**Exhibit3.5**

 

**CERTIFICATEOF AMENDMENT TO**

**CERTIFICATE OF DESIGNATIONS, PREFERENCES AND**

**RIGHTS OF SERIES E PREFERRED STOCK OF**

**STRATUS SERVICES GROUP, INC.**

 

The undersigned, the Executive Vice President and Chief FinancialOfficer of Stratus Services Group, Inc. (the “Corporation”), a corporationorganized and existing under the General Corporation Law of the State ofDelaware, DOES HEREBY CERTIFY THAT:

 

A.                                   Pursuantto the authority conferred on the Board of Directors by the Amended andRestated Certificate of Incorporation of the Corporation and Section 151 of theGeneral Corporation Law of the State of Delaware, on June 18, 2002, the Boardof Directors of the Corporation unanimously adopted a resolution providing forthe designations, preferences and other rights, and the qualifications,limitations or restrictions thereof, of the Series E Preferred Stock of theCorporation:

 

B.                                     TheCorporation filed a Certificate of Designations, Preferences and Rights ofSeries E Preferred Stock (the “Certificate of Designation”) with the Secretaryof State, State of Delaware, on July 17, 2002.

 

C.                                     Noshares of Series E Preferred Stock have been issued or are outstanding.

 

D.                                    Pursuantto authority conferred upon the Board of Directors by the Amended and RestatedCertificate of Incorporation and Section 151 of the General Corporation Law ofthe State of Delaware, said Board of Directors, pursuant to a unanimous writtenconsent dated as of July 26, 2002, adopted the following resolution providingfor the amendment and restatement of the Certificate of Designation:

 

**RESOLVED**,that the rights and preferences of the Corporation’s Series E Preferred Stockbe amended and restated as set forth below, and the President, Secretary andany Vice President of the Corporation is hereby authorized and directed tofile, in the name and on behalf of the Corporation, an Amended and RestatedCertificate of Designations, Preferences and Rights of Series E Preferred Stockwhich shall amend and restate the Certificate of Designation in its entirety sothat the rights and preferences of the Series E Preferred Stock shall be asfollows:

 

1.             **Dividends.**

 

(a)    Theholders of the Series E Preferred shall be entitled to receive out of anyassets legally available therefor cumulative dividends at the rate of 6% perannum, accrued daily on a quarterly basis, and payable every 120 days (each a“Dividend Payment Date”), the first such 120 day period being measured from thedate of Closing, in preference and priority to any payment of any dividend onthe Common Stock.  Such dividends shallaccrue on any given share from the day of original issuance of such share andshall accrue from day to day whether or not earned or declared.  If at any time dividends on the outstandingSeries E Preferred at the rate set

 

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forth above shall not have been paid or declared and set apart forpayment with respect to all preceding periods, the amount of the deficiencyshall be fully paid or declared and set apart for payment, but withoutinterest, before any distribution, whether by way of dividend or otherwise,shall be declared or paid upon or set apart for the Common Stock of theCorporation.

 

(b)    Anydividend payable on a Dividend Payment Date shall be paid at the option of theCorporation, either (i) in cash or (ii) in shares of Common Stock, if theCommon Stock issuable upon conversion of such shares has been registered forresale under the Securities Act of 1933, as amended (the “Act”), and theregistration statement including a current prospectus with respect thereto remainsin effect at the date of delivery of such shares or an exemption from suchregistration for the public resale of the Common Stock is available under theAct.

 

(c)    Nothingcontained herein shall be deemed to establish or require any payment or othercharges in excess of the maximum permitted by applicable law.  In the event that any payment required to bepaid or other charges hereunder exceed the maximum permitted by such law, anypayments in excess of such maximum shall be credited against amounts owed bythe Corporation, the holder and thus refunded to the Corporation.

 

2.             **Liquidation Preference; Redemption**.

 

(a)    In theevent of any liquidation, dissolution or winding up of the Corporation, eithervoluntary or involuntary, the holders of the Series E Preferred shall beentitled to receive, prior and in preference to any distribution of any assetsof the Corporation to the holders of the Common Stock, the amount of $100 pershare plus any and all accrued but unpaid dividends (the “Liquidation Preference”).

 

(b)    Aconsolidation or merger of the Corporation with or into any other corporationor corporations, or a sale of all or substantially all of the assets of theCorporation (other than a sale or transfer to a wholly owned subsidiary of theCorporation), shall, at the option of the holders of the Series E Preferred, bedeemed a liquidation, dissolution or winding up within the meaning of thisSection 2 if the shares of stock of the Corporation outstanding immediatelyprior to such transaction represent immediately after such transaction lessthan a majority of the voting power of the surviving corporation (or of theacquirer of the Corporation’s assets in the case of a sale of assets).  Such option may be exercised by the vote orwritten consent of holders of a majority of the outstanding shares of Series EPreferred at any time within thirty (30) days after written notice (which shallbe given promptly) of the essential terms of such transaction shall have beengiven to the holders of the Series E Preferred in the manner provided by lawfor the giving of notice of meetings of shareholders.

 

(c)     TheCorporation shall have the right, but not the obligation to redeem any or allof the shares of Series E Preferred at any time prior to the delivery of aconversion notice upon payment in cash of an amount equal to 115% of thepurchase price paid for the Series E Preferred Stock on the Closing Date, plusall accumulated but unpaid dividends (the “Redemption Price”).

 

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3.             **Optional Conversion**.  The holders of the Series E Preferred shallhave optional conversion rights as follows:

 

(a)    Rightto Convert.  Shares of Series EPreferred shall be convertible, at the option of the holder thereof, into suchnumber of fully paid and nonassessable shares of Common Stock as is determinedby dividing (x) the Liquidation Preference of the Series E Preferred determinedpursuant to Section 2 hereof on the date the notice of conversion is given, by(y) the Conversion Price determined as hereinafter provided in effect on theapplicable conversion date.

 

(b)    Mechanicsof Conversion.  To convert shares ofSeries E Preferred into shares of Common Stock under Section 3(a), the holdershall give written notice to the Corporation (which notice may be given byfacsimile transmission) that such holder elects (with the right to revoke) toconvert the shares and shall state therein date of the conversion, the numberof shares to be converted and the name or names in which such holder wishes thecertificate or certificates for shares of Common Stock to be issued.  Promptly thereafter, the holder shallsurrender the certificate or certificates representing the shares to beconverted, duly endorsed, at the office of the Corporation or of any transferagent for such shares, or at such other place designated by the Corporation; *provided,* that the holder shall not berequired to deliver the certificates representing such shares if the holder iswaiting to receive all or part of such certificates from the Corporation.  The Corporation shall immediately issue anddeliver to or upon the order of such holder, against delivery of thecertificates representing the shares which have been converted, a certificateor certificates for the number of shares of Common Stock to which such holdershall be entitled.  The Corporationshall cause such issuance to be effected within three (3) business days andshall transmit the certificates by messenger or overnight delivery service toreach the address designated by such holder within three (3) business daysafter the receipt of such notice.  Thenotice of conversion may be given by a holder at any time during the day up to5:00 p.m. New York time and such conversion shall be deemed to have been made immediatelyprior to the close of business on the date such notice of conversion isgiven.  The person or persons entitledto receive the shares of Common Stock issuable upon such conversion shall betreated for all purposes as the record holder or holders of such shares ofCommon Stock at the close of business on such date.

 

(c)    Determinationof Conversion Price.

 

(i)            The“Conversion Price” shall be equal to the average of the closing bid prices ofthe Common Stock as reported by the OTC Bulletin Board during the five (5)consecutive trading days preceding the conversion date multiplied by 75%.

 

(ii)           The“closing bid price” of the Common Stock on a trading day shall be the closingbid price of the Common Stock on OTC Bulletin Board or any other principalsecurities price quotation system or market on which prices of the Common Stockare reported.  The term “trading day”means a day on which trading is reported on the principal quotation system ormarket on which prices of the Common Stock are reported.

 

(iii)          If,during the period of consecutive trading days provided for above, theCorporation shall declare or pay any dividend on the Common Stock payable in

 

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Common Stock or in rights to acquire Common Stock, or shall effect astock split or reverse stock split, or a combination, consolidation orreclassification of the Common Stock, the Conversion Price shall beproportionately decreased or increased, as appropriate, to give effect to suchevent.

 

(d)    Distributions.  If the Corporation shall at any time or fromtime to time make or issue, or fix a record date for the determination ofholders of Common Stock entitled to receive, a dividend or other distributionpayable in securities of the Corporation or any of its subsidiaries other thanadditional shares of Common Stock, then in each such event provision shall bemade so that the holders of Series E Preferred shall receive, upon theconversion thereof, the securities of the Corporation which they would havereceived had they been the owners on the date of such event of the number ofshares of Common Stock issuable to them upon conversion.

 

(e)    Certificatesas to Adjustments.  Upon theoccurrence of any adjustment or readjustment of the Conversion Price pursuantto this Section 3, the Corporation at its expense shall promptly compute suchadjustment or readjustment in accordance with the terms hereof and cause theindependent public accountants regularly employed to audit the financialstatements of the Corporation to verify such computation and prepare andfurnish to each holder of Series E Preferred a certificate setting forth suchadjustment or readjustment and showing in detail the facts upon which suchadjustment or readjustment is based. The Corporation shall, upon the reasonable written request at any timeof any holder of Series E Preferred, furnish or cause to be furnished to suchholder a like certificate prepared by the Corporation setting forth (i) suchadjustments and readjustments, and (ii) the number of other securities and theamount, if any, of other property which at the time would be received upon theconversion of Series E Preferred with respect to each share of Common Stockreceived upon such conversion.

 

(f)    Noticeof Record Date.  In the event of anytaking by the Corporation of a record of the holders of any class of securitiesfor the purpose of determining the holders thereof who are entitled to receiveany dividend (other than a cash dividend) or other distribution, any securityor right convertible into or entitling the holder thereof to receive additionalshares of Common Stock, or any right to subscribe for, purchase or otherwiseacquire any shares of stock of any class or any other securities or property,or to receive any other right, the Corporation shall mail to each holder ofSeries E Preferred at least ten (10) days prior to the date specified therein,a notice specifying the date on which any such record is to be taken for thepurpose of such dividend, distribution, security or right and the amount andcharacter of such dividend, distribution, security or right.

 

(g)    IssueTaxes.  The Corporation shall payany and all issue and other taxes, excluding any income, franchise or similartaxes, that may be payable in respect of any issue or delivery of shares ofCommon Stock on conversion of shares of Series E Preferred pursuant hereto;provided, however, that the Corporation shall not be obligated to pay anytransfer taxes resulting from any transfer requested by any holder inconnection with any such conversion.

 

(h)    Reservationof Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of itsauthorized but unissued shares of Common Stock,

 

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solely for the purpose of effecting the conversion of the shares of theSeries E Preferred, such number of its shares of Common Stock as shall fromtime to time be sufficient to effect the conversion of all outstanding sharesof the Series E Preferred, and if at any time the number of authorized butunissued shares of Common Stock shall not be sufficient to effect theconversion of all then outstanding shares of the Series E Preferred, theCorporation will take such corporate action as may be necessary to increase itsauthorized but unissued shares of Common Stock to such number of shares asshall be sufficient for such purpose, including, without limitation, engagingin best efforts to obtain any requisite shareholder approval.

 

(i)    CertainConversion Restrictions.  A holdermay not convert shares of Series E Preferred Stock or receive shares of CommonStock as payment of dividends hereunder to the extent such conversion orreceipt of such interest payment would result in the Holder, together with anyaffiliate thereof, beneficially owning (as determined in accordance withSection 13(d) of the Exchange Act and the rules promulgated thereunder) inexcess of 9.999% of the then issued and outstanding shares of Common Stock,including shares issuable upon conversion of, and payment of interest on, theshares of Series E Preferred Stock held by such Holder after application ofthis Section.  Since the holder will notbe obligated to report to the Company the number of shares of Common Stock hemay hold at the time of a conversion hereunder, unless the conversion at issuewould result in the issuance of shares of Common Stock in excess of 9.999% ofthe then outstanding shares of Common Stock without regard to any other shareswhich may be beneficially owned by the Holder or an affiliate thereof, theholder shall have the authority and obligation to determine whether therestriction contained in this Section will limit any particular conversionhereunder and to the extent that the holder determines that the limitationcontained in this Section applies, the determination of which portion of theprincipal amount of shares of Series E Preferred Stock are convertible shall bethe responsibility and obligation of the Holder.  If the holder has delivered a Conversion Notice for shares ofSeries E Preferred Stock that, without regard to any other shares that theholder or its affiliates may beneficially own, would result in the issuance inexcess of the permitted amount hereunder, the Company shall notify the holderof this fact and shall honor the conversion for the maximum principal amountpermitted to be converted on such Conversion Date in accordance with theperiods described in Section 5(b) and, at the option of the holder, eitherretain any principal amount tendered for conversion in excess of the permittedamount hereunder for future conversions or return such excess shares of SeriesE Preferred Stock to the holder.  Theprovisions of this Section may be waived by a Holder (but only as to itself andnot to any other holder of Series E Preferred Stock) upon not less than 61 daysprior notice to the Company.  Otherholders of Series E Preferred Stock shall be unaffected by any such waiver.

 

(j)    FractionalShares.  No fractional shares shallbe issued upon the conversion of any share or shares of Series EPreferred.  All shares of Common Stock(including fractions thereof) issuable upon conversion of more than one shareof Series E Preferred by a holder thereof shall be aggregated for purposes ofdetermining whether the conversion would result in the issuance of anyfractional share.  If, after theaforementioned aggregation, the conversion would result in the issuance of afraction of a share of Common Stock, the Corporation shall, in lieu of issuingany fractional share, pay the holder otherwise entitled to such fraction a sumin cash equal to the fair market value of such fraction on the date ofconversion (as determined in good faith by the Board of Directors of theCorporation or an authorized Committee thereof).

 

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(k)    Notices.  Any notice or other communication requiredor permitted to be given hereunder shall be in writing and shall be effective(a) upon hand delivery or delivery by telex (with correct answer backreceived), telecopy or facsimile at the address or number designated below (ifdelivered on a business day during normal business hours where such notice isto be received), or the first business day following such delivery (if deliveredother than on a business day during normal business hours where such notice isto be received) or (b) on the second (2nd) business day following the date ofmailing by express courier service, fully****prepaid,addressed to such address, or upon actual receipt of such mailing, whichevershall first occur.  The addresses forsuch communications shall be:

 
| to the Corporation |   | Stratus Services Group, Inc.                                                                            |
|--------------------|--------|---------------------------------------------------------------------------------------------------------|
|               |   | 500 Craig Road, Suite 201                                                                               |
|               |   | Manalapan, NJ   07726                                                                              |
|               |   | Attention: Suzette Nanovic Berrios, Esq.                                                                |
|               |   |                                                                                                    |
| to the Holder:     |   | At the address set forth on the books and records of  the Company or as specified in writing by Holder. |

 

Any party hereto may from time to time change its address for noticesby giving at least ten (10) days’ written notice of such changed address to theother party hereto.

 

(l)    Reorganizationor Merger.  In case of anyreorganization or any reclassification of the capital stock of the Corporationor any consolidation or merger of the Corporation with or into any othercorporation or corporations or a sale of all or substantially all of the assetsof the Corporation to any other person (other than a sale or transfer to awholly owned subsidiary of the Corporation), and the holders of Series EPreferred do not elect to treat such transaction as a liquidation, dissolutionor winding up as provided in Section 2 hereof, then, as part of suchreorganization, consolidation, merger or sale, provision shall be made so thateach share of Series E Preferred shall thereafter be convertible into thenumber of shares of stock or other securities or property (including cash) towhich a holder of the number of shares of Common Stock deliverable uponconversion of such share of Series E Preferred would have been entitled uponthe record date of (or date of, if no record date is fixed) such event and, inany case, appropriate adjustment (as determined by the Board of Directors)shall be made in the application of the provisions herein set forth withrespect to the rights and interests thereafter of the holders of the Series EPreferred, to the end that the provisions set forth herein shall thereafter beapplicable, as nearly as equivalent as is practicable, in relation to anyshares of stock or the securities or property (including cash) thereafterdeliverable upon the conversion of the shares of Series E Preferred.

 

4.             **Re-issuance of Certificates**.  In the event of a conversion (or, if applicable, redemption) ofSeries E Preferred in which less than all of the shares of Series E Preferredof a particular certificate are converted or redeemed, as the case may be, theCorporation shall promptly cause to be issued and delivered to the holder ofsuch certificate, a certificate representing the remaining shares of Series EPreferred which have not been so converted or redeemed.

 

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5.             **Other Provisions**. For all purposes of this Resolution, the term “date of issuance” and theterms “Closing” or “Closing Date” shall mean the day on which Shares are firstissued by the Corporation.  Anyprovision herein which conflicts with or violates any applicable usury lawshall be deemed modified to the extent necessary to avoid such conflict orviolation.  The term “OTC BulletinBoard” herein refers to the principal market on which the Common Stock of theCorporation is traded.  If the CommonStock is listed on a securities exchange, or if another market becomes theprincipal market on which the Common Stock is traded or through which pricequotations for the Common Stock are reported, the term “OTC Bulletin Board”shall be deemed to refer to such exchange or other principal market.  The term “conversion date” shall mean thedate on which the notice of conversion is received by the Corporation.

 

6.             **No Adverse Actions**. The Corporation shall not in any manner, whether by amendment of theCertificate of Incorporation (including, without limitation, any Certificate ofDesignation), merger, reorganization, re-capitalization, consolidation, salesof assets, sale of stock, tender offer, dissolution or otherwise, take anyaction, or permit any action to be taken, solely or primarily for the purposeof increasing the value of any class of stock of the Corporation if the effectof such action is to reduce the value or security of the Series E Preferred.

 

7.             **Voting Rights.**  The Series E Preferred shall not have theright to vote, except as required by law.

 

8.             **Attorneys’ Fees**.  Any holder of Series E Preferred shall beentitled to recover from the Corporation the reasonable attorneys’ fees andexpenses incurred by such holder in connection with enforcement by such holderof any obligation of the Corporation hereunder.

 

9.             **Additional Restrictions**. For as long as any shares of the Series E Preferred Stock areoutstanding, the Corporation will not amend the terms of the Series E PreferredStock without the consent of the holders holding a majority of the outstandingshares of the Series E Preferred Stock.

 

**INWITNESS WHEREOF**, the Corporation has caused this Certificateof Designations, Preferences and Rights to be signed by Michael A. Maltzman,Executive Vice President and Chief Financial Officer, this 30th day of July2002.

 
|   | Stratus Services Group, Inc.           |
|--------|----------------------------------------|
|   |                                   |
|   | By:                               | Michael A. Maltzman |   |
|   | Name:   Michael A. Maltzman       |
|   | Title:   Executive Vice President |
|   | Chief Financial  Officer               |

 

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