issuance  of new  certificates  free of the Legend to
replace those surrendered,  (ii) a confirmation in writing to the Transfer Agent
that the  Investors  and/or  Placement  Agent has  sold,  pledged  or  otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona  fide  transaction  to a  third  party  that is not an  affiliate  of the
Company; and (iii) the Investors and/or Placement Agent confirms to the Transfer
Agent that it has complied with the prospectus delivery requirement the Transfer
Agent shall deliver to the Investors the  certificates  representing  the Common
Stock not bearing the Legend,  in such names and denominations as the Investors,
and/or Placement Agent shall request.  In the event a registration  statement is
not filed by the Company, or for any reason the registration  statement which is
filed by the Company is not declared  effective by the  Securities  and Exchange
Commission the Investors and/or Placement Agent, or its permitted  assignee,  or
either of their  brokers  confirms to the Transfer  Agent that (i) the Investors
and/or  Placement  Agent has held the  shares  of Common  Stock for at least one
year,  (ii)  counting  the  shares  surrendered  as being sold upon the date the
unlegended  Certificates  would be delivered to the Investors  and/or  Placement
Agent (or the Trading Day  immediately  following  if such date is not a Trading
Day),  the  Investors  and/or  Placement  Agent will not have sold more than the
greater of (a) one percent of the total number of  outstanding  shares of Common
Stock,  or (b) the average  weekly  trading  volume of the Common  Stock for the
preceding  four weeks during the three months ending upon such delivery date (or
the Trading Day  immediately  following if such date is not a Trading Day),  and
(iii) the Investors  and/or Placement Agent has complied with the manner of sale
and notice  requirements  of Rule 144 under the Securities  Act, and the Company
shall have  furnished  an  opinion  from its  independent  counsel to the extent
available, authorizing the removal of the Legend.

      At any time prior to the  effective  date of the  applicable  registration
statement,  and  provided  no  exemption  from  registration  exists,  upon  the
conversion  of any  Preferred  Stock  certificate  by the  Investors  and/or the
Placement  Agent,  and upon  receipt of  authorization  from the  Company to the
Transfer  Agent,  the Transfer  Agent shall deliver to the Investors  and/or the
Placement  Agent  certificates  representing  Common  Stock  bearing  the Legend
without requiring further advice or instruction or additional documentation from
the  Company or its counsel or the  Investors  or its counsel or any other party
(other than as described in such paragraphs).

      Any advice,  notice,  or  instructions  to the Transfer  Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of ( ) ___-____.



<PAGE>


2.    MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK

      In connection  with any issuance of Common Stock by the Transfer  provided
that all of the  conditions  set forth in Section 1 above  have been  satisfied,
pursuant to which the Investors  acquires Common Stock under the Agreement,  the
Transfer  Agent shall  deliver to the Investors  and/or the  Placement  Agent as
defined  in the  Agreement,  certificates  representing  Common  Stock  (with or
without the Legend, as appropriate) as soon as possible.

3.    FEES OF TRANSFER AGENT; INDEMNIFICATION

      The  Company  agrees to pay the  Transfer  Agent for all fees  incurred in
connection with these Irrevocable Instructions.  The Company agrees to indemnify
the Transfer Agent and its officers,  employees and agents,  against any losses,
claims,  damages or  liabilities,  joint or several,  to which it or they become
subject  based  upon the  performance  by the  Transfer  Agent of its  duties in
accordance with the Irrevocable Instructions.

4.    THIRD PARTY BENEFICIARY

      The  Company  and the  Transfer  Agent  acknowledge  and  agree  that  the
Investors  is  an  express  third  party   beneficiary   of  these   Irrevocable
Instructions  and shall be entitled to rely upon,  and enforce,  the  provisions
thereof.


                                    SIMS COMMUNICATIONS, INC.



                                    By__________________________


AGREED:


By:__________________________
Name:
Title:


<PAGE>


                                                                       EXHIBIT G

                              NOTICE OF CONVERSION

             (To be Executed by the Registered Holder in order to
                      Convert the Series C Preferred Stock)

The undersigned  hereby  irrevocably  elects to convert Series C Preferred Stock
Certificate  No. ___ into shares of Common  Stock of SIMS  COMMUNICATIONS,  INC.
(the  "Company")  according  to the  conditions  hereof,  as of the date written
below.

The undersigned represents and warrants that:

      (i)   that all  offers  and sales by the  undersigned  of the  shares of
            Common Stock issuable to the  undersigned  upon  conversion of the
            Series C Preferred  Stock shall be made  pursuant to an  exemption
            from  registration  under the  Securities  Act of 1933, as amended
            (the  "Act"),  or pursuant  to  registration  of the Common  Stock
            under the Act,  subject to any  restrictions  on sale or  transfer
            set  forth in the  Series C  Preferred  Stock  Purchase  Agreement
            between  the  Company  and the  original  holder  of the  Series C
            Preferred Stock submitted herewith for conversion;
      (ii)  the  undersigned  has not  engaged in any  transaction  or series of
            transaction  that is a part  of or a plan or  scheme  to  evade  the
            registration requirements of the Act; and
      (iii) upon  conversion   pursuant  to  this  Notice  of  Conversion,   the
            undersigned  will not own or deemed to beneficially  own (within the
            meaning  of the  1934  Act)  4.99% or more of the  then  issued  and
            outstanding shares of Common Stock of the Company.


  ----------------------------------  ---------------------------------
  Date of Conversion                    Applicable Conversion Price


 ----------------------------------        ---------------------------------
 Number of Common Shares upon Conversion   Shares of  Preferred Stock Converted


      ----------------------------------  ---------------------------------
      Signature                                 Name

      Address:                                  Delivery of Shares to:


<PAGE>



                              NOTICE OF CONVERSION

             (To be Executed by the Registered Holder in order to
                      Convert the Series C Preferred Stock)

The undersigned  hereby  irrevocably  elects to convert Series C Preferred Stock
Certificate  No. ___ into shares of Common  Stock of SIMS  COMMUNICATIONS,  INC.
(the  "Company")  according  to the  conditions  hereof,  as of the date written
below.

The undersigned represents and warrants that:

      (i)   that all  offers  and sales by the  undersigned  of the  shares of
            Common Stock issuable to the  undersigned  upon  conversion of the
            Series C Preferred  Stock shall be made  pursuant to an  exemption
            from  registration  under the  Securities  Act of 1933, as amended
            (the  "Act"),  or pursuant  to  registration  of the Common  Stock
            under the Act,  subject to any  restrictions  on sale or  transfer
            set  forth in the  Series C  Preferred  Stock  Purchase  Agreement
            between  the  Company  and the  original  holder  of the  Series C
            Preferred Stock submitted herewith for conversion;
      (ii)  the  undersigned  has not  engaged in any  transaction  or series of
            transaction  that is a part  of or a plan or  scheme  to  evade  the
            registration requirements of the Act; and
      (iii) upon  conversion   pursuant  to  this  Notice  of  Conversion,   the
            undersigned  will not own or deemed to beneficially  own (within the
            meaning  of the  1934  Act)  4.99% or more of the  then  issued  and
            outstanding shares of Common Stock of the Company.


      ----------------------------------  ---------------------------------
      Date of Conversion                   Applicable Conversion Price


      ----------------------------------      ---------------------------------
    Number of Common Shares upon Conversion  Shares of Preferred Stock Converted


      ----------------------------------  ---------------------------------
      Signature                                 Name

      Address:                                  Delivery of Shares to:



<PAGE>


SIDE ESCROW LETTER





                              [Company Letterhead]

To:________


      This  letter  shall  confirm  our   understanding   regarding  the  escrow
provisions  contained  in the  Series C  Convertible  Purchase  Agreement  dated
December 7, 1998 (the  "Agreement").  All securities  issuable by the Company to
_____  pursuant  to the  Agreement  shall  be  delivered  directly  to  _____ at
_________,  upon  receipt of the  original  securities  _____ shall  immediately
thereafter wire the appropriate  purchase price therefore to the Company, net of
all fees payable by the Company  which the Company  agrees that it shall provide
____ with a net letter providing for the payment of fees simultaneously with the
delivery of the securities.

                                          Very truly yours,




Acknowledged and Agreed
this ___ day of December, 1998



--------------------------
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SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported): December 14, 1998

                           SIMS Communications, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                   0-25474            65-0287558
(State or other jurisdiction of     (Commission        (I.R.S. Employer
 incorporation or organization)       File Number)      Identification No.)

                            18001 Cowan, Suite C & D
                            Irvine, California 92614
                    (Address of principal executive offices)
                                   (Zip Code)

                                (949) 261-6665
            (Registrant's telephone number, including area code)

                                       N/A
              (Former name, former address and former fiscal year,
                           if changed since last report)
Item 5.  Other Events

     On November 11, 1998,  the Company  completed a business  transaction  with
MedCard  Management  Systems,  Inc.  ("MedCard")  whereby the  Company  acquired
certain  assets of Medcard,  including the exclusive  rights to the MedCard name
and The MedCard System software and network. The MedCard System is an electronic
processing  system that  consolidates  insurance  eligibility  verification  and
processes  medical claims and approval of credit card/debit card payments within
30 seconds. Consideration for the transaction included cash of $450,000, 100,000
shares of restricted common stock,  options to purchase 350,000 shares of common
stock and royalties on future sales.

    In November and December 1998, the Company sold 1,500 shares of its Series C
Preferred Stock (the "Preferred  Stock") to a group of  institutional  investors
for  $1,500,000.  Each  Preferred  Shares  is  convertible  into  shares  of the
Company's  common  stock  equal in number to the amount  determined  by dividing
$1,000 by the lower of (i)  $1.31  (or $1.11 in the case of 750  shares  sold in
December),  or (ii) the average price of the Company's  common stock for any two
trading days during the twenty-two trading days preceding the conversion date.

    For each Series C Preferred Stock held by a preferred stockholder on certain
dates, (the "Warrant Valuation Dates") the Company will issue 50 warrants to the
preferred shareholder.

    The Warrant Valuation Dates are generally the following: (1)

                                  May 30, 1999
                                  June 30, 1999
                                  July 30, 1999
                                 August 30, 1999
                               September 30, 1999
                                October 30, 1999
                                November 30, 1999

(1) The Warrant  Valuations  Dates are  determined in reference to the dates the
    Series C Preferred  Shares were issued.  Since the Series C Preferred Shares
    were issued on  different  dates,  the actual  Warrant  Valuation  Dates are
    within seven days of the dates shown below.

    Each warrant will entitle the holder to purchase one additional share of the
Company's  common  stock  for $1.50 per share (or $1.27 per share in the case of
the 750 shares  sold in December  1998) at any time during a period  ending five
years after the Warrant Valuation Date. If none of the Series C Preferred Shares
are converted  into shares of the  Company's  common stock prior to November 30,
1999 the  Company  would be  required  to issue  warrants  which would allow the
holders of the Series C Preferred  Stock to purchase of up to 525,000  shares of
the Company's common stock.
The  Company  has the right to redeem the Series C  Preferred  Shares at any
time. Depending upon the date of redemption,  the Company is required to pay the
following amount for each Series C Preferred Share redeemed by the Company, plus
all accrued and unpaid dividends up to the Redemption Date.

If Redemption Date is after: (1)  Redemption Price per Series C Preferred Share

    November 30, 1998                             $1,100
    January 30, 1999                              $1,150
    March 1, 1999                                 $1,200
    April 1, 1999                                 $1,250 (2)

(1)  The dates  below are  determined  in  reference  to the dates the  Series C
     Preferred  Shares were  issued.  Since the Series C  Preferred  Shares were
     issued on different  dates,  the relevant  dates after which the Redemption
     Price changes are within seven days of the dates shown below.

(2)  If the Redemption  Date is after April 1, 1999 the Redemption  Price is the
     greater of (a) $1,250 or (b) the full  economic  benefit  the holder  would
     derive from  converting the Series C Preferred Stock and selling the common
     stock on the Redemption Date.

For each share of the Series C  Preferred  Stock  redeemed  by the  Company  the
Company has agreed to issue to the former holder of the redeemed shares warrants
which will  entitle the former  holder to purchase  200 shares of the  Company's
common stock at a price equal to 120% of the closing bid price of the  Company's
common  stock on the  date  prior  to the  Redemption  Date.  The  warrants  are
exercisable  during a period ending five years from the Redemption  Date. If all
1,500  shares of the Series C  Preferred  Stock are  redeemed by the Company the
Company would be required to issue warrants which would allow the former holders
to purchase up to 300,000 shares of the Company's common stock.

    The  following  condensed  pro  forma  balance  sheet of the  Company  as of
September  30, 1998  reflects  the issuance of the shares of common stock in the
MedCard transaction and the sale of the Company's Series C Preferred Stock:

                                                          September 30, 1998
                         September 30, 1998  Adjustments   (as adjusted)
ASSETS:

Cash and cash equivalents      $341,684     $1,440,000 (1) $1,781,684
Accounts receivables,
   less allowance for
   doubtful accounts            147,333                       147,333
Inventories                     440,905                       440,905
September 30, 1998
                         September 30, 1998  Adjustments   (as adjusted)
ASSETS:

Prepaid expenses and
   other current assets
   196,512
Notes receivable,
   current portion              150,000                       150,000
Property and Equipment
net of accumulated 
depreciation                  2,668,337     120,000 (2)     2,668,337
Notes receivable                415,360                       415,360
Patents, net of accumulated
amortization                    382,665                       382,665
Goodwill                        935,939                       935,939
Other                           121,355                       121,355
                              ---------      ---------      ---------
   Total Assets              $5,800,090     $1,560,000     $7,360,090
                             ==========     ==========     ==========

LIABILITIES:

Accounts payable and
  Accrued Expenses           $1,085,686                     1,085,686
Bank Line of credit             250,000                       250,000
Current obligations
under capital lease              77,109                        77,109
Current maturities
  of long term debt             664,174                       664,174
Franchise deposits
  and deferred revenue          827,661                       827,661
Long term debt                  216,674                       216,674
Obligations under
  capital leases                392,010                       392,010
                                -------                       -------

          Total Liabilities   3,513,404                     3,513,404

STOCKHOLDERS' EQUITY
   Preferred Stock, Series A and B  125                           125
   Preferred Stock, Series C                      $150 (1)        150
   Common Stock                     917             10 (2)        927
Additional Paid in Capital   24,310,287      1,439,850     25,870,127
                                               119,990 (2)

Accumulated Deficit         (22,024,682)                  (22,024,682)
                            ------------                  ------------

Total Stockholders' Equity    2,286,686                     3,846,686
                              ---------                     ---------

Total Liabilities and
Stockholders' Equity         $5,800,090     $1,560,000     $7,360,090
                             ==========     ==========     ==========
(1) Reflects  sale of 1,500 shares of Series C Preferred  Stock for  $1,500,000,
    less related offering expenses.

(2) Reflects  issuance of 100,000  shares of  Company's  common stock as partial
    payment of software, assets and other technology from Medcard.

Item 7.  Financial Statements and Exhibits

The following exhibits are filed with this report.

                   Exhibits                 Description
                   --------                 -------------
                     4              Designation  of  Series C  Preferred
                                    Stock (as amended)

                     10             Series C  Preferred  Stock  Purchase
                                    Agreement,     Escrow     Agreement,
                                    Registration  Rights  Agreement  and
                                    Form of Warrant

                                  SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

DATE: December 14, 1998
                                       SIMS COMMUNICATIONS, INC.

                                       By  /s/ Mark Bennett
                                        --------------------------------- 
                             
                                              Mark Bennett, President
EXHIBIT 4
EXHIBIT A
                                AMENDMENT TO THE

                           CERTIFICATE OF DESIGNATION

                                       of

                      SERIES C CONVERTIBLE PREFERRED STOCK

                                       of

                            SIMS COMMUNICATIONS, INC.

      (Pursuant to Section 151 of the Delaware General Corporation Law)

            SIMS  COMMUNICATIONS,  INC., a  corporation  organized  and existing
under the  General  Corporation  Law of the State of Delaware  (the  "Company"),
hereby  certifies  that the following  resolutions  were adopted by the Board of
Directors  of the Company as required by Section 151 of the General  Corporation
Law at a meeting of the Company's Board of Directors held on December , 1998:

            RESOLVED,  that pursuant to the  authority  granted to and vested in
the Board of  Directors  of the Company  (the  "Board") in  accordance  with the
provisions  of  the   Certificate  of   Incorporation   (the   "Certificate   of
Incorporation"),  the Board hereby amends the  Certificate of  Designation  (the
"Certificate  of  Designation")  which  created out of the  1,000,000  shares of
Preferred  Stock,  par value  $0.001 per share,  of the  Company  authorized  in
Article Four of the  Certificate of  Incorporation  (the "Preferred  Stock"),  a
series of the  Preferred  Stock of the  Company,  par value  $0.001  per  share,
designated  as Series C  Convertible  Preferred  Stock  and  hereby  amends  the
designation, relative rights, preferences, and limitations thereof as follows:

I. Designation and Amount. The shares of such series of Preferred Stock shall be
designated  as "Series C Convertible  Preferred  Stock" (the "Series C Preferred
Stock") and the number of shares constituting the Series C Preferred Stock shall
be 2,060.  The Series C Preferred  Stock shall have a stated  value (the "Stated
Value") of $1,000per share.

II.   Dividends.

      A. The holders of shares of Series C Preferred  Stock shall be entitled to
receive dividends, out of any assets legally available therefore,  prior to, and
in preference to, any declaration or payment of any dividend (payable other than
in Common Stock of this Company) on the Common Stock of this  Company,  at a per
share rate equal to six percent  per annum of the amount of the Stated  Value of
the Series C Preferred Stock, which is payable upon conversion (including Forced
Conversion)  as set  forth  below.  Dividends  shall  begin to  accrue as of the
Issuance Date and are based upon a 365 calendar day year. Any dividends  payable
pursuant to the provisions of this paragraph shall, at the Company's  option, be
payable in cash, or  unrestricted  shares of Common Stock of the Company  within
five Business Days of when due. In the event the Company chooses to issue Common
Stock as payment of the  dividends,  but at such time such Common  Stock has not
been  included in an  effective  registration  statement,  the Company may delay
issuance of the Common Stock until such time as these shares of Common Stock are
subject to an effective registration  statement.  Dividends, as set forth above,
will  continue  to accrue  until  such  time as such  Common  Stock (as  payment
therefor)  is issued,  and the  Company  shall issue such  additional  number of
shares of Common Stock for such additional  dividends.  If the Company elects to
pay the  dividends in shares of Common Stock and if these shares of Common Stock
are not subject to an effective  registration statement within 180 calendar days
after the Issuance  Date,  the Company will pay to the holder,  on or before the
183rd  calendar day after the Issuance Date all accrued and unpaid  dividends in
immediately  available  funds. The number of shares of Common Stock to be issued
by the Company in lieu of a cash payment for  dividends  due as set forth herein
shall be equal to the number of shares of Common Stock  resulting  from dividing
the dollar amount of dividends owed by the  Conversion  Price (as defined below)
on such date as the  dividends  are payable (if such date is not a Trading  Day,
then the next Trading Day immediately thereafter).

      B. Such dividends  shall accrue on each share of Series C Preferred  Stock
from the Issuance  Date,  and shall accrue from day to day whether or not earned
or declared.  Such  dividends  shall be cumulative so that if such  dividends in
respect of any previous or current annual  dividend  period,  at the annual rate
specified  above,  shall not have been paid or declared and a sum sufficient for
the  payment  thereof set apart,  for all Series C  Preferred  Stock at the time
outstanding,  the  deficiency  shall first be fully paid before any  dividend or
other  distribution  shall be paid on or  declared or set apart for the Series C
Preferred Stock or Common Stock. Dividends on the Series C Preferred Stock shall
be  non-participating  and the holders of the Series C Preferred Stock shall not
be  entitled  to  participate  in any  other  dividends  beyond  the  cumulative
dividends specified herein.

III.  Liquidation, Dissolution or Winding Up.

      A. In the  event of any  liquidation,  dissolution  or  winding  up of the
Company,  whether voluntary or involuntary,  before any distribution may be made
with respect to the Company's Common Stock or any other series of capital stock,
holders of each share of Series C  Preferred  Stock shall be entitled to receive
out of the assets  available for  distribution to  shareholders  $1,000 plus six
percent per annum  thereon  from the  Issuance  Date (as  defined  below) to the
Trading  Day  (as  defined  below)   immediately   prior  to  such  liquidation,
dissolution or winding up of the Company ( the "Liquidation Amount").

      B. If the assets of the Company available for distribution to shareholders
shall be  insufficient  to pay the holders of shares of Series C Preferred Stock
the full  Liquidation  Amount to which  they  shall be  entitled,  then any such
distribution  of assets  of the  Company  shall be  distributed  ratably  to the
holders of shares of Series C Preferred Stock
C. After the  payment of the  Liquidation  Amount  shall have been made in
full to the holders of the Series C Preferred  Stock or funds necessary for such
payment  shall have been set aside by the  Company  in trust for the  account of
holders of the Series C Preferred Stock so as to be available for such payments,
the  holders of the Series C  Preferred  Stock  shall be  entitled to no further
participation  in  the  distribution  of the  assets  of the  Company,  and  the
remaining   assets  of  the  Company  legally   available  for  distribution  to
shareholders  shall be  distributed  among the  holders of Common  Stock and any
other  classes or series of Preferred  Stock of the Company in  accordance  with
their respective terms.

      IV.   Voting.  Holders of Series C Preferred  Stock shall have no voting
rights except as expressly required by law or as expressly provided herein.

      V.  Conversion  of  Series C  Preferred  Stock.  The  holders  of Series C
Preferred  Stock shall have the right, at such holder's  option,  to convert the
Series C Preferred Stock into shares of Common Stock, on the following terms and
conditions:

      A.  Subject to the  provisions  of the Forced  Conversion  and  Redemption
hereof, at any time or times, upon the earlier to occur of (i) the 90th calendar
day after the  Issuance  Date,  or (ii) the  Effective  Date,  any holder of the
Series C Preferred Stock shall be entitled to convert any whole number of shares
of Series C Preferred Stock into fully paid and  nonassessable  shares of Common
Stock,  which is determined (per share of Series C Preferred  Stock) by dividing
(x) $1,000,  by (y) the  Conversion  Price (as defined  below) (the  "Conversion
Rate").

      B. For purposes of this  Certificate of  Designation,  the following terms
shall have the following meanings:

            A  "Business  Day" shall be any day other than a  Saturday,  Sunday,
national holiday or a day on which the New York Stock Exchange is closed.

            The "Closing Bid Price" shall mean, for any security as of any date,
the last  closing  bid price for such  security  on the Nasdaq  Stock  Market as
reported by Bloomberg L.P. ("Bloomberg"),  or, if the Nasdaq Stock Market is not
the principal  trading market for such  security,  the last closing bid price of
such security on the principal  securities exchange or trading market where such
security is listed or traded as reported by  Bloomberg,  or if the  foregoing do
not apply,  the last closing bid price of such security in the  over-the-counter
market on the OTC  Electronic  Bulletin  board for such  security as reported by
Bloomberg,  or, the last  closing  trade  price of such  security as reported by
Bloomberg,  or,  if no last  closing  bid or trade  price is  reported  for such
security by Bloomberg, the closing bid price shall be determined by reference to
the  closing  bid  price as  reported  on the  Principal  Market,  and if not so
reported  shall be  determined  from the average of the bid prices of any market
makers for such  security  as  reported in the "pink  sheets"  published  by the
National  Quotation  Bureau,  Inc. If the Closing Bid Price cannot be calculated
for such  security on such date on any of the foregoing  bases,  the Closing Bid
Price of such  security on such date shall be the fair market  value as mutually
agreed by the Company and the holders of two thirds of the outstanding shares of
Series C Preferred Stock.
The  "Conversion  Price" shall mean, as of any  Conversion  Date (as
defined below) the lesser of (i) 105% of the Issuance  Price, or (ii) 80% of the
average of the two lowest  Closing Bid Prices of the Common  Stock during the 22
Trading Days (the "Lookback Period")  immediately  preceding the Conversion Date
(hereinafter referred to as the "Current Price"). Notwithstanding the foregoing,
in the event a Conversion Date occurs on or before  the120th  calendar day after
the Issuance Date,  then the Conversion  Price shall not be less than 50% of the
Closing Bid Price on the Trading Day immediately preceding the Issuance Date.

            "Effective  Date"  shall mean the date on which the  Securities  and
Exchange   Commission  (the  "SEC")  first  declares  effective  a  Registration
Statement  registering  the  resale of 200%  percent  of the number of shares of
Common Stock issuable  (irrespective  of any shareholder  approval  requirement)
upon  conversion  of all of the  Series C  Preferred  Stock  outstanding  on the
Trading Day immediately preceding the day such Registration Statement is filed.

            The "Issuance Date" shall mean, with respect to each share of Series
C Preferred  Stock,  the date of issuance  of the  applicable  share of Series C
Preferred Stock.

            The  "Issuance  Price"  shall mean 100% of the  average  Closing Bid
Price of the Common Stock for the five consecutive  Trading Day period ending on
the Trading Day immediately preceding the Issuance Date.

            A  "Trading  Day"  shall  mean a day on  which  the New  York  Stock
Exchange is open.

            The "Principal  Market" shall mean the Nasdaq National  Market,  the
Nasdaq Small Cap Stock Market,  the American Stock Exchange,  the OTC Electronic
Bulletin Board operated by the National Association of Securities Dealers, Inc.,
or the New York Stock Exchange,  whichever is at the time the principal  trading
exchange or market for the Common Stock.

      C. In the event the  Current  Price is greater  than 150% of the  Issuance
Price,  then  the  number  of  shares  of  Common  Stock to be  issued  upon the
conversion  of each share of Series C  Preferred  Stock  shall be reduced by the
number of shares of Common Stock derived from the following formula:

  ((1,000 x Current Price) / Issuance Price) - 1,000) / (Current Price x 2)

      D. Holders of Series C Preferred Stock may exercise their right to convert
the Series C Preferred Stock by telecopying an executed and completed  notice of
conversion (the "Notice of Conversion") to the Company and delivering to Company
the original Notice of Conversion and the certificate  representing the Series C
Preferred Stock being converted by reputable  overnight  courier.  Each Business
Day  (between  the hours of 7:00 a.m.  and 5:00  p.m.  Pacific  Time) on which a
Notice of  Conversion  is  telecopied  to and  received by the Company  shall be
deemed a "Conversion  Date". The Company will deliver,  or instruct its transfer
agent to deliver, the certificates  representing shares of Common Stock issuable
upon  conversion  of any share of Series C Preferred  Stock  (together  with the
certificates representing the share or shares of Series C Preferred Stock not so
converted) to the holder thereof via reputable  overnight courier, by electronic
transfer or  otherwise  within five  Business  Days after the  Conversion  Date,
provided the Company has received the original Notice of Conversion and Series C
Preferred  Stock  certificate  being so  converted  on or  before  the  close of
business of the third Business Day after the Conversion Date. In addition to any
other  remedies  which may be  available  to the  holders  of shares of Series C
Preferred Stock, in the event that the Company fails to deliver,  such shares of
Common Stock within such five  Business Day period,  the holder will be entitled
to revoke the  relevant  Notice of  Conversion  by  delivering  a notice to such
effect to the  Company  whereupon  the  Company  and such  holder  shall each be
restored to their  respective  positions  immediately  prior to delivery of such
Notice of  Conversion.  The Notice of  Conversion  and Series C Preferred  Stock
certificates  representing the portion of the Series C Preferred Stock converted
shall be delivered as follows:

            To the Company:

                  Sims Communications, Inc.
                  18001 Cowan, Suite C & D
                  Irvine, California 92614
                  Attention:  President
                  Telephone:  (800) 241-1227
                  Facsimile:  (949) 261-0323

            In the event that shares representing the Common Stock issuable upon
conversion  of the Series C Preferred  Stock (the  "Conversion  Shares") are not
delivered by the Company within five Business Days after the Conversion Date, in
addition to all other available remedies which such holder may be entitled,  the
Company shall pay to the holders thereof,  in immediately  available funds, upon
demand,  as  liquidated  damages for such failure and not as a penalty,  on each
date after such fifth  Business Day (or fourth  Business Day if not delivered to
reputable  overnight  courier as set forth above) that  conversion is not timely
effected, an amount equal to 0.5% of the product of (a) the sum of the shares of
Common Stock not issued to the holder on a timely basis, as set forth above, and
to which such  holder is  entitled  and in the event the  Company  has failed to
deliver a Series C Preferred  Stock  certificate to the holder on a timely basis
as set  forth  above,  the  number  of shares  of  Common  Stock  issuable  upon
conversion of the shares of Series C Preferred Stock  represented by such Series
C Preferred Stock certificate, and (B) the Closing Bid Price of the Common Stock
on the last possible Trading Day which the Company could have issued such Common
Stock and  Series C  Preferred  Stock  certificate,  as the case may be, to such
holder without violating the delivery requirements set forth above. In the event
the Company fails to pay the  liquidated  damages as set forth above within five
Business Days of the date incurred, then such payment shall bear interest at the
rate of two percent per month (pro rated for partial months) until such payments
are made.  Any and all payments  required  pursuant to this  paragraph  shall be
payable only in cash.
E. If the  Common  Stock  issuable  upon the  conversion  of the  Series C
Preferred Stock shall be changed into the same or different  number of shares of
any  class  or   classes   of  stock,   whether   by   capital   reorganization,
reclassification  or  otherwise,  then and in each such  event,  the  holders of
Series C Preferred Stock shall have the right  thereafter to convert such shares
into the kind and amount of shares of stock and other  securities  and  property
receivable upon such capital  reorganization,  reclassification  or other change
which such  holders  would have  received had their shares of Series C Preferred
Stock  been  converted   immediately  prior  to  such  capital   reorganization,
reclassification or other change.

      F.  If at any  time  or  from  time  to  time  there  shall  be a  capital
reorganization  of the Common  Stock  (other  than a  subdivision,  combination,
reclassification  or exchange of shares  provided for elsewhere in this Section)
or a merger or consolidation of the Company with or into another corporation, or
the sale of all or substantially  all of the Company's  properties and assets to
any  other   person   (any  of  which   events  is  herein   referred  to  as  a
"Reorganization"),  then as a part of such  Reorganization,  provision  shall be
made so that the holders of the Series C Preferred  Stock  shall  thereafter  be
entitled to receive upon conversion of the Series C Preferred  Stock, the number
of shares of stock or other  securities  or property of the  Company,  or of the
successor corporation  resulting from such Reorganization,  to which such holder
would have been  entitled  if such holder had  converted  its shares of Series C
Preferred  Stock  immediately  prior to such  Reorganization.  In any such case,
appropriate  adjustment  shall be made in the  application  of the provisions of
this Section with respect to the rights of the holders of the Series C Preferred
Stock after the  Reorganization,  to the end that the provisions of this Section
(including  adjustment of the number of shares  issuable upon  conversion of the
Series C  Preferred  Stock)  shall be  applicable  after that event in as nearly
equivalent a manner as may be practicable.

      G.  Upon  the  occurrence  of  each  adjustment  or  readjustment  of  the
Conversion Price of Series C Preferred Stock, the Company, at its expense, shall
promptly  compute such  adjustment or  readjustment in accordance with the terms
hereof and prepare and furnish to each holder of such Series C Preferred Stock a
certificate  executed by the  president and chief  financial  officer (or in the
absence of a person designated as the chief financial officer, by the treasurer)
setting forth such  adjustment or  readjustment  and showing in detail the facts
upon which such adjustment or readjustment  are based.  The Company shall,  upon
written request at any time of any holder of Series C Preferred  Stock,  furnish
or cause to be  furnished  to such holder a  certificate  setting  forth (A) the
Conversion  Price at the time in effect,  and (B) the number or shares of Common
Stock and the  amount,  if any,  of other  property  which at the time  would be
received upon the conversion of a share of Series C Preferred Stock.

      H. Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of any Series C Preferred Stock  certificate(s),  and (in the case
of loss, theft or destruction) of indemnity or security reasonably  satisfactory
to the  Company,  and upon the  cancellation  of the  Series C  Preferred  Stock
certificate(s),  if  mutilated,  the  Company  shall  execute  and  deliver  new
certificates for Series C Preferred Stock of like tenure and date. However,  the
Company shall not be obligated to reissue such lost or stolen  certificates  for
shares of Series C Preferred Stock if the holder contemporaneously  requests the
Company to convert such shares of Series C Preferred Stock into Common Stock.
I. The Company  shall not issue any  fraction  of a share of Common  Stock
upon any conversion.  The Company shall round such fraction of a share of Common
Stock up to the nearest whole share.

      J. In the event some but not all of the shares of Series C Preferred Stock
represented  by a  certificate  or  certificates  surrendered  by a  holder  are
converted,  the  Company  shall  execute  and  deliver to or on the order of the
holder, at the expense of the Company, a new certificate representing the number
of shares of Series C Preferred Stock which were not converted.

      K. Each share of Series C Preferred  Stock  outstanding two years from the
Issuance Date shall automatically be converted into Common Stock on such date at
the  Conversion  Price and such date  shall be deemed the  Conversion  Date with
respect to such shares.

      L. The Company shall pay any and all original issue and/or  transfer taxes
which may be imposed upon it with respect to the issuance and delivery of Common
Stock upon conversion of the Series C Preferred Stock.

VI. No  Reissuance of Series C Preferred  Stock.  No share or shares of Series C
Preferred  Stock  acquired by the Company by reason of purchase,  conversion  or
otherwise shall be reissued, and all such shares shall be canceled,  retired and
eliminated  from the shares which the Company shall be authorized to issue.  The
Company may from time to time take such  appropriate  corporate action as may be
necessary  to reduce the  authorized  number of shares of the Series C Preferred
Stock accordingly.

VII.  Reservation of Shares.  The Company shall,  so long as any of the Series C
Preferred Stock are outstanding reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Series C Preferred  Stock,  such  number of shares of Common  Stock as shall
from time to time be sufficient to effect the  conversion of all of the Series C
Preferred Stock then  outstanding;  provided that the number of shares of Common
Stock so reserved  shall at no time be less than 200% of the number of shares of
Common Stock for which the Series C Preferred Stock are at any time  convertible
and if at any time the number of authorized but unissued  shares of Common Stock
shall not be sufficient  to maintain such number of shares of Common Stock,  the
Company  shall take such  corporate  action as may be  necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.

VIII. Restrictions and Limitations.

      A. Except as expressly  provided  herein or as required by law, so long as
any shares of Series C Preferred  Stock remain  outstanding,  the Company  shall
not,  without the approval by vote or written consent by the holders of at least
two thirds of the then outstanding shares of Series C Preferred Stock, voting as
a separate  class  take any  action  that  would  adversely  affect the  rights,
preferences or privileges of the holders of Series C Preferred Stock.
B. Without limiting the generality of the preceding paragraph, the Company
shall not so long as any shares of Series C Preferred  Stock remain  outstanding
amend its Articles of  Incorporation  without the approval by the holders of all
of the then  outstanding  shares of Series C Preferred  Stock if such  amendment
would:

            1.  create any other  class or series of capital  stock  entitled to
            seniority  as to the payment of dividends in relation to the holders
            of Series C Preferred Stock;

            2.  reduce the amount  payable to the  holders of Series C Preferred
            Stock upon the voluntary or involuntary liquidation,  dissolution or
            winding up of the Company,  or change the relative  seniority of the
            liquidation  preferences of the holders of Series C Preferred  Stock
            to the rights upon liquidation of the holders of other capital stock
            of the Company,

            3. cancel or modify the conversion rights of the holders of Series C
            Preferred Stock provided for in Section V herein;

            4.  cancel  or modify  the  rights of the  holders  of the  Series C
            Preferred Stock provided for in this Section.

IX. No  Dilution or  Impairment.  The Company  shall not,  by  amendment  of its
Articles of  Incorporation  or through any  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Certificate of Designation set forth herein,  but shall at all
times in good  faith  assist in the  carrying  out of all such  terms and in the
taking  of all such  actions  as may be  necessary  or  appropriate  in order to
protect  the  rights of the  holders  of the Series C  Preferred  Stock  against
dilution or other impairment.  Without limiting the generality of the foregoing,
the  Company  (a)  shall  not  establish  a par  value  of any  shares  of stock
receivable on the  conversion  of the Series C Preferred  Stock above the amount
payable  therefor on such  conversion,  (b) shall take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  shares of stock on the conversion of all Series C
Preferred  Stock from time to time  outstanding,  and (c) shall not  consolidate
with or merge  into any other  person or entity,  or permit  any such  person or
entity to consolidate  with or merge into the Company (if the Company is not the
surviving person),  unless such other person or entity shall expressly assume in
writing  and will be bound by all of the terms of the Series C  Preferred  Stock
set forth herein.

X. Notices of Record Date. In the event of:

               1. any taking by the  Company  of a record of the  holders of any
class of securities for the purpose of determining  the holders  thereof who are
entitled  to  receive  any  dividend  or  other  distribution,  or any  right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
2.   any   capital    reorganization   of   the   Company,    any
reclassification or  recapitalization  of the capital stock of the Company,  any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or

               3. any  voluntary  or  involuntary  dissolution,  liquidation  or
winding up of the Company, then and in each such event the Company shall mail or
cause  to be  mailed  to each  holder  of  Series  C  Preferred  Stock a  notice
specifying  (i) the date on which any such record is to be taken for the purpose
of such  dividend,  distribution  or right and a description  of such  dividend,
distribution  or  right,  (ii)  the  date  on  which  any  such  reorganization,
reclassification,  recapitalization,  transfer, merger, dissolution, liquidation
or winding up is expected to become  effective  and (iii) the time, if any, that
is to be fixed,  as to when the  holders  of  record  of Common  Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities)   for   securities   or  other   property   deliverable   upon  such
reorganization,    reclassification,    recapitalization,    transfer,   merger,
dissolution, liquidation or winding up. Such notice shall be mailed at least ten
Business Days prior to the date specified in such notice on which such action is
to be taken.

XI. Forced Conversion.

      A. Subject to the other  provisions  of this  Section,  from and after the
Effective  Date,  the Company  shall have the right to force  conversion  by the
holders of the  Preferred  Stock of up to a  cumulative  aggregate of 75% of the
total number of shares of Preferred  Stock issued by the Company by  telecopying
written  notice of its  election to force  conversion  (the  "Forced  Conversion
Notice")  containing  the  information  set forth below to the holders under the
following circumstances:

                  1. In the  event,  at any  time and  from  time to  time,  the
            Closing  Bid Price of the Common  Stock is equal to or greater  than
            175% of the Issuance  Price for ten  consecutive  Trading Days,  the
            Company may force  conversion by the holder of up to a maximum of up
            to 50% of the total  number of shares of  Preferred  Stock issued by
            the  Company  to the  holders;  provided  that the  Company  may not
            initiate a forced  conversion  pursuant  to the  provisions  of this
            Subsection  more  than  once  every 30  calendar  days and no single
            forced  conversion shall exceed 15% of the total number of shares of
            Preferred Stock issued by the Company.

                  2. In the  event,  at any  time and  from  time to  time,  the
            Closing  Bid Price of the Common  Stock is equal to or greater  than
            200% of the Issuance  Price for ten  consecutive  Trading Days,  the
            Company may force  conversion by the holder of up to a maximum of up
            to 75% of the total  number of shares of  Preferred  Stock issued by
            the  Company  to the  holders;  provided  that the  Company  may not
            initiate a forced  conversion  pursuant  to the  provisions  of this
            Subsection
more than once  every 30  calendar  days and no single  forced
            conversion  shall  exceed  15% of the  total  number  of  shares  of
            Preferred Stock issued by the Company.

                  3. In the event the Company causes a forced  conversion as set
            forth  herein  the  Accrual  Deduction  shall  not  apply.  A Forced
            Conversion  Notice shall not be deemed to affect or otherwise reduce
            the holders  conversion  rights as set forth herein as to the shares
            of Preferred Stock not subject to a Forced Conversion Notice.

      B. The Company shall effect such forced  conversions  pro rata amongst the
holders according to the number of shares of Preferred Stock held by each holder
of  Preferred  Stock.  The Forced  Conversion  Notice must be  delivered  by the
Company prior to 12:00 p.m.  Eastern Time on the first  Trading Day  immediately
following the  expiration  of the ten Trading Day period  referred to in Section
XI. A. I and 2 above. A Forced  Conversion  Notice shall be deemed  delivered on
(i) the  Trading  Day it is faxed by the  Company if such  notice is faxed (with
confirmation  that it was  received by the holder)  prior to 12:00 p.m.  Eastern
Time,  or (ii) the  immediately  succeeding  Trading  Day if it is  faxed  (with
confirmation  that it was received by the holder) after 12:00 p.m.  Eastern Time
on a Trading  Day or at any time on a day which is not a Trading  Day. No Forced
Conversion Notice may be deemed  delivered,  on a day that is not a Trading Day.
The Company must forward the original Forced Conversion Notice to the holder via
reputable  overnight  courier  for  delivery  on  the  Trading  Day  immediately
following  transmission of the Forced  Conversion  Notice via facsimile.  In the
event the  original  Forced  Conversion  Notice is not sent to the holder of the
Preferred Stock as set forth above, the Forced Conversion Notice shall be deemed
revoked  and  ineffective.  Once the Company  has  exercised  its right to force
conversion of the Preferred  Stock by giving a Forced  Conversion  Notice to the
holder as set forth above it shall be deemed  irrevocable.  Each  Trading Day on
which the Forced  Conversion  Notice is telecopied to and received by the holder
as set  forth  above  shall be  deemed a  Conversion  Date for the  purposes  of
completing the forced  conversion and calculating the number of shares of Common
Stock to be issued upon the forced conversion,  and shall also be referred to as
the  "Forced  Conversion  Date".  The  Company  will  deliver  the  certificates
representing  shares of Common Stock issuable  pursuant to the Forced Conversion
Notice  (together with the  certificates  representing  the remaining  shares of
Preferred Stock not being forced to convert, if any) to the holder via reputable
overnight courier, by electronic transfer or otherwise within five Business Days
after the Forced  Conversion Date. In the event the Company does not deliver the
shares of Common  Stock upon the forced  conversion  within five  Business  Days
after the Forced  Conversion  Date,  the holder shall be entitled to  liquidated
damages determined as set forth in Section V. D. above. In the event the Company
fails to comply  with the terms of the forced  conversion  in any manner on more
than two  separate  occasions,  it shall have waived its right to serve a Forced
Conversion Notice upon that particular holder at any time in the future.
C.  The  Forced  Conversion  Notice  shall  set  forth  (i) a  calculation
referencing the conversion formula contained herein showing the number of shares
of Common Stock being issued pursuant to the applicable forced  conversion,  and
(ii) a  statement  identifying  which  subsection  among XI A. 1 and 2, that the
Company is relying on to force  conversion,  and the  Closing  Bid Prices of the
Common Stock during the ten consecutive  Trading Days relied upon for the forced
conversion.

      D.  Upon  the  Company's  full  compliance  with  the  forced   conversion
provisions set forth in above,  the shares of Series C Preferred  Stock that are
the subject of a forced conversion shall be automatically canceled and converted
into a right to receive  shares of Common Stock,  and all rights of the Series C
Preferred  Stock which are the subject of the forced  conversion,  including the
right to conversion,  shall cease without  further  action,  provided the holder
receives  the  correct  number of shares  of  Common  Stock due upon the  forced
conversion.  Immediately  following receipt of the Forced Conversion  Notice, if
the holder  concurs with the  Company's  conversion  calculations  in the Forced
Conversion  Notice, the holder shall surrender their original shares of Series C
Preferred  Stock  which are the subject of the Forced  Conversion  Notice at the
office of the Company,  and the Company  shall send to the holder a new Series C
Preferred  Stock  certificate  for that  number of shares of Series C  Preferred
Stock which remains  outstanding,  if any,  within five Business Days after such
surrender  by the  holder.  If the  holder  does not concur  with the  Company's
conversion calculations in the Forced Conversion Notice, the holder shall notify
the Company in writing  within three  Business Days after the Forced  Conversion
Date of such fact.  Notwithstanding the foregoing, the Company remains obligated
to send those shares of Common Stock which are undisputed.

      E. The  number  of  shares  of  Common  Stock  issuable  upon  the  forced
conversion  of the Series C Preferred  Stock shall be adjusted in the manner and
under the circumstances as set forth herein.

      F. The Company may not serve a Forced Conversion Notice upon any holder if
such notice would result in such holder  holding,  at such time, more than 4.99%
of the number of shares of Common Stock then outstanding.

XII.  Redemption.

      A. For so long as the Company has not received a notice of conversion  for
such shares,  the Company may, at its option,  repay,  in whole or in part,  the
Series C Preferred Stock shares at the Redemption Price (as defined below).  The
Series C Preferred Stock is redeemable as a series,  in whole or in part, by the
Company by providing  written notice (the "Redemption  Notice") to the holder of
the Series C  Preferred  Stock via  facsimile  at his or her address as the same
shall appear on the books of the Company (the  Business Day between the hours of
9:00 a.m. and 5:00 Eastern Time the Redemption Notice is received by the holders
of the Series C Preferred  Stock via facsimile is defined to be the  "Redemption
Notice Date").  Within three Business Days after the Redemption  Notice Date the
Company  shall arrange  payment of the  Redemption  Price (as defined  below) in
immediately  available  funds to the holder for the shares of Series C Preferred
Stock  which are the  subject  of the  Redemption  Notice  (such date of payment
referred  to as the  "Redemption  Date").  Partial  redemptions  shall  be in an
aggregate  principal  amount  of at least  $100,000.  If  fewer  than all of the
outstanding  shares of Series C Preferred Stock are to be redeemed,  the Company
will select those to be redeemed pro-rata amongst the then holders of the Series
C Preferred Stock.

      B. The "Redemption Price" shall be determined as follows:

                  1. If the Redemption Notice Date falls on or prior to the 60th
            calendar day after the Issuance Date, the Redemption Price per share
            of Series C Preferred Stock being redeemed shall be equal to 110% of
            the Stated Value, plus all accrued and unpaid dividends.
                  2. If the  Redemption  Notice  Date  falls  between  the  60th
            calendar day and the 90th calendar day after the Issuance  Date, the
            Redemption  Price  per  share of  Series  C  Preferred  Stock  being
            redeemed  shall  be  equal  to 115% of the  Stated  Value,  plus all
            accrued and unpaid dividends.

                  3. If the  Redemption  Notice  Date  falls  between  the  91st
            calendar day and the 120th calendar day after the Issuance Date, the
            Redemption  Price  per  share of  Series  C  Preferred  Stock  being
            redeemed  shall  be  equal  to 120% of the  Stated  Value,  plus all
            accrued and unpaid dividends.

                  4. If the Redemption  Notice Date occurs at any time after the
            121st calendar day after the Issuance Date, the Redemption Price per
            share of Series C Preferred  Stock being  redeemed shall be equal to
            the  greater of (a) 125% of the Stated  Value,  plus all accrued and
            unpaid  dividends,  or (b) the full  "economic  benefit"  the holder
            would  derive  from  converting  the  Series C  Preferred  Stock and
            selling the Common Stock on the Redemption Notice Date.

      C. The Notice of Redemption  shall set forth (i) the  Redemption  Date and
the place fixed for redemption, (ii) the Redemption Price, and (iii) a statement
that  dividends  on the shares of Series C Preferred  Stock to be redeemed  will
cease to accrue on such Redemption Date, and (iv) a statement of or reference to
the  conversion  right set forth  herein.  If fewer  than all the  shares of the
Series C  Preferred  Stock  owned by such  holder are then to be  redeemed,  the
notice shall  specify the number of shares  thereof that are to be redeemed and,
if practicable, the numbers of the certificates representing such shares. Within
ten  Trading  Days of the Notice of  Redemption  Date,  the  Company  shall wire
transfer  the  appropriate  amount  of  funds  to the  holders  of the  Series C
Preferred  Stock. If the Company fails to comply with the redemption  provisions
in any  manner  whatsoever,  it shall  waive its rights in the future to serve a
Redemption  Notice upon the holders of the Series C Preferred Stock at any time.
For the first five Trading Days after the Notice  Redemption  Date the holder of
the Series C Preferred  Stock will retain his or her right to convert the Series
C Preferred  Stock. In the event the  aforementioned  occurs and the Company has
not complied with all of the redemption  provisions set forth herein the Company
must comply with the delivery  requirements upon conversion as set forth herein.
The holders shall send the shares of Series C Preferred  Stock being  redeemed
to the Company  within three  Business  Days after they have received good funds
for the Redemption Price of such shares.

      D. Subject to the occurrence of the wire transfer of the Redemption  Price
as  described  in above,  each share of Series C Preferred  Stock to be redeemed
shall be  automatically  canceled  and  converted  into a right to  receive  the
Redemption Price, and all rights of the Series C Preferred Stock,  including the
right to conversion shall cease without further action.

      E.  The  Redemption  Price  shall  be  adjusted  proportionally  upon  any
adjustment of the  Conversion  Price as provided  herein and in the event of any
stock dividend, stock split, combination of shares or similar event.

XIII.  4.99%  Limitation.  The  number of shares  of Common  Stock  which may be
acquired by any of holder upon conversion pursuant to the terms herein shall not
exceed the number of such shares which, when aggregated with all other shares of
Common Stock then owned by holder, inclusive of all other shares of Common Stock
or securities  convertible into Common Stock,  would result in any holder owning
more than 4.99% of the then issued and outstanding  Common Stock.  The preceding
shall not interfere with any holders right to convert  Preferred Stock over time
which in the aggregate totals more than 4.99% of the then outstanding  shares of
Common Stock so long as such  Investor  does not own more than 4.99% of the then
outstanding  Common Stock at any given time. The foregoing  limitation shall not
apply to the Automatic Conversion provision contained herein.
RESOLVED,  FURTHER,  that the  appropriate  officers of the  Company  hereby are
authorized  to  execute  and  acknowledge  a  certificate  setting  forth  these
resolutions  and to cause  such  certificate  to be filed and  recorded,  all in
accordance with the  requirements of Section 151 of the General  Corporation Law
of the State of Delaware.

            IN WITNESS  WHEREOF,  Sims  Communications,  Inc.,  has caused  this
Certificate  to be signed by its  President,  and  attested to by its  Assistant
Secretary, this 7th day of December, 1998.

                                          SIMS COMMUNICATIONS, INC.

By:______________________________
Attest:                                               President

---------------------------
Assistant Secretary
EXHIBIT 10
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                     between

                            Sims Communications, Inc.

                                       and

                          HSBC James Capel Canada, Inc.

                            Gilston Corporation, Ltd.

                               Augustine Fund, LP

                                December 7, 1998
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

      THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT,  dated as of
December 7, 1998 (the  "Agreement"),  between the entities  listed on Schedule A
attached  hereto  (collectively  referred  to as  the  "Investors"),  SETTONDOWN
CAPITAL  INTERNATIONAL  LTD. (the "Placement Agent") located at Charlotte House,
Charlotte Street,  P.O. Box N. 9204, Nassau,  Bahamas,  a corporation  organized
under  the  laws of  Bahamas,  and  SIMS  COMMUNICATIONS,  INC.,  a  corporation
organized and existing under the laws of the State of Delaware (the "Company").

      WHEREAS,  the  parties  desire  that,  upon the terms and  subject  to the
conditions  contained herein, the Company shall issue and sell to the Investors,
and the Investors  shall purchase up to (a) 2,000 shares of Preferred  Stock (as
defined  below),  and (b)  Warrants  to purchase  that number of Warrant  Shares
determined on each of the Warrant Valuation Dates as set forth below; and

      WHEREAS,  the Company shall issue to the  Placement  Agent (in addition to
the fees set forth in Section 12.7 below), in return for services  rendered,  an
aggregate  of 60  shares  of  Preferred  Stock,  and a Warrant  to  purchase  an
aggregate of 50,000 Warrant Shares; and

      WHEREAS,  such investments will be made in reliance upon the provisions of
Section 4(2) ("Section  4(2)") and  Regulation D ("Regulation  D") of the United
States  Securities  Act of 1933,  as amended,  and the  regulations  promulgated
thereunder  (the  "Securities  Act"),  and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.

      NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I

                               Certain Definitions

      Section  1.1  "Additional  Shares"  shall have that  meaning  set forth in
Section 2.5 below.

      Section 1.2 "Bid Price"  shall mean the closing bid price (as  reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.

      Section 1.3 "Business Day" means any day except  Saturday,  Sunday and any
day  which  shall  be  a  Federal  legal  holiday  or a  day  on  which  banking
institutions in the State of New York are authorized or required by law or other
government actions to close.
Section 1.4 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized,  having the
right to participate in the distribution of earnings and assets of the Company.

      Section  1.5  "Capital  Shares  Equivalents"  shall  mean any  securities,
rights,  or obligations that are convertible into or exchangeable for, or giving
any right to,  subscribe for any Capital  Shares of the Company or any warrants,
options or other rights to subscribe for or purchase  Capital Shares or any such
convertible or exchangeable securities.

      Section  1.6  "Certificate  of  Designation"   shall  mean  the  Company's
Certificate  of  Designation  setting  forth all of the rights,  privileges  and
preferences of the Preferred Stock, as annexed hereto as Exhibit A.

      Section 1.7  "Closing"  shall mean the  closings of a purchase and sale of
the Preferred Stock and Warrants pursuant to Article II below.

      Section 1.8 "Closing Date" shall mean the Subscription Date.

      Section 1.9 "Common Stock" shall mean the Company's  common stock,  $0.001
par value per share.

      Section 1.10  "Damages"  shall mean any loss,  claim,  damage,  liability,
costs and  expenses  which  shall  include,  but not be limited  to,  reasonable
attorney's  fees,  disbursements,  costs and  expenses of expert  witnesses  and
investigation.

      Section 1.11  "Effective  Date" shall mean the date on which the SEC first
declares effective a Registration  Statement  registering the resale of (i) 200%
of the number of Underlying Shares that would be required if the Preferred Stock
(including such shares of the Placement Agent) were converted on the Trading Day
immediately preceding the filing of the Registration  Statement,  plus (ii) 100%
of the number of Warrant Shares  (including such shares of the Placement  Agent)
issuable  assuming all of the Warrants had been issued  pursuant to the Purchase
Agreement.

      Section  1.12  "Escrow  Agent"  shall  mean  the law  firm  of  Goldstein,
Goldstein & Reis, LLP, pursuant to the terms of the Escrow Agreement attached as
Exhibit B.

      Section  1.13  "Exchange  Act" shall mean the  Securities  Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

      Section 1.14      "Forced  Conversion  Period" shall mean 10 consecutive
Trading Days.

      Section  1.15  "Legend"  shall have the meaning set forth in Article  VIII
below.
Section  1.16  "Material  Adverse  Effect"  shall  mean any  effect on the
business, operations, properties, Bid Price, trading volume of the Common Stock,
prospects, or financial condition of the Company that is material and adverse to
the Company and its  subsidiaries and affiliates,  taken as a whole,  and/or any
condition,  circumstance,  or situation  that would prohibit or otherwise in any
material  respect  interfere  with the  ability of the Company to enter into and
perform any of its obligations  under this Agreement,  the  Registration  Rights
Agreement,  the Escrow Agreement, the Certificate of Designation or the Warrants
in any material respect.

      Section  1.17 "NASD"  shall mean the National  Association  of  Securities
Dealers, Inc.

      Section 1.18  "Outstanding"  when used with  reference to shares of Common
Stock,  Preferred Stock, or Capital Shares  (collectively  the "Shares"),  shall
mean, at any date as of which the number of such Shares is to be determined, all
issued and  outstanding  Shares,  and shall include all such Shares  issuable in
respect  of  outstanding  scrip  or  any  certificates  representing  fractional
interests in such Shares; provided, however, that Outstanding shall not mean any
such Shares then directly or  indirectly  owned or held by or for the account of
the Company.

      Section  1.19  "Person"  shall  mean  an  individual,  a  corporation,   a
partnership,  an  association,  a limited  liability  company,  a trust or other
entity or  organization,  including a government or political  subdivision or an
agency or instrumentality thereof.

      Section 1.20 "Preferred Stock" shall mean the Company's Series C Preferred
Stock  with  the  rights,  privileges  and  preferences,  as  set  forth  in the
Certificate of Designation.

      Section 1.21 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq Small Cap Stock  Market,  the American  Stock  Exchange,  or the New York
Stock  Exchange,  whichever  is at the time the  principal  trading  exchange or
market for the Common Stock.

      Section 1.22 "Purchase Price" shall mean $2,000,000.

      Section 1.23 "Registrable  Securities"  shall mean the Underlying  Shares,
the  Additional  Shares,  the  Warrant  Shares,  (i) in  respect  of  which  the
Registration  Statement  (covering  these  securities)  has  not  been  declared
effective by the SEC,  (ii) which have not been sold under  circumstances  under
which all of the  applicable  conditions  of Rule 144 (or any similar  provision
then in force) under the  Securities  Act ("Rule 144") are met, (iii) which have
not been  otherwise  transferred  to holders who may trade such  shares  without
restriction under the Securities Act, or (iv) the sales of which, in the opinion
of counsel to the Company, are subject to any time, volume or manner limitations
pursuant  to Rule  144(k) (or any similar  provision  then in effect)  under the
Securities Act.

      Section 1.24  "Registration  Rights  Agreement"  shall mean the  agreement
regarding  the  filing  of the  Registration  Statement  for the  resale  of the
Registrable  Securities,  entered into between the Company, the Placement Agent,
and the Investors on the Subscription Date annexed hereto as Exhibit C.

      Section 1.25 "Registration  Statement" shall mean a registration statement
on Form S-3 or Form SB-2,  for the  registration  of the resale by the Investors
and the Placement Agent of the Registrable Securities under the Securities Act.

      Section  1.26  "Regulation  D" shall  have the  meaning  set  forth in the
recitals of this Agreement.

      Section 1.27 "SEC" shall mean the Securities and Exchange Commission.

      Section  1.28  "Section  4(2)"  shall  have the  meaning  set forth in the
recitals of this Agreement.

      Section 1.29 "Securities" shall mean the Underlying Shares, the Additional
Shares, the Warrant Shares.

      Section  1.30  "Securities  Act" shall have the  meaning  set forth in the
recitals of this Agreement.

      Section 1.31 "SEC  Documents"  shall mean the  Company's  latest Form 10-K
(and all amendments  thereto) or 10-KSB (and all  amendments  thereto) as of the
time in question, all Form 10-Qs or 10-QSBs and Form 8-Ks filed thereafter,  the
Company's Form SB-2  registration  statement  filed on or about August 1998, and
the Proxy  Statement for its latest fiscal year as of the time in question until
such  time  as  the  Company  no  longer  has  an  obligation  to  maintain  the
effectiveness  of a  Registration  Statement  as set  forth in the  Registration
Rights Agreement.

      Section  1.32  "Subscription  Date"  shall  mean the  date on  which  this
Agreement and all Exhibits and attachments hereto, are executed and delivered by
the parties  hereto and all of the  conditions  relating to the  issuance of the
Preferred Stock shall have been fulfilled.

      Section  1.33  "Trading  Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

      Section 1.34 "Underlying  Shares" shall mean all shares of Common Stock or
other  securities  issued or issuable  pursuant to  conversion  of the Preferred
Stock.
      Section  1.35  "Warrants"  shall mean the Common  Stock  Purchase  Warrant
annexed hereto as Exhibit D.

      Section  1.36  "Warrant  Shares"  shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.

      Section 1.37 "Warrant Valuation Date" shall mean the Business Day in which
the Investors receive Warrants pursuant to Section 2.4 below.

                                   ARTICLE II

            Purchase and Sale of the Preferred Stock and Warrants
Section 2.1 Closing. The Company will sell, and the Investors will buy, on
the Closing Date, an aggregate of up to 2,000 shares of Preferred Stock based on
U.S.$1,000 per share,  and Warrants to purchase that number of Warrant Shares as
set forth in  Section  2.4 below for the  Purchase  Price  provided  each of the
conditions  set forth in  Section  2.7 below  have been  satisfied  or waived in
writing.

      Section 2.2 Form of Payment. The Investors shall pay the Purchase Price by
delivering  good funds in United  States  Dollars by wire transfer to Goldstein,
Goldstein  &  Reis,  LLP,  Escrow  Agent,   against  delivery  of  the  original
Securities.  The parties have entered into an Escrow Agreement annexed hereto as
Exhibit B.

      Section 2.3 Wire   Instructions.   Wire   instructions   for  Goldstein,
Goldstein & Reis, LLP are as follows:

            Chase Manhattan Bank, N.A.
            ABA No. 021000021
            For the Account of:
              United States Trust Company of New York
              Account No. 920-1-073195
            In favor of:
              Goldstein, Goldstein & Reis, LLP Attorney Escrow Account
              Account No. 59-01383

      Section 2.4 Warrants.  The Company will issue to the Investors  (pro rata)
on the  Warrant  Valuation  Dates (as set  forth  below)  Warrant's  exercisable
beginning on the applicable Warrant Valuation Date and then exercisable any time
over the five year period there following,  to purchase Warrant Shares.  On each
Warrant Valuation Date (as defined below) the Investors shall receive (pro rata)
Warrants to purchase that number of Warrant  Shares equal to five percent of the
product of the following  formula:  number of all of the  unconverted  shares of
Preferred  Stock  which the  Investors  are the legal  holder of starting on the
180th calendar day after the Closing Date (or the next Business Day  immediately
thereafter if such day is not a Business Day) and each  successive 30th calendar
day thereafter (or the next Business Day  immediately  thereafter if such day is
not a Business Day) until the 360th  calendar day after the Closing Date (or the
next Business Day  immediately  thereafter  if such day is not a Business  Day),
multiplied by the Stated Value (as defined in the  Certificate  of  Designation)
per share of Preferred  Stock.  Each of the 180th calendar day after the Closing
Date, and each successive 30th calendar day period  thereafter shall be referred
to as a "Warrant  Valuation  Date". On the  Subscription  Date the Company shall
issue to the  Placement  Agent a  Warrant  to  purchase  50,000  Warrant  Shares
exercisable beginning on the Closing Date and then exercisable any time over the
five year period  there  following.  The  Warrant's  shall be  delivered  by the
Company to the Escrow Agent,  and delivered to the Investors and Placement Agent
pursuant to the terms of this  Agreement  and the Escrow  Agreement.  All of the
aforementioned  Warrant  Shares shall be registered  for resale  pursuant to the
Registration Rights Agreement.  On each Warrant Valuation Date the Company shall
issue to each  Investor an  Officer's  certificate  stating that the Company has
full authority to issue the Warrants and that the Company is in full  compliance
with the terms of this Agreement (including all Exhibits annexed hereto).

      The Company also agrees to issue to the Investors  upon the  completion of
any  Redemption  (as provided in the  Certificate  of  Designation)  Warrants to
purchase  that number of shares of Common  Stock equal to twenty  percent of the
sum of the following  formula in the case of a  Redemption:  number of shares of
Preferred  Stock which are subject to Redemption  multiplied by the Stated Value
(as defined in the Certificate of Designation) per share of Preferred Stock. The
terms of the warrants issued by the Company in connection with Redemption  shall
be identical to the Warrants but for the date of the warrant,  the  "Termination
Date"  and the  "Exercise  Price"  which  shall be 120% of the Bid  Price on the
Trading Day immediately  preceding the Redemption Notice Date (as defined in the
Certificate of Secretary).

      Section 2.5 Additional  Shares.  In the event that (a) within five Trading
Days after the date on which the Investors  and/or the  Placement  Agent receive
any of the  Securities  issued  hereunder  (provided such  Securities  have been
included  in a  registration  statement  that has been  declared  effective),  a
"blackout   period"  occurs  which  is  defined  as  any  period  in  which  the
effectiveness  of  the  Registration  Statement  is  suspended  for  any  reason
whatsoever,  and (b) the Bid Price on the Trading Day immediately preceding such
"blackout  period"  (the "Old Bid  Price") is greater  than the Bid Price on the
first Trading Day following  such "blackout  period" (the "New Bid Price"),  the
Company  shall issue to the Investors  and/or the Placement  Agent the number of
additional shares equal to the difference  between (y) the product of the number
of  Securities  held by the  Investors  and/or the  Placement  Agent during such
"blackout  period" that are or were not otherwise  freely  tradeable and the Old
Bid Price, divided by the New Bid Price and (z) the number of Securities held by
the Investors and/or the Placement Agent during such "blackout period" that were
not otherwise freely tradeable during such Blackout Period.

      Section 2.6 Liquidated  Damages.  In addition to any other  provisions for
liquidated damages in this Agreement or any Exhibit annexed hereto, in the event
that the Company does not deliver unlegended Common Stock in connection with the
sale of such Common Stock by the  Investor(s)  and/or the Placement Agent as set
forth in Article VIII below  within five (5)  Business  Days of surrender by the
Investor(s)  of the Common Stock  certificate  in accordance  with the terms and
conditions  set forth in Article VIII below (such date of receipt is referred to
as the "Receipt Date"), the Company shall pay to the Investor(s), in immediately
available funds, upon demand, as liquidated  damages for such failure and not as
a penalty, one percent of the Purchase Price of the Common Stock undelivered for
every  day  thereafter  for the  first  ten days and two  percent  for every day
thereafter that the unlegended  shares of Common Stock are not delivered,  which
liquidated damages shall run from the sixth Business Day after the Receipt Date.
The parties hereto  acknowledge  and agree that the sum payable  pursuant to the
Registration  Rights  Agreement  and as set forth above,  and the  obligation to
issue  Registrable   Securities  under  Section  2.5  above,   shall  constitute
liquidated damages and not penalties.  The parties further  acknowledge that the
amount of loss or damages  likely to be incurred is incapable or is difficult to
precisely estimate,  and the parties are sophisticated business parties and have
been  represented  by  sophisticated  and able legal and  financial  counsel and
negotiated  this Agreement at arm's length.  Notwithstanding  the above,  in the
event that the Company does not deliver  unlegended  Common Stock in  connection
with the sale of such Common Stock by the Investor(s) and/or the Placement Agent
as set forth in Article  VIII below  within  five  Business  Days of the Receipt
Date), the Company shall also pay to the Investor(s),  in immediately  available
funds,  interest (at the then current  prime rate),  based upon the Bid Price of
the Common Stock on the Receipt Date,  undelivered for every day thereafter that
the unlegended  shares of Common Stock are not  delivered.  Any and all payments
required  pursuant  to this  paragraph  shall be payable  only in cash,  and any
payment  hereunder  shall not relieve the  Company of its  delivery  obligations
under this Section.

      Section  2.7  Preferred  Stock.  The right of the  Company to receive  the
Purchase Price from the Investors, and the right of the Investors to receive the
Preferred  Stock and  Warrants  (as set forth in Section  2.4) is subject to the
satisfaction  (or written  waiver) on the Closing Date, of each of the following
conditions:

            (i)  acceptance by the Company, and by all of the Investors, of this
                 Agreement  and  all  duly  executed   Exhibits  thereto  by  an
                 authorized officer of the Company;
            (ii) delivery  into escrow by the  Investors  of clear funds for the
                 Purchase Price (as more fully set forth in the Escrow Agreement
                 attached hereto as Exhibit B);
            (iii)all  representations and warranties of the Investors and of the
                 Company  contained  herein shall remain true and correct in all
                 material respects as of the Subscription Date;
            (iv) the Company shall have obtained all permits and  qualifications
                 required  by any state for the offer and sale of the  Preferred
                 Stock  and the  Warrants,  or shall  have the  availability  of
                 exemptions therefrom;
            (v)  the sale and issuance of the Preferred  Stock, and the proposed
                 issuance of the Underlying Shares,  Warrants and Warrant Shares
                 shall be legally permitted by all laws and regulations to which
                 the  Investors  and the  Company  are  subject;  and  all  duly
                 executed Exhibits hereto for the sale of the Securities;
            (vi) delivery of the original Preferred Stock as described herein;
            (vii)receipt  by the  Investors  of an  opinion  of  counsel  of the
                 Company  as  set  forth  in  Exhibit  E  attached   hereto  and
                 instructions  to the  Transfer  Agent as set forth in Exhibit F
                 annexed hereto;
            (viii) written proof that the  Certificate of  Designation  has been
                 filed with the Secretary of State of the State of Delaware; and
            (ix) payment of all fees as set forth in Section  12.7 below and the
                 Escrow Agreement.
ARTICLE III

               Representations and Warranties of the Investors

      Each of the Investors represents and warrants to the Company that:

      Section 3.1 Intent.  Each of the Investors is entering into this Agreement
for its own  account  and has no present  arrangement  (whether  or not  legally
binding)  at any time to sell the  Common  Stock to or  through  any  person  or
entity;  provided,  however,  that by making  the  representations  herein,  the
Investors  do not  agree to hold  the  Common  Stock  for any  minimum  or other
specific  term and reserves the right to dispose of the Common Stock at any time
in  accordance  with  federal  and  state  securities  laws  applicable  to such
disposition.

      Section  3.2  Sophisticated   Investors.   Each  of  the  Investors  is  a
sophisticated  investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and each of the
Investors  has such  experience  in business  and  financial  matters that it is
capable of evaluating  the merits and risks of an investment in the  Securities.
Each of the  Investors  acknowledges  that an  investment in the Common Stock is
speculative and involves a high degree of risk.

      Section 3.3 Authority. This Agreement has been duly authorized and validly
executed  and  delivered  by each of the  Investors  and is a valid and  binding
agreement of the Investors  enforceable  against each of them in accordance with
its terms,  subject  to  applicable  bankruptcy,  insolvency,  or  similar  laws
relating to, or affecting  generally the enforcement of,  creditors'  rights and
remedies or by other equitable principles of general application.

      Section  3.4  Not an  Affiliate.  None  of the  Investors  is an  officer,
director or  "affiliate"  (as that term is defined in Rule 405 of the Securities
Act) of the Company.

      Section 3.5  Organization  and  Standing.  Each of the  Investors  is duly
organized,  validly  existing,  and in  good  standing  under  the  laws  of the
countries and/or states of their incorporation or organization.

      Section 3.6  Absence of  Conflicts.  The  execution  and  delivery of this
Agreement and any other document or instrument executed in connection  herewith,
and the consummation of the transactions  contemplated  thereby,  and compliance
with the  requirements  thereof,  will not  violate any law,  rule,  regulation,
order, writ, judgment,  injunction, decree or award binding on Investors, or, to
the Investors knowledge, (a) violate any provision of any indenture,  instrument
or agreement  to which any of the  Investors  are a party or are subject,  or by
which any of the Investors or any of their assets is bound; (b) conflict with or
constitute  a  material  default  thereunder;  (c)  result  in the  creation  or
imposition of any lien pursuant to the terms of any such  indenture,  instrument
or agreement,  or constitute a breach of any fiduciary duty owed by Investors to
any third party; or (d) require the approval of any  third-party  (which has not
been
obtained)  pursuant  to  any  material  contract,  agreement,  instrument,
relationship or legal  obligation to which any of the Investors is subject or to
which any of their assets, operations or management may be subject.

      Section 3.7 Disclosure;  Access to Information.  Each of the Investors has
received all documents,  records, books and other information pertaining to each
Investor's  investment  in the Company that have been  requested  by  Investors,
including the opportunity to ask questions and receive  answers.  The Company is
subject to the periodic reporting  requirements of the Exchange Act, and each of
the Investors has reviewed or received copies of any such reports that have been
requested  by it. Each of the  Investors  represents  that it has  reviewed  the
Company's,  Form 10-KSB for the year ended December 31, 1997, Form 10-QSB's, and
Form 8-K's filed for the twelve months prior to the  Subscription  Date, and the
Company's Form SB-2 registration statement filed on or about August 1998.

      Section 3.8 Manner of Sale. At no time were any of the Investors presented
with or  solicited  by or  through  any  leaflet,  public  promotional  meeting,
television   advertisement  or  any  other  form  of  general   solicitation  or
advertising.

      Section 3.9 Registration or Exemption Requirements.  Each of the Investors
further acknowledges and understands that the Securities may not be transferred,
resold or otherwise  disposed of except in a  transaction  registered  under the
Securities Act and any applicable  state securities laws, or unless an exemption
from such registration is available.  Each of the Investors understands that the
certificate(s)  evidencing  the Preferred  Stock will be imprinted with a legend
that prohibits the transfer of these  Securities  unless (i) they are registered
or such registration is not required, and (ii) if the transfer is pursuant to an
exemption from registration.

      Section 3.10 No Legal,  Tax or  Investment  Advice.  Each of the Investors
understands  that nothing in this Agreement or any other materials  presented to
the  Investors  in  connection  with the  purchase  and  sale of the  Securities
constitutes  legal, tax or investment  advice. The Investors have relied on, and
have consulted with, such legal,  tax and investment  advisors as they, in their
sole  discretion,  have deemed necessary or appropriate in connection with their
purchase of the Securities.

      Section 3.11 No Manipulation. Each of the Investors agree that it will not
enter into any position in the Common Stock that in any manner would  manipulate
the Bid Price of the Common Stock in  violation of the Exchange Act of 1934,  as
amended.

                                   ARTICLE IV

                Representations and Warranties of the Company

      The Company  represents  and warrants to the  Investors  and the Placement
Agent that:

      Section 4.1 Organization of the Company. The Company is a corporation duly
incorporated  and  existing  in good  standing  under  the laws of the  State of
Delaware and has all requisite  corporate authority to own its properties and to
carry on its  business as now being  conducted  except as  described  in the SEC
Documents. The Company is duly qualified as a foreign corporation to do business
and is in good  standing  in every  jurisdiction  in  which  the  nature  of the
business conducted or property owned by it makes such  qualification  necessary,
other than those in which the  failure so to  qualify  would not  reasonably  be
expected to have a Material Adverse Effect.

      Section 4.2 Authority.  (i) The Company has the requisite  corporate power
and authority to enter into and perform its  obligations  under this  Agreement,
and all Exhibits  annexed hereto,  and to issue the Preferred  Stock,  Warrants,
Underlying Shares,  Additional Shares,  Preferred Stock, and the Warrant Shares,
(ii) the execution,  issuance and delivery of this  Agreement,  and all Exhibits
annexed hereto,  by the Company and the  consummation by it of the  transactions
contemplated  hereby have been duly authorized by all necessary corporate action
and no  further  consent  or  authorization  of the  Company  or  its  Board  of
Directors,  and (iii) this Agreement, and all Exhibits annexed hereto, have been
duly  executed  and  delivered by the Company and  constitute  valid and binding
obligations of the Company  enforceable  against the Company in accordance  with
their  terms,  except  as  such  enforceability  may be  limited  by  applicable
bankruptcy,  insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable  principles
of general  application.  Upon their  issuance  and  delivery  pursuant  to this
Agreement,  the securities will be validly issued,  fully paid and nonassessable
and will be free of any liens or encumbrances other than those created hereunder
or by the actions of the Investors;  provided,  however, that the securities are
subject to restrictions on transfer under state and/or federal  securities laws.
The  issuance  and sale of the  securities  hereunder  will not give rise to any
preemptive  right or right of first refusal or right of  participation on behalf
of any person.

      Section 4.3  Capitalization.  The authorized  capital stock of the Company
consists of 40,000,000  shares of Common Stock,  $0.001 par value per share,  of
which  9,430,356  shares are issued and  outstanding,  and  1,000,000  shares of
Preferred  Stock,  $0.001 par value per share,  of which  125,250 are issued and
outstanding.  All of the outstanding  shares of Common Stock and Preferred Stock
of the Company  have been duly and validly  authorized  and issued and are fully
paid and nonassessable.  No shares of Common Stock are entitled to preemptive or
similar rights. Except as specifically disclosed in the SEC Documents, there are
no outstanding options,  warrants,  rights to subscribe to, calls or commitments
of any character  whatsoever relating to, or, except as a result of the purchase
and  sale  of the  Preferred  Stock  and the  Warrants,  securities,  rights  or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings,  or  arrangements  by  which  the  Company  or any
subsidiary is or may become bound to issue additional  shares of Common Stock or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company,  no Person or group of Persons  beneficially  owns
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or has
the right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of five percent of the Common Stock.
Section 4.4 Common  Stock.  The Company has  registered  its Common  Stock
pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting  requirements  of the Exchange Act, and such Common Stock is currently
listed or quoted on the Nasdaq Small Cap Stock Market.

      Section 4.5 SEC Documents.  The Company has delivered or made available to
the Investors true and complete copies of the SEC Documents filed by the Company
with  the  SEC  during  the  twelve  (12)  months   immediately   preceding  the
Subscription  Date  (including,   without  limitation,   proxy  information  and
solicitation  materials).  The Company has not provided to any of the  Investors
any information  that,  according to applicable law, rule or regulation,  should
have been disclosed publicly prior to the date hereof by the Company,  but which
has not been so  disclosed.  The SEC Documents  comply in all material  respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated  thereunder and none of the
SEC Documents  contained  any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  The financial  statements of the Company  included in the
SEC  Documents  comply  as to  form in all  material  respects  with  applicable
accounting  requirements  and the published  rules and regulations of the SEC or
other  applicable  rules and regulations  with respect  thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial  statements or the notes thereto
or (ii) in the case of unaudited interim statements,  to the extent they may not
include footnotes or may be condensed or summary  statements) and fairly present
in all material  respects the financial  position of the Company as of the dates
thereof and the results of operations  and cash flows for the periods then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).

      Section  4.6  Valid  Issuances.  When  issued  and  payment  has been made
therefor (in the case of the  Investors),  the Common  Stock,  Preferred  Stock,
Underlying Shares, Warrants,  Warrant Shares, and the Additional Shares, sold to
the Investors will be duly and validly  issued,  fully paid, and  nonassessable.
Neither the  issuance of,  Preferred  Stock,  Underlying  Shares,  Warrants,  or
Warrant Shares,  to the Placement Agent, nor the sale of the Additional  Shares,
the  Underlying  Shares,  the Warrants,  or the Warrant Shares to the Investors,
pursuant  to,  nor the  Company's  performance  of its  obligations  under  this
Agreement,  and all Exhibits  annexed  hereto will (i) result in the creation or
imposition by the Company of any liens,  charges,  claims or other  encumbrances
upon the Common Stock,  Preferred Stock,  Warrant Shares, or Underlying  Shares,
issued to the Placement Agent, the Additional  Shares,  the Preferred Stock, the
Underlying  Shares,  the Warrant Shares issued to the  Investors,  or any of the
assets of the Company, or (ii) entitle the holders of Outstanding Capital Shares
to preemptive  or other rights to subscribe to or acquire the Capital  Shares or
other securities of the Company.
Section  4.7 No  General  Solicitation  or  Advertising  in Regard to this
Transaction.  Neither the Company nor any of its affiliates nor any  distributor
or any person  acting on its or their  behalf (i) has  conducted or will conduct
any general  solicitation  (as that term is used in Rule 502(c) of Regulation D)
or  general  advertising  with  respect  to  any  of the  Preferred  Stock,  the
Additional Shares,  the Underlying Shares, the Warrants,  or the Warrant Shares,
or (ii) made any offers or sales of any security or solicited  any offers to buy
any security  under any  circumstances  that would require  registration  of the
Preferred Stock, the Additional Shares, the Underlying Shares, the Warrants,  or
the Warrant Shares under the Securities Act.

      Section  4.8  Corporate  Documents.  The  Company  has  furnished  or made
available  to each of the  Investors  true and correct  copies of the  Company's
Articles of Incorporation,  as amended and in effect on the date hereof, and the
Company's by-laws, as amended and in effect on the date hereof (the "By-Laws").

      Section 4.9 No Conflicts. The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby,  including  without  limitation the issuance of the Common
Stock, Preferred Stock, Underlying Shares,  Warrants, and Warrant Shares, do not
and  will  not  (i)  result  in  a  violation  of  the  Company's   Articles  of
Incorporation or By-Laws or (ii) conflict with, or constitute a material default
(or an event that with  notice or lapse of time or both would  become a default)
under, or give to others any rights of termination,  amendment,  acceleration or
cancellation of, any material agreement,  indenture, instrument or any "lock-up"
or similar  provision  of any  underwriting  or similar  agreement  to which the
Company is a party,  or (iii)  result in a violation  of any  federal,  state or
local law, rule,  regulation,  order,  judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
property  or asset of the  Company  is bound  or  affected,  nor is the  Company
otherwise  in  violation  of,  conflict  with  or in  default  under  any of the
foregoing as would not  reasonably be expected to have,  individually  or in the
aggregate,  a Material Adverse Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
entity,  except for possible  violations  that either singly or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.  The Company
is not required under federal,  state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute,  deliver or perform
any of its obligations  under this Agreement or issue and sell the Common Stock,
Preferred  Stock,  or Warrants,  in accordance  with the terms hereof;  provided
that, for purposes of the representation  made in this sentence,  the Company is
assuming  and relying  upon the  accuracy of the  relevant  representations  and
agreements of the Investors herein.

      Section 4.10 No Material Adverse Change.  Since June 30, 1998, no Material
Adverse  Effect has occurred or exists with  respect to the  Company,  except as
disclosed in the SEC Documents, or as publicly announced.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material,  individually or in the aggregate,  that are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
set forth in the Company's  financial  statements or as incurred in the ordinary
course of the Company's businesses since June 30, 1998, and which,  individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.

      Section 4.12 No Undisclosed Events or Circumstances.  Since June 30, 1998,
no event or  circumstance  has occurred or exists with respect to the Company or
its businesses,  properties, prospects, operations or financial condition, that,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  prior to the date  hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.

      Section 4.13 No Integrated Offering.  To the Company's knowledge,  neither
the Company,  nor any of its  affiliates,  nor any person acting on its or their
behalf has, directly or indirectly,  made any offers or sales of any security or
solicited any offers to buy any security,  other than pursuant to this Agreement
or pursuant to the Company's existing employee benefit plan, under circumstances
that would require registration of the Common Stock under the Securities Act, or
cause the offering of the Securities pursuant to this Agreement to be integrated
with prior or future offerings by the Company for purposes of the Securities Act
or any applicable  stockholder approval  provisions,  except as set forth in the
SEC Documents.

      Section 4.14 Litigation and Other Proceedings.  Except as may be set forth
in the SEC  Documents,  there are no lawsuits or  proceedings  pending or to the
knowledge of the Company  threatened,  against the Company,  nor has the Company
received  any written or oral notice of any such  action,  suit,  proceeding  or
investigation,  which would  reasonably  be expected to have a Material  Adverse
Effect.  Except as set forth in the SEC  Documents,  no judgment,  order,  writ,
injunction  or decree or award has been  issued by or, so far as is known by the
Company,  requested of any court,  arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.

      Section  4.15  Accuracy  of Reports  and  Information.  The  Company is in
compliance,  to the extent  applicable,  with all  reporting  obligations  under
either Section 12(b), 12(g) or 15(d) of the 1934 Act. The Company has registered
its Common Stock  pursuant to Section 12 of the 1934 Act and the Common Stock is
listed and trades on the Nasdaq Small Cap Stock Market. The Company has complied
in all  material  respects  and to the  extent  applicable  with  all  reporting
obligations, under either Section 13(a) or 15(d) of the 1934 Act for a period of
at least  twelve (12)  months  immediately  preceding  the offer and sale of the
Securities  (or for such  shorter  period that the Company has been  required to
file such material).

     Section  4.16  Acknowledgment  of  Dilution.   The  Company  is  aware  and
acknowledges that issuance of Common Stock, upon the conversion of the Preferred
Stock and/or  exercise of the Warrants,  may result in may result in dilution of
the outstanding  shares of Common Stock, which dilution may be substantial under
certain market conditions.  The Company further acknowledges that its obligation
to issue Underlying Shares in accordance with the Certificate of Designation and
Warrant Shares in accordance
with the Warrants is unconditional and absolute  regardless of the effect of any
such dilution.

      Section 4.17 Employee Relations.  The Company is not involved in any labor
dispute,  nor, to the knowledge of the Company,  is any such dispute  threatened
which could  reasonably be expected to have a Material  Adverse Effect.  None of
the Company's employees is a member of a union and the Company believes that its
relations with its employees are good.

      Section 4.18 Environmental Laws. The Company is (i) in compliance with any
and all foreign,  federal,  state and local laws and regulations relating to the
protection  of human health and safety,  the  environment  or hazardous or toxic
substances or wastes,  pollutants or contaminants  and which the Company know is
applicable  to them  ("Environmental  Laws"),  (ii) has  received  all  permits,
licenses or other  approvals  required under  applicable  Environmental  Laws to
conduct its business,  and (iii) is in compliance  with all terms and conditions
of any such permit, license or approval.

      Section 4.19  Insurance.  The Company is insured by insurers of recognized
financial  responsibility  against  such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the  Company is engaged.  The Company has no notice to believe  that it
will not be able to renew  its  existing  insurance  coverage  as and when  such
coverage  expires,  or obtain similar  coverage from similar  insurers as may be
necessary  to  continue  its  business at a cost that would not  materially  and
adversely  affect  the  condition,  financial  or  otherwise,  or the  earnings,
business or operation, of the Company.

      Section  4.20 Board  Approval.  The board of  directors of the Company has
concluded,  in its good  faith  business  judgment,  that the  issuances  of the
securities  of the Company in  connection  with this  Agreement  are in the best
interests of the Company.

      Section  4.21  Integration.  The Company  shall not and shall use its best
efforts to ensure that no affiliate shall sell, offer for sale or solicit offers
to buy or  otherwise  negotiate  in respect of any  security of the Company that
would be  integrated  with the offer or sale of the  Securities in a manner that
would require the registration  under the Securities Act of the issue,  offer or
sale of the  Securities to the  Investors.  The Securities are being offered and
sold pursuant to the terms hereunder,  are not being offered and sold as part of
a previously commenced private placement of securities.

      Section  4.22  Patents and  Trademarks.  The Company has, or has rights to
use, all  patents,  patent  applications,  trademarks,  trademark  applications,
service  marks,  trade  names,  copyrights,  licenses,  trade  secrets and other
intellectual  property rights which are necessary for use in connection with its
business  or which the failure to so have would have a Material  Adverse  Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company,  none of the Intellectual Property Rights infringe on any rights of any
other  Person,  and the Company  either owns or has duly  licensed or  otherwise
acquired all necessary rights with respect to the Intellectual  Property Rights.
The  Company  has not  received  any notice from any third party of any claim of
infringement by the Company of any of the Intellectual  Property Rights, and has
no  reason  to  believe  there  is any  basis  for any such  claim.  To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.

      Section 4.23 Use of Proceeds. The Company represents that the net proceeds
from this offering will be used for working capital purposes.

      Section 4.24 Subsidiaries. Except as disclosed in the Reports, the Company
does not presently own or control,  directly or indirectly,  any interest in any
other corporation, partnership, association or other business entity.

                                    ARTICLE V
                           Covenants of the Investors

      Section 5.1 4.99%  Limitation.  The number of shares of Common Stock which
may be acquired by any of the Investors  pursuant to the terms of this Agreement
shall not exceed the number of such shares which, when aggregated with all other
shares of Common  Stock  then  owned by any of the  Investors,  beneficially  or
deemed beneficially owned by any of the Investors,  inclusive of Warrant Shares,
would result in any of the  Investors  owning more than 4.99% of the then issued
and outstanding Common Stock.

      The preceding  paragraph shall not interfere with any Investor's  right to
convert  Preferred Stock over time which in the aggregate totals more than 4.99%
of the then outstanding shares of Common Stock so long as such Investor does not
own more than 4.99% of the then outstanding  Common Stock at any given time. The
foregoing  limitation  shall not  apply to the  Automatic  Conversion  provision
contained in the Certificate of Designation.

                                   ARTICLE VI
                            Covenants of the Company

      Section 6.1 Registration  Rights. The Company shall cause the Registration
Rights  Agreement to remain in full force and effect so long as any  Registrable
Securities  remain  outstanding  and the Company  shall  comply in all  material
respects with the terms thereof.

      Section  6.2  Reservation  of Common  Stock.  As of the date  hereof,  the
Company has  authorized  and reserved and the Company shall  continue to reserve
and keep  available at all times,  free of preemptive  rights,  shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
the Additional Shares,  Underlying  Shares,  and Warrant Shares;  such amount of
shares  of  Common  Stock to be  reserved  shall be  calculated  based  upon the
Purchase Price therefor under the terms of this  Agreement,  the  Certificate of
Designation,  and Warrants.  The number of shares so reserved shall be increased
or  decreased  to reflect  potential  increases or decreases in the Common Stock
that  the  Company  may  thereafter  be so  obligated  to  issue  by  reason  of
adjustments to the Preferred Stock and the Warrants.
Section 6.3 Listing of Common Stock. The Company shall (a) not later
than the fifth Business Day following the Closing Date prepare and file with the
Nasdaq  Small  Cap  Stock  Market  (as  well as any  other  national  securities
exchange,  market or trading  facility on which the Common Stock is then listed)
an additional  shares listing  application  covering at least the sum of (i) two
times the number of Underlying  Shares as would be issuable upon a conversion in
full of (and as payment of  dividends  in  respect  of) the shares of  Preferred
Stock, assuming such conversion occurred on the Closing Date (whichever yields a
lower Conversion  Price),  and (ii) the Warrant Shares issuable upon exercise in
full of the Warrants,  (b) take all steps  necessary to cause the such shares to
be approved  for listing on the Nasdaq Small Cap Stock Market (as well as on any
other  national  securities  exchange,  market or trading  facility on which the
Common Stock is then listed) as soon as possible thereafter,  and (c) provide to
the  Investors  evidence of such  listing,  and the Company  shall  maintain the
listing of its Common Stock on such exchange or market.  In addition,  if at any
time the number of shares of Common  Stock  issuable on  conversion  of all then
outstanding  shares of  Preferred  Stock,  on  account  of  accrued  and  unpaid
dividends  thereon and upon exercise in full of the Warrants is greater than the
number of shares of Common  Stock  theretofore  listed with the Nasdaq Small Cap
Stock Market (and any such other national securities exchange, market or trading
facility),  the Company shall  promptly take such action  (including the actions
described  in the  preceding  sentence)  to file an  additional  shares  listing
application  with the Nasdaq Small Cap Stock Market (and any such other national
securities  exchange,  market or trading facility) covering at least a number of
shares  equal to the sum of (x) 200% of (A) the number of  Underlying  Shares as
would then be  issuable  upon a  conversion  in full of the shares of  Preferred
Stock,  and (B) the number of Underlying  Shares as would be issuable as payment
of  dividends  on the Shares  and (y) the  number of Warrant  Shares as would be
issuable upon exercise in full of the Warrants.  Except for the notice  attached
hereto as Annex I (which the Company  represents  it has  responded  to and been
notified  by the Nasdaq  Small Cap Stock  Market that the Company is now in full
compliance with the  requirements for such continued  listing),  the Company (i)
has not received any notice, oral or written, affecting its continued listing on
the  Nasdaq  Small Cap Stock  Market,  and (ii) is in full  compliance  with the
requirements  for continued  listing on the Nasdaq Small Cap Stock  Market.  The
Company  will take no  action  which  would  impact  its  continued  listing  or
eligibility of the Company for such listing (except as set forth in Section 6.11
below). The Company will comply with the listing and trading requirements of its
Common Stock on a Principal Market (including,  without limitation,  maintaining
sufficient  net  tangible  assets)  and will  comply  in all  respects  with the
Company's  reporting,  filing and other obligations under the bylaws or rules of
the Principal Market. In the event the Company receives notification from Nasdaq
or any other  controlling  entity  stating that the Company is not in compliance
with the listing  qualifications of such Principal Market, the Company will take
all action necessary to bring the Company within  compliance with all applicable
listing standards of the Principal Market.  Notwithstanding  the foregoing,  the
Company  shall only be required to include that number of shares of Common Stock
in the  aforementioned  listing  application as is allowable under the rules and
regulations of the Principal Market.

      Section 6.4  Exchange  Act  Registration.  The Company  will  maintain the
registration  of its Common  Stock under  Section 12 of the Exchange  Act,  will
comply in all  respects  with its  reporting  and filing  obligations  under the
Exchange Act, and will not take any action or file any document  (whether or not
permitted by Exchange Act or the rules  thereunder) to terminate or suspend such
registration  or to terminate or suspend its  reporting  and filing  obligations
under said Act.

      Section 6.5 Legends.  The Securities to be sold by the Company pursuant to
this Agreement shall be free of legends, except as set forth in Article VIII.

      Section 6.6 Corporate  Existence.   The  Company  will  take  all  steps
necessary to preserve and continue the corporate existence of the Company.

      Section 6.7 Notice of Certain Events Affecting  Registration.  The Company
will  immediately  notify each of the Investors and the Placement Agent upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable  Securities:  (i)
receipt  of any  request  for  additional  information  by the SEC or any  other
federal or state  governmental  authority  during the period of effectiveness of
the  Registration  Statement for amendments or  supplements to the  Registration
Statement  or  related  prospectus;  (ii) the  issuance  by the SEC or any other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness of the Registration Statement or the initiation of any proceedings
for  that  purpose;  (iii)  receipt  of any  notification  with  respect  to the
suspension of the  qualification  or exemption from  qualification of any of the
Registrable  Securities  for  sale  in any  jurisdiction  or the  initiation  or
threatening of any proceeding for such purpose;  (iv) the happening of any event
that  makes  any  statement  made  in  the  Registration  Statement  or  related
prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration Statement,  related prospectus or documents so that,
in the case of the  Registration  Statement,  it will  not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein not misleading,  and
that in the case of the  related  prospectus,  it will not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading;  and (v) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate.  The Company will promptly make available to the
Investors any such supplement or amendment to the related prospectus.

      Section 6.8  Consolidation;  Merger.  The  Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the  Investors  and the Placement  Agent such shares of
stock and/or securities as the Investors and the Placement Agent are entitled to
receive pursuant to this Agreement.

      Section 6.9 Issuance of Underlying Shares and Warrant Shares. The issuance
of the  Underlying  Shares and the  Warrant  Shares  pursuant to exercise of the
Warrants, and the conversion of the Preferred Stock, shall be made in accordance
with the provisions and  requirements  of Section 4(2) of the Securities Act, or
Regulation D and any applicable state securities law.
Section  6.10 Legal  Opinion.  The  Company's  independent  counsel  shall
deliver to the Investors upon execution of this Agreement, and upon the issuance
of the  Warrants  as set forth in Section  2.4 above,  an opinion in the form of
Exhibit E annexed  hereto (as  conformed  for the issuance of the  Warrants,  as
applicable).  The Company will obtain for the Investors and the Placement Agent,
at the  Company's  expense,  any  and  all  opinions  of  counsel  which  may be
reasonably  required in order to convert the Preferred Stock and/or exercise the
Warrants,  including,  but not limited to,  obtaining  for the Investors and the
Placement  Agent an opinion of counsel,  subject  only to receipt of a notice of
conversion (the "Notice of Conversion") in the form of Exhibit G, and/or subject
only to a receipt of a notice of  exercise in the form  annexed to the  Warrant,
directing the Transfer Agent to remove the legend from the certificate.

      Section 6.11 20% Rule  Limitation.  If required by The Nasdaq Stock Market
or  otherwise on the market or exchange on which the  Company's  Common Stock is
then listed, the Company shall call a meeting of its shareholders, to be held no
later than 60 calendar days after the  Subscription  Date,  seeking  shareholder
approval of the below market issuances of shares of Common Stock (and securities
convertible  into and  exercisable  for Common  Stock) to the  Investors and the
Placement  Agent  of 20% or  more  of the  number  of  shares  of  Common  Stock
outstanding  as of  Subscription  Date.  In the  event  that the  aforementioned
proposal is not so approved with such 60 calendar day period,  the Company shall
seek a waiver from The Nasdaq Stock Market (or such other Principal  Market) for
such below  market  issuances.  In the event the Company  does not receive  such
waiver  within  the  earlier  of ten  calendar  days  after  the  aforementioned
shareholders  meeting,  or 70 calendar  days after the  Subscription  Date,  the
Company  shall  either  delist the Common Stock from The Nasdaq Stock Market and
immediately  (within two Trading Days  thereafter)  list the Common Stock on the
OTC Bulletin  Board, or the Company agrees that it will pay to the Investors the
Redemption Price (as defined and pursuant to the redemption provisions contained
in the  Certificate  of  Designation,  with  payment  due as if such  date was a
Redemption Date) for that number of shares of Preferred Stock which would result
in the  Company  issuing,  in the  aggregate,  of 20%or more of the  outstanding
Common Stock as of the Subscription Date.

      Section 6.12  Restrictions on Future  Financings.  Except for offerings by
the Company of which all of the proceeds are used to redeem the Preferred  Stock
pursuant to the terms of the Certificate of Designation, the Company agrees that
it will not,  without the prior written  consent of all of the Investors,  which
consent shall not be unreasonably withheld, enter into any subsequent or further
offer  or  sale  of  Common  Stock,  or  any  securities  or  other  instruments
convertible into shares of Common Stock,  until the  Registration  Statement has
been effective for 60 calendar days.  This  restriction  shall not apply to: (a)
the issuance of securities  (other than for cash) in  connection  with a merger,
consolidation, sale of assets, or other disposition, (b) the exchange of Capital
Shares for assets,  stock, or joint venture interest,  (c) an offering of any of
the  Company's  securities at then current  market prices with no repricing,  no
reset provisions, no attached warrants, or no securities convertible into shares
of Common Stock, or (d) any employee benefit plan; provided,  however,  that any
action  contemplated  under  this  Section  is  subject  to the  condition  that
registration  rights,  if any, in connection  with such action shall not require
the filing by the Company of a registration statement of such shares prior to 60
calendar days after the Effective Date.
Section 6.13  Conversion of Preferred  Stock.  The Company will permit the
Investors  and the  Placement  Agent to  exercise  their  right to  convert  the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company as is set forth in the Certificate of Designation.

      Section 6.14  Restriction  on Future  Issuances of  Preferred  Stock.  The
Company agrees that except as provided for in this Agreement,  it will not issue
any additional share or shares of the Preferred Stock.

      Section 6.15  Increase in Authorized  Shares.  At such time as the Company
would be, if a notice of  conversion or exercise (as the case may be) were to be
delivered on such date,  precluded from (a) converting in full all of the shares
of Preferred Stock that remain  unconverted at such date (and paying any accrued
but unpaid  dividends  in respect  thereof  in shares of Common  Stock),  or (b)
honoring the exercise in full of the Warrants,  due to the  unavailability  of a
sufficient  number of shares of authorized  but unissued or  re-acquired  Common
Stock,  the Board of Directors of the Company  shall  promptly  (and in any case
within 60 calendar days from such date) hold a shareholders meeting in which the
shareholders would vote for authorization to amend the Company's  certificate of
incorporation to increase the number of shares of Common Stock which the Company
is  authorized  to issue to at least a number of shares  equal to the sum of (i)
all shares of Common Stock then outstanding, (ii) the number of shares of Common
Stock issuable on account of all outstanding  warrants,  options and convertible
securities  (other than the Preferred  Stock and the Warrants) and on account of
all shares reserved under any stock option,  stock purchase,  warrant or similar
plan,  (iii) 200% of the number of  Underlying  Shares as would then be issuable
upon a conversion in full of the then outstanding  shares of Preferred Stock and
as  payment  of all  future  dividends  thereon  in shares  of  Common  Stock in
accordance  with the terms of this Agreement and the Certificate of Designation,
and (iv)  such  number of  Warrant  Shares as would  then be  issuable  upon the
exercise  in full  of the  Warrants.  In  connection  therewith,  the  Board  of
Directors  shall (x) adopt proper  resolutions  authorizing  such increase,  (y)
recommend  to and  otherwise  use its best  efforts to promptly  and duly obtain
shareholder  approval to carry out such resolutions and (z) within five Business
Days of obtaining such shareholder authorization,  file an appropriate amendment
to the Company's certificate of incorporation to evidence such increase.

      Section 6.16 Notice of Breaches.  Each of the Company on the one hand, and
the Investors on the other, shall give prompt written notice to the other of any
breach  by it of any  representation,  covenant,  warranty  or  other  agreement
contained in this Agreement or any Exhibit annexed hereto, as well as any events
or occurrences  arising after the date hereof,  which would reasonably be likely
to cause any  representation,  covenant,  or warranty or other agreement of such
party,  as the case may be,  contained in this Agreement or any Exhibit  annexed
hereto,  to be  incorrect  or  breached as of such  Closing  Date.  However,  no
disclosure by either party  pursuant to this Section shall be deemed to cure any
breach of any  representation,  warranty or other  agreement  contained  in this
Agreement or any Exhibit annexed hereto.  Notwithstanding  the generality of the
foregoing,  the Company  shall  promptly  notify each  Investor of any notice or
claim  (written or oral) that it receives  from any lender of the Company to the
effect that the consummation of the transactions  contemplated by this Agreement
or any Exhibit annexed hereto,  violates or would violate any written  agreement
or  understanding  between  such lender and the Company,  and the Company  shall
promptly  furnish by facsimile to each Investor a copy of any written  statement
in support of or relating to such claim or notice.

      Section  6.17  Transfer of  Intellectual  Property  Rights.  Except in the
ordinary  course of the Company's  business  consistent with past practice or in
connection  with  the  sale of all or  substantially  all of the  assets  of the
Company,  the Company  shall not  transfer,  sell or  otherwise  dispose of, any
Intellectual  Property  Rights,  or allow the  Intellectual  Property  Rights to
become subject to any Liens, or fail to renew such Intellectual  Property Rights
(if renewable and would otherwise expire).

                                   ARTICLE VII

        Due Diligence Review; Non-Disclosure of Non-Public Information

      Section 7.1 Due Diligence  Review.  The Company shall make available for
inspection and review by the Investors,  advisors to and  representatives of the
Investors (who may or may not be affiliated with the Investors), any underwriter
participating in any disposition of the Registrable  Securities on behalf of the
Investors  pursuant  to  the  Registration  Statement,   any  such  registration
statement  or  amendment or  supplement  thereto or any blue sky,  NASD or other
filing,  all  financial and other  records,  all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be  reasonably  necessary  for the  purpose  of such  review,  and cause the
Company's  officers,  directors  and  employees  to supply all such  information
reasonably requested by any of the Investors or any such representative, advisor
or  underwriter  in  connection  with such  Registration  Statement  (including,
without limitation,  in response to all questions and other inquiries reasonably
made or  submitted  by any of them),  prior to and from  time to time  after the
filing and  effectiveness of the Registration  Statement for the sole purpose of
enabling the Investors and such  representatives,  advisors and underwriters and
their  respective  accountants  and attorneys to conduct initial and ongoing due
diligence  with  respect to the  Company and the  accuracy  of the  Registration
Statement.

      Section 7.2 Non-Disclosure of Non-Public Information

            (a) The Company  shall not disclose  non-public  information  to the
Investors,  advisors to, or  representatives  of, the Investors  unless prior to
disclosure of such information the Company  identifies such information as being
non-public  information  and  provides  each  Investor,  and  its  advisors  and
representatives  with the  opportunity  to  accept  or  refuse  to  accept  such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require each of the Investors advisors and
representatives  to enter into a  confidentiality  agreement in form  reasonably
satisfactory to the Company and the Investors.

            (b) Nothing herein shall require the Company to disclose  non-public
information  to any of the Investors or their advisors or  representatives,  and
the Company  represents that it does not disseminate  non-public  information to
any investors who purchase stock in the Company in a public  offering,  to money
managers or to securities  analysts,  provided,  however,  that  notwithstanding
anything  herein to the contrary,  the Company will,  as  hereinabove  provided,
immediately  notify the advisors and  representatives  of the Investors  and, if
any,  underwriters,  of any event or the existence of any circumstance  (without
any  obligation  to disclose the  specific  event or  circumstance)  of which it
becomes aware,  constituting non-public information (whether or not requested of
the Company specifically or generally during the course of due diligence by such
persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made, not misleading.  Nothing contained in this Section shall be construed
to mean that such  persons or entities  other than the  Investors  (without  the
written  consent of the Investors prior to disclosure of such  information)  may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from  notifying the Company of their opinion that based
on such due  diligence  by such  persons  or  entities,  that  the  Registration
Statement  contains an untrue  statement of a material  fact or omits a material
fact  required to be stated in the  Registration  Statement or necessary to make
the statements  contained  therein,  in light of the circumstances in which they
were made, not misleading.

                                  ARTICLE VIII

                                     Legends

            Section 8.1 Legends. The Investors agree to the imprinting,  so long
as is required by this Section,  of the following legend (or such  substantially
similar legend as is acceptable to the Investors and their counsel,  the parties
agreeing that any unacceptable legended Securities shall be replaced promptly by
and at the Company's cost) on the Securities:

      [FOR SHARES PREFERRED STOCK AND WARRANTS] NEITHER THESE SECURITIES NOR THE
   SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]  [EXERCISABLE]  HAVE
   BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
   COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
   THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
   ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD  EXCEPT  PURSUANT  TO AN  EFFECTIVE
   REGISTRATION  STATEMENT  UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
   EXEMPTION  FROM,  OR  IN A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION
   REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
   SECURITIES LAWS.

      [ONLY FOR  UNDERLYING  SHARES AND WARRANT  SHARES TO THE EXTENT THE RESALE
   THEREOF IS NOT COVERED BY AN EFFECTIVE  REGISTRATION STATEMENT AT THE TIME OF
   CONVERSION,  ISSUANCE OR EXERCISE] THE SHARES REPRESENTED BY THIS CERTIFICATE
   HAVE NOT BEEN REGISTERED  WITH THE SECURITIES AND EXCHANGE  COMMISSION OR THE
   SECURITIES  COMMISSION  OF ANY  STATE  IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES
   ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT  PURSUANT TO AN
   EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
   AVAILABLE   EXEMPTION   FROM,  OR  IN  A  TRANSACTION  NOT  SUBJECT  TO,  THE
   REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT  AND IN  ACCORDANCE  WITH
   APPLICABLE STATE SECURITIES LAWS.

      The  Underlying  Shares and/or Warrant Shares shall not contain the legend
set  forth  above or any  other  restrictive  legend  if the  conversion  of the
Preferred  Stock,  exercise of Warrants or other issuances of Underlying  Shares
and/or  Warrant  Shares,  as the  case  may  be,  occurs  at any  time  while  a
Registration  Statement is effective  under the Securities Act and in connection
with the resale of the shares of Common  Stock or, in the event  there is not an
effective  Registration  Statement at such time, if in the opinion of counsel to
the Company such legend is not required  under  applicable  requirements  of the
Securities Act (including judicial  interpretations and pronouncements issued by
the staff of the  Commission).  The  Company  agrees  that it will  provide  the
Investors,  upon  request,  with  a  certificate  or  certificates  representing
Underlying  Shares and/or Warrant Shares,  free from such legend at such time as
such  legend is no  longer  required  hereunder.  The  Company  may not make any
notation  on its  records  or give  instructions  to any  transfer  agent of the
Company which enlarge the restrictions of transfer set forth in this Section.

      Upon the  execution  and  delivery  hereof,  the Company is issuing to the
transfer  agent for its  Common  Stock  (and to any  substitute  or  replacement
transfer  agent for its Common Stock upon the Company's  appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto.  Such instructions shall be irrevocable by the Company from
and after the date  hereof or from and after the  issuance  thereof  to any such
substitute  or  replacement  transfer  agent,  as the  case  may be,  except  as
otherwise  expressly  provided in the Registration  Rights Agreement.  It is the
intent and purpose of such  instructions,  as provided  therein,  to require the
transfer  agent  for  the  Common  Stock  from  time to time  upon  transfer  of
Registrable  Securities  by  the  Investors  or the  Placement  Agent  to  issue
certificates  evidencing such  Registrable  Securities free of the Legend during
the  following  periods  and under the  following  circumstances  and  except as
provided below,  without  consultation by the transfer agent with the Company or
its  counsel  and without  the need for any  further  advice or  instruction  or
documentation to the transfer agent by or from the Company or its counsel or the
Investors:

            (a) at any time after the Effective  Date,  upon surrender of one or
more certificates evidencing the Warrants, Preferred Stock, Underlying Shares or
Warrant Shares that bear the aforementioned Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the  aforementioned
legend  to  replace  those  surrendered;  provided  that  (i)  the  Registration
Statement  shall then be effective;  (ii) the  Investor(s)  and/or the Placement
Agent  confirm  to the  transfer  agent that it has sold,  pledged or  otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona  fide  transaction  to a  third  party  that is not an  affiliate  of the
Company;  and  (iii) the  Investor(s)  and/or  Placement  Agent  confirm  to the
transfer agent that the  Investor(s)  and/or  Placement Agent have complied with
the prospectus delivery requirement.
(b) at any  time  upon  any  surrender  of one or more  certificates
evidencing Registrable  Securities,  that bear the aforementioned legend, to the
extent  accompanied by a notice requesting the issuance of new certificates free
of such legend to replace those surrendered and containing  representations that
(i) the  Investor(s)  and/or the Placement Agent is permitted to dispose of such
Registrable  Securities,  without  limitation  as to  amount  or  manner of sale
pursuant to Rule 144(k) under the Securities Act or (ii) the Investor(s)  and/or
Placement  Agent has sold,  pledged or otherwise  transferred or agreed to sell,
pledge or otherwise transfer such Registrable Securities, in a manner other than
pursuant to an effective registration  statement,  to a transferee who will upon
such transfer be entitled to freely tradeable securities. The Company shall have
counsel provide any and all opinions necessary for the sale under Rule 144.

      Any of the  notices  referred  to  above  in this  Section  may be sent by
facsimile to the Company's transfer agent.

      Section  8.2 No Other  Legend or Stock  Transfer  Restrictions.  No legend
other than the one  specified in this Article has been or shall be placed on the
share  certificates  representing the Common Stock, and no instructions or "stop
transfer   orders,"  so  called,   "stock  transfer   restrictions,"   or  other
restrictions  have been or shall be given to the Company's  transfer  agent with
respect thereto other than as expressly set forth in this Article.

      Section 8.3 Investor's Compliance. Nothing in this Article shall affect in
any way any of the Investors  obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.

                                   ARTICLE IX

                                  Choice of Law

      Section 9.1 Choice of Law;  Venue;  Jurisdiction.  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  Securities  Act,  without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive  jurisdiction  of the U.S.  District  Court  sitting  in the  Southern
District of the State of New York sitting in Manhattan  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 any other manner  permitted by law. Each party waives
its right to a trial by jury.
ARTICLE X

             Assignment; Entire Agreement, Amendment; Termination

      Section 10.1 Assignment.  Subject to Section 3.9the Investor's interest in
this Agreement and its ownership of Preferred Stock and Warrants may be assigned
or  transferred  at any time, in whole or in part, to any other person or entity
(including any affiliate of the  Investors)  who agrees to, and truthfully  can,
make the representations and warranties contained in Article III, and who agrees
to be bound by the  covenants  of Article V. The  provisions  of this  Agreement
shall inure to the benefit of, and be  enforceable  by, any transferee of any of
the shares of  Preferred  Stock  and/or  Warrants  purchased  or acquired by the
Investors hereunder with respect to the Common Stock held by such person.

      Section 10.2 Termination. This Agreement shall terminate upon the earliest
of (i) the date  that  all the  Registrable  Securities  have  been  sold by the
Investors  pursuant to the Registration  Statement;  (ii) the date the Investors
receive  an opinion  from  counsel to the  Company  that all of the  Registrable
Securities  may be sold  under  the  provisions  of  Rule  144,  without  volume
limitation; or (iii) three years after the Closing Date; provided, however, that
the provisions of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII herein,
and the registration  rights  provisions for the Registrable  Securities held by
the  Investors  and the  Placement  Agent set forth in this  Agreement,  and the
Registration Rights Agreement, shall survive the termination of this Agreement.

                                   ARTICLE XI

                                     Notices

      Section 11.1 Notices. All notices, demands, requests, consents, approvals,
and other  communications  required or permitted  hereunder  shall be in writing
and, unless otherwise  specified herein,  shall be (i) personally  served,  (ii)
deposited  in the mail,  registered  or  certified,  return  receipt  requested,
postage  prepaid,  (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other  address as such party shall have  specified
most recently by written notice. Any notice or other  communication  required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or  delivery  by  facsimile,   with  accurate  confirmation   generated  by  the
transmitting  facsimile  machine,  at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received),  or the first  Business Day following  such delivery (if delivered
other than on a Business Day during normal  business  hours where such notice is
to be received) or (b) on the second  Business Day following the date of mailing
by reputable courier service, fully prepaid,  addressed to such address, or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

      If to the Company:

                        Sims Communications, Inc.
                        18001 Cowan, Suite C & D
                        Irvine, CA 92614
                        Attention: President
                        Facsimile: (949) 261-0323
                        Telephone: (800) 241-1227
With a copy to:

                        Hart & Trinen, L.L.P.
                        1624 Washington Street
                        Denver, Colorado 80203
                        Attention: William Hart
                        Facsimile: (303) 839-0061
                        Telephone: (303) 839-5414

      If to the Investors, at the addresses listed on Schedule A.

      If to the Placement Agent, at the address listed on the first page of this
      Agreement.

      with a copy to:

                        Goldstein, Goldstein & Reis, LLP
                        65 Broadway, 10th Floor
                        New York, NY  10006
                        Attention: Scott H. Goldstein, Esq.
                        Telephone: (212) 809-4220
                        Facsimile: (212) 809-4228

      Either  party hereto may from time to time change its address or facsimile
number for notices under this Section 11.1 by giving at least ten calendar days'
prior written  notice of such changed  address or facsimile  number to the other
party hereto.

      Section 11.2  Indemnification.  The Company  agrees to indemnify  and hold
harmless each of the  Investors  and each officer,  director of the Investors or
person,  if any, who controls the Investors within the meaning of the Securities
Act against any losses, claims, damages or liabilities,  joint or several (which
shall, for all purposes of this Agreement,  include,  but not be limited to, all
costs of  defense  and  investigation  and all  attorneys'  fees),  to which the
Investors may become subject, under the Securities Act or otherwise,  insofar as
such losses,  claims,  damages or  liabilities  (or actions in respect  thereof)
arise out of or are based  upon the breach of any term of this  Agreement.  This
indemnity  agreement will be in addition to any liability  which the Company may
otherwise have.

      Each Investor agrees that it will indemnify and hold harmless the Company,
and each  officer,  director of the Company or person,  if any, who controls the
Company within the meaning of the Securities  Act,  against any losses,  claims,
damages  or  liabilities  (which  shall,  for all  purposes  of this  Agreement,
include,  but not be limited to, all costs of defense and  investigation and all
attorneys'  fees)  to  which  the  Company  or any  such  officer,  director  or
controlling  person may become  subject under the  Securities  Act or otherwise,
insofar as such losses  claims,  damages or  liabilities  (or actions in respect
thereof)  arise  out of or are  based  upon  the  breach  of any  term  of  this
Agreement.  This indemnity  agreement will be in addition to any liability which
the Investors or any subsequent assignee may otherwise have.

      Promptly  after  receipt by an  indemnified  party  under this  Section of
notice of the  commencement  of any action,  such  indemnified  party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section,  notify the  indemnifying  party of the commencement  thereof;  but the
omission so to notify the  indemnifying  party will not relieve the indemnifying
party from any liability  which it may have to any  indemnified  party otherwise
than as to the particular item as to which  indemnification is then being sought
solely pursuant to this Section.  In case any such action is brought against any
indemnified  party, and it notifies the  indemnifying  party of the commencement
thereof,  the indemnifying party will be entitled to participate in, and, to the
extent that it may wish,  jointly with any other  indemnifying  party  similarly
notified,  assume the defense thereof,  subject to the provisions  herein stated
and after notice from the indemnifying  party to such  indemnified  party of its
election so to assume the defense thereof,  the  indemnifying  party will not be
liable 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,  unless  the
indemnifying  party  shall not pursue the  action to its final  conclusion.  The
indemnified  party shall have the right to employ  separate  counsel in any such
action and to participate in the defense  thereof,  but the fees and expenses of
such  counsel  shall  not be at the  expense  of the  indemnifying  party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
one of the  Investors,  the fees and  expenses of such  counsel  shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically  authorized in writing by the indemnifying party, or (ii) the named
parties to any such action  (including any impleaded  parties)  include both the
Investors and the  indemnifying  party and the Investors shall have been advised
by such  counsel that there may be one or more legal  defenses  available to the
indemnifying  party  different from or in conflict with any legal defenses which
may be available to the  Investors (in which case the  indemnifying  party shall
not have the  right to  assume  the  defense  of such  action  on  behalf of the
Investors,  it being understood,  however, that the indemnifying party shall, in
connection  with any one such action or separate  but  substantially  similar or
related  actions  in the  same  jurisdiction  arising  out of the  same  general
allegations  or  circumstances,  be  liable  only  for the  reasonable  fees and
expenses of one separate firm of attorneys for the Investor(s), which firm shall
be  designated  in  writing by the  Investor(s)).  No  settlement  of any action
against an indemnified  party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.

      Section  11.3  Contribution.  In order to provide  for just and  equitable
contribution  under the Securities Act in any case in which (i) the  indemnified
party makes a claim for  indemnification  pursuant to Section 11.2 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding  the fact that the  express  provisions  of Section  11.2 hereof
provide  for  indemnification  in such  case,  or (ii)  contribution  under  the
Securities Act may be required on the part of any  indemnified  party,  then the
Company and the applicable  Investor shall  contribute to the aggregate  losses,
claims,  damages or liabilities  to which they may be subject (which shall,  for
all  purposes of this  Agreement,  include,  but not be limited to, all costs of
defense and  investigation  and all attorneys' fees), in either such case (after
contribution  from  others) on the basis of relative  fault as well as any other
relevant equitable considerations.  The amount paid or payable by an indemnified
party as a result of the losses,  claims,  damages or liabilities (or actions in
respect  thereof)  referred to above in Section  11.2 shall be deemed to include
any legal or other expenses  reasonably  incurred by such  indemnified  party in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to  contributions  from any person who was
not guilty of such fraudulent misrepresentation.

                                   ARTICLE XII

                                  Miscellaneous

      Section 12.1 Counterparts;  Facsimile;  Amendments.  This Agreement may be
executed  in multiple  counterparts,  each of which may be executed by less than
all of the parties and shall be deemed to be an original  instrument which shall
be enforceable  against the parties actually executing such counterparts and all
of which  together  shall  constitute  one and the same  instrument.  Except  as
otherwise  stated  herein,  in  lieu  of the  original  documents,  a  facsimile
transmission  or  copy of the  original  documents  shall  be as  effective  and
enforceable  as the  original.  This  Agreement may be amended only by a writing
executed  by the  Company  on the one hand,  and all of the  Investors,  and the
Placement Agent, on the other hand.

      Section 12.2 Entire Agreement. This Agreement, the Exhibits or Attachments
hereto,  which include,  but are not limited to the  Certificate of Designation,
the Warrant,  the Escrow Agreement,  and the Registration Rights Agreement,  set
forth the entire  agreement  and  understanding  of the parties  relating to the
subject matter hereof and supersedes all prior and  contemporaneous  agreements,
negotiations  and  understandings  between  the  parties,  both oral and written
relating to the subject matter hereof.  The terms and conditions of all Exhibits
and Attachments to this Agreement are incorporated  herein by this reference and
shall constitute part of this Agreement as is fully set forth herein.

      Section 12.3  Survival;  Severability.  The  representations,  warranties,
covenants  and  agreements  of the parties  hereto  shall  survive  each Closing
hereunder.  In the event  that any  provision  of this  Agreement  becomes or is
declared by a court of competent  jurisdiction to be illegal,  unenforceable  or
void,  this  Agreement  shall  continue  in full force and effect  without  said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.

      Section 12.4 Title and  Subtitles.  The titles and subtitles  used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.
Section 12.5 Reporting  Entity for the Common Stock.  The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg,  L.P. or any successor thereto.  The written mutual
consent of the  Investors  and the Company shall be required to employ any other
reporting entity.

      Section 12.6  Replacement  of  Certificates.  Upon (i) receipt of evidence
reasonably  satisfactory  to the  Company  of the loss,  theft,  destruction  or
mutilation  of  a  certificate   representing  the  Preferred  Stock,  Warrants,
Underlying  Shares or  Warrant  Shares,  and (ii) in the case of any such  loss,
theft  or  destruction  of  such  certificate,  upon  delivery  of an  indemnity
agreement or security reasonably  satisfactory in form and amount to the Company
or (iii) in the case of any such  mutilation,  on surrender and  cancellation of
such certificate,  the Company at its expense will execute and deliver,  in lieu
thereof, a new certificate of like tenor.

      Section 12.7 Fees and Expenses. Each of the parties shall pay its own fees
and expenses  (including the fees of any attorneys,  accountants,  appraisers or
others  engaged  by such  party)  in  connection  with  this  Agreement  and the
transactions  contemplated  hereby,  except  that the  Company  shall pay on the
Subscription Date (i) the sum of one percent of the Purchase Price, in cash, out
of escrow, to Goldstein,  Goldstein & Reis, LLP for legal,  administrative,  and
escrow fees, and (ii) to the Placement  Agent (A) the sum equal to three percent
of the Purchase Price payable in cash out of escrow,  (B) 60 shares of Preferred
Stock,  and (C) Warrants to purchase 50,000 Warrant Shares,  for Placement Agent
fees.

      Section 12.8  Noncircumvention.  The Company and the Investors  agree that
they shall not  circumvent  this  Agreement and the Company's  obligation to pay
fees to the Placement  Agent,  and the Company,  the Investors and the Placement
Agent agree that they will not  circumvent  the  provisions of this Agreement or
the Escrow Agreement and the Company's obligation for the payment of fees to the
Escrow Agent.

      Section 12.9  Publicity.  The Company and the Investors shall consult with
each other in issuing any press releases or otherwise  making public  statements
with respect to the  transactions  contemplated  hereby and no party shall issue
any such press release or otherwise make any such public  statement  without the
prior  written  consent  of  the  other  parties,  which  consent  shall  not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such  disclosure is required by law, in which such case the disclosing  party
shall  provide the other  parties  with prior  notice of such public  statement.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of the Investors  without the prior written consent of the Investors,  except to
the  extent  required  by law,  in which  case the  Company  shall  provide  the
Investors with prior written notice of such public disclosure.
[Remainder of page intentionally left blank]

                            [Signature page follows]
IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Series  C
Convertible   Preferred   Stock  Purchase   Agreement  to  be  executed  by  the
undersigned, thereunto duly authorized, as of the date first set forth above.

                                    SIMS COMMUNICATIONS, INC.

                                    By ____________________________
                                          Mark Bennett, President

                                    SETTONDOWN CAPITAL INTER-
                                    NATIONAL LTD., Placement Agent

                                    By_____________________________

                                    AUGUSTINE FUND, LP, Investor

                                    By_____________________________

                                    HSBC JAMES CAPEL CANADA, INC., Investor

                                    By_____________________________

                                    GILSTON CORPORATION, LTD., Investor

                                    By_____________________________
SCHEDULE A

INVESTORS:

1.    AUGUSTINE FUND, LP
      141 West Jackson Boulevard, Suite 2182
      Chicago, Illinois 60604
      Telephone: (312) 427-5457
      Facismile: (312) 427-5396
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250

2.    HSBC James Capel Canada, Inc.*
      105 Adelaide Street, Suite 1200
      Toronto, ON MSH 1P9
      Telephone: (416) 947-2700
      Facsimile: (416) 947-9450
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250
      * HSBC James Capel Canada, Inc. is not a party to the Escrow Agreement
      annexed hereto.

3.    Gilston Corporation, Ltd.
      Charlotte House, Charlotte Street
      P.O. Box N 9204
      Nassau, Bahamas
      Telephone: (242) 325-1033
      Facsimile: (242) 323-7918
      Initial Investment Amount: $250,000
      No. of Shares of Preferred Stock: 250
EXHIBIT B

                                ESCROW AGREEMENT

      THIS ESCROW  AGREEMENT is made as of the 7th day of December,  1998 by and
among SIMS COMMUNICATIONS, INC., with its principal office at 18001 Cowan, Suite
C & D, Irvine, CA 92614 (hereinafter the "Company"),  the "Investors"  specified
on Schedule A attached hereto  (excluding HSBC James Capel Canada,  Inc.),  with
their  respective  principal  offices at the  addresses set forth in Schedule A,
SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.,  (the  "Placement  Agent")  located at
Charlotte  House,  Charlotte  Street,  P.O. Box N. 9204,  Nassau,  Bahamas,  and
GOLDSTEIN,  GOLDSTEIN & REIS,  LLP, 65 Broadway,  10th Fl.,  New York,  NY 10006
(hereinafter the "Escrow Agent").

                             W I T N E S S E T H:

            WHEREAS,  the  Investors  will be  purchasing  Preferred  Stock  and
Warrants, from time to time from the Company at a purchase price as set forth in
the Series C Convertible  Preferred  Stock  Purchase  Agreement  (the  "Purchase
Agreement")  dated as of December 7, 1998, which will be issued as per the terms
contained herein and in the Agreement executed by the Company and Investors; and

            WHEREAS,   the  Company  will  be  issuing  Preferred  Stock,  and
Warrants to the Placement Agent pursuant to the Agreement; and

            WHEREAS, it is intended that the purchase of the Preferred Stock and
Warrants  be  consummated  in  accordance  with the  requirements  set  forth by
Regulation D promulgated under the Securities Act of 1933, as amended; and

            WHEREAS,  the Company has  requested  that the Escrow Agent hold the
Purchase  Price,  in escrow  until the Escrow  Agent has  received  the original
Preferred  Stock.  The  Escrow  Agent will then  immediately  wire  transfer  or
otherwise deliver at the Company's discretion immediately available funds to the
Company's  account  and  arrange  for  delivery  of the  Preferred  Stock to the
Investors,  and Preferred  Stock and Warrants to the Placement  Agent as per the
terms and conditions in the Agreement.
ESCROW AGREEMENT

      THIS ESCROW  AGREEMENT is made as of the 7th day of December,  1998 by and
among SIMS COMMUNICATIONS, INC., with its principal office at 18001 Cowan, Suite
C & D, Irvine, CA 92614 (hereinafter the "Company"),  the "Investors"  specified
on Schedule A attached  hereto(excluding  HSBC James Capel Canada,  Inc.),  with
their  respective  principal  offices at the  addresses set forth in Schedule A,
SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.,  (the  "Placement  Agent")  located at
Charlotte  House,  Charlotte  Street,  P.O. Box N. 9204,  Nassau,  Bahamas,  and
GOLDSTEIN,  GOLDSTEIN & REIS,  LLP, 65 Broadway,  10th Fl.,  New York,  NY 10006
(hereinafter the "Escrow Agent").

                             W I T N E S S E T H:

            WHEREAS,  the  Investors  will be  purchasing  Preferred  Stock  and
Warrants, from time to time from the Company at a purchase price as set forth in
the Series C Convertible  Preferred  Stock  Purchase  Agreement  (the  "Purchase
Agreement")  dated as of December 7, 1998, which will be issued as per the terms
contained herein and in the Agreement executed by the Company and Investors; and

            WHEREAS,   the  Company  will  be  issuing  Preferred  Stock,  and
Warrants to the Placement Agent pursuant to the Agreement; and

            WHEREAS, it is intended that the purchase of the Preferred Stock and
Warrants  be  consummated  in  accordance  with the  requirements  set  forth by
Regulation D promulgated under the Securities Act of 1933, as amended; and

            WHEREAS,  the Company has  requested  that the Escrow Agent hold the
Purchase  Price,  in escrow  until the Escrow  Agent has  received  the original
Preferred  Stock.  The  Escrow  Agent will then  immediately  wire  transfer  or
otherwise deliver at the Company's discretion immediately available funds to the
Company's  account  and  arrange  for  delivery  of the  Preferred  Stock to the
Investors,  and Preferred  Stock and Warrants to the Placement  Agent as per the
terms and conditions in the Agreement.
NOW,  THEREFORE,  in  consideration  of  the  covenants  and  mutual
promises contained herein and other good and valuable consideration, the receipt
and legal  sufficiency  of which are hereby  acknowledged  and  intending  to be
legally bound hereby, the parties agree as follows:

                                    ARTICLE 1

                     TERMS OF THE ESCROW FOR THE SECURITIES

            1.1 The parties hereby agree to establish an escrow account with the
Escrow  Agent  whereby the Escrow Agent shall hold the funds for the purchase of
the Preferred Stock.

            1.2 Upon  Escrow  Agent's  receipt  of the  Purchase  Price into its
attorney  trustee  account,  it  shall  notify  the  Company,  or the  Company's
designated  attorney or agent,  of the amount of funds it has received  into its
account.

            1.3 The Company,  upon receipt of said notice and  acceptance of the
Agreement by all parties,  as evidenced by the  Company's  and the Investors and
Placement  Agent's  execution  thereof,  shall  deliver to the Escrow  Agent the
Preferred  Stock issued to the Investors,  and the Preferred  Stock and Warrants
issued to the Placement  Agent. The Escrow Agent shall then communicate with the
Company to confirm the validity of such issuances.

            1.4 Once Escrow  Agent  confirms the validity of the issuance of the
Preferred  Stock as set forth in Section  1.3  above,  the  Escrow  Agent  shall
immediately  wire that  amount of funds  necessary  to  purchase  such shares of
Preferred Stock per the written  instructions  of the Company.  The Company will
furnish the Escrow  Agent with a "Net  Letter"  directing  payment of  Placement
Agent fees,  and  administrative,  legal and escrow fees as per the terms of the
Purchase  Agreement,  such fees are to be  remitted to in  accordance  with wire
instructions  that will be sent to Escrow Agent from the  Company,  with the net
balance  payable to the  Company.  Once the funds (as set forth above) have been
received per the Company's instructions,  the Escrow Agent shall then arrange to
have the Preferred  Stock and Warrants  delivered as per  instructions  from the
Investors and the Placement Agent.

                                    ARTICLE 2

                                  MISCELLANEOUS

            2.1 No waiver or any  breach of any  covenant  or  provision  herein
contained  shall be  deemed a  waiver  of any  preceding  or  succeeding  breach
thereof, or of any other covenant or provision herein contained. No extension of
time for  performance  of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2 All  notices  or  other  communications  required  or  permitted
hereunder  shall be in  writing,  and shall be sent by fax,  overnight  courier,
registered or certified mail,  postage prepaid,  return receipt  requested,  and
shall be deemed received upon receipt thereof, as follows:

            (a)   Sims Communications, Inc.
                  18001 Cowan, Suite C & D
                  Irvine, CA 92614
                  Attention: President
                  Facsimile: (949) 261-0323
                  Telephone: (800) 241-1227

                  With a copy to:

                  Hart & Trinen, L.L.P.
                  1624 Washington Street
                  Denver, Colorado 80203
                  Attention: William Hart
                  Facsimile: (303) 839-0061
                  Telephone: (303) 839-5414

            (b) If to the  Investors,  at the  addresses set forth on Schedule A
hereto.

            (c)   Settondown Capital International Ltd.
                  Charlotte House, Charlotte Street
                  P.O. Box N. 9204
                  Nassau, Bahamas
                  Attention: Anthony L. M. Inder Riden
                  Telephone: (242) 325-1033
                  Facsimile: (242) 323-7918

            (d)   Goldstein, Goldstein & Reis, LLP
                  65 Broadway, 10th Fl.
                  New York, NY  10006
                  Attn:  Scott H. Goldstein, Esq.
                  Telephone: (212) 809-4220
                  Facsimile: (212) 809-4228

      or to such  other  person at such  other  place as shall  designated  in
writing;

            2.3 This  Agreement  shall be  binding  upon and shall  inure to the
benefit of the permitted successors and assigns of the parties hereto.
2.4 This  Agreement  is the final  expression  of, and  contains the
entire Agreement between,  the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto.

            2.5 Whenever required by the context of this Agreement, the singular
shall  include  the  plural and  masculine  shall  include  the  feminine.  This
Agreement  shall  not be  construed  as if it had  been  prepared  by one of the
parties,  but rather as if both parties had prepared the same.  Unless otherwise
indicated, all references to Articles are to this Agreement.

            2.6 The  Company  acknowledges  and  confirms  that it is not  being
represented in a legal  capacity by Goldstein,  Goldstein & Reis, LLP and it has
had the  opportunity to consult with its own legal advisors prior to the signing
of this Agreement.

            2.7 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  exclusive  jurisdiction  of the U.S.  District  Court
sitting in the Southern District 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 any other manner  permitted by law. Each party waives
its right to a trial by jury.

            2.8 This  Agreement  may be altered or amended only with the consent
of all of the parties  hereto.  Should the Company,  any of the Investors or the
Placement  Agent  attempt to change this  Agreement  in a manner  which,  in the
Escrow Agent's discretion,  shall be undesirable, the Escrow Agent may resign as
Escrow Agent by notifying the Company and the Investors in writing. The Company,
the  Investors  and the  Placement  agent may remove the Escrow  Agent as Escrow
Agent  in  writing  signed  by  each of the  foregoing,  which  writing  must be
delivered  to the Escrow  Agent via  reputable  overnight  courier  and shall be
effective  upon receipt by the Escrow Agent.  In the case of the Escrow  Agent's
resignation or removal  pursuant to the foregoing,  its only duty, until receipt
of notice  from the Company  and the  Investors  or their agent that a successor
escrow agent shall have been appointed, shall be to hold and preserve the funds.
Upon  receipt  by the  Escrow  Agent of said  notice  from the  Company  and the
Investors  of the  appointment  of a  successor  escrow  agent,  the  name  of a
successor escrow account and a direction to transfer the funds, the Escrow Agent
shall  promptly  thereafter  transfer  all of the funds  held in escrow  and all
Securities  and/or documents to said successor escrow agent.  Immediately  after
said transfer, the Escrow Agent shall furnish the Company and the Investors with
proof of such transfer. The Escrow Agent is authorized to disregard any notices,
requests,  instructions  or  demands  received  by it from  the  Company  or the
Investors  after notice of resignation or removal shall have been given,  unless
the same shall be the  aforementioned  notice from the Company and the Investors
to  transfer  the funds to a  successor  escrow  agent or to return  same to the
respective parties.

            2.9 The Escrow  Agent  shall be  reimbursed  by the  Company and the
Investors for any reasonable  expenses incurred in the event there is a conflict
between  the  parties and the Escrow  Agent  shall deem it  necessary  to retain
counsel.

            2.10 The Escrow  Agent  shall not be liable for any action  taken or
omitted by it in good faith in accordance  with the advice of the Escrow Agent's
counsel;  and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.

            2.11 The  Company  and the  Investors  warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:

                  (i)   there is no  security  interest in the  Securities  or
                  any part thereof;

                  (ii) no financing  statement under the Uniform Commercial Code
                  is on file in any jurisdiction claiming a security interest or
                  in  describing   (whether   specifically   or  generally)  the
                  Securities or any part thereof; and

                  (iii) the Escrow  Agent  shall have no  responsibility  at any
                  time to ascertain  whether or not any security interest exists
                  in the Securities or any part thereof or to file any financing
                  statement  under the Uniform  Commercial  Code with respect to
                  the Securities or any part thereof.

            2.12 The  Escrow  Agent  in its  capacity  as such has no  liability
hereunder to either party other than to hold the funds and the Securities and to
deliver them under the terms  hereof.  Each party hereto agrees to indemnify and
hold  harmless the Escrow Agent in its capacity as such from and with respect to
any  suits,  claims,  actions  or  liabilities  arising  in any  way out of this
transaction including the obligation to defend any legal action brought which in
any way arises out of or is related to this Escrow.

                   [Remainder of page intentionally blank]

                            [Signature page follows]
IN WITNESS WHEREOF, the parties hereto have cause this Escrow Agreement to
be executed as of the date first written on the first page of this Agreement.

SIMS COMMUNICATIONS, INC.

By ____________________________
      Mark Bennett, President

                                      SETTONDOWN CAPITAL INTER-
                                      NATIONAL LTD., Placement Agent

                                    By_____________________________
            
                                    GOLDSTEIN, GOLDSTEIN & REIS, LLP,
                                    Escrow Agent

                                    By______________________________
                                         Scott H. Goldstein

                                    AUGUSTINE FUND, LP, Investor

                                    By_____________________________

                                    GILSTON CORPORATION, LTD., Investor

                                    By_____________________________
EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT

            THIS REGISTRATION  RIGHTS AGREEMENT,  dated the 7th day of December,
1998,  between the entities listed on Schedule A attached hereto (referred to as
a the  "Investors"),  SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.  (the  "Placement
Agent",  and together with the Investors is also hereinafter  referred to as the
"Holder" or "Holders") located at Charlotte House, Charlotte Street, P.O. Box N.
9204, Nassau,  Bahamas, a corporation  organized under the laws of Bahamas,  and
SIMS  COMMUNICATIONS,  INC., a  corporation  incorporated  under the laws of the
State of Delaware,  and having its  principle  place of business at 18001 Cowan,
Suite C & D, Irvine, CA 92614 (the "Company").

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to the Series
C Convertible  Preferred  Stock  Purchase  Agreement  dated the date hereof (the
"Purchase  Agreement"),  shares of  Preferred  Stock and  Warrants  (hereinafter
collectively  referred to as the  "Securities" of the Company);  All capitalized
terms not  hereinafter  defined shall have that meaning  assigned to them in the
Purchase Agreement; and

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement,  the Company shall issue Securities to the Placement Agent, in return
for services rendered,  from time to time as provided in the Purchase Agreement;
and

            WHEREAS,   the   Company   desires  to  grant  to  the  Holders  the
registration rights set forth herein with respect to the securities set forth in
the Purchase Agreement.

            NOW, THEREFORE, the parties hereto mutually agree as follows:

            Section  1.  Registrable   Securities.   As  used  herein  the  term
"Registrable  Security" means the Underlying  Shares, the Additional Shares, and
the Warrant  Shares;  provided,  however,  that with  respect to any  particular
Registrable  Security,  such security  shall cease to be a Registrable  Security
when, as of the date of  determination,  (i) it has been effectively  registered
under the  Securities  Act of 1933,  as amended (the "1933 Act") and disposed of
pursuant thereto, (ii) registration under the 1933 Act is no longer required for
the immediate public distribution of such security as a result of the provisions
of Rule 144  promulgated  under  the 1933  Act,  or  (iii) it has  ceased  to be
outstanding.  The term  "Registrable  Securities"  means any  and/or  all of the
securities falling within the foregoing definition of a Registrable Security. In
the event of any  merger,  reorganization,  consolidation,  recapitalization  or
other change in corporate  structure affecting the Common Stock, such adjustment
shall be made in the  definition of  Registrable  Security as is  appropriate in
order to prevent any dilution or enlargement  of the rights granted  pursuant to
this Section.
REGISTRATION RIGHTS AGREEMENT

            THIS REGISTRATION  RIGHTS AGREEMENT,  dated the 7th day of December,
1998,  between the entities listed on Schedule A attached hereto (referred to as
a the  "Investors"),  SETTONDOWN  CAPITAL  INTERNATIONAL  LTD.  (the  "Placement
Agent",  and together with the Investors is also hereinafter  referred to as the
"Holder" or "Holders") located at Charlotte House, Charlotte Street, P.O. Box N.
9204, Nassau,  Bahamas, a corporation  organized under the laws of Bahamas,  and
SIMS  COMMUNICATIONS,  INC., a  corporation  incorporated  under the laws of the
State of Delaware,  and having its  principle  place of business at 18001 Cowan,
Suite C & D, Irvine, CA 92614 (the "Company").

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to the Series
C Convertible  Preferred  Stock  Purchase  Agreement  dated the date hereof (the
"Purchase  Agreement"),  shares of  Preferred  Stock and  Warrants  (hereinafter
collectively  referred to as the  "Securities" of the Company);  All capitalized
terms not  hereinafter  defined shall have that meaning  assigned to them in the
Purchase Agreement; and

            WHEREAS,  simultaneously  with the  execution  and  delivery of this
Agreement,  the Company shall issue Securities to the Placement Agent, in return
for services rendered,  from time to time as provided in the Purchase Agreement;
and

            WHEREAS,   the   Company   desires  to  grant  to  the  Holders  the
registration rights set forth herein with respect to the securities set forth in
the Purchase Agreement.

            NOW, THEREFORE, the parties hereto mutually agree as follows:

            Section  1.  Registrable   Securities.   As  used  herein  the  term
"Registrable  Security" means the Underlying  Shares, the Additional Shares, and
the Warrant  Shares;  provided,  however,  that with  respect to any  particular
Registrable  Security,  such security  shall cease to be a Registrable  Security
when, as of the date of  determination,  (i) it has been effectively  registered
under the  Securities  Act of 1933,  as amended (the "1933 Act") and disposed of
pursuant thereto, (ii) registration under the 1933 Act is no longer required for
the immediate public distribution of such security as a result of the provisions
of Rule 144  promulgated  under  the 1933  Act,  or  (iii) it has  ceased  to be
outstanding.  The term  "Registrable  Securities"  means any  and/or  all of the
securities falling within the foregoing definition of a Registrable Security. In
the event of any  merger,  reorganization,  consolidation,  recapitalization  or
other change in corporate  structure affecting the Common Stock, such adjustment
shall be made in the  definition of  Registrable  Security as is  appropriate in
order to prevent any dilution or enlargement  of the rights granted  pursuant to
this Section.
Section 2.  Restrictions  on Transfer.  The Holders  acknowledge and
understand  that prior to the  registration  of the  Registrable  Securities  as
provided herein,  the Registrable  Securities and the Securities are "restricted
securities"  as  defined  in Rule 144  promulgated  under the Act.  The  Holders
understand that no disposition or transfer of the Registrable  Securities or the
Securities  may be made by the  Holders  in the  absence  of (i) an  opinion  of
counsel to the Holders that such transfer may be made without registration under
the 1933 Act or (ii) such registration.

            Section 3.  Registration Rights.

                  (a) The Company  agrees that it will prepare and file with the
Securities and Exchange  Commission  ("SEC"),  within 60 calendar days after the
Closing  Date, a  registration  statement  (on Form SB-2,  or other  appropriate
registration  statement) under the 1933 Act (the "Registration  Statement"),  at
the sole expense of the Company (except as provided in Section 3(c) hereof),  in
respect  of all  holders  of  Registrable  Securities,  so as to permit a public
offering and sale of the Registrable Securities under the Act. The Company shall
use its best efforts to cause the  Registration  Statement  to become  effective
within 90 calendar  days from the Closing  Date.  The number of shares of Common
Stock  designated in the  Registration  Statement to be registered  shall be (i)
200% of the number of Underlying  Shares that would be required if the Preferred
Stock  (including  such shares of the  Placement  Agent) were  converted  on the
Trading Day immediately preceding the filing of the Registration Statement, plus
(ii)  100% of the  number  of  Warrant  Shares  (including  such  shares  of the
Placement Agent) issuable  assuming all of the Warrants had been issued pursuant
to the Purchase Agreement.

                  (b) The Company will maintain the Registration  Statement,  or
post-effective  amendment  filed under this Section 3 hereof  current  under the
1933  Act  until  the  earlier  of (i)  the  date  that  all of the  Registrable
Securities  have been sold pursuant to the  applicable  Registration  Statement,
(ii) the date the  holders  thereof  receive  an  opinion  of  counsel  that the
Registrable  Securities  may be sold under the  provisions  of Rule 144 or (iii)
five years after the Subscription Date for the Registration Statement.

                  (c) All fees,  disbursements  and  out-of-pocket  expenses and
costs incurred by the Company in connection  with the  preparation and filing of
the  Registration  Statement  under  subparagraph  3(a)  and in  complying  with
applicable  securities and blue sky laws  (including,  without  limitation,  all
attorneys' fees) shall be borne by the Company. The Holders shall bear the cost,
pro rata, of underwriting  discounts and commissions,  if any, applicable to the
Registrable  Securities  being  registered  and the  fees  and  expenses  of its
counsel. The Company shall qualify any of the securities for sale in such states
as such Holder reasonably  designates and shall furnish  indemnification  in the
manner provided in Section 6 hereof.  However, the Company shall not be required
to  qualify  in any state  which  will  require  an escrow or other  restriction
relating  to the Company  and/or the  sellers.  The Company at its expense  will
supply the Holders with copies of the Registration  Statement and the prospectus
or offering  circular  included  therein  and other  related  documents  in such
quantities as may be reasonably requested by the Holders.
(d) The Company  shall not be  required  by this  Section 3 to
include a Holder's Registrable Securities in any Registration Statement which is
to be filed if, in the  opinion of counsel  for both the Holder and the  Company
(or,  should they not agree,  in the opinion of another  counsel  experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed  offering or other transfer as to which such  registration is requested
is exempt from applicable  federal and state securities laws and would result in
all purchasers or transferees  obtaining  securities  which are not  "restricted
securities", as defined in Rule 144 under the 1933 Act.

                  (e) In the event the Registration Statement to be filed by the
Company  pursuant  to Section  3(a) above is not filed with the SEC on or before
the 60th calendar day after the Closing Date and/or the  Registration  Statement
is not declared  effective by the SEC within 120 calendar  days from the Closing
Date,  then the Company  will pay the Holders (pro rated on a daily  basis),  as
liquidated  damages for such  failure  and not as a penalty,  two percent of the
purchase  price of the then  outstanding  Securities  for every 30 calendar  day
period  until  the  Registration   Statement  has  been  filed  and/or  declared
effective.  Such payment of the liquidated  damages shall be made to the Holders
in cash,  immediately upon demand,  provided,  however, that the payment of such
liquidated  damages  shall not  relieve  the  Company  from its  obligations  to
register the Underlying  Shares and Warrant Shares pursuant to this Section.  If
the  Company  does not remit the damages to the Holder as set forth  above,  the
Company will pay the Holders reasonable costs of collection, including attorneys
fees, in addition to the liquidated damages.  The registration of the Securities
pursuant to this  provision  shall not affect or limit  Holder's other rights or
remedies as set forth in this Agreement.

                  (f) No provision  contained  herein shall preclude the Company
from selling  securities  pursuant to any registration  statement in which it is
required to include Registrable Securities pursuant to this Section 3.

                  (g) The Company agrees that it shall declare the  Registration
Statement  effective  within three Business Days after being informed by the SEC
that it may do so.  The  Company  also  agrees  that  it  shall  respond  to any
questions  and/or  comments  from  the  SEC  which  relate  to the  Registration
Statement within ten Business Days of receipt of such question or comment.

            Section  4.  Cooperation  with  Company.  Each of the  Holders  will
cooperate  with the Company in all respects in connection  with this  Agreement,
including timely supplying all information  reasonably  requested by the Company
and executing and  returning  all documents  reasonably  requested in connection
with the registration and sale of the Registrable Securities.
Section 5. Registration  Procedures.  If and whenever the Company is
required by any of the provisions of this  Agreement to effect the  registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:

                  (a)  prepare  and  file  with  the  SEC  such  amendments  and
supplements to the registration statements and the prospectus used in connection
therewith as may be necessary to keep such registration  statement effective and
to  comply  with the  provisions  of the Act with  respect  to the sale or other
disposition of all securities  covered by such registration  statement  whenever
the Holder of such securities  shall desire to sell or otherwise  dispose of the
same (including  prospectus  supplements with respect to the sales of securities
from time to time in connection with a registration  statement  pursuant to Rule
415 promulgated under the Act);

                  (b) furnish to each Holder such numbers of copies of a summary
prospectus  or other  prospectus,  including  a  preliminary  prospectus  or any
amendment or supplement to any prospectus,  in conformity with the  requirements
of the Act, and such other documents,  as such Holder may reasonably  request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;

                  (c)  register  and  qualify  the  securities  covered  by  the
Registration  Statement  under  such other  securities  or blue sky laws of such
jurisdictions as the Holders shall reasonably request,  and do any and all other
acts and things  which may be  necessary  or  advisable to enable each Holder to
consummate  the public sale or other  disposition  in such  jurisdiction  of the
securities owned by such Holder,  except that the Company shall not for any such
purpose be required to qualify to do  business as a foreign  corporation  in any
jurisdiction  wherein it is not so  qualified  or to file  therein  any  general
consent to service of process;

                  (d) list such  securities on the NASDAQ Small Cap Stock Market
or other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such exchange or NASDAQ;

                  (e)  enter  into  and   perform  its   obligations   under  an
underwriting  agreement,  if the offering is an underwritten  offering, in usual
and  customary  form,  with the managing  underwriter  or  underwriters  of such
underwritten offering;

                  (f) notify each Holder of  Registrable  Securities  covered by
the Registration  Statement any time when a prospectus  relating thereto covered
by the Registration  Statement is required to be delivered under the Act, of the
happening  of any  event of  which it has  knowledge  as a result  of which  the
prospectus included in the Registration  Statement,  as then in effect, includes
an  untrue  statement  of a  material  fact or omits to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in the light of the circumstances then existing.
Section  6.  Information  by  Holder.  Each  Holder  of  Registrable
Securities  included in any registration  statement shall furnish to the Company
such  information  regarding such Holder and the  distribution  proposed by such
Holder as the  Company  may  request  in  writing  and as shall be  required  in
connection with any  registration,  qualification  or compliance  referred to in
this Section.

            Section 7.  Assignment.  The rights  granted the Holders  under this
Agreement  shall not be assigned  without the  written  consent of the  Company,
which consent shall not be unreasonably withheld. This Agreement is binding upon
and inures to the  benefit of the  parties  hereto and their  respective  heirs,
successors and permitted assigns.

            Section 8.  Termination of Registration  Rights.  The rights granted
pursuant to this  Agreement  shall  terminate as to each Investor (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:

                  (a)   all  such   Holder's   securities   subject   to  this
Agreement have been registered;

                  (b) all of such Holder's  securities subject to this Agreement
may be sold without such  registration  pursuant to Rule 144  promulgated by the
SEC pursuant to the Securities Act;

                  (c) all of such Holder's  securities subject to this Agreement
can be sold pursuant to Rule 144(k) without volume limitation; or

                  (d)            five   years   from  the   issuance   of  the
                     Registrable Securities.

            Section 9.  Indemnification.

                  (a) In the event of the filing of any  Registration  Statement
with respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold  harmless the Holders and each person,  if any, who
controls the Holders  within the meaning of the  Securities  Act  ("Distributing
Holders") against any losses, claims,  damages or liabilities,  joint or several
(which shall,  for all purposes of this Agreement,  include,  but not be limited
to, all costs of defense and  investigation  and all attorneys'  fees), to which
the  Distributing  Holders  may  become  subject,  under the  Securities  Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement  of any  material  fact  contained  in any  such  Registration
Statement or any related  preliminary  prospectus,  final  prospectus,  offering
circular,  notification or amendment or supplement  thereto,  or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading;  provided,  however, that the Company will not be liable in any such
case to the extent that any such loss, claim,  damage or liability arises out of
or is based upon an untrue  statement or alleged untrue statement or omission or
alleged omission made in such Registration  Statement,  preliminary  prospectus,
final  prospectus,  offering  circular,  notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information  furnished
to  the  Company  by  the  Distributing  Holders,  specifically  for  use in the
preparation  thereof.  This  indemnity  agreement  will  be in  addition  to any
liability which the Company may otherwise have.

                  (b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer,  director of the Company or person,
if any,  who  controls  the Company  within the meaning of the  Securities  Act,
against  any  losses,  claims,  damages or  liabilities  (which  shall,  for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and  investigation  and all  attorneys'  fees) to which the  Company or any such
officer,  director or controlling person may become subject under the Securities
Act or otherwise,  insofar as such losses  claims,  damages or  liabilities  (or
actions in respect thereof,  arise out of or are based upon any untrue statement
or alleged  untrue  statement of any material fact  contained in a  Registration
Statement,  requested by such Distributing  Holder,  or any related  preliminary
prospectus,  final prospectus,  offering circular,  notification or amendment or
supplement  thereto,  or arise  out of or are  based  upon the  omission  or the
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  but in each case
only to the extent that such untrue  statement  or alleged  untrue  statement or
omission  or  alleged  omission  was  made  in  such   Registration   Statement,
preliminary  prospectus,  final prospectus,  offering circular,  notification or
amendment  or  supplement  thereto in reliance  upon,  and in  conformity  with,
written  information  furnished  to the  Company  by such  Distributing  Holder,
specifically for use in the preparation  thereof.  This indemnity agreement will
be in addition to any  liability  which the  Distributing  Holders may otherwise
have.

                  (c) Promptly after receipt by an indemnified  party under this
Section of notice of the  commencement  of any action,  such  indemnified  party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section,  notify the indemnifying party of the commencement  thereof;
but the  omission  so to notify  the  indemnifying  party will not  relieve  the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the  particular  item as to which  indemnification  is then
being sought solely pursuant to this Section. In case any such action is brought
against any indemnified  party,  and it notifies the  indemnifying  party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish,  jointly with any other  indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof,  the indemnifying  party will not
be liable 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,  unless  the
indemnifying  party  shall not pursue the  action to its final  conclusion.  The
indemnified  party shall have the right to employ  separate  counsel in any such
action and to participate in the defense  thereof,  but the fees and expenses of
such  counsel  shall  not be at the  expense  of the  indemnifying  party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing  Holder,  the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically  authorized in writing by the indemnifying party, or (ii) the named
parties to any such action  (including any impleaded  parties)  include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such  counsel that there may be one or more legal  defenses
available to the indemnifying party different from or in conflict with any legal
defenses  which may be available to the  Distributing  Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing  Holder,  it being understood,  however,  that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which  firm shall be  designated  in writing  by the  Distributing  Holder).  No
settlement of any action against an indemnified  party shall be made without the
prior  written  consent of the  indemnified  party,  which  consent shall not be
unreasonably withheld.

            Section 10. Contribution. In order to provide for just and equitable
contribution  under the Securities Act in any case in which (i) the Distributing
Holder  makes a claim for  indemnification  pursuant  to Section 9 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for  indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages  or  liabilities  to which  they may be subject  (which  shall,  for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and  investigation  and  all  attorneys'  fees),  in  either  such  case  (after
contribution  from  others) on the basis of relative  fault as well as any other
relevant  equitable  considerations.  The relative  fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged  omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing  Holder,  on the other  hand,  and the  parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or  omission.  The Company and the  Distributing  Holder agree that it
would not be just and  equitable if  contribution  pursuant to this Section were
determined by pro rata  allocation  or by any other method of  allocation  which
does  not take  account  of the  equitable  considerations  referred  to in this
Section.  The amount paid or payable by an indemnified  party as a result of the
losses,  claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other  expenses
reasonably  incurred by such indemnified party in connection with  investigating
or  defending  any  such  action  or  claim.  No  person  guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.
Section 11.  Notices.  Any notice  pursuant to this Agreement by the
Company  or by the Holder  shall be in writing  and shall be deemed to have been
duly given if  delivered  by (i) hand,  (ii) by  facsimile  and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:

            (a)   If to the Company:

                              Sims Communications, Inc.
                              18001 Cowan, Suite C & D
                              Irvine, CA 92614
                              Attention: President
                              Facsimile: (949) 261-0323
                              Telephone: (800) 241-1227

                  With a copy to:

                             Hart & Trinen, L.L.P.
                             1624 Washington Street
                             Denver, Colorado 80203
                             Attention: William Hart
                             Facsimile: (303) 839-0061
                             Telephone: (303) 839-5414

            (b) If to the Placement Agent:

                              Settondown Capital International Ltd.
                              Charlotte House, Charlotte Street
                              P.O. Box N. 9204
                              Nassau, Bahamas
                              Attention: Anthony L. M. Inder Riden
                              Telephone: (242) 325-1033
                              Facsimile: (242) 323-7918

            (c) If to the  Investors,  to their  address set forth on Schedule A
annexed to the Purchase Agreement.

      Notices shall be deemed given at the time they are delivered personally or
five  calendar  days after they are  mailed in the  manner set forth  above.  If
notice is delivered  by facsimile to the Company and followed by mail,  delivery
shall be deemed given two calendar days after such facsimile is sent.

            Section  12.  Counterparts.  This  Agreement  may be  executed  in
counterparts,  each of which  shall be  deemed an  original,  but all of which
together shall constitute one and the same instrument.
Section  13.  Headings.  The  headings in this  Agreement  are for
reference  purposes  only and  shall  not  affect  in any way the  meaning  or
interpretation of this Agreement.

            Section 14. Choice of Law; Venue; Jurisdiction.  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 Securities Act, without
reference to principles of conflicts of law. Each of the parties consents to the
exclusive  jurisdiction  of the U.S.  District  Court  sitting  in the  Southern
District of the State of New York sitting in Manhattan  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 any other manner  permitted by law. Each party waives
its right to a trial by jury.

            Section 15.  Severability.  If any provision of this Agreement shall
for  any  reason  be  held  invalid  or   unenforceable,   such   invalidity  or
unenforceability  shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable  provision had never been
contained herein.
IN WITNESS  WHEREOF,  the parties  hereto  have  caused this  Registration
Rights Agreement to be duly executed, on the day and year first above written.

Attest:                            SIMS COMMUNICATIONS, INC.

By:_________________________       By:____________________________
    Name:                              Name: Mark Bennett
    Title:                             Title: President

                                     SETTONDOWN CAPITAL INTER-
                                      NATIONAL LTD., Placement Agent

                                    By_____________________________
      
                                    AUGUSTINE FUND, LP, Investor

                                    By_____________________________

                                    HSBC JAMES CAPEL CANADA, INC., Investor

                                    By_____________________________

                                    GILSTON CORPORATION, LTD., Investor
      

                                    By_____________________________
EXHIBIT D

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES  SECURITIES AND
EXCHANGE  COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE  PURSUANT TO AN
EXEMPTION FROM REGISTRATION  UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT").  THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH  SUCH OFFER OR  SOLICITATION  WOULD BE  UNLAWFUL.  THE  SECURITIES  ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED  EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

                          COMMON STOCK PURCHASE WARRANT

No. __

                 To Purchase ______ Shares of Common Stock of

                            SIMS COMMUNICATIONS, INC.

      THIS  CERTIFIES  that,  for  value  received,   ___________________   (the
"Investor"),  is  entitled,  upon  the  terms  and  subject  to  the  conditions
hereinafter  set forth,  at any time on or after the date hereof and on or prior
to ____________  (the "Termination  Date") but not thereafter,  to subscribe for
and  purchase  from SIMS  COMMUNICATIONS,  INC.,  a  Delaware  corporation  (the
"Company"),  ( ) shares of Common  Stock (the  "Warrant  Shares").  The purchase
price of one share of Common  Stock (the  "Exercise  Price")  under this Warrant
shall be _____  (which  shall be equal to 120% of the  closing  bid price of the
Common Stock on the Principal Market,  on the Trading Day immediately  preceding
the  Subscription  Date, as defined in the Series C Convertible  Preferred Stock
Purchase  Agreement).  The Exercise Price and the number of shares for which the
Warrant is exercisable  shall be subject to adjustment as provided herein.  This
Warrant is being issued in connection  with the Series C  Convertible  Preferred
Stock Purchase  Agreement dated December 7, 1998 (the "Agreement")  entered into
between  the  Company,  the  Investor  and  other  entities  not a party to this
Warrant.  In the event of any conflict between the terms of this Warrant and the
Agreement, the Agreement shall control.

            1. Title of Warrant.  Prior to the expiration  hereof and subject to
compliance  with  applicable  laws,  this Warrant and all rights  hereunder  are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized  attorney,  upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights  represented by this Warrant,  be duly
authorized,  validly  issued,  fully  paid and  nonassessable  and free from all
taxes,  liens and charges in respect of the issue  thereof  (other than taxes in
respect of any transfer occurring contemporaneously with such issue).

            3.  Exercise of Warrant.  The Holder may not  exercise  its purchase
rights granted hereunder until one of the following two events has occurred: (i)
the Company has obtained  shareholder  approval for the below market issuance of
more than 20% of the  outstanding  shares  of  Common  Stock as set forth in the
Agreement,  or (ii) the Common Stock is no longer traded on a Principal  Market.
In the event the  Common  Stock is traded on a  Principal  Market  that does not
mandate such shareholder approval, then the aforementioned exercise restrictions
shall not apply. In the event the Company fails to obtain  shareholder  approval
as set forth in (i) above,  the Company  agrees to  immediately  list the Common
Stock on the OTC Bulletin Board  (pursuant to the terms of the Agreement) and in
such case the  aforementioned  restrictions  shall not  apply.  Exercise  of the
purchase rights represented by this Warrant may be made at any time or times, in
whole or in part,  before the close of business on the Termination Date, or such
earlier  date on which this  Warrant may  terminate  as provided in paragraph 11
below,  assuming one of the aforementioned events has occurred, by the surrender
of this Warrant and the Subscription  Form annexed hereto duly executed,  at the
office of the Company  (or such other  office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such  holder  appearing  on the books of the  Company)  and upon  payment of the
Exercise  Price of the shares  thereby  purchased;  whereupon the holder of this
Warrant shall be entitled to receive a  certificate  for the number of shares of
Common Stock so purchased.  Certificates for shares purchased hereunder shall be
delivered to the holder hereof within five Business Days after the date on which
this Warrant  shall have been  exercised as  aforesaid.  Payment of the Exercise
Price of the  shares may be by  certified  check or  cashier's  check or by wire
transfer  (of same day  funds) to an  account  designated  by the  Company in an
amount  equal to the  Exercise  Price  multiplied  by the number of shares being
purchased.

            4. No  Fractional  Shares or Scrip.  No  fractional  shares or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.

            5. Charges, Taxes and Expenses.  Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant  shall be made without  charge
to the holder hereof for any issue or transfer tax or other  incidental  expense
in respect of the issuance of such certificate,  all of which taxes and expenses
shall be paid by the Company,  and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant;  provided,  however,  that in the event certificates for
shares of Common  Stock  are to be issued in a name  other  than the name of the
holder of this  Warrant,  this Warrant when  surrendered  for exercise  shall be
accompanied by the Assignment  Form attached  hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery  of any  certificates  for  shares of Common  Stock,  the  Company  may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6.  Closing  of  Books.  The  Company  will  at no  time  close  its
shareholder  books or  records in any manner  which  interferes  with the timely
exercise of this Warrant.

            7. No Rights as Shareholder  until  Exercise.  This Warrant does not
entitle the holder  hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise  thereof.  If, however,  at the time of the
surrender of this  Warrant and  purchase the holder  hereof shall be entitled to
exercise  this  Warrant,  the shares so  purchased  shall be and be deemed to be
issued to such  holder  as the  record  owner of such  shares as of the close of
business on the date on which this Warrant shall have been exercised.

            8. Assignment and Transfer of Warrant.  This Warrant may be assigned
by the  surrender of this Warrant and the  Assignment  Form annexed  hereto duly
executed  at the office of the  Company  (or such other  office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company);  provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction  registered  under the Securities Act, or (ii) in a transaction
pursuant to an exemption,  if available,  from such registration and whereby, if
requested by the Company,  an opinion of counsel reasonably  satisfactory to the
Company  is  obtained  by the  holder of this  Warrant  to the  effect  that the
transaction is so exempt.

            9. Loss,  Theft,  Destruction or Mutilation of Warrant.  The Company
represents and warrants that upon receipt by the Company of evidence  reasonably
satisfactory to it of the loss, theft,  destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto,  and upon surrender and cancellation
of such Warrant or stock  certificate,  if mutilated,  the Company will make and
deliver a new  Warrant or stock  certificate  of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.

            10. Saturdays,  Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the  expiration of any right required or granted
herein shall be a Saturday,  Sunday or a legal holiday,  then such action may be
taken or such  right may be  exercised  on the next  succeeding  day not a legal
holiday.

            11. Effect of Certain  Events.  If at any time the Company  proposes
(i) to sell or otherwise convey all or  substantially  all of its assets or (ii)
to effect a  transaction  (by merger or otherwise) in which more than 50% of the
voting  power of the  Company is disposed  of  (collectively,  a "Sale or Merger
Transaction"),  in which the  consideration to be received by the Company or its
shareholders  consists solely of cash, and in case the Company shall at any time
effect a Sale or Merger Transaction in which the consideration to be received by
the Company or its  shareholders  consists in part of  consideration  other than
cash, the holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate  Exercise  Price in effect
immediately  prior to such  action,  the kind and  amount  of  shares  and other
securities  and  property  which it would  have owned or have been  entitled  to
receive after the happening of such  transaction had this Warrant been exercised
immediately prior thereto.
12.  Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities  purchasable upon the exercise of this Warrant and
the  Exercise  Price shall be subject to  adjustment  from time to time upon the
happening of any of the following.

            In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution  in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its  outstanding  shares of Common Stock into a smaller  number of
shares  of Common  Stock or (iv)  issue any  shares  of its  capital  stock in a
reclassification  of the Common Stock, the number of Warrant Shares  purchasable
upon  exercise of this Warrant  immediately  prior  thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant  Shares or other  securities of the Company which he would have owned
or have been  entitled to receive had such  Warrant  been  exercised  in advance
thereof.  An adjustment made pursuant to this paragraph  shall become  effective
immediately  after the effective  date of such event  retroactive  to the record
date, if any, for such event.

            13.  Voluntary  Adjustment  by the  Company.  The Company may at its
option,  at any time during the term of this  Warrant,  reduce the then  current
Exercise  Price to any amount and for any period of time deemed  appropriate  by
the Board of Directors of the Company.

            14. Notice of  Adjustment.  Whenever the number of Warrant shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall promptly mail by registered or certified mail,  return receipt  requested,
to the holder of this Warrant notice of such  adjustment or adjustments  setting
forth  the  number  of  Warrant  Shares  (and  other   securities  or  property)
purchasable  upon the exercise of this  Warrant and the  Exercise  Price of such
Warrant  Shares after such  adjustment,  setting forth a brief  statement of the
facts  requiring  such  adjustment  and setting forth  computation by which such
adjustment  was made.  Such  notice,  in absence  of  manifest  error,  shall be
conclusive evidence of the correctness of such adjustment.

            15. Authorized  Shares. The Company covenants that during the period
the Warrant is  outstanding,  it will reserve from its  authorized  and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase  rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates to execute and issue the necessary  certificates  for shares of the
Company's  Common  Stock upon the  exercise of the  purchase  rights  under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any  applicable law or regulation,  or of any  requirements  of the
NASDAQ Small Cap Stock Market or any domestic securities exchange upon which the
Common Stock may be listed.
16.   Miscellaneous.

                  (a)  Issue  Date;  Choice  of Law;  Venue;  Jurisdiction.  The
provisions  of this Warrant  shall be construed and shall be given effect in all
respects  as if it had been  issued  and  delivered  by the  Company on the date
hereof.  This  Warrant  shall be binding upon any  successors  or assigns of the
Company.  This  Warrant 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  Securities  Act,  without  reference to principles of conflicts of law. The
parties consent to the exclusive jurisdiction of the U.S. District Court sitting
in the Southern District of the State of New York in connection with any dispute
arising under this Warrant 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 the other party to this Warrant 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  Warrant  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 any other
manner permitted by law. Each party waives its right to a trial by jury.

                  (b)  Restrictions.  The holder  hereof  acknowledges  that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered (or
if no exemption from  registration  exists),  will have restrictions upon resale
imposed by state and federal securities laws. Each certificate  representing the
Warrant  Shares issued to the Holder upon  exercise (if not  registered or if no
exemption from registration exists) will bear the following legend:

            "THE  SECURITIES   EVIDENCED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
      REGISTERED  UNDER  THE  U.S.  SECURITIES  ACT OF  1933,  AS  AMENDED  (THE
      "SECURITIES  ACT"), OR ANY OTHER APPLICABLE  SECURITIES LAWS AND HAVE BEEN
      ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
      THE SECURITIES ACT AND SUCH OTHER SECURITIES  LAWS.  NEITHER THIS SECURITY
      NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
      TRANSFERRED,  PLEDGED, ENCUMBERED,  HYPOTHECATED OR OTHERWISE DISPOSED OF,
      EXCEPT  PURSUANT  TO  AN  EFFECTIVE   REGISTRATION   STATEMENT  UNDER  THE
      SECURITIES  ACT OR PURSUANT TO A  TRANSACTION  THAT IS EXEMPT FROM, OR NOT
      SUBJECT TO, SUCH REGISTRATION".
(c) Modification  and Waiver.  This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

                  (d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid,  to
each such  holder at its  address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
IN  WITNESS  WHEREOF,  the  Company  has caused  this  Warrant to be
executed by its officers thereunto duly authorized.

Dated:

                                    SIMS COMMUNICATIONS, INC.

                                    By ______________________________
                                      Name:
                                     Title:
NOTICE OF EXERCISE

To:   SIMS COMMUNICATIONS, INC.

(1) The undersigned hereby elects to purchase ________ shares of Common Stock of
SIMS  COMMUNICATIONS,  INC. pursuant to the terms of the attached  Warrant,  and
tenders  herewith  payment  of the  purchase  price in full,  together  with all
applicable transfer taxes, if any.

(2) Please  issue a  certificate  or  certificates  representing  said shares of
Common  Stock  in the  name  of the  undersigned  or in  such  other  name as is
specified below:

                  -------------------------------
                  (Name)

                  -------------------------------
                  (Address)
                  -------------------------------

Dated:

------------------------------
Signature
1

                                 ASSIGNMENT FORM

                   (To  assign  the  foregoing  warrant,
                      execute  this form and
                      supply required information.
                Do not use this form to exercise the warrant.)

            FOR  VALUE  RECEIVED,   the  foregoing   Warrant  and  all  rights
evidenced thereby are hereby assigned to

_______________________________________________ whose address is

---------------------------------------------------------------.

---------------------------------------------------------------

                                          Dated:  ______________,

                  Holder's Signature:    _____________________________

                  Holder's Address:      _____________________________

                                         -----------------------------

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of  corporations  and  those  acting  in an  fiduciary  or other  representative
capacity  should  file  proper  evidence of  authority  to assign the  foregoing
Warrant.
EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]

Address

Re:   Series C Convertible  Preferred Stock Purchase  Agreement dated December
      7, 1998

Ladies and Gentlemen:

      This  opinion is  furnished  to you  pursuant to the Series C  Convertible
Preferred   Stock  Purchase   Agreement  by  and  between   Settondown   Capital
International,  Ltd. (the  "Placement  Agent"),  the entities (the  "Investors")
listed on Schedule  A, and Sims  Communications,  Inc.  (the  "Company"),  dated
December 7, 1998 (the "Purchase Agreement"),  which provides for the issuance of
Preferred Stock,  and, certain  additional shares upon the occurrence of certain
events as set forth thereof (the "Blackout  Shares"),  and a warrant to purchase
shares of Common Stock of the Company (the  "Warrant",  and the shares of Common
Stock  issued or issuable  pursuant to exercise  of the  Warrant,  the  "Warrant
Shares").  All terms  used  herein  have the  meanings  defined  for them in the
Purchase Agreement unless otherwise defined herein.

      We  have  acted  as  counsel  for  the  Company  in  connection  with  the
negotiation  of  the  Purchase  Agreement,   the  Warrant,  the  Certificate  of
Designation,  the Escrow  Agent,  and the  Registration  Rights  Agreement  (the
"Registration Rights Agreement") between the Investors, the Placement Agent, and
the  Company,  dated  December  7, 1998,  and the Escrow  Agreement  between the
Investors  (excluding HSBC James Capel Canada,  Inc.),  the Placement Agent, the
Company and the Escrow Agent,  dated  December 7, 1998 (the "Escrow  Agreement",
and together with the Purchase Agreement and the Registration  Rights Agreement,
the "Agreements").  As counsel, we have made such legal and factual examinations
and  inquires  as we have  deemed  advisable  or  necessary  for the  purpose of
rendering  this  opinion.  In addition,  we have  examined,  among other things,
originals or copies of such corporate  records of the Company,  certificates  of
public  officials and such other documents and questions of law that we consider
necessary  or  advisable  for the purpose of  rendering  this  opinion.  In such
examination  we have  assumed  the  genuineness  of all  signatures  on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery  of all  documents  (except as to due  execution  and  delivery  by the
Company)   where  due  execution  and  delivery  are  a   prerequisite   to  the
effectiveness thereof.

      As used in this opinion,  the expression "to our knowledge"  refers to the
current  actual  knowledge  of the  attorneys  of this  firm who have  worked on
matters for the Company solely in connection with the Agreements and the Warrant
and the transactions contemplated thereby.

      For purposes of this opinion,  we have assumed that you have all requisite
power and authority,  and have taken any and all necessary  corporate action, to
execute and deliver the Agreements, and we are assuming that the representations
and warranties  made by the Investor in the Agreements and pursuant  thereto are
true and correct.
The  opinions   hereinafter   expressed   are  subject  to  the  following
qualifications:

      Based upon and subject to the foregoing, we are of the opinion that:

      1. The Company is a corporation  duly organized,  validly  existing and in
good  standing  under the laws of the State of  Delaware  and has all  requisite
power and authority  (corporate  and other) to carry on its business and to own,
lease and operate its  properties  and assets as described in the  Company's SEC
Documents.  To our  knowledge,  the  Company  does not own or control  any other
business  entity.  The Company is duly qualified as a foreign  corporation to do
business and is in good standing in every jurisdiction in which the Company owns
or leases  property,  other than those in which the failure so to qualify  would
not have a Material Adverse Effect.

      2. The Company has the  requisite  corporate  power and authority to enter
into and  perform its  obligations  under the  Agreements,  the  Certificate  of
Designation,  and the Warrants and to issue the Preferred  Stock, the Additional
Shares, the Warrants, the Warrant Shares, the Underlying Shares and the Blackout
Shares.  The  execution  and  delivery  of the  Agreements,  and the  execution,
issuance and delivery of the Preferred Stock,  and the Warrants,  by the Company
and the  consummation by it of the transactions  contemplated  thereby have been
duly  authorized by all  necessary  corporate  action and no further  consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required.  Each of the Agreements has been duly executed and delivered,  and the
Warrants, and Preferred Stock has been duly executed,  issued and delivered,  by
the Company and each of the Agreements,  the Preferred  Stock,  and the Warrants
constitutes valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable  bankruptcy,  insolvency,  or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.

      3.  The  execution,  delivery  and  performance  of  the  Agreements,  the
Preferred  Stock,  and the Warrants by the Company and the  consummation  by the
Company of the transactions contemplated thereby, including, without limitation,
the issuance of the Additional  Shares,  the Warrants,  the Warrant Shares,  the
Preferred Stock, the Underlying Shares, and the Blackout Shares, do not and will
not (i) result in a violation of the Company's Articles or By-Laws;  (ii) to our
knowledge,  conflict  with, or  constitute a material  default (or an event that
with notice or lapse of time or both would become a default)  under,  or give to
others any rights of termination,  amendment,  acceleration or cancellation  of,
any  material  agreement,  indenture,  instrument  or any  "lock-up"  or similar
provision  of any  underwriting  or similar  agreement to which the Company is a
party,   except  for  such  conflicts,   defaults,   terminations,   amendments,
accelerations and cancellations as would not,  individually or in the aggregate,
have a Material Adverse Effect; or (iii) result in a violation of any federal or
state law, rule or regulation applicable to the Company or by which any property
or asset of the  Company is bound or  affected,  except for such  violations  as
would not, individually or in the aggregate,  have a Material Adverse Effect. To
our  knowledge,  the Company is not in violation of any terms of its Articles or
Bylaws.
4. The  issuance  of the  Additional  Shares,  the  Warrants,  the Warrant
Shares,  the Preferred Stock, the Underlying  Shares, and the Blackout Shares in
accordance with the Purchase  Agreement will be exempt from  registration  under
the  Securities  Act of 1933  and  will be in  compliance  with  Delaware  state
securities  laws.  When so issued,  subject to  sufficient  reserved  authorized
shares  of Common  Stock,  the  Additional  Shares,  the  Blackout  Shares,  the
Warrants,  the Warrant Shares,  the Preferred Stock,  and the Underlying  Stock,
will be duly and validly issued,  fully paid and nonassessable,  and free of any
liens,  encumbrances and preemptive or similar rights contained in the Company's
Articles of Incorporation  (the  "Articles") or Bylaws or, to our knowledge,  in
any agreement to which the Company is party.

      5. To our knowledge,  except as disclosed in the SEC Documents,  there are
no claims,  actions,  suits,  proceedings  or  investigations  that are  pending
against the Company or its properties, or against any officer or director of the
Company in his or her capacity as such, nor has the Company received any written
threat of any such claims, actions, suits, proceedings,  or investigations which
are required to be and have not been disclosed in the SEC Documents.

      6. To our knowledge,  there are no outstanding options, warrants, calls or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations  convertible  into or  exchangeable  for,  or  giving  any  right to
subscribe for or acquire any shares of Common Stock or  contracts,  commitments,
understanding,  or  arrangements  by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into  shares  of Common  Stock,  except  as  described  in the SEC
Documents.  To our  knowledge,  the  Company is not a party to or subject to the
provisions of any order,  writ,  injunction,  judgment or decree of any court or
government agency or instrumentality.

      7. The issuance of the Securities will not violate the applicable  listing
agreement between the Company and any securities exchange or market on which the
Company's securities are listed, subject to the NASD 20% Rule.

      8. As more  specifically  described in the SEC  Documents,  the authorized
capital stock of the Company consists of shares of Common Stock,  $___ par value
per share, and shares of Preferred Stock, par value $___ per shares.

      This  opinion is furnished to the  Investors  solely for their  benefit in
connection with the  transactions  described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.

                                          Very truly yours,
EXHIBIT F
                         INSTRUCTIONS TO TRANSFER AGENT
                            Sims Communications, Inc.

_______________, 1998
[Name and address of Transfer Agent]

Dear Sirs:

Reference is made to the Series C Convertible Preferred Stock Purchase Agreement
and all Exhibits and Attachments  thereto (the "Agreement") dated as of December
7, 1998,  between the  entities  referred  to on Schedule A annexed  hereto (the
"Investors"),  Settondown Capital International Ltd. (the "Placement Agent") and
Sims  Communications,  Inc.  (the  "Company").  Pursuant to the  Agreement,  and
subject to the terms and conditions  set forth in the  Agreement,  the Investors
have agreed to  purchase  from the Company and the Company has agreed to sell to
the  Investors  from time to time  during  the term of the  Agreement  shares of
Series C Preferred Stock of the Company, ___ par value per share (the "Preferred
Stock"), to issue to the Placement Agent shares of Preferred Stock, and (ii) the
Company  has  agreed  to  issue to the  Investors,  and to the  Placement  Agent
warrants  to  purchase  Common  Stock (the  "Warrant").  As a  condition  to the
effectiveness  of the Agreement,  the Company has agreed to issue to you, as the
transfer agent for the Common Stock (the "Transfer  Agent"),  these instructions
relating to the Preferred  Stock, and Warrants to be issued to the Investors and
the Placement Agent (or a permitted  assignee)  pursuant to the Agreement,  upon
conversion of the Preferred  Stock, or upon exercise of the Warrants.  All terms
used herein and not  otherwise  defined  shall have the meaning set forth in the
Agreement.

1.    ISSUANCE  OF COMMON STOCK

      Pursuant  to the  Agreement,  the  Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or  registration  statements  registering  the resale of the Common  Stock to be
acquired by the Investors  and the  Placement  Agent (i) under the Agreement and
(ii) upon exercise of the Warrants.  The Company will advise the Transfer  Agent
in writing of the effectiveness of any such registration statement promptly upon
its being  declared  effective.  The Transfer Agent shall be entitled to rely on
such  advice  and  shall  assume  that the  effectiveness  of such  registration
statement  remains in effect unless the Transfer  Agent is otherwise  advised in
writing by the Company and shall not be  required to  independently  confirm the
continued effectiveness of such registration statement. In the circumstances set
forth in the  following  paragraph,  the  Transfer  Agent  shall  deliver to the
Investors and the Placement  Agent  certificates  representing  Common Stock not
bearing the Legend without requiring further advice or instruction or additional
documentation from the Company or its counsel or the Investors or its counsel or
any other party (other than as described in such paragraphs).
At any  time  after  the  effective  date of the  applicable  registration
statement  (provided  that the Company has not informed  the  Transfer  Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates which bear the Legend, to the extent accompanied by (i)
a notice  requesting  the  issuance  of new  certificates  free of the Legend to
replace those surrendered,  (ii) a confirmation in writing to the Transfer Agent
that the  Investors  and/or  Placement  Agent has  sold,  pledged  or  otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona  fide  transaction  to a  third  party  that is not an  affiliate  of the
Company; and (iii) the Investors and/or Placement Agent confirms to the Transfer
Agent that it has complied with the prospectus delivery requirement the Transfer
Agent shall deliver to the Investors the  certificates  representing  the Common
Stock not bearing the Legend,  in such names and denominations as the Investors,
and/or Placement Agent shall request.  In the event a registration  statement is
not filed by the Company, or for any reason the registration  statement which is
filed by the Company is not declared  effective by the  Securities  and Exchange
Commission the Investors and/or Placement Agent, or its permitted  assignee,  or
either of their  brokers  confirms to the Transfer  Agent that (i) the Investors
and/or  Placement  Agent has held the  shares  of Common  Stock for at least one
year,  (ii)  counting  the  shares  surrendered  as being sold upon the date the
unlegended  Certificates  would be delivered to the Investors  and/or  Placement
Agent (or the Trading Day  immediately  following  if such date is not a Trading
Day),  the  Investors  and/or  Placement  Agent will not have sold more than the
greater of (a) one percent of the total number of  outstanding  shares of Common
Stock,  or (b) the average  weekly  trading  volume of the Common  Stock for the
preceding  four weeks during the three months ending upon such delivery date (or
the Trading Day  immediately  following if such date is not a Trading Day),  and
(iii) the Investors  and/or Placement Agent has complied with the manner of sale
and notice  requirements  of Rule 144 under the Securities  Act, and the Company
shall have  furnished  an  opinion  from its  independent  counsel to the extent
available, authorizing the removal of the Legend.

      At any time prior to the  effective  date of the  applicable  registration
statement,  and  provided  no  exemption  from  registration  exists,  upon  the
conversion  of any  Preferred  Stock  certificate  by the  Investors  and/or the
Placement  Agent,  and upon  receipt of  authorization  from the  Company to the
Transfer  Agent,  the Transfer  Agent shall deliver to the Investors  and/or the
Placement  Agent  certificates  representing  Common  Stock  bearing  the Legend
without requiring further advice or instruction or additional documentation from
the  Company or its counsel or the  Investors  or its counsel or any other party
(other than as described in such paragraphs).

      Any advice,  notice,  or  instructions  to the Transfer  Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of ( ) ___-____.
2.    MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK

      In connection  with any issuance of Common Stock by the Transfer  provided
that all of the  conditions  set forth in Section 1 above  have been  satisfied,
pursuant to which the Investors  acquires Common Stock under the Agreement,  the
Transfer  Agent shall  deliver to the Investors  and/or the  Placement  Agent as
defined  in the  Agreement,  certificates  representing  Common  Stock  (with or
without the Legend, as appropriate) as soon as possible.

3.    FEES OF TRANSFER AGENT; INDEMNIFICATION

      The  Company  agrees to pay the  Transfer  Agent for all fees  incurred in
connection with these Irrevocable Instructions.  The Company agrees to indemnify
the Transfer Agent and its officers,  employees and agents,  against any losses,
claims,  damages or  liabilities,  joint or several,  to which it or they become
subject  based  upon the  performance  by the  Transfer  Agent of its  duties in
accordance with the Irrevocable Instructions.

4.    THIRD PARTY BENEFICIARY

      The  Company  and the  Transfer  Agent  acknowledge  and  agree  that  the
Investors  is  an  express  third  party   beneficiary   of  these   Irrevocable
Instructions  and shall be entitled to rely upon,  and enforce,  the  provisions
thereof.

                                    SIMS COMMUNICATIONS, INC.

                                    By__________________________

AGREED:

By:__________________________
Name:
Title:
EXHIBIT G

                              NOTICE OF CONVERSION

             (To be Executed by the Registered Holder in order to
                      Convert the Series C Preferred Stock)

The undersigned  hereby  irrevocably  elects to convert Series C Preferred Stock
Certificate  No. ___ into shares of Common  Stock of SIMS  COMMUNICATIONS,  INC.
(the  "Company")  according  to the  conditions  hereof,  as of the date written
below.

The undersigned represents and warrants that:

      (i)   that all  offers  and sales by the  undersigned  of the  shares of
            Common Stock issuable to the  undersigned  upon  conversion of the
            Series C Preferred  Stock shall be made  pursuant to an  exemption
            from  registration  under the  Securities  Act of 1933, as amended
            (the  "Act"),  or pursuant  to  registration  of the Common  Stock
            under the Act,  subject to any  restrictions  on sale or  transfer
            set  forth in the  Series C  Preferred  Stock  Purchase  Agreement
            between  the  Company  and the  original  holder  of the  Series C
            Preferred Stock submitted herewith for conversion;
      (ii)  the  undersigned  has not  engaged in any  transaction  or series of
            transaction  that is a part  of or a plan or  scheme  to  evade  the
            registration requirements of the Act; and
      (iii) upon  conversion   pursuant  to  this  Notice  of  Conversion,   the
            undersigned  will not own or deemed to beneficially  own (within the
            meaning  of the  1934  Act)  4.99% or more of the  then  issued  and
            outstanding shares of Common Stock of the Company.

  ----------------------------------  ---------------------------------
  Date of Conversion                    Applicable Conversion Price

 ----------------------------------        ---------------------------------
 Number of Common Shares upon Conversion   Shares of  Preferred Stock Converted

      ----------------------------------  ---------------------------------
      Signature                                 Name

      Address:                                  Delivery of Shares to:
NOTICE OF CONVERSION

             (To be Executed by the Registered Holder in order to
                      Convert the Series C Preferred Stock)

The undersigned  hereby  irrevocably  elects to convert Series C Preferred Stock
Certificate  No. ___ into shares of Common  Stock of SIMS  COMMUNICATIONS,  INC.
(the  "Company")  according  to the  conditions  hereof,  as of the date written
below.

The undersigned represents and warrants that:

      (i)   that all  offers  and sales by the  undersigned  of the  shares of
            Common Stock issuable to the  undersigned  upon  conversion of the
            Series C Preferred  Stock shall be made  pursuant to an  exemption
            from  registration  under the  Securities  Act of 1933, as amended
            (the  "Act"),  or pursuant  to  registration  of the Common  Stock
            under the Act,  subject to any  restrictions  on sale or  transfer
            set  forth in the  Series C  Preferred  Stock  Purchase  Agreement
            between  the  Company  and the  original  holder  of the  Series C
            Preferred Stock submitted herewith for conversion;
      (ii)  the  undersigned  has not  engaged in any  transaction  or series of
            transaction  that is a part  of or a plan or  scheme  to  evade  the
            registration requirements of the Act; and
      (iii) upon  conversion   pursuant  to  this  Notice  of  Conversion,   the
            undersigned  will not own or deemed to beneficially  own (within the
            meaning  of the  1934  Act)  4.99% or more of the  then  issued  and
            outstanding shares of Common Stock of the Company.

      ----------------------------------  ---------------------------------
      Date of Conversion                   Applicable Conversion Price

      ----------------------------------      ---------------------------------
    Number of Common Shares upon Conversion  Shares of Preferred Stock Converted

      ----------------------------------  ---------------------------------
      Signature                                 Name

      Address:                                  Delivery of Shares to:
SIDE ESCROW LETTER

                              [Company Letterhead]

To:________

      This  letter  shall  confirm  our   understanding   regarding  the  escrow
provisions  contained  in the  Series C  Convertible  Purchase  Agreement  dated
December 7, 1998 (the  "Agreement").  All securities  issuable by the Company to
_____  pursuant  to the  Agreement  shall  be  delivered  directly  to  _____ at
_________,  upon  receipt of the  original  securities  _____ shall  immediately
thereafter wire the appropriate  purchase price therefore to the Company, net of
all fees payable by the Company  which the Company  agrees that it shall provide
____ with a net letter providing for the payment of fees simultaneously with the
delivery of the securities.

                                          Very truly yours,

Acknowledged and Agreed
this ___ day of December, 1998

--------------------------