Document:

a6740413_ex4-03.htm

Exhibit 4.03

 

 

STRATUS MEDIA GROUP, INC.

 

_______________

 

CERTIFICATE OF DESIGNATIONS

OF

SERIES E CONVERTIBLE PREFERRED STOCK

 

(Pursuant to Section 78.195 of the General Corporation Law of the State of Nevada)

 

_______________

 

Stratus Media Group, Inc., a Nevada corporation (the “Corporation”), in accordance with the provisions of the Nevada General Corporation Law (the “NGCL”) does hereby certify that, in accordance with Section 78.1955 of the NGCL, the following resolution was duly adopted by the Board of Directors of the Corporation as of May 16, 2011:

 

RESOLVED, that the Board of Directors of the Corporation pursuant to authority expressly vested in it by the provisions of the Articles of Incorporation of the Corporation, as amended, hereby authorizes the issuance of a series of Preferred Stock designated as the Series E Convertible Preferred Stock, par value $0.001 per share, of the Corporation and hereby fixes the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions thereof (in addition to any provisions set forth in the Articles of Incorporation of the Corporation, as amended, which are applicable to the Preferred Stock of all classes and series) as follows:

 

SERIES E CONVERTIBLE PREFERRED STOCK

 

1.             Designation, Amount and Par Value.  The following series of preferred stock shall be designated as the Corporation’s Series E Convertible Preferred Stock (the “Series E Preferred Stock”), and the number of shares so designated shall be ten thousand (10,000).  Each share of Series E Preferred Stock shall have a par value of $0.001 per share.  The “Stated Value” for each share of Series E Preferred Stock shall equal $1,000.

 

2.             Definitions.  In addition to the terms defined elsewhere in this Certificate of Designations the following terms have the meanings indicated:

 

“Additional Shares” has the meaning set forth in Section 9(a).

 

“Alternate Consideration” has the meaning set forth in Section 9(d).

 

“Applicable Price” has the meaning set forth in Section 9(a).

 

“Approved Share Plan” means any employee benefit or equity incentive plan which has been approved by the Board of Directors of the Corporation, pursuant to which the Corporation’s securities may be issued to any employee, officer, consultant or director for services provided to the Corporation.

 

 

  

  

  

 

“Bankruptcy Event” means any of the following events: (a) the Corporation or a Subsidiary of the Corporation commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Subsidiary thereof; (b) there is commenced against the Corporation or any Subsidiary any such case or proceeding that is not dismissed within sixty (60) days after commencement; (c) the Corporation or any Subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) days; (e) the Corporation or any Subsidiary makes a general assignment for the benefit of creditors; (f) the Corporation or any Subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Corporation or any Subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Corporation or any Subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Bloomberg” means Bloomberg Financial Markets.

 

“Business Day” means any day other than Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in The State of New York are authorized or required by law or other governmental action to close.

 

“Calendar Quarter” means each of the following periods: the period beginning on and including January 1 and ending on and including March 31; the period beginning on and including April 1 and ending on and including June 30; the period beginning on and including July 1 and ending on and including September 30; and the period beginning on and including October 1 and ending on and including December 31.

 

“Common Share” means one share of the Common Stock.

 

“Common Stock” means the common stock of the Corporation, par value $0.001 per share, and any securities into which such common stock may hereafter be reclassified.

 

“Conversion Notice” has the meaning set forth in Section 7(a).

 

“Conversion Price” means $0.40 per share, as adjusted herein.

 

“Conversion Rate” means, for each share of Series E Preferred Stock, the quotient of (i) the Stated Value, plus the amount of any accrued but unpaid Dividends, divided by (ii) the Conversion Price.

 

“Convertible Securities” means any stock or securities (other than the Options, the Warrants, the Series A Preferred Stock. the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock) convertible into or exercisable or exchangeable for Common Stock.

 

“Dilutive Issuance” has the meaning set forth in Section 9(a).

 

“Distributed Property” has the meaning set forth in Section 9(c).

 

“Dividends” has the meaning set forth in Section 3.

 

“Dividend Date” has the meaning set forth in Section 3.

 

 

  

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“Dividend Rate” has the meaning set forth in Section 3.

 

“Dividend Shares” has the meaning set forth in Section 3.

 

“Equity Conditions” means, with respect to a specified issuance of Common Stock, that each of the following conditions is satisfied: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) the Common Stock is listed or quoted (and is not suspended from trading) on the Trading Market and such shares of Common Stock are approved for listing upon issuance; (iii) no Bankruptcy Event has occurred; (iv) the conversion of the Series E Preferred Stock is permitted by the Trading Market and all other applicable laws, rules and regulations; and (v) the Corporation is not in default with respect to any material obligation hereunder or under any other Transaction Document.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Securities” means Common Shares issued or deemed to be issued by the Corporation: (A) in connection with an Approved Share Plan; (B) in connection with a bank financing or strategic partnership or investment; (C) in a Qualified Public Offering; (D) upon issuance of the shares of Series E Preferred Stock or Dividend Shares or upon conversion of the shares of Series E Preferred Stock or upon exercise of any Warrants that were outstanding on the Original Issue Date; (E) upon exercise of Options or Convertible Securities; (F) upon issuance or conversion of any shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; (G) upon the payment of any dividend in respect of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; and (H) in connection with any share split, share dividend, recapitalization or similar transaction by the Corporation for which adjustment is made pursuant to Section 9(b).

 

“Fundamental Transaction” means the occurrence of any of the following in one or a series of related transactions: (i) an acquisition after the date of the Purchase Agreement by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of more than fifty percent (50%) of the voting rights or voting equity interests in the Corporation; (ii) the first day on which more than one half of the members of the Corporation’s Board of Directors; (iii) a merger or consolidation of the Corporation or any Subsidiary or a sale of all or substantially all of the assets of the Corporation in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Corporation’s securities prior to the first such transaction continue to hold at least half of the voting rights or voting equity interests in of the surviving entity or acquirer of such assets; (iv) a recapitalization, reorganization or other transaction involving the Corporation or any Subsidiary that constitutes or results in a transfer of more than one half of the voting rights or voting equity interests in the Corporation; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the Corporation; (vi) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of more than fifty percent (50%) of the outstanding Common Stock tender or exchange their shares for other securities, cash or property; or (vii) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

 

“Holder” means any holder of Series E Preferred Stock.

 

“Junior Securities” means the Common Stock and all other equity or equity equivalent securities of the Corporation (other than the Series E Preferred Stock), including, without limitation, the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.

 

 

  

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“Liquidation Event” means any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary.

 

“Mandatory Conversion” has the meaning set forth in Section 7(b).

 

“Mandatory Conversion Date” has the meaning set forth in Section 7(b).

 

“Mandatory Conversion Eligibility Date” has the meaning set forth in Section 7(b).

 

“Mandatory Conversion Measuring Period” has the meaning set forth in Section 7(b).

 

“Mandatory Conversion Notice” has the meaning set forth in Section 7(b).

 

“Mandatory Conversion Notice Date” has the meaning set forth in Section 7(b).

 

“New Issuance Price” has the meaning set forth in Section 9(a).

 

“Optional Conversion” has the meaning set forth in Section 7(a).

 

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

“Original Issue Date” means the date of the first issuance of any shares of the Series E Preferred Stock, regardless of the number of transfers of any particular shares of Series E Preferred Stock and regardless of the number of certificates that may be issued to evidence shares of Series E Preferred Stock.

 

“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“PIK Dividend” has the meaning set forth in Section 3.

 

“PIK Dividend Average Price” has the meaning set forth in Section 3.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of May 24, 2011, among the Corporation and the Holders, as amended from time to time.

 

“Qualified Public Offering” means a bona fide underwritten public offering of Common Stock or Convertible Securities by the Corporation.

 

“Registration Rights” means the Registration Rights set forth in Article VI of the Purchase Agreement among the Corporation and the Holders.

 

“Required Holders” means the Holders of shares of Series E Preferred Stock representing at least a majority of the aggregate shares of Series E Preferred Stock then outstanding.

 

 

  

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“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission having substantially the same effect as such Rule.

 

“Series A Preferred Stock” means the Preferred Stock designated by the Board of Directors of the Corporation as Series A Convertible Preferred Stock pursuant to a Certificate of Designations filed with the Secretary of State of the State of Nevada on September 14, 1999.

 

“Series B Preferred Stock” means the Preferred Stock designated by the Board of Directors of the Corporation as Series B Convertible Preferred Stock pursuant to a Certificate of Designations filed with the Secretary of State of the State of Nevada on March 1, 2000.

 

“Series C Preferred Stock” means the Preferred Stock designated by the Board of Directors of the Corporation as Series C 10% Convertible Preferred Shares pursuant to a Certificate of Designations filed with the Secretary of State of the State of Nevada on April 20, 2010.

 

“Series D Preferred Stock” the Preferred Stock designated by the Board of Directors of the Corporation as Series D 10% Convertible Preferred Shares pursuant to a Certificate of Designations filed with the Secretary of State of the State of Nevada on May 13, 2011.

 

“Series E Preferred Stock” has the meaning set forth in Section 1.

 

“Series E Preferred Stock Liquidation Preference” has the meaning set forth in Section 6.

 

“Series E Preferred Stock Register” has the meaning set forth in Section 4.

 

“Securities” means, collectively, the Series E Preferred Stock and the Underlying Shares issued or issuable pursuant to the Purchase Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Dividend Amount” means, for any Dividend Date, the quotient of (i) the Stated Value divided by (ii) the Weighted Average Price for the 20 Trading Days immediately prior to the record date applicable to such Dividend Date.

 

“Subsidiary” means any “significant subsidiary” of the Corporation as defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

 

  

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“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

“Transaction Documents” means the Purchase Agreement, the schedules and exhibits attached thereto, the Warrants, this Certificate of Designations and the Transfer Agent Instructions and any other documents or agreements executed or delivered in connection with the transactions contemplated under the Purchase Agreement and thereunder.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of the shares of Series E Preferred Stock and in satisfaction of any other obligation of the Corporation to issue shares of Common Stock pursuant to the Transaction Documents.

 

“Valuation Event” has the meaning set forth in Section 9(a)(viii)(D).

 

“Warrants” means the warrants issued to the Holders pursuant to the Purchase Agreement.

 

“Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New York City Time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New York City Time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be calculated for such security on such date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Corporation and the Required Holders.  All such determinations shall be appropriately adjusted for any share dividend, share split or other similar transaction during such period.

 

3.             Dividends.  The Holders of the shares of Series E Preferred Stock shall be entitled to receive dividends (“Dividends”) payable on the Stated Value of each share of Series E Preferred Stock at the rate of five percent (5%) per annum (the “Dividend Rate”).  Dividends on the shares of Series E Preferred Stock shall commence accruing on the Original Issue Date and shall be computed on the basis of a 360-day year consisting of twelve 30-day months and shall be payable in arrears for each Calendar Quarter on the first day of the succeeding Calendar Quarter during the period beginning on the Original Issue Date (each, a “Dividend Date”) with the first Dividend Date being July 1, 2011.  Prior to the payment of Dividends on a Dividend Date, Dividends on the shares of Series E Preferred Stock shall accrue at the Dividend Rate.  If a Dividend Date is not a Business Day (as defined below), then the Dividend shall be due and payable on the Business Day immediately following such Dividend Date.  Dividends shall be payable in cash on each Dividend Date.  In lieu of cash, at the option of the Company, Dividends shall be payable in fully paid and non-assessable shares of Common Stock (“Dividend Shares”), provided that the resale of such Dividend Shares is registered pursuant to an effective registration statement under the Securities Act (a “PIK Dividend”).  With respect to the payment of any PIK Dividend, the number of Dividend Shares to be issued in payment of such PIK Dividend with respect to each outstanding share of Series E Preferred Stock shall be determined by dividing (i) the amount of the PIK Dividend (were it paid in cash) by (ii) the arithmetic average of the Weighted Average Price of the Common Stock for each of the ten (10) consecutive Trading Days preceding the Dividend Date corresponding to such PIK Dividend (the “PIK Dividend Average Price”).  To the extent that any PIK Dividend would result in the issuance of a fractional share of Common Stock to any Holder, then the amount of such fraction multiplied by the PIK Dividend Average Price shall be paid in cash (unless there are no legally available funds with which to make such cash payment, in which event the number of shares of Common Stock to be issued to each such Holder shall be rounded up to the nearest whole share).

 

 

  

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4.             Registration of Issuance and Ownership of Series E Preferred Stock.  The Corporation shall register the issuance and ownership of shares of the Series E Preferred Stock, upon records to be maintained by the Corporation or its Transfer Agent (as defined in the Purchase Agreement) for that purpose (the “Series E Preferred Stock Register”), in the name of the record Holders thereof from time to time.  The Corporation may deem and treat the registered Holder of shares of Series E Preferred Stock as the absolute owner thereof for the purpose of any conversion hereof or any distribution to such Holder, and for all other purposes, absent actual notice to the contrary.

 

5.             Registration of Transfers.  The Corporation shall register the transfer of any shares of Series E Preferred Stock in the Series E Preferred Stock Register, upon surrender of certificates evidencing such Shares to the Corporation at its address specified herein.  Upon any such registration or transfer, a new certificate evidencing the shares of Series E Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder.

 

6.             Liquidation.

 

(a)           In the event of any Liquidation Event, the Holders of Series E Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (i) the Stated Value for each share of Series E Preferred Stock then held by them (as adjusted pursuant to Section 9), plus all accrued but unpaid dividends on such Series E Preferred Stock as of the date of such event, and (ii) the amount per share that would be payable to a Holder had all shares of Series E Preferred Stock been converted to Underlying Shares immediately prior to such Liquidation Event (the “Series E Preferred Stock Liquidation Preference”).  If, upon the occurrence of a Liquidation Event, the assets and funds thus distributed among the Holders shall be insufficient to permit the payment to such Holders of the full Series E Preferred Stock Liquidation Preference, then the Holders shall share ratably in any such distribution of the assets and funds of the Corporation in proportion to the aggregate Series E Preferred Stock Liquidation Preference that would otherwise be payable to each of such Holders.

 

(b)           After the Holders have been paid the full Series E Preferred Stock Liquidation Preference to which they are entitled, the Holders will have no right or claim to any of the assets or funds of the Corporation.

 

(c)           The Corporation shall provide written notice of any Liquidation Event or Fundamental Transaction to each record Holder not less than forty-five (45) days prior to the payment date or effective date thereof, provided that such information shall be made known to the public prior to or in connection with such notice being provided to the Holders.  At the request of any Holder, which must be delivered prior to the effective date of a Fundamental Transaction (or, if later, within five (5) Trading Days after such Holder receives notice of such Fundamental Transaction from the Corporation), such Fundamental Transaction will be treated as a Liquidation Event with respect to such Holder for the purposes of this Section 6.

 

 

  

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(d)           In the event that, immediately prior to the closing of a Liquidation Event the cash distributions required by Section 6(a) have not been made, the Corporation shall forthwith either:  (i) cause such closing to be postponed until such time as such cash distributions have been made, or (ii) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series E Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice by the Corporation delivered pursuant to Section 6(c).

 

7.             Conversion.

 

(a)           Conversion at Option of Holder.  At the option of any Holder, any shares of Series E Preferred Stock held by such Holder may be converted into shares of Common Stock at the Conversion Rate.  A Holder may convert shares of Series E Preferred Stock into Common Stock pursuant to this paragraph at any time and from time to time after the Original Issue Date, by delivering to the Corporation a conversion notice (the “Conversion Notice”), in the form attached hereto as Exhibit A, appropriately completed and duly signed, and the date any such Conversion Notice is delivered to the Corporation (as determined in accordance with the notice provisions hereof) is a “Conversion Date.”

 

(b)           Mandatory Conversion.  If, at any time from and after the Effective Date (as defined in the Purchase Agreement) (the “Mandatory Conversion Eligibility Date”), (i) the Weighted Average Price of the Common Stock equals or exceeds $2.50 per share for each of any twenty (20) consecutive Trading Days following the Mandatory Conversion Eligibility Date (the “Mandatory Conversion Measuring Period”) and (ii) the average daily trading volume over the Mandatory Conversion Measuring Period is at least $250,000, then the Corporation shall have the right to require the Holders to convert any or all of their shares of Series E Preferred Stock Price into fully paid and non-assessable shares of Common Stock at the Conversion Rate (a “Mandatory Conversion”).  The Corporation may exercise its right to require conversion under this Section 7(b) on one occasion by delivering within not more than five (5) Trading Days following the end of such Mandatory Conversion Measuring Period a written notice thereof by facsimile and overnight courier to all Holders of shares of Series E Preferred Stock and the Transfer Agent (the “Mandatory Conversion Notice,” and the date all the Holders received such notice by facsimile is referred to as the “Mandatory Conversion Notice Date”).  The Mandatory Conversion Notice shall be irrevocable.  The Mandatory Conversion Notice shall state (i) the Trading Day selected for the Mandatory Conversion in accordance with Section 7(a), which Trading Day shall be at least twenty (20) Business Days but not more than sixty (60) Business Days following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”), (ii) the number of shares of Series E Preferred Stock of such Holder subject to the Mandatory Conversion (iii) the aggregate number of shares of Series E Preferred Stock subject to Mandatory Conversion from all of the Holders pursuant to this Section 7 and (iv) the number of shares of Common Stock to be issued to such Holder on the Mandatory Conversion Date.

 

8.             Mechanics of Conversion.

 

(a)           The number of Underlying Shares issuable upon any conversion of shares of Series E Preferred Stock hereunder shall equal the number of shares of Series E Preferred Stock to be converted multiplied by the Conversion Rate.

 

 

  

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(b)           Upon conversion of any shares of Series E Preferred Stock, the Corporation shall promptly (but in no event later than three (3) Trading Days after the Conversion Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate for the Underlying Shares issuable upon such conversion.  The Holder agrees to the imprinting of a restrictive legend on any such certificate evidencing any of the Underlying Shares, until such time as the Underlying Shares are no longer required to contain such legend or any other legend.  Certificates evidencing the Underlying Shares shall not be required to contain such legend or any other legend (i) while a registration statement covering the resale of the Underlying Shares is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144 if the Holder provides the Corporation with a legal opinion reasonably acceptable to the Corporation to the effect that the Underlying Shares can be sold under Rule 144, (iii) if the Underlying Shares are eligible for sale under Rule 144 without any volume limitation, or (iv) if the Holder provides the Corporation with a legal opinion reasonably acceptable to the Corporation to the effect that the  legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Staff of the SEC).  The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of the Conversion Date.  If the shares are then not required to bear a restrictive legend, the Corporation shall, upon request of the Holder, deliver Underlying Shares hereunder electronically through DTC or another established clearing corporation performing similar functions, and shall credit the number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission System.

 

(c)           A Holder shall deliver the original certificate(s) evidencing the Series E Preferred Stock being converted in connection with the conversion of such Series E Preferred Stock.  Upon surrender of a certificate following one or more partial conversions, the Corporation shall promptly deliver to the Holder a new certificate representing the remaining shares of Series E Preferred Stock.

 

(d)           The Corporation’s obligations to issue and deliver Underlying Shares upon conversion of Series E Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to any Holder in connection with the issuance of such Underlying Shares.

 

9.             Certain Adjustments.  The Conversion Price is subject to adjustment from time to time as set forth in this Section 9.

 

(a)           Adjustment of Conversion Price upon Issuance of Common Shares.  If and whenever on or after the Original Issue Date, the Corporation issues or sells, or in accordance with this Section 9(a) is deemed to have issued or sold, any Common Shares other than Excluded Securities (“Additional Shares”) for a consideration per share (the “New Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such time (a “Dilutive Issuance”), then immediately after such issue or sale, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price.  For purposes of determining the adjusted Conversion Price under this Section 9(a), the following shall be applicable:

 

 

  

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(i)  Issuance of Options.  If the Corporation in any manner grants or sells any Options and the lowest price per share for which one Common Share is issuable upon the exercise of any such Option or upon conversion, exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such Common Share shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the granting or sale of such Option for such price per share.  For purposes of this Section 9(a)(i), the “lowest price per share for which one Common Share is issuable upon the exercise of any such Option or upon conversion, exchange or exercise of any Convertible Securities issuable upon exercise of such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Corporation with respect to any one Common Share upon granting or sale of the Option, upon exercise of the Option and upon conversion, exchange or exercise of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Shares or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Shares upon conversion, exchange or exercise of such Convertible Securities.

 

(ii)  Issuance of Convertible Securities.  If the Corporation in any manner issues or sells any Convertible Securities and the lowest price per share for which one Common Share is issuable upon such conversion, exchange or exercise thereof is less than the Applicable Price, then such Common Share shall be deemed to be outstanding and to have been issued and sold by the Corporation at the time of the issuance of sale of such Convertible Securities for such price per share.  For the purposes of this Section 9(a)(ii), the “lowest price per share for which one Common Share is issuable upon such conversion, exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Corporation with respect to any one Common Share upon the issuance or sale of the Convertible Security and upon the conversion, exchange or exercise of such Convertible Security.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Shares upon conversion, exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 9(a)(ii), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

(iii)  Change in Option Price or Rate of Conversion.  If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Shares changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold.  For purposes of this Section 9(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of the shares of Series E Preferred Stock are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Shares deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.  No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

 

 

  

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(iv)  Calculation of Consideration Received.  In case any Option is issued in connection with the issue or sale of other securities of the Corporation, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.001.  If any Common Shares, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the gross amount received by the Corporation therefor.  If any Common Shares, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Corporation will be the arithmetic average of the Weighted Average Price of such securities during the ten (10) consecutive Trading Days ending on the date of receipt of such securities.  The fair value of any consideration other than cash or securities will be determined jointly by the Corporation and the Required Holders.  If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser selected by the Corporation and the Required Holders.  The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Corporation.

 

(v)  Record Date.  If the Corporation takes a record of the holders of Common Shares for the purpose of entitling them (x) to receive a dividend or other distribution payable in Common Shares, Options or Convertible Securities or (y) to subscribe for or purchase Common Shares, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Shares deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

(b)           Stock Dividends and Splits.  If the Corporation, at any time while Series E Preferred Stock is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock (other than dividends paid in respect of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock or the Series E Preferred Stock); (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the applicable Conversion Price for Series E Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

 

 

  

11

  

 

(c)           Pro Rata Distributions.  If the Corporation, at any time while Series E Preferred Stock is outstanding, distributes or pays as a dividend to holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (including, without limitation, cash) (in each case, “Distributed Property”), then in each such case the Corporation shall simultaneously deliver to each Holder the Distributed Property that each such Holder would have been entitled to receive in respect the number of Underlying Shares then issuable pursuant to Section 7(a) above had the Holder been the record holder of such Underlying Shares immediately prior to the applicable record or payment date.

 

(d)           Fundamental Transactions.  If the Corporation, at any time while Series E Preferred Stock is outstanding, effects any Fundamental Transaction, then upon any subsequent conversion of Series E Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it could have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”).  For purposes of any such conversion, the determination of the applicable Conversion Price for the Series E Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Series E Preferred Stock following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall issue to the Holder a new series of preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and ensuring that the Series E Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

(e)           Calculations.  All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Corporation, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(f)           Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 9, the Corporation at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based.  Upon written request, the Corporation will promptly deliver a copy of each such certificate to each Holder and to the Corporation’s Transfer Agent.

 

 

  

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(g)           Notice of Corporation Events.  If the Corporation (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Corporation or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Corporation, then the Corporation shall deliver to each Holder a notice describing the material terms and conditions of such transaction, at least twenty (20) calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction.

 

10.           Voting Rights.

 

(a)           General.  Except as otherwise provided herein or as required by applicable law, the Holders of the Series E Preferred Stock shall be entitled to vote on all matters on which holders of Common Stock are entitled to vote, including, without limitation, the election of directors.  For such purposes, each Holder shall be entitled to a number of votes in respect of the Underlying Shares owned by it equal to the number of shares of Common Stock into which such shares of Series E Preferred Stock are convertible as of the record date for the determination of stockholders entitled to vote on such matter, or if no record date is established, at the date such vote is taken or any written consent of stockholders is solicited.

 

(b)           Protective Provisions.  Notwithstanding anything to the contrary in Section 10(a), so long as the Holders, in the aggregate, hold at least thirty percent (30%) of the shares of Series E Preferred Stock issued pursuant to the Purchase Agreement, the Corporation shall not, without the affirmative vote of the Holders of a majority of the shares of Series E Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock or alter or amend this Certificate of Designation (whether by merger, reorganization, consolidation or otherwise), (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation Event or Fundamental Transaction senior to or pari passu with the Series E Preferred Stock, (c) amend its articles of incorporation or other charter documents so as to affect adversely any rights of the Holders (whether by merger, reorganization, consolidation or otherwise), (d) increase the authorized number of shares of Series E Preferred Stock, (e) pay or declare any dividend or make any distribution on any Junior Securities, except pro rata stock dividends on the Common Stock payable in additional shares of Common Stock, (f) incur any indebtedness for money borrowed, individually or in the aggregate, in excess of $1 million, or (g) enter into any agreement with respect to the foregoing.

 

 

  

13

  

 

(c)           Board of Directors.  The holders of the outstanding shares of Series E Preferred Stock, voting as a separate class, shall be entitled to elect two (2) directors of the Corporation so long as such holders remain the holders of, in the aggregate, at least 50% of the total number of shares of Series E Preferred Stock purchased pursuant to the Purchase Agreement; provided, however, that in the event that such holders hold, in the aggregate, less than 50%, but at least 25%, of the total number of shares of Series E Preferred Stock purchased pursuant to the Purchase Agreement, such holders, voting as a separate class, shall be entitled to elect one (1) director of the Corporation; provided, further, that upon the occurrence of (and during the continued existence of) a Default (as defined in Section 16 below), such holders, voting as a separate class, shall be entitled to elect a majority of the directors of the Corporation, each to serve during the continued existence of such Default.  In the event that the holders of the outstanding shares of Series E Preferred Stock hold, in the aggregate, less than 25% of the total number of shares of Series E Preferred Stock purchased pursuant to the Purchase Agreement, such holders shall forfeit their right to nominate directors of the Corporation as a separate voting class other than upon the occurrence of (and during the continued existence of) a Default.  At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.  In the case of any vacancy in the office of a director elected by the holders of a particular class or classes of stock, a successor shall be elected to hold office for the unexpired term of such director by the affirmative vote of the holders of a majority of the shares of that class or classes, as applicable, given at a special meeting of such shareholders duly called or by an action by written consent for that purpose or, in the absence of action by such holders, by action of the remaining directors elected by the holders of that class or classes, as applicable.  Any director who shall have been elected by the holders of a particular class or classes of stock may be removed from the Board of Directors during such director’s term of office, either for or without cause by, and only by, the affirmative vote of the holders of a majority of the shares of such class or classes, as applicable, given at a special meeting of the shareholders duly called or by an action by written consent for that purpose.

 

11.           Priority.  The Series E Preferred Stock, whether now or hereafter issued, shall, with respect to dividend rights (other than the right to receive additional shares of Series E Preferred Stock pursuant to Section 14) and rights on liquidation, winding up or dissolution, whether voluntary or involuntary, rank senior to the Common Stock of the Corporation and to any other series of Preferred Stock established hereafter by the Board of Directors the terms of which shall specifically provide that such series shall rank junior to the Series E Preferred Stock with respect to dividend rights and rights on liquidation, winding up or dissolution. The Corporation shall not, without the prior approval of Holders of at least 66-2/3% of the shares of Series E Preferred Stock then outstanding, voting as a separate class, issue any additional shares of the Series E Preferred Stock, or create any other class or series of capital stock that ranks senior to or on a parity with the Series E Preferred Stock.

 

12.           Charges, Taxes and Expenses.  Issuance of certificates for shares of Series E Preferred Stock and for Underlying Shares issued on conversion of (or otherwise in respect of) the Series E Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Corporation.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Series E Preferred Stock or receiving Underlying Shares in respect of the Series E Preferred Stock.

 

13.           Replacement Certificates.  If any certificate evidencing Series E Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, or a Holder fails to deliver such certificate as may otherwise be provided herein, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction (in such case) and, in each case, customary and reasonable indemnity, if requested.  Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.

 

14.           Reservation of Underlying Shares.  The Corporation covenants that it shall at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) all outstanding Series E Preferred Stock (taking into account the adjustments of Section 9), free from preemptive rights or any other contingent purchase rights of persons other than the Holder.  The Corporation covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.  The Corporation covenants that it shall use its best efforts to satisfy each of the Equity Conditions.  The Corporation has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable upon conversion of the Series E Preferred Stock.

 

 

  

14

  

 

15.           Fractional Shares.  The Corporation shall not be required to issue or cause to be issued fractional Common Shares on conversion of Series E Preferred Stock or in payment of any Dividend.  If any fraction of a Common Share would, except for the provisions of this Section, be issuable upon conversion of Series E Preferred Stock or in payment of any Dividend, the number of Common Shares to be issued will be rounded up to the nearest whole share.

 

16.           Mandatory Redemption.

 

(a)           The Corporation shall redeem, from any source of funds legally available therefor, all remaining outstanding shares of the Series E Preferred Stock on the fifth anniversary of the Original Issue Date (the “Redemption Date”).  The Corporation shall effect such redemption by paying in cash in exchange for the shares of Series E Preferred Stock to be redeemed a sum equal to the Stated Value of each share of Series E Preferred Stock plus all declared or accumulated but unpaid dividends on such shares (the “Redemption Price”).  In the event the Corporation is lawfully able to redeem only part of the Series E Preferred Stock outstanding, then the holders of shares of Series E Preferred Stock shall be entitled to have their shares redeemed ratably, in proportion to the number of such shares owned by each such holder (rounded to the nearest share), and the Corporation shall redeem the remaining shares of Series E Preferred Stock on the first day it may lawfully do so.

 

(b)           Ten (10) days prior to the Redemption Date, the Corporation shall deposit the aggregate Redemption Price for all outstanding shares of Series E Preferred Stock designated for redemption on such Redemption Date and not yet redeemed or converted, with a bank or trust company having aggregate capital and surplus in excess of $1,000,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed.  Simultaneously, the Corporation shall deposit irrevocable instructions and authority with such bank or trust company to pay, on and after the Redemption Date, the Redemption Price of the shares of Series E Preferred Stock so designated for redemption to the holders thereof upon surrender of their certificates or a reasonably acceptable affidavit of loss.  The balance of any monies deposited by the Corporation pursuant to this paragraph remaining unclaimed at the expiration of six (6) months following the Redemption Date shall thereafter be returned to the Corporation, provided that the stockholder to whom such monies would be payable hereunder shall be entitled to receive such monies upon proof of ownership of the Series E Preferred Stock, which payment shall be made without interest.  Dividends with respect to shares of Series E Preferred Stock shall cease to accrue after the Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except the right to receive the Redemption Price pursuant to the terms of this Section 16; provided, that in the event of a Default (as defined below), the holders of shares of Series E Preferred Stock shall have all of the rights, preferences and privileges provided for herein, including, without limitation, pursuant to Section 16(c) below.

 

(c)           If the Corporation fails to pay the full Redemption Price for all shares of Series E Preferred Stock payable as of such Redemption Date (a “Default”) then, notwithstanding anything else to the contrary contained herein or in the Articles of Incorporation of the Corporation, as amended, the holders of the outstanding shares of Series E Preferred Stock, voting as a separate class, shall be entitled to elect a majority of the directors of the Corporation, each to serve until such time as such Redemption Price has been paid in full.  At the request of the holders of a majority of the shares of Series E Preferred Stock, the Corporation shall use its best efforts to secure the necessary corporate approvals and effect (i) a sale of the debt or equity securities of the Corporation and/or any of its subsidiaries, (ii) a sale or transfer of all or a portion of the assets of the Corporation and/or any of its subsidiaries, (iii) a merger, consolidation or other business combination of the Corporation and/or any of its subsidiaries or (iv) any other transaction (including the liquidation, dissolution or winding up of the Corporation and/or any of its subsidiaries) which could reasonably be expected to enable the Corporation to pay and discharge any outstanding portion of such Redemption Price.

 

 

  

15

  

 

17.           Notices.  Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 4:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 4:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.  The addresses for such communications shall be: (i) if to the Corporation, to 3 E. De La Guerra Street, Santa Barbara, California 93101, Attention: Chief Executive Officer, or (ii) if to a Holder, to the address or facsimile number appearing on the Corporation’s stockholder records or such other address or facsimile number as such Holder may provide to the Corporation in accordance with this Section.

 

18.           Miscellaneous.

 

(a)           The headings herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof.

 

(b)           No provision of this Certificate of Designations may be amended, except in a written instrument signed by the Corporation and Holders of at least a majority of the shares of Series E Preferred Stock then outstanding.  Any of the rights of the Holders of Series E Preferred Stock set forth herein, including any Equity Conditions or any other similar conditions for the Holders’ benefit, may be waived by the affirmative vote of Holders of at least a majority of the shares of Series E Preferred Stock then outstanding.  No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designations shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

[Signature page follows.]

 

 

  

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IN WITNESS WHEREOF, Stratus Media Group, Inc. has caused this Certificate of Designations to be duly executed as of this 24 day of May, 2011.

 

	  	
STRATUS MEDIA GROUP, INC.

	  	  
	  	  
	  	
By:    /s/ Paul Feller                                

	  	
Name:  Paul Feller

	  	
Title:    Chief Executive Officer

 

 

  

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EXHIBIT A

 

 

FORM OF CONVERSION NOTICE

 

(To be executed by the registered Holder in order to convert shares of Series E Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series E Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of Stratus Media Group, Inc., a Nevada corporation (the “Corporation”), according to the conditions hereof, as of the date written below.

 

	 	  
	 	
                                                          

	 	
Date to Effect Conversion

	 	  
	 	
                                                          

	 	
Number of shares of Series E Preferred Stock owned prior to Conversion

	 	  
	 	
                                                          

	 	
Number of shares of Series E Preferred Stock to be Converted

	 	  
	 	
                                                          

	 	
Stated Value of shares of Series E Preferred Stock to be Converted

	 	  
	 	
                                                          

	 	
Number of shares of Common Stock to be Issued

	 	  
	 	
                                                          

	 	
Applicable Conversion Price

	 	  
	 	
 

	 	
Number of shares of Series E Preferred Stock subsequent to Conversion

	 	  
	 	 
	 	
Name of Holder

	 	
By:

	
 

	 	
Name:

	
 

	 	
Title:

	
 

 

18a6740413_ex4-04.htm

Exhibit 4.04

 

 

Series A Warrant

 

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.

 

WARRANT TO PURCHASE COMMON STOCK

 

OF

 

STRATUS MEDIA GROUP, INC.

 

 April __, 2011

 

THIS CERTIFIES THAT, for value received ______________ (“Holder”) is entitled, subject to the terms and conditions of this Warrant, at any time or from time to time after the issuance date of this Warrant (the “Effective Date”), and before 5:00 p.m. Pacific Time on the fifth (5th) anniversary of the date hereof (the “Expiration Date”), to purchase ______________ shares of Common Stock of Stratus Media Group, Inc. (the “Company”) at a price per share equal to $____ (the “Purchase Price”).  Both the number of shares of Common Stock purchasable upon exercise of this Warrant and the Purchase Price are subject to adjustment and change as provided herein.

 

1.             CERTAIN DEFINITIONS.  As used in this Warrant the following terms shall have the following respective meanings:

 

1.1             “Closing Sale Price” shall mean, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, L.P., or, if the Principal Market begins to operate on an extended-hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, L.P. or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Inc. (formerly Pink Sheets LLC). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

 

  

1

  

 

1.2              “Common Stock” shall mean the Common Stock of the Company.

 

1.3             “Eligible Market” shall mean the New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board.

 

1.4              “Registered Holder” shall mean any Holder in whose name this Warrant is registered upon the books and records maintained by the Company.

 

1.5             “Trading Day” shall mean any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York time).

 

1.6              “Warrant” as used herein, shall include this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.

 

1.7              “Warrant Shares” shall mean the shares of Common Stock receivable or issuable upon exercise of this Warrant.

 

2.             EXERCISE OF WARRANT.

 

2.1             Payment.  Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by (a) the delivery (including, without limitation, delivery by facsimile) of the form of Notice of Exercise attached hereto as Exhibit A (the “Notice of Exercise”), duly executed by the Holder, at the principal office of the Company, and (b) as soon as practicable after such date, surrendering

 

(a)            this Warrant at the principal office of the Company, and

 

(b)            payment, in cash (by check) or by wire transfer, of an amount equal to the product obtained by multiplying the number of shares of Common Stock being purchased upon such exercise by the then effective Purchase Price (the “Exercise Amount”).

 

2.2             “Easy Sale” Exercise.  In lieu of the payment methods set forth in Section 2.1(b) above, when permitted by law and applicable regulations (including Nasdaq and FINRA rules), the Holder may pay the Purchase Price through a “same day sale” commitment from the Holder (and if applicable a broker-dealer (a “Dealer”)), whereby the Holder irrevocably elects to exercise this Warrant and to sell a portion of the shares so purchased to pay the Purchase Price and the Holder (or, if applicable, a Dealer) commits upon sale (or, in the case of a Dealer, upon receipt) of such shares to forward the Purchase Price directly to the Company.

 

 

  

2

  

 

2.3             Stock Certificates; Fractional Shares.  As soon as practicable on or after the date of any exercise of this Warrant, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Common Stock issuable upon such exercise.  No fractional shares or scrip representing fractional shares shall be issued upon an exercise of this Warrant.

 

2.4             Partial Exercise; Effective Date of Exercise.  In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the shares of Common Stock purchasable hereunder.  This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above.  The person entitled to receive the shares of Common Stock issuable upon exercise of this Warrant shall be treated for all purposes as the holder of record of such shares as of the close of business on the date the Holder is deemed to have exercised this Warrant.

 

2.5             Vesting.  This Warrant shall vest fully upon issuance.

 

3.             Company Optional Exercise.  If at any time (i) the Closing Sale Price of the Common Stock is equal to or greater than $1.50 per share (as adjusted for stock splits, stock combinations and the like occurring from and after the Effective Date) (the “Trigger Price”) for a period of twenty (20) consecutive Trading Days (the twenty (20) consecutive Trading Days on which the condition in this clause (i) is satisfied are referred to herein as the “Measuring Period”), and (ii) the average aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock on the applicable Eligible Market for each Trading Day during the Measuring Period exceeds 100,000 shares per day (as adjusted for stock splits, stock combinations and the like occurring from and after the Effective Date), then the Company shall have the right to require the Holder to exercise all, but not less than all, of this Warrant for all of the then remaining Warrant Shares in accordance with Section 2 hereof (a “Mandatory Exercise”).  The Company may exercise its right to require exercise under this Section 3 on one occasion by delivering (provided that all of the conditions set forth in clauses (i) through (ii) above are then satisfied), not later than the tenth Trading Day immediately following the end of the Measuring Period, a written notice thereof by facsimile and overnight courier to the Holder (the “Company Optional Exercise Notice”) and the date the Holder receives such notice by facsimile is referred to as the “Notice Date.”  The Company Optional Exercise Notice shall be irrevocable.  The Company Optional Exercise Notice shall (1) state the Trading Day selected for the Company Optional Exercise in accordance with this Section 3, which Trading Day shall be at least twenty (20) Trading Days but not more than sixty (60) Trading Days following the Notice Date (the “Company Optional Exercise Date”), (2) state the number of shares of Common Stock to be issued to the Holder on the Company Optional Exercise Date, and (3) contain a statement that the Company has simultaneously taken the same action with respect to all of the Series A Warrants.  Any portion of this Warrant exercised by the Holder after the Company Optional Exercise Notice Date shall reduce the number of Warrant Shares for which this Warrant is required to be exercised on the Company Optional Exercise Date.  If the Company has elected a Company Optional Exercise, the mechanics of exercise set forth in Section 2 shall apply, to the extent applicable, as if the Company had received from the Holder on the Company Optional Exercise Date an Exercise Notice with respect to all of the then remaining Warrant Shares that are then eligible to be purchased by the Company, and the Holder shall make payment in accordance with Section 2.1 or 2.2. If the Company elects to cause a Company Optional Exercise of this entire Warrant pursuant to this Section, then it must simultaneously take the same action with respect to all of the other Series A Warrants that are then eligible to be purchased.

 

 

  

3

  

 

4.             VALID ISSUANCE:  TAXES.  All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof.  The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock in any name other than that of the Registered Holder of this Warrant, and in such case the Company shall not be required to issue or deliver any stock certificate or security until such tax or other charge has been paid, or it has been established to the Company’s reasonable satisfaction that no tax or other charge is due.

 

5.             ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) and the Purchase Price are subject to adjustment upon occurrence of the following events:

 

5.1             Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares.  The Purchase Price of this Warrant shall be proportionally decreased and the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect any stock split or subdivision of the Company’s Common Stock.  The Purchase Price of this Warrant shall be proportionally increased and the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally decreased to reflect any combination of the Company’s Common Stock.

 

5.2             Adjustment for Dividends or Distributions of Stock or Other Securities or Property.  In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Common Stock (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (a) securities of the Company or (b) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, the Holder of this Warrant on exercise hereof at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the shares of Common Stock (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 5.

 

 

  

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5.3             Reclassification.  If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change, and the Purchase Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 5.  No adjustment shall be made pursuant to this Section 5.3 upon any conversion or redemption of the Common Stock, which is the subject of Section 5.3.

 

5.4             Adjustment for Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of the capital stock of the Company (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Purchase Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 5.  The foregoing provisions of this Section 5.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to the Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors.  In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

 

5.5             Conversion of Common Stock.  In case all or any portion of the authorized and outstanding shares of Common Stock of the Company are redeemed or converted or reclassified into other securities or property pursuant to the Company’s Certificate of Incorporation or otherwise, or the Common Stock otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon exercise hereof at any time after the date on which the Common Stock is so redeemed or converted, reclassified or ceases to exist (the “Termination Date”), shall receive, in lieu of the number of shares of Common Stock that would have been issuable upon such exercise immediately prior to the Termination Date, the securities or property that would have been received if this Warrant had been exercised in full and the Common Stock received thereupon had been simultaneously converted immediately prior to the Termination Date, all subject to further adjustment as provided in this Warrant.  Additionally, the Purchase Price shall be immediately adjusted to equal the quotient obtained by dividing (x) the aggregate Purchase Price of the maximum number of shares of Common Stock for which this Warrant was exercisable immediately prior to the Termination Date by (y) the number of shares of Common Stock of the Company for which this Warrant is exercisable immediately after the Termination Date, all subject to further adjustment as provided herein.

 

 

  

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6.           CERTIFICATE AS TO ADJUSTMENTS.  In each case of any adjustment in the Purchase Price, or number or type of shares issuable upon exercise of this Warrant, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Purchase Price.  The Company shall promptly send (by facsimile and by either first class mail, postage prepaid or overnight delivery) a copy of each such certificate to the Holder.

 

7.           LOSS OR MUTILATION.  Upon receipt of evidence reasonably satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.

 

8.           RESERVATION OF COMMON STOCK.  The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and, from time to time, will take all steps necessary to amend its Certificate of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant.  All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions arising under federal or state securities laws. Issuance of this Warrant shall constitute full authority to the Company’s Officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

 

9.           TRANSFER AND EXCHANGE.  Subject to the terms and conditions of this Warrant and compliance with all applicable securities laws, this Warrant and all rights hereunder may be transferred to any Registered Holder’s parent, subsidiary or affiliate, or, if the Registered Holder is a partnership, to any partner of such Registered Holder, in whole or in part, on the books of the Company maintained for such purpose at the principal office of the Company referred to above, by the Registered Holder hereof in person, or by duly authorized attorney, upon surrender of this Warrant properly endorsed and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer.  Upon any permitted partial transfer, the Company will issue and deliver to the Registered Holder a new Warrant or Warrants with respect to the shares of Common Stock not so transferred.  Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that when this Warrant shall have been so endorsed, the person in possession of this Warrant may be treated by the Company, and all other persons dealing with this Warrant, as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, any notice to the contrary notwithstanding; provided, however, that until a transfer of this Warrant is duly registered on the books of the Company, the Company may treat the Registered Holder hereof as the owner for all purposes.

 

 

  

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10.           RESTRICTIONS ON TRANSFER.  The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”) covering the disposition or sale of this Warrant or the Common Stock issued or issuable upon exercise hereof, as the case may be, and registration or qualification under applicable state securities laws, such Holder will not sell, transfer, pledge, or hypothecate any or all of this Warrant or such Common Stock, as the case may be, unless either (i) the Company has received an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such registration is not required in connection with such disposition or (ii) the sale of such securities is made pursuant to SEC Rule 144.

 

11.           COMPLIANCE WITH SECURITIES LAWS.  By acceptance of this Warrant, the Holder hereby represents, warrants and covenants that any shares of stock purchased upon exercise of this Warrant shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof; that the Holder has had such opportunity as such Holder has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of its investment in the Company; that the Holder is able to bear the economic risk of holding such shares as may be acquired pursuant to the exercise of this Warrant for an indefinite period; that the Holder understands that the shares of stock acquired pursuant to the exercise of this Warrant will not be registered under the Securities Act (unless otherwise required pursuant to exercise by the Holder of the registration rights, if any, granted to the Registered Holder) and will be “restricted securities” within the meaning of Rule 144 under the Securities Act and that the exemption from registration under Rule 144 will not be available for at least six months from the date of exercise of this Warrant, and even then will not be available unless a public market then exists for the stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and that all stock certificates representing shares of stock issued to the Holder upon exercise of this Warrant or upon conversion of such shares may have affixed thereto a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

 

  

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12.           NO RIGHTS OR LIABILITIES AS STOCKHOLDERS.  This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.  In the absence of affirmative action by such Holder to purchase Common Stock by exercise of this Warrant or Common Stock upon conversion thereof, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder hereof shall cause such Holder hereof to be a stockholder of the Company for any purpose.

 

13.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby represents and warrants to Holder that:

 

13.1             Due Authorization; Consents.  All corporate action on the part of the Company, its officers, directors and stockholders necessary for (a) the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Warrant, and (b) the authorization, issuance, reservation for issuance and delivery of all of the Common Stock issuable upon exercise of this Warrant, has been duly taken.  This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.  All consents, approvals and authorizations of, and registrations, qualifications and filings with, any federal or state governmental agency, authority or body, or any third party, required in connection with the execution, delivery and performance of this Warrant and the consummation of the transactions contemplated hereby and thereby have been obtained.

 

13.2             Organization.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.

 

13.3             Valid Issuance of Stock.  The outstanding shares of the capital stock of the Company are duly and validly issued, fully paid and nonassessable, and such shares, and all outstanding options and other securities of the Company, have been issued in full compliance with the registration and prospectus delivery requirements of the Securities Act and the registration and qualification requirements of all applicable state securities laws, or in compliance with applicable exemptions therefrom, and all other provisions of applicable federal and state securities laws, including without limitation, anti-fraud provisions.

 

13.4             Governmental Consents.  All consents, approvals, orders, authorizations or registrations, qualifications, declarations or filings with any federal or state governmental authority on the part of the Company required in connection with the consummation of the transactions contemplated herein shall have been obtained prior to and be effective as of the Effective Date.

 

14.           NOTICES.  Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when received when sent by facsimile at the address and number set forth below; (c) three business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party as set forth below; or (d) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth below with next-business-day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider.

 

 

  

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To the Company:

	
To the Holder:

	
Stratus Media Group, Inc.

	
The address on the signature page hereto

	
3 East De La Guerra Street, 2nd Floor

	  
	
Santa Barbara, California 93101

	  
	
Attn:  Paul Feller

	  
	  	  

Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication.  A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 14 by giving the other party written notice of the new address in the manner set forth above.

 

15.           HEADINGS.  The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof.

 

16.           LAW GOVERNING.  This Warrant shall be construed and enforced in accordance with, and governed by, the laws of the State of California, with regard to conflict of law principles of such state.

 

17.           NO IMPAIRMENT.  The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Registered Holder of this Warrant against impairment.  Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon exercise of this Warrant.

 

18.           NOTICES OF RECORD DATE.  In case:

 

18.1             the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant), for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities or to receive any other right; or

 

18.2             of any consolidation or merger of the Company with or into another corporation, any capital reorganization of the Company, any reclassification of the capital stock of the Company, or any conveyance of all or substantially all of the assets of the Company to another corporation in which holders of the Company’s stock are to receive stock, securities or property of another corporation; or

 

 

  

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18.3             of any voluntary dissolution, liquidation or winding-up of the Company; or

 

18.4             of any redemption or conversion of all outstanding Common Stock;

 

then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock or (such stock or securities as at the time are receivable upon the exercise of this Warrant), shall be entitled to exchange their shares of Common Stock (or such other stock or securities), for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up.  The Company shall use all reasonable efforts to ensure such notice shall be delivered at least thirty (30) days prior to the date therein specified.

 

19.           SEVERABILITY.  If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

20.           COUNTERPARTS.  For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.

 

21.           NO INCONSISTENT AGREEMENTS.  The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of this Warrant or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to holders of the Company’s securities under any other agreements, except rights that have been waived.

 

22.           SATURDAYS, SUNDAYS AND HOLIDAYS.  If the Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration Date shall automatically be extended until 5:00 p.m. the next business day.

 

23.           ENTIRE AGREEMENT.  This Warrant contains the sole and entire agreement and understanding of the parties with respect to the entire subject matter of this Warrant, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter of this Warrant are hereby merged herein.

 

[Signatures appear on following page.]

 

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the Effective Date.

 

	
INVESTOR

 

 

_________________________________________

 

Address:

_________________________________________

 

_________________________________________

 

	
STRATUS MEDIA GROUP, INC.

 

 

By:     ________________________________________

Paul Feller, President

 

 

 

SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK

 

 

 

  

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EXHIBIT A

 

NOTICE OF EXERCISE

 

(To be executed upon exercise of Warrant)

 

STRATUS MEDIA GROUP, INC.

 

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, the securities of the Company, as provided for therein, and tenders herewith payment of the exercise price in full in the form of cash or a certified or official bank check in same-day funds in the amount of $____________ for _________ such securities.

 

Please issue a certificate or certificates for such securities in the name of, and pay any cash for any fractional share to (please print name, address and social security number):

 

Name:                                                                                                                                                                                                                                                                                                               

 

Address:                                                                                                                                                                                                                                                                                                           

 

Signature:                                                                                                                                                                                                                                                                                                         

 

Note:  The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form below.

 

If said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares.

 

  

  

  

 

EXHIBIT B

 

ASSIGNMENT

 

(To be executed only upon assignment of Warrant Certificate)

 

For value received, hereby sells, assigns and transfers unto ____________________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________________ attorney, to transfer said Warrant Certificate on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises:

 

	
Name(s) of Assignee(s)

	
Address

	
No. of Warrants

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

And if said number of Warrants shall not be all the Warrants represented by the Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant Certificate.

 

Dated:                                                                                                                                                                                                                                                                                                           

 

Signature:                                                                                                                                                                                                                                                                                                     

 

Notice:  The signature to the foregoing Assignment must correspond to the name as written upon the face of this security in every particular, without alteration or any change whatsoever; signature(s) must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Securities and Exchange Commission Rule 17Ad-15.

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