EXHIBIT 10.35 AMENDED AND RESTATED FORBEARANCE AGREEMENT

AMENDED AND RESTATED

FORBEARANCE AGREEMENT

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

BACKGROUND

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(d)   During the Forbearance Period, Capital shall maintai