-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TBh1E0peI/0Mqr2QnKo+WmeFmT/dfWWpz4d0R3mu1NTa0mCf2UEl19KEvWspU5Is oLWmt4GXhJdZ4b3wEXgibA== 0000700941-03-000009.txt : 20030403 0000700941-03-000009.hdr.sgml : 20030403 20030403162221 ACCESSION NUMBER: 0000700941-03-000009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030325 ITEM INFORMATION: Other events FILED AS OF DATE: 20030403 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED REMOTE COMMUNICATION SOLUTIONS CENTRAL INDEX KEY: 0000700941 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 330644381 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11038 FILM NUMBER: 03638887 BUSINESS ADDRESS: STREET 1: 10675 SORRENTO VALLEY ROAD STREET 2: STE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 8586570146 MAIL ADDRESS: STREET 1: 10675 SORRENTO VALLEY ROAD STREET 2: STE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: FIRST NATIONAL CORP /CA/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BOATRACS INC /CA/ DATE OF NAME CHANGE: 19950123 8-K 1 eightklnamd.txt LOAN AMENDMENT MARCH 2003 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 March 25, 2003 Date of Report (date of earliest event reported) ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. (Exact Name of Registrant as Specified in its Charter) California 0-11038 33-0644381 (State or Other (Commission (IRS Employer Iden- Jurisdiction of File Number) tification Number) Incorporation) 1935 Cordell Court El Cajon, California 92020 (Address of Principal Executive Offices Including Zip Code 619-438-6000 (Registrant's Telephone Number, Including Area Code) (Former Name or Former Address if Changed Since Last Report) Item 5 - Other Events On March 25, 2003, Advanced Remote Communication Solutions, Inc. ("ARCOMS) made and entered into a Loan and Warrant Purchase Agreement ("the Agreement") among the Company, Housatonic Micro Fund, L.P ("Housatonic") and Lexington Funding LLC, ("Lexington"). In addition, an Agreement, Amendment, Reservation of Rights and Release (the "Loan Amendment") was made and entered into as of March 25, 2003, by and among ARCOMS, Enerdyne Technologies, Inc., ("Enerdyne"; ARCOMS and Enerdyne are collectively referred to as "Borrower"), Housatonic, Housatonic Micro Fund SBIC, L.P. and Lexington (collectively the "Lender"), as the assignee of First National Bank (the "Bank"). The Agreement and the Loan Amendment amend certain portions of a Loan Agreement, originally signed in December 1998 between the Borrower and the Bank and amended from time to time, with a current balance of $1,500,000 along with accrued interest. The bank and the Lenders subsequently entered into a Purchase and Sale Agreement dated September 20, 2002, pursuant to which the Bank assigned all of its rights under the Loan Agreement to the Lenders. The Agreement and Loan Amendment also make certain additional loans to the Company on the terms and conditions set forth in the Loan Amendment in an amount not to exceed $500,000 at an interest rate of prime plus one and one-half percent with a minimum interest rate of 8% maturing in June 2004. The existing loan is also amended to a minimum interest rate of 8%. In consideration of the Lenders' execution of the Loan Amendment, the Company has agreed to issue a warrant to purchase 1,667 shares of a newly designated Series D Preferred Stock to each of the Lenders. (C) Exhibits 99.1 Loan and Warrant Purchase Agreement 99.2 Agreement, Amendment, Reservation of Rights and Release 99.3 Warrant to Purchase Series D Preferred Stock (Housatonic) 99.4 Warrant to Purchase Series D Preferred Stock (Lexington) 99.5 Certificate of Determination of Series D Preferred Stock 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. Dated: April 3, 2003 Advanced Remote Communication Solutions, Inc. By: /s/ Paul Wickman Paul Wickmna Chief Financial Officer EX-99 3 exhone.txt LOAN AND WARRANT PURCHASE AGREEMENT Exhibit 99.1 ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. LOAN AND WARRANT PURCHASE AGREEMENT THIS LOAN AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of March 25, 2003 (the "Effective Date"), by and among ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., a California corporation (the "Company"), Housatonic Micro Fund, L.P ("Housatonic") and Lexington Funding LLC ("Lexington" and, together with Housatonic, the "Lenders"). WHEREAS, the Company and First National Bank (the "Bank") entered into that certain Loan Agreement dated as of December 29, 1998 (the "Loan Agreement") pursuant to which the Bank agreed to make certain loans (the "Loans") to the Company on the terms and conditions contained set forth in the Loan Agreement; WHEREAS, the Bank and the Lenders subsequently entered into that certain Purchase and Sale Agreement dated as of September 20, 2002, pursuant to which the Bank assigned all of its rights under the Loan Agreement to the Lenders; WHEREAS, pursuant to that certain Agreement, Amendment, Reservation of Rights and Release of even date herewith by and among the Company, Enerdyne Technologies, Inc., and the Lenders (the "Loan Amendment"), a copy of which is attached hereto as Exhibit A, the Lenders have agreed to amend certain portions of the Loan Agreement and to make certain additional loans to the Company on the terms and conditions set forth in the Loan Amendment; and WHEREAS, in consideration of the Lenders' execution of the Loan Amendment, the Company has agreed to issue a warrant in substantially the form attached hereto as Exhibit B to purchase shares of a newly designated Series D Preferred Stock (each, a "Warrant") to each of the Lenders on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties, and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT 1. LOAN AMENDMENT; WARRANTS. On the Effective Date: 1.1 Execution and Delivery of the Loan Amendment. The Company and the Lenders shall each deliver an executed copy of the Loan Amendment to each of the other parties hereto. 1.2 Issuance of the Warrants. The Company shall issue to each of the Lenders, in consideration for the Lenders' execution of the Loan Amendment, a Warrant to purchase one thousand six hundred sixty-six (1,667) shares of Series D Preferred Stock. 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 2.1 Corporate Power. The Company has all requisite corporate power to execute and deliver this Agreement and the Loan Agreement, to issue each Warrant and to carry out and perform its obligations under the terms of this Agreement, the Loan Agreement and under the terms of each Warrant. 2.2 Authorization. All corporate action on the part of the Company, its directors and its stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company and the performance of the Company's obligations hereunder, including, without limitation, the filing of the Certificate of Determination of Series D Preferred Stock (the "Certificate of Determination"), the issuance and delivery of the Warrants and the reservation of the shares of Series D Preferred Stock (and any shares of Common Stock issuable upon the conversion of the Series D Preferred Stock in accordance with the Certificate of Determination) issuable upon exercise of the Warrants has been taken or will be taken prior to the issuance of such equity securities. This Agreement, the Loan Agreement and the Warrants, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company enforceable in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors and, with respect to rights to indemnity, subject to federal and state securities laws. 2.3 Valid Issuance. The Warrants, the shares of Series D Preferred Stock of the Company issuable upon the exercise of the Warrants (when issued in compliance with the provisions of the Warrants) and the shares of Common Stock issuable upon the conversion of the Series D Preferred Stock in accordance with the Certificate of Determination (when issued in compliance with the Certificate of Determination) will be validly issued, fully paid and nonassessable and free of any liens or encumbrances and issued in compliance with all applicable federal and state securities laws. 3. RIGHT OF FIRST REFUSAL. 3.1 Subsequent Offerings. Each holder of Series D Preferred or any right, option or warrant to purchase shares of Series D Preferred (a "Holder") shall have a right of first refusal to purchase its pro rata share of all Equity Securities (as defined below) that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 3.5 hereof. Each Holder's pro rata share is equal to the ratio of (i) the number of shares of the Company's Common Stock (including any shares of Common Stock issuable upon conversion of Preferred Stock or any other convertible securities and upon the exercise of any options, warrants or other derivative securities held by such Holder) which such Holder, is deemed to be a holder immediately prior to the issuance of such Equity Securities to (ii) the total number of shares of the Company's outstanding Common Stock (including any shares of Common Stock issuable upon conversion of Preferred Stock or any other convertible securities and upon the exercise of any in-the-money options, warrants or other derivative securities, as the case may be) immediately prior to the issuance of the Equity Securities. The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security or (iv) any such warrant or right. 3.2 Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall give each Holder written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Holder shall have fifteen (15) days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. As a condition to the exercise of such rights, any Holder exercising its rights hereunder shall execute the appropriate purchase and related agreements in connection with such purchase. 3.3 Issuance of Equity Securities to Other Persons. If the Holders fail to exercise in full the rights of first refusal set forth in this Section 3, the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Holders' rights were not exercised, at a price and upon general terms and conditions materially no more favorable to the proposed purchasers thereof than specified in the Company's notice to the Holders pursuant to Section 3.2 hereof. If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 3.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Holders in the manner provided above. 3.4 Termination and Waiver of Rights of First Refusal. The rights of first refusal established by this Section 3 shall not apply to, and shall terminate upon the earlier of (i) a Change in Control (as defined below) or (ii) six years from the date hereof. The rights of first refusal established by this Section 3 shall be subject to customary exceptions and may be amended, or any provision waived with the written consent of the Holders. For the purpose of this Section 3.4, "Change in Control" shall mean either the sale, lease or other disposition of all or substantially all of the assets of the Company, or an acquisition of the Company by another corporation or entity by consolidation, merger or other reorganization in which the holders of the Company's outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of the corporation or other entity surviving such transaction. 3.5 Excluded Securities. The rights of first refusal established by this Section 3 shall have no application to any of the following Equity Securities: (a) shares of Common Stock (and/or options, warrants or other Common Stock purchase rights issued pursuant to such options, warrants or other rights) issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board of Directors. (b) stock issued pursuant to any rights or agreements outstanding as of the date of this Agreement; options and warrants outstanding as of the date of this Agreement; and stock issued pursuant to any such rights or agreements granted after the date of this Agreements; provided that the rights of first refusal established by this Section 3 applied with respect to the initial sale or grant by the Company of such rights or agreements; (c) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination approved by the Board of Directors; (d) shares of Common Stock issued in connection with any stock split, stock dividend or recapitalization by the Company; (e) shares of Common Stock issued upon conversion of the Company's Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; and (f) any Equity Securities that are issued to the public by the Company pursuant to a registration statement filed under the Securities Act of 1933, as amended. 4. MISCELLANEOUS. 4.1 Governing Law. This Agreement shall be governed, construed and enforced solely and exclusively in accordance with the laws of the State of California, without regard to any conflict of law provisions. Any and all disputes arising under or in connection with this Agreement shall be brought and resolved solely and exclusively in courts located within the State of California and the parties hereby irrevocably consent to the jurisdiction of such courts, services of process in connection therewith, and waive any objections thereto. 4.2 Entire Agreement. This Agreement, together with Exhibits A and B hereto, constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein 4.3 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but of all such counterparts taken together shall constitute one and the same Agreement. .. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURE PAGE TO LOAN AND WARRANT PURCHASE AGREEMENT] 374534 v3/SD 80zq03!.DOC IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer HOUSATONIC MICRO FUND, L.P. HOUSATONIC MICRO PARTNERS, L.L.C., Its General Partner /s/ Jospeh M. Niehaus Joseph M. Niehaus LEXINGTON FUNDING LLC LEXINGTON COMMERCIAL HOLDINGS, INC., Its Manager /s/ Harvey S. Gettleson Harvey S. Gettleson Chief Financial Officer EX-99 4 exhtwo.txt AGREEMENT, AMENDMENT, RESERVATION Exhibit 99.2 AGREEMENT, AMENDMENT, RESERVATION OF RIGHTS AND RELEASE THIS AGREEMENT, AMENDMENT, RESERVATION OF RIGHTS AND RELEASE (this "Agreement") is made and entered into as of March 25, 2003, by and among Advanced Remote Communication Solutions, Inc., a California corporation formerly known as Boatracs, Inc. (herein called "Arcoms"), Enerdyne Technologies, Inc., a California corporation ("Enerdyne"; Arcoms and Enerdyne are collectively referred to herein as "Borrower"), Housatonic Micro Fund SBIC, L.P., Housatonic Micro Fund, L.P and Lexington Funding LLC (collectively, the "Lender"), as the assignee of First National Bank, a national banking association ("Bank"). RECITALS A. Borrower and Bank entered into that certain Loan Agreement, dated as of December 29, 1998, (as the same has been and may from time to time be modified, amended, supplemented, restated or superseded, the "Loan Agreement"), pursuant to which Bank agreed to extend and make loans ("Loans") available to Borrower upon the terms and conditions contained therein. The Loans are evidenced by (i) the Loan Agreement, (ii) that certain Promissory Note dated December 29, 1998, in the original principal amount of $750,000 (as such amount has been subsequently increased and decreased from time to time (the "Note"), the terms of which were amended by a letter to Borrower from Bank dated February 20, 2001 and those various Change in Terms Agreements, dated February 4, 2000, February 28, 2000, March 13, 2001, May 18, 2001, August 3, 2001, November 5, 2001, and December 20, 2001, (iii) that certain Loan Modification Agreement, dated May 29, 2002 between Bank and Borrower, and (iv) all security agreements, pledge agreements, guarantees, financing statements, subordination agreements and other documents or instruments entered into in connection with the Loans (all of which, together with the Loan Agreement and the Note, shall be referred to herein as the "Loan Documents"). As of the date of this Agreement, the aggregate principal balance of the Loans is $1,500,000 and such principal balance, along with accrued interest thereon, and other charges, costs and expenses with respect to the Loans remains unpaid. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings given to such terms in the Loan Agreement. B. Bank and Lender entered into that certain Purchase and Sale Agreement ("Purchase Agreement"), dated as of September 20, 2002, pursuant to which Bank irrevocably sold, transferred, assigned, granted, and conveyed Bank's right, title, and interest in, to and under the Loans, the Loan Documents and the other Transferred Rights (as defined in the Purchase Agreement) to Lender. C. Borrower is presently in violation of the following covenants set forth in the Loan Agreement: (i) Overadvance default, due to the Eligible Account Deficiency as disclosed in the Borrowing Base Certificate dated July 31, 2002 and failure to submit Borrowing Base Certificates for each calendar month thereafter, (ii) failure to deposit Additional Collateral upon the existence of an Eligible Account Deficiency, (iii) Payment default, as monthly interest payments have not been made since August, 2002, (iv) failure to not allow any Account Payable to a Key Vendor to remain outstanding for a period in excess of sixty (60) days from its due date, and (v) failure to direct all of its Account Debtors to send all future payments on their Accounts Payables directly to Lender, each of which violation constitutes an Event of Default under the Loan Agreement (collectively, the "Current Events of Default"). D. The continuance of the Current Events of Default entitles Lender to, among other things, declare all existing Indebtedness to be immediately due and payable and commence immediate enforcement and collection actions and to exercise such other rights or remedies as are available at law or in equity including, without limitation, remedies available under Article 9 of California's Uniform Commercial Code (collectively, the "Enforcement Actions"). E. Borrower has requested Lender to provide additional loans to Borrower for the purpose of meeting certain of its working capital requirements, and Lender is willing, subject to the terms and conditions set forth herein, to make such additional loans on the terms and conditions set forth herein and in reliance of the representations and warranties set forth herein and the documents to be executed in connection herewith. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants herein set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, and to induce Lender to enter into this Agreement, Borrower and Lender hereby agree as follows: SECTION 1. LENDER, ASSIGNEE OF BANK. Borrower hereby acknowledges and consents to the assignment of all rights, title and interest in, to and under the Loans, the Loan Documents and the other Transferred Rights by Bank to Lender and expressly agrees that each Loan Document is hereby amended so that all references to Bank therein shall be references to Lender, as assignee of Bank. SECTION 2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended to add the following terms and conditions. 2.1 Lender agrees to extend an additional credit facility under which it agrees, upon the satisfaction of the conditions set forth in Section 6 below, and subject to the other terms hereof, to make Advances to Borrower from time to time until the business day immediately prior to the Maturity Date (as defined below), provided however, that the aggregate original principal amount of such Advances does not exceed $500,000 (each Advance, an "Expansion Loan"; collectively, the "Expansion Loans"). 2.2 Notwithstanding anything to the contrary in the Loan Documents, (i) Expansion Loans shall constitute "Loans" under the Loan Documents and have the benefit of, and be subject to, the terms and conditions of the Loan Documents, as such terms and conditions are amended by this Agreement, and (ii) Borrower's obligation to repay the Expansion Loans as provided in this Agreement shall constitute "Indebtedness" under the Loan Agreement and shall be secured by the Collateral. A default in repayment of the Expansion Loans or any other term and condition set forth in the Loan Documents as modified by this Agreement shall constitute an Event of Default under the Loan Documents and Lender shall have the right to accelerate the Loans, including the Expansion Loans, and exercise all other remedies under the Loan Documents; provided, however, that the Current Events of Default shall not trigger Lender's rights to accelerate the Expansion Loans or enforce any other remedies set forth in the Loan Documents relating to the Expansion Loans. 2.3 Expansion Loans shall be made in minimum increments of $100,000 and the proceeds of the Expansion Loans shall be used only for the purpose of financing Arcom's working capital needs. The proceeds from the Expansion Loans shall not be used to pay down the principal balances of outstanding debt of Arcoms or Enerdyne other than repayment of trade account payables of Arcoms payable in the ordinary course of its business. 2.4 When Borrower desires to obtain an Expansion Loan, Borrower shall notify Lender (which notice shall be irrevocable) by facsimile transmission to be received by each Lender at the facsimile number set forth on the signature pages hereto (or such other facsimile number of which Lender shall have notified Borrower in writing) no later than 12:00 noon pacific time five (5) business days before the day on which the Expansion Loan is to be made, along with written certifications signed by the chief executive officer or the chief financial officer of Borrower, in form and substance acceptable to Lender in its sole discretion, to the effect that (i) the proceeds of such Expansion Loan shall be utilized in compliance with the requirements set forth in Section 2.3 of this Agreement, (ii) no Event of Default (other than Current Events of Default) has occurred or would exist after giving effect to such Expansion Loan, and (iii) there has not occurred any material adverse change in the financial condition or business operations or prospects of Borrower since the date of the most recently audited financial statements delivered to Lender. Additionally, prior to Lender's obligation to make any Expansion Loans available to Borrower, Lender shall have received a re-affirmation of guaranty from each guarantor of the Loans, including such Expansion Loan, and shall have received such other documents as Lender may request and deem necessary or appropriate in its sole and absolute discretion. 2.5 Notwithstanding anything to the contrary in the Loan Documents, from and after the date of this Agreement, the Loans, including the Expansion Loans, shall bear interest, on the outstanding daily balance thereof, at a rate of interest equal to Prime Rate (as defined below) plus 1.5% per annum, calculated on the basis of a 360-day year, subject to a minimum interest rate of 8.0% per annum and a maximum interest rate per annum equal to the maximum interest rate per annum allowed under applicable laws. Notwithstanding anything to the contrary in the Loan Documents, interest on the outstanding Loans, including Expansion Loans, shall be due and payable on the first day of each calendar quarter and, at Arcom's option, either in cash or by adding the accrued interest to the outstanding principal amount of Loans, including the Expansion Loans, outstanding under the Loan Documents. Any interest not paid in cash when due shall be compounded by becoming a part of the Loans, and such interest shall thereafter accrue interest at the rate then applicable hereunder. "Prime Rate" means, on any date of determination, the prime rate as published by the western edition of the Wall Street Journal on the last business day of the calendar month immediately preceding such date. 2.6 Notwithstanding anything to the contrary in the Loan Documents, Borrower promises to pay to Lender the aggregate unpaid principal amount of the Loans, including the Expansion Loans, together with accrued and unpaid interest on the unpaid principal thereof, at interest rates in accordance with Section 2.5 of this Agreement, on or prior to June 30, 2004 (the "Maturity Date"). Notwithstanding anything to the contrary in the Loan Documents, the Loans, including Expansion Loans, may be prepaid in whole or from time to time in part in minimum increments of $100,000 without premium or penalty, along with accrued and unpaid interest on the amount so prepaid. Notwithstanding anything to the contrary in the Loan Documents, any Loans, including Expansion Loans, once prepaid, may not be re-borrowed. 2.7 Notwithstanding anything to the contrary in the Loan Documents, Borrower may sell assets for fair market value (as reasonably determined by the Board of Directors of Arcoms, or a committee thereof) cash consideration with the prior written consent of the Lender (not be unreasonably withheld), provided that the net proceeds generated from sale of any assets of Arcoms shall be applied as follows: ITEM NO. NET PROCEEDS APPLICATION 1. First $1,500,000 To be retained by Arcoms for its working capital requirements. 2. Next $1,500,000 To be paid by Arcoms to Lender for application toward repayment of Borrower's Indebtedness. 3. Next $3,000,000 50% of such proceeds to be retained by Arcoms for its working capital requirements. 50% of such proceeds to be paid by Arcoms to Lender for application toward repayment of Borrower's Indebtedness. 4. All proceeds To be paid by Arcoms to therafter Lender until complete and indefeasible payment of Borrower's Indebtedness and all other secured debt owing by Borrower to Lender. SECTION 3. REAFFIRMATION OF SECURITY INTEREST. Borrower hereby reaffirms its obligations under the Loan Documents, as amended by this Agreement, and ratifies and reaffirms the validity and enforceability of all of the liens and security interests heretofore in the Collateral granted to Lender pursuant to the Loan Documents, as collateral security for the Indebtedness (including the Expansion Loans) of Borrower under the Loan Agreement and the other Loan Documents, as amended by this Agreement, and acknowledges that all of such liens and security interests, and all Collateral heretofore pledged as security for such Indebtedness, continues to be and remain collateral for such Indebtedness, including the Expansion Loans, from and after the date hereof. The Borrower hereby authorizes the filing of all Uniform Commercial Code financing statements and amendments, along with appropriate filings with the U.S Patent and Trademarks Office and U.S. Copyright Office, necessary to maintain and continue Lender's first priority fully perfected security interest in the Collateral. SECTION 4. LIMITED AMENDMENT. Each of the amendments set forth in Section 2 of this Agreement shall be limited precisely as written and shall not be deemed (a) to be an amendment of any other term or condition of the Loan Agreement or the other Loan Documents, to prejudice any right or remedy which Lender may now have or may have in the future under or in connection with the Loan Agreement or the other Loan Documents, or (b) to be a consent to any future amendment. SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that (1) the representations and warranties respectively made in the Loan Documents continue to be true and complete in all material respects as of the date hereof after giving effect to this Agreement except as set forth in Schedule 5 hereto, (2) the execution, delivery and performance of this Agreement are duly authorized, do not require the consent or approval of any governmental body or regulatory authority and are not in contravention of or in conflict with any material law or regulation or any term or provision of any other material agreement entered into by Borrower, (3) no representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Lender taken together with all such certificates and written statements furnished to Lender contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading, it being recognized by Lender that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results, and (4) it has good title to the Collateral; the liens in the Collateral in favor of Lender are valid and first priority liens, and there are no liens or encumbrances on the Collateral other than those specifically set forth on Exhibit 5.4 hereto. SECTION 6. CONDITIONS PRECEDENT. The obligation of each Lender to make available the Expansion Loans is subject to the satisfaction of all of the following conditions precedent: 6.1 Lender shall have received that certain Warrant to Purchase Stock issued concurrently herewith by Arcoms to Lender for the purchase of Arcom's Series D Preferred stock, in form and substance substantially identical to Exhibit 6.1 attached hereto and the same shall have become effective according to its terms ("Series D Warrant"); 6.2 Arcoms shall have filed a certificate of determination with the office of the Secretary of State for the State of California to create sufficient Series D Preferred Stock of Arcoms underlying the Series D Warrant; 6.3 Lender and Borrower shall have entered into a letter agreement on a payment schedule for the accounts payable due to Lender's counsel, Cooley Godward LLP, acceptable to Lender and Borrower. In addition to the foregoing, Lender shall have received reimbursement from Borrower of its costs and expenses incurred (including, without limitation, its reasonable attorneys' fees and expenses not to exceed $25,000) in connection with this Agreement and the transactions contemplated hereby; 6.4 There shall have occurred no material adverse change in the financial condition or business operations or prospects of Borrower since the date of the most recently audited financial statements delivered to Lender; 6.5 There shall have been delivered to Lender or executed, filed and/or recorded in all applicable jurisdictions such other instruments or documents, including, without limitation, all UCC financing statements, UCC amendments, intellectual property filings, fixture filings, landlord waivers, and mortgagee waivers, as Lender deems necessary or, in the opinion of Lender, desirable to perfect and protect its security interest in the Collateral; and Lender shall have received such lien and judgment searches, opinions, releases, termination statements, and other documents and instruments as Lender shall reasonably request to confirm that Lender has a first priority perfected security interest in the Collateral subject to no other liens, other than those set forth in Exhibit 5.4 hereto; and 6.6 Lender shall have received such other documents, information and items, including all the required consents and approvals, related to the Loans as it shall request in its sole and absolute discretion. SECTION 7. RESERVATION OF RIGHTS. While Lender has, to date, not determined to take any Enforcement Actions based on the Current Events of Default, Lender reserves its rights, notwithstanding anything to the contrary in this Agreement, at any time to declare an Event of Default based on the Current Events of Default or any future Event of Default under the Loan Documents, including any Event of Default relating to Expansion Loans, or on any other violation, breach or event which constitutes an Event of Default under the Loan Documents currently existing or hereafter occurring, and thereupon to exercise any and all of its rights and remedies available under the Loan Documents and applicable law including, without limitation, an acceleration of the Indebtedness. Borrower expressly agrees that Lender shall not, by entering into this Agreement, or by any other actions or omissions to act (including any determination by Lender in its sole and absolute discretion, to make or not make Expansion Loans), be deemed to have waived the Current Events of Default, or any other past or present breaches, defaults or violations of the Loan Documents. SECTION 8. CO-OBLIGOR WAIVERS. Each Borrower hereby expressly waives (1) diligence, presentment, demand for payment and protest affecting the other Borrower's liability under the Loan Documents; (2) discharge due to any disability of the other Borrower; (3) any defenses of the other Borrower to obligations under the Loan Documents available to such Borrower solely by virtue of its status as a guarantor or surety of the other Borrower; (4) the benefit of any act or omission by Lender which directly or indirectly results in or aids the discharge of the other Borrower from any of the Indebtedness of such Borrower by operation of law; (5) all notices whatsoever, including, without limitation, notice of acceptance of the incurring of the Indebtedness of the other Borrower; (6) any right it may have to require Lender to disclose to it any information that Lender may now or hereafter acquire concerning the financial condition or any circumstances that bear on the risk of nonpayment by the other Borrower, including the release of the other Borrower from its Indebtedness hereunder; (7) any requirement that Lender exhaust any right, power or remedy or proceed against the other Borrower or any other security for, or any guarantor of, or any other party liable for, any of the Indebtedness of the Borrower, or any portion thereof; and (8) without limiting the foregoing, the benefit of California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and 1432. Each Borrower specifically agrees that it shall not be necessary or required, and neither Borrower shall be entitled to require, that Lender (i) file suit or proceed to assert or obtain a claim for personal judgment against the other Borrower or any guarantor or any other party for all or any part of the Indebtedness of such Borrower; (ii) make any effort at collection or enforcement of all or any part of the indebtedness of the Borrower from the other Borrower; (iii) foreclose against or seek to realize upon any collateral or any other security now or hereafter existing for all or any part of the Indebtedness of the other Borrower; (iv) exercise or assert any other right or remedy to which Lender is or may be entitled in connection with the Indebtedness of any Borrower or any security or guaranty relating thereto to assert; or (v) file any claim against assets of one Borrower before or as a condition of enforcing the liability of the other Borrower under this Agreement or the other Loan Documents. SECTION 9. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent expressly provided in this Agreement, the terms and conditions of the Loan Agreement and the other Loan Documents shall remain in full force and effect. The parties hereto further agree that the Loan Documents comprise the entire agreement of the parties thereto and supersede any and all prior agreements, negotiations, correspondence, understandings and other communications between the parties thereto, whether written or oral respecting the extension of credit by Lender to Borrower. In the event of any conflict between any terms and conditions set forth in any other Loan Document and this Agreement, the terms and conditions set forth in this Agreement shall prevail. SECTION 10. NO CLAIMS; RELEASE. 10.1 Except as set forth in Section 10.4 below, Borrower hereby acknowledges and agrees that to its knowledge: (i) it has no claim or cause of action against Lender or any parent, subsidiary or affiliate of Lender, or any of Lender's officers, directors, employees, attorneys or other representatives or agents in connection with the Loan Documents, the loans thereunder or the transactions contemplated therein and in this Agreement; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of Lender; and (iii) Lender has heretofore properly performed and satisfied in a timely manner all of its obligations to and contracts with Borrower as set forth in the Loan Documents. 10.2 Except as set forth in Section 10.4 below, Arcoms, Enerdyne and each of their respective subsidiaries, affiliates, predecessors, successors and assigns, hereby fully and forever expressly agree, unconditionally and irrevocably to RELEASE, DISCHARGE, acquit and forgive the Lender and all of their respective subsidiaries, affiliates, predecessors, successors and assigns, and all of their present and former officers, directors, employees, partners, members, attorneys, beneficiaries and trustees (collectively, the "Releasees"), or any of them, from all actions, causes of action, suits, debts, liabilities, contracts, obligations, controversies, judgments, executions, claims, costs and demands both at law and in equity which they have or may have against the Releasees, or any of them, whether asserted or unasserted, whether now known or suspected which have existed or may have existed, or which do exist or which hereafter can, shall or may exist, based on any facts, events, or omissions, by reason of any matter or act whatsoever from the beginning of time until the date hereof in connection with the Loan Documents, the loans thereunder or the transactions contemplated therein and in this Agreement. 10.3 Except as set forth in Section 10.4 below, each of Arcoms and Enerdyne hereby acknowledges that there is a possibility that subsequent to the execution of this Agreement, they will discover facts or incur or suffer claims that were unknown or unsuspected at the time this Agreement was executed, and which if known by that party at that time may have materially affected that party's decision to execute this Agreement. Each of Arcoms and Enerdyne hereby acknowledges and agrees that by reason of this Agreement, and the releases contained in this Section 10, each of Arcoms and Enerdyne is assuming any risk of such unknown facts and such unknown and unsuspected claims. Each of Arcoms and Enerdyne has been advised of the existence of Section 1542 of the California Civil Code ("Section 1542") which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Notwithstanding such provisions, this release shall constitute a full release in accordance with its terms. Each of Arcoms and Enerdyne hereby knowingly and voluntarily waives the provisions of Section 1542, as well as any other statute, law or rule of similar effect. 10.4 Each of Lender and Borrower agrees that, notwithstanding anything to the contrary contained in this Agreement, Borrower reserves and does not release any of the Releasees from any and all actions, causes of action, suits, rights, remedies defenses, debts, liabilities, obligations, controversies, judgments, executions, claims, costs and demands both at law and in equity which they have or may have against the Releasees, or any of them, whether asserted or unasserted, as to the amount of principal which Lender is entitled to be repaid by Borrower or any guarantor with respect to the Loans and the Subordinated Notes arising directly or indirectly from the purchase of the Loans and Subordinated Notes at a discount; provided, however, that notwithstanding anything to the contrary in the foregoing, each of Lender and Borrower agrees that no inference is intended to be drawn as to the validity of any such actions, causes of action, suits, rights, remedies defenses, debts, liabilities, obligations, controversies, judgments, executions, claims, costs and demands and the foregoing shall not be deemed to be an admission by Lender of the validity thereof. SECTION 11. GOVERNING LAW; VENUE; DISPUTES; JURY TRIAL WAIVER. This Agreement will be construed in accordance with, and governed in all respects by, the laws of the State of California (without giving effect to principles of conflicts of laws that would require the application of the laws of any other state). Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state court located in the County of San Francisco, California or any federal court located in the Northern District of California. Each party expressly and irrevocably consents and submits to the jurisdiction of each such state and federal court (and each appellate court located in the State of California) in connection with any such legal proceeding. SECTION 12. MISCELLANEOUS. 12.1 Borrower recognizes that this Agreement is confidential and that disclosure of the provisions contained herein could cause irreparable harm to Lender. Accordingly, Borrower, and each of Borrower's agents, officers and directors acknowledge and agree that the terms, conditions and contents of this term sheet will be kept confidential and will not be published or disclosed except in the following circumstances: (i) disclosure may be made to Borrower's directors, officers, employees or representatives who need to know such information for the purpose of evaluating this proposed investment (it being understood that such persons shall be informed by Borrower of the confidential nature of such information and shall be required to treat such information confidentially); (ii) disclosure may be made with the prior written consent of Lender; and (iii) disclosure required by law. 12.2 If any provision of this Agreement is determined to be invalid or unenforceable to any extent, the remainder of this Agreement will not be impaired or otherwise affected and will continue to be valid and enforceable, and the affected provision will be deemed valid and enforceable to the fullest extent permitted by applicable law. 12.3 All waivers must be in writing and signed by an authorized representative of the party to be charged. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver of any other provision or of such provision on any other occasion. There will be no waiver by course of dealing, performance, trade, usage, or custom. This Agreement may not be amended, modified, altered, or supplemented other than by means of a written instrument duly executed and delivered on behalf of both Lender and Borrower. 12.4 Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents, which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telecopy to Borrower or to Lender, as the case may be, at its addresses set forth below its respective signatures. 12.5 This Agreement may be executed in any number of counterparts, each of which when so delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. Each such agreement shall become effective upon the execution of a counterpart hereof or thereof by each of the parties hereto and telephonic notification that such executed counterparts has been received by each party. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first written above. LENDER: HOUSATONIC MICRO FUND SBIC, L.P. /s/ Joseph Niehaus Name: Joseph Hiehaus ADDRESS FOR NOTICES: 44 Montgomery Street, Suite 4010 San Francisco, CA 94104 Attention: Mr. Joseph Niehaus Facsimile: (415) 955-5715 HOUSATONIC MICRO FUND, L.P /s/ Joseph Niehaus Name: Joseph Niehaus ADDRESS FOR NOTICES: 44 Montgomery Street, Suite 4010 San Francisco, CA 94104 Attention: Mr. Joseph Niehaus Facsimile: (415) 955-5715 LEXINGTON FUNDING LLC /s/ Harvey S. Gettleson Name:Harvey S. Gettleson Title: Chief Financial Officer ADDRESS FOR NOTICES: 9350 Wilshire Blvd., Suite 400 Beverly Hills, CA 90212-3206 Attention: Mr. Harvey Gettleson Facsimile: (310) 271-3990 BORROWER: ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer ADDRESS FOR NOTICES: ENERDYNE TECHNOLOGIES, INC. /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer ADDRESS FOR NOTICES: ACKNOWLEDGMENT OF AND CONSENT TO AGREEMENT, AMENDMENT, RESERVATION OF RIGHTS AND RELEASE AND REAFFIRMATION OF GUARANTY EACH OF THE UNDERSIGNED, AS A GUARANTOR OF THE INDEBTEDNESS OF ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., A CALIFORNIA CORPORATION FORMERLY KNOWN AS BOATRACS, INC. AND ENERDYNE TECHNOLOGIES, INC., A CALIFORNIA CORPORATION (COLLECTIVELY "BORROWER") OWING TO HOUSATONIC MICRO FUND SBIC, L.P., HOUSATONIC MICRO FUND, L.P AND LEXINGTON FUNDING LLC (COLLECTIVELY, THE "LENDER") UNDER THE LOAN DOCUMENTS BETWEEN BORROWER AND LENDER (IN SUCH CAPACITY, EACH A "GUARANTOR"), HEREBY ACKNOWLEDGES AND CONFIRMS THAT IT HAS REVIEWED THE TERMS AND CONDITIONS OF THE FOREGOING AGREEMENT, AMENDMENT, RESERVATION OF RIGHTS AND RELEASE ("AGREEMENT") BETWEEN BORROWER AND LENDER. EACH GUARANTOR HEREBY (A) CONSENTS TO AND APPROVES THE EXECUTION OF THE AGREEMENT BY BORROWER AND LENDER, (B) AGREES THAT ITS RESPECTIVE GUARANTY RELATING TO THE INDEBTEDNESS OF BORROWER UNDER THE LOAN DOCUMENTS, AS AMENDED BY THE AGREEMENT, SHALL CONTINUE IN FULL FORCE AND EFFECT, SHALL BE VALID AND ENFORCEABLE AND SHALL NOT BE IMPAIRED OR OTHERWISE AFFECTED BY THE EXECUTION OF THE AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT DELIVERED IN CONNECTION THEREWITH, AND (C) REAFFIRMS THAT ITS RESPECTIVE GUARANTY GUARANTEES ALL INDEBTEDNESS OF BORROWER UNDER THE LOAN DOCUMENTS, AS AMENDED BY THE AGREEMENT, AND ALL OTHER DOCUMENTS EXECUTED IN CONNECTION THEREWITH. Dated: March 25, 2003 GUARANTORS: INNOVATIVE COMMUNICATIONS TECHNOLOGIES, INC., a Delaware corporation /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer BOATRACS (EUROPE) B.V., a Netherlands corporation /s/ Paul Wickman Name: Paul Wickman Title:Treasurer OCEANTRAC INCORPORATED, a Canadian corporation /s/ Paul Wickman Name:Paul Wickman Title: Treasurer EX-99 5 exhthree.txt WARRANT TO PURCHASE - HOUSATONIC Exhibit 99.3 THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. WARRANT TO PURCHASE SERIES D PREFERRED STOCK No. __ March 25, 2003 Void After March 25, 2013 THIS CERTIFIES THAT, for value received, the sufficiency of which is hereby acknowledged, Housatonic Micro Fund, L.P., with its principal address at 44 Montgomery Street, Suite 4010, San Francisco, CA 94104, or its assigns (the "Holder"), is entitled to subscribe for and purchase at the Exercise Price (defined below) from ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., a California corporation, with its principal office at 1935 Cordell Court, El Cajon, CA 92020 (the "Company") up to one thousand six hundred sixty-seven (1,667) shares of Series D Preferred Stock of the Company (the "Series D Preferred"). 1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings: (a) "Exercise Period" shall mean the period commencing with the date hereof and ending ten (10) years later, unless sooner terminated as provided below. (b) "Exercise Price" shall mean, as of any given date and subject to adjustment pursuant to Section 5 below, (i) $1.00, (ii) multiplied by a fraction, (a) the numerator of which shall be equal to the aggregate amount of Expansion Loans (as defined in the Loan Amendment, as defined below) taken out by the Company (the "Drawn-Down Amount") pursuant to that certain Agreement, Amendment, Reservation of Rights and Release of even date herewith by and among the Company, Enerdyne Technologies, Inc., the Holder and Lexington Funding LLC (the "Loan Amendment"), and (b) the denominator of which shall be $500,000; (iii) less any portion of the Exercise Price previously paid in connection with the partial exercise of the Holder's rights to acquire Exercise Shares pursuant to this Warrant. (c) "Exercise Shares" shall mean the shares of Series D Preferred issuable upon exercise of this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section 5 below. 2. EXERCISE OF WARRANT. Subject to the vesting schedule set forth in Section 2.2 below, the rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder): (a) An executed Notice of Exercise in the form attached hereto; (b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness; and (c) This Warrant. Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, and, if applicable, a new warrant evidencing the balance of the shares of Series D Preferred remaining subject to this Warrant, shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.1 Net Exercise. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of shares of Series D Preferred computed using the following formula: X = Y - B ---- ---- A Where X = the number of shares of Series D Preferred to be issued to the Holder Y = the number of shares of Series D Preferred purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation) A = the fair market value of one share of the Series D Preferred (at the date of such calculation) B = Exercise Price (as adjusted to the date of such calculation) For purposes of the above calculation, the fair market value of one share of Series D Preferred shall be determined by the Company's Board of Directors in good faith. 2.2 Vesting Schedule. Until (i) the expiration of the Exercise Period or (ii) all of the Exercise Shares have fully vested in accordance with this Section 2.2, the Holder's right to acquire the Exercise Shares shall be subject to a vesting schedule such that, as of any given date, the Holder shall be entitled to exercise its right to purchase that number of Exercise Shares equal to (i) one-half of the Drawn-Down Amount under the Loan Amendment, (ii) divided by 150. 2.3 Automatic Exercise Upon Redemption. In the event of any redemption by the Company of shares of Series D Preferred pursuant to Section 4 of the Company's Certificate of Determination of Series D Preferred Stock (the "Series D Certificate of Determination"), the Holder shall be deemed, as of immediately prior to the Redemption Date (as defined in the Series D Certificate of Determination), to have exercised this Warrant to purchase that portion of its vested Exercise Shares which the Company has sufficient legally available funds to redeem in full upon such Redemption Date (as defined in the Series D Certificate of Determination); provided, however, that if the number of vested Exercise Shares received by virtue of the automatic exercise of the Warrant pursuant to this Section 2.3 is less than the aggregate number of shares of Series D Preferred subject to this Warrant on the Redemption Date (as defined in the Series D Certificate of Determination), a new warrant evidencing the balance of the such shares remaining subject to this Warrant shall be issued and delivered to the Holder within a reasonable time after Redemption Date (as defined in the Series D Certificate of Determination). Payment of the Exercise Price due in connection with any such automatic exercise pursuant to this Section 2.3 shall be made by virtue of the net exercise provisions set forth in Section 2.1 of this Warrant. 3. COVENANTS OF THE COMPANY. 3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant (and all shares of Common Stock issuable upon the conversion of the Exercise Shares in accordance with the Series D Certificate of Determination) will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Series D Preferred (and Common Stock issuable upon the conversion of the Series D Preferred in accordance with the Series D Certificate of Determination) to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Series D Preferred (or Common Stock issuable upon the conversion of the Series D Preferred in accordance with the Series D Certificate of Determination) shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Series D Preferred and/or Common Stock to such number of shares as shall be sufficient for such purposes. 3.2 No Impairment. Except and to the extent as waived or consented to by the Holder, the Company will not, by amendment of its Certificate 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 to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. 3.3 Notices of Record Date. In the event of 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 (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least ten (10) days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution. 4. REPRESENTATIONS OF HOLDER. 4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only. 4.2 Securities Are Not Registered. (a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the "Act") on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention. (b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration. (c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future. 4.3 Disposition of Warrant and Exercise Shares. (a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until: (i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition; (ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or (iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. (b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legends: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 5. ADJUSTMENTS. 5.1 Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Series D Preferred shall be entitled to receive stock, securities, or other assets or property (an "Organic Change"), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder shall thereafter have the right to purchase and receive (in lieu of the shares of the Series D Preferred immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Series D Preferred equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby; provided, however, that in the event the value of the stock, securities or other assets or property (as determined in good faith by the Board of Directors of the Company) issuable or payable with respect to one share of the Series D Preferred of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby is in excess of the Stock Purchase Price hereof effective at the time of a merger and securities received in such reorganization, if any, are publicly traded, then this Warrant shall expire unless exercised prior to such Organic Change. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company will not effect any such consolidation, merger or sale unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or the corporation purchasing such assets shall assume the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5.2 Certain Events. If any change in the outstanding Series D Preferred or any other event occurs as to which the other provisions of this Section 5 do not, in the reasonable opinion of the Board of Directors of the Company reached in good faith, fairly and equitably protect the purchase rights of the Holder of the Warrant in accordance with such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be such as to give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as he would have owned had the Warrant been exercised prior to the event and had he continued to hold such shares until after the event requiring adjustment 5.3 Notices of Change. (a) Promptly following any adjustment in the number or class of shares subject to this Warrant, the Company shall give written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. (b) The Company shall also give written notice to the Holder at least thirty (30) business days prior to the date on which an Organic Change shall take place. 6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of an Exercise Share by such fraction. 7. AUTOMATIC EXERCISE UPON EXPIRATION. If this Warrant shall not have been exercised in full as to the shares that have vested pursuant to Sections 2.2 (the "Vested Shares") on or before the end of the Exercise Period (the "Termination Date"), then this Warrant shall be automatically exercised, without further action on the part of the Holder hereof, in full as to the Vested Shares (and the Holder hereof shall be deemed to be a Holder of the Exercise Shares issued upon such automatic exercise) on and as of the Termination Date, unless at any time on or before the Termination Date the Holder of this Warrant shall notify the Company in writing that no such automatic exercise is to occur. Payment of the Exercise Price due in connection with any such automatic exercise pursuant to this section shall be made by virtue of the net exercise provisions set forth in Section 2.1 of this Warrant, if applicable, unless at any time on or before the Termination Date the Holder of this Warrant shall notify the Company that such Holder elects one of the other payment options set forth herein or if the net exercise provisions set forth in Section 2.1 are for any reason inapplicable, the Holder shall be obligated to deliver the Exercise Price to the Company in cash. As promptly as practicable following any such automatic exercise, and in any event within thirty (30) days after the date that the Holder of this Warrant surrenders this Warrant to the Company for cancellation together with any required consideration therefor, the Company shall cause to be issued and delivered to the Holder hereof a certificate registered in the name of the Holder hereof (unless the Holder shall specifically instruct the Company otherwise) representing the Exercise Shares (or other security issuable upon the exercise hereof) issued in connection with such automatic exercise of this Warrant minus the number of Exercise Shares, if any, applied in payment of the Exercise Price as provided in Section 2.1. 8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. 9. TRANSFER OF WARRANT. Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company. 10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 11. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company or to the Holder at their respective addresses listed on the signature page hereto or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto. 12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein. 13. GOVERNING LAW. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of California. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of March 25, 2003. ADVANCED REMOTE COMMUNICATIONS SOLUTIONS, INC. /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer NOTICE OF EXERCISE TO: ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. (1) |_| The undersigned hereby elects to purchase ________ shares of the Series D Preferred Stock of ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. |_| The undersigned hereby elects to purchase ________ shares of the Series D Preferred Stock of the Company pursuant to the terms of the cashless exercise provisions set forth in Section 2.1 of the attached Warrant and shall tender payment of all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Series D Preferred Stock in the name of the undersigned or in such other name as is specified below: ________________________ (Name) ________________________ ________________________ (Address) (3) The undersigned represents that (i) the aforesaid shares of Series D Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned's own interests; (iv) the undersigned understands that the shares of Common Stock issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid shares of Series D Preferred Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of Rule 144 is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Series D Preferred Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required. (Date) (Signature) (Print name) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to Name: (Please Print) Address: (Please Print) Dated: __________, 20__ Holder's Signature: Holder's Address: 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 whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-99 6 exhfour.txt WARRANT TO PURCHASE - LEXINGTON Exhibit 99.4 THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. WARRANT TO PURCHASE SERIES D PREFERRED STOCK No. __ March 25, 2003 Void After March 25, 2013 THIS CERTIFIES THAT, for value received, the sufficiency of which is hereby acknowledged, Lexington Funding LLC, with its principal address at 9350 Wilshire Blvd., Suite 400, Beverly Hills, CA, or its assigns (the "Holder"), is entitled to subscribe for and purchase at the Exercise Price (defined below) from ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., a California corporation, with its principal office at 1935 Cordell Court, El Cajon, CA 92020 (the "Company") up to one thousand six hundred sixty-seven (1,667) shares of Series D Preferred Stock of the Company (the "Series D Preferred"). 1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings: (a) "Exercise Period" shall mean the period commencing with the date hereof and ending ten (10) years later, unless sooner terminated as provided below. (b) "Exercise Price" shall mean, as of any given date and subject to adjustment pursuant to Section 5 below, (i) $1.00, (ii) multiplied by a fraction, (a) the numerator of which shall be equal to the aggregate amount of Expansion Loans (as defined in the Loan Amendment, as defined below) taken out by the Company (the "Drawn-Down Amount") pursuant to that certain Agreement, Amendment, Reservation of Rights and Release of even date herewith by and among the Company, Enerdyne Technologies, Inc., the Holder, Housatonic Micro Fund SBIC, L.P. and Housatonic Micro Fund, L.P. (the "Loan Amendment"), and (b) the denominator of which shall be $500,000; (iii) less any portion of the Exercise Price previously paid in connection with the partial exercise of the Holder's rights to acquire Exercise Shares pursuant to this Warrant. (c) "Exercise Shares" shall mean the shares of Series D Preferred issuable upon exercise of this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section 5 below. 2. EXERCISE OF WARRANT. Subject to the vesting schedule set forth in Section 2.2 below, the rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder): (a) An executed Notice of Exercise in the form attached hereto; (b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness; and (c) This Warrant. Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, and, if applicable, a new warrant evidencing the balance of the shares of Series D Preferred remaining subject to this Warrant, shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open. 2.1 Net Exercise. Notwithstanding any provisions herein to the contrary, in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of shares of Series D Preferred computed using the following formula: X = Y - B ---- ---- A Where X = the number of shares of Series D Preferred to be issued to the Holder Y = the number of shares of Series D Preferred purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation) A = the fair market value of one share of the Series D Preferred (at the date of such calculation) B = Exercise Price (as adjusted to the date of such calculation) For purposes of the above calculation, the fair market value of one share of Series D Preferred shall be determined by the Company's Board of Directors in good faith. 2.2 Vesting Schedule. Until (i) the expiration of the Exercise Period or (ii) all of the Exercise Shares have fully vested in accordance with this Section 2.2, the Holder's right to acquire the Exercise Shares shall be subject to a vesting schedule such that, as of any given date, the Holder shall be entitled to exercise its right to purchase that number of Exercise Shares equal to (i) one-half of the Drawn-Down Amount under the Loan Amendment, (ii) divided by 150. 2.3 Automatic Exercise Upon Redemption. In the event of any redemption by the Company of shares of Series D Preferred pursuant to Section 4 of the Company's Certificate of Determination of Series D Preferred Stock (the "Series D Certificate of Determination"), the Holder shall be deemed, as of immediately prior to the Redemption Date (as defined in the Series D Certificate of Determination), to have exercised this Warrant to purchase that portion of its vested Exercise Shares which the Company has sufficient legally available funds to redeem in full upon such Redemption Date (as defined in the Series D Certificate of Determination); provided, however, that if the number of vested Exercise Shares received by virtue of the automatic exercise of the Warrant pursuant to this Section 2.3 is less than the aggregate number of shares of Series D Preferred subject to this Warrant on the Redemption Date (as defined in the Series D Certificate of Determination), a new warrant evidencing the balance of the such shares remaining subject to this Warrant shall be issued and delivered to the Holder within a reasonable time after Redemption Date (as defined in the Series D Certificate of Determination). Payment of the Exercise Price due in connection with any such automatic exercise pursuant to this Section 2.3 shall be made by virtue of the net exercise provisions set forth in Section 2.1 of this Warrant. 3. COVENANTS OF THE COMPANY. 3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant (and all shares of Common Stock issuable upon the conversion of the Exercise Shares in accordance with the Series D Certificate of Determination) will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Series D Preferred (and Common Stock issuable upon the conversion of the Series D Preferred in accordance with the Series D Certificate of Determination) to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Series D Preferred (or Common Stock issuable upon the conversion of the Series D Preferred in accordance with the Series D Certificate of Determination) shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Series D Preferred and/or Common Stock to such number of shares as shall be sufficient for such purposes. 3.2 No Impairment. Except and to the extent as waived or consented to by the Holder, the Company will not, by amendment of its Certificate 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 to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. 3.3 Notices of Record Date. In the event of 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 (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least ten (10) days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution. 4. REPRESENTATIONS OF HOLDER. 4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only. 4.2 Securities Are Not Registered. (a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the "Act") on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention. (b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration. (c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future. 4.3 Disposition of Warrant and Exercise Shares. (a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until: (i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition; (ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or (iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. (b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legends: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 5. ADJUSTMENTS. 5.1 Reorganization, Reclassification, Consolidation, Merger or Sale. If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Series D Preferred shall be entitled to receive stock, securities, or other assets or property (an "Organic Change"), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder shall thereafter have the right to purchase and receive (in lieu of the shares of the Series D Preferred immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Series D Preferred equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby; provided, however, that in the event the value of the stock, securities or other assets or property (as determined in good faith by the Board of Directors of the Company) issuable or payable with respect to one share of the Series D Preferred of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby is in excess of the Stock Purchase Price hereof effective at the time of a merger and securities received in such reorganization, if any, are publicly traded, then this Warrant shall expire unless exercised prior to such Organic Change. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company will not effect any such consolidation, merger or sale unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or the corporation purchasing such assets shall assume the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5.2 Certain Events. If any change in the outstanding Series D Preferred or any other event occurs as to which the other provisions of this Section 5 do not, in the reasonable opinion of the Board of Directors of the Company reached in good faith, fairly and equitably protect the purchase rights of the Holder of the Warrant in accordance with such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be such as to give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as he would have owned had the Warrant been exercised prior to the event and had he continued to hold such shares until after the event requiring adjustment 5.3 Notices of Change. (a) Promptly following any adjustment in the number or class of shares subject to this Warrant, the Company shall give written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. (b) The Company shall also give written notice to the Holder at least thirty (30) business days prior to the date on which an Organic Change shall take place. 6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of an Exercise Share by such fraction. 7. AUTOMATIC EXERCISE UPON EXPIRATION. If this Warrant shall not have been exercised in full as to the shares that have vested pursuant to Sections 2.2 (the "Vested Shares") on or before the end of the Exercise Period (the "Termination Date"), then this Warrant shall be automatically exercised, without further action on the part of the Holder hereof, in full as to the Vested Shares (and the Holder hereof shall be deemed to be a Holder of the Exercise Shares issued upon such automatic exercise) on and as of the Termination Date, unless at any time on or before the Termination Date the Holder of this Warrant shall notify the Company in writing that no such automatic exercise is to occur. Payment of the Exercise Price due in connection with any such automatic exercise pursuant to this section shall be made by virtue of the net exercise provisions set forth in Section 2.1 of this Warrant, if applicable, unless at any time on or before the Termination Date the Holder of this Warrant shall notify the Company that such Holder elects one of the other payment options set forth herein or if the net exercise provisions set forth in Section 2.1 are for any reason inapplicable, the Holder shall be obligated to deliver the Exercise Price to the Company in cash. As promptly as practicable following any such automatic exercise, and in any event within thirty (30) days after the date that the Holder of this Warrant surrenders this Warrant to the Company for cancellation together with any required consideration therefor, the Company shall cause to be issued and delivered to the Holder hereof a certificate registered in the name of the Holder hereof (unless the Holder shall specifically instruct the Company otherwise) representing the Exercise Shares (or other security issuable upon the exercise hereof) issued in connection with such automatic exercise of this Warrant minus the number of Exercise Shares, if any, applied in payment of the Exercise Price as provided in Section 2.1. 8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. 9. TRANSFER OF WARRANT. Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company. 10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 11. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company or to the Holder at their respective addresses listed on the signature page hereto or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto. 12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein. 13. GOVERNING LAW. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of California. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of March 25, 2003. ADVANCED REMOTE COMMUNICATIONS SOLUTIONS, INC. /s/ Paul Wickman Name: Paul Wickman Title: Chief Financial Officer 374631 v1/SD 812F01!.DOC NOTICE OF EXERCISE TO: ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. (1) |_| The undersigned hereby elects to purchase ________ shares of the Series D Preferred Stock of ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. (the "Company") pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. |_| The undersigned hereby elects to purchase ________ shares of the Series D Preferred Stock of the Company pursuant to the terms of the cashless exercise provisions set forth in Section 2.1 of the attached Warrant and shall tender payment of all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Series D Preferred Stock in the name of the undersigned or in such other name as is specified below: ________________________ (Name) ________________________ ________________________ (Address) (3) The undersigned represents that (i) the aforesaid shares of Series D Preferred Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned's own interests; (iv) the undersigned understands that the shares of Common Stock issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid shares of Series D Preferred Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of Rule 144 is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Series D Preferred Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required. (Date) (Signature) (Print name) ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares. FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to Name: (Please Print) Address: (Please Print) Dated: __________, 20__ Holder's Signature: Holder's Address: 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 whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-99 7 exhfive.txt SERIES D CERTIF OF DETM Exhibit 99.5 CERTIFICATE OF DETERMINATION OF SERIES D PREFERRED STOCK OF ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC. The undersigned, Brandon Nixon and Paul Wickman, hereby certify that: A. They are the duly elected and acting Chief Executive Officer and Secretary, respectively of ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., a California Company (the "Company"). B. Pursuant to authority conferred by the Company's Amended and Restated Articles of Incorporation, as the same may from time to time be amended (the "Articles of Incorporation"), the board of directors of the Company (the "Board of Directors") has duly adopted the following recitals and resolutions: WHEREAS, the Articles of Incorporation of the Company authorize a class of shares of stock known as "Preferred Stock" comprising 1,000,000 shares, issuable from time to time in one or more series; and WHEREAS, the Board of Directors is authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series prior or subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding; NOW, THEREFORE, BE IT RESOLVED that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock, no par value, to be known as the Series D Preferred Stock of the Company and does hereby fix and determine the rights, preferences, privileges, restrictions, and other matters relating to said Series D Preferred Stock as follows: 1. DESIGNATION AND RANK. (a) There shall be designated a new series of Preferred Stock of the Company to be denominated the "Series D Preferred". The Series D Preferred shall consist of three thousand three hundred thirty-four (3,334) shares of Preferred Stock. (b) The Series D Preferred shall rank (i) junior and subsequent to the Series C-1 Preferred Stock, no par value (the "Series C-1 Preferred"), Series C-2 Preferred Stock, no par value (the "Series C-2 Preferred") and Series C-3 Preferred Stock, no par value (the "Series C-3 Preferred" and together with the Series C-1 Preferred and Series C-2 Preferred, the "Series C Preferred"), and the Series B Preferred Stock, no par value (the "Series B Preferred" and together with the Series C Preferred, the "Senior Stock"); and (ii) senior and prior to all outstanding stock other than Senior Stock, including the Series A Preferred Stock, no par value (the "Series A Preferred"), and the Common Stock, no par value (the "Common Stock" and together with the Series A Preferred, the "Junior Stock"), with respect to the payment of any dividends, liquidation rights, conversion rights and other rights, as further set forth herein. 2. DIVIDEND RIGHTS. Subject to the rights of the Senior Stock and any series of Preferred Stock that may from time to time come into existence in accordance with the terms of the Articles of Incorporation, the holders of Series D Preferred shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, noncumulative dividends at the rate of ten percent (10%) of the Original Issue Price (as defined below) of the Series D Preferred per annum on each outstanding share of Series D Preferred (as appropriately adjusted for any stock dividends, reclassifications, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof ("Appropriately Adjusted"), commencing from the date this Certificate of Determination of Series D Preferred Stock is filed with the Secretary of State of California (the "Certificate Filing Date"). The "Original Issue Price" of the Series D Preferred shall be one hundred fifty dollars ($150) per share. In case the Company shall declare a cash dividend upon its Common Stock or shall distribute to holders of its Common Stock shares of its capital stock (other than Common Stock), stock or other securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights (excluding options to purchase and rights to subscribe for Common Stock or other securities of the Company convertible into or exchangeable for Common Stock), then, in each such case, the holders of shares of Series D Preferred shall, concurrent with the distribution to holders of Common Stock, receive a like distribution based upon the number of shares of Common Stock into which such Series D Preferred is then convertible. 3. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, distributions to the shareholders of the Company shall be made in the following manner: (a) Preference. After any distributions due to the holders of Senior Stock then outstanding, the holders of Series D Preferred then outstanding shall be entitled to receive in preference to the holders of the Junior Stock then outstanding a per share amount equal to the one and one-half times (1.5x) the Original Issue Price of the Series D Preferred, Appropriately Adjusted, plus any accrued but unpaid dividends thereon (the "Liquidation Preference"). (b) Distribution after Payment of Liquidation Preference. After the payment of the Liquidation Preference to the Series D Preferred, and any preference payable with respect to the Senior Stock, the remaining assets of the Company shall be distributed ratably to the holders of the Junior Stock. (c) Deemed Liquidation. For purposes of this Section 3, a liquidation, dissolution or winding up of the Company shall be deemed to include (A) any consolidation or merger of the Company with or into any other Company or other entity or person, or any other corporate reorganization, in which the shareholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the voting power of the surviving entity immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions (1) to which the Company is a party in which in excess of fifty percent (50%) of the Company's voting power is transferred, or (2) by which in excess of fifty percent (50%) of the Company's voting power is acquired by a person or group as defined in Rule 13d of the Exchange Act of 1934, excluding any consolidation or merger effected exclusively to change the domicile of the Company, or (C) a sale, lease or other disposition of all or substantially all of the assets of the Company. (d) Non-cash Distributions. If consideration other than cash is to be distributed in exchange for shares of the Company or if any of the assets of the Company are to be distributed other than in cash, then the Board of Directors shall determine the value of the assets to be distributed to the holders of Preferred Stock. If such valuation is not to the satisfaction of a majority in interest of the holders of Series D Preferred, the Company shall, upon receipt of such request by such holders, promptly engage an independent competent appraiser reasonably acceptable to the holders of a majority of the Series D Preferred, to determine the value of the assets to be distributed to the holders of Series D Preferred. The Company shall, upon receipt of the appraiser's valuation, give prompt written notice to each holder of shares of Series D Preferred of the appraiser's valuation. Notwithstanding the above, any securities to be distributed to the shareholders shall be valued as follows: (i) If traded on a securities exchange or the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange, or the last reported sale prices on the Nasdaq National Market as the case may be, over the 30-day period ending three (3) business days prior to the distribution under Section 3(d) or the closing of the transaction or series of transactions under Section 3(c); (ii) If actively traded over-the-counter (other than on the Nasdaq National Market), the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three (3) business days prior to the distribution under Section 3(d) or the closing of the transaction or series of transactions under Section 3(c); and (iii) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Company after consultation with a competent independent appraiser reasonably acceptable to the holders of a majority of the Series D Preferred. 4. REDEMPTION OF PREFERRED STOCK. (a) At any time on or after the Certificate Filing Date, the Company may deliver to the holders of the Series D Preferred and the holders of any rights, options or warrants to purchase shares of Series D Preferred written notice (the "Redemption Notice") of its intent to redeem all, but not less than all, of the outstanding shares of Series D Preferred. Within ninety (90) days of, but not earlier than sixty (60) days following, delivery of the Redemption Notice, the Company shall, unless such shares are earlier converted at the option of the holders thereof, redeem all of the shares of Series D Preferred by paying the holders thereof cash (in the manner described in Section 4(b)) in exchange for such shares of Series D Preferred in an amount per share to equal to (i) fifty percent (50%) of the Liquidation Preference if the date on which the shares are actually redeemed (the "Redemption Date") occurs prior to June 30, 2003; (ii) seventy-five percent (75%) of the Liquidation Preference if the Redemption Date occurs after June 30, 2003 but prior to December 31, 2003; or (iii) the Liquidation Preference if the Redemption Date occurs after December 31, 2003. Within (30) days following the delivery of such Redemption Notice, the Company shall send an additional notice to all holders of the Series D Preferred to be redeemed setting forth (A) the price for the shares to be redeemed; and (B) the place at which such holders may obtain payment upon surrender of their share certificates. (b) On or prior to the Redemption Date, the Company shall deposit the aggregate consideration to be paid to redeem the Series D Preferred (the "Redemption Price") with a bank or trust company having aggregate capital and surplus in excess of $100,000,000, as a trust fund, with irrevocable instructions and authority to the bank or trust company to pay, on and after such Redemption Date, the applicable Redemption Price of the shares to their respective holders upon the surrender of their share certificates. Any funds deposited by the Company pursuant to this Section 4(b) for the redemption of shares of Series D Preferred which are thereafter converted into shares of Common Stock pursuant to Section 6 hereof shall be returned to the Company no later than the fifth (5th) day preceding the Redemption Date. The balance of any funds deposited by the Company pursuant to this Section 4(b), together with any accrued interest thereon, remaining unclaimed at the expiration of one (1) year following such Redemption Date shall be returned to the Company promptly upon its written request. (c) On or after such Redemption Date, each holder of shares of Series D Preferred to be redeemed shall surrender such holder's certificates representing such shares to the Company in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event that less than all the shares represented by such certificates are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after such Redemption Date, unless there shall have been a default in payment of the Redemption Price or the Company is unable to pay the Redemption Price due to not having sufficient legally available funds, all rights of the holder of such shares as a holder of Series D Preferred (except the right to receive the Redemption Price without interest upon surrender of their certificates), shall cease and terminate with respect to such shares; provided, however, that if all of the shares of Series D Preferred cannot be redeemed due to a default in payment by the Company or because the Company does not have sufficient legally available funds, the shares of Series D Preferred to be redeemed shall be redeemed pro rata, as determined by the Company's Board of Directors, and such shares that are not so redeemed, shall remain outstanding and shall be entitled to all of the rights and preferences provided herein. (d) In the event of a call for redemption of any shares of Series D Preferred, the Series D Conversion Rights (as defined in Section 6) for such shares shall terminate as to the shares designated for redemption at the close of business on the fifth (5th) day preceding the Redemption Date, unless default is made in payment of the Redemption Price. 5. VOTING RIGHTS. (a) General. Each holder of shares of Series D Preferred shall (i) be entitled to the number of votes equal to the whole number of shares of Common Stock into which such shares of Series D Preferred could be converted (pursuant to Section 6 hereof) immediately after the close of business on the record date fixed for any meeting or the effective date of any written consent; (ii) have voting rights and powers equal to the voting rights and powers of the Common Stock; and (iii) be entitled to notice of any shareholders' meeting in accordance with the Bylaws of the Company. Except as otherwise provided herein or as required by law, the Series D Preferred shall vote together with the Common Stock at any annual or special meeting of the shareholders and not as a separate class, and may act by written consent in the same manner as the Common Stock. (b) Separate Vote of Series D Preferred. In addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series D Preferred shall be necessary for effecting or validating the following actions: (i) Any amendment, alteration, or repeal of any provision of the Articles of Incorporation or the Bylaws of the Company (including any filing of a Certificate of Determination) that alters or changes the voting or other powers, preferences, or other special rights or privileges, or restrictions of the Series D Preferred; or (ii) Any authorization or any designation, whether by reclassification or otherwise, of any new class or series of stock or any other securities convertible into equity securities of the Company ranking on a parity with or senior to the Series D Preferred. 6. CONVERSION. The holders of the Series D Preferred have conversion rights as follows (the "Series D Conversion Rights"): (a) Right to Convert. Each share of Series D Preferred shall be convertible, at the option of the holder thereof, at any time after the date of issuance (the "Original Issue Date") of such share, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the applicable Original Issue Price, Appropriately Adjusted, by the Series D Conversion Price (as defined below) in effect at the time of the conversion. The ratio of the number of shares of Common Stock issuable upon the conversion of one share of Series D Preferred shall be referred to herein as the "Series D Conversion Rate." As of the Certificate Filing Date, the "Series D Conversion Price" shall be $0.15 per share, such that, as of the Certificate Filing Date, the Series D Conversion Rates shall be one thousand for one (1000:1). Such Series D Conversion Price shall be subject to adjustment as hereinafter provided. (b) Automatic Conversion. Each share of Series D Preferred shall automatically be converted into shares of Common Stock at the then-effective Series D Conversion Rate on the date upon which the Company obtains the consent of the holders of a majority of the shares of Series D Preferred then outstanding, voting as a single class on an as converted to Common Stock basis. (c) Mechanics of Conversion. Before any holder of Series D Preferred shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or that of any transfer agent for the Series D Preferred and shall give written notice to the Company at such office that such holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section 6(b), the outstanding shares of Series D Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent, and provided further that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series D Preferred are either delivered to the Company or its transfer agent as provided above, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. The Company shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Series D Preferred, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid and a check payable to the holder in the amount of the cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series D Preferred to be converted, or in the case of automatic conversion, on the date of the closing of the offering and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. Notwithstanding the foregoing, if the conversion is in connection with a transaction or series of related transactions described in Section 3(c) above, the conversion may, at the option of any holder tendering Series D Preferred for conversion, be conditioned upon the closing of such transaction or series of related transactions, in which event the person(s) entitled to receive the Common Stock issuable upon conversion of the Series D Preferred shall not be deemed to have converted such Series D Preferred until immediately prior to the final closing of such transaction or series of transactions. (d) Fractional Shares. In lieu of any fractional shares to which the holder of Series D Preferred would otherwise be entitled, the Company may (i) pay cash equal to such fraction multiplied by the fair market value of the fractional shares or (ii) round such fractional share up to a whole share (after aggregating all shares into which shares of Series D Preferred held by each holder could be converted). Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series D Preferred of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (e) Adjustment of Conversion Price. Unless the holders of a majority of the Series D Preferred, voting as a separate class, waive such right to adjustment of the Series D Conversion Price upon the occurrence of any event set forth in this Section 6(e), the Series D Conversion Price shall be subject to adjustment from time to time as follows: (i) If the number of shares of Common Stock outstanding at any time after the Certificate Filing Date is increased by a stock dividend payable in shares of Common Stock or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock, or by a subdivision or split-up of shares of Common Stock, then, on the date such payment is made or such change is effective, the Series D Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of any shares of Series D Preferred shall be increased in proportion to such increase of outstanding shares (determined on an as-converted into Common Stock basis). (ii) If the number of shares of Common Stock outstanding at any time after the Certificate Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Series D Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Series D Preferred shall be decreased in proportion to such decrease in outstanding shares. (iii) In the case, at any time after the date hereof, of any capital reorganization, or any reclassification of the stock of the Company (other than as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Company with or into another entity (other than a consolidation or merger in which the Company is the continuing entity and which does not result in any change in the Common Stock or a consolidation or merger where Section 3 applies), the shares of Series D Preferred shall, after such reorganization, reclassification, consolidation, merger, sale or other disposition, be convertible into the kind and number of shares of stock or other securities or property of the Company or otherwise to which such holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation, merger, sale or other disposition such holder had converted its shares of Series D Preferred into Common Stock. The provisions of this clause (iii) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or other dispositions. (iv) All calculations under this Section 6 shall be made to the nearest one-thousandth of one cent ($0.00001) or to the nearest one hundredth (1/100) of a share, as the case may be. (f) Minimal Adjustments. No adjustment in the Series D Conversion Price for any series of Series D Preferred need be made if such adjustment would result in a change in Series D Conversion Price of less than one-thousandth of one cent ($0.00001); provided, however, that any adjustment of less than one-thousandth of one cent ($0.00001) which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of one-thousandth of one cent ($0.00001) or more in such Series D Conversion Price. (g) No Impairment. The Company will not through any reorganization, re-capitalization, 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 to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6. This provision shall not restrict the Company's right to amend its Articles of Incorporation or this Certificate of Determination of Series D Preferred Stock with the requisite shareholder consent. (h) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series D Conversion Rate pursuant to this Section 6, 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 Series D Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon written request at any time of any holder of Series D Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) all such adjustments and readjustments, (ii) the Series D Conversion Rate at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Series D Preferred. (i) Notices of Record Date and Proposed Liquidation Distribution. In the event of any undertaking 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 (other than a cash dividend) or other distribution, 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, the Company shall mail to each holder of Series D Preferred at least thirty (30) days prior to such record date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution or right. In the event of a liquidation distribution pursuant to Section 3 hereof, the Company shall mail to each holder of Series D Preferred at least thirty (30) days prior to the date of such distribution a notice (i) certifying as to (x) the anticipated aggregate proceeds available for distribution to holders of Preferred Stock and Common Stock, (y) the amount expected to be distributed pursuant to Section 3 in respect of each share of each outstanding series of Preferred Stock and each share of Common Stock and (z) the amount expected to be distributed pursuant to Section 3 in respect of each share of each outstanding series of Preferred Stock if the holder of each such share of Preferred Stock converted such share of Preferred Stock into Common Stock immediately prior to the liquidation distribution and (ii) stating that in connection with such liquidation distribution the holders of shares of each series of Preferred Stock may prior to such liquidation distribution convert their shares of such series of Preferred Stock into Common Stock at the applicable conversion rate for such series. (j) Notices. Any notice required by the provisions of this Section 6 to be given to the holders of shares of the Series D Preferred shall be deemed given upon personal delivery, when received and upon acknowledgement when sent by facsimile, upon delivery by nationally recognized courier or three business days after deposit in the United States mail, postage prepaid, and addressed to each holder of record at such holder's address appearing on the Company's books. (k) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series D Preferred such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series D Preferred; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series D Preferred, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (l) Reissuance of Converted Shares. No shares of Series D Preferred which have been converted into Common Stock after the original issuance thereof shall ever again be reissued and all such shares so converted shall upon such conversion cease to be a part of the authorized shares of the Company. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of the Company are hereby authorized and directed to prepare and file a Certificate of Determination of Series D Preferred Stock in accordance with the foregoing resolutions and the provisions of California law. C. The authorized number of shares of Preferred Stock of the Company is one million (1,000,000) shares and the number of shares constituting Series D Preferred, none of which has been issued, is three thousand three hundred thirty-four (3,334) shares. D. The foregoing Certificate was approved by the holders of a majority of shares of the Series B Preferred and the holders of a majority of the Series C-1 Preferred, Series C-2 Preferred and Series C-3 Preferred. There were no shares of Series A Preferred Stock of the Company outstanding. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Determination of Series D Preferred Stock as of March 24, 2003. /s/Brandon Nixon Chief Executive Officer /s/Paul Wickman Secretary The undersigned, Brandon Nixon and Paul Wickman, the Chief Executive Officer and Secretary, respectively, of ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC., declare under penalty of perjury that the matters set out in the foregoing Certificate are true of their own knowledge. Executed at San Diego, California on March 24, 2003. /s/ Brandon Nixon /s/ Paul Wickman -----END PRIVACY-ENHANCED MESSAGE-----