AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO
NOTE PURCHASE AGREEMENT (this “Amendment”), dated as of November 14, 2014, with an effective date
as of August 31, 2014 (the “Effective Date”), is by and among LAPOLLA INDUSTRIES, INC., a Delaware corporation
(the “Borrower”), ENHANCED CREDIT SUPPORTED LOAN FUND, LP, a Delaware limited partnership, and the
other Purchasers party hereto. Unless otherwise defined herein or the context otherwise requires, capitalized terms used herein
shall have the meanings ascribed thereto in the Note Purchase Agreement (as defined below).
WHEREAS, the Purchasers
have extended certain credit facilities in favor of the Borrower pursuant to that certain Note Purchase Agreement, dated as of
December 10, 2013 by and between the Borrower and the Purchasers (as amended by that certain Amendment No. 1 dated April 8, 2014
(“Amendment No. 1”), the “Note Purchase Agreement”); and
WHEREAS, the Borrower
and the Purchasers have agreed, subject to the terms and conditions hereof, to amend the Note Purchase Agreement by (i) changing
certain covenants in the Note Purchase Agreement, and (ii) providing for the payment of legal fees in connection with this amendment;
in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Amendment to Note Purchase Agreement. Upon execution of this Amendment by the parties hereto, the
Note Purchase Agreement is amended as of the Effective Date as follows:
Section 1.1 is hereby amended by adding the definition of Amendment No. 2 to Note Purchase Agreement as follows:
“Amendment No. 2 to Note
Purchase Agreement” means that certain Amendment No. 2 to Note Purchase Agreement dated as of November 14, 2014 between
the Purchasers and the Borrower.
Section 1.1 is hereby amended by amending and restating the definitions of “Fixed Charge Coverage Ratio”
and “Subordinated Debt” as follows:
“Fixed Charge Coverage Ratio:
the ratio, determined for any period on a consolidated basis for Borrower and Subsidiaries, of (a) the sum of (i) EBITDA, (ii) Subordinated
Debt incurred during such period on or after August 31, 2014 up to a maximum aggregate amount over all periods of $500,000, and
(iii) up to $267,000 in Accounts charged off by Borrower in August, 2014, to (b) the sum of Capital Expenditures (except those
financed with Indebtedness (other than with respect to Revolver Loans (as defined in the Senior Credit Agreement)), cash taxes
paid, interest expense (other than payment-in-kind), principal payments made on Indebtedness (other than with respect to Revolver
Loans), and Distributions made, in each case determined for such period; provided that principal payments made with respect to
the Enhanced Indebtedness during December 2013 in an amount not exceeding $150,000 shall not be included in the calculation of
the Fixed Charge Coverage Ratio.”
Indebtedness incurred by Borrower that (i) is subject to a subordination agreement between Agent and the holder of such Indebtedness,
in form and substance satisfactory to Agent, which, among other things, expressly subordinates and makes junior in right of payment
to the payment in full in cash of all Obligations, and (ii) is on terms (including maturity, interest, fees, repayment, covenants,
and subordination) satisfactory to Agent.”
Section 2.4(a) is hereby amended by replacing “3.75%” with “4.25%”.
Section 6.1(a)(ii) is hereby amended and restated as follows:
(ii) as soon as practicable after
the end of each month, and in any event within twenty-five (25) days thereafter, a balance sheet of the Borrower as of the end
of such month, a monthly aging report for accounts receivable and accounts payable showing aging, write-offs, and reserves, a copy
of the most recent borrowing base certificate delivered in connection with the Senior Indebtedness, a statement of income and a
statement of cash flows of the Borrower for such month and for the fiscal year to date, including a comparison to plan figures
for such period prepared in accordance with GAAP consistently applied (except as noted therein);
Section 7.18 is hereby amended and restated as follows:
Section 7.18 Minimum EBITDA.
Permit its EBITDA for the three (3) months ending on the last day of each month set forth below to be less than the corresponding
amount set forth below for such period:
|Three Month Period Ended
|February 28, 2014
|March 31, 2014
|April 30, 2014
|May 31, 2014
|June 30, 2014
|July 31, 2014
|August 31, 2014
|September 30, 2014
|October 31, 2014
|November 30, 2014
|December 31, 2014
|January 31, 2015
|February 28, 2015
|March 31, 2015
|April 30, 2015
|May 31, 2015
|June 30, 2015
|July 31, 2015
|August 31, 2015
|September 30, 2015
|October 31, 2015
|November 30, 2015
|December 31, 2015
|January 31, 2016
|February 28, 2016
|March 31, 2016
|April 30, 2016
|May 31, 2016
|June 30, 2016
|July 31, 2016
|August 31, 2016
|September 30, 2016
|October 31, 2016
|November 30, 2016
(*) For purposes of the February 2014
minimum EBITDA calculation the Borrower will be permitted to add-back to EBITDA the amount of $236,737 which represents a portion
of the Note Receivable to Dena Lynn Sosebee and Chemical Design, Corporation dated May 14, 2013 in the amount of $515,708.69 and
Amended on February 14, 2014 in the amount of $473,473.40 which the Borrower elected to reserve $236,737 as of December 31, 2013.
Section 7.19 is hereby amended and restated as follows:
“Section 7.19 Fixed Charge
Coverage Ratio. Permit its Fixed Charge Coverage Ratio for the twelve (12) months ending on the last day of each calendar month
to be less than (i) 0.90 to 1.0 for the periods ended December 31, 2013, January 31, 2014, February 28, 2014, May 31, 2014, June
30, 2014, (ii) 0.80 to 1.0 for the periods ended March 31, 2014 and April 30, 2014 and (iii) 1.0 to 1.0 for the periods ended July
31, 2014 and thereafter, provided that, if Borrower fails to maintain such Fixed Charge Coverage Ratio as of any date of determination
but, on or before the date Borrower is required to provide to Agent its monthly financial statements in accordance with Section
6.1(a) hereof for the month ending as of such date of determination, Borrower incurs additional Subordinated Debt (up to the
aggregate limit of $500,000 set forth in the definition of Fixed Charge Coverage Ratio) that, when included in the determination
of Fixed Charge Coverage Ratio as of such date of determination would prevent a breach of this covenant, then Borrower shall be
deemed to have satisfied this covenant as of such date of determination and no Default shall have occurred as a result thereof.”
Section 7.20 is hereby amended and restated as follows:
Section 7.20 Minimum Liquidity.
Permit its Liquidity to be less than $500,000.
Amendment to Amendment No. 1. Amendment No. 1 is hereby amended as of April 8, 2014 to revise the
first date referenced to be April 8, 2014 and to delete the second sentence of Section 6.
Loan Documents Generally. All references to the Note Purchase Agreement in the Loan Documents and
any other documents evidencing, securing or otherwise relating to the credit extended by Purchasers in favor of Borrower shall
mean the Note Purchase Agreement and as modified hereby and this Amendment shall itself constitute a Loan Document.
Representations and Warranties. The Borrower hereby represents and warrants to the Purchasers that:
No Default or Event of Default will exist after giving pro forma effect to this Amendment, the consent contained
herein and the transactions contemplated by and consented to in this Amendment;
Giving effect to this Amendment, the representations and warranties set forth in the Note Purchase Agreement are,
subject to the limitations set forth therein, true and correct in all material respects as of the date hereof (except for those
which expressly relate to an earlier date) and each of such representations and warranties (except to
the extent such representations and warranties expressly relate to an earlier date) together with each of the representations and
warranties contained in this Amendment shall be true and correct on and as of the date of consummation of the transactions contemplated
by and consented to in this Amendment, as if such representations and warranties were made on such date;
The Borrower has the organizational power and authority to execute and deliver this Amendment and to perform its
obligations hereunder and has taken all necessary organizational action to authorize the execution, delivery and performance by
it of this Amendment; and
The Borrower has duly executed and delivered this Amendment, and this Amendment constitutes its legal, valid and
binding obligation enforceable in accordance with its terms.
Amendment; No Implied Waiver. This Amendment shall be limited precisely as written and shall not
operate as a consent to any other action or inaction by the Borrower, or as a waiver or amendment of any right, power, or remedy
of the Purchasers under the Note Purchase Agreement or the other Loan Documents nor constitute a consent to any action or inaction,
or a waiver or amendment of any provision contained in the Note Purchase Agreement and the other Loan Documents except as specifically
Reaffirmation of Borrower Obligations; Other Acknowledgement and Consents. The Borrower hereby:
Agrees that it is truly and justly indebted to the Purchasers for all of the Borrower’s obligations under the
Note Purchase Agreement and the other Loan Documents without defense, offset or counterclaim of any kind whatsoever and reaffirms
and admits the validity and enforceability of the Note Purchase Agreement and the Loan Documents to which it is a party and the
liens upon and security interests in the collateral which were granted pursuant to the Loan Documents to which it is a party;
Consents to the execution and delivery of this Amendment by the Borrower and to the terms and conditions set forth
herein and any other waivers, consents or amendments which the Purchasers deems appropriate;
Agrees to be bound by the terms and conditions of the Note Purchase Agreement as amended or modified by this Amendment;
Acknowledges and agrees that all obligations of the Borrower under the Note Purchase Agreement, as amended and modified
by this Amendment, and the other Loan Documents pursuant to which the Borrower grants any security to the Purchasers, are secured
pursuant to the Loan Documents and all references in the Loan Documents to the secured obligations or language of similar meaning
shall hereafter be deemed to include the Borrower’s obligations to the Purchasers under the Note Purchase Agreement, as modified
by this Amendment and the other instruments, documents and agreements executed and delivered pursuant hereto or in connection herewith;
Notwithstanding any prior disregard of any of the terms of the Note Purchase Agreement or any of the Loan Documents,
agrees that the terms of the Note Purchase Agreement and each of the Loan Documents shall be strictly adhered to on and after the
date hereof in accordance with the terms hereof.
Effectiveness. This Agreement shall become effective as of the date set forth on the first page
hereof at such time as each of the following conditions is satisfied:
Representations. The representations and warranties contained herein and in all other Loan Documents shall
be true and correct as of the date hereof as if made on the date hereof.
Default. No Default or Event of Default shall have occurred and be continuing.
This Agreement. Agent shall have received counterparts of this Amendment, duly executed by Borrower and each
Purchaser, and acknowledgment of this Agreement from each Guarantor.
Kurtz Loan. Agent shall have received evidence that Richard Kurtz shall have made an additional subordinated
loan to Borrower in the amount of not less than $250,000 and Agent shall have received true and complete copies of all documents,
instruments, and agreements evidencing or otherwise related to the additional subordinated loan from Richard Kurtz to Borrower.
Kurtz Documents. Agent shall have received an amendment to that certain Subordination Agreement, dated as
of December 10, 2013, among Borrower, Agent, and Richard Kurtz, in form and substance satisfactory to Agent. Agent shall have received
an amendment to that certain Guaranty Agreement, dated as of December 10, 2013, Richard Kurtz in favor of Agent, in form and substance
satisfactory to Agent.
Corporate Documentation. Agent shall have received (i) a secretary certificate certifying the resolutions
of the board of directors of Borrower authorizing the execution of this Amendment and the Amendment No. 1 and (ii) an opinion of
counsel for the Borrower in form and substance satisfactory to Agent with respect to this Amendment and Amendment No. 1
Fees and Expenses. Agent shall have received reimbursement for all outstanding fees and expenses of the Agent.
Further Assurances. The Borrower will execute such additional documents as are reasonably requested
by the Purchasers to reflect the terms and conditions of this Amendment and will cause to be delivered such agreements, certificates,
legal opinions and other documents as are reasonably required by the Purchasers.
Counterparts/Telecopy. This Amendment may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be original and all of which shall constitute together but one and the same agreement. Delivery
of executed counterparts of this Amendment by telecopy shall be effective as an original and shall constitute a representation
that an original shall be delivered.
Governing Law/Consent to Jurisdiction/Waiver of Jury Trial. THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK AND THE PARTIES HERETO HEREBY CONSENT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE 2ND
CIRCUIT, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION BROUGHT TO ENFORCE ANY RIGHTS UNDER THIS AGREEMENT AND ANY RELATED
DOCUMENT OR INSTRUMENT. EACH OF THE PARTIES HERETO HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR
PROCEEDING ARISING OUT OF OR RELATED TO THIS AMENDMENT.
Survival. All warranties, representations and covenants made by Borrower herein, or in any agreement
referred to herein or in any certificate, document or other instrument delivered by it or on its behalf under this Amendment, shall
be considered to have been relied upon by the Purchasers. All statements in any such certificate or other instrument shall constitute
warranties and representations by Borrower hereunder. All warranties, representations, and covenants made by Borrower hereunder
or under any other agreement or instrument shall be deemed continuing until the payment in full, in cash, and indefeasible satisfaction
of all obligations and any other obligations of Purchasers and any commitment of Purchasers to extend credit to Borrower shall
have been irrevocably terminated.
[Signatures are on the following page]
IN WITNESS WHEREOF, the Borrower
and the other parties listed below have caused this Amendment to be duly executed as of the day and year first above written.
LAPOLLA INDUSTRIES, INC.
By: /s/ Michael T. Adams,
Michael T. Adams, Executive Vice President
AS AGENT FOR PURCHASER AND AS
ENHANCED CREDIT SUPPORTED LOAN FUND,
By: Enhanced CSLF GP, LLC, its general
By: /s/ Douglas Cruishank
Name: Douglas Cruikshank
ENHANCED JOBS FOR TEXAS FUND, LLC
By: /s/ Michael A.G.
Name: Michael A.G. Korengold
Title: President and CEO
AND CONSENT OF GUARANTORS
Each of the undersigned Guarantors hereby (i) acknowledges
that such Guarantor has read the preceding Amendment No. 2 to Note Purchase Agreement (the “Second Amendment”) dated
as of November 14, 2014 between LaPolla Industries, Inc., Enhanced Credit Supported Loan Fund, LP, and the other parties thereto.;
(ii) reaffirms and ratifies such Guarantor’s obligations under Guarantor’s Guaranty made by such Guarantor as
of December 10, 2013 to and for the benefit of Agent (as defined therein) (together with all amendments,
supplements, exhibits and modifications thereto, each a “Guaranty”), and (iii) acknowledges
that Guarantor’s obligations pursuant to the Guaranty are enforceable without defense, offset or counterclaim.
IN WITNESS WHEREOF, each Guarantor hereby executes
this instrument as of November 14, 2014.
FOREST HILL TERRACE ASSOCIATES, L.P.
BY: FOREST HILL TERRACE ASSOCIATES, GP, LLC,
its General Partner
By /s/ Richard J. Kurtz
Name: Richard J. Kurtz
FOREST HILL TERRACE ASSOCIATES, GP, LLC
By /s/ Richard J. Kurtz
Name: Richard J. Kurtz
Richard J. Kurtz
/s/ Richard J. Kurtz