ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement ("Agreement") is made as of the 21st day of October, 2005, by and between Source One Financial Staffing, LLC , a Pennsylvania limited liability company ("Buyer") with its principal business offices located at 2 Princess Road, Lawrenceville, New Jersey 08648, and Stratus Services Group, Inc. , a Delaware corporation ("Seller") with its principal business offices located at 500 Craig Road, Suite 201, Manalapan, New Jersey 07726.

WHEREAS, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer certain of the properties, rights, assets and business of the Seller, all upon and subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.    Purchase and Sale and Delivery of the Assets.

1.1.    Purchase and Sale and Delivery of the Assets.

(a)    Purchased Assets . Subject to and upon the terms and conditions of this Agreement and excluding the assets retained by the Seller as set forth in Section 1.1(b) herein, as of the “Effective Date” (as defined in Section 1.5 below), the Seller shall sell, transfer, convey, assign and deliver, to the Buyer, and the Buyer shall purchase from the Seller, free and clear of all liens and encumbrances (except for Permitted Liens as defined in Section 2.8), all of the properties, rights, assets and business as a going concern, of every kind and nature, real, personal or mixed, tangible or intangible, wherever located, which are owned, leased, licensed or used by Seller in the conduct of its business at its New Jersey office located in the town of Lawrenceville, (the “Lawrenceville Office”) and which exist on the “Effective Date” (as defined in Section 1.5 below) (collectively, the "Purchased Assets"), including, without limitation, the following assets:

(i)    all office supplies and similar materials (the "Supplies");

(ii)    all contracts, agreements, leases, arrangements and/or commitments of any kind, whether oral or written, relating solely to the Purchased Assets, and limited to the geographic area serviced by the Lawrenceville Office as set forth on Schedule 2.12 attached hereto (the "Contracts");

(iii)    all customer lists, files, records and documents (including credit information) relating solely to customers and vendors of the Purchased Assets and limited to the geographic area serviced by the Lawrenceville Office and all other business, financial and employee books, records, files, documents, reports and correspondence relating to the Purchased Assets, but excluding records relating to accounts receivable, except to the extent required by Sections 2.22 and 7.2(d) herein (collectively, the "Records");

(iv)    all rights of the Seller, if any, under express or implied warranties from the suppliers of the Seller in connection with the Purchased Assets;

(v)    all furnishings, furniture, fixtures, tools, machinery, equipment and leasehold improvements owned by the Seller and related to the Purchased Assets, whether or not reflected as capital assets in the accounting records of the Seller (collectively, the "Fixed Assets"), as set forth on Schedule 2.8 ; and

(vi)    all computers, computer programs, computer databases, hardware and software owned or licensed by the Seller and used in connection with the Purchased Assets, but not to include any proprietary software of Seller;

(vii)    the right to use any forms, processes and solutions developed by and for Stratus and employed by Stratus, prior to the date of Closing, in operating the Lawrenceville Office;

(viii)    all municipal, state and federal franchises, licenses, authorizations and permits of the Seller which are necessary to operate or are related to the Purchased Assets;

(ix)    all prepaid charges,   deposits, sums and fees   of Seller relating to the Purchased Assets;

(x)    all claims and rights of Seller related to or arising from the Purchased Assets; and

(xi)    all of the goodwill of the Lawrenceville Office.

(b)    Retained Assets. Notwithstanding anything to the contrary set forth in this Agreement, the following assets of the Seller are not included in the sale of Purchased Assets contemplated hereby: (i) the cash and cash equivalents, accounts receivable, chattel papers (including electronic chattel paper), instruments (including promissory notes), all of Debtor’s rights to receive payments from any source and for any reason (whether characterized as accounts, accounts receivable, chattel paper, choses-in-action, contract rights, general intangibles, instruments, securities, notes or otherwise) including, without limitation, Debtor’s right to receive payments for services rendered, whether or not earned by performance or recognized or billed by Debtor, prepaid security deposits on Real Property Lease (as defined in Section 2.10 of the Purchase Agreement) and all other prepaid charges, deposits or prepaid expenses related to the Purchased Assets, (ii) the Purchase Price (as hereinafter defined) and the other rights of the Seller under or relating to this Agreement, (iii) the corporate minute books, stock records, qualification to conduct business as a foreign corporation, and other documents relating to the formation, maintenance or existence as a corporation of the Seller, except that Seller agrees that it will provide copies of any such document from the corporate minute books as reasonably requested by the Buyer which the Buyer believes are necessary for the use and operation of the Purchased Assets after the Effective Date, (iv) motor vehicles, (v) all properties, rights, assets and services related to the conduct of Seller’s business at all of its other offices nationwide and all information, documents and files relative thereto; and (vi) all properties, rights, assets and services related to the conduct of Seller’s business at any of its other offices and locations throughout the United States.  

1.2.    Purchase Price. The purchase price for the Purchased Assets (the "Purchase Price") shall be payable as follows:

(a)    the Buyer shall deliver certified funds in the amount of [Thirty-five Thousand Dollars ($35,000.00)] payable to Capital TempFunds, a division of Capital Factors LLC (“Capital”) as Seller’s designee, at the Closing in accordance with the letter attached hereto as Exhibit A .

1.3.    Assumption of Liabilities.

(a)    Assumed Liabilities. Effective as of the Effective Date, the Buyer agrees to assume and to pay, perform and discharge all liabilities and obligations arising on and after the Effective Date (i) under only those Contracts to which any Customer is a party (collectively, the “Customer Contracts”) and those Contracts to which are Employee Contracts (as defined in Section 2.23) and (ii) with respect to the use and operation of the Purchased Assets by the Buyer after the Effective Date. The liabilities and obligations described in this Section 1.3(a) are referred to as the “Assumed Liabilities”.

(b)    Liabilities Retained by the Buyer. Except for the Assumed Liabilities, the Buyer shall not assume, be liable for or pay, and none of the Purchased Assets shall be subject to, and the Seller shall retain, be unconditionally liable for and pay, any liability or obligation (whether known or unknown, matured or unmatured, stated or unstated, recorded or unrecorded, fixed or contingent, currently existing or hereafter arising) of the Seller, without limitation, the following:

(i)    any obligation or liability of Seller arising out of this Agreement, any agreement entered into in connection herewith or the transactions contemplated hereby or thereby;

(ii)    except as otherwise provided herein, any obligation or liability of Seller for the fees and expenses of its counsel, accountants and other experts and all other expenses incurred by Seller incident to the negotiation, preparation and execution of this Agreement and any agreement entered into in connection herewith and the performance by Seller of its obligations hereunder or thereunder;

1.    except as otherwise provided herein, any obligation or liability of Seller and its directors, officers, employees, consultants and other representatives, arising out of or resulting from any business, activity, course of conduct, action or omission before, on or after the Effective Date;

2.    all accounts payable of the Seller;

3.    any liability or obligation under or in connection with the Retained Assets.

4.    any federal, state, local or other foreign tax payable by the Seller whether such tax is due and payable prior to or after the Effective Date;

5.    any indebtedness of the Seller for borrowed money;

6.    all liabilities of the Seller with respect to any claim, litigation or proceeding accruing with respect to, or arising from or relating to any business, activity, course of conduct, action or omission before, on or after the Effective Date, including, without limitation, those matters set forth on Schedule 2.9 , whether such claim, litigation or proceeding is presented or instituted prior to or after the Effective Date;

7.    all liabilities, obligations, payments, benefits, costs and expenses including, without limitation, any salary, wage, vacation, bonus, severance, expense reimbursement or other benefit: (a) accruing and payable to staff and part--time employees of the Seller who become employed by the Buyer after the Effective Date with respect to any period before the Effective Date as set forth in Schedule 1.3 attached hereto, (b) accruing and payable to all other employees of the Seller with respect to any period before or after the Effective Date, (c) accruing and payable to all former employees of the Seller whose employment terminated before the Effective Date, (d) accruing and payable pursuant to any employee benefit plans (including pension plans) of the Seller or under federal and state laws governing such plans, whether before or after the Effective Date, including, without limitation, in connection with the termination of participation under such plan by a staff or part-time employee; or (e) accruing and payable in connection with the termination of any such employee benefit plan of the Seller, whether before or after the Effective Date.

8.    all warranty liability of the Seller, including without limitation, for claims which arise prior to the Effective Date, whether such claims are presented prior to or after the Effective Date.

9.    All liabilities and obligations of the Seller under all Contracts other than the Customer Contracts and the Employee Contracts, including, without limitation, the Real Property Lease and any equipment leases.

1.4.    Other Agreements. As further consideration for the transactions contemplated hereby, the Seller will enter into a Non-Competition, Non-Solicitation and Confidentiality Agreement attached hereto as Exhibit C .

1.5.    Closing. The closing (the “Closing”) shall take place at the offices of the Seller in Manalapan, New Jersey, at 3:00 PM EST, or at such other time or date or such location as the parties may mutually agree (the "Closing Date"), but the Closing shall take place no later than October 21, 2005, and the transactions contemplated hereby shall be deemed to occur at 12:01 a.m., Eastern Time, on October 23, 2005 (the "Effective Date"). At the Closing the parties will exchange facsimile executed documents and they will promptly send each other original signature pages by overnight mail. The parties are executing this Asset Purchase Agreement now, but all Exhibits and Schedules hereto will be delivered at the Closing.

1.6.    Allocation of Purchase Price. The Purchase Price shall be allocated among the various Purchased Assets by mutual agreement of the parties as set forth on Schedule 1.6 . The parties covenant and agree with each other that this allocation was arrived at by arm’s length negotiation and that none of them will take a position on any income tax return, before any governmental agency charged with the collection of any income tax or in any judicial proceeding that is in any manner inconsistent with the terms of this Section 1.6 without the written consent of the other parties to this Agreement. Each of Buyer and Seller covenant and agree to execute and timely file U.S. Treasury Form 8594 consistent with Schedule 1.6 , and upon a party’s reasonable request the other party shall execute and file such other documents as may be necessary to document such allocation.

2.    Representations of the Seller. The Seller represents and warrants to the Buyer as follows:

2.1.    Organization. The Seller is a corporation and is duly organized, validly existing and in good standing under the laws of the State of Delaware. The Seller is not required to be qualified or licensed to do business as a foreign corporation or other organization in any other jurisdiction, except such jurisdictions, if any, in which the failure to be so qualified or licensed will not have a material adverse effect on the conduct of its business or use of any of its properties or assets. The Seller has delivered to the Buyer complete and correct copies of the Seller’s Articles of Incorporation and By-laws as in effect on the date hereof. The Seller is not in default under or in violation of any provision of its Articles of Incorporation or By-laws. The Seller has all requisite power and authority (corporate and other) to execute and deliver this Agreement and the documents, instruments and agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.

2.2.    Affiliates and Other Equity Investments. The Seller does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, limited liability company, association or other business organization, other than a fifty percent (50%) interest in Stratus Technology Services, LLC (“STS”).

2.3.    Authorization. The Seller has the power to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement, and the agreements provided for herein by the Seller, and the consummation by the Seller of all transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate action. This Agreement and all such other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which the Seller is a party constitute the valid and legally binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

2.4.    No Violation. Except as set forth in Schedule 2.4 , neither the execution, delivery or performance of this Agreement and the agreements provided for herein, nor the consummation of any of the transactions contemplated hereby or thereby (i) will violate or conflict with the Articles of Incorporation or By-laws of Seller, or (ii) conflict with, result in any breach of, constitute (with or without due notice or lapse of time or both) a default under, or result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require notice, consent or waiver under any provision of any contract or agreement of any kind to which the Seller is a party or by which the Seller is bound (including, without limitation, the Contracts) or to which any property or asset (including, without limitation, the Purchased Assets) of any of them is subject, (iii) is prohibited by or requires the Seller to obtain or make any consent, authorization, approval, registration or filing under any statute, law, ordinance, regulation, rule, judgment, decree or order of any court or governmental agency, board, bureau, body, department or authority, (iv) will cause any acceleration of maturity of any note, instrument or other obligation to which Seller is a party or by   which Seller is bound or with respect to which Seller is an obligor or guarantor, or (v) will result in the creation or imposition of any lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever upon or give to any other person any interest or right (including any right of termination or cancellation) in or with respect to any of the properties, assets (including, without limitation, the Purchased Assets), business, agreements or contracts (including, without limitation, the Contracts) of Seller.

2.5.    Financial Statements. Seller has delivered to Buyer audited financial statements, for the annual period ended September 30, 2004, and unaudited financial statements, for the nine months ended June 30, 2005, for the Seller’s operations as a whole. Such financial statements fairly present the financial position of Seller as of the date thereof and the results of its operations and cash flows for the period indicated.

2.6.    No Undisclosed Liabilities. As of the Closing Date, except for the transactions contemplated by this Agreement and except as set forth in Schedule 2.6 , Seller has not incurred any material liability or obligation (absolute, accrued, contingent or otherwise) of any nature, other than liabilities and obligations incurred in the ordinary course of business.

2.7.    Absence of Certain Changes. As of the Closing Date, except for the execution and delivery of this Agreement and except as set forth in Schedule 2.7 , Seller has not (i) had any change in its condition (financial or otherwise), operations (present or prospective), business (present or prospective), assets or liabilities, other than changes in the ordinary course of business, none of which has been materially adverse; (ii) incurred or agreed to incur any indebtedness for borrowed money; (iii) paid or obligated itself to pay in excess of ten thousand dollars ($10,000) in the aggregate for Fixed Assets; (iv) suffered any substantial loss or waived any substantial right; (v) agreed to sell, transfer or otherwise dispose any of the Purchased Assets; (vi) mortgaged, pledged or subjected to any charge, lien, claim or encumbrance, or agreed to mortgage, pledge or subject to any charge, lien, claim or encumbrance, any of the Purchased Assets; (vii) made or permitted any material amendment or termination of any Contract, license or permit to which it is a party other than in the ordinary course of business; (viii) experienced any shortage or difficulty in obtaining qualified personnel to meet customer orders, demands and requirements; (ix) made any change in its accounting methods or practices with respect to its condition, operations, business, properties, assets or liabilities; or (x) entered into any transaction not in the ordinary course of the business.

2.8.    Title; Ownership, Condition and Adequacy of the Assets. Except with respect to Purchased Assets that are leased and except as set forth in Schedule 2.8 , Seller has good and marketable title to all of its respective properties and assets included in the Purchased Assets, and valid leasehold interests in all such Purchased Assets leased by it under any personal property lease, in each case free and clear and not subject to any mortgage, pledge, conditional sales contract, lien, security interest, right of possession in favor of any third party, claim or other encumbrance, except for Permitted Liens. The Fixed Assets are in good operating condition and repair, subject only to the ordinary wear and tear. Schedule 2.8 sets forth an accurate, correct and complete list of all of the Fixed Assets owned or used by the Seller with respect to the Purchased Assets. As used herein, the term “Permitted Liens” means (i) liens or encumbrances for taxes not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of Seller; (ii) carrier’s, warehousemen’s, mechanic’s, materialmen’s, repairmen’s or other like liens or encumbrances arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of Seller; and (iii) those liens or encumbrances described on Schedule 2.8 attached hereto.

2.9.    Litigation. Except as set forth in Schedule 2.9 , there are no actions, suits, proceedings or investigations, either at law or in equity, or before any commission or other administrative authority in any United States or foreign jurisdiction, of any kind now pending or, to the best of Seller's knowledge, threatened involving Seller that (i) if asserted and decided adversely to Seller, could materially and adversely affect the use or operations of the Purchased Assets (in a manner consistent with Seller’s past practices), or (ii) questions the validity of this Agreement or the other agreements to be entered into in connection herewith, or (iii) seeks to delay, prohibit or restrict in any manner any action taken or contemplated to be taken by the Seller under this Agreement or the other agreements to be entered into in connection herewith. Except as set forth in Schedule 2.9 , there is no arbitration proceeding pending or, to Seller’s knowledge, threatened or proposed in any manner under any collective bargaining agreement or other agreement or otherwise. Neither Seller nor any of the Purchased Assets are subject to any judicial or administrative judgment, order, decree or restraint.

2.10.    Real Property; Leases. Seller does not own any real property used in connection with the Purchased Assets. Schedule 2.10 attached hereto sets forth a true, correct and complete list as of the date hereof of all leases of real property to which the Seller is a party in connection with the Purchased Assets (the "Real Property Lease"). Except as set forth on Schedule 2.10 , true, correct and complete copies of the Real Property Lease, and all amendments and modifications thereof, have previously been delivered by the Seller to the Buyer. The Real Property Lease has not been modified or amended since the date of delivery to the Buyer. No party to any Real Property Lease has sent written notice to the other claiming that such other party is in default thereunder, which alleged default remains uncured.

2.11.    Tax Matters. All federal, state, local and foreign tax and information returns required to have been filed prior to the date of this Agreement by Seller have been duly filed, and each such return correctly reflects the income, franchise or other tax liability and all other information required to be reported thereon, and the Seller has paid or accrued all income, franchise and other taxes due by it as reflected on said returns. There are not pending, nor to the knowledge of Seller, threatened, any audits, examinations, investigations or other proceedings in respect of taxes or tax matters and there are not, to the knowledge of Seller, any unresolved questions or claims concerning Seller's tax liability.

2.12.    Contracts.   Schedule 2.12 contains a true and complete list of all Contracts. The Seller has made available to the Buyer a true and complete copy of each such written Contract and a true, correct and complete written description of each such oral Contract. Except as set forth as Schedule 2.12 , neither the Seller, nor, to the knowledge of the Seller, any other party, is in default under or in breach or in violation of any Contract, nor has an event occurred that (with or without notice, lapse of time, or both) would constitute a default, breach or violation by the Seller, or, to the knowledge of the Seller, by any other party, under any Contract .

2.13.    Compliance with Agreements and Laws. Except as set forth in Schedule 2.13 , Seller has complied in all material respects with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, permits, judgments, orders or decrees applicable to it, and to Seller’s knowledge there does not exist any basis for any claim of default under or violation of any such statute, law, ordinance, regulation, rule, judgment, order or decree except such defaults or violations, if any, that in the aggregate do not and will not materially and adversely affect the Purchased Assets or the operation, financial condition or prospects of the Purchased Assets.

2.14.    Environmental Matters. Except for such matters that, alone or in the aggregate, are not reasonably likely to have a material adverse effect on the Seller, to its knowledge: (i) Seller has complied with all applicable “Environmental Laws” (as defined below); (ii) Seller has not received any notice, demand, letter, claim or request for information alleging that it may be in violation of or liable under any Environmental Law; and (iii) Seller is not subject to any orders, decrees, injunctions or other arrangements with any governmental entity relating to liability under any Environmental Law or relating to Hazardous Substances.

For purposes of this Agreement, the term "Environmental Law" means any law relating to pollution (or the clean up of the environment), or the protection of air, surface water, groundwater, drinking water, land (surface or subsurface), human health, the environment or any other natural resource or the use, storage, recycling, treatment, generation, processing, handling, production or disposal of Hazardous Materials, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 USC §§9601 et seq. And 40 CFR §§302.1 et seq., and regulations thereunder; the Federal Clean Air Act, as amended, 42 USC §§7401 et seq., and regulations thereunder; the Resource Conservation and Recovery Act, 42 USC §§6901 et seq., as amended and regulations thereunder; and the Federal Water Pollution Control Act, 33 USC §§1251 et seq., as amended, and regulations thereunder.

For purposes of this Agreement, the term "Hazardous Substance" means any asbestos containing materials, mono- and polychlorinated biphenyls, urea formaldehyde products, radon, radioactive materials, any "hazardous substance", "hazardous waste", "pollutant", "toxic pollutant", "oil" or "contaminant" as used in, or defined pursuant to any Environmental Law, and any other substance, waste, pollutant, contaminant or material, including petroleum products and derivatives, the use, transport, disposal, storage, treatment, recycling, handling, discharge, release, threatened release, discharge or emission of which is regulated or governed by any Environmental Law.

2.15.    Governmental Authorizations and Regulations.   Schedule 2.15 lists all licenses, franchises, permits and other governmental authorizations held by Seller material to the use of the Purchased Assets. Such licenses, franchises, permits and other governmental authorizations are valid, and Seller has not received any notice that any governmental authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. Except as set forth on Schedule 2.15 , Seller holds all licenses, franchises, permits and other governmental authorizations, the absence of any of which could have a material adverse effect on the use of the Purchased Assets.

2.16.    Accounting Practices. The books and accounts of Seller are complete and correct, and fully and fairly reflect the assets and transactions of the Company.

2.17.    [Intentionally left blank].

2.18.    Insurance.   Schedule 2.18 contains a true and complete list of all policies of fire, liability, workers' compensation and ot