ADVANCED REMOTE COMMUNICATION SOLUTIONS
STOCK PURCHASE AGREEMENT
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<FILENAME>strpuragr.txt
<DESCRIPTION>STOCK PURCHASE AGREEMENT
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Exhibit 10.1


                            STOCK PURCHASE AGREEMENT


         Stock Purchase Agreement (this "Agreement"), dated as of May 31, 2002,
among Advanced Remote Communication  Solutions,  Inc., a California  corporation
(the  "Company")  and  Housatonic  Micro Fund  SBIC,  L.P.,  a Delaware  Limited
Partnership  ("Housatonic")  and  Lexington  Funding LLC, a  California  limited
liability   company   ("Lexington"   and  collectively   with  Housatonic,   the
"Purchasers").

                                   R E C I T A L S:

         A. Whereas, the Company desires to issue and sell to the Purchasers and
the  Purchasers  desire to purchase from the Company in the amounts set forth on
Schedule I, based on the terms and  conditions  set forth herein an aggregate of
(i) six thousand six hundred  sixty-seven  (6,667) shares of a newly  designated
class of the  Company's  preferred  stock,  no par  value,  entitled  Series C-1
Preferred  Stock (the "Series C-1  Preferred  Stock")  having a total  aggregate
purchase  price of  $2,000,000;  and (ii) an aggregate of four thousand  (4,000)
shares of a newly  designated  class of the Company's  preferred  stock,  no par
value,  entitled Series C-2 Preferred  Stock (the "Series C-2 Preferred  Stock")
having a total aggregate purchase price of $2,000,000 (the Series C-1 and Series
C-2 Preferred Stock are sometimes  referred to  collectively  herein as the "C-1
and C-2 Shares").

         B. Whereas, no later than fifteen (15) calendar days following the date
hereof,  the Company will  commence by filing a Schedule TO with the  Securities
and  Exchange  Commission  (the  "SEC")  an offer  to all  holders  of  Series B
Preferred  Stock to exchange such shares for up to an aggregate of one thousand,
two  hundred  (1,200)  shares  of a  newly  designated  class  of the  Company's
preferred  stock,  no par  value,  entitled  Series C-3  Preferred  Stock of the
Company (the Series C-3 Preferred  Stock is sometimes  referred to herein as the
"C-3  Shares"  and,  collectively  with the C-1 and C-2  Shares,  the  "Series C
Preferred  Stock"),  based on the terms and  conditions  set forth  herein  (the
"Exchange  Offer"),  and the Company will use its best efforts to complete  such
Exchange Offer as soon as practicable following such filing.

         C.  Whereas,  Lexington  may,  in its sole  discretion  and at any time
following  the  forty-fifth  calendar day following the date hereof and prior to
the completion of the Exchange Offer,  exchange its shares of Series B Preferred
Stock for C-3 Shares,  based upon the terms and conditions set forth herein (the
"Lexington Option").

         D. Whereas,  the Company has filed a certificate of determination  with
the  Secretary  of State of the State of  California  setting  forth the rights,
preferences  and privileges of the Series C Preferred Stock in the form attached
hereto as Exhibit A (the "Certificate of Determination").

                                A G R E E M E N T:

         In  consideration  of the foregoing  promises and the mutual  covenants
contained herein, the sufficiency of which is hereby  acknowledged,  the parties
hereby agree as follows:

Section 1.        PURCHASE AND SALE AND EXCHANGE OF PREFERRED STOCK

1.1  Authorization  of Series C Preferred  Stock. On or prior to the Closing (as
defined in Section 1.3 below),  the Company shall have  authorized  (a) the sale
and issuance to the Purchasers of the C-1 and C-2 Shares, (b) the C-3 Shares for
issuance in connection with the Exchange Offer or upon exercise of the Lexington
Option,  and (c) the  issuance of such shares of Common  Stock to be issued upon
conversion of the Series C Preferred Stock Shares (the "Conversion Shares"). The
Series C  Preferred  Stock and the  Conversion  Shares  shall  have the  rights,
preferences,  privileges  and  restrictions  set  forth  in the  Certificate  of
Determination.

1.2 Sale and  Purchase.  Subject  to the terms  and  conditions  hereof,  at the
Closing (as hereinafter  defined) the Company hereby agrees to issue and sell to
each Purchaser, severally and not jointly, and each Purchaser agrees to purchase
from the Company,  severally and not jointly, the number of shares of Series C-1
Preferred  Stock  and  Series  C-2  Preferred  Stock  set  forth  opposite  such
Purchaser's name on Schedule I, at the purchase prices set forth therein.

1.3  Closing.  The  closing of the sale and  purchase  of the C-1 and C-2 Shares
under this Agreement (the  "Closing")  shall take place at 9:00 a.m. on the date
hereof,  at the offices of Cooley Godward llp, 4401 Eastgate Mall, San Diego, CA
92121 or at such other time or place as the Company and  Purchasers may mutually
agree (such date is hereinafter referred to as the "Closing Date").

1.4 Delivery.  At the Closing,  subject to the terms and conditions  hereof, the
Company will deliver to each Purchaser certificates  representing the number and
class of C-1 and C-2 Shares to be  purchased  at the Closing by such  Purchaser,
against  payment of the purchase  price therefor by the Purchasers by check made
payable to the order of the Company, wire transfer, cancellation of indebtedness
or any combination of the foregoing.

Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and  warrants  as of the  date  hereof,  and as of the date of  Closing,  to the
Purchasers  that except as set forth on a Schedule of  Exceptions  furnished  to
each  Purchaser,  which  exceptions  shall be deemed to be  representations  and
warranties as if made hereunder:

2.1 The Company has been duly  incorporated  and is an existing  corporation  in
good  standing  under  the  laws of the  State  of  California,  with  requisite
corporate  power and authority to own its properties and conduct its business as
presently  conducted.  The Company is duly qualified to do business as a foreign
corporation  in good  standing  in all  other  U.S.  jurisdictions  in which its
ownership  or lease of  property or the conduct of its  business  requires  such
qualification,  except  where the  failure to be so  qualified  would not have a
material  adverse  effect  on the  condition  (financial  or  other),  business,
properties,  assets,  results or prospects of  operations of the Company and its
subsidiaries  (hereinafter,  a  "Material  Adverse  Effect").  The  Company  has
furnished  representatives  of the Purchaser with correct and complete copies of
the articles of incorporation and any certificates of determination  thereto and
bylaws of the Company, both as amended and currently in effect.

2.2 Each subsidiary of the Company has been duly incorporated and is an existing
corporation  in  good  standing  under  the  laws  of  the  jurisdiction  of its
incorporation,  with  corporate  power and authority to own its  properties  and
conduct its business as presently  conducted.  Each subsidiary of the Company is
duly  qualified to do business as a foreign  corporation in good standing in all
other U.S.  jurisdictions  in which its  ownership  or lease of  property or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not have a Material Adverse Effect;  all of the issued and
outstanding  capital  stock of each  subsidiary  of the  Company  has been  duly
authorized and validly issued and is fully paid and  nonassessable  and is owned
of record by the Company.

2.3  Immediately  prior to the  Closing,  the  authorized  capital  stock of the
Company  consists  of: (i) one hundred  million  (100,000,000)  shares of Common
Stock and (ii) one million  (1,000,000) shares of Preferred Stock; three hundred
(300) of which have been  designated  Series A Preferred  Stock and five hundred
(500) of which have been  designated  Series B Preferred  Stock. As of March 31,
2002, twenty one million two hundred sixty one thousand six hundred twenty seven
(21,261,627)  shares of Common  Stock have been issued and are  outstanding,  no
shares of Series A Preferred  Stock are issued and outstanding and three hundred
fifty-one and one quarter (351.25) shares of Series B Preferred Stock are issued
and outstanding.  As of May 29, 2002, other than with respect to an aggregate of
six million  (6,000,000)  shares of Common Stock reserved for issuance under the
Company's  equity  incentive plans, of which four million one hundred forty five
thousand  three  hundred  thirty-three  (4,145,333)  are subject to  outstanding
options,  that certain  convertible  promissory  note dated May 16, 2002, in the
original principal amount of $500,000 issued to Lexington (the "Lexington Note")
and warrants to purchase  six hundred  forty two thousand  seven  hundred  fifty
seven (642,757) shares of Common Stock of the Company,  there are no outstanding
options,  warrants, rights (including conversion or preemptive rights and rights
of first refusal),  proxy or stockholder  agreements,  or agreements of any kind
for  the  purchase  or  acquisition  from  the  Company  of any  of  its  equity
securities.  The  Company  has not issued or made any  commitments  to issue any
shares,  options or other  securities  exercisable or convertible into shares of
the Company's capital stock since March 31, 2002.

2.4 The Series C Preferred Stock, and the Conversion Shares, and all outstanding
shares  of  capital  stock  of  the  Company  have  been  duly  authorized;  all
outstanding  shares of capital  stock of the Company are,  and, when the C-1 and
C-2 Shares have been delivered and paid for in accordance with this Agreement on
the Closing  Date,  when the C-3 Shares has been  delivered in  connection  with
either the  Exchange  Offer or exercise of the  Lexington  Option,  and when the
Conversion Shares have been delivered in accordance with the terms of the Series
C Certificate  of  Determination,  such Series C Preferred  Stock and Conversion
Shares will have been, validly issued, fully paid and nonassessable. None of the
Series C Preferred  Stock or  Conversion  Shares are  subject to any  preemptive
right or any right of refusal.

2.5

(a) No  consent,  approval,  authorization,  or order of, or  filing  with,  any
governmental agency or body or any court is required for the consummation of the
transactions  contemplated by this Agreement in connection with the issuance and
sale of the C-1 and C-2  Shares,  the  exercise  of the  Lexington  Option,  the
issuance of the C-3 shares upon exercise of the Lexington Option or the issuance
of Conversion Shares by the Company,  except for the filing of a Form D with the
SEC under the Securities  Act of 1933, as amended (the  "Securities  Act"),  and
such as may be required under state securities laws.

(b) No  consent,  approval,  authorization,  or order of, or  filing  with,  any
governmental  agency or body or any court is required  for the  consummation  of
Exchange  Offer  by the  Company  and  the  issuance  of  the  C-3  Shares  upon
consummation of the Exchange Offer,  except for the filing of a Schedule TO with
the SEC under the Securities Act.

2.6 This  Agreement  has been duly  authorized,  executed  and  delivered by the
Company.  All corporate action on the part of the Company and its  shareholders,
directors and officers necessary for the  authorization,  execution and delivery
of this Agreement,  the performance of all the Company's  obligations  hereunder
and for the  authorization,  issuance  or  reservation  for  issuance,  sale and
delivery  of the Series C  Preferred  Stock and the  Conversion  Shares has been
taken. This Agreement constitutes the legal, valid and binding obligation of the
Company,  enforceable against the Company in accordance with its terms,  subject
to (i) laws of general  application  relating to bankruptcy,  insolvency and the
relief of debtors, (ii) rules of law governing specific performance,  injunctive
relief  and other  equitable  remedies,  and (iii) the  limitations  imposed  by
applicable  federal or state securities laws on the  indemnification  provisions
contained in this Agreement.

2.7 The execution,  delivery and performance of this Agreement, and the issuance
and sale of the Series C  Preferred  Stock and the  Conversion  Shares  will not
result in a breach or  violation of (i) any of the terms and  provisions  of the
Restated Articles or bylaws of the Company or any of its subsidiaries,  nor (ii)
any of the terms and  provisions  of, or constitute a default under any statute,
rule,  regulation  or order of any  governmental  agency  or body or any  court,
domestic or foreign,  having  jurisdiction over the Company or any subsidiary of
the Company or any of their properties,  or any agreement or instrument to which
the  Company or any such  subsidiary  is a party or by which the  Company or any
such subsidiary is bound or to which any of the properties of the Company or any
such  subsidiary  is  subject.  The  Company  has full  power and  authority  to
authorize,  issue and sell the Series C Preferred Stock and Conversion Shares as
contemplated by this Agreement.

2.8 There  have been no  investment  bankers,  brokers  or  finders  used by the
Company or its affiliates in connection  with the  transactions  contemplated by
this Agreement and no persons or entities are entitled to a fee or  compensation
in respect thereof.

2.9 The Company and its subsidiaries  have good and marketable title to all real
properties  and all other  properties and assets owned by them that are material
to the  operation  of the  Company's  business,  in each case  free from  liens,
encumbrances  and defects that would affect the value thereof or interfere  with
the use made or to be made  thereof by them.  With  respect to the  property and
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge,  holds a valid leasehold interest free of any liens, claims or
encumbrances,  except such  encumbrances  and liens which arise in the  ordinary
course of  business  and do not  materially  impair  the  Company's  use of such
property or assets.

2.10 The Company and its subsidiaries possess valid certificates, authorities or
permits  issued by  appropriate  governmental  agencies or bodies  necessary  to
conduct the  business  now  operated by them and have not received any notice of
proceedings  relating to the revocation or modification of any such certificate,
authority  or permit  except  where the failure to obtain any such  certificate,
authority or permit would not have a material  adverse  effect on the Company or
any of its subsidiaries.

2.11 There are no pending actions, suits or proceedings against or affecting the
Company,  any of its subsidiaries or any of their  respective  properties or, to
the best of the Company's knowledge, any director,  officer or employee (related
to any such person's services as a director, officer or employee of the Company)
or would affect the ability of the Company to perform its obligations under this
Agreement, or which otherwise relate to the sale of the Series C Preferred Stock
and, to the Company's  knowledge,  no such  actions,  suits or  proceedings  are
threatened  or  contemplated.  The Company has not  initiated and has no plan to
initiate  any action,  suit or  proceeding  that,  if decided  adversely  to the
Company, would,  individually or in the aggregate,  result in a Material Adverse
Effect.

2.12 The Company has made  available to  representatives  of the  Purchasers all
registration  statements,  proxy  statements  and  other  statements,   reports,
schedules, forms and other documents filed by the Company with SEC since January
1, 2001, including copies of all the exhibits referenced therein, as well as the
Company's  draft  Annual  Report on Form 10-KSB for the year ended  December 31,
2001 (the "SEC Documents"). All statements,  reports, schedules, forms and other
documents  required to have been filed by the Company with the SEC since January
1, 2001 have been so filed.  As of their  respective  dates  (or,  if amended or
superseded by a filing prior to the date of this Agreement,  then on the date of
such amendment or superseding filing): (i) each of the SEC Documents complied in
all material respects with the applicable  requirements of the Securities Act or
the  Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  as the
case may be; and (ii) none of the SEC Documents  contained any untrue  statement
of a material  fact or omitted to state a material  fact  required  to be stated
therein or necessary in order to make the  statements  therein,  in the light of
the circumstances under which they were made, not misleading.

2.13 The financial  statements  included in the SEC Documents present fairly the
financial  position of the Company and its  consolidated  subsidiaries as of the
dates  shown and their  results of  operations  and cash  flows for the  periods
shown,  and such financial  statements have been prepared in conformity with the
generally  accepted  accounting  principles  in the United  States  applied on a
consistent  basis  (except as may be  indicated  in the notes to such  financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the  SEC,  and  except  that the  unaudited  financial  statements  may not have
contained   footnotes  and  were  subject  to  normal  and  recurring   year-end
adjustments which were not, or are not reasonably  expected to be,  individually
or in the aggregate, material in amount) and complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto.

2.14  The  Company  and its  subsidiaries  own or  possess,  or can  acquire  on
reasonable  terms,  sufficient  legal  rights to all  material  patents,  patent
rights, licenses, inventions,  copyrights, know-how (including trade secrets and
other  unpatented  and/or  unpatentable  propriety or confidential  information,
systems or  procedures),  trademarks,  service  marks and trade names  currently
employed by them in  connection  with the  business  now  operated by them,  and
neither the  Company  nor any of its  subsidiaries  has  received  any notice of
infringement  of or conflict with asserted  rights of others with respect to any
of the foregoing.

2.15  Neither  the  Company  nor any  affiliate  (as  defined in Rule  501(b) of
Regulation  D under the  Securities  Act) (an  "Affiliate")  of the Company has,
directly, or through any agent, (a) sold, offered for sale, solicited any offers
to buy or  otherwise  negotiated  in respect of, any security (as defined in the
Securities  Act) which is or will be  integrated  with the sales of the Series C
Preferred  Stock in a manner  that  would  require  the  registration  under the
Securities Act of the Series C Preferred Stock; or (b) offered, solicited offers
to buy or sold the Series C Preferred Stock in any form of general  solicitation
or  general  advertising  (as  those  terms are used in  Regulation  D under the
Securities Act) or in any manner  involving a public offering within the meaning
of Section 4(2) of the Securities Act; and the Company will not engage in any of
the actions described in subsections (a) and (b) of this paragraph.

2.16 Subject to the accuracy of each of the Purchaser's  representations herein,
it is not  necessary  in  connection  with the offer,  sale and  delivery of the
Series C Preferred  Stock to such Purchaser in the manner  contemplated  by this
Agreement to register the Series C Preferred Stock under the Securities Act.

2.17 The  issuance of the Series C Preferred  Stock and the  Conversion  Shares,
neither individually nor in the aggregate, constitute an anti-dilution event for
any  existing   securityholders   of  the   Company,   pursuant  to  which  such
securityholders would be entitled to additional securities or a reduction in the
applicable  conversion  price or  exercise  price of any  securities  due to any
issuance proposed to be conducted hereunder. There are no agreements between the
Company and any securityholders granting any pre-emptive,  voting,  registration
or any similar or other rights  other than as may be set forth in the  Company's
Articles of  Incorporation,  Series A Certificate of  Determination  or Series B
Certificate of Determination.

2.18 The  information  contained in this  Agreement and the SEC  Documents  with
respect to the business, operations, assets, results of operations and financial
condition of the Company,  and the transactions  contemplated by this Agreement,
are true and  complete  in all  material  respects  and do not omit to state any
material fact or facts  necessary in order to make the  statements  therein,  in
light of the circumstances under which they were made, not misleading.

2.19 Section 2.19 of the Company Schedule of Exceptions identifies all insurance
policies  maintained by, at the expense of or for the benefit of the Company and
identifies  any material  pending  claims made  thereunder,  and the Company has
delivered to Purchaser  accurate and complete  copies of the insurance  policies
identified on Section 2.19 of the Company  Schedule of  Exceptions.  Each of the
insurance  policies  identified in Section 2.19 of the Schedule of Exceptions is
in full force and effect and the Company has not received any written  notice or
other written communication regarding any actual or possible (a) cancellation or
invalidation of any insurance  policy,  (b) refusal of any coverage or rejection
of any pending claim under any insurance policy,  or (c) material  adjustment in
the amount of the premiums  payable with respect to any  insurance  policy,  nor
shall the transactions contemplated hereby cause any of the foregoing.

Section 3.        REPRESENTATION AND WARRANTIES OF THE PURCHASERS.

3.1      Each Purchaser hereby, represents and warrants to the Company, as of
the date hereof, as follows:

(a) Each  Purchaser is duly  organized,  validly  existing and in good  standing
under the laws of the  jurisdiction  of its  organization  and has all requisite
corporate  or  limited   partnership  power  and  authority  to  consummate  the
transactions contemplated hereby.

(b) Each  Purchaser has full  corporate,  limited  liability  company or limited
partnership  power and  authority to execute and deliver this  Agreement  and to
perform its obligations  hereunder.  This Agreement constitutes the legal, valid
and binding obligation of each Purchaser,  enforceable against such Purchaser in
accordance with its terms,  subject to (i) laws of general application  relating
to bankruptcy, insolvency and the relief of debtors, (ii) rules of law governing
specific performance,  injunctive relief and other equitable remedies, and (iii)
the limitations  imposed by applicable  federal or state  securities laws on the
indemnification provisions contained in this Agreement.

(c)      Investment Representations.

(i) Each Purchaser is  sophisticated in transactions of this type and capable of
evaluating the merits and risks of the transactions described herein and has the
capacity to protect its own interests. Each Purchaser has not been formed solely
for the  purpose  of  entering  into the  transactions  described  herein and is
acquiring the Series C Preferred  Stock for investment for its own account,  not
as a nominee  or agent,  and not with the view to, or for  resale,  distribution
thereof.

(ii) Each  Purchaser  has not and does not  intend to enter  into any  contract,
undertaking,  agreement  or  arrangement  with any  person  or  entity  to sell,
transfer or pledge the Series C  Preferred  Stock,  other than to an  affiliate,
partner  (or member  thereof)  or former  partner  (or member  thereof)  of such
Purchaser in compliance with the Securities Act.

(iii) Each Purchaser  acknowledges its understanding that the Company intends to
sell the Series C Preferred  Stock pursuant to a private  placement  exempt from
registration  under the Securities Act. In furtherance  thereof,  each Purchaser
represents  and  warrants  that it is an  "accredited  investor" as that term is
defined in Rule 501 of Regulation D under the Securities  Act, has the financial
ability to bear the economic  risk of its  investment,  has  adequate  means for
providing for its current needs and personal  contingencies  and has no need for
liquidity with respect to its investment in the Company.

(iv) Each Purchaser  agrees that it shall not sell or otherwise  transfer any of
the Series C Preferred  Stock without  registration  under the  Securities  Act,
pursuant  to Rule  144 (or any  successor  rule)  under  the  Securities  Act or
pursuant to an opinion of counsel reasonably satisfactory to the Company that no
violation  of the  Securities  Act  will  be  involved  in such  transfer.  Each
Purchaser fully  understands that none of the Series C Preferred Stock have been
registered  under  the  Securities  Act or  under  the  securities  laws  of any
applicable  state  or other  jurisdiction  and,  therefore,  cannot  be  resold,
pledged,  assigned or otherwise disposed of unless subsequently registered under
the Securities Act and under the  applicable  securities  laws of such states or
jurisdictions  or  an  exemption  from  such  registration  is  available.  Each
Purchaser  understands  that the Company is under no  obligation to register the
Series  C  Preferred   Stock  on  its  behalf  with  the  exception  of  certain
registration  rights set forth herein.  Each Purchaser  understands  the lack of
liquidity and  restrictions on transfer of the Series C Preferred Stock and that
this  investment is suitable  only for a person or entity of adequate  financial
means that has no need for  liquidity of this  investment  and that can afford a
total loss of its investment.

(v)  Each  Purchaser  has  had  the  opportunity  to ask  questions  and  obtain
additional  information  which  such  Purchaser  used to make to the best of its
knowledge an informed investment decision.

(d) There have been no  investment  bankers,  brokers  or  finders  used by such
Purchaser or its affiliates in connection with the transactions  contemplated by
this Agreement and no persons or entities are entitled to a fee or  compensation
in respect thereof.

Section 4.        CONDITIONS OF THE OBLIGATIONS OF THE PURCHASER.

4.1  Closing.  The  obligations  of the  Purchasers  to purchase and pay for the
Series C-1 and Series C-2 Preferred Stock on the Closing Date are subject to the
satisfaction, or waiver by the Purchasers, of each of the conditions below:

(a) The representations and warranties of the Company in Section 2 shall be true
and correct on the Closing Date and the Company shall have  performed all of its
obligations hereunder required to be performed prior to the Closing Date.

(b) The Series C  Certificate  of  Determination  shall have been  accepted  for
filing by the California Secretary of State.

(c) The Purchaser  shall have received an opinion in the form attached hereto as
Exhibit B, dated the Closing  Date,  from Solomon  Ward  Seidenwurm & Smith LLP,
counsel for the Company.

(d) The Purchasers  shall have received a  certificate,  dated as of the Closing
Date, from an officer of the Company in which such officer shall state that: the
representations and warranties of the Company in Section 2 of this Agreement are
true and  correct as of such date;  the Company  has  complied  in all  material
respects with all  agreements  and  satisfied  all  conditions on its part to be
performed or satisfied  hereunder at or prior to the Closing Date; and there has
been no material  and adverse  change in the  business of the Company  since the
date of December 31, 2001.

(e) The business,  assets, financial condition,  operations and prospects of the
Company shall be  substantially as represented to the Purchasers on December 31,
2001,  and no  change  shall  have  occurred  that,  in the  judgment  of either
Purchaser, is or could have a Material Adverse Effect.

(f)      Satisfactory completion of due diligence by the Purchasers.

(g) Michael L. Silverman, Irene Shinsato, Scott T. Boden, Qualcomm and Lexington
shall each have entered into a separate  Voting  Agreement  with the Company and
Housatonic in the form attached hereto as Exhibit C (the "Voting Agreement").

(h)      The board of  directors  shall be set at five and shall  consist  of
Brandon  L.  Nixon,  Joseph M.  Niehaus, Michael L.  Silverman,  Mohammed  G.
Abutaleb  and Harvey S.  Gettleson.  Scott  Boden and Irene  Shinsato  shall
have relinquished  all  visitation  rights and each of Scott Boden,  Andrew
Werth,  Douglas Dwyre and Daniel  Flanagan shall have resigned from his seat as
a director prior to Closing.

(i) The Company  shall have entered into  modifications,  on  substantially  the
terms set forth on Exhibit D and as acceptable to the Purchaser, of (i) the Loan
Agreement dated December 29, 1998 between the Company and Enerdyne Technologies,
Inc. and First  National Bank (the "Loan  Agreement"),  (ii) the Debt  Agreement
dated as of July 7,  1998  between  the  Company  and  Scott T.  Boden and Irene
Shinsato  and (iii) the separate  promissory  notes dated July 7, 1998 issued by
the Company in favor of Scott T. Boden,  Irene Shinsato and Flemming,  Lessard &
Shields llc.

(j) An additional  1,500,000  shares of the Company's Common Stock available for
issuance  to  employees  and  officers  of the  Company  (excluding  the  shares
underlying  the options  granted to Brandon L. Nixon as  contemplated  under his
employment  Agreement),  shall be reserved under the Company's 1996 Stock Option
Plan by the Company,  subject to the approval of the Company's  shareholders  at
the Company's next annual meeting of shareholders.

(k) The Company shall have entered into an employment  Agreement with Brandon L.
Nixon,  making him Chief  Executive  Officer  and  Chairman  of the Board of the
Company and granting him 3,000,000  options,  substantially in the form attached
hereto as Exhibit E.

(l) Michael L. Silverman shall have resigned as Chief  Executive  Officer of the
Company  and from his  position  as  Chairman  of the Board and Brandon L. Nixon
shall have been appointed as Chairman of the Board.

(m)      Reserved.

(n) The Company and Qualcomm,  Incorporated shall have entered into an agreement
to the  satisfaction  of the  Housatonic as to, among other things,  the minimum
number of  "units"  required  to be  purchased  by the  Company  to  retain  the
Company's  exclusive  agreement  with  Qualcomm.  As  part  of  this  agreement,
Qualcomm,  Incorporated shall have also relinquished and terminated its right of
first  refusal  and any other  right to  purchase  the  assets  of the  Boatracs
Division of the Company.

(o) The Lexington Note shall have been cancelled and applied toward  Lexington's
purchase of Series C-1 and Series C-2 Preferred Stock hereunder.

Section 5.        CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.

5.1 The  obligations of the Company to sell the Series C Preferred  Stock on the
Closing Date to the Purchaser will be subject to the satisfaction,  or waiver by
the Company, of the conditions below:

(a) The  representations  and warranties of such Purchaser in Section 3 shall be
true and correct on the Closing Date and the Purchaser  must have  performed all
of its  obligations  hereunder  required to be  performed  prior to such Closing
Date.

(b) The Series C  Certificate  of  Determination  shall have been  accepted  for
filing by the California Secretary of State.

Section 6.        REGISTRATION OF THE REGISTRABLE SECURITIES; COMPLIANCE WITH
THE SECURITIES ACT.

6.1      Registration Procedures.  The Company is obligated to do the following:

(a) Within sixty (60) days of a request by holders of a majority of the Series C
Preferred  Stock then  outstanding  (including,  without  limitation,  Lexington
following  exercise of the Lexington Option or any persons holding C-3 Shares as
a result  of the  Exchange  Offer  who  becomes a  signatory  to this  Agreement
pursuant to Section 8.6 hereof (such persons  collectively,  the "C-3 Conversion
Participants"   and  collectively   with  Lexington  and  the  Purchasers,   the
"Holders")),  subject to delivery by such holders of information  regarding such
holders'  addresses  and holdings of capital  stock of the Company,  the Company
shall prepare and file with the SEC one or more registration statements in order
to register  with the SEC the resale by such holder,  from time to time,  of the
Conversion  Shares  (which,  along with any Common  Stock issued as (or issuable
upon the conversion of exercise of any warrant,  right or other security that is
issued as) a dividend or other  distribution with respect to, or in exchange for
or in replacement of, the Series C Preferred Stock or the Conversion Shares, are
sometimes referred to herein as the "Registrable  Securities") through NASDAQ or
the facilities of any national securities exchange on which the Company's Common
Stock is then traded, or in privately negotiated transactions. The Company shall
use its best  efforts  to  cause  such  registration  statement  to be  declared
effective as soon thereafter as reasonably possible.  The Company shall promptly
notify the Purchaser of the  effectiveness of such registration  statement.  The
Company shall not be obligated to effect such a registration hereunder more than
twice in the aggregate nor more than once in any 12-month period.

(b) The  Company  shall  prepare and file with the SEC (i) such  amendments  and
supplements to any registration  statement and the prospectus used in connection
therewith,  and (ii) such other filings required by the SEC, in each case as may
be necessary to keep the registration  statement  continuously effective and not
misleading  until the earlier of (A) the date that the  Purchaser  has completed
the distribution  related to the Registrable  Securities,  or (B) such time that
all  Registrable  Securities then held by the holders can be sold within a given
three (3) month period without compliance with the registration  requirements of
the  Securities  Act pursuant to Rule 144 under the  Securities  Act;  provided,
however,  that at any time,  upon written notice to the holders and for a period
not to exceed  fifteen  (15) days  thereafter  (the  "Suspension  Period"),  the
Company may delay the filing or effectiveness  of any registration  statement or
suspend the use or effectiveness of any registration  statement (and the holders
hereby agree not to offer or sell any  Registrable  Securities  pursuant to such
registration  statement during the Suspension  Period) if the Company reasonably
believes  that the  Company  may,  in the  absence of such  delay or  suspension
hereunder,  be required under state or federal  securities  laws to disclose any
corporate  development  the disclosure of which could  reasonably be expected to
have an  adverse  effect  upon the  Company,  its  shareholders,  a  potentially
significant  transaction or event  involving the Company,  or any  negotiations,
discussions,  or  proposals  directly  relating  thereto.  The Company  shall be
limited to only one Suspension  Period in any 90 day period.  The Company agrees
to use its  commercially  reasonable  best efforts to insure that the Suspension
Period is kept to a minimum  number of days. If so directed by the Company,  the
holders shall use their best efforts to deliver to the Company (at the Company's
expense) all copies,  other than permanent  file copies then in the  Purchasers'
possession, of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.

(c) Furnish to the holders  such number of copies of a  prospectus,  including a
preliminary  prospectus,  in conformity with the  requirements of the Securities
Act,  and such  other  documents  as they  may  reasonably  request  in order to
facilitate the disposition of Registrable  Securities owned by them,  unless the
Company  is  already  subject  to  service  in such  jurisdiction  and except as
required by the Securities Act.

(d) Use its best efforts to register and qualify the securities  covered by such
registration  statement  under  such other  securities  or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the holders; provided that the
Company shall not be required in connection  therewith or as a condition thereto
to qualify to do business or to file a general  consent to service of process in
any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting  agreement,  in usual and customary form, with
the managing  underwriter(s) of such offering. Each holder participating in such
underwriting  shall also enter into and  perform its  obligations  under such an
agreement.

(f)  Notify  each  holder  whose  Registrable  Securities  are  covered  by such
registration  statement  at any  time  when a  prospectus  relating  thereto  is
required to be delivered  under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration  statement, as
then in effect,  includes  an untrue  statement  of a material  fact or omits to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein  not  misleading  in the  light  of the  circumstances  then
existing.  The Company shall  promptly  amend or supplement  such  prospectus in
order to cause such prospectus not to include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements  therein not misleading in the light of the circumstances
then existing.

(g) Furnish,  on the date that such Registrable  Securities are delivered to the
underwriters  for sale, if such securities are being sold through  underwriters,
(i) an opinion,  dated as of such date, of the counsel  representing the Company
for the purposes of such  registration,  in form and substance as is customarily
given to  underwriters  in an  underwritten  public  offering,  addressed to the
underwriters,  if any,  and  (ii) a  letter,  dated  as of such  date,  from the
independent  certified public accountants of the Company,  in form and substance
as  is  customarily  given  by  independent   certified  public  accountants  to
underwriters in an underwritten public offering addressed to the underwriters.

(h) Cause all such Registrable  Securities  registered  pursuant hereunder to be
listed on NASDAQ and each other securities  exchange on which similar securities
issued by the Company are then listed.

6.2 Transfer of Securities  After  Registration.  The Purchasers agree that they
will not  effect  any  disposition  of the  Registrable  Securities  that  would
constitute a sale within the meaning of the Securities Act, unless:

(a)      pursuant to a registration  statement then in effect covering such
disposition,  if such  disposition is made in accordance with such; or

(b) such Purchaser  shall have notified the Company of the proposed  disposition
and shall have furnished the Company with a reasonably detailed statement of the
circumstances surrounding the proposed disposition,  and if reasonably requested
by the Company,  such Purchaser shall have furnished the Company with an opinion
of  counsel,   reasonably  satisfactory  to  the  Company,  or  other  evidence,
reasonably  satisfactory to the Company,  that such disposition will not require
registration  of such  Registrable  Securities  under the Securities  Act. It is
agreed that the Company  will not require  opinions of counsel for  transactions
made pursuant to and in compliance  with Rule 144, and will not require (i) that
such holder  furnish the Company  with a  reasonably  detailed  statement of the
circumstances  of the proposed  disposition or (ii) an opinion of counsel except
in unusual circumstances.

(c)  Notwithstanding  the  provisions of paragraphs  (a) and (b) above,  no such
registration  statement or opinion of counsel  shall be necessary for a transfer
by a Purchaser (A) that is a partnership  to its partners or former  partners in
accordance with partnership  interests,  (B) that is a limited liability company
to its  members or former  members in  accordance  with  their  interest  in the
limited  liability  company,  (C) that is a  corporation  to its majority  owned
subsidiaries  or  affiliates  or (D) that is an  individual  to the  Purchaser's
family  member or trust for the benefit of such  Purchaser  or his or her family
members or an entity whose equity owners consist solely of the Purchaser and his
or her family members; provided that in each case the transferee will be subject
to the terms of this  Agreement  to the same  extent  as if he were an  original
Purchaser hereunder.

6.3 Legends. Each certificate  representing Registrable Securities shall (unless
otherwise  permitted by the provisions of the Agreement) be stamped or otherwise
imprinted with a legend  substantially  similar to the following (in addition to
any legend  required  under  applicable  state  securities  laws or as  provided
elsewhere in this Agreement):

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
         REGISTERED  UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
         OFFERED, SOLD OR OTHERWISE TRANSFERRED,  PLEDGED OR HYPOTHECATED UNLESS
         AND UNTIL  REGISTERED  UNDER THE ACT OR, IN THE  OPINION  OF COUNSEL OR
         BASED ON OTHER WRITTEN EVIDENCE IN THE FORM AND SUBSTANCE  SATISFACTORY
         TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
         OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

6.4  Expenses of  Registration.  Except as  specifically  provided  herein,  all
expenses incurred by the Company in complying with Section 6 hereof,  including,
all registration and filing fees,  printing expenses,  fees and disbursements of
counsel  for the  Company,  reasonable  fees and  expenses of one counsel to the
holders,  blue sky fees and expenses,  reasonable fees and  disbursements of one
counsel for the holders,  fees and the expense of any special audits incident to
or required by any such  registration (but excluding the compensation of regular
employees  of the  Company  which  shall be paid in any  event  by the  Company)
(collectively,  the "Registration  Expenses") shall be borne by the Company. All
underwriting  discounts and selling commissions applicable to a sale incurred in
connection with any registrations hereunder shall be borne by the holders of the
securities so registered pro rata on the basis of the number of shares so sold.

6.5  Furnishing  Information.  The holders  shall  furnish to the  Company  such
information  regarding themselves,  the Registrable  Securities held by them and
the intended  method of disposition  of such  securities as shall be required to
effect the  registration  of their  Registrable  Securities.  Furthermore,  each
Purchaser,  severally and not jointly,  agrees to promptly notify the Company of
any changes in the information set forth in a registration  statement  regarding
such  holders  or its  plan of  distribution  set  forth  in  such  registration
statement.

6.6      Indemnification.  In the event any  Registrable  Securities  are
included in a  registration  statement  under this Section 6.

(a) To the extent permitted by law, the Company will indemnify and hold harmless
the Purchasers,  their respective partners, officers, directors and members, any
underwriter  (as  defined in the  Securities  Act) for the  Purchasers  and each
person, if any, who controls the Purchasers or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims,  damages, or
liabilities  (joint or  several)  to which  they may  become  subject  under the
Securities Act, the Exchange Act or other federal or state law,  insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the  following  statements,  omissions or violations
(collectively  a  "Violation"):  (i) any  untrue  statement  or  alleged  untrue
statement of a material fact contained in such registration statement, including
any  preliminary  prospectus  or  final  prospectus  contained  therein  or  any
amendments  or  supplements  thereto,  (ii) the omission or alleged  omission to
state  therein a material fact  required to be stated  therein,  or necessary to
make the statements  therein not  misleading,  or (iii) any violation or alleged
violation by the Company of the  Securities  Act,  the  Exchange  Act, any state
securities law or any rule or regulation  promulgated  under the Securities Act,
the Exchange Act or any state  securities  law in  connection  with the offering
covered by such registration statement;  and the Company will pay as incurred to
the Purchaser, partner, officer, director, underwriter or controlling person for
any legal or other  expenses  reasonably  incurred  by them in  connection  with
investigating or defending any such loss,  claim,  damage,  liability or action;
provided,  however,  that the indemnity  agreement contained in this Section 6.6
shall not apply to amounts paid in settlement of any such loss,  claim,  damage,
liability or action if such  settlement  is effected  without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection  with such  registration by the Purchaser,  partner,  officer,
director, underwriter or controlling person of the Purchaser.

(b) To the extent permitted by law, a Purchaser will, if Registrable  Securities
held  by  such  Purchaser  are  included  in the  securities  as to  which  such
registration qualifications or compliance is being effected,  indemnify and hold
harmless the Company,  each of its directors,  its officers and each person,  if
any,  who  controls the Company  within the meaning of the  Securities  Act, any
underwriter  and any other holder  selling  securities  under such  registration
statement or any of such holder's  partners,  directors,  officers or members or
any person who controls such Purchaser,  against any losses,  claims, damages or
liabilities  (joint or  several)  to which  the  Company  or any such  director,
officer,  controlling person,  underwriter or other such Purchaser,  or partner,
director,  officer,  member or  controlling  person of such other  Purchaser may
become  subject under the  Securities  Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereto) arise out of or are based upon any Violation,  in each case to
the extent (and only to the extent) that such Violation  occurs in reliance upon
and in conformity with written  information  furnished by the Purchaser under an
instrument duly executed by such Purchaser and stated to be specifically for use
in connection  with such  registration;  and such Purchaser will pay as incurred
any legal or other  expenses  reasonably  incurred  by the  Company  or any such
director,  officer,  member,  controlling  person,  underwriter  or other person
registering  shares  under such  registration,  or partner,  officer,  director,
member or controlling  person of such other person registering shares under such
registration in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation;  provided,  however,  that the indemnity  agreement contained in this
Section  6.6 shall not apply to  amounts  paid in  settlement  of any such loss,
claim,  damage,  liability or action if such settlement is effected  without the
consent of the  Purchaser,  which  consent shall not be  unreasonably  withheld;
provided  further,  that in no event shall any indemnity  under this Section 6.6
exceed the gross proceeds from the offering received by such Purchaser.

(c) Promptly  after  receipt by an  indemnified  party under this Section 6.6 of
notice of the commencement of any action  (including any  governmental  action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 6.6, deliver to the indemnifying party
a written notice of the commencement  thereof and the  indemnifying  party shall
have the right to participate in, and, to the extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however,  that an  indemnified  party  shall  have the right to  retain  its own
counsel,  with the fees and expenses to be paid by the  indemnifying  party,  if
representation  of  such  indemnified  party  by  the  counsel  retained  by the
indemnifying  party would be inappropriate due to actual or potential  differing
interests between such indemnified party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
indemnifying  party within a  reasonable  time of the  commencement  of any such
action,  if materially  prejudicial to its ability to defend such action,  shall
relieve such indemnifying  party of any liability to the indemnified party under
this  Section  6.6,  but  the  omission  so to  deliver  written  notice  to the
indemnifying  party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 6.6.

(d) If the  indemnification  provided for in this Section 6.6 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to  any  losses,   claims,  damages  or  liabilities  referred  to  herein,  the
indemnifying  party, in lieu of indemnifying  such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such  indemnified  party as a result of such loss,  claim,  damage or
liability in such  proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations.  The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by  reference  to, among other  things,  whether the untrue or
alleged untrue  statement of a material fact or the omission to state a material
fact  relates  to  information  supplied  by the  indemnifying  party  or by the
indemnified  party  and the  parties'  relative  intent,  knowledge,  access  to
information  and  opportunity  to correct or prevent such statement or omission;
provided,  that in no event  shall any  contribution  by a  Purchaser  hereunder
exceed the gross proceeds from the offering received by such Purchaser.

(e) The  obligations  of the Company and the  Purchasers  under this Section 6.6
shall  survive  completion  of  any  offering  of  Registrable  Securities  in a
registration  statement and the termination of this  Agreement.  No indemnifying
party,  in the defense of any such claim or litigation,  shall,  except with the
consent of each  indemnified  party,  consent to entry of any  judgment or enter
into any settlement which does not include as an unconditional  term thereof the
giving by the claimant or plaintiff to such indemnified  party of a release from
all liability in respect to such claim or litigation.

6.7 Agreement to Furnish Information. In connection with a registration in which
a Purchaser is participating,  such Purchaser agrees to execute and deliver such
other  agreements  as  may  be  reasonably  requested  by  the  Company  or  the
underwriter.  In addition,  if requested by the Company or the representative of
the  underwriters  of Common Stock (or other  securities)  of the Company,  such
Purchaser shall provide,  within ten (10) days of such request, such information
related  to  such   Purchaser  as  may  be  required  by  the  Company  or  such
representative  in connection  with the completion of any public offering of the
Company's  securities  pursuant  to a  registration  statement  filed  under the
Securities Act.

6.8 Rule 144  Reporting.  With a view to making  available to the Purchasers the
benefits of certain rules and  regulations  of the SEC which may permit the sale
of the Registrable  Securities to the public without  registration,  the Company
agrees to use its best efforts to:

(a) Make and keep public  information  available,  as those terms are understood
and defined in SEC Rule 144 or any similar or analogous rule  promulgated  under
the Securities Act;

(b)      File with the SEC,  in a timely  manner,  all reports and other
documents  required of the Company  under the Exchange Act; and

(c) So long as any Purchaser  owns any  Registrable  Securities,  furnish to the
Purchaser  forthwith upon request:  a written statement by the Company as to its
compliance  with the reporting  requirements  of said Rule 144 of the Securities
Act, and of the  Exchange  Act (at any time after it has become  subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company;  and such other reports and documents as a Purchaser may reasonably
request in availing  itself of any rule or  regulation of the SEC allowing it to
sell any such securities without registration.

6.9 S-3  Eligibility.  The Company will use commercially  reasonable  efforts to
meet the  requirements for the use of Form S-3 for registration of the resale by
the  Purchaser  of the  Registrable  Securities.  The Company  will use its best
efforts to file all reports  required to be filed by the Company with the SEC in
a timely  manner  and take all other  necessary  action so as to  maintain  such
eligibility  for the use of Form S-3. In the event that the Company  shall cease
to meet  eligibility  requirements  for the use of Form S-3,  the  Company  will
immediately convert any effective S-3 Registration Statement with respect to the
Registrable  Securities  into such form as shall then be  available  in order to
permit the shares to continue to be sold.

6.10 The  obligations  of the Company to register  shares of a Holder  hereunder
shall terminate when all such shares may be sold pursuant to rule 144 during any
ninety (90) day period.

Section 7.        RIGHT OF FIRST REFUSAL.

7.1  Subsequent  Offerings.  The Holders  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 7.5 hereof. Each
Holder's pro rata share is equal to the ratio of (a) the number of shares of the
Company's  Common Stock (based on the shares of Common Stock  issuable or issued
upon conversion of the Series C Preferred Stock) which such Holder, is deemed to
be a holder  immediately  prior to the issuance of such Equity Securities to (b)
the total number of shares of the Company's  outstanding Common Stock (including
Common Stock issuable upon conversion of all Preferred Stock outstanding on such
date, but not including any other convertible  securities)  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.

7.2 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.  The Holders  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.

7.3  Issuance of Equity  Securities  to Other  Persons.  If the Holders  fail to
exercise in full the rights of first refusal, 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 7.2 hereof.  If the
Company  has not sold such  Equity  Securities  within  ninety  (90) days of the
notice provided  pursuant to Section 7.2, the Company shall not thereafter issue
or sell any Equity  Securities,  without first  offering such  securities to the
Holders in the manner provided above.

7.4  Termination  and  Waiver of Rights of First  Refusal.  The  rights of first
refusal  established  by this Section 7 shall not apply to, and shall  terminate
upon the earlier of (i) a Change in Control,  defined below,  and (ii) six years
from the date hereof. The rights of first refusal  established by this Section 7
shall be subject to customary  exceptions  and may be amended,  or any provision
waived  with the written  consent of holders  holding a majority of the Series C
Preferred  Stock.  For the purpose of this Section 7.4,  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.

7.5      Excluded  Securities.  The rights of first refusal  established by this
Section 7 shall have no application to any of the following Equity Securities:

(a) up to an  aggregate  amount of  1,500,000  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 7 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 Series B or Series
C Preferred Stock;

(f)      any Equity  Securities  that are issued to the public by the  Company
pursuant  to a  registration  statement filed under the Securities Act; and

(g)      shares of C-3 Shares issued in connection with the Exchange Offer and/
or the Lexington Option.

Section 8.        COVENANTS OF THE COMPANY.

8.1 The Company shall timely renew its existing Director and Officers  Insurance
Policy for a minimum period of one (1) year.

8.2 Use of Proceeds.  The Company  agrees that the proceeds from the sale of the
Series C Preferred Stock shall be used for working capital and general corporate
purposes  only.  The proceeds of the  investment may not be used to pay down the
principal  balances  of  the  Company's  outstanding  notes  payable  (with  the
exception of certain  principal  payments in connection with the modification to
the Loan  Agreement  pursuant to the terms set forth in Exhibit D) or other debt
obligations except as they relate to accounts payable.

8.3      Exchange Offer and Lexington Option.

(a) As soon as  practicable  following  the  Closing  but in no case  later than
fifteen (15) calendar days following the Closing, the Company shall use its best
efforts to commence the Exchange Offer by filing a Schedule TO with the SEC, and
will  thereafter use its best efforts to complete such Exchange Offer as soon as
practicable  substantially on the terms set forth in this Section 8.3.  Pursuant
to the Exchange Offer, the Company shall offer each holder of Series B Preferred
Stock of the  Company  the  opportunity  to  exchange  the  shares  of  Series B
Preferred  Stock then held by such holder for the number of shares of C-3 Shares
equal to the quotient of (i) 75% of the value of any payments  which such holder
would be  entitled to receive  with  respect to its shares of Series B Preferred
Stock 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 (the "Series B Certificate  of  Determination")  upon
any  liquidation,  dissolution  or  winding  up of the  Company  (including  all
dividends  accrued  through the date of the Exchange  Offer) divided by (ii) the
Original  Issue  Price of the C-3  Shares  (as  defined  in the  Certificate  of
Determination)   Appropriately  Adjusted  (as  defined  in  the  Certificate  of
Determination).

(b) In connection with the Exchange Offer, Lexington shall elect to exchange all
or a portion of the Series B  Preferred  Stock then held by  Lexington  into C-3
Shares;  unless an  alternative  arrangement  is agreed  upon in  writing by the
Company, Housatonic and Lexington.

(c) Notwithstanding  anything to the contrary herein, Lexington may, in its sole
discretion  at any time after 45 days from the date hereof and within 90 days of
the date  hereof,  elect to convert its shares of Series B Preferred  Stock into
the number of shares of C-3 Shares equal to the quotient of (i) 75% of the value
of any payments which Lexington would be entitled to receive with respect to its
shares of Series B Preferred  Stock in accordance with the terms of the Series B
Certificate of Determination upon any liquidation,  dissolution or winding up of
the Company (including all dividends accrued through the date of the date of the
Lexington Option) divided by (ii) the Original Issue Price of the C-3 Shares (as
defined in the Certificate of Determination)  Appropriately Adjusted (as defined
in the Certificate of Determination).

(d) Lexington  hereby  covenants to Housatonic that from the date hereof through
consummation of the Exchange Offer Lexington will not sell, transfer,  assign or
otherwise dispose of, encumber, subject to any restriction, security interest or
lien  whether by operation  of law or  otherwise,  any of the Series B Preferred
Stock  currently  held by Lexington  other than in connection  with the Exchange
Offer pursuant to Section 8.3(b) above or in connection with its exercise of the
Lexington Option pursuant to Section 8.3(c) above.

8.4  Shareholder  Vote for Option Pool.  In connection  with the Company's  next
annual meeting of Shareholders,  the Company shall submit for a vote thereon the
increase by 4,500,000  shares of the  Company's  1996 Stock Option Plan reserves
and any additional  shares that the Company or its counsel may deem necessary or
appropriate  for such  approval in  connection  with the  issuance to Brandon L.
Nixon contemplated by Section 4.1(k).

8.5  Amendment  for  C-3  Conversion  Participants.  Upon  the  consummation  of
Lexington  Option and the Exchange  Offer,  the Company and the Purchasers  will
enter into an  amendment to this  Agreement,  causing any person who has thereby
converted  Series B Preferred Stock into C-3 Shares to become a signatory to and
beneficiary  of this  Agreement  for the  purposes  of  enjoying  the rights and
privileges  and  being  bound by  Sections  6 through  9 of this  Agreement.  In
addition,  such  persons  (excluding  Lexington)  who so convert  shall have the
option, in connection with such conversion, to purchase, in the aggregate, up to
223 shares of Series C-1 Preferred  Stock and 134 shares of Series C-2 Preferred
Stock.  In the event of such  purchase  of shares of Series  C-1 and  Series C-2
Preferred,  such  purchasers  shall also make the  representations  set forth in
Section 3 hereof  and the  Company  shall make the  representation  set forth in
Section  2 hereof;  provided  that the  Company  may make  such  changes  to the
Schedule of Exceptions  hereto as it deems appropriate in connection with making
such representations.

8.6  Nominating  Committee.  As soon as practicable  following the Closing,  the
Company's Board of Directors  shall form a Nominating  Subcommittee of the Board
which shall have the exclusive  authority to determine the slate of nominees for
election to the Board,  prospective  new Board members,  the removal of existing
Board members,  and other customary  duties of such a committee.  The Nominating
Committee shall be comprised of only three members as follows:  a representative
of Housatonic,  who shall initially be Joseph N. Niehaus,  a  representative  of
Lexington,  who shall initially be Harvey S. Gettleson and an independent member
of the  Board,  who shall  initially  be Michael L.  Silverman.  The  Nominating
Committee  shall remain in force and effect for so long as a  representative  of
Housatonic  remains  on the  Board of  Directors.  The  Purchasers  and  Michael
Silverman  hereby  covenant  to take  such  action  at the next  meeting  of the
shareholders to elect Michael Silverman to the Board of Directors.

Section 9.        BOATRACS PURCHASE OPTION.

9.1 Purchase  Option.  Housatonic  and its  Affiliates  shall have the exclusive
right, exercisable by delivery of written notice (the "Boatracs Notice"), to the
Company (with a copy to Lexington) during the period from August 2, 2002 through
June 1, 2003 to  purchase  the  assets of the  Company's  Boatracs  division  as
specified on Exhibit F hereof (the "Boatracs  Assets") at a purchase price equal
to the twelve  month  trailing (a) net income less (b) the sum of (i) any agreed
upon  additional  payments  to  Qualcomm  Incorporated  in  connection  with the
agreement  contemplated  by  Section  4.1(n)  of the  Series  C  Stock  Purchase
Agreement  (that has not already been taken into account in the  computation  of
net income) not to exceed $250,000 and (ii) interest income; plus (c) the sum of
(i) income tax provision,  (ii) interest expense, (iii) amortization expense and
(iv) depreciation  expense as set forth in the Company's statement of operations
and statement of cash flows attributable to the Boatracs division, in conformity
with accounting  principals  generally  accepted in the United States of America
and consistent with prior accounting  practices of the Company  calculated as of
the date of the Boatracs Notice multiplied by five (5.0) (the "Boatracs Purchase
Price").  The parties hereto  acknowledge  and agree that the Boatracs  Purchase
Price is a reasonable  approximation of the value of the Boatracs Assets. In the
event that  Housatonic  exercises  its option to purchase  the  Boatracs  Assets
hereunder,  Housatonic  may  tender the  Series C  Preferred  Stock then held by
Housatonic  toward the purchase price  therefor;  such shares shall be valued at
their original  purchase price plus accrued but unpaid  dividends  thereon.  The
Company  covenants  that it will use its best efforts to assist in obtaining any
approvals  that may be necessary or  appropriate  in  connection  with such sale
including,   without  limitation,   obtaining  any  regulatory  approvals  under
applicable  laws and  regulations,  assignments or delegation of any third party
agreements in connection  therewith,  and/or any board and shareholder approvals
that may be necessary or advisable.

9.2 Option to Participate in Housatonic Purchase of Boatracs.  In the event that
Housatonic  exercises  the  option  set  forth in  Section  9.1  (the  "Boatracs
Option"),  Lexington and/or C-3 Conversion  Participants may participate in each
party's sole  discretion  with  Housatonic  in such purchase by, and only to the
extent of,  tendering the Series C Preferred Stock then held by Lexington and/or
C-3 Conversion  Participants  (including Series C Preferred Stock received or to
be received upon exercise of the Exchange Offer or Lexington  Option) toward the
purchase price therefore; such shares shall be valued at their original purchase
price plus accrued but unpaid dividends thereon.

9.3      Operation Of Boatracs Division.

(a)      During the period from the date hereof and the termination of the
Boatracs Option:

(i) the Company  shall  conduct the  operations  of the Boatracs  communications
business segment,  as described in the Form 10-KSB filed by the Company with the
Securities and Exchange  Commission on May 15, 2002 including the description on
Item 1 therein (the "Boatracs  Business") in the ordinary course of business and
in the same manner as such  operations  were conducted prior to the date of this
Agreement;

(ii) the Company shall use its best efforts to: (i) preserve  intact the current
business organization of the Boatracs Business, (ii) keep available the services
of the current officers and employees of the Boatracs  Business,  (iii) maintain
the relations and good will with all material suppliers,  customers,  landlords,
creditors, licensors,  licensees,  employees,  independent contractors and other
persons having material business  relationships with the Boatracs Business,  and
(iv) promptly repair,  restore or replace in the ordinary course of business any
Boatracs Assets that are destroyed or damaged;

(iii) the  Company  shall  maintain  insurance  on or  related  to the  Boatracs
Business which is at least comparable to the insurance  policies in place on the
date hereof;

(iv)  the  officers  of the  Company  shall  confer  regularly  with  Housatonic
concerning  operational  matters  and the  status  of the  business,  condition,
assets,  liabilities,  operations,  financial  performance  and prospects of the
Boatracs Business;

(v)      the  Company  and its  officers  shall use their  best  efforts  to
cause the  Boatracs  Business  to  operate profitably and to maximize its
revenues;

(vi) the Company shall not alter,  modify or accelerate its existing  collection
levels of account  receivables  or its  existing  levels of  invoice  billing or
billing  services  or billing  method in each case as  related  to the  Boatracs
Business;

(vii) the Company shall not authorize,  commit or irrevocably  offer to take any
actions inconsistent with this Section 9.

(b) Without limiting Section 9.3(a),  the Company agrees that, during the period
between the date hereof and the exercise of the Boatracs  Options (the "Exercise
Date"),  it will  not,  and will  cause  its  subsidiaries  not to, in each case
without the prior written consent of Housatonic:

(i) in a single transaction or series of related  transactions,  sell (including
any sale-leaseback),  lease, license,  pledge,  transfer or otherwise dispose of
(including  through a dividend or distribution  to any person),  or discontinue,
all or any portion of its assets,  business  or  properties  that are used in or
necessary  for the conduct of the Boatracs  Business or are part of the Boatracs
Assets  except for the sale of inventory in the ordinary  course of the Boatracs
Business and consistent with past practices;

(ii)  dismiss any  management-level  business  employee  other than for cause or
transfer any employee in each case whose services are utilized primarily for the
conduct of the Boatracs Business;

(iii)  except in an  amount,  individually  or in the  aggregate,  not to exceed
$50,000,  commit to make any  capital  expenditure  or acquire  any  property or
assets in  connection  with the Boatracs  Business to the extent the  commitment
will give rise to any liabilities;

(iv) permit or allow any of the Boatracs Assets to be subject to any encumbrance
which cannot be removed  prior to the Exercise  Date without  giving rise to any
liabilities;

(v) write-off as uncollectible any notes or accounts, funds or trust receivables
that are part of the Boatracs  Assets,  except for  write-downs or write-offs in
the ordinary course of business and consistent with past practice;

(vi) to the extent  related to the  Boatracs  Business,  commence,  undertake or
engage in any new and material  line of business or commit to open or open a new
office (or move or close any existing office);

(vii) adopt a plan or  resolution to dissolve or liquidate the Company or any of
its  subsidiaries  other than to the extent the dissolution or liquidation  does
not  materially  and  adversely  affect  the  Boatracs  Business  and  would not
materially  and  adversely  affect  the  ability of the  Company to perform  its
obligations under this Agreement;

(viii)  intentionally  take any action that, or  intentionally  omit to take any
action not otherwise  prohibited by the terms of this  Agreement the omission of
which, would (A) breach any provision of this Agreement, or (B) result in any of
the conditions to the consummation of the transactions not being satisfied on or
prior to the date of termination of the Boatracs Option;

(ix) recognize any labor union or enter into any collective bargaining agreement
that  includes  any business  employee in each case whose  services are utilized
primarily for the conduct of the Boatracs Business;

(x) settle or  compromise  any claim,  dispute or pending  proceeding on a basis
requiring  any  agreement  that  would  (A) give rise to any  liabilities  to be
assumed  by  Housatonic  if it were to  acquire  the  Boatracs  Business  or (B)
materially and adversely affect the Company's ability to perform its obligations
under this Agreement;

(xi) commit,  enter into, or  irrevocably  offer to enter into,  any contract to
take any of the actions prohibited in this Section 9.3(b).

Section 10.       INDEMNIFICATION OF CERTAIN CLAIMS.

10.1 Certain  Claims.  The Company  hereby agrees to hold harmless and indemnify
the Purchasers,  the Purchasers'  direct and indirect  subsidiaries,  affiliated
entities  and  corporations,  and each of  their  partners,  members,  officers,
directors, employees,  stockholders,  agents, and representatives (collectively,
referred  to as the  "Purchaser  Indemnitees")  against  any  and  all  expenses
(including  attorneys'  fees),  damages,   judgments,  fines,  amounts  paid  in
settlements, or any other amounts that a Purchaser Indemnitee incurs as a result
of any claim or claims made against it (whether by the Company  itself,  another
stockholder  of the Company or any other  third  party) in  connection  with any
threatened,  pending or completed action,  suit,  arbitration,  investigation or
other proceeding  arising out of, or relating to any Purchaser's  purchase of or
exchange for the Series C Preferred  Stock and the exercise and  consummation of
the Boatracs Option and all  negotiations  concerning the structure,  timing and
valuation of such purchase and/or exercise  (each, a  "Financing-Based  Claim");
provided,  however,  that no Purchaser  Indemnitee  shall be entitled to be held
harmless or  indemnified  by the Company for acts,  conduct or  omissions  as to
which it has  been  adjudicated  or  agreed  (including  the  agreement  of such
Purchaser  Indemnitee)  that  such  Purchaser  Indemnitee  engaged  in  fraud or
intentional misconduct.

10.2  Reimbursement.  The Company shall  advance prior to the final  disposition
thereof,  promptly following request therefor,  all reasonable expenses incurred
by a  Purchaser  Indemnitee  in  connection  with  any  threatened,  pending  or
completed action, suit,  arbitration,  investigation or other proceeding arising
out of, or relating to, a  Financing-Based  Claim,  provided,  however,  that no
Purchaser Indemnitee shall be entitled to reimbursement in connection with acts,
conduct or omissions as to which there has been a final  adjudication  that such
Investor Indemnitee engaged in fraud or intentional misconduct.

10.3 Manner of Defense. The Company's indemnity  obligations set forth above are
subject  to the  Purchasers  providing  prompt  written  notice of a claim.  The
Company shall control the defense of any such action and, at its discretion, may
enter into a stipulation of discontinuance or settlement thereof;  provided that
the Company may not  discontinue any action or settle any claim in a manner that
does not  unconditionally  release the Investors  without the Purchasers'  prior
written approval.  The Purchasers shall, at the Company's expense and reasonable
request, cooperate with the Company in any such defense and shall make available
to the Company at the Company's expense all those persons,  documents (excluding
attorney/client  privileged  or  attorney  work  product  materials)  reasonably
required by the Company in the defense of any such action.  The Purchasers  may,
at their expense, assist in such defense.

Section 11. EXEMPTION FROM  REGISTRATION;  LEGEND.  The Series C Preferred Stock
and the Conversion  Shares will be issued under an exemption or exemptions  from
registration  under the  Securities  Act, and are also subject to certain rights
and obligations set forth herein.  Accordingly,  the certificates evidencing the
Series C Preferred Stock and any Conversion  Shares issuable upon the conversion
thereof shall,  upon issuance,  contain a legend,  substantially  in the form as
follows:

                  THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
                  UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
                  OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST HEREIN MAY
                  BE SOLD,  TRANSFERRED  OR  OTHERWISE  DISPOSED OF UNLESS (1) A
                  REGISTRATION  STATEMENT WITH RESPECT TO SUCH SECURITIES  SHALL
                  BE EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
                  LAWS OR (2) SUCH SECURITIES ARE  TRANSFERRED  PURSUANT TO RULE
                  144  PROMULGATED  UNDER THE ACT (OR ANY SUCCESSOR RULE) OR (3)
                  THE ISSUER OF THESE  SECURITIES SHALL HAVE RECEIVED AN OPINION
                  OF COUNSEL FOR THE HOLDER OF THESE SECURITIES  SATISFACTORY TO
                  THE  ISSUER  THAT NO  VIOLATION  OF THE ACT OR  SIMILAR  STATE
                  SECURITIES LAWS WILL BE INVOLVED IN SUCH TRANSFER.

Section 12. EQUITABLE  RELIEF.  The Purchasers and the Company  acknowledge that
the breach of any of  Sections  6, 7, 8, 9 or 10 by the  Company  may cause each
Purchaser  irreparable  injury.  Therefore,  in addition  to all other  remedies
available  to it,  each  Purchaser  shall  have the  right  to seek  injunction,
specific  performance or other equitable relief as and when such Purchaser deems
fit in the event of an actual,  attempted or threatened breach by the Company of
any of such Sections 6, 7, 8, 9 or 10.

Section 13.       NOTICES.  All  communications  hereunder  will be in writing
and,  (a) if sent to Purchaser,  will be mailed,  delivered or telegraphed  and
confirmed to Housatonic at 88 Kearny St.,  Suite 1610, San Francisco,  CA 94108,
Attention:  Joseph M. Niehaus;  (b) if sent to the Company,  will be mailed,
delivered or telegraphed and confirmed to it at 10675 Sorrento Valley Road,
#200, San Diego, CA 92121, Attention: Chief Executive Officer.

Section 14. EXPENSES.  The Company, on the one hand, and each Purchaser,  on the
other  hand,  are each  responsible  for its own  expenses  associated  with the
purchases  and sales of the Series C  Preferred  Stock  pursuant to the terms of
this  Agreement;  provided,  that the Company will pay, on the Closing Date, the
legal fees and expenses of Cooley  Godward LLP,  legal counsel to Housatonic and
O'Melveny & Myers LLP, legal counsel to Lexington.

Section 15.       AMENDMENT AND WAIVER

15.1 Except as otherwise  expressly  provided,  this Agreement may be amended or
modified only upon the written consent of the Company and a majority in interest
of the Series C  Preferred  Stock  voting as a single  class on an  as-converted
basis.

15.2 Except as otherwise  expressly  provided  herein,  (i) rights arising under
this Agreement may only be waived in writing by the party entitled to such right
and (ii)  obligations  under this  Agreement  may only be waived by the party to
whose benefit the obligations runs.

Section 16.       SUCCESSORS.  This  Agreement  will inure to the benefit of and
be binding upon the parties hereto and their respective successors and no other
person will have any right or obligation hereunder.

Section 17.       COUNTERPARTS.  This Agreement may be executed in any number of
counterparts,  each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

Section 18.  APPLICABLE LAW AND VENUE.  This Agreement shall be governed by, and
construed  in  accordance  with,  the laws of the State of  California,  without
regard to principles of conflicts of laws. Any dispute under this Agreement that
is not settled by mutual consent shall be finally  adjudicated by any federal or
state  court  sitting  in the  City and  County  of San  Diego  in the  State of
California, and each party consents to the exclusive jurisdiction of such courts
(or any appellate  court  therefrom)  over any such dispute.  Each party further
consents to personal jurisdiction in the courts mentioned in the prior sentence.






         In Witness  Whereof,  this Agreement is entered into by the undersigned
parties as of the date first written above.

                               Advanced Remote Communication Solutions, Inc.


                                   By:
                                   Michael L. Silverman
                                /s/Michael L. Silverman
                                Chief Executive Officer


Housatonic Micro Fund SBIC, L.P.


Housatonic Micro Partners SBIC, L.L.C.,
Its General Partner


By:
       Joseph M. Niehaus
   /s/ Joseph M. Niehaus



Lexington Funding LLC


Lexington Commercial Holdings, Inc.,
Its Manager


By:
         Harvey S. Gettleson
     /s/ Harvey S. Gettleson
         Chief Financial Officer




<TABLE>
<CAPTION>

                                   SCHEDULE I

                             Schedule of Purchasers



                                         Series C-1                                 Series C-2
                                          Per Share      Purchase                    Per Share      Purchase
                                          Purchase      Aggregate                    Purchase      Aggregate
                             Shares         Price         Price         Shares         Price         Price
<S>                            <C>          <C>            <C>            <C>          <C>           <C>

Housatonic Micro Fund         5,000          $300       $1,500,000       3,000         $500        $1,500,000
SBIC LLC
Lexington Funding LLC         1,667          $300        $500,1001       1,000         $500         $500,0001
</TABLE>






















</TEXT>
</DOCUMENT>
