EXHIBIT 10.68
 
SETTLEMENT AGREEMENT
 
This Settlement Agreement (“Agreement”) is entered as of November 21, 2006,
between STRATUS SERVICES GROUP, INC. (“Stratus”) and STATE COMPENSATION
INSURANCE FUND (“State Fund”) with reference to the following:

A. State Fund has asserted claims against Stratus in an action entitled State
Compensation Insurance Fund v. Stratus Services Group, Inc., Case No. CV06-3025
CAS (SHx), now pending in the United States District Court for the Central
District of California (the "Action").
 
B. To avoid the cost and uncertainty of litigation, and without the admission of
any claim, fact or defense, the parties desire to settle the Action and all
actual and potential claims between them on the terms described below.
 
Now, therefore, in consideration of the foregoing and the promises and covenants
herein, the parties agree as follows:
 
(c)  Nature of Agreement. This Agreement is a full settlement of all claims
asserted in the Action or which could have been asserted in the Action or which
arise directly or indirectly from any act, contract, breach or omission by
Stratus any time prior to the date of this Agreement. This Agreement is not an
admission of any liability, fact, claim or defense by any party.
 
(d)  Settlement Payment to State Fund.
 
(a) Stratus shall pay State Fund the sum of $300,000.00 in monthly installments
as follows: $4500.00 per month for twenty-four consecutive months commencing in
January 2007, and $6000.00 per month for the following thirty-two consecutive
months.
 
(b) Each installment payment shall be sent by first class mail directly to State
Compensation Insurance Fund, Credit & Collections Department, Attention Paul
Nannini, P.O. Box 42087, San Francisco, CA 94142.
 
(c) Each installment payment shall be due on the first day of each calendar
month (“Due Date”), beginning January 1, 2007. If any installment payment is not
received by State Fund on or before the fifth (5th) calendar day after the Due
Date, such payment will be considered in default. State Fund shall send written
notice of default, via facsimile, to Stratus at the following number:
732-907-1888 or such other facsimile number as Stratus shall designate. Upon
notification, Stratus shall have seven (7) calendar days to cure such default.
If default is not cured by Stratus within said seven (7) day time period, State
Fund may, at its sole discretion, enter judgment against Stratus in the sum of
$2,023,419.15 minus those payments made to State Fund between January 1, 2007
and the date of default. Not exercising this option in the event of a default by
Stratus will not be a waiver by State Fund of its right to do so should a future
default by Stratus take place.
 

 
 

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(d) Stratus will sign a Stipulation for Entry of Judgment consistent with the
provisions in this section, which Stipulation will be held by State Fund and
will not be filed unless there is a default under this section.
 
(e)  New Insurance. In the event that Stratus should in the future apply for a
policy of workers’ compensations and employer’s liability insurance with State
Fund, issuance of such policy will be made contingent on the payment to State
Fund of $2,023,419.15, less any and all sums previously paid to State Fund
pursuant to this agreement. This condition precedent is in addition to all other
conditions appurtenant to issuance of such insurance policy.
 
(f)  Release of Claims.
 
(a) Except for the obligations under this Agreement, and to the fullest extent
possible under law, State Fund fully releases and discharges Stratus and each of
its shareholders, officers, directors, employees, agents, successors, and
assigns from any and all claims alleged or which could have been alleged in the
Action and all other known and unknown existing or potential claims, rights,
liabilities, torts, damages, injuries, penalties, attorneys' fees, and causes of
action which arise directly or indirectly from any act, breach, promise,
omission, event, insurance policy or agreement prior to the date of this
Agreement.
 
(b) State Fund understands and agrees that the foregoing release extends, but is
not limited to, to all rights or claims related directly or indirectly to
workers’ compensation policy number 1686667 it issued to Stratus on or about May
20, 2002.
 
(c) State Fund waives all rights it may have under section 1542 of the
California Civil Code, which reads as follows: “A general release does not
extend to claims which the creditor does not know or suspect to exist in his or
her favor at the time of executing the release, which if known by him or her
must have materially affected his settlement with the debtor.” State Fund is
aware that it may learn that the facts and circumstances surrounding the claims
released hereby may be different from the facts and circumstances now known or
believed by it to be true. It assumes the risk that it may discover facts and
circumstances different from its current knowledge or belief, and agrees that in
such event this Agreement nevertheless shall be in all respects effective and
not subject to termination, rescission or modification for any reason.
 
(d) State Fund represents that it has not heretofore assigned or transferred to
any person all or part of or any interest in any claim released hereby.
 
(g)  Dismissal of the Action. State Fund and Stratus will file a stipulation for
dismissal of the Action with prejudice in its entirety immediately after this
Agreement is fully executed.
 
(h)  Counterparts. This Agreement may be executed in counterparts and will be
deemed fully executed when each party has signed and transmitted a counterpart
to the other. All counterparts taken together shall constitute a single
agreement. Signatures transmitted by fax shall be deemed fully effective as
original signatures.
 
(i)  Attorneys’ Fees. Stratus and State Fund shall bear their own attorney's
fees and costs incurred in connection with the Action and the claims released
hereby. In any action
 

 
 

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brought to enforce or interpret the terms of this Agreement, the prevailing
party will be entitled to recover all costs incurred in such action, including
reasonable attorneys’ fees, in addition to any other relief to which they may be
otherwise entitled.
 
(j)  Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and any and all prior
discussions, negotiations, commitments and understandings are merged herein.
 
(k)  Representations and Warranties. The parties represent and warrant to and
agree with each other as follows:
 
(a) Each party has received independent legal advice from attorneys of its
choice with respect to the advisability of making this settlement and the
release provided herein and with respect to the advisability of executing this
Agreement.
 
(b) Except as expressly stated in this Agreement, no party has made any
statement or representation to any other party regarding any fact, which
statement or representation is relied upon by any other party in entering into
this Agreement. In connection with the execution of this Agreement or the making
of the settlement provided for herein, no party to this Agreement has relied
upon any statement, representation or promise of any other party not expressly
contained herein.
 
(l)  Waiver, Modification and Amendment. No provisions of this Agreement may be
waived unless in a writing signed by all parties. Waiver of any one provision
will not be deemed a waiver of any other provision. This Agreement may be
modified or amended only by a written agreement executed by all of the parties.
 
(m)  Construction. In the event of vagueness or ambiguity, this Agreement will
not be construed against the party preparing it, but will be construed as if all
parties prepared it jointly. Headings in this Agreement are for convenience only
and do not limit or define any provisions. This Agreement shall be interpreted
under and governed by the laws of California. If any provision of this Agreement
is adjudged void or unenforceable, the same shall not affect the validity of the
Agreement as a whole.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates
written below.
 

 STRATUS SERVICES GROUP, INC.      STATE COMPENSATION INSURANCE FUND /s/ Michael
A. Maltzman       /s/ Paul Nannini

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Name:  Michael A. Maltzman
Title:  Executive Vice President and CFO
More Title:  Stratus Services Group, Inc.
 
Date:  12/01/06
   
Name:  Paul Nannini
Title:  Collections Manager
More Title:  State Compensation Insurance Fund
 
Date:  11/30/06