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