Exhibit 10.35


    


    AMENDED
      AND RESTATED 

    FORBEARANCE
      AGREEMENT

    


    


    AMENDED
      AND RESTATED FORBEARANCE AGREEMENT (this “Agreement”), dated as of August 11,
      2005, by and between CAPITAL TEMPFUNDS, a division of CAPITAL FACTORS LLC,
      as
      successor in interest to Capital Tempfunds, Inc., a Delaware limited liability
      company having its principal place of business at One Brixam Green, 15800 John
      J. Delaney Drive, Suite 300, Charlotte, North Carolina 28277 (“Capital”), and
      STRATUS SERVICES GROUP, INC., a Delaware corporation with its principal place
      of
      business at 500 Craig Road, Suite 201, Manalapan, New Jersey 07726
      (“Borrower”).

     

    BACKGROUND

     

    Borrower
      and Capital are parties to (i) a Loan and Security Agreement dated as of
      December 8, 2000 (as amended, restated, supplemented or otherwise modified
      from
      time to time, the “Loan Agreement”) pursuant to which Capital provides Borrower
      with certain financial accommodations, and (ii) a Forbearance Agreement dated
      as
      of January 15, 2005, between Borrower and Capital and amended on April 8, 2005
      and June 10, 2005 (as amended, restated, supplemented or otherwise modified
      from
      time to time, the “Forbearance Agreement”) pursuant to which Capital agreed to
      forbear from exercising rights and remedies under the Loan
      Agreement.

     

    As
      of
      January 15, 2005 and continuing thereafter, there were various continuing Events
      of Default existing under the Loan Agreement as listed (the “Designated
      Defaults”) on Exhibit
      A
      annexed
      hereto and incorporated by reference herein, by reason of which Capital has
      no
      obligation to make any additional Loans and Capital has the full legal right
      to
      exercise its rights and remedies under the Loan Agreement. Borrower has
      requested that Capital forbear for an additional period of time from exercising
      its rights and remedies under the Loan Agreement. Capital is prepared to
      establish an additional period of forbearance for Borrower on the terms and
      conditions set forth below.

     

    Borrower
      and Capital have agreed to amend and restate the Forbearance Agreement in its
      entirety.

     

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the parties hereto hereby agree as
      follows:

     

    1. Definitions.
      All
      capitalized terms not otherwise defined herein shall have the meanings given
      to
      them in the Loan Agreement.

     

    2. Acknowledgement.
      Borrower acknowledges and agrees that the Designated Defaults have occurred
      and
      exist as of the date hereof. Borrower hereby affirms and acknowledges that
      (a)
      as of August 5, 2005, there is presently due and owing to Capital the principal
      amount of $9,040, 039.42 with respect to the Loan Agreement including interest,
      costs, fees and expenses (collectively, the “Amount”), (b) the Amount is
      due and owing without

     


    
      
        
        

      

      
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    defense,
      offset or counterclaim of any kind or nature whatsoever, and (c) the
      Loan
      Documents are and shall continue to be legal, valid and binding obligations
      and
      agreements of Borrower enforceable in accordance with their respective
      terms.

     

    3. Forbearance
      Period.
      During
      the period commencing on the date hereof and ending on the earlier to occur
      of
      (a) August 26, 2005 (or such other date as may be mutually agreed upon in
      writing) or (b) the date of any Forbearance Default (as defined below) (the
      “Forbearance Period”), Capital will forbear from the exercise of its rights and
      remedies under the Loan Documents solely with respect to the Designated
      Defaults. Such forbearance shall not derogate from Capital’s rights to collect,
      receive and/or apply proceeds of Collateral to the Obligations as may be
      specifically provided for in the Credit Agreement. At the option of Capital
      all
      Obligations shall be due and payable in full at the end of the Forbearance
      Period, without the need for any demand or notice by Capital and notwithstanding
      any future compliance by Borrower with any provisions of the Loan Agreement
      (including the provisions giving rise to the Designated Defaults). During the
      Forbearance Period, the Maximum Credit Line shall continue at $10,
      500,000.

     

    4. Forbearance
      Fee.
      In
      consideration of Capital’s extension of forbearance to Borrower pursuant to the
      terms and conditions set forth herein and its forbearance from charging the
      Default Rate which Capital was entitled to charge from and after the date of
      the
      Designated Defaults, Borrower hereby authorizes Capital to charge Borrower’s
      loan account with a forbearance fee in the amount of $300,000 (the “Forbearance
      Fee”), which Forbearance Fee shall be earned upon the execution of the
      Agreement, provided,
      however,
      if the
      Forbearance Fee is paid in full within sixty (60) days from the date hereof,
      Capital shall rebate to Borrower’s loan account the amount of $50,000. Provided
      there are no additional Events of Default, there will be no additional
      Forbearance Fee due through October 31, 2005.

     

    5. Representations
      and Warranties.
      Borrower hereby represents and warrants as follows:

     

    (a) this
      Agreement and the Loan Documents are and shall continue to be legal, valid
      and
      binding obligations of Borrower and are enforceable against Borrower in
      accordance with their respective terms;

     

    (b) with
      the
      exception of the Designated Defaults, upon the effectiveness of this Agreement,
      Borrower hereby reaffirms all covenants, representations and warranties made
      in
      the Loan Documents and agrees that all such covenants, representations and
      warranties shall be deemed to have been remade and are true and correct in
      all
      material respects as of the effective date of this Agreement, except for such
      representations and warranties which, by their terms, are only made as of a
      previous date;

     

    (c) Borrower
      has the corporate power, and has been duly authorized by all requisite corporate
      action, to execute and deliver this Agreement and to perform its obligations
      hereunder; and this Agreement has been duly executed and delivered by
      Borrower;

     


    
      
        
        

      

      
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    (d) Borrower’s
      execution, delivery and performance of this Agreement does not and will not
      (1)
      violate any law, rule, regulation or court order to which Borrower is subject,
      (2) conflict with or result in a breach of Borrower’s organizational documents
      or any agreement or instrument to which Borrower is a party or by which it
      or
      its properties are bound, or (3) result in the creation or imposition of any
      lien, security interest or encumbrance on any property of Borrower, whether
      now
      owned or hereafter acquired, other than liens, security interests or
      encumbrances in favor of Capital;

     

    (e) Capital
      has and will continue to have a valid, first priority, and only Lien in all
      Collateral except for Liens permitted by the Loan Documents, and Borrower
      expressly reaffirms all Liens granted to Capital pursuant to the Loan
      Documents;

     

    (f) the
      recitals set forth in the Background paragraph above are truthful and accurate
      and are an operative part of this Agreement;

     

    (g) no
      Defaults or Events of Default are in existence other than the Designated
      Defaults;

     

    (h) Borrower
      has no defense, counterclaim or offset with respect to the Loan Documents;
      and

     

    (i) the
      Loan
      Documents are in full force and effect, are hereby ratified and
      confirmed.

     

    6. General
      Forbearance Covenants of Borrower.
      During
      the Forbearance Period, Borrower shall:

     

    (a) comply
      with all covenants (other than the covenants with respect to which the
      Designated Defaults exist ) and other obligations of Borrower under the Loan
      Documents;

     

    (b) upon
      notice sent by Capital to Borrower, make available to Capital and/or its
      designated agent, accountant or other representative for audit, inspection
      and/or evaluation all books, records, financial information, leases, invoices
      and other materials relating to Borrower and/or the Collateral; and

     

    (c) not,
      directly or indirectly, make any payments, repayments or reimbursements, whether
      in cash, in kind, securities or other property, to any guarantor, affiliate,
      or
      any officer, director, shareholder, general partner or limited partner of
      Borrower with respect to (1) any indebtedness of Borrower to such person or
      entity, (2) any capital contributed by such person to Borrower or (3)
      any
      indebtedness incurred by such person or entity on behalf of or for the benefit
      of Borrower, provided,
      however,
      that
      scheduled payments due to the holder of Series I Preferred Stock due and payable
      after the date hereof, may be made but only the extent of third party
      contributions of capital or fully subordinated loans (such subordinated loans
      to
      made pursuant to such terms and agreements as are acceptable to Capital) in
      the
      amount of any such payments.

     


    
      
        
        

      

      
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      	7.  	
              Specific
                Forbearance Covenants of Borrower.

            


    

     

    (a) Borrower
      shall continue to furnish to Capital all financial reporting as required by
      the
      Loan Documents;

     

    (b) Borrower
      hereby acknowledges, confirms and agrees that upon the request of Capital,
      Borrower will, at Borrower’s sole cost and expense, engage Morris Anderson &
      Associates, Ltd. (“MAA”) or another consultant acceptable to Capital in
      Capital’s sole discretion, to examine Borrower’s books and records, interview
      Borrower’s staff and report directly to Capital concerning various areas of
      Borrower’s business and the status of Capital’s Collateral, provided,
      however,
      that if
      MAA is engaged, such engagement shall be pursuant to the existing Agreement
      for
      Consulting Services among Borrower, Capital and Capital’s counsel dated May 27,
      2005, as amended from time to time. In such event, Capital may confer directly
      with the personnel of MAA or such other consultant with respect to their
      engagement;

     

    (c) Borrower
      shall retain no later than thirty (30) days after the effective date of this
      Agreement, an investment bank of recognized standing and repute acceptable
      to
      Capital in its sole discretion (the “Investment Bank”) to make a complete
      analysis and review of strategic alternatives concerning the recapitalization,
      sale, reorganization and/or alternate funding of the Borrower. Among other
      things, the engagement letter between Borrower and Investment Bank shall provide
      as follows:

     

    “Investment
      Bank shall give Capital timely access (a) to the work product of Investment
      Bank with respect to Borrower and the Engagement, and (b) to Investment
      Bank’s personnel engaged with respect to Borrower and the Engagement. In
      furtherance and not in limitation of the foregoing, (a) Investment Bank shall
      provide Capital with copies of all correspondence, reports, memoranda, and
      other
      documents that may be issued or generated by Investment Bank pursuant to the
      Engagement, as and when transmitted by Investment Bank to Borrower, and
      (b) Capital may confer directly with Investment Bank’s personnel on an
      ongoing basis with respect to the Engagement, without borrower’s consent or
      approval and whether or not a representative of Borrower is present at any
      such
      conference. Capital shall be a third party beneficiary of this letter agreement
      and entitled to the benefits of this paragraph.”

     

    (d) During
      the Forbearance Period, Capital shall maintain a representative at Borrower’s
      premises to monitor Collateral performance and the adherence by Borrower to
      the
      terms and provisions of the Loan Documents and this Agreement. Borrower shall
      be
      charged a monitoring fee $750 per day plus all out of pocket expenses of such
      representative which shall be charged to Borrower’s account
      monthly;

     


    
      
        
        

      

      
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    (e) All
      Accounts shall be placed on a notification basis (the form and substance of
      such
      notification to be determined exclusively by Capital) which notice shall, among
      other things, require that customers remit proceeds of Accounts to a lock box
      controlled by Capital; and

     

    (f) No
      later
      than August 31, 2005, Borrower shall have received at least $500,000 in capital
      or subordinated loans from a third party.

     

    8. Forbearance
      Defaults.
      Each of
      the following shall constitute a Forbearance Default, absent the prior written
      approval by Capital:

     

    (a) the
      existence of any Event of Default (other than a Designated Default) under the
      Loan Documents, provided,
      however,
      that in
      determining whether or not the outstanding Loans are within permissible
      borrowing formulae, the amount of Loans resulting from the charging of the
      Forbearance Fee shall not be included.

     

    (b) Borrower
      shall fail to keep or perform any of the terms, obligations, covenants or
      agreements contained in this Agreement or under the Loan Documents;


     

    (c) if
      any
      representation or warranty of Borrower herein shall be false, misleading or
      incorrect in any respect; 

     

    (d) the
      occurrence of any event, condition, obligation, liability or circumstance or
      set
      of events, conditions, obligations, liabilities or circumstances or any
      change(s) which (i) has, had or could reasonably be expected to have any
      material adverse effect upon or change in the validity or enforceability of
      any
      Loan Document or this Agreement, (ii) has been or could reasonably be expected
      to be material and adverse to the value of any of the Collateral or to the
      business, operations, prospects, properties, assets, liabilities or condition
      of
      Borrower and/or Guarantors, either individually or taken as a whole, or (iii)
      has materially impaired or could reasonably be expected to materially impair
      the
      ability of Borrower or Guarantors to perform the Obligations or to consummate
      the transactions under the Loan Documents or this Agreement;

     

    (e) Borrower
      or any third party shall threaten or assert any claim, or commence any action,
      suit or proceeding, against Capital contesting or challenging the validity,
      priority, perfection or enforceability of this Agreement or any of the Loan
      Documents, of the Obligations, or of any interest of Capital in the
      Collateral;

     

    (f) Failure
      of the Borrower or ALS, LLC, after the Forbearance Period, to comply in any
      material respect with any of the terms and conditions of that certain Employer
      Services Agreement bearing the effective date of August 13, 2004 between
      Borrower and ALS, LLC, as the same may be amended, supplemented, modified or
      restated from time to time or such Employer Outsourcing Agreement shall
      hereafter be amended, supplemented, modified or restated without Capital’s
      written consent; and

     


    
      
        
        

      

      
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    (g) Failure
      of the Borrower to pay when due any fees, costs or expenses owing to Capital,
      including, without limitation, the remaining $50,000 portion of that certain
      consent fee in the amount of $150,000 agreed to on June 10, 2005, which is
      due
      and payable in full on August 12, 2005.

     

    (h) Failure
      of Borrower to comply with that certain forbearance agreement between Borrower
      and ALS, LLC of even date.

     

    9. Reaffirmation
      of Guaranty.
      Joseph
      Raymond (“Guarantor”), by his signature below, hereby reaffirms and ratifies the
      terms of his Fidelity Guaranty dated as of December 8, 2000 as amended (the
      “Guaranty”), confirms that the Guaranty is in full force and effect and binding
      on Guarantor without any defenses, setoffs or counterclaims of any kind and
      Guarantor consents to this Forbearance Agreement.

     

    10. Rights
      and Remedies.
      Upon
      the termination of the Forbearance Period, at the option of Capital, all
      Obligations shall be immediately due and payable, and in addition, Capital
      shall
      be immediately entitled to enforce all of its rights and remedies under this
      Agreement, the Loan Documents and/or applicable law.

     

    11. Waivers.
      Borrower, waives and affirmatively agrees not to allege or otherwise pursue
      any
      or all defenses, affirmative defenses, counterclaims, claims, causes of action,
      setoffs or other rights that it may have, as of the date hereof, to contest
      on
      any basis whatsoever, including without limitation based upon theories of
      liability such as “lender in control”, “lender liability” and/or “deepening
      insolvency” or otherwise, (a) any Defaults and/or Events of Default which could
      be declared by Capital on the date hereof, (b) any provision of the Loan
      Documents or this Agreement, (c) the right of Capital to all of the rents,
      issues, profits and proceeds from the Collateral, (d) the mortgage, lien and/or
      security interest of Capital in any property, whether real or personal, tangible
      or intangible, or any right or other interest, now or hereafter arising in
      connection with the Collateral, or (e) the conduct of Capital in administering
      the financing arrangements by and between Borrower and Capital.

     

    12. Release.
      Borrower hereby releases, remises, acquits and forever discharges Capital,
      and
      its respective employees, agents, representatives, consultants, attorneys,
      fiduciaries, servants, officers, directors, partners, predecessors, successors
      and assigns, subsidiary corporations, parent corporations, and related corporate
      divisions (all of the foregoing hereinafter called the “Released Parties”), from
      any and all actions and causes of action, judgments, executions, suits, debts,
      claims, demands, Obligations, obligations, damages and expenses of any and
      every
      character, known or unknown, direct and/or indirect, at law or in equity, of
      whatsoever kind or nature, for or because of any matter or things done, omitted
      or suffered to be done by any of the Released Parties prior to and including
      the
      date of execution hereof, and in any way directly or indirectly arising out
      of
      or in any way connected to this Agreement and the Loan Documents (all of the
      foregoing hereinafter called the “Released Matters”). Borrower acknowledges that
      the agreements in this Section are intended to be in full satisfaction of all
      or
      any alleged injuries or damages arising in connection with the Released Matters.
      

     


    
      
        
        

      

      
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    13. Effect
      and Construction of Agreement.
      Except
      as expressly provided herein, the Loan Documents shall remain in full force
      and
      effect in accordance with their respective terms, and this Agreement shall
      not
      be construed to:

     

    (a) impair
      the validity, perfection or priority of any lien or security interest securing
      the Obligations;

     

    (b) waive
      or
      impair any rights, powers or remedies of Capital under, or constitute a waiver
      of, any provision of the Loan Documents upon termination of the Forbearance
      Period with respect to the Designated Defaults or otherwise; or

     

    (c) constitute
      an agreement by Capital, or require Capital to extend the Forbearance Period,
      grant additional waivers, or extend the term of the Loan Agreement or the time
      for payment of any of the Obligations.

     

    14. Presumptions.
      Borrower acknowledges that it has consulted with and has been advised by counsel
      and such other experts and advisors as it has deemed necessary in connection
      with the negotiation, execution and delivery of this Agreement and has
      participated in the drafting hereof. Therefore, this Agreement shall be
      construed without regard to any presumption or rule requiring that it be
      construed against any one party causing this Agreement or any part hereof to
      be
      drafted.

     

    15. Conditions
      of Effectiveness.
      This
      Agreement shall become effective upon satisfaction of the following conditions
      precedent:

     

    (a) Capital
      shall have received an original of this Agreement executed by
      Borrower;

     

    (b) Capital
      shall have received an opinion of counsel to Borrower in form and substance
      satisfactory to Capital; and

     

    (c) Borrower
      shall pay all costs, fees and expenses of Capital (including the reasonable
      costs, fees and expenses of Capital’s in-house and outside counsel, consultants
      and appraisers) incurred by Capital in connection with the negotiation,
      preparation and closing of this Agreement. 

     

    16. Expenses.
      Borrower shall pay all costs, fees and expenses of Capital (including the
      reasonable costs, fees and expenses of Capital’s in-house and outside counsel,
      consultants and appraisers) incurred by Capital from and after the date of
      this
      Agreement in connection with the administration and enforcement of this
      Agreement. 

     

    17. Entire
      Agreement.
      This
      Agreement sets forth the entire agreement among the parties hereto with respect
      to the subject matter hereof. Borrower has not relied on any agreements,
      representations, or warranties of Capital except as specifically set forth
      herein. Any promises, representations, warranties or guarantees not herein
      contained and hereinafter made shall have no force and effect unless in writing,
      signed by each party hereto. Borrower 

     


    
      
        
        

      

      
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    acknowledges
      that it is not relying upon oral representations or statements inconsistent
      with
      the terms and provisions of this Agreement.

     

    18. Further
      Assurance.
      Borrower shall execute such other and further documents and instruments as
      Capital may reasonably request to implement the provisions of this Agreement
      and
      to perfect and protect the liens and security interests created by or agreed
      upon in the Loan Documents.

     

    19. Benefit
      of Agreement.
      This
      Agreement shall be binding upon, inure to the benefit of and be enforceable
      by
      the parties hereto and their respective permitted successors and assigns. No
      other person or entity shall be entitled to claim any right or benefit
      hereunder, including, without limitation, any third-party beneficiary of this
      Agreement. Capital’s agreement to forbear with respect to the Designated
      Defaults subject to the terms and conditions of this Agreement and to refrain
      from enforcing certain of its remedies does not in any manner limit Borrower’s
      obligations to comply with, and Capital’s right to insist upon compliance with,
      each and every one of the terms of this Agreement and the Loan Documents except
      as specifically modified herein.

     

    20. Severability.
      The
      provisions of this Agreement are intended to be severable. If any provisions
      of
      this Agreement shall be held invalid or unenforceable in whole or in part in
      any
      jurisdiction, such provision shall, as to such jurisdiction, be ineffective
      to
      the extent of such invalidity or enforceability without in any manner affecting
      the validity or enforceability of such provision in any other jurisdiction
      or
      the remaining provisions of this Agreement in any jurisdiction.

     

    21. Governing
      Law, Jurisdiction, Venue.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of North Carolina applied to contracts to be performed wholly within
      the
      State of North Carolina Any judicial proceeding brought by or against Borrower
      with respect to this Agreement or any related agreement may be brought in any
      court of competent jurisdiction in the State of North Carolina and, by execution
      and delivery of this Agreement, Borrower accepts for itself and in connection
      with its properties, generally and unconditionally, the non-exclusive
      jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by
      any
      judgment rendered thereby in connection with this Agreement. Nothing herein
      shall affect the right to serve process in any manner permitted by law or shall
      limit the right of Capital to bring proceedings against Borrower in the courts
      of any other jurisdiction. Borrower waives any objection to jurisdiction and
      venue of any action instituted hereunder and shall not assert any defense based
      on lack of jurisdiction or venue or based upon forum
      non conveniens.
      Any
      judicial proceeding by Borrower against Capital involving, directly or
      indirectly, any matter or claim in any way arising out of, related to or
      connected with this Agreement or any related agreement, shall be brought only
      in
      a federal or state court located in the State of North Carolina.

     

    22. Waiver
      of Jury Trial.

     

    EACH
      PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
      OF
      ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT,
      THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
      OR
      DELIVERED IN 

     


    
      
        
        

      

      
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    CONNECTION
      HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
      DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT,
      THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
      OR
      DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
      IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
      IN
      CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
      CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
      A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART
      OR
      A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF
      THE
      PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. IN ADDITION,
      EACH
      PARTY WAIVES THE RIGHT TO CLAIM OR RECOVER IN ANY SUCH SUIT, ACTION OR
      PROCEEDING ANY DAMAGES OTHER THAN OR IN ADDITION TO ACTUAL DAMAGES.

     

    23. Counterparts;
      Telecopied Signatures.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original and all of which taken together shall constitute one and
      the
      same agreement. Any signature delivered by a party by facsimile transmission
      shall be deemed to be an original signature hereto.

     

    24. Survival.
      All
      representations, warranties, covenants, agreements, undertakings, waivers and
      releases of Borrower contained herein shall survive the termination of the
      Forbearance Period and payment in full of the Obligations under the Loan
      Documents.

     

    25. Amendment.
      No
      amendment, modification, rescission, waiver or release of any provision of
      this
      Agreement shall be effective unless the same shall be in writing and signed
      by
      Borrower and Capital. This Agreement shall constitute a Loan
      Document.

     

    26. Headings.
      Section
      headings in this Agreement are included herein for convenience of reference
      only
      and shall not constitute a part of this Agreement for any other
      purpose.

     

    27. Limited
      Forbearance.
      The
      forbearance with respect to the Designated Defaults set forth in this Agreement
      (a) shall not apply to any other past, present or future violation or violations
      of any other provision of the Loan Documents, and (b) Capital’s failure to
      exercise any right, privilege or remedy as a result of the Specified Defaults
      shall not directly or indirectly in any way whatsoever either: (a) impair,
      prejudice or otherwise adversely affect Capital’s’ right at any time to exercise
      any right, privilege, or remedy in connection with the Loan Documents, any
      other
      agreement, or any other contract or instrument (except to the extent expressly
      waived in this Agreement), or (b) amend or alter any provision of the Loan
      Documents, any other agreement, or any other contract or instrument, or (c)
      constitute any course of dealing or other basis for altering any obligation
      of
      the Borrower or any rights, privilege, or remedy of the Capital under the Loan
      Documents, any other agreement, or any other contract or
      instrument.

     

    [
      Signature pages follows ]


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
      first above written.

    


    


    CAPITAL
      TEMPFUNDS, a division of CAPITAL FACTORS LLC, as successor in interest to
      Capital Tempfunds, Inc., as Lender

    


    


    By:    /s/
      James Rothman      

    Name: 
      James Rothman

    Title: 
      President 

    


    STRATUS
      SERVICES GROUP, INC.

    


    


    By: 
      /s/ Joseph J. Raymond 

    Name: 
      Joseph J. Raymond

    Title: 
      President & CEO

    


    


                                    /s/
      Joseph J.
      Raymond

                                 Joseph
      J.
      Raymond, individually


    
      
        
        

      

      
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    EXHIBIT
      A

    


    DESIGNATED
      DEFAULTS

    


    Borrower’s
      common stock being delisted from NASDAQ beginning October 1, 2004.

    


    Borrower’s
      failure to meet financial covenant for the period beginning October 1, 2004
      and
      thereafter.

    


    Borrower
      having delinquent state, local and federal taxes.

    


    Borrower’s
      acknowledgement that the Obligations will not be paid in full as of August
      12,
      2005

    


    Default
      under Outsourcing Agreement with ALS, LLC

    


    Series
      I
      Dividend Payment of August 5, 2005