EXHIBIT 10.19
 

$1,200,000.00   March 31, 2006

SUBORDINATED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned (the “Borrower”) promises to pay to the
order of RON FEE INC., a Florida corporation (the “Holder”) at 266 Gulfport
Lane, Spring Hill, Florida 34608, or such other place or places as the Holder
may designate in writing, the sum set forth herein in lawful money of the United
States, together with interest in like lawful money, as set forth below:
     1. Asset Purchase Agreement. This Promissory Note (this “Note”) is being
issued pursuant to that certain Asset Purchase Agreement, dated as of March 31,
2006 (the “Agreement”), between Holder and Middleton Pest Control, Inc.
(“Buyer”), a subsidiary of the Borrower, and is subject to the right of set-off,
other adjustments and Holder provisions as expressly provided therein. All terms
appearing in initial capital letters and not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement.
     2. Principal Amount. The principal amount of the Note shall be a sum equal
to $1,200,000.00. This Note is unsecured and is not assignable by Holder.
     3. Principal Payments. The principal amount of this Note shall be paid to
the Holder in one installment which shall be due and payable in full along with
all accrued and unpaid interest on the third (3rd) anniversary date of this Note
(the “Maturity Date”).
     4. Interest Rate and Interest Payments. The unpaid principal balance of
this Note shall bear interest at a fixed rate of six percent (6%) per annum
simple interest. Interest shall be computed on the basis of the actual number of
days elapsed and a year of 365 days. Interest shall be payable to the Holder
semi-annually in arrears on September 30 and March 31 with the first such
payment commencing September 30, 2006.
     5. Prepayment. This Note is subject to prepayment at any time or from time
to time at the option of Borrower, either in whole or in part, without premium
or penalty. Any partial prepayment shall be applied first in payment of the
interest accrued upon the principal balance hereof at the time outstanding and
then in reduction of the principal balance of the Note.
     6. Subordination. The payment and performance of the indebtedness evidenced
by this Note are hereby subordinated to the payment in full in cash of any
indebtedness for borrowed money of Borrower and its subsidiaries from Borrower’s
primary institutional lenders (currently, Wachovia Bank, National Association,
as agent for the lenders), unless the instruments evidencing such borrowing
provide otherwise. Borrower agrees that for the indebtedness to be subordinated
to any new indebtedness incurred after the date hereof, the principal purpose of
such new indebtedness must be use in connection with the Borrower’s business.

 

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     7. Default. At the option of the Holder, all sums advanced hereunder
together with accrued interest thereon shall become immediately due and payable,
without notice or demand, upon the occurrence of any one or more of the
following events of default: (a) Borrower’s failure to promptly pay in full any
payment of principal or interest due under this Note within ten (10) days after
written notice has been delivered by the Holder stating that such payment is
past due (provided, however, that if the Holder gives two (2) such notices at
any time during the term of this Note, no notice or opportunity to cure shall be
required with regard to any subsequent failure under this Section 7(a) by the
Borrower); or (b) the dissolution, termination of existence, insolvency of,
business failure, appointment of a receiver of any part of any proceedings under
any bankruptcy or insolvency laws, by or against Borrower.
     8. Modification or Waiver. The Note may not be amended, modified or
changed, nor shall any waiver of any provision hereof be affected, except by an
instrument in writing which is signed by the party against whom enforcement of
any waiver, amendment, change, modification or discharge is sought.
     9. Right of Offset. The Note is being delivered as partial consideration
for those assets of the Holder described in the Agreement. By acceptance of the
Note, the Holder acknowledges that, pursuant to the Agreement, Borrower and
Buyer have (in addition to other remedies) the right to cause Borrower to make
offset against amounts due Holder under this Note to satisfy certain
indemnification and other obligations owed by Holder to Buyer pursuant to the
Agreement. In the event of any such offset, the amount of such offset shall
first reduce any accrued but unpaid interest due Holder under the Note and then
shall reduce the principal balance of the Note.
     10. Attorneys’ Fees. In any action to enforce this Note, the prevailing
party shall be entitled to recover the costs, charges and expenses incurred by
the other including, but not limited to, reasonable trial, appellate and
bankruptcy attorneys’ fees.
     11. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Florida.
     12. Notices, Successors. Any notice required to be given to Borrower or to
Holder, on behalf of the Holder, shall be deemed effective only if in writing
and delivered by personal service or delivered to an overnight courier service,
with guaranteed next day delivery or mailed by registered or certified mail,
return receipt requested, postage prepaid, to Borrower’s or, if to the Holder,
to the Holder’s address as it appears in this Note, or to such other address as
otherwise notified in writing by like notice. All of the terms of this Note
shall inure to the benefit of Holder and their respective successors and assigns
and shall be binding upon Borrower and its successors and assigns.
     13. Execution. This Note is signed, sealed and delivered as of the 31st day
of March, 2006.

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     HOLDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT WHICH HE OR IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
NOTE, OR THE FINANCING CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR THE ACTIONS OF ANY PARTY
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER’S EXTENDING THE
LOAN EVIDENCED BY THIS NOTE.

            BORROWER:

SUNAIR SERVICES CORPORATION
      By:   /s/ Synnott B. Durham         Name:   Synnott B. Durham       
Title:   Chief Financial Officer        Borrower’s Address:
Sunair Services Corporation
c/o Sunair Southeast Pest Holdings, Inc.
3005 SW 3rd Ave
Fort Lauderdale, FL 33315-3312
Attention: Chief Executive Officer
                       

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