Exhibit 10.17

 

 

July 31, 2003

 

Via Fax:  011 1 480 436 231

 

Board of Directors

Artisan (UK) plc

Dean House, Sovereign Court

Ermine Business Park, Huntingdon

Cambridgeshire PE29 6 XU

England

 

Re:                             Stratus Services Group, Inc.; Series A
Transaction

 

Gentlemen:

 

Please let this serve as memorialization of the Agreement between Stratus
Services Group, Inc. (“Stratus”) and Artisan (UK) plc (“Artisan”), the sole
beneficial shareholder of Stratus’ issued and outstanding Series A Preferred
Stock (the “Series A Stock”).

 

As Artisan is aware, Stratus is currently working towards the filing of an S-1
Registration Statement for a continuous offering of units to consist of Stratus
common stock and warrants, the precise terms of which have not yet been
finalized (the “Continuous Offering”).  As discussed with Artisan, Stratus is
willing to agree to redeem the Series A stock, subject to the terms and
conditions set forth below, in the event that Stratus through its underwriters
completes a Continuous Offering raise in an aggregate amount of at least $4.0
million (for purposes of this letter agreement only the receipt of such $4.0
million in the aggregate by the underwriters shall mean the  “Initial Closing”).

 

Assuming that this Initial Closing of the Continuous Offering is indeed
completed, the parties hereto hereby agree that, upon the Initial Closing of the
Continuous Offering, the Series A Stock shall be redeemed in full by Stratus and
thereafter cancelled, pursuant to the following terms:

 

1.                                       Within fifteen (15) days after the
completion of the Initial Closing of the Continuous Offering, Stratus will pay
to Artisan the lump sum of Five Hundred Thousand Dollars ($500,000.00).

 

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2.                                       Within eighteen (18) months from the
date of this Agreement, Stratus shall either, at its option (i) pay Artisan the
sum of Two Hundred Fifty Thousand Dollars ($250,000.00), or (ii) within three
(3) business days from the expiration of such eighteen (18) month period,
deliver to Artisan shares of common stock registered for resale and freely
tradeable with an aggregate value of $250,000.00, based on the average of the
closing bid prices for Stratus’ common stock for the thirty (30) consecutive
trading days prior to the expiration of such eighteen (18) month period.

 

No interest will accrue on this obligation over such eighteen (18) month period;
however, in the event that Stratus shall default on its obligations to pay such
$250,000.00 in cash or in stock, then Artisan shall be entitled to receive a
lump sum payment of $300,000 cash only, plus default interest, at a rate of
eighteen percent (18%) calculated on a daily basis, from the date of the default
until the default is cured.

 

3.                                       Artisan or its designee, will receive
within fifteen (15) days of the completion of the Initial Closing of the
Continuous Offering a number of shares of common stock equal to five and
one-half percent (5.5%) of the issued and outstanding shares of Stratus common
stock, as of the completion date of the Initial Closing of the Continuous
Offering.  Additionally, upon final completion of the Continuous Offering (the
“Final Closing”), Artisan shall receive such number of shares of common stock,
subject to reduction for any outstanding underwater options and warrants (the
“Reduction Amount”) (see attached Exhibit A for a summary of all such options
and warrants), as will result in Artisan holding, as of the date of the Final
Closing, an amount of common shares equal to five and one half percent (5.5%) of
Stratus’ common stock, on a fully diluted basis, taking into account any still
outstanding convertible securities but specifically excluding the Reduction
Amount.

 

In conjunction with this issuance of common stock, Artisan will agree to execute
a lock-up agreement with Stratus (the “Lock-Up Agreement”) with the following
terms:

 

(a)                                  Any common stock issued in connection with
this Agreement shall be subject to a lock-up for a period of fourteen (14)
months following issuance, however, Artisan will retain the voting rights to
same; and

 

(b)                                 Any common stock held by Artisan as of the
date of the signing of this Agreement, shall be subject to lock-up for a period
of one hundred thirty-five (135) days from the completion of the Initial Closing
of the Continuous Offering.  Thereafter, assuming the completion of a 1-for-4
reverse split by Stratus in connection with the Continuous Offering, Artisan
shall be entitled to sell up to 25,000 shares of common stock per month.  While
the shares  released from the lock-up do not aggregate monthly, (i.e. if 25,000
shares are not sold in month one 50,000 shares may not be sold in month two),
this

 

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25,000 per month share limitation shall in all respects be released within one
(1) year from the date of the signing of this Agreement.  Further, in the event
that the reverse split deviates in any manner from the contemplated 1 for 4,
then the amount of shares to be released monthly from the lock-up shall be
adjusted proportionately as well (i.e., assuming a reverse split of 1 for 3, the
amount of shares to be released monthly from lock-up would be 33,333).

 

4.                                       All of the foregoing is contingent upon
the following:

 

(a)                                  Approval by the Board of Directors of
Stratus within two (2) business days of the date hereof;

 

(b)                                 Approval by the Board of Directors of
Artisan within two (2) business days of the date hereof;

 

(c)                                  Completion of the Initial Closing of the
Continuous Offering.

 

5.                                       If Stratus does not deliver the
$500,000 and 5.5% of its outstanding common stock within fifteen (15) days of
the Initial Closing, or if the Initial Closing does not take place within nine
(9) months of the date of this Agreement, then Artisan will have the right to
immediately terminate this Agreement, with no further obligations hereunder and
without prejudicing any of its available rights and remedies under applicable
law or equity.

 

6.                                       Upon execution of this Agreement,
Stratus will deliver into escrow all voting rights to the Series A Stock and the
common stock held by Artisan as of the date of the signing of this agreement. 
Upon the completion of the Initial Closing and the delivery of the lump sum
payment and common shares by Stratus pursuant to the terms of Items 1 through 4
above, Stratus shall deliver from escrow to Artisan any voting rights that
Stratus and/or Joseph J. Raymond, Sr., Stratus’ Chairman, President and CEO, may
have with respect to the Artisan Series A stock and common shares.

 

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If you are in agreement with the following, please sign below where indicated
and return a copy to the undersigned.

 

 

Very truly yours,

 

 

 

Stratus Services Group, Inc.

 

 

 

By:

s/Joseph J. Raymond

 

 

Name:  Joseph J. Raymond

 

Title:   CEO

 

 

AGREED TO AND ACCEPTED:

 

Artisan (UK) plc

 

By:

s/Chris Musselle

 

Name:  Chris Musselle

Title:   Financial Director

 

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