EXHIBIT 10.15
PURCHASE AGREEMENT
     THIS AGREEMENT (this “Agreement”) is made as of the ___day of
December 2005, by and between Sunair Services Corporation (formerly known as
Sunair Electronics, Inc.) (the “Company”), a corporation organized under the
laws of the State of Florida, with its principal offices at 3005 SW Third
Avenue, Fort Lauderdale, Florida 33315, and the purchaser whose name and address
is set forth on the signature page hereof (the “Purchaser”). As used herein, the
term “Placement Agent” shall mean Roth Capital Partners, LLC.
     IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
     SECTION 1. Authorization of Sale of the Securities. Subject to the terms
and conditions of this Agreement, the Company has authorized, subject to the
Company obtaining Stockholder Approval (as defined herein), the issuance and
sale to the Purchaser pursuant to this Agreement, in two tranches, an Initial
Closing and a Second Closing (as such terms are defined in Sections 3.2 and 3.3,
respectively), of shares of Common Stock, par value $0.10 per share (the “Common
Stock”), of the Company, and warrants (the “Warrants”) to purchase shares of
Common Stock of the Company. The shares of Common Stock and Warrants (including
the underlying shares of Common Stock) to be issued and sold by the Company to
the Purchaser pursuant to this Agreement at the Initial Closing are referred to
herein as the “Initial Securities” and shall in no event exceed an amount equal
to 19.9% of the Company’s issued and outstanding Common Stock as of the Initial
Closing. The shares of Common Stock and Warrants (including the underlying
shares of Common Stock) to be issued and sold to the Purchaser pursuant to this
Agreement at the Second Closing are referred to herein as the “Additional
Securities”. The Initial Securities and the Additional Securities, together with
those additional shares of Common Stock issued to the Purchaser pursuant to
Section 8 hereof (the “Anti-Dilution Shares”), are referred to herein as the
“Securities”. One share of Common Stock and the accompanying one Warrant shall
also be referred to as a “Unit”.
     SECTION 2. Agreement to Sell and Purchase the Securities. At each Closing
(as defined in Section 3), the Company will issue and sell to the Purchaser, and
the Purchaser will buy from the Company, upon the terms and subject to the
conditions hereinafter set forth, the aggregate number of shares of Common Stock
and Warrants at a purchase price of $5.25 per Unit.
     SECTION 3. Delivery of the Securities at the Closings.
          3.1 Location of the Closings. The Initial Closing (as defined below)
and the Second Closing (as defined below) shall occur at the offices of
Lowenstein Sandler PC, 1251 Avenue of the Americas, New York, New York 10020.
          3.2 The Initial Closing. The completion of the purchase and sale of
the Initial Securities (the “Initial Closing”) shall occur as soon as
practicable and as agreed to by the parties hereto within, but not more than,
three (3) business days following the execution of this Agreement, or on such
later date or at such different location as the parties shall agree in writing,

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but not prior to the date that all of the conditions precedent to the Initial
Closing set forth in Section 3.5(a) below have been satisfied or waived by the
appropriate party (the “Initial Closing Date”). The Initial Closing shall occur
at a time to be agreed upon by the Company and the Placement Agent and of which
the Purchaser will be notified by facsimile transmission or otherwise.
          3.3 The Second Closing. The completion of the purchase and sale of the
Additional Securities (the “Second Closing”) shall occur as soon as practicable,
but not more than three (3) business days following the date on which all of the
conditions relevant to the Second Closing set forth in Section 3.5(b) below have
been satisfied or waived by the appropriate party but no later than 45 days
after the Initial Closing Date or such later date or at such different location
as the Company and the Purchaser shall agree in writing (the “Second Closing
Date”). The Second Closing shall occur at a time to be agreed upon by the
Company and the Placement Agent and of which the Purchaser will be notified by
facsimile transmission or otherwise.
          3.4 Actions to be Taken Prior to, and at, each Closing. (a) At the
Initial Closing, the Company shall deliver to the Purchaser one or more
certificates registered in the name of the Purchaser, or, if so indicated on the
Securities Certificate Questionnaire attached hereto as Appendix II, in such
nominee name(s) as designated by the Purchaser, representing the number of
shares of Common Stock and Warrants to be purchased by the Purchaser at the
Initial Closing, each bearing an appropriate legend referring to the fact that
the Initial Securities were sold in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the “Securities Act”)
provided by Section 4(2) thereof and Rule 506 thereunder. The name(s) in which
the certificates are to be registered are set forth in the Securities
Certificate Questionnaire attached hereto as Appendix II.
               (b) At the Second Closing, the Company shall deliver to the
Purchaser one or more certificates registered in the name of the Purchaser, or,
if so indicated on the Securities Certificate Questionnaire attached hereto as
Appendix II, in such nominee name(s) as designated by the Purchaser,
representing the number of shares of Common Stock and Warrants to be purchased
by such Purchaser at the Second Closing, each bearing an appropriate legend
referring to the fact that the Additional Securities were sold in reliance upon
the exemption from registration under the Securities Act provided by
Section 4(2) thereof and Rule 506 thereunder. The name(s) in which the
certificates are to be registered are set forth in the Securities Certificate
Questionnaire attached hereto as Appendix II.
          3.5 Conditions Precedent to each Closing. (a) The Initial Closing. The
Company’s obligation to complete the purchase and sale of the Initial Securities
and deliver certificates representing the Initial Securities to the Purchaser at
the Initial Closing shall be subject to the following conditions, any one or
more of which may be waived by the Company: (i) receipt by the Company of
same-day funds in the full amount of the purchase price for the Initial
Securities being purchased hereunder; (ii) simultaneously with, or prior to, the
Initial Closing, the Company shall have sold shares of Common Stock and Warrants
to third party purchasers, who are not acting in concert with the Purchaser, for
an aggregate minimum of $11 million, which shares of Common Stock and Warrants
shall be sold to such third party purchasers on the same terms and conditions as
are set forth herein; (iii) the sale of the Initial

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Securities shall not be prohibited by any law or governmental law or
governmental order or regulation, including the American Stock Exchange; and
(iv) the accuracy in all material respects of the representations and warranties
made by the Purchaser (as if such representations and warranties were made on
the Initial Closing Date) and the fulfillment of those undertakings of the
Purchaser to be fulfilled prior to the Initial Closing. The Purchaser’s
obligation to accept delivery of such certificates and to pay for the Initial
Securities evidenced thereby shall be subject to the following conditions, any
one or more of which may be waived by the Placement Agent after consultation
with the Purchaser: (i) the accuracy in all material respects of the
representations and warranties of the Company made herein as of the Initial
Closing Date; (ii) the delivery to the Purchaser by counsel to the Company of a
legal opinion in form and substance reasonably satisfactory to counsel to the
Placement Agent; (iii) the execution of those certain Lock-up Agreements
attached hereto as Exhibits C-1 and C-2, (iv) the fulfillment in all material
respects of those undertakings of the Company to be fulfilled prior to the
Initial Closing; and (v) simultaneously with the Initial Closing, the Company
shall have sold shares of Common Stock and Warrants to third party purchasers,
who are not acting in concert with the Purchaser, for an aggregate minimum of
$11 million, which shares of Common Stock and Warrants shall be sold to such
third party purchasers on the same terms and conditions as are set forth herein.
               (b) The Second Closing. The Company’s obligation to complete the
purchase and sale of the Additional Securities and deliver certificates
representing such securities to the Purchaser at the Second Closing shall be
subject to the following conditions, any one of which may be waived by the
Company: (i) receipt by the Company of same-day funds in the full amount of the
purchase price for the Additional Securities being purchased hereunder; (ii) the
accuracy in all material respects of the representations and warranties made by
the Purchaser (as if such representations and warranties were made on the Second
Closing Date) and the fulfillment of those undertakings of the Purchaser to be
fulfilled prior to the Second Closing; (iii) the sale of the Additional
Securities shall not be prohibited by any law or governmental law or
governmental order or regulation; (iv) the Company shall have obtained the
requisite stockholder approval via written consent (the “Stockholder Approval”)
for the issuance of the Additional Securities at the Second Closing (together
with the Initial Securities) and the Anti-Dilution Shares in a manner that
complies with Section 705 of the American Stock Exchange Company Guide and all
other relevant rules and regulations of the American Stock Exchange; and
(v) simultaneously with, or prior to, the Second Closing, the Company shall have
sold shares of Common Stock and Warrants to third party purchasers, who are not
acting in concert with the Purchaser, for an aggregate minimum of $11 million,
which shares of Common Stock and Warrants shall be sold to such third party
purchasers on the same terms and conditions as are set forth herein. The
Purchaser’s obligation to accept delivery of such certificates and to pay for
the Additional Securities evidenced thereby shall be subject to the following
conditions, any one or more of which may be waived by the Placement Agent after
consultation with the Purchaser: (i) the Company shall have scheduled the Second
Closing for a date on or prior to the 45th day following the Initial Closing
Date; (ii) each of the representations and warranties of the Company made herein
shall be accurate in all material respects as of the Second Closing Date;
(iii) the delivery to the Purchaser by counsel to the Company of a legal opinion
in a form and substance reasonably satisfactory to counsel to the Placement
Agent; (iv) the Company shall have filed with the Securities and Exchange
Commission (the “Commission”) (x) a preliminary information statement at least
11 calendar days prior to the date on which the definitive Information Statement
(as defined below) was mailed to security holders and (y) a definitive
information

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statement (the “Information Statement”) at least 20 calendar days prior to the
Second Closing Date; (v) the absence of any material adverse change affecting
the Company, its financial condition or its results of operations; (vi) the sale
of the Additional Securities shall not be prohibited by any law or governmental
order or regulation; (vii) the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to the Second Closing and
(viii) simultaneously with, or prior to, the Second Closing, the Company shall
have sold shares of Common Stock and Warrants to third party purchasers, who are
not acting in concert with the Purchaser, for an aggregate minimum of
$11 million, which shares of Common Stock and Warrants shall be sold to such
third party purchasers on the same terms and conditions as are set forth herein.
          3.6 Escrow of Purchase Price.
               3.6.1 Simultaneously with the execution and delivery of a
counterpart to this Agreement by the Purchaser, such Purchaser shall promptly
cause a wire transfer of immediately available funds (U.S. dollars) in an amount
representing such Purchaser’s “Aggregate Purchase Price”, as set forth on such
Purchaser’s signature page, to be paid to the non-interest bearing escrow
account of Lowenstein Sandler PC, the Placement Agent’s counsel (“Placement
Agent’s Counsel”), set forth on Appendix I hereto (the aggregate amounts being
held in escrow are referred to herein as the “Escrow Amount”). Placement Agent’s
Counsel shall hold the Escrow Amount in escrow until (i) Placement Agent’s
Counsel receives written instructions from the Company and the Placement Agent
authorizing the release of the Escrow Amount; (ii) Placement Agent’s Counsel
receives written instructions from the Company and/or the Purchaser that the
Agreement has been terminated in accordance with Section 21 in which case
Placement Agent’s Counsel shall return to the Purchaser the portion of the
Escrow Amount such Purchaser delivered to the Placement Agent’s Counsel; or
(iii) ninety (90) days after the date of this Agreement in which case Placement
Agent’s Counsel shall return to such Purchaser the portion of the Escrow Amount
such Purchaser delivered to the Placement Agent’s Counsel. The Company hereby
authorizes the Placement Agent’s Counsel to release from the Escrow Amount, at
the Initial Closing and the Second Closing, without further action or deed
(other than receipt of the written instructions from the Company and the
Placement Agent authorizing the release of the Escrow Amount), the (i) the cash
commission (the “Placement Fee”) to be paid to the Placement Agent pursuant to
the terms of the agreement between the Company and the Placement Agent; and
(ii) the Escrow Amount less the Placement Fee to the Company.
               3.6.2. The Company and the Purchaser acknowledge and agree for
the benefit of Placement Agent’s Counsel (which shall be deemed to be a third
party beneficiary of this Section 3.6) as follows:
                    (a) Placement Agent’s Counsel (i) is not responsible for the
performance by the Company or the Purchaser of this Agreement or the Warrant or
for determining or compelling compliance therewith; (ii) is only responsible for
(A) holding the Escrow Amount in escrow pending receipt of written instructions
from the Placement Agent and the Company directing the release of the Escrow
Amount in accordance with Section 3.6.1, (B) disbursing the Escrow Amount in
accordance with the written instructions from the Company and/or the Purchaser
in accordance with Section 3.6.1 or (C) disbursing the Escrow Amount to such
Purchaser 90 days following the date of this Agreement, each of the
responsibilities of

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Placement Agent’s Counsel in clauses (A), (B) and (C) is ministerial in nature,
and no implied duties or obligations of any kind shall be read into this
Agreement against or on the part of Placement Agent’s Counsel (collectively, the
“Placement Agent’s Counsel Duties”); (iii) shall not be obligated to take any
legal or other action hereunder which might in its judgment involve or cause it
to incur any expense or liability unless it shall have been furnished with
indemnification acceptable to it, in its sole discretion; (iv) may rely on and
shall be protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
person, and shall have no responsibility for making inquiry as to, or for
determining, the genuineness, accuracy or validity thereof, or of the authority
of the person signing or presenting the same; and (v) may consult counsel
satisfactory to it, and the opinion or advice of such counsel in any instance
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or advice of such counsel. Documents and written materials referred
to in this Section 3.6.2(a) include, without limitation, e-mail and other
electronic transmissions capable of being printed, whether or not they are in
fact printed; and any such e-mail or other electronic transmission may be deemed
and treated by Placement Agent’s Counsel as having been signed or presented by a
person if it bears, as sender, the person’s e-mail address.
                    (b) Placement Agent’s Counsel shall not be liable to anyone
for any action taken or omitted to be taken by it hereunder in connection with
its Placement Agent’s Counsel Duties, except in the case of Placement Agent’s
Counsel’s gross negligence, willful misconduct or bad faith (in each case, as
finally determined by a court of competent jurisdiction) in breach of the
Placement Agent’s Counsel Duties. IN NO EVENT SHALL THE PLACEMENT AGENT BE
LIABLE FOR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS
(INCLUDING BUT NOT LIMITED TO LOST PROFITS) WHATSOEVER, EVEN IF PLACEMENT
AGENT’S COUNSEL HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND
REGARDLESS OF THE FORM OF ACTION.
                    (c) The Company and the Purchaser hereby indemnify and hold
harmless Placement Agent’s Counsel from and against, any and all loss,
liability, cost, damage and expense, including, without limitation, reasonable
counsel fees and expenses, which Placement Agent’s Counsel may suffer or incur
by reason of any action, claim or proceeding brought against Placement Agent’s
Counsel arising out of or relating to the performance of the Placement Agent’s
Counsel Duties, unless such action, claim or proceeding is the result of the
gross negligence, willful misconduct or bad faith (in each case, as finally
determined by a court of competent jurisdiction) of Placement Agent’s Counsel.
                    (d) Placement Agent’s Counsel has acted as legal counsel to
the Placement Agent in connection with this Agreement, is merely acting as an
escrow agent under this Agreement and is, therefore, hereby authorized to
continue acting as legal counsel to the Placement Agent including, without
limitation, with regard to any dispute arising out of this Agreement, the
Warrant, the Escrow Amount or any other matter. Each of the Company and the
Purchaser hereby expressly consents to permit Placement Agent’s Counsel to
represent the

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Placement Agent in connection with all matters relating to or arising from this
Agreement, including, without limitation, with regard to any dispute arising out
of this Agreement, the Warrant, the Escrow Amount or any other matter, and
hereby waives any conflict of interest or appearance of conflict or impropriety
with respect to such representation. Each of the Company and the Purchaser has
consulted with its own counsel specifically about this Section 3.6 to the extent
they deemed necessary, and has entered into this Agreement after being satisfied
with such advice.
     SECTION 4. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Purchaser on
the date hereof, on the Initial Closing Date and on the Second Closing Date as
follows:
          4.1 Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida and the Company is qualified to do business as a foreign corporation
in each jurisdiction in which qualification is required, except where failure to
so qualify would not reasonably be expected to have a Material Adverse Effect
(as defined herein). The material subsidiaries of the Company are listed on
Exhibit A (each a “Subsidiary” and collectively, the “Subsidiaries”). Each
Subsidiary is a direct or indirect wholly owned subsidiary of the Company. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and is qualified to do business as a
foreign entity in each jurisdiction in which qualification is required, except
where failure to so qualify would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement, the term “Material Adverse
Effect” shall mean a material adverse effect upon the business, prospects,
financial condition, properties or results of operations of the Company and its
Subsidiaries, taken as a whole.
          4.2 Authorized Capital Stock. The Company has the outstanding capital
stock as most recently set forth in the Company Documents as filed with the
Commission. The issued and outstanding shares of the Company’s Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities. The Company has authorized the issuance
and sale of the Securities to the Purchasers at the Initial Closing and the
Second Closing. Except as disclosed in the Company Documents as filed with the
Commission, the Company does not have outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company’s stock,
stock bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder set forth in the Company Documents as
filed with the Commission accurately and fairly presents all material
information with respect to such plans, arrangements, options and rights. With
respect to each Subsidiary, (i) all the issued and outstanding shares of each
Subsidiary’s capital stock have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with applicable
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities,
and (ii) there are no outstanding options to purchase, or any preemptive rights
or other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or

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commitments to issue or sell, shares of any Subsidiary’s capital stock or any
such options, rights, convertible securities or obligations.
          4.3 Issuance, Sale and Delivery of the Securities.
               (a) The Securities have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all pledges, liens, restrictions and encumbrances (other than restrictions on
transfer under state and/or federal securities laws).
               (b) The Warrants have been duly authorized. Upon the exercise of
the Warrants, the Common Stock issuable upon exercise of the Warrants will be
duly authorized, validly issued, fully paid and nonassessable and free and clear
of all pledges, liens, restrictions and encumbrances (other than restrictions on
transfer under state and/or federal securities laws). The Company has reserved
sufficient number of shares of Common Stock for issuance upon the exercise of
the Warrants free and clear of all pledges, liens, restrictions and encumbrances
(other than restrictions on transfer under state and/or federal securities
laws). The Warrants shall take the form of and conform with that certain Form of
Warrant attached as Exhibit B hereto.
               (c) The Anti-Dilution Shares have been duly authorized. When
issued pursuant to Section 8 hereof, the Anti-Dilution Shares will be validly
issued, fully paid and nonassessable, and free and clear of all pledges, liens,
restrictions and encumbrances (other than restrictions on transfer under state
and/or federal securities laws). The Company has reserved sufficient number of
shares of Common Stock for issuance of the Anti-Dilution Shares in accordance
with Section 8 free and clear of all pledges, liens, restrictions and
encumbrances (other than restrictions on transfer under state and/or federal
securities laws).
               (d) No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Securities by the
Company pursuant to this Agreement. Except as disclosed the Company Documents as
filed with the Commission, no stockholder of the Company has any right (which
has not been waived or has not expired by reason of lapse of time following
notification of the Company’s intent to file the registration statement to be
filed by it pursuant to Section 7.1 (the “Registration Statement”)) to require
the Company to register the sale of any shares owned by such stockholder under
the Securities Act in the Registration Statement. Other than the Stockholder
Approval to be obtained in connection with the Additional Securities and the
Anti-Dilution Shares, no further approval or authority of the stockholders or
the Board of Directors of the Company will be required for the issuance and sale
of the Securities to be sold by the Company as contemplated herein.
          4.4 Due Execution, Delivery and Performance of this Agreement. The
Company has full legal right, corporate power and authority to enter into this
Agreement and to perform the transactions contemplated hereby, subject in the
case of the issuance, sale and delivery of the Additional Securities and the
Anti-Dilution Shares to obtaining Stockholder Approval. This Agreement has been
duly authorized, executed and delivered by the Company. The execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions herein contemplated will not violate any provision of the
certificate of incorporation or bylaws of the Company or any of its Subsidiaries
and will not

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result in the creation of any lien, charge, security interest or encumbrance
upon any assets of the Company or any of its Subsidiaries pursuant to the terms
or provisions of, and will not (i) conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage of
time or both, a default under (A) any agreement, lease, franchise, license,
permit or other instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties may be bound or affected and in each case which would have
a Material Adverse Effect, or (B) to the Company’s knowledge, any statute or any
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its Subsidiaries or any of their respective properties where such
conflict, breach, violation or default is likely to result in a Material Adverse
Effect. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with the blue
sky laws and federal securities laws applicable to the offering of the
Securities to the Purchaser. Upon the execution and delivery of this Agreement,
and assuming the valid execution thereof by the Purchaser, this Agreement will
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Company in Section 7.3
hereof may be limited by federal or state securities laws or the public policy
underlying such laws.
          4.5 Accountant. The firm of Berenfeld Spritzer Schechter & Sheer,
which has expressed its opinion with respect to the consolidated financial
statements to be included or incorporated by reference in the Registration
Statement and the prospectus which forms a part thereof (the “Prospectus”), is
an independent accountant as required by the Securities Act and the rules and
regulations promulgated thereunder (the “Rules and Regulations”).
          4.6 No Defaults. Neither the Company nor any of its Subsidiaries is in
violation or default of any provision of its certificate of incorporation or
bylaws, or in breach of or default with respect to any provision of any
agreement, judgment, decree, order, lease, franchise, license, permit or other
instrument to which it is a party or by which it or any of its properties are
bound which could reasonably be expected to have a Material Adverse Effect and
there does not exist any state of facts which, with notice or lapse of time or
both, would constitute an event of default on the part of the Company or any of
its Subsidiaries as defined in such documents and which would have a Material
Adverse Effect.
          4.7 Contracts. All of the Company’s material contracts have been filed
with the Commission. All of such contracts are in full force and effect on the
date hereof; and neither the Company nor any of its Subsidiaries is, nor, to the
Company’s knowledge, is any other party in breach of or default under any of
such contracts which would have a Material Adverse Effect.
          4.8 No Actions. Except as disclosed in the Company Documents as filed
with the Commission, (1) there are no legal or governmental actions, suits or
proceedings pending and

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(2) to the Company’s knowledge, there are no inquiries or investigations, nor
are there any legal or governmental actions, suits, or proceedings threatened to
which the Company or any of its Subsidiaries is or may be a party or of which
property owned or leased by the Company or any of its Subsidiaries is or may be
the subject, or related to environmental or discrimination matters, which
actions, suits or proceedings, individually or in the aggregate, might
reasonably be expected to have a Material Adverse Effect; and no labor
disturbance by the employees of the Company or any of its Subsidiaries exists
or, to the Company’s knowledge, is imminent which might reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is party to or subject to the provisions of any injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body which might reasonably be expected to have a Material
Adverse Effect.
          4.9 Properties. The Company and the Subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements included in the Company Documents as filed with the
Commission, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such financial statements, or
(ii) those which are not material in amount and do not adversely affect the use
of such property by the Company and its Subsidiaries. Each of the Company and
its Subsidiaries holds its leased properties under valid and binding leases,
with such exceptions as are not materially significant in relation to its
business taken as a whole.
          4.10 No Material Change. Except as disclosed in the Company Documents
as filed with the Commission, since March 31, 2005 (i) the Company and its
Subsidiaries have not incurred any material liabilities or obligations,
indirect, or contingent, or entered into any material oral or written agreement
or other transaction which is not in the ordinary course of business or which
could reasonably be expected to result in a material reduction in the future
earnings of the Company and its Subsidiaries; (ii) the Company and its
Subsidiaries have not sustained any material loss or interference with their
businesses or properties from fire, flood, windstorm, accident or other calamity
not covered by insurance; (iii) the Company and its Subsidiaries have not paid
or declared any dividends or other distributions with respect to their capital
stock and neither the Company nor any of its Subsidiaries is in default in the
payment of principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock of the Company or any of its
Subsidiaries other than the sale of the Securities hereunder, shares or options
issued pursuant to employee equity incentive plans or purchase plans approved by
the Company’s Board of Directors and repurchases of shares or options pursuant
to repurchase plans already approved by the Company’s Board of Directors, or
indebtedness not incurred in the ordinary course of business that is material to
the Company and its Subsidiaries, taken as a whole; and (v) there has not been
any other event which has caused a Material Adverse Effect.
          4.11 Intellectual Property. Each of the Company and its Subsidiaries
owns or has obtained valid and enforceable licenses or options for the
inventions, patent applications, patents, trademarks (both registered and
unregistered), trade names, copyrights and trade secrets necessary for the
conduct of the its business as currently conducted (collectively, the
“Intellectual Property”). There are no third parties who have any ownership
rights to any Intellectual Property that is owned by, or has been licensed to,
the Company or its Subsidiaries for the products described in the Company
Documents as filed with the Commission that would

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preclude the Company or its Subsidiaries from conducting its business as
currently conducted and have a Material Adverse Effect, except for the ownership
rights of the owners of the Intellectual Property licensed or optioned by the
Company or its Subsidiaries. To the Company’s knowledge, there are currently no
sales of any products that would constitute an infringement by third parties of
any Intellectual Property owned, licensed or optioned by the Company or its
Subsidiaries, which infringement would have a Material Adverse Effect. There is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the rights of the Company or its Subsidiaries in
or to any Intellectual Property owned, licensed or optioned by the Company or
its Subsidiaries, other than claims which would not reasonably be expected to
have a Material Adverse Effect. There is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Intellectual Property owned, licensed or optioned
by the Company or its Subsidiaries, other than non-material actions, suits,
proceedings and claims. There is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the Company any of
its Subsidiaries infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary right of others, other than
non-material actions, suits, proceedings and claims.
          4.12 Compliance. Neither the Company nor any of its Subsidiaries has
been advised, nor has reason to believe, that it is not conducting its business
in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting its business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not have a
Material Adverse Effect.
          4.13 Taxes. Each of the Company and its Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and neither the Company nor any
of its Subsidiaries has knowledge of a tax deficiency which has been or might be
asserted or threatened against it which might reasonably be expected to have a
Material Adverse Effect.
          4.14 Transfer Taxes. On each Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Securities to be sold to the Purchaser hereunder
will be, or will have been, fully paid or provided for by the Company and all
laws imposing such taxes will be or will have been complied with.
          4.15 Investment Company. The Company is not an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
          4.16 Offering Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Securities to the Purchaser other than the Company
Documents. Neither the Company nor any person acting on its behalf has in the
past or will hereafter take any action independent of the Placement Agent to
sell, offer for sale or solicit offers to buy any securities of the Company
which would subject the offer, issuance or sale of the Securities to the
Purchaser, as

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contemplated by this Agreement, to the registration requirements of Section 5 of
the Securities Act.
          4.17 Insurance. The Company and its Subsidiaries maintain insurance of
the types and in the amounts that the Company reasonably believes is adequate
for their businesses, including, but not limited to, insurance covering all real
and personal property leased by the Company and its Subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against by similarly situated companies, all of which insurance is in full force
and effect.
          4.18 Additional Information. The information contained in (a) through
(h) below (the “Company Documents”) did not, as of the date of the applicable
document, include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, as of their respective filing dates or, if amended, as so amended:
               (a) the Company’s Annual Report on Form 10-KSB for the fiscal
year ended September 30, 2004;
               (b) the Company’s Quarterly Report on Form 10-QSB for the quarter
ended December 31, 2004;
               (c) the Company’s Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2005;
               (d) the Company’s Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2005;
               (e) the Company’s Current Reports on Form 8-K filed on May 20,
2005; June 10, 2005; August 19, 2005; August 25, 2005; September 9, 2005; and
November 30, 2005;
               (f) the Company’s Proxy Statement for the Annual Meeting of
Stockholders held on February 4, 2005;
               (g) the Company’s Definitive Information Statement filed on
November 11, 2005; and
               (h) all other documents, if any, filed by the Company with the
Commission since September 30, 2004 pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
          4.19 Price of Common Stock. The Company has not taken, and will not
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of the Common Stock to
facilitate the sale or resale of the Securities.

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          4.20 Corporate Legal Opinion. As a condition to the Purchaser’s
obligation to purchase the Securities, legal counsel to the Company will deliver
one or more legal opinions to the Purchaser in a form reasonably satisfactory to
counsel to the Placement Agent. Such opinions also shall state that the
Placement Agent may rely thereon as though the opinions were addressed directly
to such Placement Agent.
          4.21 Certificate. At each Closing, the Company will deliver to the
Purchaser a certificate executed by the chief executive officer and the chief
financial or accounting officer of the Company, dated as of the applicable
Closing Date, in form and substance reasonably satisfactory to the Purchaser, to
the effect that the representations and warranties of the Company set forth in
this Section 4 are true and correct as of the date of this Agreement and as of
such Closing Date and that the Company has complied with all the agreements and
satisfied all the conditions herein on its part to be performed or satisfied on
or prior to such Closing Date.
          4.22 Reporting Company; Form S-3. The Company is subject to the
reporting requirements of the Exchange Act. The Company is eligible to register
the Securities for resale by the Purchaser on a registration statement on Form
S-3 under the Securities Act. There exist no facts or circumstances (including
without limitation any required approvals or waivers or any circumstances that
may delay or prevent the obtaining of accountant’s consents) that reasonably
could be expected to prohibit or delay the preparation and filing of a
registration statement on Form S-3 that will be available for the resale of the
Securities by the Purchaser.
          4.23 Use of Proceeds. The Company expects to use the proceeds from the
sale of Securities for working capital and general corporate purposes, as well
as in connection with selected acquisitions that may be considered in the future
in the lawn and pest control business. Pending such uses, the Company intends to
invest the net proceeds in short-term, interest-bearing, investment grade
securities.
          4.24 Approvals. Prior to the Initial Closing, the Company shall obtain
approval of the American Stock Exchange for the transactions contemplated by
this Agreement. Prior to the Second Closing, the Company shall obtain the
Stockholder Approval and shall obtain the approval of the American Stock
Exchange for the transactions contemplated by this Agreement. For clarification
purposes only and without implication to the contrary, the transactions
contemplated by this Agreement include only the transaction between the Company
and the Purchaser and do not include any other transaction between the Company
and any other third party purchaser of the Company’s securities.
          4.25 Non-Public Information. Neither the Company nor, to the Company’s
knowledge, any person acting on behalf of the Company, has provided the
Purchaser with any information that the Company believes constitutes material,
non-public information. On or before 9:00 a.m. New York City time on the first
business day after the execution of this Agreement, the Company shall issue a
press release announcing the execution of this Agreement, and on or before 5:30
p.m. New York City time on the fourth business day after the execution of this
Agreement, the Company shall file a Current Report on Form 8-K describing the
material terms of the transactions contemplated by this Agreement and attaching
as an exhibit to such Form 8-K a copy of the press release and this Agreement
(including such exhibit, the “8-K Filing”). On or before 9:00 a.m. New York City
time, on the first business day after each

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Closing, the Company shall issue a press release announcing the consummation of
the transactions contemplated by this Agreement at such Closing, and on or
before 5:30 p.m. New York City time on the fourth business day after each
Closing, the Company shall file a Current Report on Form 8-K attaching such
press release. The Company shall not, and shall cause each of its officers,
directors, employees, and use its best efforts to cause its agents, not to,
provide the Purchaser with any material nonpublic information regarding the
Company from and after the filing of the 8-K Filing without the express written
consent of the Purchaser. The Company understands and confirms that the
Purchaser will rely on the representations and covenants set forth in this
section in effecting transactions in securities of the Company.
          4.26 Use of Purchaser Name. Except as may be required by applicable
law or regulation, the Company shall not use the Purchaser’s name or the name of
any of its affiliates in any advertisement, announcement, press release or other
similar public communication unless it has received the prior written consent of
the Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.
          4.27 Related Party Transactions. No transaction has occurred between
or among the Company, any of the Subsidiaries and their affiliates, officers or
directors or any affiliate or affiliates of any such officer or director that is
required to have been described under applicable securities laws in the
Company’s Exchange Act filings and is not so described in such filings.
          4.28 Off-Balance Sheet Arrangements. There is no transaction,
arrangement or other relationship between the Company and an unconsolidated or
other off-balance sheet entity that is required to be disclosed by the Company
in the Company’s Exchange Act filings and is not so disclosed or that otherwise
would be reasonably likely to have a Material Adverse Effect. There are no such
transactions, arrangements or other relationships with the Company that may
create contingencies or liabilities that are not otherwise disclosed by the
Company in the Company’s Exchange Act filings.
          4.29 Governmental Permits, Etc. Each of the Company and its
Subsidiaries has all franchises, licenses, certificates and other authorizations
from such federal, state or local government or governmental agency, department
or body that are currently required for the operation of the business of the
Company and its Subsidiaries as currently conducted, except where the failure to
possess currently such franchises, licenses, certificates and other
authorizations is not reasonably expected to have a Material Adverse Effect. The
Company and its Subsidiaries have not received any notice of proceedings
relating to the revocation or modification of any such permit which, if the
subject of an unfavorable decision, ruling or finding, could reasonably be
expected to have a Material Adverse Effect.

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          4.30 Financial Statements. The consolidated financial statements of
the Company and the related notes contained in the Company’s last quarterly
report on Form 10-QSB present fairly, in accordance with generally accepted
accounting principles, the consolidated financial position of the Company and
its Subsidiaries as of the dates indicated, and the results of their operations,
cash flows and the changes in stockholders’ equity for the periods therein
specified, subject, in the case of unaudited financial statements for interim
periods, to normal year-end audit adjustments. Such consolidated financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except that unaudited financial
statements may not contain all footnotes required by generally accepted
accounting principles.
          4.31 Intentionally deleted.
          4.32 Sarbanes-Oxley Act. The Company is, and at each Closing Date will
be, in compliance in all material respects with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it. The Company maintains a
system of internal accounting controls that the Company reasonably believes are
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorization; and
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets.
          4.33 Listing. The Company has not, in the two years preceding the date
hereof, received any notice (written or oral) from the American Stock Exchange,
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 shall comply with all
requirements of the American Stock Exchange with respect to the issuance of the
Securities and shall use its best efforts to have the Securities listed on the
American Stock Exchange prior to applicable Closing Date.
          4.34 Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor, to the knowledge of the Company, any director, officer,
agent, employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
          4.35 Employee Relations. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. No executive officer of the Company (as defined in Rule
501(f) of the Securities Act) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer’s employment with the
Company. No executive officer of the Company, to the knowledge of the

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Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.
          4.36 ERISA. The Company is in compliance, in all material respects,
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”); no “reportable event” (as defined in
ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title (IV) of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
4917 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the “Code”); and each “pension plan”
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which, in each
case, would cause the loss of such qualification, except as would not reasonably
be expected to have a Material Adverse Effect.
          4.37 Environmental Matters. There has been no storage, disposal,
generation, manufacture, transportation, handling or treatment of toxic wastes,
hazardous wastes or hazardous substances by the Company or to its knowledge, any
of its Subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or previously
owned or leased by the Company or any of its Subsidiaries in violation of any
applicable law, ordinance, rule, regulation, order, judgment, decree or permit
or which would require remedial action under any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit; there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind into such property or into the environment surrounding such property of any
toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or any of its Subsidiaries or with
respect to which the Company or any of its Subsidiaries have knowledge; the
terms “hazardous wastes”, “toxic wastes”, “hazardous substances”, and “medical
wastes” shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.
          4.38 Removal of Legend. The legend set forth in Section 5(f) shall be
removed from the certificates evidencing the Securities (i) following any sale
of such Securities pursuant to Rule 144 or at the written request of a Purchaser
after the Registration Statement has been declared effective, (ii) if such
Securities are eligible for sale under Rule 144(k) (and the holder of such
Securities has submitted a written request for removal of the legend indicating
that the holder has complied with the applicable provisions of Rule 144 or such
judicial interpretation or pronouncement), or (iii) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission) and
the holder of such Securities has submitted a written request for removal of the
legend indicating that such legend is not required under applicable requirements
of the Securities Act (including such judicial interpretations and
pronouncements issued by the Staff of the

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Commission). The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly upon the occurrence of any of the events in
clauses (i), (ii) or (iii) above to effect the removal of the legend on
certificates evidencing the Securities and shall also cause its counsel to issue
a “blanket” legal opinion to the Company’s transfer agent promptly after the
effective date of any registration statement covering the resale of the
Securities, if required by the Company’s transfer agent, to allow sales without
restriction pursuant to an effective registration statement. The Company agrees
that at such time as such legend is no longer required under this Section 4.38,
it will, no later than five (5) business days (or three (3) business days in the
event the Purchaser needs to deliver unlegended certificates in connection with
settlement of a sale of Securities and such Purchaser has communicated such
settlement date in writing to the Company) following the delivery by the
Purchaser to the Company or the Company’s transfer agent of a certificate
representing the Securities issued with a restrictive legend, deliver or cause
to be delivered to such Purchaser a certificate representing such Securities
that is free from all restrictive and other legends; provided that in the case
of removal of the legend for reasons set forth in clause (ii) above, the holder
of such Securities has submitted a written request for removal of the legend
indicating that the holder has complied with the applicable provisions of
Rule 144. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section 4.38.
     SECTION 5. Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to, and covenants with, the Company
that: (i) the Purchaser is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares representing an investment decision like that involved in the purchase of
the Securities, including investments in securities issued by the Company and
comparable entities, and has had the opportunity to request, receive, review and
consider all information it deems relevant in making an informed decision to
purchase the Securities; (ii) the Purchaser is acquiring the number of
Securities set forth on the signature page hereto in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Securities or any arrangement or
understanding with any other persons regarding the distribution of any of the
Securities (this representation and warranty notwithstanding, such Purchaser
does not agree to hold any of the Securities for any minimum or other specific
term and this representation and warranty does not limit the Purchaser’s right
to sell pursuant to the Registration Statement or in compliance with the
Securities Act and the Rules and Regulations, or, other than with respect to any
claims arising out of a breach of this representation and warranty, the
Purchaser’s right to indemnification under Section 7.3); (iii) the Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the Securities except in compliance with the Securities Act
and the Rules and Regulations and any applicable state securities laws, nor has
the Purchaser, during the last thirty (30) days prior to the date of this
Agreement, directly or indirectly, effected or agreed to effect any transactions
in the securities of the Company, including any short sale, whether or not
against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the Exchange Act) with respect to the Common Stock, granted
any other right (including, without limitation, any put or call option) with
respect to the Common Stock or with respect to any security that includes,
relates to or derived any significant part of its value from the Common Stock or
otherwise sought to hedge its position in the Securities (each, a “Prohibited
Transaction”), and such Purchaser shall not

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engage, directly or indirectly, in a Prohibited Transaction during the period
from the date of this Agreement until such time as (A) the transactions
contemplated by this Agreement are first publicly announced or (B) this
Agreement is terminated pursuant to Section 21 hereof; (iv) the Purchaser has
completed or caused to be completed the Registration Statement Questionnaire
attached hereto as part of Appendix II, for use in preparation of the
Registration Statement, and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the effective date of the
Registration Statement and the Purchaser will notify the Company immediately of
any material change in any such information provided in the Registration
Statement Questionnaire until such time as the Purchaser has sold all of the
Securities or until the Company is no longer required to keep the Registration
Statement effective; (v) the Purchaser has, in connection with its decision to
purchase the number of shares of Common Stock and Warrants set forth on the
signature page hereto, relied solely upon the Company Documents as filed with
the Commission and the documents included therein or incorporated by reference
and the representations and warranties of the Company contained herein; (vi) the
Purchaser has had an opportunity to discuss this investment with representatives
of the Company and ask questions of them; (vii) the Purchaser is an “accredited
investor” within the meaning of Rule 501(a) of Regulation D promulgated under
the Securities Act ; and (viii) the Purchaser agrees to notify the Company
immediately of any change in any of the foregoing information until such time as
the Purchaser has sold all of the Securities or the Company is no longer
required to keep the Registration Statement effective.
               (b) The Purchaser understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of the Securities Act, the Rules and Regulations and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.
               (c) For the benefit of the Company, the Purchaser previously
agreed orally with the Placement Agent to keep confidential all information
concerning the private placement of the Securities to the Purchaser. The
Purchaser understands that the existence and nature of all conversations and
presentations, if any, regarding the Company and this offering must be kept
strictly confidential. The Purchaser understands that the federal securities
laws impose restrictions on trading based on information regarding the offering
of the Securities to the Purchaser. In addition, the Purchaser hereby
acknowledges that unauthorized disclosure of information regarding the offering
of the Securities to the Purchaser may result in a violation of Regulation FD.
This obligation will terminate upon submission by the Company of the 8-K Filing.
In addition to the above, the Purchaser shall maintain in confidence the receipt
and content of any notice of a Suspension (as defined in Section 5(h) below).
The foregoing agreements shall not apply to any information that is or becomes
publicly available through no fault of the Purchaser, or that the Purchaser is
legally required to disclose; provided, however, that if the Purchaser is
requested or ordered to disclose any such information pursuant to any court or
other government order or any other applicable legal procedure, it shall provide
the Company with prompt notice of any such request or order in time sufficient
to enable the Company to seek (at its own expense) an appropriate protective
order.

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               (d) The Purchaser understands that its investment in the
Securities involves a significant degree of risk, including a risk of total loss
of the Purchaser’s investment, and the Purchaser has full cognizance of and
understands all of the risk factors related to the Purchaser’s purchase of the
Securities. The Purchaser understands that the market price of the Common Stock
can be volatile and that no representation is being made as to the future value
of the Common Stock. The Purchaser has the knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Securities and has the ability to bear the economic risks of
an investment in the Securities.
               (e) The Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.
               (f) The Purchaser understands that, until such time as the
Registration Statement has been declared effective or the Securities may be sold
pursuant to Rule 144 under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
the Securities will bear a restrictive legend in substantially the following
form:
“The Securities evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”), or the securities
laws of any state or other jurisdiction. The Securities may not be offered,
sold, pledged or otherwise transferred except (1) pursuant to an exemption from
registration under the Securities Act or (2) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
all applicable securities laws of the states and other jurisdictions, and in the
case of a transaction exempt from registration, unless the Company has received
an opinion of counsel reasonably satisfactory to it that such transaction does
not require registration under the Securities Act and such other applicable
laws.”
               (g) The Purchaser’s principal executive offices are in the
jurisdiction set forth immediately below the Purchaser’s name on the signature
pages hereto.
               (h) The Purchaser hereby covenants with the Company not to make
any sale of the Securities under the Registration Statement without complying
with the provisions of this Agreement and without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied to the
extent applicable, and the Purchaser acknowledges and agrees that the Securities
are not transferable on the books of the Company in connection with any sale
under the Registration Statement unless the certificate submitted to the
transfer agent evidencing the Securities is accompanied by a separate
Purchaser’s Certificate of Subsequent Sale delivered by the Purchaser: (i) in
the form of Appendix III hereto, (ii) executed by an officer of, or other
authorized person designated by, the Purchaser, and (iii) to the effect that
(A) the Securities have been sold in accordance with the Registration Statement,
the Securities Act and any applicable state securities or blue sky laws and
(B) the requirement of

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delivering a current prospectus has been satisfied, to the extent applicable.
Purchaser will notify the Company promptly after the sale of all of the
Securities. Purchaser acknowledges that there may occasionally be times when the
Company, in the good faith determination of its Board of Directors, but if not
practical under the circumstances in the good faith determination of the
Company’s executive officers, must suspend the use of the Prospectus forming a
part of the Registration Statement (a “Suspension”) until such time as an
amendment to the Registration Statement has been filed by the Company and
declared effective by the Commission, or until such time as the Company has
filed an appropriate report with the Commission pursuant to the Exchange Act.
The Purchaser hereby covenants that it will not sell any of the Securities
pursuant to said Prospectus during the period commencing at the time at which
the Company gives the Purchaser written notice of the Suspension of the use of
said Prospectus and ending at the time the Company gives the Purchaser written
notice that the Purchaser may thereafter effect sales pursuant to said
Prospectus. Notwithstanding the foregoing, the Company agrees that no Suspension
shall be for a period of longer than 60 consecutive days, and no Suspension
shall be for a period of an aggregate in any 365-day period of longer than
90 days.
               (i) The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, (ii) the making and
performance of this Agreement by the Purchaser and the consummation of the
transactions herein contemplated will not violate any provision of the
organizational documents of the Purchaser or conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any material agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party, or any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Purchaser, (iii) no consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, (iv) upon the execution and
delivery of this Agreement, this Agreement shall constitute a legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except to the extent enforcement of the
indemnification provisions, set forth in Section 7.3 of this Agreement, may be
limited by federal or state securities laws or the public policy underlying such
laws, and (v) there is not in effect any order enjoining or restraining the
Purchaser from entering into or engaging in any of the transactions contemplated
by this Agreement.
     SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the
Securities delivered pursuant hereto shall survive

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the execution of this Agreement, the delivery to the Purchaser of the Securities
being purchased and the payment therefore.
     SECTION 7. Registration of the Securities; Compliance with the Securities
Act.
          7.1 Registration Procedures and Expenses. The Company shall:
               (a) as soon as reasonably practicable, but in no event later than
five (5) days following the Second Closing Date, or if the Second Closing shall
not have taken place, within 45 days after the Initial Closing Date, then in no
event later than 45 days after the Initial Closing Date (such date, “Filing
Date”), prepare and file with the Commission the Registration Statement on Form
S-3 relating to the sale of the Securities by the Purchaser, as well as any
shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization or other similar event with respect to the
Securities (such shares together with the Securities are collectively referred
to as, the “Shares”) from time to time on the American Stock Exchange, or the
facilities of any national securities exchange on which the Common Stock is then
traded or in privately-negotiated transactions (the parties acknowledge that the
Company may choose to include the Shares on a registration statement with other
similar securities issued by the Company);
               (b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause the Commission to declare the
Registration Statement effective within 45 days after the Filing Date (such
date, the “Required Effective Date”). However, so long as the Company filed the
Registration Statement by the Filing Date, if the Registration Statement
receives Commission review, then the Required Effective Date will be the
seventy-fifth (75th) calendar day after the Filing Date;
               (c) use its best efforts to promptly prepare and file with the
Commission such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statement effective until the earliest of (i) two years after the
effective date of the Registration Statement, or (ii) such time as the Shares
become eligible for resale by non-affiliates pursuant to Rule 144(k) under the
Securities Act of 1933, as amended;
               (d) promptly furnish to the Purchaser with respect to the Shares
registered under the Registration Statement (and to each underwriter, if any, of
such Shares) such number of copies of prospectuses and such other documents as
the Purchaser may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Shares by the Purchaser;
               (e) file documents required of the Company for normal Blue Sky
clearance in states specified in writing by the Purchaser; provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
               (f) bear all expenses in connection with the procedures in
paragraphs (a) through (e) of this Section 7.1 and the registration of the
Shares pursuant to the Registration

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Statement, other than fees and expenses, if any, of counsel or other advisers to
the Purchaser or underwriting discounts, brokerage fees and commissions incurred
by the Purchaser, if any;
               (g) file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to the Purchaser promptly after
filing;
               (h) issue a press release describing the transactions
contemplated by this Agreement on each of the Closing Dates;
               (i) make available, while the Registration Statement is effective
and available for resale, its Chief Executive Officer, Chief Financial Officer,
and Chief Administrative Officer for questions regarding information which the
Purchaser may reasonably request in order to fulfill any due diligence
obligation on its part; and
               (j) promptly provide to the Purchaser notice of (i) effectiveness
of the Registration Statement, (ii) any Suspension, or (iii) the issuance of any
stop order with respect to the Registration Statement.
     The Company understands that the Purchaser disclaims being an underwriter,
but the Purchaser being deemed an underwriter shall not relieve the Company of
any obligations it has hereunder. A questionnaire related to the Registration
Statement to be completed by the Purchaser is attached hereto as Appendix II.
          7.2 Transfer of Securities After Registration. The Purchaser agrees
that it will not effect any disposition of the Securities or its right to
purchase the Securities that would constitute a sale within the meaning of the
Securities Act or any applicable state securities laws, except as contemplated
in the Registration Statement referred to in Section 7.1 or as otherwise
permitted by law, and that it will promptly notify the Company of any changes in
the information set forth in the Registration Statement regarding the Purchaser
or its plan of distribution. Notwithstanding anything contained in this
Agreement to the contrary, it is expressly understood and agreed that (i) the
number of Shares set forth in the Registration Statement shall decrease by
virtue of sales of the Shares by the Purchaser, (ii) the Purchaser shall have no
obligation to inform the Company of such sales or any changes to the number of
Shares set forth in the Registration Statement, the Prospectus or any supplement
or update to either of them and (iii) the Purchaser shall have no liability
whatsoever for failing to inform the Company of any such sales or changes to the
number of Shares set forth in the Registration Statement, the Prospectus or any
supplement or update to either of them; provided, however, that if the Company
notifies the Purchaser of its intent to amend the Registration Statement, and
the Company shall request from the Purchaser in such notice an update to the
information in the Registration Statement, the Purchaser shall provide to the
Company any changes to the information set forth in the Registration Statement.
          7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term “Purchaser/Affiliate” shall mean any affiliate of the Purchaser,
including a transferee who is an affiliate of the Purchaser, and any person who
controls the Purchaser or any

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affiliate of the Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act; and
(ii) the term “Registration Statement” shall include any preliminary prospectus,
final prospectus, exhibit, supplement or amendment included in or relating to,
and any document incorporated by reference in, the Registration Statement
referred to in Section 7.1.
               (a) The Company agrees to indemnify and hold harmless the
Purchaser and each Purchaser/Affiliate against any losses, claims, damages,
liabilities or expenses, joint or several, to which the Purchaser or any
Purchaser/Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the prior written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the Prospectus, financial statements and schedules, and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the Prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) filing is required, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state in any
of them a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they were
made, not misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations or warranties of the Company contained in this
Agreement, or any failure of the Company to perform its obligations hereunder or
under law, and will promptly reimburse the Purchaser and each
Purchaser/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by the Purchaser or any Purchaser/Affiliate in connection
with investigating, defending or preparing to defend, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the extent, but
only to the extent, that any such loss, claim, damage, liability or expense
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Purchaser expressly for use therein, or (ii) the failure of the Purchaser to
comply with the covenants and agreements contained in Sections 5 or 7.2, or
(iii) the inaccuracy of any representation or warranty made by the Purchaser
herein or (iv) any statement or omission in any Prospectus that is corrected in
any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by the Purchaser.
               (b) The Purchaser will severally indemnify and hold harmless the
Company, each of its directors, each of its executive officers, including such
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the

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meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act in
an amount not to exceed in the aggregate for all indemnification obligations
arising pursuant to Section 7.3(b) the net proceeds received by the Purchaser
from sales of Shares under the Registration Statement, against any losses,
claims, damages, liabilities or expenses to which the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure of the
Purchaser to comply with its covenants and agreements contained in Sections 5 or
7.2 hereof, or (ii) any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the Purchaser expressly for use therein, and will reimburse the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person for any legal and other expense reasonably
incurred by the Company, each of its directors, each of its officers who signed
the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action.
               (c) Promptly after receipt by an indemnified party under this
Section 7.3 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 7.3, promptly notify the indemnifying
party in writing thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise under the indemnity agreement contained in
this Section 7.3 to the extent it is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded, based on an opinion of
counsel reasonably satisfactory to the indemnifying party, that there may be a
conflict of interest between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there may
be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election to assume
the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such

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indemnified party under this Section 7.3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
reasonably satisfactory to such indemnifying party, representing all of the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of commencement of action, in each of which cases the reasonable fees and
expenses of counsel shall be at the expense of the indemnifying party. In no
event shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved in
writing the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnification could have been sought hereunder by such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
               (d) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the private placement of the
Securities to the Purchaser hereunder or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but the relative fault of the Company and the Purchaser in connection
with the statements or omissions or inaccuracies in the representations and
warranties in this Agreement and/or the Registration Statement which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations; provided, however, that the Purchaser shall
only be required to contribute an amount up to the net proceeds received by the
Purchaser from sales of the Shares under the Registration Statement. The
respective relative benefits received by the Company on the one hand and the
Purchaser on the other shall be deemed to be in the same proportion as the
amount paid by the Purchaser to the Company pursuant to this Agreement for the
Shares purchased by the Purchaser that were sold pursuant to the Registration
Statement bears to the difference (the “Difference”) between the amount the
Purchaser paid for the Shares that were sold pursuant to the Registration
Statement and the amount received by the Purchaser from such sale. The relative
fault of the Company, on the one hand, and the Purchaser on the other shall be
determined by reference to, among other things, whether the untrue or alleged
statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate representation and/or
warranty relates to information supplied by the Company or by the Purchaser and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in paragraph (c)

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of this Section 7.3, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The provisions set forth in paragraph (c) of this Section 7.3 with respect to
the notice of the threat or commencement of any threat or action shall apply if
a claim for contribution is to be made under this paragraph (d); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and the Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7.3 were determined
solely by pro rata allocation (even if the Purchaser were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 7.3, the Purchaser shall not be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that the Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchaser’s obligation to contribute pursuant to this
Section 7.3 is several and not joint.
          7.4 Termination of Conditions and Obligations. The restrictions
imposed by Section 5 or this Section 7 upon the transferability of the
Securities shall cease and terminate as to any particular number of the
Securities upon the passage of two years from the effective date of the
Registration Statement covering the Securities or at such time as an opinion of
counsel satisfactory in form and substance to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.
          7.5 Information Available. So long as the Registration Statement is
effective covering the resale of the Shares owned by the Purchaser, the Company
will furnish to the Purchaser:
               (a) as soon as practicable after available (but in the case of
the Annual Report to the Stockholders, within 150 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report to Stockholders
(which Annual Report shall contain financial statements audited in accordance
with generally accepted accounting principles by a national firm of certified
public accountants), (ii) if not included in substance in the Annual Report to
Stockholders, upon the request of Purchaser, its Annual Report on Form 10-K,
(iii) upon request of Purchaser, its quarterly reports on Form 10-Q, and (iv) a
full copy of the particular Registration Statement covering the Shares (the
foregoing, in each case, excluding exhibits);
               (b) upon the reasonable request of the Purchaser, a reasonable
number of copies of the Prospectuses, and any supplements thereto, to supply to
any other party requiring such Prospectuses; and
               (c) the Company, upon the reasonable request of the Purchaser and
with prior notice, will be available to the Purchaser or a representative
thereof at the Company’s headquarters to discuss information relevant for
disclosure in the Registration Statement covering the Shares and will otherwise
cooperate with the Purchaser conducting an investigation for the purpose of
reducing or eliminating the Purchaser’s exposure to liability under the

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Securities Act, including the reasonable production of information at the
Company’s headquarters, subject to appropriate confidentiality limitations.
          7.6 Delay in Filing or Effectiveness of Registration Statement. If
(i) the Registration Statement is not filed by the Company with the Commission
on or prior to the Filing Date, then for each day following the Filing Date,
until but excluding the date the Registration Statement is filed, or (ii) the
Registration Statement is not declared effective by the Commission by the
Required Effective Date, then for each day following the Required Effective
Date, until but excluding the date the Commission declares the Registration
Statement effective, in each case, the Company shall, for each such day, pay the
Purchaser with respect to any such failure, as partial damages and not as a
penalty, an amount equal to 0.0667% of the purchase price paid by the Purchaser
for the Securities pursuant to this Agreement; and for any such day, such
payment shall be made no later than the first business day of the calendar month
next succeeding the month in which such day occurs. If the Purchaser shall be
prohibited from selling any of the Shares under the Registration Statement as a
result of a Suspension of more than thirty (30) days or Suspensions on more than
two (2) occasions of not more than thirty (30) days each in any 12-month period,
then for each day on which a Suspension is in effect that exceeds the maximum
allowed period above for a Suspension or Suspensions, but not including any day
on which a Suspension is lifted, the Company shall pay the Purchaser, as partial
damages and not as a penalty, an amount equal to 0.0667% of the purchase price
paid by the Purchaser for the Securities purchased pursuant to this Agreement
for each such day, and such payment shall be made no later than the first
business day of the calendar month next succeeding the month in which such day
occurs. For purposes of this Section 7.6, a Suspension shall be deemed lifted on
the date that notice that the Suspension has been lifted is delivered to the
Purchaser pursuant to Section 11 of this Agreement. Any payments made pursuant
to this Section 7.6. shall not constitute the Purchaser’s exclusive remedy for
such events. Notwithstanding the foregoing provisions, in no event shall the
Company be obligated to pay such partial damages to more than one person in
respect of the same Securities for the same period of time. Such payments shall
be made to the Purchaser in cash.
     SECTION 8. Certain Adjustments. (a) Subject to Section 8(c), except with
respect to the issuance of Excluded Securities (as such term is defined in the
Warrant), if at any time on or before the one year anniversary of the Second
Closing (the “Full Ratchet Period”), the Company shall issue or sell or agree to
issue or sell any shares of Common Stock or Common Stock Equivalents (as defined
below) to any person or persons for a price per share (in each case, as
determined in accordance with Section 2.8 of the Warrant) less than the Strike
Price (as defined below) in effect immediately prior to the time of such issue
or sale or agreement related thereto, then and in each such case (a “Trigger
Issuance”), the Company shall issue without the payment of additional
consideration, in connection with such Trigger Issuance, a number of additional
shares of Common Stock to the Purchaser equal to difference of: (A) the number
of shares of Common Stock that would have been issued to such Purchaser, based
on such Purchaser’s purchase price of Common Stock at the Initial Closing (i.e.,
$5.25 per share), if the Strike Price in effect immediately prior to such
Trigger Issuance was equal to the Strike Price in effect immediately after such
Trigger Issuance; minus (B) the number of shares of Common Stock initially
issued to such Purchaser upon payment of its purchase price (and, to the extent
there has been a previous adjustment to the price per share, any Anti-Dilution
Shares previously issued to such Purchaser).

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               (b) Subject to Section 8(c), except with respect to the issuance
of Excluded Securities, if at any time after the Full Ratchet Period, the
Company shall effect a Trigger Issuance, the Company shall issue without the
payment of additional consideration, in connection with such Trigger Issuance, a
number of additional shares of Common Stock to the Purchaser equal to the
difference of: (A) the number of shares of Common Stock that would have been
issued to such Purchaser at each Closing that occurred under this Agreement, if
the price per share for such Purchaser was equal to the product of the Strike
Price in effect immediately prior to such Trigger Issuance multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Trigger Issuance plus the number of shares
of Common Stock which the aggregate consideration received by the Company for
the total number of additional shares of Common Stock so issued in the Trigger
Issuance would purchase at the purchase price paid by the Purchaser at the
Initial Closing (i.e., $5.25), and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such Trigger Issuance
plus the number of such additional shares of Common Stock so issued; minus
(B) the number of shares of Common Stock initially issued to such Purchaser upon
payment of its purchase price (and, to the extent there has been a previous
adjustment to the price per share, any Anti-Dilution Shares previously issued to
such Purchaser).
               (c) The provisions of this Section 8(c) shall be applicable to
Sections 8(a) and 8(b) and to Section 9. The price per share at which the
Company issues or sells or agrees to issue or sell shares of Common Stock or
Common Stock Equivalents shall be determined in accordance with the provisions
of Section 2.8 of the Warrant. For the avoidance of doubt, the issuance of
Common Stock Equivalents (and not the actual conversion or exercise of such
Common Stock Equivalent into shares of Common Stock) is the event that gives
rise to the issuance of Anti-Dilution Shares pursuant to this Section 8.
Promptly following the occurrence of any event giving rise to the issuance of
any Anti-Dilution Shares (but in no event more than four (4) business days
thereafter), the Company shall issue irrevocable instructions authorizing its
transfer agent to issue such Anti-Dilution Shares to the Purchaser. Without
further action or deed, automatically after each Trigger Issuance, the Strike
Price shall be reset to the per share price at which the Common Stock, or the
Common Stock underlying the Common Stock Equivalents, was issued in the Trigger
Issuance; as determined in accordance with the provisions of Section 2.8 of the
Warrant. The “Strike Price” shall initially be equal to $5.25, and shall be
re-set from time to time in accordance with the immediately preceding sentence
upon each Trigger Issuance. Notwithstanding the foregoing, Sections 8(a) and
8(b) and Section 9 shall not apply to the issuance of Excluded Securities.
     SECTION 9. Participation Right on Future Financings.
               (a) Notice of Proposed Issuance. Except with respect to the
issuance of Excluded Securities or Common Stock and Common Stock Equivalents to
Strategic Investors (as defined below) of the Company, in the event that the
Company proposes to issue any (i) shares of Common Stock, (ii) warrants, options
or other rights to purchase shares of Common Stock or (iii) any notes,
debentures or other securities convertible into or exercisable or exchangeable
for shares of Common Stock (collectively, the “Common Stock Equivalents”), the
Company will deliver to the Purchaser a written notice (the “Offer Notice”)
prior to effecting any such issuance (the “New Issuance”), offering to such
Purchaser the right, for a period of ten (10)

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days, to purchase for cash at an amount equal to the price or other
consideration for which such Common Stock or Common Stock Equivalents are to be
issued, on a pro rata basis with all other purchasers of Securities at the
Initial Closing who then own such Securities (each, a “Recipient”), a number of
shares of such Common Stock or Common Stock Equivalents equal to the lesser of
(i) the number of shares to be issued in such New Issuance equal to the number
of shares of Common Stock or Common Stock Equivalents, as the case may be, that
could be purchased for the aggregate purchase price paid at the Initial Closing
and the Second Closing, and (ii) twenty percent (20.0%) of the number of shares
of Common Stock or Common Stock Equivalents, as the case may be, to be issued in
such New Issuance. The Offer Notice shall describe the securities proposed to be
issued by the Company and specify the number, price and payment terms in the New
Issuance.
               (b) Right to Purchase Common Stock or Common Stock Equivalents.
                    (i) The Purchaser may accept the Company’s offer as to the
full number of securities offered to it in the Offer Notice or any lesser
number, by written notice thereof (an “Exercise Notice”) given by it to the
Company prior to the expiration of the aforesaid 10-day period. A delivery of an
Exercise Notice (which notice shall specify the number (or amount) of Common
Stock Equivalents to be purchased by the Purchaser as permitted under this
Section 9) shall constitute a binding agreement of the holder to purchase, at
the price and on the terms specified in the Offer Notice, the number (or amount)
of Common Stock or Common Stock Equivalents specified in the Purchaser’s
Exercise Notice. If at the termination of such 10-day period the Purchaser shall
not have exercised its rights to purchase Common Stock or Common Stock
Equivalents pursuant to this Section 9, the Purchaser shall be deemed to have
waived any and all of its rights under this Section 9 with respect to that
purchase of such Common Stock or Common Stock Equivalents (such waiver shall not
apply to any subsequently offered Common Stock or Common Stock Equivalents).
Notwithstanding anything in this Section 9 to the contrary, if, with respect to
a given New Issuance, any other Recipient elects not to exercise fully its
rights or is deemed to have waived its rights, then the Company shall provide
the Purchaser and each other Recipient who exercised its rights with a second
Offer Notice, and the Purchaser and each other Recipient who exercised its
rights may include in its Exercise Notice for such New Issuance, upon delivery
to the Company of an Exercise Notice within five (5) business days after receipt
by the Purchaser and each other Recipient of such second Offer Notice, an
additional number (or amount) of Common Stock or Common Stock Equivalents equal
to its pro rata share of the unexercised number (or amount) of Common Stock or
Common Stock Equivalents in such New Issuance.
                    (ii) The Company shall have ninety (90) days from the date
of the Offer Notice to consummate the proposed New Issuance at the price and
upon substantially the same terms specified in the Offer Notice, provided that,
if such issuance is subject to regulatory and shareholder approval, such ninety
(90) day period shall be extended until the expiration of five (5) business days
after all such approvals have been received, but in no event later than one
hundred eighty (180) days from the date of the Offer Notice. At the consummation
of such New Issuance, the Company shall issue certificates representing the
Common Stock or Common Stock Equivalents to be purchased by the Purchaser
registered in the name of such Purchaser, against payment by such Purchaser of
the purchase price for such Common Stock or Common Stock Equivalents specified
in such Purchaser’s Exercise Notice. If

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the Company proposed to issue any class of Common Stock or Common Stock
Equivalents after such time period above, it shall again comply with the
procedures set forth in this Section 9.
                    (iii) The value of any non-cash consideration to be received
by the Company in any New Issuance shall be determined by the Board of Directors
in good faith, and shall be specified in the Offer Notice delivered in
connection with any such New Issuance. If the Purchaser elects to exercise its
rights under this Section 9 in connection with any New Issuance in which there
is any such non-cash consideration, then, such Purchaser may elect in its
Exercise Notice to tender, in lieu of tendering any such non-cash consideration,
an amount in cash equal to the reasonably determined good faith value of such
non-cash consideration.
               (c) Expiration of Participation Right. The participation right
granted pursuant to this Section 9 shall expire on the two (2) year anniversary
of the date of this Agreement.
For purposes of this Section 9, the term “Strategic Investor” means (i) any
person that has been resolved by a majority of a quorum of the Company’s Board
of Directors to constitute a “strategic investor” on the basis of such person’s
(A) existing or prospective business relationship with the Company and/or its
subsidiaries; or (B) existing or anticipated ability to further the business
objectives of the Company and/or its subsidiaries; or (ii) a corporation,
partnership or other entity that has at the time of its initial investment in
the Company (A) an equity market capitalization in excess of $100 million or
(B) assets in excess of $100 million.
     SECTION 10. Broker’s Fee. The Purchaser acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the
Securities to the Purchaser. The Purchaser and the Company hereby agree that the
Purchaser shall not be responsible for such fee and that the Company will
indemnify and hold harmless the Purchaser and each Purchaser/Affiliate against
any losses, claims, damages, liabilities or expenses, joint or several, to which
the Purchaser or any Purchaser/Affiliate may become subject with respect to such
fee. Each of the parties hereto hereby represents that, on the basis of any
actions and agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Securities to the Purchaser.
     SECTION 11. Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon delivery to the party
to be notified; (ii) when received by confirmed facsimile or (iii) one
(1) business day after deposit with a nationally recognized overnight carrier,
specifying next business day delivery, with written verification of receipt. All
communications shall be sent to the Company and the Purchaser as follows or at
such other addresses as the Company or the Purchaser may designate upon ten
(10) days’ advance written notice to the other party:

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  (a)   if to the Company, to:         Sunair Services Corporation.
3005 SW Third Avenue
Fort Lauderdale, Florida 33315
Facsimile: (561) 955-7333
Attention:         with a copy to:         Akerman Senterfitt
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131
Facsimile: (305) 374-5618
Attention: Stephen K. Roddenberry     (b)   if to the Placement Agent, to:      
  Roth Capital Partners, LLC
11100 Santa Monica Blvd.
Suite 550
Los Angeles, California 90025
Facsimile: (310) 445-5864
Attention: John Dalfonsi         with a copy to:         Lowenstein Sandler PC
1251 Avenue of the Americas
New York, New York 10020
Facsimile: (973) 597-2507
Attention: Steven E. Siesser

               (c) if to the Purchaser, at its address as set forth at the end
of this Agreement.
     SECTION 12. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser. No
provision hereunder may be waived other than in a written instrument executed by
the waiving party.
     SECTION 13. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
     SECTION 14. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

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     SECTION 15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the federal
law of the United States of America.
     SECTION 16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains an electronic file of an
executed signature page, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or electronic file
signature page (as the case may be) were an original thereof.
     SECTION 17. Entire Agreement. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.
     SECTION 18. Assignment. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective permitted successors, assigns, heirs,
executors and administrators. This Agreement and the rights of the Purchaser
hereunder may be assigned by the Purchaser with the prior written consent of the
Company, except such consent shall not be required in cases of assignments by an
investment adviser to a fund for which it is the adviser or by or among funds
that are under common control, provided that such assignee agrees to be bound by
the terms of this Agreement.
     SECTION 19. Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
     SECTION 20. Independent Nature of the Purchaser’s Obligations and Rights.
The obligations of the Purchaser under this Agreement are several and not joint
with the obligations of any other third party purchasers of the Company’s
securities, and the Purchaser shall not be responsible in any way for the
performance of the obligations of any other third party purchasers of the
Company’s securities. Each of the Purchaser and the Company agree and
acknowledge that (i) the decision of the Purchaser to purchase the Securities
pursuant to this Agreement has been made by the Purchaser independently of any
other third party purchasers of the Company’s securities and (ii) no other third
party purchasers of the Company’s securities have acted as agent for the
Purchaser in connection with the Purchaser making its investment hereunder and
that no such other third party purchasers will be acting as agent of the
Purchaser in connection with monitoring its investment hereunder or enforcing
its rights under this Agreement. Nothing contained herein or in any other
document contemplated hereby or any agreement of any such other third party
purchaser, and no action taken by the Purchaser pursuant hereto or any other
third party purchaser pursuant thereto, shall be deemed to constitute the
Purchaser or any such

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other third party purchasers as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Purchaser or any
such other third party purchasers are in any way acting in concert or as a group
with respect to any matters. The Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any of the other documents contemplated
hereby, and it shall not be necessary for any such other third party purchasers
to be joined as an additional party in any proceeding for such purpose. To the
extent that any such other third party purchasers purchase the same or similar
securities as the Purchaser hereunder or on the same or similar terms and
conditions or pursuant to the same or similar documents, all such matters are
solely in the control of the Company, not the action or decision of the
Purchaser, and would be solely for the convenience of the Company and not
because it was required or requested to do so by the Purchaser or any such other
third party purchaser.
     SECTION 21. Termination. Purchaser may terminate this Agreement without any
obligation or liability hereunder or otherwise if the Initial Closing does not
occur within fifteen (15) business days after the execution of this Agreement.
After the Initial Closing, Purchaser may also terminate this Agreement, but only
with respect to the Second Closing and the Additional Securities to be purchased
by the Purchaser, without any obligation or liability hereunder or otherwise if
the Second Closing does not occur within forty-five (45) days after the Initial
Closing, and in such event all applicable sections and provisions of this
Agreement shall survive such termination.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.

                      SUNAIR SERVICES CORPORATION    
 
               
 
  By:                          
 
      Name:        
 
               
 
      Title:        
 
               

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[Investor Signature Page]

         
Print or Type:
            Name of Purchaser     (Individual or Institution):
 
             
 
            Name of Individual representing     Purchaser (if an Institution):
 
             
 
            Title of Individual representing     Purchaser (if an Institution):
 
             
 
       
Signature by:
       
 
             
 
            Individual Purchaser or Individual
representing Purchaser:
 
             
 
       
 
  Address:    
 
       
 
       
 
  Telephone:    
 
       
 
       
 
  Telecopier:    
 
       

                      Number of                     Securities to Be      
Aggregate Price   Number of Securities       Aggregate Price Purchased by the  
    to be paid by the   to be Purchased by the   Price Per   to be paid by
Purchaser at the   Price Per Share   Purchaser   Purchaser at the   Share In  
the Purchaser Initial Closing   In Dollars   at Initial Closing   Second Closing
  Dollars   at Second Closing Common Stock   $       Common Stock   $   $
Warrants           Warrants        

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