Document:

Unassociated Document

    
      

    

    

      Exhibit
        10.2

      

      
        	
                $2,000,000

              	
                February
                  21, 2007

              

      

      

      CONVERTIBLE
        TERM NOTE

      

      This
        Note and the Common Stock issuable upon conversion hereof (until such time,
        if
        any, as such Common Stock is registered with the Securities and Exchange
        Commission pursuant to an effective registration statement) have not been
        registered under the Securities Act of 1933, as amended (the “Act”), or any
        state securities laws, and may not be sold, offered for sale of otherwise
        transferred unless registered or qualified under the Act and applicable state
        securities laws or unless the Maker receives an opinion, in form and from
        counsel reasonably acceptable to the Maker, that registration, qualification
        or
        other such actions are not required under any such laws.

      

      FOR
        VALUE
        RECEIVED, LAPOLLA INDUSTRIES, INC., a Delaware corporation (the “Maker”),
        hereby promises to pay to the order of ComVest Capital, LLC, a Delaware limited
        liability company (together with any subsequent holder hereof, the “Payee”),
        the
        sum of Two Million ($2,000,000) Dollars (the “Principal”),
        with
        interest thereon, on the terms and conditions set forth herein and in the
        Revolving Credit and Term Loan Agreement of even date herewith by and between
        the Maker and the Payee (as same may be amended, modified, supplemented and/or
        restated from time to time, the “Loan
        Agreement”).
        Terms
        defined in the Loan Agreement and not otherwise defined herein shall have
        the
        meanings assigned thereto in the Loan Agreement.

      

      Payments
        of principal of, interest on and any other amounts with respect to this
        Convertible Promissory Note (this “Note”)
        are to
        be made in lawful money of the United States of America.

      

      Principal
        and accrued interest of this Note may or shall be convertible into common
        stock
        of the Maker as provided in Section 3 below. 

      

      
        	 	
                1.

              	
                Payments.

              

      

      

      (a)    Interest.  This
        Note shall bear
        interest (“Interest”)
        on
        Principal amounts outstanding from time to time from the date hereof at the
        rate
        of ten (10%) percent per annum; provided,
        however,
        that
        during the continuance of any Event of Default, the Interest rate hereunder
        shall be increased to fourteen (14%) percent per annum. All Interest shall
        be
        computed on the daily unpaid Principal balance of this Note based on a three
        hundred sixty (360) day year, and shall be payable monthly in arrears on
        the
        last day of each calendar month commencing March 31, 2007 and on the maturity
        hereof.

      

      (b)    Principal.  The
        Principal of this
        Note shall be payable in thirty (30) equal monthly installments of $66,666.67
        each, due and payable on the last day of each calendar month commencing
        September 30, 2007 and continuing through and including February 28,
        2010.

      

      (c)    Non-Business
        Day.  If
        any scheduled payment
        date as aforesaid is not a business day in either the State of Florida or
        the
        State of Texas, then the payment to be made on such scheduled payment date
        shall
        be due and payable on the next succeeding business day, with additional interest
        on any Principal amount so delayed for the period of such delay.

      

      
        	 	
                2.

              	
                Prepayment.

              

      

      

      (a)    Optional
        Prepayment of Principal.  The
        unpaid Principal
        balance of this Note may, at the Maker’s option, be prepaid in whole or in part,
        at any time or from time to time, upon fifteen (15) days’ prior written notice
        to the Payee, provided that the Payee shall retain the right to convert all
        or
        any portion of such Principal amount called for prepayment, together with
        any or
        all Interest accrued thereon, at any time prior to the date fixed for
        prepayment, and thereafter until such prepayment is actually made. Any optional
        prepayment of Principal hereunder shall require the simultaneous payment
        of a
        prepayment premium as provided in Section 2.03(c) of the Loan
        Agreement.

      

      (b)    Mandatory
        Prepayment of Principal.  The
        Principal of this
        Note may be required to be prepaid, in whole or in part, at any time and
        from
        time to time in accordance with Section 2.02(b) of the Loan
        Agreement.

      

      (c)    Interest.  Except
        to the extent that
        such Interest is converted as herein provided, each prepayment of Principal
        shall be accompanied by all accrued Interest on the Principal amount prepaid
        or
        converted accrued to the date of prepayment or conversion.

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      (d)    Application
        of Payments.  Any
        and all prepayments
        hereunder shall be applied first to any prepayment premium required under
        Section 2(a) above, then to unpaid accrued Interest on the Principal amount
        being prepaid, and finally to the remaining Principal installments in inverse
        order of maturity. 

      

      
        	 	
                3.

              	
                Conversion.

              

      

      

      (a)    Optional
        and Mandatory Conversion.  The
        Payee may, at its
        option, upon written notice to the Maker given at any time and from time
        to
        time, convert all or any portion of the unpaid Principal balance of this
        Note,
        and/or any accrued Interest thereon, into shares of common stock of the Maker
        (“Common
        Stock”),
        at a
        price of Eighty ($.80) Cents per share of Common Stock (as same may be adjusted
        from time to time in accordance herewith, the “Conversion
        Price”).
        In
        addition, if (i) there is not then continuing any Default or Event of
        Default under and as defined in the Loan Agreement, (ii) the Common Stock
        is then traded or listed for trading on any national securities exchange
        or the
        NASDAQ National Market or NASDAQ Capital Market, (iii) there is then in
        effect a valid registration statement under the Securities Act of 1933, as
        amended, in respect of the Common Stock issued and issuable upon conversion
        of
        this Note and upon exercise of the Warrants issued pursuant to the Loan
        Agreement, such that all such shares of Common Stock will be freely tradable
        immediately upon issuance at such time, (iv) the Maker is current in all
        of its
        required filings with the Securities and Exchange Commission, (v) the reported
        Trading Price (as hereinafter defined) of the Common Stock for each of the
        twenty (20) consecutive trading days immediately prior thereto has been equal
        to
        or greater than 165% of the Conversion Price in effect on each such trading
        day,
        and (vi) the average daily trading volume of the Common Stock as reported
        by the
        principal exchange or trading medium on which the Common Stock is listed
        or
        quoted has been equal to or greater than 100,000 shares (such number to be
        subject to adjustment on a proportionate basis in the event of each and every
        stock split, stock dividend, combination of shares, recapitalization or other
        such event respecting the Common Stock which may occur subsequent to the
        date
        hereof) during the three (3) months immediately prior thereto, then
        the
        Maker may, upon five (5) business days’ prior written notice to the Payee,
        require the Payee to convert all or any portion of the Principal of this
        Note
        into shares of Common Stock at the Conversion Price then in effect; and in
        the
        event of any such conversion at the option of the Maker, the Maker shall
        give
        written notice thereof to the Payee certifying as to the satisfaction of
        the
        foregoing conditions (including a detailed schedule of Trading Prices and
        volumes for purposes of the foregoing clauses (v) and (vi)), and shall pay
        to
        the Payee, simultaneously with the delivery of stock certificates in accordance
        with Section 3(c), all unpaid accrued Interest on the Principal amount so
        converted. As used herein, the term “Trading Price” on any relevant date means
        the closing sale price (or, if no closing sale price is reported, the last
        reported sale price) of the Common Stock (regular way). The effective date
        of
        any conversion hereunder is herein referred to as the “Conversion
        Date.”
To
        the
        extent that this Note is converted only in part, then such conversion shall
        be
        treated as a prepayment of the Principal amount converted in accordance with
        Section 2(d) above, provided that no prepayment premium shall be required
        in
        respect of any conversion.

      

      (b)    Mechanics
        of Conversion.  Upon
        notice to the Maker of the Payee’s conversion election as provided in Section
        3(a), or upon notice to the Payee of the Maker’s conversion election as provided
        in Section 3(a), the Maker shall, in accordance with Section 3(c), issue
        to the
        Payee (or to the Payee’s designee(s) set forth in the Payee’s conversion
        election, or in any direction given to the Maker in response to the Maker’s
        conversion election) the number of shares of Common Stock to which the Payee
        shall be entitled upon such conversion, and shall deliver or cause to be
        delivered to the Payee or such designee(s) the certificates representing
        such
        shares of Common Stock. All shares of Common Stock issued or delivered upon
        any
        conversion hereunder shall, when issued or delivered, be duly authorized,
        validly issued, fully paid and nonassessable. In lieu of any fractional shares
        to which the Payee would otherwise be entitled, the Maker shall pay cash
        equal
        to such fraction multiplied by the per share Conversion Price.

      

      (c)    Issuance
        of Common Stock Upon Conversion.  Within
        a reasonable time,
        not exceeding five (5) Business Days after the Conversion Date, the Maker
        shall
        deliver or cause to be delivered, to or upon the written order of the Payee
        of
        this Note so converted, certificates representing the number of fully paid
        and
        nonassessable shares of Common Stock into which this Note has been converted
        in
        accordance with the provisions of this Section 3. If so requested by the
        Maker,
        the Payee shall, within a reasonable time (not exceeding five (5) Business
        Days
        after receipt by the Payee of such certificates), surrender this Note to
        the
        Maker for cancellation, against delivery of a replacement Note representing
        the
        remaining balance (if any) of this Note which has not been converted. Subject
        to
        the following provisions of this Section 3, such conversion shall be deemed
        to
        have occurred on the Conversion Date, so that the Payee of this Note or such
        Payee’s designee(s) shall be treated for all purposes as having become the
        record Payee of such shares of Common Stock at such time.

      

      (d)    Taxes
        on Conversion.  The
        issuance of certificates for shares for Common Stock upon the conversion
        of this
        Note shall be made without charge by the Maker to the converting Payee for
        any
        tax in respect of the issuance of such certificates and such certificates
        shall
        be issued in the name of, or in such names as may be directed by, the Payee
        of
        this Note; provided,
        however,
        that
        the Maker shall not be required to pay any tax which may be payable in respect
        of any transfer involved in the issuance or delivery of any such certificate
        in
        a name other than that of the Payee of this Note, and the Maker shall not
        be
        required to issue or deliver such certificates unless or until the person
        or
        persons requesting the issuance thereof shall have paid to the Maker the
        amount
        of any such tax or shall have established to the satisfaction of the Maker
        that
        any such tax has been paid.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (e)

              	
                Adjustment
                  of Shares

              

      

      

      (i)    Stock
        Dividends, Distributions or Subdivisions.  In
        the event that, at any
        time and from time to time from and after the date of this Note, the Maker
        shall
        issue additional shares of Common Stock (or securities convertible into Common
        Stock) in a stock dividend, stock distribution or subdivision paid with respect
        to Common Stock, or declare any dividend or other distribution payable in
        additional shares of Common Stock (or securities convertible into Common
        Stock)
        or effect a split or subdivision of the outstanding shares of Common Stock,
        then, concurrently with the effectiveness of such stock dividend, stock
        distribution or subdivision, the then-effective Conversion Price shall be
        proportionately decreased, and the number of shares of Common Stock issuable
        upon conversion of this Note shall thus be proportionately increased.

      

      (ii)    Combinations
        or Consolidations.  In
        the event that, at any
        time and from time to time from and after the date of this Note, the outstanding
        shares of Common Stock shall be combined or consolidated, by reclassification
        or
        otherwise, into a lesser number of shares of Common Stock, then, concurrently
        with the effectiveness of such combination or consolidation, the then-effective
        Conversion Price shall be proportionately increased, and the number of shares
        of
        Common Stock issuable upon conversion of this Note shall thus be proportionately
        decreased. 

      

      (iii)    Other
        Dividends or Distributions.  If
        the Maker, at any time
        or from time to time after the issuance of this Note, makes a distribution
        to
        the holders of Common Stock which is payable in securities of the Maker other
        than Common Stock, then, in each such event, provision shall be made so that
        the
        Payee shall receive upon conversion of this Note, in addition to the number
        of
        shares of Common Stock, the amount of such securities of the Maker which
        would
        have been received if the portion of this Note so converted had been exercised
        for Common Stock on the date of such event, subject to adjustments subsequent
        to
        the date of such event with respect to such distributed securities which
        shall
        be on terms as nearly equivalent as practicable to the adjustments provided
        in
        this Section 3(e)(iii) and all other adjustments under this
        Section 3(e). Nothing contained in this Section 3(e)(iii) shall be deemed
        to permit the payment of any distribution in violation of the Loan
        Agreement.

      

      (iv)    Merger,
        Consolidation or Exchange.  If,
        at any time or from
        time to time after the date of this Note, there occurs any merger,
        consolidation, arrangement or statutory share exchange of the Maker with
        or into
        any other person or entity, then, in each such event, provision shall be
        made so
        that the Payee shall receive upon conversion of this Note the kind and amount
        of
        shares and other securities and property (including cash) which would have
        been
        received upon such merger, consolidation, arrangement or statutory share
        exchange by the Payee if the portion of this Note so converted had been
        exercised for shares of Common Stock immediately prior to such merger,
        consolidation, arrangement or statutory share exchange, subject to adjustments
        for events subsequent to the effective date of such merger, consolidation,
        arrangement or statutory share exchange with respect to such shares and other
        securities which shall be on terms as nearly equivalent as practicable to
        the
        adjustments provided in this Section 3(e)(iv) and all other adjustments
        under this Section 3(e). Nothing contained in this Section 3(e)(iv) shall
        be deemed to permit any such transaction in violation of the Loan
        Agreement.

      

      (v)    Recapitalization
        or Reclassification.  If,
        at any time or from
        time to time after the date of this Note, the shares of Common Stock issuable
        upon conversion of this Note are changed into the same or a different number
        of
        securities of any class of the Maker, whether by recapitalization,
        reclassification or otherwise (other than a merger, consolidation, arrangement
        or statutory share exchange provided for elsewhere in this Section 3(e)),
        then, in each such event, provision shall be made so that the Payee shall
        receive upon conversion of this Note the kind and amount of securities or
        other
        property which would have been received in connection with such
        recapitalization, reclassification or other change by the Payee if the portion
        of this Note so converted had been converted immediately prior to such
        recapitalization, reclassification or change, subject to adjustments for
        events
        subsequent to the effective date of such recapitalization, reclassification
        or
        other change with respect to such securities which shall be on terms as nearly
        equivalent as practicable to the adjustments provided in this
        Section 3(e)(v) and all other adjustments under this
        Section 3(e).

      

      (vi)    Extraordinary
        Dividends or Distributions.  If,
        at any time or from
        time to time after the date of this Note, the Maker shall declare a dividend
        or
        any other distribution upon the Common Stock payable otherwise than out of
        current earnings, retained earnings or earned surplus and otherwise than
        in
        shares of Common Stock, then the Conversion Price in effect immediately prior
        to
        such declaration shall be reduced by an amount equal, in the case of a dividend
        or distribution in cash, to the amount thereof payable per share of Common
        Stock
        or, in the case of any other dividend or distribution, to the value thereof
        per
        share of Common Stock at the time such dividend or distribution was declared,
        as
        determined by the Board of Directors of the Maker in good faith. Such reductions
        shall take effect as of the date on which a record is taken for the purposes
        of
        the subject dividend or distribution, or, if a record is not taken, the date
        as
        of which the holders of record of Common Stock entitled to such dividend
        or
        distribution are to be determined. Nothing contained in this Section 3(e)(vi)
        shall be deemed to permit the payment of any dividend in violation of the
        Loan
        Agreement.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (vii)    Dilutive
        Issuances.  (A)
        If the Maker, at any
        time or from time to time, issues or sells any Additional Shares of Common
        Stock
        (as defined below), other than as provided in the foregoing subsections of
        this
        Section 3(e), for a price per share (which, in the case of options,
        warrants, convertible securities or other rights, includes the amounts paid
        therefor plus the exercise price, conversion price or other such amounts
        payable
        thereunder) that is less than the
        Conversion Price then in effect, then and in each such case, the then applicable
        Conversion Price shall automatically be reduced as of the opening of business
        on
        the date of such issue or sale, to a price determined by multiplying the
        Conversion Price then in effect by a fraction (i) the numerator of which
        shall be (A) the number of share of Common Stock deemed outstanding (as
        determined below) immediately prior to such issue or sale, plus (B) the
        number of shares of Common Stock which the aggregate consideration received
        by
        the Maker for the total number of Additional Shares of Common Stock so issued
        would purchase at such Conversion Price, and (ii) the denominator of which
        shall be the number of shares of Common Stock deemed outstanding (as defined
        below) immediately prior to such issue or sale plus the total number of
        Additional Shares of Common Stock so issued; provided,
        however,
        that
        upon the expiration or other termination of options, warrants or other rights
        to
        purchase or acquire Common Stock which triggered any adjustment under this
        Section 3(e)(vii), and upon the expiration or termination of the right to
        convert or exchange convertible or exchangeable securities (whether by reason
        of
        redemption or otherwise) which triggered any adjustment under this Section
        3(e)(vii), if any thereof shall not have been exercised, converted or exchanged,
        as applicable, the number of shares of Common Stock deemed to be outstanding
        pursuant to this Section 3(e)(vii) shall be reduced by the number of shares
        as to which options, warrants and rights to purchase or acquire Common Stock
        shall have expired or terminated unexercised, and as to which conversion
        or
        exchange rights shall have expired or terminated unexercised, and such number
        of
        shares shall no longer be deemed to be outstanding; and the Conversion Price
        then in effect shall forthwith be readjusted and thereafter be the price
        that it
        would have been had adjustment been made on the basis of the issuance only
        of
        the shares of Common Stock actually issued. For purposes of the preceding
        sentence, the number of shares of Common Stock deemed to be outstanding as
        of a
        given date shall be the sum of (x) the number of shares of Common Stock
        actually outstanding, (y) the number of shares of Common Stock into which
        this Note could be converted on the day immediately preceding the given date,
        and (z) the number of shares of Common Stock which could be obtained
        through the exercise or conversion of all other rights, options and convertible
        securities outstanding on the day immediately preceding the given date.
“Additional
        Shares of Common Stock”
shall
        mean all shares of Common Stock, and all options, warrants, convertible
        securities or other rights to purchase or acquire Common Stock, issued by
        the
        Maker other than (i) shares of Common Stock issued pursuant to the exercise
        of options, warrants or convertible securities outstanding on the date hereof
        (including, without limitation, all of the Warrants issued pursuant to the
        Loan
        Agreement), or hereafter issued from time to time pursuant to and in accordance
        with stock purchase or stock option plans as in effect on the date hereof,
        and
        (ii) shares of Common Stock and/or options, warrants or other Common Stock
        purchase rights for up to an aggregate of 900,000 shares of Common Stock
        (such
        number to be subject to adjustment in accordance with Sections 3(e)(i) and
        3(e)(ii) above), where such options, warrants or other rights are issued
        both
        (x) with exercise prices per share of Common Stock at the then-current fair
        market value of a share of Common Stock, as determined in good faith by the
        Board of Directors of the Maker or the Compensation Committee thereof, and
        (B)
        to employees, officers or directors of, or consultants to, the Maker or any
        Subsidiary pursuant to stock purchase or stock option plans or other
        arrangements that are approved by the Maker’s Board of Directors or the
        Compensation Committee thereof, and by the Maker’s stockholders.

      

      (B)    In
        the
        event that the exercise price, conversion price, purchase price or other
        price
        at which shares of Common Stock are purchasable pursuant to any options,
        warrants, convertible securities or other rights to purchase or acquire Common
        Stock is reduced at any time or from time to time (other than under or by
        reason
        of provisions designed to protect against dilution), then, upon such reduction
        becoming effective, the Conversion Price then in effect hereunder shall
        forthwith be decreased to such Conversion Price as would have been obtained
        had
        the adjustments made and required under this Section 3(e)(vii) upon the issuance
        of such options, warrants, convertible securities or other rights been made
        upon
        the basis of (and the total consideration received therefor) (i) the issuance
        of
        the number of shares of Common Stock theretofore actually delivered upon
        the
        exercise, conversion or exchange of such options, warrants, convertible
        securities or other rights, (ii) the issuance of all of the Common Stock
        and all
        other options, warrants, convertible securities and other rights to purchase
        or
        acquire Common Stock issued after the issuance of the modified options,
        warrants, convertible securities or other rights, and (iii) the original
        issuance at the time of the reduction of any such options, warrants, convertible
        securities or other rights then still outstanding.

      

      (C)    In
        no
        event shall an adjustment under this Section 3(e)(vii) be made if it would
        result in an increase in the then applicable Conversion Price.

      

      (viii)  
          Certificate
        of Adjustment.  Whenever
        the Conversion
        Price and/or the number of share of Common Stock receivable upon conversion
        of
        this Note is adjusted, the Maker shall promptly deliver to the Payee a
        certificate of adjustment, setting forth the Conversion Price and/or shares
        of
        Common Stock issuable after adjustment, a brief statement of the facts requiring
        the adjustment and the computation by which the adjustment was made. The
        certificate of adjustment shall be prima facie evidence of the correctness
        of
        the adjustment.

      

      (ix)    Successive
        Application.  The
        provisions of this
        Section 3(e) shall be applicable successively to each event described herein
        which may occur subsequent to the date of this Note and prior to the conversion
        in full of this Note.

      

      (x)    Fractional
        Shares.  No
        fractional shares of
        Common Stock shall be issuable by reason of any adjustments made pursuant
        to
        this Section 3(e); and in lieu of any such fractional shares, the Maker shall
        pay cash therefor in accordance with Section 3(b) above.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (f)    No
        Impairment.  The
        Maker will not, by
        amendment of its incorporation documents or through any reorganization, transfer
        of assets, consolidation, merger, dissolution, issue or sale of securities
        or
        any other voluntary action, avoid or seek to avoid the observance or performance
        of any of the terms to be observed or performed hereunder but will at all
        times
        in good faith assist in the carrying out of all the provisions of this Section
        3
        and in the taking of all such action as may be necessary or appropriate in
        order
        to protect the conversion rights of the Payee of this Note against impairment.
        In the event of any merger or consolidation in which the Maker is not the
        surviving entity, the Maker shall make appropriate arrangements in order
        that,
        upon any subsequent conversion of this Note, the Payee shall become entitled
        to
        receive the same securities or other consideration that such Payee would
        have
        received had such conversion been made immediately prior to the consummation
        of
        such merger or consolidation, subject to further adjustments, of the type
        provided in this Note, with respect to any events relating to any such
        securities occurring subsequent to the consummation of such merger or
        consolidation.

      

      (g)    Common
        Stock Reserved.  The
        Maker
        shall at all times reserve and keep available out of its authorized but unissued
        Common Stock such number of shares of Common Stock as shall from time to
        time be
        sufficient to effect the full conversion of this Note into Common Stock.
        

      

      (h)    Restricted
        Securities.  The
        shares of Common Stock issuable to the Payee hereunder (the “Shares”)
        may
        not, at the time of issuance, have been registered under any federal or state
        securities laws, and may constitute “restricted securities” within the meaning
        of federal and state securities laws. By its receipt of Shares, if the Shares
        are not then the subject of an effective registration statement under the
        Securities Act, the Payee will be deemed to acknowledge and confirm that
        it is
        receiving such Shares for its own account for investment, and not with a
        view to
        the resale or distribution thereof in violation of any federal or state
        securities laws. 

      

      4.    Events
        of Default.  The
        occurrence and continuance of an Event of Default under the Loan Agreement
        shall
        constitute a default under this Note and shall entitle the Payee to accelerate
        the entire indebtedness hereunder and take such other action as may be provided
        for in the Loan Agreement and/or in any and all other instruments evidencing
        and/or securing the indebtedness under this Note, or as may be provided under
        the law.

      

      5.    Communications
        and Notices.  Except
        as
        otherwise specifically provided herein, all communications and notices provided
        for in this Note shall be sent by post-paid first class mail, reputable
        overnight courier or facsimile to the Payee at the Payee’s address as provided
        to the Secretary of the Maker from time to time and, if to the Maker, at
        15402
        Vantage Parkway East, Suite 322, Houston, Texas 77032, Attention: Michael
        T.
        Adams, Executive Vice President and Secretary. Any first-class mail notice
        provided pursuant to this Section 5 shall be deemed given three (3) Business
        Days after being sent by first-class mail. Any notice sent by overnight courier
        shall be deemed given on the next Business Day after being deposited with
        the
        courier with all charges prepaid or billed to the account of the sender.
        Notices
        sent by facsimile shall be deemed received upon delivery. The Maker and the
        Payee may from time to time change their respective addresses, for purposes
        of
        this Section 5, by written notice to the other parties; provided, however,
        that
        notice of such change shall be effective only upon receipt.

      

      6.    Governing
        Law.  This
        Note
        shall be construed in accordance with and governed by the
        laws
        of the State of New York, except to the extent superseded by Federal
        enactments.

      

      7.    Assignment.  This
        Note
        shall be binding upon and shall inure to the benefit of the respective
        successors and permitted assigns of the parties hereto, provided that the
        Maker
        may not assign any of its rights or obligations hereunder without the prior
        written consent of the Payee.

      

      8.    Waiver
        and Amendment.  No
        waiver of a right in
        any instance shall constitute a continuing waiver of successive rights, and
        any
        one waiver shall govern only the particular matters waived. Neither any
        provision of this Note nor any performance hereunder may be amended or waived
        except pursuant to an agreement in writing signed by the party against whom
        enforcement thereof is sought. Except as otherwise expressly provided in
        this
        Note, the Maker hereby waives diligence, demand, presentment for payment,
        protest, dishonor, nonpayment, default, notice of any and all of the foregoing,
        and any other notice or action otherwise required to be given or taken under
        the
        law in connection with the delivery, acceptance, performance, default,
        enforcement or collection of this Note, and expressly agrees that this Note,
        or
        any payment hereunder, may be extended, modified or subordinated (by forbearance
        or otherwise) from time to time, without in any way affecting the liability
        of
        the Maker. The Maker further waives the benefit of any exemption under the
        homestead exemption laws, if any, or any other exemption, appraisal or
        insolvency laws, and consents that the Payee may release or surrender, exchange
        or substitute any personal property or other collateral security now held
        or
        which may hereafter be held as security for the payment of this
        Note.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      9.    Usury
        Savings Clause.  All
        agreements between the Maker and the Payee are hereby expressly limited to
        provide that in no contingency or event whatsoever, whether by reason of
        acceleration of maturity of the indebtedness evidenced hereby or otherwise,
        shall the amount paid or agreed to be paid to the Payee for the use, forbearance
        or detention of the indebtedness evidenced hereby exceed the maximum amount
        which the Payee is permitted to receive under applicable law. If, from any
        circumstances whatsoever, fulfillment of any provision hereof or of the Loan
        Agreement or any Loan Document thereunder, at the time performance of such
        provision shall be due, shall involve transcending the limit of validity
        prescribed by law, then, ipso facto,
        the
        obligation to be fulfilled shall automatically be reduced to the limit of
        such
        validity, and if from any circumstance the Payee shall ever receive as interest
        an amount which would exceed the highest lawful rate, such amount which would
        be
        excessive interest shall be applied to the reduction of the principal balance
        of
        any of the Maker’s Obligations (as such term is defined in the Loan Agreement)
        to the Payee, and not to the payment of interest hereunder. To the extent
        permitted by applicable law, all sums paid or agreed to be paid for the use,
        forbearance or detention of the indebtedness evidenced by this Note shall
        be
        amortized, prorated, allocated and spread throughout the full term of such
        indebtedness until payment in full, to the end that the rate or amount of
        interest on account of such indebtedness does not exceed any applicable usury
        ceiling. As used herein, the term “applicable law” shall mean the law in effect
        as of the date hereof, provided, however, that in the event there is a change
        in
        the law which results in a higher permissible rate of interest, then this
        Note
        shall be governed by such new law as of its effective date. This provision
        shall
        control every other provision of all agreements between the Maker and the
        Payee.

      

      10.    Collection
        Costs.  In
        the event that the
        Payee shall place this Note in the hands of an attorney for collection during
        the continuance of any Event of Default, the Maker shall further be liable
        to
        the Payee for all costs and expenses (including reasonable attorneys’ fees)
        which may be incurred by the Payee in enforcing this Note, all of which costs
        and expenses shall be obligations under and part of this Note; and the Payee
        may
        take judgment for all such amounts in addition to all other sums due
        hereunder.

      

      IN
        WITNESS WHEREOF, the Maker has executed this Note on the date first above
        written.

      

      

      
        	 	
                LAPOLLA
                  INDUSTRIES, INC.

              
	 	 
	 	
                By:
                  /s/ Michael T. Adams, EVP

              
	 	
                Name:
                  Michael T. Adams

              
	 	
                Title:
                  Executive Vice President

              

      

      
 

    

    6Unassociated Document

    
      

    

    

      EXHIBIT
        10.3

      

      REVOLVING
        CREDIT NOTE

      

      
        	
                $3,500,000

              	
                February
                  21, 2007

              

      

      

      FOR
        VALUE RECEIVED,
        the
        undersigned, LAPOLLA
        INDUSTRIES, INC.,
        a
        Delaware corporation (the “Maker”), hereby promises to pay to the order of
COMVEST
        CAPITAL, LLC, a
        Delaware limited liability company (“ComVest”), and/or to the order of any
        subsequent holder(s) of this Note (hereinafter, collectively with ComVest,
        referred to as the “Payee”), on February 28, 2009 (subject to extension in
        accordance with Section 2.01(e) of the Loan Agreement hereinafter described,
        or
        sooner by reason of an Event of Default or required prepayment in accordance
        with such Loan Agreement), the principal sum of Three Million Five Hundred
        Thousand ($3,500,000) Dollars or, if less, the aggregate unpaid principal
        amount
        of all Revolving Credit Advances made by the Payee to the Maker pursuant
        to that
        certain Revolving Credit and Term Loan Agreement of even date herewith by
        and
        between ComVest and the Maker (as same may be amended, modified, supplemented
        and/or restated from time to time, the “Loan Agreement”), together with interest
        (computed as hereinafter provided) on any and all principal amounts outstanding
        hereunder from time to time from the date hereof until payment in full hereof,
        at a rate per annum equal to the greater of (a) the Prime Rate (as such term
        is
        hereinafter defined) in effect from time to time plus one (1%) percent, or
        (b)
        nine and one-half (9.5%) percent; provided,
        however,
        that
        during the continuance of any Event of Default under the Loan Agreement,
        the
        interest rate otherwise applicable hereunder shall be increased by four hundred
        (400) basis points. All interest shall be computed on the daily unpaid principal
        balance hereof based on a three hundred sixty (360) day year, and shall be
        payable monthly in arrears on the last day of each calendar month commencing
        March 31, 2007, and upon maturity or acceleration hereof.

      

      As
        used
        herein, the term “Prime Rate” shall mean the “prime rate” or “base rate” of
        interest publicly announced by Citibank, N.A. (or any successor thereto,
        or in
        the event that such bank shall cease to exist and shall have no successor,
        any
        other domestic commercial bank selected by the Payee in good faith) from
        time to
        time, which is merely a reference rate for determining the interest rate
        to be
        charged on loans or other financial transactions, and may or may not be the
        best
        rate offered by such bank for commercial loans; and upon each announced change
        of the Prime Rate by such bank, the interest rate hereunder shall be
        correspondingly adjusted.

      

      The
        Maker
        shall have the right, at any time and from time to time, to prepay all or
        any
        portion of the principal balance of this Note upon written notice to the
        Payee,
        stating the amount of the prepayment. In addition, the Maker shall be required
        (a) to make principal payments hereunder, without requirement of notice or
        demand, as and to the extent provided in Section 2.01(d) of the Loan Agreement,
        and (b) to make payment of all outstanding principal and accrued interest
        hereunder simultaneously with the payment or prepayment in full of the Term
        Note
        issued pursuant to the Loan Agreement.

      

      Unless
        the Maker shall be otherwise notified in writing by ComVest, all principal
        and
        interest hereunder are payable in lawful money of the United States of America
        at the office of ComVest set forth in the Loan Agreement in immediately
        available funds. Payments of principal and/or interest hereunder shall be
        made,
        at the Payee’s option, by debiting any demand deposit account(s) in the name of
        the Maker at the Payee (or any agent of the Payee) or in such other reasonable
        manner as may be designated by the Payee in writing to the Maker and in any
        event shall be made in immediately available funds. The Maker hereby irrevocably
        authorizes the Payee to so debit any and all such demand deposit
        accounts.

      

      The
        Maker
        hereby waives presentment, demand, dishonor, protest, notice of protest,
        diligence and any other notice or action otherwise required to be given or
        taken
        under the law in connection with the delivery, acceptance, performance, default,
        enforcement or collection of this Note, and expressly agrees that this Note,
        or
        any payment hereunder, may be extended, modified or subordinated (by forbearance
        or otherwise) from time to time, without in any way affecting the liability
        of
        the Maker. The Maker hereby further waives the benefit of any exemption under
        the homestead exemption laws, if any, or any other exemption, appraisal or
        insolvency laws, and consents that the Payee may release or surrender, exchange
        or substitute any personal property or other collateral security now held
        or
        which may hereafter be held as security for the payment of this
        Note.

      

      This
        Note
        is the Revolving Credit Note issued pursuant to the terms of the Loan Agreement
        and is secured pursuant to the provisions of certain “Security Documents”
referred to in the Loan Agreement. This Note is entitled to all of the benefits
        of the Loan Agreement and said Security Documents, including provisions
        governing the payment and the acceleration of maturity hereof, which agreements
        and instruments are hereby incorporated by reference herein and made a part
        hereof. The occurrence and continuance of an Event of Default thereunder
        shall
        constitute a default under this Note and shall entitle the Payee to accelerate
        the entire indebtedness hereunder and take such other action as may be provided
        for in the Loan Agreement and/or any and all other instruments evidencing
        and/or
        securing the indebtedness under this Note, or as may be provided under the
        law.

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      In
        the
        event that any holder of this Note shall, during the continuance of any Event
        of
        Default, exercise or endeavor to exercise any of its remedies hereunder or
        under
        the Loan Agreement or any of the Security Documents, the Maker shall pay
        all
        reasonable costs and expenses incurred in connection therewith, including,
        without limitation, reasonable attorneys’ fees, all of which costs and expenses
        shall be obligations under and part of this Note; and the holder hereof may
        take
        judgment for all such amounts in addition to all other sums due
        hereunder.

      

      No
        consent or waiver by the holder hereof with respect to any action or failure
        to
        act which, without such consent or waiver, would constitute a breach of any
        provision of this Note shall be valid and binding unless in writing and signed
        by the Maker and by the holder hereof.

      

      All
        agreements between the Maker and the Payee are hereby expressly limited to
        provide that in no contingency or event whatsoever, whether by reason of
        acceleration of maturity of the indebtedness evidenced hereby or otherwise,
        shall the amount paid or agreed to be paid to the Payee for the use, forbearance
        or detention of the indebtedness evidenced hereby exceed the maximum amount
        which the Payee is permitted to receive under applicable law. If, from any
        circumstances whatsoever, fulfillment of any provision hereof or of any of
        the
        Security Documents or the Loan Agreement, at the time performance of such
        provision shall be due, shall involve transcending the limit of validity
        prescribed by law, then, ipso facto,
        the
        obligation to be fulfilled shall automatically be reduced to the limit of
        such
        validity, and if from any circumstance the Payee shall ever receive as interest
        an amount which would exceed the highest lawful rate, such amount which would
        be
        excessive interest shall be applied to the reduction of the principal balance
        of
        any of the Maker’s Obligations (as such term is defined in the Loan Agreement)
        to the Payee, and not to the payment of interest hereunder. To the extent
        permitted by applicable law, all sums paid or agreed to be paid for the use,
        forbearance or detention of the indebtedness evidenced by this Note shall
        be
        amortized, prorated, allocated and spread throughout the full term of such
        indebtedness until payment in full, to the end that the rate or amount of
        interest on account of such indebtedness does not exceed any applicable usury
        ceiling. As used herein, the term “applicable law” shall mean the law in effect
        as of the date hereof, provided,
        however,
        that in
        the event there is a change in the law which results in a higher permissible
        rate of interest, then this Note shall be governed by such new law as of
        its
        effective date. This provision shall control every other provision of all
        agreements between the Maker and the Payee.

      

      This
        Note
        shall be governed by and construed in accordance with the laws of the State
        of
        New York, except to the extent that such laws are superseded by Federal
        enactments. 

      

      IN
        WITNESS WHEREOF,
        the
        Maker has caused this Note to be executed by its duly authorized officers
        as of
        the date first set forth above.

      

      
        	 	
                LAPOLLA
                  INDUSTRIES, INC.

              
	 	 
	 	
                By:
                  /s/ Michael T. Adams, EVP

              
	 	
                Name:
                  Michael T. Adams

              
	 	
                Title:
                  Executive Vice President

              

      

    

     

     

    2

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