Document:

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EXHIBIT 10.6.3
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                          SECURITIES PURCHASE AGREEMENT

      THIS SECURITIES PURCHASE AGREEMENT, dated as of December 4, 2000, is
entered into by and between STRATUS SERVICES GROUP, INC., a Delaware
corporation, with headquarters located at 500 Craig Road, Manalapan, New Jersey
(the "Company"), and the purchasers who are or become a party hereto by
executing a signature page prior to the Closing, as defined herein ("Buyer
Signature Page") in the form of Exhibit A hereto (individually the "Buyer" and
collectively, the "Buyers").

                              W I T N E S S E T H:

      WHEREAS, the Company and the Buyers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, INTER ALIA, by Rule 506 under Regulation D ("Regulation
D" as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and

      WHEREAS, the Buyers wish to purchase, upon the terms and subject to the
conditions of this Agreement, 6% Convertible Debentures, due December 1, 2005
(the "Debentures"), of the Company which will be convertible into shares of
Common Stock, $0.01 par value per share of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Debentures, and, in the
case of a certain Buyer, certain Common Stock purchase warrants (further
described herein) (the "Warrants") (the Common Stock, the Debentures and the
Warrants sometimes referred to herein as the "Securities"), and subject to
acceptance of this Agreement by the Company;

      WHEREAS, the Debentures being subscribed for pursuant to this Agreement
comprise part of a duly authorized issue of up to $2,000,000 of the Debentures;

      NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.    AGREEMENT TO PURCHASE; PURCHASE PRICE.

      (a)   PURCHASE.  Each Buyer hereby subscribes to purchase from the
            Company, the Debentures, in the principal amount set forth below
            the name of the Buyer on the Buyer Signature Page hereto, out of
            a total offering of up to $3,000,000 aggregate principal amount
            of Debentures, and having the terms and conditions and being in
            the form attached hereto as Annex I.  The purchase price for the
            Debentures shall

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            be equal to the principal amount of the Debentures as set forth on
            the Buyer Signature Page and shall be payable in United States
            Dollars.

      (b)   FORM OF PAYMENT.  Each Buyer shall pay the purchase price for the
            Debentures by delivering immediately available good funds in
            United States Dollars to the Company in an amount equal to the
            principal amount of Debentures being so purchased.  Concurrently
            with the payment by the Buyer to the Company of the purchase
            price of the Debentures and the acceptance of the Buyer's
            subscription by the Company, the Company shall deliver the
            Debentures duly executed on behalf of the Company to the Buyer.

      (c)   CLOSING.  The closing of the purchase and sale of the Debentures
            shall take place at the offices of the Company or such other
            place as the Company and the applicable Buyer shall agree on the
            date that the Company accepts this subscription (the "Closing
            Date"), which in no event shall be later than December 8, 2000.
            No closing shall occur unless irrevocable subscriptions for
            $2,000,000 aggregate principal amount of Debentures are received
            and accepted.  The Company reserves the right to reject this
            subscription for any reason whatsoever.

2.    BUYER REPRESENTATIONS, WARRANTIES, ETC.

      Each Buyer severally represents and warrants to, and covenants and agrees
with, the Company as follows:

      (a)   Without limiting such Buyer's right to sell the Common Stock
            pursuant to the Registration Statement (as defined below), the Buyer
            is purchasing the Debentures and will be acquiring the shares of
            Common Stock issuable upon conversion of the Debentures for its own
            account for investment only and not with a view towards the public
            sale or distribution thereof and not with a view to or for sale in
            connection with any distribution thereof;

      (b)   Such Buyer is (i) an "accredited investor" as that term is
            defined in Rule 501 of the General Rules and Regulations under
            the 1933 Act, and (ii) experienced in making investments of the
            kind described in this Agreement and the related documents, (iii)
            able, by reason of the business and financial experience of its
            officers (if an entity) and professional advisors (who are not
            affiliated with or compensated in any way by the Company or any
            of its affiliates or selling agents), to protect its own
            interests in connection with the transactions described in this
            Agreement, and the related documents, and (iv) able to afford the
            entire loss of its investment in the Securities;

      (c)   All subsequent offers and sales of the Debentures and the shares of
            Common Stock issuable upon conversion of, or issued as dividends on,
            the Debentures (the

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            "Shares" or "Common Stock") by the Buyer shall be made pursuant to
            registration of the Shares under the 1933 Act or pursuant to an
            exemption from registration;

      (d)   Such Buyer understands that the Debentures are being offered and
            sold, and the Shares are being offered, to it in reliance on
            specific exemptions from the registration requirements of United
            States federal and state securities laws and that the Company is
            relying upon the truth and accuracy of, and such Buyer's
            compliance with, the representations, warranties, agreements,
            acknowledgments and understandings set forth herein in order to
            determine the availability of such exemptions and the eligibility
            of such Buyer to acquire the Debentures and to receive an offer
            of the Shares;

      (e)   Such Buyer and its advisors, if any, have been furnished with all
            materials relating to the business, finances and operations of
            the Company and materials relating to the offer and sale of the
            Debenture and the offer of the Shares which have been requested
            by the Buyer. The Buyer and its advisors, if any, have been
            afforded the opportunity to ask questions of the Company and have
            received complete and satisfactory answers to any such
            inquiries.  Without limiting the generality of the foregoing, the
            Buyer has also had the opportunity to obtain and to review the
            Company's  (1) Prospectus dated April 26, 2000, (2) Quarterly
            Report on Form 10-Q for the fiscal quarter ended June 30, 2000,
            (3) the Company's Report on Form 8-K filed with the SEC on June
            30, 2000 and (4) the Company's Report on Form 8-K/A filed with
            the SEC on August 30, 2000 (the "Company's SEC Documents").  No
            such investigation shall impair such Buyer's ability to rely upon
            the Company's representations and warranties herein.

      (f)   The Buyer understands that its investment in the Securities
            involves a high degree of risk;

      (g)   The Buyer understands that no United States federal or state agency
            or any other government or governmental agency has passed on or made
            any recommendation or endorsement of the Securities;

      (h)   This Agreement has been duly and validly authorized, executed and
            delivered on behalf of the Buyer and is a valid and binding
            agreement of the Buyer enforceable in accordance with its terms,
            subject as to enforceability to general principles of equity and to
            bankruptcy, insolvency, moratorium and other similar laws affecting
            the enforcement of creditors' rights generally.

      (i)   Neither such Buyer, nor any affiliate of such Buyer, will enter
            into, any put option, short position, or other similar position with
            respect to the Debentures or the Shares.

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3.    COMPANY REPRESENTATIONS, ETC.

      The Company represents and warrants to the Buyers that:

      (a)   REPORTING COMPANY STATUS.  The Company is a corporation duly
            organized, validly existing and in good standing under the laws
            of the State of Delaware, and has the requisite corporate power
            to own its properties and to carry on its business as now being
            conducted.  The Company is duly qualified as a foreign
            corporation to do business and is in good standing in each
            jurisdiction where the nature of the business conducted or
            property owned by it makes such qualification necessary other
            than those jurisdictions in which the failure to so qualify would
            not have a material and adverse effect on the business,
            operations, properties, prospects or condition (financial or
            otherwise) of the Company.  The Company has registered its Common
            Stock pursuant to Section 12 of the Securities Exchange Act of
            1934, as amended (the "Exchange Act"), and the Common Stock is
            listed and traded on the Nasdaq Stock Market/SmallCap Market. The
            Company shall promptly provide to Buyer copies of any notices it
            receives regarding the continued eligibility of the Common Stock
            for listing on the Nasdaq Stock Market/SmallCap Market.

      (b)   CAPITALIZATION. The number of authorized, issued and outstanding
            shares of capital stock of the Company is set forth in SCHEDULE 3
            (b). The Company does not have any Subsidiaries. No shares of Common
            Stock are entitled to preemptive or similar rights, nor is any
            holder of the securities of the Company or any Subsidiary entitled
            to preemptive or similar rights arising out of any agreement or
            understanding with the Company by virtue of the Agreement, the
            Registration Rights Agreement, the Debentures and the Warrant (the
            "Transaction Documents"). Except as a result of the purchase and
            sale of the Debentures and the Warrants and except as disclosed in
            SCHEDULE 3 (b), there are no outstanding options, warrants, script
            rights to subscribe to, calls or commitments of any character
            whatsoever relating to, or securities, rights or obligations
            convertible into or exchangeable for, or giving any Person any right
            to subscribe for or acquire, any shares of Common Stock, or
            contracts, commitments, understandings, or arrangements by which the
            Company or any Subsidiary is or may become bound to issue additional
            shares of Common Stock, or securities or rights convertible or
            exchangeable into shares of Common Stock. The issue and sale of the
            Debentures, Warrants or Underlying Shares (as hereinafter defined)
            will not obligate the Company to issue shares of Common Stock or
            other securities to any Person other than the Buyers and will not
            result in a right of any holder of Company securities to adjust the
            exercise or conversion or reset price under such securities.

      (c)   AUTHORIZED SHARES. The Company has sufficient authorized and
            unissued Shares as may be reasonably necessary to effect the
            conversion of the Debentures. The

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            Shares have been duly authorized and, when issued upon conversion
            of, or as interest on, the Debentures, will be duly and validly
            issued, fully paid and non-assessable and will not subject the
            holder thereof to personal liability by reason of being such holder.

      (d)   SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND
            STOCK.  This Agreement and each of the Registration Rights
            Agreement, the form of which is attached hereto as Annex II (the
            "Registration Rights Agreement"), the Debentures and the Warrants
            and the transactions contemplated thereby, have been duly and
            validly authorized by the Company, this Agreement has been duly
            executed and delivered by the Company and this Agreement is, and
            each of the Registration Rights Agreement, the Debentures and the
            Warrants, when executed and delivered by the Company, will be,
            valid and binding agreements and obligations of the Company
            enforceable in accordance with their respective terms, subject as
            to enforceability to general principles of equity and to
            bankruptcy, insolvency, moratorium, and other similar laws
            affecting the enforcement of creditors' rights generally;.

      (e)   NON-CONTRAVENTION.  The execution and delivery of this Agreement
            and the Registration Rights Agreement by the Company, the
            issuance of the Securities, and the consummation by the Company
            of the other transactions contemplated by the Transaction
            Documents do not and will not conflict with or result in a breach
            by the Company of any of the terms or provisions of, or
            constitute a default under (i) the articles of incorporation or
            by-laws of the Company, (ii) any indenture, mortgage, deed of
            trust, or other agreement or instrument to which the Company is a
            party or by which it or any of its properties or assets are
            bound, including any listing agreement for the Common Stock
            except as herein set forth, (iii) any existing applicable law,
            rule, or regulation or any applicable decree, judgment, or (iv)
            order of any court, United States federal or state regulatory
            body, administrative agency, or other governmental body having
            jurisdiction over the Company or any of its properties or assets,
            except such conflict, breach or default which would not have a
            material adverse effect on the transactions contemplated herein
            or impair the ability of the Company to timely comply with its
            obligations under the Transaction Documents.  The Company is not
            in violation of any laws, governmental orders, rules, regulations
            or ordinances to which its  property, real, personal, mixed,
            tangible or intangible,  or its businesses related to such
            properties, are subject.

      (f)   APPROVALS. No authorization, approval or consent of any court,
            governmental body, regulatory agency, self-regulatory organization,
            or stock exchange or market is required to be obtained by the
            Company for the issuance and sale of the Securities to the Buyer as
            contemplated by this Agreement, except such authorizations,
            approvals and consents that have been obtained.

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      (g)   SEC DOCUMENTS, FINANCIAL STATEMENTS.  The Common Stock of the
            Company is registered pursuant to Section 12(g) of the Exchange
            Act and the Company has, except as set forth in Schedule 3(g),
            timely filed all reports, schedules, forms, statements and other
            documents required to be filed by it with the SEC pursuant to the
            reporting requirements of the Exchange Act, including material
            filed pursuant to Section 13(a) or 15(d), in addition to one or
            more registration statements and amendments thereto heretofore
            filed by the Company with the SEC under the Act (all of the
            foregoing including filings incorporated by reference therein
            being referred to herein as the "SEC Documents").  The Company,
            through its agent, has delivered to the Buyer true and complete
            copies of the SEC Documents (except for exhibits and incorporated
            documents).  The Company has not provided to the Buyer any
            information which, according to applicable law, rule or
            regulation, should have been disclosed publicly by the Company
            but which has not been so disclosed, other than with respect to
            the transactions contemplated by this Agreement.

            As of their respective dates, the SEC Documents complied in all
            material respects with the requirements or the Exchange Act and the
            rules and regulations of the SEC promulgated thereunder and other
            federal, state and local laws, rules and regulations applicable to
            such SEC Documents, and none of the SEC Documents contained any
            untrue statement of a material fact or omitted to state a material
            fact required to be stated therein or necessary in order to make the
            statements therein, in light of the circumstances under which they
            were made, not misleading. The financial statements of the Company
            included in the SEC Documents comply as to form in all material
            respects with applicable accounting requirements and the published
            rules and regulations of the SEC or other applicable rules and
            regulations with respect thereto. Such financial statements have
            been prepared in accordance with generally accepted accounting
            principles applied on a consistent basis during the periods involved
            (except (i) as may be otherwise indicated in such financial
            statements or the notes thereto or (ii) in the case of unaudited
            interim statements, to the extent they may not include footnotes or
            may be condensed or summary statements) and fairly present in all
            material respects the financial position of the Company as of the
            dates thereof and the results of operations and cash flows for the
            periods then ended (subject, in the case of unaudited statements, to
            normal year-end audit adjustments).

      (h)   ABSENCE OF CERTAIN CHANGES. Since June 30, 2000, there has been no
            material adverse change and no material adverse development in the
            business, properties, operations, financial condition, or results of
            operations of the Company other than as may have been disclosed in
            the SEC Documents.

      (i)   FULL DISCLOSURE.  There is no fact known to the Company (other
            than general economic conditions known to the public generally)
            or as disclosed in the documents referred to in Section 2(e),
            that has not been disclosed in writing to the

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            Buyer that (i) would reasonably be expected to have a material
            adverse effect on the business or financial condition of the Company
            or (ii) would reasonably be expected to materially and adversely
            affect the ability of the Company to perform its obligations
            pursuant to this Agreement.

      (j)   ABSENCE OF LITIGATION.  Except as disclosed in the SEC Documents
            referred to in Section 2(e), which the Buyer has reviewed and,
            except as set forth in SCHEDULE 3(j), there is no action, suit,
            proceeding, inquiry or investigation before or by any court,
            public board or body pending or, to the knowledge of the Company,
            threatened against or affecting the Company, wherein an
            unfavorable decision, ruling or finding would have a material
            adverse effect on the business or financial condition of the
            Company or the transactions contemplated by this Agreement or any
            of the documents contemplated hereby or which would adversely
            affect the validity or enforceability of, or the authority or
            ability of the Company to perform its obligations under, this
            Agreement or any of such other documents.

      (k)   ABSENCE OF EVENTS OF DEFAULT. The Company is not in default in any
            material respect under its Certificate of Incorporation, Bylaws or
            any indenture, mortgage, note or other agreement, which would have a
            material adverse effect on the Company's financial condition or
            results of operations.

      (l)   ISSUANCE OF THE DEBENTURES AND THE WARRANTS. The Company will have
            (and will, at all times while the Debentures and the Warrants are
            outstanding, maintain) an adequate reserve of duly authorized shares
            of Common Stock, reserved for issuance to the holders of such
            Debentures and Warrants, to enable it to perform its conversion,
            exercise and other obligations under this Agreement, the Debentures
            and the Warrants. Such number of reserved and available shares of
            Common Stock shall not be less than the sum of 200% of the number of
            shares of Common Stock which would be issuable upon: (i) conversion
            in full of the Debentures assuming such conversion occurred on the
            Original Issue Date of the Debentures remain outstanding for three
            years and all interest is paid in shares of Common Stock and (ii)
            exercise in full of the Warrants (collectively, the "INITIAL
            MINIMUM"). All such authorized shares of Common Stock shall be duly
            reserved for issuance to the holders of the Debentures and the
            Warrants. The shares of Common Stock issuable upon conversion of the
            Debentures and upon exercise of the Warrants are collectively
            referred to herein as the "UNDERLYING SHARES." The Debentures, the
            Warrants and the Underlying Shares are collectively referred to
            herein as, the "SECURITIES." When issued in accordance with the
            Debentures and the Warrants, the Underlying Shares will be duly
            authorized, validly issued, fully paid and nonassessable, free and
            clear of all liens, encumbrances and rights of first refusal of any
            kind (collectively, "LIENS").

      (m)   LISTING AND MAINTENANCE REQUIREMENTS.  The Company has not, in
            the two years preceding the date hereof, received  notice
            (written or oral)  from the Nasdaq

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            Smallcap Market or any stock exchange, market or trading facility on
            which the Common Stock is or has been listed (or on which it has
            been quoted) to the effect that the Company is not in compliance
            with the listing or maintenance requirements of such exchange,
            market or trading facility. The Company is, and has no reason to
            believe that it will not in the foreseeable future continue to be,
            in compliance with all such listing and maintenance requirements.

      (n)   REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set forth
            in Schedule 3(n), the Company has not granted or agreed to grant
            to any Person any rights (including "piggy-back" registration
            rights) to have any securities of the Company registered with the
            Commission or any other governmental authority which has not been
            satisfied. No Person has any right of first refusal, preemptive
            right, right of participation, or any similar right to
            participate in the transactions contemplated by this Agreement.

      (o)   SOLVENCY.  Based on the financial condition of the Company as of
            the Closing Date, (i) the Company's fair saleable value of its
            assets exceeds the amount that will be required to be paid on or
            in respect of the Company's existing debts and other liabilities
            (including known contingent liabilities) as they mature; (ii) the
            Company's assets do not constitute unreasonably small capital to
            carry on its business for the current fiscal year as now
            conducted and as proposed to be conducted including its capital
            needs taking into account the particular capital requirements of
            the business conducted by the Company, and project capital
            requirements and capital availability thereof; and (iii) the
            current cash flow of the Company, together with the proceeds the
            Company would receive, were it to liquidate all of its assets,
            after taking into account all anticipated uses of the cash, would
            be sufficient to pay all amounts on or in respect of its debt
            when such amounts are required to be paid.  The Company does not
            intend to incur debts beyond its ability to pay such debts as
            they mature (taking into account the timing and amounts of cash
            to be payable on or in respect of its debt).

      (p)   APPLICATION OF TAKEOVER PROTECTIONS.  The Company and its Board
            of Directors have taken all necessary action, if any, in order to
            render inapplicable any control share acquisition, business
            combination, poison pill (including any distribution under a
            rights agreement) or other similar anti-takeover provision under
            the Company's Certificate of Incorporation (or similar charter
            documents) or the laws of its state of incorporation that is or
            could become applicable to the Buyers as a result of the Buyers
            and the Company fulfilling their obligations or exercising their
            rights under this Agreement, including without limitation the
            Company's issuance of the Securities and the Buyers' ownership of
            the Securities.

      (m)   CERTAIN FEES. Other than fees payable to May Davis Group, Inc. and
            Hornblower & Weeks, Inc. by the Company, no fees or commissions will
            be payable by the Company to any broker, financial advisor or
            consultant, finder, placement

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            agent, investment banker, bank or other Person with respect to the
            transactions contemplated by this Agreement. The Buyers shall have
            no obligation with respect to any fees or with respect to any claims
            made by or on behalf of other Persons for fees of a type
            contemplated in this Section that may be due in connection with the
            transactions contemplated by this Agreement. The Company shall
            indemnify and hold harmless the Buyers, their employees, officers,
            directors, agents, and partners, and their respective Affiliates,
            from and against all claims, losses, damages, costs (including the
            costs of preparation and attorney's fees) and expenses suffered in
            respect of any such claimed or existing fees, as such fees and
            expenses are incurred.

4.    CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

      (a)   TRANSFER RESTRICTIONS.  Each Buyer acknowledges that (1) the
            Debentures and the Warrants have not been and are not being
            registered under the provisions of the 1933 Act and, except as
            provided in the Registration Rights Agreement, the Shares have
            not been and are not being registered under the 1933 Act, and may
            not be transferred unless (A) subsequently registered thereunder
            or (B) the Buyer shall have delivered to the Company an opinion
            of counsel, reasonably satisfactory in form, scope and substance
            to the Company, to the effect that the Securities to be sold or
            transferred may be sold or transferred pursuant to an exemption
            from such registration; (2) any sale of the Securities made in
            reliance on Rule 144 promulgated under the 1933 Act may be made
            only in accordance with the terms of said Rule; and (3) neither
            the Company nor any other person is under any obligation to
            register the resale of the Debentures, the Warrants and the
            Securities under the 1933 Act.

      (b)   RESTRICTIVE LEGEND.  Each Buyer acknowledges and agrees that the
            Debentures, and, until such time as the Common Stock has been
            registered under the 1933 Act as contemplated by the Registration
            Rights Agreement and sold in accordance with an effective
            registration statement ("Registration Statement"), the Shares
            issued to the Holder upon conversion of the Debentures shall bear
            a restrictive legend in substantially the following form (and a
            stop-transfer order may be placed against transfer of the
            Debentures and such Shares):

            THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
            THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE
            SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE
            IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
            SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
            ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
            REQUIRED.

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            Underlying Shares shall not contain the legend set forth above nor
            any other legend if the conversion of the Debentures and exercise of
            the Warrants or other issuances of Underlying Shares as contemplated
            hereby, by the Debentures or the Warrants occurs at any time while
            an Underlying Shares Registration Statement is effective under the
            1933 Act or the holder of any such security is relying on Rule
            144(k) promulgated under the 1933 Act ("RULE 144(K)") in connection
            with the resale of such Underlying Shares or in the event there is
            not an effective Underlying Shares Registration Statement at such
            time and Rule 144(k) is not then available if, in the opinion of
            counsel to the Company, such legend is not required under applicable
            requirements of the 1933 Act (including judicial interpretations and
            pronouncements issued by the staff of the Commission). The Company
            shall cause its counsel to issue the legal opinion included in the
            Transfer Agent Instructions to the Company's transfer agent on the
            day that the Underlying Shares Registration Statement is declared
            effective by the Commission (the "EFFECTIVE DATE"). The Company
            agrees that in the event any Underlying Shares are issued with a
            legend in accordance with this Section 4(b), it will, within three
            (3) Trading Days after request therefor by a Purchaser, provide such
            Purchaser with a certificate or certificates representing such
            Underlying Shares, free from such legend at such time as such legend
            would not have been required under this Section 4(b) had such
            issuance occurred on the date of such request. The Company may not
            make any notation on its records or give instructions to any
            transfer agent of the Company which enlarge the restrictions of
            transfer set forth in this Section.

      (c)   FILINGS. The Company undertakes and agrees to make all necessary
            filings in connection with the sale of the Debentures to the Buyers
            under any United States laws and regulations, or by any domestic
            securities exchange or trading market, and to provide a copy thereof
            to each Buyer upon request.

      (d)   REPORTING STATUS. So long as the Buyers beneficially own any of the
            Debentures, the Company shall file all reports required to be filed
            with the SEC pursuant to Section 13 or 15(d) of the Exchange Act,
            and the Company shall not terminate its status as an issuer required
            to file reports under the Exchange Act even if the Exchange Act or
            the rules and regulations thereunder would permit such termination.

      (e)   AVAILABLE SHARES. The Company shall have at all times authorized and
            reserved for issuance, free from preemptive rights, shares of Common
            Stock sufficient to yield the number of shares of Common Stock
            issuable at conversion as may be required to satisfy the conversion
            rights of the Buyers pursuant to the terms and conditions of the
            Debentures.

      (f)   INCREASE IN AUTHORIZED SHARES.   If on any date the Company would
            be, if a notice of conversion or exercise (as the case may be)
            were to be delivered on such date, precluded from issuing (a)
            200% of the number of Underlying Shares as would

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            then be issuable upon a conversion in full of the Debentures and (b)
            the number of Underlying Shares issuable upon exercise in full of
            the Warrants (the "CURRENT REQUIRED MINIMUM"), in either case, due
            to the unavailability of a sufficient number of authorized but
            unissued or reserved shares of Common Stock, then the Board of
            Directors of the Company shall promptly prepare and mail to the
            stockholders of the Company proxy materials requesting authorization
            to amend the Company's certificate or articles of incorporation to
            increase the number of shares of Common Stock which the Company is
            authorized to issue to at least such number of shares as reasonably
            requested by the Buyers in order to provide for such number of
            authorized and unissued shares of Common Stock to enable the Company
            to comply with its issuance, conversion exercise and reservation of
            shares obligations as set forth in this Agreement, the Debentures
            and the Warrants (the sum of (x) the number of shares of Common
            Stock then outstanding plus all shares of Common Stock issuable upon
            exercise of all outstanding options, warrants and convertible
            instruments, and (y) the Current Required Minimum, shall be a
            reasonable number). In connection therewith, the Board of Directors
            shall (a) adopt proper resolutions authorizing such increase, (b)
            recommend to and otherwise use its best efforts to promptly and duly
            obtain stockholder approval to carry out such resolutions (and hold
            a special meeting of the stockholders no later than the earlier to
            occur of the sixtieth (60th) day after delivery of the proxy
            materials relating to such meeting and the ninetieth (90th) day
            after request by a holder of Securities to issue the number of
            Underlying Shares in accordance with the terms hereof) and (c)
            within five (5) Business Days of obtaining such stockholder
            authorization, file an appropriate amendment to the Company's
            certificate or articles of incorporation to evidence such increase.

      (g)   NON-PUBLIC INFORMATION.  The Company shall in no event disclose
            non-public information to the Buyers, advisors to or
            representatives of the Buyer unless prior to disclosure of such
            information the Company marks such information as "Non-Public
            Information - Confidential," and then only in accordance with
            Regulation FD promulgated under the Exchange Act, provides the
            Buyers, such advisors and representatives with a reasonable
            opportunity to accept or refuse to accept such non-public
            information for review.

      (h)   LIMITATION ON REGISTRATIONS.

      (1)   Except for (x) Registrable Securities (as defined in the
            Registration Rights Agreement), (y) securities of the Company
            permitted pursuant to Section 4(i) to be registered in the
            Registration Statement, and (z) Common Stock permitted to be issued
            pursuant to Section 4(h)(4), the Company may not until the 90th day
            after the Effective Date file a registration statement to register
            any of its securities other than a registration on Form S-4 or Form
            S-8, each as promulgated under the 1933 Act. The restriction shall
            terminate at such time as the Registrable

                                      -11-
<PAGE>

            Securities cease to be Registrable Securities under the terms of the
            Registration Rights Agreement.

      (2)   The restrictive period set forth in Section 4(h)(1) shall be
            extended for the number of Trading Days during such period (A) in
            which trading in the Common Stock is suspended by any securities
            exchange or market or quotation system on which the Common Stock is
            then listed, or (B) that the Registration Statement is not effective
            following the Effective Date, or (C) that the prospectus included in
            the Registration Statement may not be used by the holders thereof
            for the resale of Registrable Securities following the Effective
            Date.

      (i)   NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent specified
            in SCHEDULE 4(i) hereto and except as otherwise will be disclosed
            prior to the initial filing, in writing, to the Buyers, PROVIDED,
            that all such security holders included prior to the initial filing
            shall (as a condition to such inclusion) be subject to an
            enforceable lock-up agreement, under which such security holders
            shall not sell or otherwise dispose of any of their securities
            requested to be so registered prior to 120th following the Effective
            Date, neither the Company nor any of its security holders (other
            than the Buyers in such capacity pursuant hereto) may include
            securities of the Company in the Registration Statement other than
            the Securities, and the Company shall not after the date hereof
            enter into any agreement providing any such right to any of its
            security holders.

      (j)   PIGGY-BACK REGISTRATIONS. If at any time after the earlier to occur
            of the Effective Date and the Required Effective Date (as defined in
            the Registration Rights Agreement) there is not an effective
            Registration Statement covering all of the Registrable Securities
            and the Company shall determine to prepare and file with the
            Commission a registration statement relating to an offering for its
            own account or the account of others under the 1933 Act of any of
            its equity securities, other than on Form S-4 or Form S-8 (each as
            promulgated under the 1933 Act) or their then equivalents relating
            to equity securities to be issued solely in connection with any
            acquisition of any entity or business or equity securities issuable
            in connection with stock option or other employee benefit plans,
            then the Company shall send to each Buyer written notice of such
            determination and, if within fifteen days after receipt of such
            notice, any such Holder shall request in writing the inclusion in
            such registration statement all or any portion of their Registrable
            Securities, then the Company shall include in such registration
            statement such Registrable Securities such holder requested to be
            registered therein.

6.    EXECUTION. This Agreement may be executed in two or more counterparts,
      each of which shall be deemed an original but all of which shall
      constitute one and the same agreement. In the event that any signature is
      delivered by facsimile transmission, such signature shall create a valid
      and binding obligation of the party executing (or on whose

                                      -12-
<PAGE>

      behalf such signature is executed) the same with the same force and effect
      as if such facsimile signature page were an original thereof.

7.    GOVERNING LAW; MISCELLANEOUS. All questions concerning the construction,
      validity, enforcement and interpretation of this Agreement shall be
      governed by and construed and enforced in accordance with the internal
      laws of the State of New York, without regard to the principles of
      conflicts of law thereof. Each party hereby irrevocably submits to the
      exclusive jurisdiction of the state and federal courts sitting in the City
      of New York, borough of Manhattan, for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated
      hereby or discussed herein (including with respect to the enforcement of
      any of the Transaction Documents), and hereby irrevocably waives, and
      agrees not to assert in any suit, action or proceeding, any claim that it
      is not personally subject to the jurisdiction of any such court, that such
      suit, action or proceeding is improper. Each party hereby irrevocably
      waives personal service of process and consents to process being served in
      any such suit, action or proceeding by mailing a copy thereof via
      registered or certified mail or overnight delivery (with evidence of
      delivery) to such party at the address in effect for notices to it under
      this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any
      manner permitted by law. Each party irrevocably waives, to the fullest
      extent permitted by applicable law, any and all right to trial by jury in
      any legal proceeding arising out of or relating to this Agreement or the
      transactions contemplated hereby. If either party shall commence an action
      or proceeding to enforce any provisions of a Transaction Document, then
      the prevailing party in such action or proceeding shall be reimbursed by
      the other party for its' reasonable attorneys fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of
      such action or proceeding.

8.    NOTICES.  Any notice required or permitted hereunder shall be given in
      writing (unless otherwise specified herein) and shall be deemed
      effectively given, (i) on the date delivered, (a) by personal delivery,
      or (b) if advance copy is given by fax, (ii) three business days after
      deposit in the United States Postal Service by regular or certified
      mail, or (iii) one business day mailing by international express
      courier, with postage and fees prepaid, addressed to each of the other
      parties thereunto entitled at the following addresses, or at such other
      addresses as a party may designate by ten days advance written notice
      to each of the other parties hereto.

      COMPANY:             STRATUS SERVICES GROUP, INC.
                           500 Craig Road, Suite 201
                           Manalapan, New Jersey  07726
                           Facsimile number: (732) 294-1133
                           Attention:  Joseph J. Raymond, President

      With a copy to:      GIORDANO, HALLERAN & CIESLA, P.C.

                                      -13-
<PAGE>

                           125 Half Mile Road, P.O. Box 190
                           Middletown, New Jersey  07748
                           Facsimile number: (732) 224-6599
                           Attention:  Philip D. Forlenza, Esq.

      BUYER:               At the address set forth on the signature page of
                           this Agreement.

9.    SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's representations and
      warranties shall survive the execution and delivery hereof of this
      Agreement and the delivery of the Debentures and conversions and the
      Purchase Price, and shall inure to the benefit of their respective
      successors and assigns.

10.   FEES AND EXPENSES.  At the Closing, the Company shall reimburse the
      Buyers for  their legal fees and expenses incurred in connection with
      the preparation and negotiation of this Agreement by paying to Robinson
      Silverman $15,000 for the preparation and negotiation of this
      Agreement.  The amount contemplated by the immediately preceding
      sentence shall be retained by the Buyers and shall not be delivered to
      the Company at the Closing. Other than the amount contemplated herein,
      and except as otherwise set forth in the Registration Rights Agreement,
      each party shall pay the fees and expenses of its advisers, counsel,
      accountants and other experts, if any, and all other expenses incurred
      by such party incident to the negotiation, preparation, execution,
      delivery and performance of this Agreement.  The Company shall pay all
      stamp and other taxes and duties levied in connection with the issuance
      of the Securities

9.    SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and inure
      to the benefit of the parties hereto and their respective successors
      and permitted assigns.

                                      -14-
<PAGE>

      IN WITNESS WHEREOF, this Agreement has been duly executed by the Company
and the Buyers as of the date first above written.

                              STRATUS SERVICES GROUP, INC.

                              By:
                                  -----------------------------------------
                                  Joseph J. Raymond, Chairman & CEO

                                      -15-
<PAGE>

                                                                       EXHIBIT A

                              BUYER SIGNATURE PAGE

This Signature Page constitutes (i) a signature page to, and part of, that
certain Securities Purchase Agreement, dated and effective as of December 1,
2000 (the "Securities Purchase Agreement"), by and among Stratus Services Group,
Inc. and the purchasers who are or become party thereto by executing a signature
page substantially in the form of Exhibit A thereto and prior to the Closing
(ii) the agreement of the undersigned to become a party to, and be bound by the
terms and provisions of, the Securities Purchase Agreement.

BUYER:                           Name:
                                      ---------------------------------------
                                              (Please Print)

                                 By:
                                     ----------------------------------------
                                              (Sign above)

                                 Name:
                                       --------------------------------------
                                              (For Buyers that are entities)

                                 Title:

                                              (For Buyers that are entities)

                                 Principal Amount of Debentures:  $

                                 Address:

                                 Facsimile:

                                 Telephone:

The Buyer has represented Stratus Services Group, Inc. that it is an "accredited
investor" within the meaning of Rule 501 of the Securities Act of 1933 (the
"Act"). Please indicate by checking the applicable box(es) set forth below, the
basis by which Buyer has concluded that Buyer is an accredited investor.

Buyer is:

      |_|   A natural person whose individual net worth, or joint net worth with
            that person's spouse, at the time of his purchase exceeds
            $1,000,000;

      |_|   a natural person who had an individual income in excess of $200,000
            in each of the two most recent years or joint income with that
            person's spouse in excess of

                                      -16-
<PAGE>

            $300,000 in each of those years and has a reasonable expectation of
            reaching the same income level in the current year;

      |_|   a director or executive officer of Stratus Services Group, Inc.;

      |_|   a bank as defined in section 3(a)(2) of the Act or a savings and
            loan association or other institution as defined in section
            3(a)(5)(A) of the Act; a broker or dealer registered pursuant to
            section 15 of the Exchange Act; an insurance company as defined
            in section 2(13) of the Act; an investment company registered
            under the Investment Company Act of 1940 or a business
            development company as defined in section 2(a)(45) of that act; a
            Small Business Investment Company licensed by the U.S. Small
            Business Administration under section 301(c) or (d) of the Small
            Business Investment Act of 1958; a plan established and
            maintained by a state, its political subdivisions, for the
            benefit of its employees, that has total assets in excess of
            $5,000,000; an employee benefit plan within the meaning of the
            Employee Retirement Income Security Act of 1974 whose investment
            decisions are made by a plan fiduciary, as defined in section
            3(21) of such act, which is either a bank, savings and loan
            association, insurance company, or registered investment adviser,
            or if the employee benefit plan has total assets in excess of
            $5,000,000 or if a self-directed plan, whose investment decisions
            are made solely by persons that are accredited investors;

      |_|   a private business development company as defined in section
            202(a)(22) of the Investment Advisers Act of 1940;

      |_|   an organization described in section 501(c)(3) of the Internal
            Revenue Code, corporation, Massachusetts or similar business trust,
            or partnership, not formed for the specific purpose of acquiring the
            securities offered, with total assets in excess of $5,000,000;

      |_|   a trust, with total assets in excess of $5,000,000 not formed for
            the specific purpose of acquiring the securities offered, whose
            purchase is directed by a sophisticated person as described in Rule
            506(b)(2)(ii); and

      |_|   an entity in which all of the equity owners are accredited
            investors.

                                      -17-<PAGE>

                                                                  EXHIBIT 10.7.2

                          STRATUS SERVICES GROUP, INC.
                           2000 EQUITY INCENTIVE PLAN

1.    PURPOSE.

      The purpose of this Stratus Services Group, Inc. 2000 Equity Incentive
      Plan (the "Plan") is to advance the interests of Stratus Services Group,
      Inc. (the "Company") and its subsidiaries by enhancing the ability of the
      Company to (i) attract and retain employees and other persons or entities
      who are in a position to make significant contributions to the success of
      the Company and its subsidiaries; (ii) reward such persons for such
      contributions; and (iii) encourage such persons or entities to take into
      account the long-term interest of the Company through ownership of shares
      of the Company's common stock, $.01 par value per share (the "Common
      Stock").

      The Plan is intended to accomplish these objectives by enabling the
      Company to grant awards ("Awards") in the form of incentive stock options
      ("ISOs"), nonqualified stock options ("Nonqualified Options") (ISOs and
      Nonqualified Options shall be collectively referred to herein as
      "Options"), stock appreciation rights ("SARs"), restricted stock
      ("Restricted Stock"), deferred stock ("Deferred Stock"), or other stock
      based awards ("Other Stock Based Awards"), all as more fully described
      below.

2.    ADMINISTRATION.

      The Plan will be administered by the Compensation Committee (the
      "Committee") of the Board of Directors of the Company (the "Board"). The
      Committee may be constituted to permit the Plan to comply with the
      "disinterested administration" requirement of Rule 16b-3(c) promulgated
      under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act"), or any successor rules, and to comply with the "outside director"
      requirement of Section 162(m)(4)(c)(i) of the Internal Revenue Code of
      1986, as amended (the "Code"), and the regulations promulgated thereunder,
      or any successor rules. The Committee will determine the recipients of
      Awards, the times at which Awards will be made, the size and type or types
      of Awards to be made to each recipient, and will set forth in each such
      Award the terms, conditions and limitations applicable to the Award
      granted. Awards may be made singly, in combination or in tandem. The
      Committee will have full and exclusive power to interpret the Plan, to
      adopt rules, regulations and guidelines relating to the Plan, to grant
      waivers of Plan restrictions and to make all of the determinations
      necessary for its administration. Such determinations and actions of the
      Committee, and all other determinations and actions of the Committee made
      or taken under authority granted by any provision of the Plan, will be
      conclusive and binding on all parties.

3.    EFFECTIVE DATE AND TERM OF PLAN.

      The Plan will become effective on December 14, 2000. Awards under the Plan
      may be made prior to that date.

<PAGE>

      The Plan will terminate on December 14, 2010, subject to earlier
      termination of the Plan by the Board pursuant to Section 18 herein. No
      Award may be granted under the Plan after the termination date of the
      Plan, but Awards previously granted may extend beyond that date pursuant
      to the terms of such Awards.

4.    SHARES SUBJECT TO THE PLAN.

      Subject to adjustment as provided in Section 16 herein, the aggregate
      number of shares of Common Stock reserved for issuance pursuant to Awards
      granted under the Plan shall be five hundred thousand (500,000). The
      maximum number of shares of Common Stock which may be issued to the Chief
      Executive Officer ("CEO") of the Company pursuant to all Awards granted
      the CEO under the Plan shall not exceed thirty-five percent (35%) of the
      number of shares of the Company's Common Stock reserved for issuance
      hereunder. The maximum number of shares of the Company's Common Stock
      awarded to any other "Participant" (as defined in Section 5 below)
      pursuant to all Awards granted to such Participant under the Plan shall
      not exceed twenty percent (20%) of the number of shares of the Company's
      Common Stock reserved for issuance hereunder.

      The shares of Common Stock delivered under the Plan may be either
      authorized but unissued shares of Common Stock or shares of the Company's
      Common Stock held by the Company as treasury shares, including shares of
      Common Stock acquired by the Company in open market and private
      transactions. No fractional shares of Common Stock will be delivered
      pursuant to Awards granted under the Plan and the Committee shall
      determine the manner in which fractional share value will be treated.

      If any Award requiring exercise by a Participant for delivery of shares of
      Common Stock is cancelled or terminates without having been exercised in
      full, or if any Award payable in shares of Common Stock or cash is
      satisfied in cash rather than Common Stock, the number of shares of Common
      Stock as to which such Award was not exercised or for which cash was
      substituted will be available for future Awards of Common Stock; provided,
      however, that Common Stock subject to an Option cancelled upon the
      exercise of an SAR shall not again be available for Awards under the Plan
      unless, and to the extent that, the SAR is settled in cash. Shares of
      Restricted Stock and Deferred Stock forfeited to the Company in accordance
      with the Plan and the terms of the particular Award shall be available
      again for Awards under the Plan unless the Committee determines otherwise.

5.    ELIGIBILITY AND PARTICIPATION.

      Those eligible to receive Awards under the Plan (each, a "Participant" and
      collectively, the "Participants") will be persons in the employ of the
      Company or any of its subsidiaries designated by the Committee
      ("Employees") and other persons or entities who, in the opinion of the
      Committee, are in a position to make a significant contribution to the
      success of the Company or its subsidiaries, including, without limitation,
      consultants and agents of the Company or any subsidiary; provided, that
      such consultants and agents have been actively engaged in the conduct of
      the business of the Company or any subsidiary. A "subsidiary" for purposes
      of the Plan will be a present or future

                                       2
<PAGE>

      corporation of which the Company owns or controls, or will own or control,
      more than 50% of the total combined voting power of all classes of stock
      or other equity interests.

6.    OPTIONS.

      (a)   NATURE OF OPTIONS. An Option is an Award entitling the Participant
            to purchase a specified number of shares of Common Stock at a
            specified exercise price. Both ISOs, as defined in Section 422 of
            the Code, and Nonqualified Options may be granted under the Plan;
            provided however, that ISOs may be awarded only to Employees.

      (b)   EXERCISE PRICE.  The exercise price of each Option shall be equal to
            the "Fair Market Value" (as defined below) of the Common Stock on
            the date the Award is granted to the Participant; provided,
            however, that (i) in the Committee's discretion, the exercise
            price of a Nonqualified Option may be less than the Fair Market
            Value of the Common Stock on the date of grant; (ii) with respect
            to a Participant who owns more than ten percent (10%) of the
            total combined voting power of all classes of stock of the
            Company, the option price of an ISO granted to such Participant
            shall not be less than one hundred and ten percent (110%) of the
            Fair Market Value of the Common Stock on the date the Award is
            granted; and (iii) with respect to any Option repriced by the
            Committee, the exercise price shall be equal to the Fair Market
            Value of the Common Stock on the date such Option is repriced
            unless otherwise determined by the Committee.  For purposes of
            this Plan, Fair Market Value shall mean the average of the
            closing bid and asked prices of the Common Stock as reported on
            the Nasdaq Smallcap Market on a particular date, or if not quoted
            on the Nasdaq Smallcap Market, the average the closing bid and
            asked prices as furnished by a professional market maker making a
            market in the Common Stock as selected by the Committee.  If the
            Common Stock is not publicly traded, Fair Market Value shall be
            determined in good faith by the Board of Directors.

      (c)   DURATION OF OPTIONS. The term of each Option granted to a
            Participant pursuant to an Award shall be determined by the
            Committee; provided, however, that in no case shall an Option be
            exercisable more than ten (10) years (five (5) years in the case of
            an ISO granted to a ten-percent stockholder as defined in (b) above)
            from the date of the Award.

      (d)   EXERCISE OF OPTIONS AND CONDITIONS.  Except as otherwise provided in
            Sections 16 and 17 herein, and except as otherwise provided below
            with respect to ISOs, Options granted pursuant to an Award will
            become exercisable at such time or times, and on and subject to
            such conditions, as the Committee may specify at the time of the
            Award.  The Options may be subject to such restrictions,
            conditions and forfeiture provisions as the Committee may
            determine, including, but not limited to, restrictions on
            transfer, continuous service with the Company or any of its
            subsidiaries, achievement of business objectives, and individual,
            division and Company performance.  To the extent exercisable, an
            Option may be exercised either in whole at any time or in part
            from time to time.  With respect to an ISO

                                       3
<PAGE>

            granted to a Participant, the Fair Market Value of the shares of
            Common Stock on the date of grant which are exercisable for the
            first time by a Participant during any calendar year shall not
            exceed $100,000.

      (e)   PAYMENT FOR AND DELIVERY OF STOCK. Full payment for shares of Common
            Stock purchased will be made at the time of the exercise of the
            Option, in whole or in part. Payment of the purchase price will be
            made in cash or in such other form as the Committee may permit,
            including, without limitation, delivery of shares of Common Stock.

7.    STOCK APPRECIATION RIGHTS.

      (a)   NATURE OF STOCK APPRECIATION RIGHTS. A SAR is an Award entitling the
            recipient to receive payment, in cash and/or shares of Common Stock,
            determined in whole or in part by reference to appreciation in the
            value of a share of Common Stock. A SAR entitles the recipient to
            receive in cash and/or shares of Common Stock, with respect to each
            SAR exercised, the excess of the Fair Market Value of a share of
            Common Stock on the date of exercise over the Fair Market Value of a
            share of Common Stock on the date the SAR was granted.

      (b)   GRANT OF SARs. SARs may be subject to Awards in tandem with, or
            independently of, Options granted under the Plan. A SAR granted in
            tandem with an Option which is not an ISO may be granted either at
            or after the time the Option is granted. A SAR granted in tandem
            with an ISO may be granted only at the time the ISO is granted and
            may expire no later than the expiration of the underlying ISO.

      (c)   EXERCISE OF SARs.  A SAR not granted in tandem with an Option will
            become exercisable at such time or times, and on such conditions,
            as the Committee may specify.  A SAR granted in tandem with an
            Option will be exercisable only at such times, and to the extent,
            that the related option is exercisable.  A SAR granted in tandem
            with an ISO may be exercised only when the market price of the
            shares of Common Stock subject to the ISO exceeds the exercise
            price of the ISO, and the SAR may be for no more than one hundred
            percent (100%) of the difference between the exercise price of
            the underlying ISO and the Fair Market Value of the Common Stock
            subject to the underlying ISO at the time the SAR is exercised.
            At the option of the Committee, upon exercise, an SAR may be
            settled in cash, Common Stock or a combination of both.

8.    RESTRICTED STOCK.

      A Restricted Stock Award entitles the recipient to acquire shares of
      Common Stock, subject to certain restrictions or conditions, for no cash
      consideration, if permitted by applicable law, or for such other
      consideration as may be determined by the Committee. The Award may be
      subject to such restrictions, conditions and forfeiture provisions as the
      Committee may determine, including, but not limited to, restrictions on
      transfer, continuous service with the Company or any of its subsidiaries,
      achievement of business

                                       4
<PAGE>

      objectives, and individual, division and Company performance. Subject to
      such restrictions, conditions and forfeiture provisions as may be
      established by the Committee, any Participant receiving an Award of
      Restricted Stock will have all the rights of a stockholder of the Company
      with respect to the shares of Restricted Stock, including the right to
      vote the shares and the right to receive any dividends thereon.

9.    DEFERRED STOCK.

      A Deferred Stock Award entitles the recipient to receive shares of Common
      Stock to be delivered in the future. Delivery of the shares of Common
      Stock will take place at such time or times, and on such conditions, as
      the Committee may specify. At the time any Deferred Stock Award is
      granted, the Committee may provide that the Participant will receive an
      instrument evidencing the Participant's right to future delivery of
      Deferred Stock.

10.   OTHER STOCK BASED AWARDS.

      The Committee shall have the right to grant Other Stock Based Awards under
      the Plan to Employees which may include, without limitation, the grant of
      shares of Common Stock as bonus compensation and the issuance of shares of
      Common Stock in lieu of an Employee's cash compensation.

11.   AWARD AGREEMENTS.

      The grant of any Award under the Plan may be evidenced by an agreement
      which shall describe the specific Award granted and the terms and
      conditions of the Award. Any Award shall be subject to the terms and
      conditions of any such agreement required by the Committee.

12.   TRANSFERS.

      No Award (other than an outright Award in the form of Common Stock without
      any restrictions) may be assigned, pledged or transferred other than by
      will or by the laws of descent and distribution and, during a
      Participant's lifetime, will be exercisable only by the Participant or, in
      the event of a Participant's incapacity, by the Participant's guardian or
      legal representative.

13.   RIGHTS OF A STOCKHOLDER.

      Except as specifically provided by the Plan, the receipt of an Award will
      not give a Participant rights as a stockholder of the Company. The
      Participant will obtain such rights, subject to any limitations imposed by
      the Plan, or the instrument evidencing the Award, upon actual receipt of
      shares of Common Stock.

14.   CONDITIONS ON DELIVERY OF STOCK.

      The Company will not be obligated to deliver any shares of Common Stock
      pursuant to the Plan or to remove any restrictions or legends from shares
      of Common Stock

                                       5
<PAGE>

      previously delivered under the Plan until, (a) in the opinion of the
      Company's counsel, all applicable federal and state laws and regulations
      have been complied with, (b) until the shares of Common Stock to be
      delivered have been listed or authorized to be listed on the Nasdaq
      Smallcap Market, and (c) until all other legal matters in connection with
      the issuance and delivery of such shares of Common Stock have been
      approved by the Company's counsel. If the sale of shares of Common Stock
      has not been registered under the Securities Act of 1933, as amended (the
      "Act"), and qualified under the appropriate "blue sky" laws, the Company
      may require, as a condition to exercise of the Award, such representations
      and agreements as counsel for the Company may consider appropriate to
      avoid violation of such Act and laws and may require that the certificates
      evidencing such shares of Common Stock bear an appropriate legend
      restricting transfer.

      If an Award is exercised by a Participant's legal representative, the
      Company will be under no obligation to deliver shares of Common Stock
      pursuant to such exercise until the Company is satisfied as to the
      authority of such representative.

15.   TAX WITHHOLDING.

      The Company will have the right to deduct from any cash payment under the
      Plan taxes that are required to be withheld and to condition the
      obligation to deliver or vest shares of Common Stock under this Plan upon
      the Participant's paying the Company such amount as the Company may
      request to satisfy any liability for applicable withholding taxes. The
      Committee may in its discretion permit Participants to satisfy all or part
      of their withholding liability either by delivery of shares of Common
      Stock held by the Participant or by withholding shares of Common Stock to
      be delivered to a Participant upon the grant or exercise of an Award.

16.   ADJUSTMENT OF AWARD.

      (a)   In the event that a dividend shall be declared upon the Common Stock
            payable in shares of Common Stock, the number of shares of the
            Common Stock then subject to any Award and the number of shares
            of the Common Stock which may be issued under the Plan but not
            yet covered by an Award shall be adjusted by adding to each share
            the number of shares which would be distributable thereon if such
            shares had been outstanding on the date fixed for determining the
            stockholders entitled to receive such stock dividend. In the
            event that the outstanding shares of the Common Stock shall be
            changed into or exchanged for a different number or kind of
            shares of Common Stock or other securities of the Company or of
            another corporation or for cash, whether through reorganization,
            recapitalization, stock split, combination of shares, sale of
            assets, merger or consolidation in which the Company is the
            surviving corporation, then, there shall be substituted for each
            share of the Common Stock then subject to any Award, the number
            and kind of shares of stock or other securities or the amount of
            cash into which each outstanding share of the Common Stock shall
            be so changed or for which each such share shall be exchanged.

                                       6
<PAGE>

      (b)   In the event of a proposal, which is approved by the Board, of any
            merger or consolidation involving the Company where the Company
            is not the surviving entity, any sale of substantially all of the
            Company's assets or any other transaction or series of related
            transactions as a result of which a single person or several
            persons acting in concert own a majority of the Company's then
            outstanding Common Stock (such merger, consolidation, sale of
            assets, or other transaction being hereinafter referred to as a
            "Transaction"), all outstanding options and SARs shall become
            exercisable immediately before or contemporaneously with the
            consummation of such Transaction and each outstanding share of
            Restricted Stock and each outstanding Deferred Stock Award shall
            immediately become free of all restrictions and conditions upon
            consummation of such Transaction. Immediately following the
            consummation of the Transaction, all outstanding Options and SARs
            shall terminate and cease to be exercisable.

            In lieu of the foregoing, if the Company will not be the surviving
            corporation or entity, the Committee may arrange to have such
            acquiring or surviving corporation or entity, or an "Affiliate" (as
            defined below) thereof, grant replacement Awards which shall be
            immediately exercisable to Participants holding outstanding Awards.

            The term "Affiliate," with respect to any Person, shall mean any
            other Person who is, or would be deemed to be an "affiliate" or an
            "associate" of such Person within the respective meanings ascribed
            to such terms in Rule 12b-2 of the General Rules and Regulations
            under the Exchange Act. The term "Person" shall mean a corporation,
            association, partnership, joint venture, trust, organization,
            business, individual or government or any governmental agency or
            political subdivision thereof.

      (c)   In the event of the dissolution or liquidation of the Company
            (except a dissolution or liquidation relating to a sale of assets or
            other reorganization of the Company referred to in the preceding
            sections), the outstanding options and SARs shall terminate as of a
            date fixed by the Committee; provided, however, that not less than
            thirty (30) days written notice of the date so fixed shall be given
            to each Participant who shall have the right during such period to
            exercise the Participant's Options or SARs as to all or any part of
            the shares of Common Stock covered thereby. Further, in the event of
            the dissolution or liquidation of the Company, each outstanding
            share of Restricted Stock and each outstanding Deferred Stock Award
            shall immediately become free of all restrictions and conditions.

17.   TERMINATION OF SERVICE.

      Upon a Participant's termination of service with the Company or a
      subsidiary (if an employee only of a subsidiary), any outstanding Award
      shall be subject to the terms and conditions set forth below, unless
      otherwise determined by the Committee:

                                       7
<PAGE>

      (a)   In the event a Participant leaves the employ or service of the
            Company or a subsidiary of the Company, prior to the Participant's
            65th birthday, whether voluntarily or otherwise but other than by
            reason of the Participant's death or "disability" (as such term is
            defined in Section 22(e)(3) of the Code), each Option and SAR
            granted to the Participant shall terminate upon the earlier to occur
            of (i) the expiration of the period three (3) months after the date
            of such termination and (ii) the date specified in the Option or
            SAR; provided, that, prior to the termination of such Option or SAR,
            the Participant shall be able to exercise any part of the Option or
            SAR which is exercisable as of the date of termination. Further,
            each outstanding share of Restricted Stock and each outstanding
            Deferred Stock Award which remains subject to any restrictions or
            conditions of the Award shall be forfeited to the Company upon such
            date of termination.

      (b)   In the event a Participant's employment with or service to the
            Company or its subsidiaries terminates by reason of the
            Participant's death or "disability" (as such term is defined in
            Section 22(e)(3) of the Code), each Option and SAR granted to the
            Participant shall become immediately exercisable in full and shall
            terminate upon the earlier to occur of (i) the expiration of the
            period six (6) months after the date of such termination and (ii)
            the date specified in the option or SAR. Further, each outstanding
            share of Restricted Stock and each outstanding Deferred Stock Award
            shall immediately become free of all restrictions and conditions
            upon the date of such termination.

      (c)   In the event a Participant voluntarily leaves the employ or service
            of the Company or a subsidiary of the Company, after the
            Participant's 65th birthday, each Option and SAR granted to the
            Participant shall become immediately exercisable in full and shall
            terminate upon the earlier to occur of (i) the expiration of three
            (3) months after the date of such termination and (ii) the date
            specified in the Option or SAR. Further, each outstanding share of
            Restricted Stock and each outstanding Deferred Stock Award shall
            immediately become free of all restrictions and conditions upon the
            date of such termination unless otherwise provided in the Award. If
            the Participant involuntarily leaves the employ or service of the
            Company or a subsidiary after the Participant's 65th birthday, each
            Option and SAR granted to the Participant shall terminate upon the
            earlier to occur of (i) the expiration of three (3) months after the
            date of such termination and (ii) the date specified in the Option
            or SAR; provided, that, prior to the termination of such Option or
            SAR, the Participant shall be able to exercise any part of the
            Option or SAR which is exercisable as of the date of termination.
            Further, each outstanding share of Restricted Stock and each
            outstanding Deferred Stock Award which remains subject to any
            restrictions or conditions of the Award shall be forfeited to the
            Company upon such date of termination.

18.   AMENDMENTS AND TERMINATION.

      The Committee will have the authority to make such amendments to any terms
      and conditions applicable to outstanding Awards as are consistent with
      this Plan; provided, that, except for adjustments under Section 16 hereof,
      no such action will modify such

                                       8
<PAGE>

      Award in a manner adverse to the Participant without the Participant's
      consent except as such modification is provided for or contemplated in the
      terms of the Award.

      The Board may amend, suspend or terminate the Plan, except no action may,
      without the consent of a Participant, alter or impair any Award
      previously granted to the Participant under the Plan.

19.   SUCCESSORS AND ASSIGNS.

      The provisions of this Plan shall be binding upon all successors and
      assigns of any such Participant including, without limitation, the estate
      of any such Participant and the executors, administrators, or trustees of
      such estate, and any receiver, trustee in bankruptcy or representative of
      the creditors of any such Participant.

20.   MISCELLANEOUS.

      (a)   This Plan shall be governed by and construed in accordance with the
            laws of the State of New Jersey.

      (b)   Any and all funds received by the Company under the Plan may be used
            for any corporate purpose.

      (c)   Nothing contained in the Plan or any Award granted under the Plan
            shall confer upon a Participant any right to be continued in the
            employment of the Company or any subsidiary, or interfere in any way
            with the right of the Company, or its subsidiaries, to terminate the
            employment relationship at any time.

                                       9

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