CERTIFICATE OF DETERMINATION
of
SERIES C PREFERRED STOCK
of
ADVANCED REMOTE COMMUNICATION SOLUTIONS, INC.
The undersigned, Michael Silverman and Dean Kernus, hereby certify
that:
A. They are the duly elected and acting Chairman of the
Board 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 C Preferred Stock of the Company
and does hereby fix and determine the rights, preferences, privileges,
restrictions, and other matters relating to said Series C 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 C Preferred." The Series C Preferred shall consist of
fifteen thousand (15,000) shares of Series C-1 Preferred Stock (the "Series C-1
Preferred"), eight thousand (8,000) shares of Series C-2 Preferred Stock (the
"Series C-2 Preferred"), and two thousand (2,000) shares of Series C-3 Preferred
Stock (the "Series C-3 Preferred") of the authorized but unissued and
undesignated shares of Preferred Stock.
(b) The Series C Preferred shall rank senior and prior to all other outstanding
stock, including the Series A Preferred Stock, Series B Preferred Stock each no
par value (collectively, the "Junior Preferred"), and the common stock, no par
value of the Company (the "Common 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 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 C Preferred shall be entitled
to receive dividends out of assets of the Company legally available therefor at
the rate of 10% of the respective Original Issue Prices of Series C Preferred
(as defined below) per annum on each outstanding share of Series C 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 C Preferred Stock is filed with the
Secretary of State of California (the "Certificate Filing Date"). The right to
dividends on shares of the Series C Preferred shall be cumulative, and such
dividends shall be payable semi-annually and will be payable, at the Company's
option, in either a like class of Series C Preferred or cash. The "Original
Issue Prices" of the Series C Preferred shall be three hundred dollars ($300)
per share for the Series C-1 Preferred, five hundred dollars ($500) per share
for the Series C-2 Preferred, and three thousand dollars ($3,000) per share for
the Series C-3 Preferred. 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 C 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 C 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. The holders of Series C Preferred then outstanding shall be
entitled to receive in preference to the holders of the Junior Preferred and the
Common Stock a per share amount equal to the respective Original Issue Prices of
Series C Preferred, Appropriately Adjusted, plus any accrued (accrued through
the later of the date of liquidation and the date that is three years following
the Original Issue Date (as defined in Section 6(a) so as to give a minimum of
three (3) years of dividend payments in connection with a liquidation) but
unpaid dividends thereon (the "Liquidation Preference"). Notwithstanding
anything contained herein to the contrary, if any event of liquidation,
dissolution or winding up of the Company (including any deemed liquidation
pursuant to Section 3(c)) occurs on or prior to August 1, 2002, the holders of
the Series C Preferred then outstanding shall be entitled to receive the
Liquidation Preference pari passu with seventy-five percent (75%) of payments
which the holders of the Series B Preferred Stock are entitled to receive upon
such event in accordance with the terms of the Company's Certificate of
Determination for Series B Preferred Stock filed with the Secretary of State of
the State of California on May 25, 2000 (such payments, the "Series B
Liquidation Preference"); provided that payment of the Liquidation Preference
and the Series B Liquidation Preference in such event will occur in preference
to the holders of the Series A Preferred Stock and the Common Stock.
(b) Distribution after Payment of Liquidation Preference. After the payment of
the Liquidation Preference to the Series C Preferred, and any preference payable
with respect to the Junior Preferred, the remaining assets of the Company shall
be distributed ratably to the holders of the Common 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 C 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 C
Preferred, to determine the value of the assets to be distributed to the holders
of Series C Preferred. The Company shall, upon receipt of the appraiser's
valuation, give prompt written notice to each holder of shares of Series C
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 an independent competent appraiser
engaged by the Company and reasonably acceptable to the holders of a majority of
the Series C Preferred.
4. REDEMPTION OF PREFERRED STOCK.
(a) Redemption at Holders' Option.
(i) On or at any time after June 1, 2007, the holders of at least a majority of
any class of the then outstanding Series C Preferred, voting as a separate
class, may by notice to the Company require the Company, to the extent it may
lawfully do so, to redeem such class of the Series C Preferred. The Company
shall redeem all shares of such class of Series C Preferred by paying the
holders thereof cash in exchange for such shares equal to the applicable
Original Issue Price per share of such class of Series C Preferred,
Appropriately Adjusted, plus accrued and unpaid dividends thereon through the
date of redemption.
(ii) The Company shall redeem all of the shares of such class of Series C
Preferred within ninety (90) days of the Company's receipt of a request for
redemption from the holders thereof pursuant to subsection (i) above. Within
sixty (60) days of such request, the Company shall send a notice to all holders
of the class of Series C Preferred to be redeemed setting forth (A) the price
for the shares to be redeemed determined as set forth above; and (B) the place
at which such holders may obtain such payment upon surrender of their share
certificates. If the Company does not have sufficient funds legally available to
redeem all such shares (including, if applicable, those to be redeemed at the
option of the Company), then it shall redeem such shares pro rata (based on the
portion of the aggregate consideration payable to holders thereof) to the extent
possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) Redemption at Company's Option.
(i) The Company may by notice to the holders thereof redeem all, but not less
than all, of the outstanding Series C-3 Preferred on or after the Certificate
Filing Date, and the Company may by notice to the holders thereof redeem all but
not less than all of the Series C-1 Preferred on or after June 1, 2003, and the
Company may by notice to the holders thereof redeem all, but not less than all,
of the outstanding Series C-2 Preferred on or after June 1, 2004; provided,
however, that at the time of either such election by the Company, (a) the
closing price of the Common Stock of the Company as reported on the securities
exchange on which such Common Stock is then traded is greater than $1.00 for at
least forty five (45) of the sixty (60) consecutive trading days immediately
preceding the date of election, (b) the total trading volume of the Company's
Common Stock for such 60 day period is at least 200,000 shares, and (c) a
registration statement covering the sale of Common Stock underlying the Series C
Preferred is effective or all the shares are otherwise saleable without
restriction.
(ii) Within ninety (90) days of, but not earlier than sixty (60) days following
receipt by the holders thereof, a written notice from the Company of redemption
of the applicable class of Series C Preferred, the Company shall, unless such
shares are earlier converted at the option of the holders thereof, redeem all of
the shares of such class of Series C Preferred by paying the holders thereof
cash (in the manner described in Section 4(c)) in exchange for such shares equal
to the applicable Original Issue Price per share of such class of Series C
Preferred, Appropriately Adjusted, plus accrued and unpaid dividends thereon
through the date of redemption. Within (30) days following such notice the
Company shall send an additional notice to all holders of the Series C 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.
(c) On or prior to the actual date that shares are actually redeemed (the
"Redemption Date"), the Company shall deposit the aggregate consideration to be
paid therefore (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
moneys deposited by the Company pursuant to this Section 4(c) for the redemption
of shares thereafter converted into shares of Common Stock pursuant to Section 6
hereof no later than the fifth (5th) day preceding the Redemption Date shall be
returned to the Company forthwith upon such conversion. The balance of any funds
deposited, together with any accrued interest thereon, by the Company pursuant
to this Section 4(c) remaining unclaimed at the expiration of one (1) year
following such Redemption Date shall be returned to the Company promptly upon
its written request.
(d) On or after such Redemption Date, each holder of shares of Series C
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
notice for redemption, 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 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 C 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 that in the event that shares of Series C Preferred are not redeemed
due to a default in payment by the Company or because the Company does not have
sufficient legally available funds, such shares of Series C Preferred shall
remain outstanding and shall be entitled to all of the rights and preferences
provided herein.
(e) In the event of a call for redemption of any shares of Series C Preferred,
the Conversion Rights (as defined in Section 6) for such Series C Preferred
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 the Series C Preferred shall be entitled
to the number of votes equal to the whole number of shares of Common Stock into
which such shares of Series C Preferred could be converted (pursuant to Section
6 hereof) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent and shall have voting
rights and powers equal to the voting rights and powers of the Common Stock) and
shall 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 C 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 C Preferred. In addition to any other vote or
consent required herein or by law, for so long as shares of Series C Preferred,
Appropriately Adjusted, remain outstanding which equal at least ten percent
(10%) of the total Common Stock of the Company on an as converted to Common
Stock basis (including for this purpose any shares of Common Stock subject to
warrants and vested options, but excluding unvested options), the vote or
written consent of the holders of at least a majority of the outstanding Series
C 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 C Preferred;
(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 C Preferred in right of redemption, liquidation preference,
voting or dividends or any increase in the authorized or designated number of
any such new class or series;
(iii) Any issuance of Series A Preferred Stock, Series B Preferred or Series C
Preferred after the Certificate Filing Date other than in connection with the
issuance of Series C-3 Preferred in exchange for Series B Preferred, or a
dividend as set forth in this Certificate of Determination or in the Series B
Certificate of Determination;
(iv) Any decision to pay dividends or make other distributions to holders of the
Company's Junior Preferred, or repurchase or redeem any such shares of Junior
Preferred, except for payments of accrued dividends to Series B Preferred; or
(v) Convey, or otherwise dispose of or encumber all or substantially all of the
Company's property or business or merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation) or effect any
transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of.
(c) Separate Vote of Series C-3 Preferred. For so long as shares of any Series
C-3 Preferred remain outstanding, 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 C-3 Preferred shall be necessary for
effecting or validating an amendment that adversely affects Series C-3 Preferred
in a manner different than the other class of Series C Preferred; provided
however, that without limitation, 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 C-3 Preferred in rights of redemption,
liquidation preference, voting, dividends or anti-dilution or any increase in
the authorized or designated number of any such new class or series shall not
constitute an action that adversely affects the Series C-3 Preferred which
requires a vote under this Section 5(c).
(d) Election of Board of Directors. For so long as shares of Series C Preferred,
Appropriately Adjusted, remain outstanding which equal at least ten percent
(10%) of the total Common Stock of the Company on an as converted to Common
Stock basis (including for this purpose any shares of Common Stock subject to
warrants and vested options, but excluding unvested options), (i) and there are
shares of Series C-1 Preferred or Series C-2 Preferred outstanding, the holders
of Series C-1 Preferred and Series C-2 Preferred, voting together as a single
class, shall be entitled to elect two (2) members of the Company's Board of
Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such directors; and (ii) and there are shares of Series C-3 Preferred
outstanding, the holders of Series C-3 Preferred voting together as a single
class, shall be entitled to elect one (1) member of the Company's Board of
Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such director. For so long as shares of Series C Preferred, Appropriately
Adjusted, remain outstanding which equal at least five percent (5%) but less
than ten percent (10%) of the total Common Stock of the Company on an as
converted to Common Stock basis (calculated as set forth above), (i) and there
are shares of Series C-1 Preferred or Series C-2 Preferred outstanding, the
holders of Series C-1 Preferred and Series C-2 Preferred, voting together as a
single class, shall be entitled to elect one (1) member of the Company's Board
of Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; and (ii) and there are shares of Series C-3 Preferred
outstanding, the holders of Series C-3 Preferred voting together as a single
class, shall be entitled to elect one (1) member of the Company's Board of
Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office such
directors and to fill any vacancy caused by the resignation, death or removal of
such director. The holders of Common Stock and Preferred Stock, voting together
as a single class on an as-if-converted basis, shall be entitled to elect all
remaining members of the Board of Directors at each meeting or pursuant to each
consent of the Company's shareholders for the election of directors, and to
remove from office such directors and to fill any vacancy caused by the
resignation, disability, death or removal of such directors. In addition, the
holders of the Series C Preferred, voting together as a single class, shall be
entitled to nominate one (1) person to be included on any slate of potential
directors submitted to a vote of the Company's nominating committee.
6. CONVERSION. The holders of the Series C Preferred have conversion
rights as follows (the "Series C Conversion Rights"):
(a) Right to Convert. Each share of Series C 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 at the office of the Company or any
transfer agent for the Series C Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the applicable
Original Issue Price, Appropriately Adjusted, plus an amount equal to all
dividends accrued on such share of Series C Preferred Stock since the Original
Issue Date, by the corresponding Series C Conversion Price, determined as
hereinafter provided, 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 C Preferred shall be referred to herein as the "Series C Conversion
Rate." As of the Certificate Filing Date, the "Series C-1 Conversion Price"
shall be $0.30 per share, the "Series C-2 Conversion Price" shall be $0.50 per
share, and the "Series C-3 Conversion Price" shall be $3.00 per share such that,
as of the Certificate Filing Date, the Series C-1, Series C-2 and Series C-3
Conversion Rates shall be one thousand-for-one (1000:1). Such Series C-1, Series
C-2 and Series C-3 Conversion Prices shall be subject to adjustment as
hereinafter provided.
(b) Automatic Conversion. Each share of Series C-1 Preferred shall automatically
be converted into shares of Common Stock at the then effective Series C-1
Conversion Rate on the date upon which the Company obtains the consent of the
holders of a majority of the shares of Series C-1 Preferred then outstanding,
voting as a single class on an as converted to Common Stock basis. Each share of
Series C-2 Preferred shall automatically be converted into shares of Common
Stock at the then effective Series C-2 Conversion Rate on the date upon which
the Company obtains the consent of the holders of a majority of the shares of
Series C-2 Preferred then outstanding, voting as a single class on an
as-converted to Common Stock basis. Each share of Series C-3 Preferred shall
automatically be converted into shares of Common Stock at the then effective
Series C-3 Conversion Rate on the date upon which the Company obtains the
consent of the holders of a majority of the shares of Series C-3 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 C 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 of any
transfer agent for the Series C 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),
the outstanding shares of Series C 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 C
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 C 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 then fair value of any 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 C Preferred to
be converted, or in the case of automatic conversion on the date of 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 C 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 C Preferred shall not be
deemed to have converted such Series C 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 C Preferred would otherwise be entitled, the Company may pay cash equal
to such fraction multiplied by the then fair value of the fractional shares or
round such fractional share up to a whole share (after aggregating all shares
into which shares of Series C 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 C 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 (i) the holders of a majority of the
Series C Preferred, voting as a separate class, and (ii) the holder of a
majority of the Series C-3 Preferred, voting as a separate class, waive such
right to adjustment of the Series C Conversion Price upon the occurrence of any
event set forth in this Section 6(e), the Series C 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 C Conversion Prices
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of any shares of Series C 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 C
Conversion Prices shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of any shares of Series C 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 C
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 C Preferred into
Common Stock. The provisions of this clause (iv) 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 C Conversion Price for any
class of Series C Preferred need be made if such adjustment would result in a
change in Series C Conversion Price of less than $0.00001. Any adjustment of
less than $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 $0.00001 or more in such Series C
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 C Preferred Stock with the requisite
shareholder consent. (h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series C Conversion Rate(s) 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 C 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 C Preferred, furnish or cause to be furnished
to such holder a like certificate setting forth (i) all such adjustments and
readjustments, (ii) the Series C Conversion Rates 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 C
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 C
Convertible Preferred, none of which has been issued, is fifteen thousand
(15,000) shares of Series C-1 Preferred, eight thousand (8,000) shares of Series
C-2 Preferred and two thousand (2,000) shares of Series C-3 Preferred.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Determination of Series C Preferred Stock as of May 28, 2002.
Michael Silverman
/s/ Chairman of the Board
/s/ Dean Kernus
Secretary
The undersigned, Michael Silverman and Dean Kernus, the Chairman of the
Board 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 May 28, 2002.
Michael Silverman
/s/ Michael Silverman
Dean Kernus
/s/ Dean Kernus