<PAGE>   1




                                  EXHIBIT 6.40

            REGULATION S DISTRIBUTION AGREEMENT, DATED JUNE 26, 1996,
         BY AND BETWEEN THE COMPANY AND BERKSHIRE INTERNATIONAL FINANCE





                       
<PAGE>   2



                       REGULATION S DISTRIBUTION AGREEMENT

    THIS AGREEMENT is made this 26th day of June 1996 by and between KCD
HOLDINGS INCORPORATED, a Nevada corporation, whose main offices are located at
2835 Townsgate Road, Suite 110, Westlake Village, CA 91361 (hereinafter referred
to as "KCD"); and BERKSHIRE INTERNATIONAL FINANCE, INC., a Delaware corporation
(hereinafter referred to as "BERKSHIRE"), with principal executive offices
located at 551 Fifth Avenue, Suite 605, New York, NY 10017.

                               W I T N E S S E T H

    WHEREAS, KCD is a "reporting issuer" with the meaning of Rule 902(l) of
Regulation S, 17 CFR Section 240.901 et seq. promulgated under the Securities
Act of 1933 ("Regulation S") which files reports with the U.S. Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), and whose stock is traded on the OTC Electronic Bulletin Board
under the symbol "KCDH".

    WHEREAS, BERKSHIRE is acting as a "distributor" within the meaning of Rule
902(c) of Regulation S; and

    WHEREAS, BERKSHIRE desires to assist KCD in obtaining equity capital
pursuant to an offering conducted in compliance with Regulation S upon the terms
and conditions set forth herein;

    NOW THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:

I.  WARRANTIES AND COVENANTS.

    1.01 BERKSHIRE shall use its "best efforts" to obtain subscriptions for up
to approximately $2,000,000 worth of KCD Common Stock, (the "Securities") in an
offering conducted pursuant to Rule 903 of Regulation S (the "Offering"). The
Offering will consist of a maximum of 1,000,000 shares of Common Stock offered
at a price per share equal to the lesser of (i) 50% below the closing bid price
of the Company's common stock on the day immediately prior to the execution of
the attached Offshore Securities Subscription Agreement by the Purchaser; or
(ii) $2.00 per share. Such subscriptions shall be in the form of a Subscription
Agreement (a copy of which is attached hereto) executed by a prospective
purchaser.

    1.02 BERKSHIRE represents and warrants that all offers and sales of the
Securities shall be made only in accordance with the provisions of Rule 903 or
904 of Regulation S.

    1.03 BERKSHIRE represents and warrants that all offers and sales of the
Securities will be made in an "offshore transaction," as defined in Rule 902(i)
of Regulation S.

    1.04 BERKSHIRE represents and warrants that none of BERKSHIRE, any affiliate
of BERKSHIRE, or any person acting on behalf of any of them will engage in any
"directed selling efforts", as defined by Rule 902(b) of Regulation S, in the
United States with respect to the offer and sale of the Securities.


                       
<PAGE>   3



    1.05 BERKSHIRE represents and warrants that any offering materials or
documents (except press releases) used in connection with offers and sales of
Securities shall include statements to the effect that the Securities have not
been registered under the Securities Act of 1933 (the "Securities Act") and may
not be offered or sold in the United States or to U.S. persons (other than
distributors as that term is defined under Rule 902(c) of Regulation S) unless
the Securities are registered under the Securities Act, or an exemption from the
registration requirements of the Securities Act is available. Such statements
shall appear on all materials as provided under Rule 902(h)(2)(i), (ii), and
(iii) of Regulation S.

    1.06 BERKSHIRE represents and warrants that no offer or sale will be made
to, or for the account or benefit of, a "U.S. person," as defined by Rule 902(o)
of Regulation S.

    1.07 BERKSHIRE shall advise KCD of legends or restrictions required by
foreign countries, if any, pertaining to the Securities which KCD shall cause to
be placed on the certificates representing the Securities; and BERKSHIRE shall
take all steps necessary to ensure that any offers and sales made pursuant to
this Agreement comply with the laws and regulations of all foreign regulatory
and/or self-regulatory authorities.

    1.08 KCD and BERKSHIRE agree that the certificates for any Securities sold
pursuant to this Agreement shall include the following restrictive legend:

         "These shares have been issued pursuant to Regulation S as an exemption
         to the registration provisions under the Securities Act of 1933, as
         amended. These shares cannot be transferred, offered or sold in the
         U.S. or to U.S. persons (as defined in Regulation S) until after
         ________________, 1996 (Forty-one days after issuance)."

    1.09 KCD shall maintain its status as a corporation in good standing and as
reporting issuer under the Exchange Act, operating in all material respects in
accordance with its most recent reports filed under the Exchange Act and
provided to BERKSHIRE.

    1.10 BERKSHIRE acknowledges that it is not authorized to and will not give
any information or make any representations in connection with the offer or sale
of the Securities other than those which are contained in disclosure materials
approved by KCD in advance. BERKSHIRE agrees that it is not an agent of KCD and
that it is not authorized to and will not incur any obligation or enter into any
agreement on behalf of KCD in any manner or respect.

    1.11 KCD shall promptly issue certificates representing the Securities upon
notice by Escrow Agent that the Subscription Agreement has been executed by the
Purchaser and accepted by KCD.

II.      COMPENSATION.

    2.01 KCD acknowledges that BERKSHIRE is being compensated directly by the
foreign purchaser.


                                        2

<PAGE>   4



    2.02 All subscriptions funds received by BERKSHIRE will be directed to the
Attorney Trust Account of Levy & Levy, P.A., Attn; William N. Levy, Esq. as
Escrow Agent. Each time that KCD delivers a certificate for Securities sold in
accordance with Regulation S, pursuant to a Subscription Agreement accepted by
KCD, the sale proceeds will be immediately delivered to KCD in a certified check
or wire, less a one-half of one percent (0.005) escrow fee to Levy & Levy, P.A.

III.     INDEMNIFICATION

    3.01 BERKSHIRE and KCD agree to indemnify and hold harmless the escrow agent
from any and all claims, liabilities, losses, actions, suits, or proceedings, at
law or in equity, that may incur or with which it may be threatened by reason of
its acting as Escrow Agent as described herein (including but not limited to
expenses reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever); provided,
however, that the provisions of this paragraph shall not apply in the event of
any claim, liability, loss, action , suit, or proceeding resulting from the
breach of by the Escrow Agent of any provision of this Agreement or from its
gross negligence or willful misconduct.

    3.02 KCD agrees to indemnify and hold harmless BERKSHIRE, its directors and
each person, if any, who controls BERKSHIRE within the meaning of Section 15 of
the Securities Act as follows:

         a. Against any loss, liability, claim, damage and expense arising out
of (including but not limited to expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever based upon) any untrue or alleged untrue statement of a
material fact contained in the offering materials (as amended and supplemented)
furnished to BERKSHIRE by KCD, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading unless such statement or omission was made in
reliance upon and in conformity with written information furnished to KCD by
BERKSHIRE expressly for use in the offering materials or any amendment or
supplement thereof; and

         b. Against any loss, liability, claim, damage and expense to the extent
of the aggregate amount paid in settlement of any litigation commenced or
threatened, or of any claim based upon any untrue statement or omission or any
alleged untrue statement or omission (including but not limited to expenses
reasonably incurred in investigating, preparing or defending against any such
litigation or claim), if such settlement is effected with the written consent of
KCD.

    3.03 BERKSHIRE agrees to indemnify and hold harmless KCD, its directors,
officers, employees, attorneys, accountants, agents, and affiliates, and each
person, if any, who controls any of the foregoing persons within the meaning of
Section 15 of the Securities Act as follows:

         a. Against any loss, liability, claim, damage or expense resulting from
or arising out of (including but not limited to expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever based upon) (i) BERKSHIRE's violation or
alleged violation or alleged violation of Regulation S or any other applicable
law, (ii) any breach by BERKSHIRE of any of its representations, warranties,
covenants or agreements contained in this Agreement, or (iii) any untrue or
alleged untrue statement of a

                                        3

<PAGE>   5



material fact contained in the offering materials (as amended and supplemented)
prepared by BERKSHIRE, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
offering materials upon and in conformity with written information furnished to
BERKSHIRE by KCD specifically for use in the preparation thereof; and

         b. Against loss, liability, claim, damage or expense to the extent of
the aggregate amount paid in settlement of any litigation commenced or
threatened, or of any claim based upon any untrue statement or omission or any
alleged untrue statement or omission (including but not limited to expenses
reasonably incurred in investigating, preparing or defending against any such
litigation or claim), if such settlement is effected with the written consent of
BERKSHIRE.

IV.      TERMINATION.

    4.01 The Offering will terminate at 12:00 p.m. EST on the _____ day of
August, 1996, unless extended by KCD.

V.       MISCELLANEOUS.

    5.01 This Agreement is binding on all parties, as well as on their
successors, assignees and representatives, and constitutes the entire Agreement
between the parties. This Agreement may be modified or amended solely by a
written agreement executed by the parties hereto, and may be executed in
counterparts.

    5.02 The parties shall resolve any dispute arising hereunder before an
arbitrator selected pursuant to the rules of the American Arbitration
Association and each party shall bear their own attorney's fees and costs of
such arbitration. Disputes under this Agreement as well as all of the terms and
conditions of this Agreement shall be governed in accordance with and by the
laws of the State of New York.

VI.      RESTRICTIVE CLAUSES.

    6.01 KCD agrees that it will not participate or engage in any Regulation S
Private Placement Transactions with any other distributor or foreign purchaser
other than through BERKSHIRE for a period of 90 days subsequent to the Closing
of the last Regulation S transaction by or through BERKSHIRE. For a period of
six months from the last Reg S Closing, KCD agrees to grant BERKSHIRE the First
Right of Refusal on all Regulation S Transactions (BERKSHIRE wold have ten days
to match any bona fide offer and have 20 additional days to complete same).

    6.02 In the event KCD engages in a non-Regulation S Private Placement (Reg.
D or 4(2) financing), for a period of three months after the last Reg S Closing,
KCD hereby agrees not to sell any stock to a non-U.S. resident or any one else
who might qualify for a Regulation S transaction.




                                        4

<PAGE>   6



    6.03 KCD hereby agrees to use its best efforts to prevent its officers,
directors and more than 5% shareholders from selling any of their shares
pursuant to Rule 144(g) and (k) for a period of 90 days after the last closing.

VII.     NOTICES.

    7.01 All notices and communications regarding this Agreement shall be sent
to the following:

         If to KCD:                  KCD Holdings Incorporated
                                     2835 Townsgate Road, Suite 110
                                     Westlake Village, CA 91361

         If to BERKSHIRE :           John Figliolini, President
                                     Berkshire International Finance, Inc.
                                     551 Fifth Avenue, Suite 605
                                     New York, NY  10017


    IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement.

                             BERKSHIRE INTERNATIONAL FINANCE, INC.


                             By:      _______________________________
                                      John Figliolini, President


                             KCD HOLDINGS INCORPORATED


                             By:      _______________________________
                                      Wellington Ewen, President



                                        5