Stratus Services Group, Inc. Announces Recent Sale Of Six Northern California Offices; Amendment Of Outsourcing Agreement


MANALAPAN, N.J., June 10, 2005 (PRIMEZONE) -- Stratus Services Group, Inc. (OTCBB:SSVG), the SMARTSolutions(tm) Company (the "Company" or "Stratus"), announced today the sale of substantially all of the assets, excluding accounts receivable, of six of its Northern California offices to ALS, LLC. The offices sold were the following: Cotati, California, Fairfield, California, Hayward, California, Napa, California, Roseville, California and Sacramento, California.

ALS paid, in exchange for the purchased assets, a base purchase price of $3,392,507, which represented the balance of all monies due from the Company to ALS outstanding as of the close of business on May 13, 2005, less $600,000. The $3,392,507 base purchase price was paid by the cancellation of an equal amount of indebtedness owed by the Company to ALS. At the same time as the asset purchase transaction, ALS and the Company's lender, Capital Temp Funds, entered into a transaction pursuant to which ALS contributed $600,000 to Capital in exchange for a junior participation interest in the Capital loan to the Company. After ALS has been repaid the junior participation interest, ALS will be required to pay to the Company an additional $600,000 as contingent purchase price for the assets it acquired from the Company, which amount may be offset against the balance of the $600,000 of indebtedness remaining due from the Company to ALS, provided that all other amounts due from the Company to ALS are then current and paid in full.. Thus, as a result of the sale of the assets to ALS, only $600,000 of the $3,992,507 debt due from the Company to ALS remains, along with any unpaid balance of the Company's payrolls for weeks ending subsequent to May 8, 2005.

The purpose of the California sale was to reduce debt and to also enable the Company to return to its focus on its core business. The California offices sold represented approximately 7.6% and 11% of the Company's gross revenues for the fiscal year ended September 30, 2004 and the six months ended March 31, 2005, respectively.

In connection with the transaction, each of the Company and ALS entered into Non-Compete and Non-Solicitation Agreements pursuant to which the Company agreed not to compete with ALS with the customers and in the geographic area of the Northern California Offices, and ALS agreed not to compete with the Company with respect to certain customers and accounts, including accounts serviced by the Company's remaining offices, for a period of two (2) years. Both parties agreed also that certain key accounts were shared accounts.

Additionally, on June 10, 2005, the Company entered into a Second Addendum to Outsourcing Agreement with ALS, whereby the Company and ALS agreed to further restructure the Outsourcing Agreement currently in effect between such parties to reduce certain rates, modify certain payment terms and eliminate the termination fee payable to ALS if Stratus has paid to ALS all amounts due and owing to ALS at the time of termination. The Addendum also provides that the Company will assume certain costs previously borne by ALS and rehire certain employees. ALS personnel will no longer be involved in Stratus sales or operations, but will continue to provide risk management and worker's compensation functions to the Company.

Joseph J. Raymond, Sr. stated, "I am pleased that all parties have been able to reach an amicable solution that is acceptable to all parties, and yet beneficial to the Company and its shareholders."

Stratus is a national provider of staffing services and also provides a broad range of information technology staffing and project consulting through its Stratus Technology Services, LLC joint venture.

This news release includes forward-looking statements within the meaning of the federal securities laws that are subject to risks and uncertainties. Factors that could cause the Company's actual results and financial condition to differ from the Company's expectations include, but are not limited to, a change in economic conditions that adversely affects the level of demand for the Company's services, competitive market and pricing pressures, the availability of qualified temporary workers, the effects of continued operating losses on liquidity, the continued cooperation of the Company's creditors, effects of acquisitions, availability of capital to sustain growth, the ability of the Company to manage growth through improved information systems and the training and retention of new staff, and government regulation.



            

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