Exhibit 10.16

 

 

July 22, 2003

 

Mr. Christopher Janish

Pinnacle Investment Partners, L.P.

The Trump Building

40 Wall Street, 33rd Floor

New York, New York 10005

 

Re:                             Series E Registration Penalties; Stratus
Services Group, Inc. (“Stratus”)

 

Dear Mr. Janish:

 

As the authorized representative of Pinnacle Investments Partners, L.P.
(“Pinnacle”), the majority holder of the Series E Preferred Stock, you advised
Stratus, at a meeting with Stratus senior management held on July 9, 2003, of
certain issues that the Series E shareholders had regarding registration
penalties.

 

Specifically you advised that the Series E shareholders were claiming
entitlement to certain penalties, pursuant to Paragraph 5(b) of the Stock
Purchase Agreement (the “SPA”) executed by and among Stratus and each of the
respective Series E investors, for failing to timely terminate the suspension of
the S-1 Registration Statement filed by Stratus with the SEC on September 27,
2002, which was declared effective on October 25, 2002.

 

The Series E shareholders do not contend they are entitled to any penalty under
Section 5(b) (i) of the SPA because the registration statement was timely
filed.  They do contend, however, that, when the effectiveness of such
Registration Statement was suspended on December 1, 2002, the Effective Date of
a certain Asset Purchase Agreement (“APA”) between Stratus and Elite Personnel
Services, Inc. (“Elite”), that Stratus failed to fulfill its obligations
pursuant to Section 5(b)(ii) of the SPA to “use its best efforts to cause such
suspension to terminate at the earliest possible date”.

 

The S-1 Registration Statement was suspended on December 1, 2002 due to the
necessity of Stratus providing certain financial statements of the Elite
business acquired.  Stratus filed such statements thereafter by virtue of a Form
8-K/A with the SEC on January 30, 2003.  The suspension of the Registration
Statement has not been terminated.

 

While Stratus does not admit that it failed to fulfill its contractual
obligations pursuant to the SPA to use such “best efforts” to terminate the
suspension of the S-1, in the interest of amicably settling this matter, and for
the further consideration of future investments by the Series E shareholders,
including, but not limited to, Pinnacle, the parties have agreed to pay the sum
of $447,735 to the Series E shareholders, as of July 31, 2003.  However,
Pinnacle has agreed to receive these monies as additional shares of Series E
preferred Stock, i.e., 4,477 shares.  Moreover, Pinnacle has also agreed to
waive any rights to the accrued dividends on such Series E Preferred Stock,

 

--------------------------------------------------------------------------------

 

which amounted to $84,943 as of June 30, 2003 ($64,108 Pinnacle; $20,835 other
investors).

 

By signing below, you acknowledge on behalf of the Series E shareholders,
payment of such 4,477 shares of Series E Preferred Stock shall constitute
payment in full for all amounts due and owing to the Series E shareholders
through and including the date hereof.

 

 

Very truly yours,

 

 

 

 

 

/s/ Joseph J. Raymond

 

Joseph J. Raymond

 

Chief Executive Officer

 

 

AGREED TO AND ACCEPTED BY:

 

Pinnacle Investment Partners, L.P.

 

 

By:

/s/ Christopher Janish

 

Name:  Christopher Janish

Title:  Fund Manager

 

 

cc:

Mr. Michael A. Maltzman

 

Mr. Jeffrey Raymond

 

Mr. Joseph J. Raymond, Jr.

 

Suzette Nanovic Berrios, Esq.

 

2

--------------------------------------------------------------------------------