REVOLVING CREDIT AND TERM LOAN AGREEMENT

EXHIBIT 10.1

AGREEMENT (this “ Agreement ”) is made and entered into as of the 21 ^st day of February, 2007, by and between COMVEST CAPITAL, LLC , a Delaware limited liability company (the “ Lender ”), and LAPOLLA INDUSTRIES, INC. , a Delaware corporation (the “ Borrower ”).

WHEREAS , the Borrower is engaged in the business of manufacturing and distributing coatings, foam, paints, sealants, adhesives, equipment and other goods targeting commercial, industrial and residential applications in the roofing, construction and paint industries (collectively, the “ Business Operations ”); and

WHEREAS , in order to provide funds for the repayment and retirement of the Borrower’s existing line of credit facility and certain other Indebtedness and for the Borrower’s working capital and other general corporate purposes, the Borrower has requested the Lender to extend to the Borrower a revolving credit facility and a term loan on the terms and conditions of this Agreement; and

WHEREAS , the Lender is willing and able to provide such revolving credit facility and make such term loan to the Borrower on the terms and conditions of this Agreement;

NOW, THEREFORE , in consideration of the premises and the mutual covenants herein contained, the parties hereby agree as follows:

Section 1.01. Defined Terms . In addition to the other terms defined elsewhere in this Agreement, as used herein, the following terms shall have the following meanings:

“ Accounts ” shall mean “accounts” (as defined in the UCC) of the Borrower and its Domestic Subsidiaries from time to time.

“ Account Debtor ” shall mean any Person who is obligated on an Account.

“ Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“ Advances ” shall mean the principal amounts loaned to the Borrower from time to time pursuant to Section 2.01 below.

“ Affiliate ” shall mean, with respect to any Person, any other Person in Control of, Controlled by, or under common Control with the first Person, and any other Person who has a substantial interest, direct or indirect, in the first Person or any of its Affiliates, including, without limitation, any officer or director of the first Person or any of its Affiliates; provided , however , that neither the Lender nor any of its Affiliates shall be deemed an “Affiliate” of the Borrower for any purposes of this Agreement. For the purpose of this definition, a “substantial interest” shall mean the direct or indirect legal or beneficial ownership of more than ten (10%) percent of any class of stock or similar interest.

“ Agreement ” shall mean this Revolving Credit and Term Loan Agreement as it may from time to time be amended, modified, supplemented and/or restated.

“ Applicable Law ” shall mean all applicable provisions of all (a) constitutions, statutes, ordinances, rules, regulations and orders of all governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c) order, judgments and decrees of all courts and arbitrators.

“ Availability ” shall mean the amount (if any) by which, at the time of determination, (a) the Revolving Credit Commitment exceeds (b) the outstanding principal amount of Advances.

“ Borrowing Base ” shall mean an amount, determined in accordance with the most recent borrowing base report provided to the Lender under Section 5.04(e) hereof, equal to (a) 80% of Eligible Accounts, minus (b) such reserves as the Lender may establish from time to time in its Permitted Discretion (including, without limitation, to account for concentration and other risks of collection). In the event that the Borrower has not timely delivered a current Borrowing Base report in accordance with Section 5.04(e) below, then the applicable Borrowing Base shall be such amount as is established by the Lender, until such time as the Borrower has delivered a current Borrowing Base report.

“ Borrowing Date ” means the Business Day on which the Lender makes a Loan hereunder.

“ Business Day ” shall mean a day other than (a) a Saturday, (b) a Sunday, or (c) a day on which banking institutions in either the State of Florida or the State of Texas are authorized or required by law or executive order to close.

“ Capital Expenditures ” shall mean with respect to any Person, all expenditures of such Person for tangible assets which are capitalized, and the fair value of any tangible assets leased by such Person under any lease which would be a Capitalized Lease, determined in accordance with GAAP, including all amounts paid or accrued by such Person in connection with the purchase (whether on a cash or deferred payment basis) or lease (including Capitalized Lease Obligations) of any machinery, equipment, real property, improvements to real property (including leasehold improvements), or any other tangible asset of such Person which is required, in accordance with GAAP, to be treated as a fixed asset on the consolidated balance sheet of such Person.

“ Capitalized Lease ” shall mean any lease which is or should be capitalized on the balance sheet of the lessee thereunder in accordance with GAAP.

“ Capitalized Lease Obligation ” shall mean with respect to any Person, the amount of the liability which reflects the amount of future payments under all Capitalized Leases of such Person as at any date, determined in accordance with GAAP.

“ Cash Equivalents ” shall mean (a) marketable securities issued, or directly and fully guaranteed or insured, by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve (12) months from the date of acquisition; (b) time deposits, demand deposits, certificates of deposit, acceptances or prime commercial paper issued by, or repurchase obligations for underlying securities of the types described in clause (a) entered into with any commercial bank having a short-term deposit rating of at least A-2 or the equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s Investors Service, Inc.; (c) commercial paper with a rating of A-I or A-2 or the equivalent thereof by Standard & Poor’s Corporation or P-1 or P-2 or the equivalent thereof by Moody’s Investors Service, Inc. and in each case maturing within twelve (12) months after the date of acquisition; (d) marketable direct obligations issued by any state in the United States or any agency or instrumentality thereof maturing within twelve (12) months from the date of acquisition thereof and, at the time of acquisition, have one of the two highest ratings generally obtainable from either Standard & Poor’s Corporation or Moody’s Investors Services, Inc.; (e) tax-exempt commercial paper of United States municipal, state or local governments rated at least A-2 or the equivalent thereof by Standard & Poor’s Corporation or at least P-2 or the equivalent thereof by Moody’s Investors Services, Inc. and maturing within twelve (12) months after the date of acquisition thereof; (f) any other items selected by the Borrower and approved by the Lender (which approval shall not be unreasonably withheld or delayed); or (g) any mutual fund or other pooled investment vehicle which invests principally in the foregoing obligations.

“ Closing Date ” shall mean the date of this Agreement, simultaneously with the funding of the Term Loan.

“ Closing Fee ” shall mean the sum of $115,000, which shall be payable in accordance with Section 2.03(a) below.

“ Code ” shall mean the Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, as in effect from time to time.

“ Collateral ” shall mean all collateral pledged by the Borrower and/or any of the Subsidiaries as security for the payment and performance of the Obligations, whether pursuant to the Collateral Agreement or any other Security Document.

“ Collateral Agreement ” shall mean the Collateral Agreement, dated as of the Closing Date, by and between the Borrower and the Lender, as same may be amended, modified, supplemented and/or restated from time to time.

“ Common Stock ” shall mean the authorized common stock of the Company, $.01 par value per share.

“ Confidential Information ” shall mean information that the Borrower furnishes to the Lender pursuant to any Loan Document, but does not include any such information once such information has become, or if such information is, generally available to the public or available to the Lender from a source other than the Borrower which is not, to the Lender’s knowledge, bound by any confidentiality agreement in respect thereof.

“ Contract ” shall mean any indenture, agreement (other than this Agreement), other contractual restriction, lease in which the Borrower or any Subsidiary is a lessor or lessee, license or instrument.

“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” shall have meanings correlative thereto.

“ Control Agreement ” shall mean, with respect to each bank account and/or securities account maintained by or in the name of the Borrower or any Domestic Subsidiary, an agreement executed and delivered by the Borrower (or the subject Domestic Subsidiary, as applicable) and the account intermediary, whereby the account intermediary acknowledges the Lender’s Lien on such account and all funds or property therein, and “control” (within the meaning of the UCC) over such account is established in favor of the Lender.

“ Default ” shall mean any of the events specified in Article VII hereof, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“ Disclosure Schedule ” shall mean the disclosure schedule, dated as of the Closing Date, executed and delivered by the Borrower to the Lender, the section numbers of which correspond to the Section numbers of this Agreement.

“ Dollars ” or “ $ ” shall mean United States Dollars, lawful currency for the payment of public and private debts.

“ Domestic Subsidiary ” shall mean any Subsidiary which is incorporated or formed under the laws of the United States, any State or Commonwealth in the United States, or the District of Columbia.

“ EBITDA ” shall mean, for the subject twelve (12) month period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) Net Income, plus (b) Interest Expense deducted in the calculation of such Net Income, plus (c) taxes on income, whether paid, payable or accrued, deducted in the calculation of such Net Income, plus (d) depreciation expense deducted in the calculation of such Net Income, plus (e) amortization expense deducted in the calculation of such Net Income, plus (f) all other non-cash charges and expenses deducted in the calculation of such Net Income, excluding accruals for cash expenses made in the ordinary course of business, plus (g) losses deducted in the calculation of such Net Income from any sales of assets, other than sales in the ordinary course of business, minus (h) gains added in the calculation of such Net Income from any sales of assets, other than sales in the ordinary course of business, plus (i) other extraordinary or non-recurring non-cash losses deducted in the calculation of such Net Income, minus (j) other extraordinary or non-recurring non-cash gains added in the calculation of such Net Income, all determined in accordance with GAAP.

“ Eligible Account ” shall mean the face amount of each trade Account of the Borrower or a Domestic Subsidiary (if same has executed a Guaranty Agreement and become a party to the Collateral Agreement) for services rendered or goods and products sold in the ordinary course of the Business Operations which the Lender, in its Permitted Discretion, deems to be an Eligible Account; provided , however , that an Account shall not be deemed an Eligible Account unless it meets all of the following conditions:

(a)      the subject services or products and goods have been rendered, shipped or delivered on an absolute sale basis to an Account Debtor which is not an Affiliate, vendor or supplier of the Borrower or a Subsidiary, with an invoice date contemporaneous with or within thirty (30) calendar days after the date of shipment or service, and which does not constitute a consignment sale, bill-and-hold sale, sale-and-return or other such arrangement and is not subject to any other repurchase, return or offset agreement binding upon the Borrower or a Domestic Subsidiary; the subject services or products and goods have been rendered, shipped and delivered (or shipped f.o.b.) to such Account Debtor on an open account basis (or with payment guaranteed by a domestic letter of credit, drawn on or by a domestic financial institution, acceptable to the Lender in all respects), and no part of the subject services, products or goods has been returned, rejected, lost or damaged; the Account is not evidenced by chattel paper or an instrument of any kind; and such Account Debtor, unless pre-approved in writing by the Lender, is not insolvent or the subject of any bankruptcy or insolvency proceeding of any kind in any jurisdiction;

(b)      if the Account Debtor is located outside the continental United States and (i) the subject Account is greater than $25,000, or (ii) all earlier-dated invoices to Account Debtors located outside the continental United States represent (in the aggregate) 15% or more of the total Eligible Accounts at the date of determination, then the payment for the subject services or goods shall be secured by an irrevocable letter of credit, which letter of credit shall have been confirmed by a financial institutional reasonably acceptable to the Lender payable in the full amount of the face value of the Account in lawful currency of the United States; provided , however , that the Lender may, from time to time, in its sole and absolute discretion, waive any of the requirements of this subsection (b);

(c)      it is a valid, legally enforceable obligation of the Account Debtor thereunder payable in Dollars and is not subject to any recoupment, offset or other defense or any discount or chargeback on the part of such Account Debtor (provided that prompt payment discounts granted in the ordinary course of business shall not cause an Account to be disqualified hereunder, so long as only the discounted amount of such Account, if not otherwise disqualified, is included in the calculation of the Borrowing Base) or to any claim on the part of such Account Debtor denying liability thereunder (provided that the undisputed portion may be considered to be an Eligible Account);

(d)      it is subject to no Lien whatsoever, except for the Lien of the Lender;

(e)      it has not remained unpaid in whole or in part for a period exceeding ninety (90) days after the original invoice date;

(f)       it does not arise out of a transaction (whether direct or indirect) with an employee, officer, agent, director or Affiliate of the Borrower or any Subsidiary or with any entity controlled by any employee, officer, agent or director of the Borrower or any Subsidiary;

(g)      it is not subject to any contract retainage or other withholding of any portion of payments on amounts invoiced, whether to secure the Borrower’s or any Subsidiary’s performance or otherwise;

(h)      it does not represent the unpaid portion of an Account any portion of which was previously paid or agreed to be paid through the issuance or delivery of equity securities or other non-cash consideration;

(i)       if the Account Debtor is the United States, any State or Commonwealth therein, or any department, agency or instrumentality thereof, the Borrower or the applicable Domestic Subsidiary has duly assigned its rights to payment of such Account to the Lender pursuant to the federal Assignment of Claims Act and any comparable state statutes;

(j)       the Lender has a perfected first priority Lien in such Account;

(k)      such Account is not payable by any person other than the Account Debtor (such as a beneficiary, recipient or subscriber individually), provided that the portion thereof which is payable by the Account Debtor may be considered to be an Eligible Domestic Account;

(l)       at least sixty (60%) percent in dollar amount of the total Accounts owed by such Account Debtor and/or its Affiliates constitute Eligible Domestic Accounts;

(m)           the total Accounts owed by the subject Account Debtor and/or its Affiliates constitute less than ten (10%) percent of the net collectible dollar value of all Eligible Accounts (provided that only the excess over ten (10%) percent shall be disqualified under this clause (m), unless the Lender has otherwise consented in writing to the inclusion of all or any portion of such excess);

(n)      such Account is payable solely to the Borrower or a Domestic Subsidiary, and the Borrower or such Domestic Subsidiary is not aware of any dispute by the Account Debtor with respect to such Account; and

(o)      it is not otherwise determined by the Lender, in the Lender’s Permitted Discretion, to be difficult to collect, uncollectible or otherwise unacceptable for any reason.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as in effect from time to time.

“ ERISA Affiliate ” shall mean, with respect to any Person, any other Person which is under common control with the first Person within the meaning of Section 414(b) or 414(c) of the Code; provided , however , that with respect to the Borrower, no Person which is an Affiliate of the Lender (other than the Borrower and its Subsidiaries) shall be deemed an ERISA Affiliate for purposes of this Agreement

“ Event of Default ” has the meaning set forth in Article VII below.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Existing Lender ” shall mean Wachovia Bank, National Association, as the lender under the outstanding line of credit facility by and between such lender and the Borrower.

“ Financial Statements ” has the meaning set forth in Section 3.01(a) below.

“ Fiscal Year ” shall mean the fiscal year of the Borrower which ends on December 31 of each year.

“ Foreign Subsidiary ” shall mean any Subsidiary which is not a Domestic Subsidiary.

“ GAAP ” shall mean generally accepted accounting principles in the United States of America, consistently applied, unless the context otherwise requires, with respect to any financial terms contained herein, as then in effect with respect to the preparation of financial statements.

“ Government Approval ” shall mean an authorization, consent, non-action, approval, license or exemption of, registration or filing with, or report to, any governmental or quasi-governmental department, agency, body or other unit.

“ Guaranty ”, “ Guaranteed ” or to “ Guarantee ”, as applied to any Indebtedness, liability or other obligation, shall mean (a) a guaranty, directly or indirectly, in any manner, including by way of endorsement (other than endorsements of negotiable instruments for collection in the ordinary course of business), of any part or all of such obligation, and (b) an agreement, contingent or otherwise, and whether or not constituting a guaranty, assuring, or intended to assure, the payment or performance (or payment of damages in the event of non-performance) of any part or all of such obligation by any means (including, without limitation, the purchase of securities or obligations, the purchase or sale of property or services, or the supplying of funds).

“ Guaranty Agreement ” shall mean a guaranty agreement, in form and substance satisfactory to the Lender, to be executed by each Domestic Subsidiary in favor of the Lender, pursuant to which such Domestic Subsidiary will guaranty the full and timely payment and performance of all of the Obligations.

“ Indebtedness ” shall mean (without duplication), with respect to any Person, (a) all obligations or liabilities, contingent or otherwise, for borrowed money, (b) any and all obligations represented by promissory notes, bonds, debentures or the like, or on which interest charges are customarily paid, (c) any liability secured by any mortgage, pledge, lien or security interest on property owned or acquired, whether or not such liability shall have been assumed, (d) obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding trade payables and accrued obligations incurred in the ordinary course of business), (f) any obligations (contingent or otherwise) of such Person as an account party or applicant in respect of letters of credit and/or bankers’ acceptances, or in respect of financial or other hedging obligations, and (g) Guarantees, endorsements (other than for collection in the ordinary course of business) and other contingent obligations in respect of the obligations of others.

“ Interest Expense ” shall mean, for the relevant period, total interest expense (including interest attributable to Capitalized Leases in accordance with GAAP) and fees with respect to outstanding Indebtedness.

“ Investment ”, as applied to the Borrower or any Subsidiary, shall mean: (a) any shares of capital stock, evidence of Indebtedness or other security issued by any other Person to the Borrower or any Subsidiary, (b) any loan, advance or extension of credit to, or contribution to the capital of, any other Person, other than credit terms extended to customers in the ordinary course of business, (c) any other investment by the Borrower or any Subsidiary in any assets or securities of any other Person, and (d) any commitment to make any Investment.

“ Knowledge” or “Known ” or words of similar import shall mean, with respect to the Borrower and/or any Subsidiary, the actual knowledge of Douglas J. Kramer, Michael T. Adams and John A. Campbell (and/or their respective successors as officers of the Borrower) after reasonable inquiry of the appropriate employees of the Borrower and the Subsidiaries.

“ Liabilities and Contingencies ” has the meaning set forth in Section 3.01(c) below.

“ Lien ”, as applied to the property or assets (or the income or profits therefrom) of the Borrower or any Subsidiary, shall mean (in each case, whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise): (a) any mortgage, lien, pledge, hypothecation, attachment, assignment, deposit arrangement, encumbrance, charge, lease constituting a Capitalized Lease Obligation, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind in respect of any property (including, without limitation, stock of any Subsidiary) of the Borrower or any Subsidiary, or upon the income or profits therefrom; (b) any arrangement under which any property of the Borrower or any Subsidiary is transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of Indebtedness or the performance of any other liability in priority to the payment of the general, unsecured creditors of the Borrower or any Subsidiary; (c) any Indebtedness or liability which remains unpaid after the same shall become due and payable and which, if unpaid, by law or otherwise is given any priority whatsoever over the general unsecured creditors of the Borrower or any Subsidiary; and (d) any agreement (other than this Agreement) or other arrangement which, directly or indirectly, prohibits the Borrower or any Subsidiary from creating or incurring any lien on any of its properties or assets or which conditions the ability to do so on the security, on a pro   rata or other basis, of Indebtedness other than Indebtedness outstanding under this Agreement.

“ Loan Documents ” shall mean the collective reference to this Agreement, the Notes, the Security Documents, the Warrants, the Registration Rights Agreement, and any and all other agreements, instruments, certificates and other documents as may be executed and delivered by the Borrower and/or any of the Subsidiaries pursuant hereto or thereto.

“ Loans ” shall mean, collectively, the Advances and the Term Loan.

“ Material Adverse Effect ” shall mean any event, act, omission, condition or circumstance which has or would reasonably be expected to have a material adverse effect on (a) the business, operations, properties, assets or condition, financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Borrower or any Subsidiary to perform any of its obligations under any of the Loan Documents, or (c) the validity or enforceability of, or the Lender’s rights and remedies under, any of the Loan Documents, other than due to the acts or omissions of the Lender or any of its Affiliates.

“ Maturity Date ” shall mean the Revolver Maturity Date and/or the Term Loan Maturity Date, as the case may be.

“ Monitoring Fee ” shall mean the fees payable to the Lender pursuant to Section 2.03(b) below.

“ Net Income ” shall mean the consolidated net income (or loss) of the Borrower and its Subsidiaries for the twelve (12) month period in question, after giving effect to deduction of or provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided that, for purposes of calculating Net Income, there shall be excluded and no effect shall be given to:

(a)      any restoration of any contingency reserve, except to the extent that provision for such reserve was made out of income for the subject period;

(b)      any net gain arising from the collection of the proceeds of any insurance policy or policies or the sale or disposition of any fixed assets outside of the ordinary course of business;

(c)      any expenses associated with any equity incentive plan of the Borrower; and

(d)      any Net Income attributable to any Subsidiary to the extent that the Borrower is prohibited (by law, by Contract or otherwise) from receiving a distribution of such Net Income from such Subsidiary.

“ Notes ” shall mean, collectively, the Revolving Credit Note and the Term Note.

“ Obligations ” shall mean the collective reference to all Indebtedness and other liabilities and obligations of every kind and description owed by the Borrower to the Lender from time to time under or pursuant to this Agreement, the Notes, the Security Documents and the other Loan Documents (excluding the Warrant and Registration Rights Agreement, other than amounts payable from time to time pursuant to Section 2(c) of the Registration Rights Agreement), and/or otherwise in respect of the Loans, however evidenced, created or incurred, fixed or contingent, now or hereafter existing, due or to become due.

“ Organic Documents ” shall mean, with respect to any Person, the certificate of incorporation, articles of incorporation, certificate of formation, certificate of limited partnership, by-laws, operating agreement, limited partnership agreement or other such document of such Person.

“ Permitted Discretion ” shall mean a determination or judgment made by the Lender in good faith in the exercise of reasonable business judgment from the perspective of a secured lender.

“ Permitted Indebtedness ” shall mean any and all Indebtedness expressly permitted pursuant to Section 6.01 below.

“ Permitted Liens ” shall mean those Liens expressly permitted pursuant to Section 6.02 below.

“ Person ” shall mean any individual, partnership, corporation, limited liability company, banking association, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

“ Pro Forma Operating Cash Flow ” shall mean, for the twelve (12) month period ended most recently prior to the date of determination, (a) EBITDA for such twelve (12) month period, minus (b) the sum of (i) Capital Expenditures paid or payable in cash during such twelve (12) month period, plus (ii) Interest Expense to the extent paid or payable in cash during such twelve (12) month period, plus (iii) all scheduled payments of principal and interest required to be paid under the Term Note during the next succeeding twelve (12) month period.

“ Qualified Proceeds ” shall mean any and all net proceeds received by the Borrower from time to time from the issuance and/or sale of any capital stock of the Borrower or any security or Indebtedness convertible into or exchangeable for capital stock of the Borrower, except to the extent that such proceeds are, within thirty (30) days after the receipt thereof, applied to pay the purchase price and/or directly associated expenses of the Borrower’s acquisition (directly or through a Wholly-Owned Subsidiary) of another business (whether through merger, consolidation, share exchange, stock purchase, or purchase of all or substantially all of the assets of the target company or an operating division or unit thereof), in each case effected subject to and in accordance with the requirements of this Agreement. In determining the amount of net proceeds for purposes of this definition, there shall be deducted from gross proceeds only those reasonable expenses incurred by the Borrower directly related to the subject issuance or sale, exclusive of any fees or commissions paid to any officer, director or other Affiliate of the Borrower or any Affiliate of any of the foregoing.

“ Real Properties ” shall mean, collectively, any real properties (land, buildings and/or improvements) now owned or leased or occupied by the Borrower or any of the Subsidiaries, and, during the period of the Borrower’s and/or Subsidiary’s occupancy thereof, any other real properties heretofore owned or leased by the Borrower or any Subsidiary (provided that, with respect to leased properties, the “Real Property” shall refer only to the portion of the subject property (excluding common areas) leased by the Borrower or a Subsidiary).

“ Registration Rights Agreement ” shall mean the Registration Rights Agreement, to be dated as of the Closing Date, made by the Borrower for the benefit of the Lender and any subsequent Holders (as such term is defined in the Registration Rights Agreement), as same may be amended, modified, supplemented and/or restated from time to time.

“ Revolving Credit Commitment ” shall mean the Lender’s agreement to make Advances to the Borrower within the limitations set forth in Section 2.01 below.

“ Revolving Credit Note ” shall mean the promissory note of the Borrower issued to the Lender to represent the Advances and interest thereon, as described in Section 2.01(f) below.

“ Revolving Maturity Date ” shall mean February 28, 2009, subject to extension in accordance with Section 2.01(e) below.

“ Sale ” shall mean any transaction or series of related transactions (a) whereby Control of the Borrower is held by a Person (or group of Persons acting in concert) other than the management of the Borrower on the date of this Agreement (or Affiliates of such management), (b) in which the Borrower is a constituent party to any merger, consolidation or share exchange and as a result thereof (i) the holders of the outstanding capital stock of the Borrower which ordinarily has voting power for the election of directors (including preferred stock counted on an “as converted” basis into common stock) immediately prior to such merger or consolidation cease to own a majority of the outstanding capital stock of the Borrower which ordinarily has voting power for the election of directors (including preferred stock counted on an “as converted” basis into common stock), or (ii) the Borrower is not the surviving corporation, or (c) whereby all or any material portion of the assets of the Borrower or any Subsidiary are sold, assigned or transferred.

“ SEC ” shall mean the United States Securities and Exchange Commission, and any successor agency performing the functions thereof.

“ SEC Reports ” shall mean the periodic and current reports, registration statements, proxy statements and other reports filed or required to be filed by the Borrower with the SEC pursuant to the Act and/or the Exchange Act, and any amendments or supplements thereto filed with the SEC.

“ Security Documents ” shall mean the Collateral Agreement, any collateral assignments, control agreements, financing statements or other such agreements or documents pursuant thereto, any Guaranty Agreements, and any other agreements or instruments securing or creating or evidencing Liens securing the Obligations.

“ Series D Dividends ” shall mean dividends payable from time to time on the Series D preferred stock of the Borrower which is outstanding on the date of this Agreement, payable at the rate and at the times provided in the certificate of designations respecting such Series D preferred stock as in effect on the date of this Agreement.

“ Subordinated Debt ” shall mean all Indebtedness for money borrowed and other liabilities of the Borrower, whether or not evidenced by promissory notes, which is contractually subordinated in right of payment, in a manner satisfactory to the Lender (as evidenced by the Lender’s prior written approval thereof), to all Obligations of the Borrower to the Lender.

“ Subsidiary ” or “ Subsidiaries ” shall mean the individual or collective reference to any corporation, limited liability company or other entity of which 50% or more of the outstanding shares of stock or other equity interests of each class having ordinary voting power and/or rights to profits (other than stock having such power only by reason of the happening of a contingency) is at the time owned by the Borrower, directly or indirectly through one or more Subsidiaries of the Borrower.

“ Term Loan ” shall mean the term loan in the principal amount of $2,000,000 to be made pursuant to Section 2.02(a) below.

“ Term Loan Maturity Date ” shall mean February 28, 2010.

“ Term Note ” shall mean the promissory note of the Borrower issued to the Lender as described in Section 2.02(d) below.

“ UCC ” means the Uniform Commercial Code as in effect in the State of New York on the date hereof and hereafter from time to time.

“ Warrants ” shall mean the warrants to purchase shares of Common Stock (such warrants covering an aggregate of 1,500,000 shares of Common Stock, subject to adjustment) to be issued by the Borrower to the Lender on the Closing Date.

“ Wholly-Owned Subsidiary ” shall mean each Domestic Subsidiary of which all of the outstanding equity securities (other than directors’ qualifying shares) are owned by the Borrower or another such Wholly-Owned Subsidiary.

Section 1.02. Use of Defined Terms . All terms defined in this Agreement shall have their defined meanings when used in the Notes, the Security Documents, the other Loan Documents, and all certificates, reports or other documents made or delivered pursuant to this Agreement, unless otherwise defined therein or unless the specific context shall otherwise require.

Section 1.03. Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with GAAP.

Section 1.04. Other Definitional Provisions . The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified.

Section 2.01.   Revolving Credit Loans .

(a)      Subject at all times to all of the terms and conditions of this Agreement, the Lender hereby agrees to extend to the Borrower a secured revolving credit facility, from the Closing Date to the Primary Maturity Date, in an aggregate principal amount not to exceed, at any time outstanding, the lesser of (i) the Borrowing Base at the subject time, or (ii) $3,500,000 (the " Revolving Credit Commitment ").

(b)      Such revolving credit loans are herein sometimes referred to individually as an " Advance " and collectively as the " Advances ." Subject at all times to all of the terms and conditions of this Agreement, from the Closing Date to the Revolver Maturity Date and within the limits of the Revolving Credit Commitment, the Lender shall lend, and the Borrower may borrow, prepay (without premium or penalty) and reborrow under this Section 2.01. Each request for an Advance (i) shall be irrevocable, (ii) shall be deemed to constitute an express affirmation that all conditions precedent set forth in part B of Article IV hereof are satisfied on the date of such request and will be satisfied on the requested Borrowing Date, and (iii) shall be made to the Lender in writing, not later than three (3) Business Days prior to the requested Borrowing Date, by an authorized officer of the Borrower or by telephonic communication by such authorized officer to the Lender, which shall be confirmed by written notice to the Lender to be delivered to the Lender by the Business Day next following the subject request. In no event shall the Borrower request, or shall the Lender be required to honor, (A) any request for an Advance in an amount greater than the Availability at such time, (B) any request for an Advance in an amount less than $100,000, or (C) more than one request for the borrowing of Advances in any seven (7) calendar day period.

(c)      The Borrower shall pay the Lender interest on all Advances at the rate(s) per annum as in effect from time to time in accordance with the Revolving Credit Note. Such interest shall be payable monthly in arrears on the last day of each calendar month and on the Revolver Maturity Date, and shall be computed on the daily unpaid balance of all Advances made under the Borrower's revolving credit loan accounts with the Lender, based on a three hundred sixty (360) day year, counting the actual number of days elapsed. The Borrower hereby authorizes the Lender to charge the Borrower's revolving credit loan accounts for all such interest; provided , however , that the Lender shall be under no obligation to make any such charge to the Borrower’s revolving credit loan accounts (including, without limitation, if there is insufficient Availability at the time such interest is due and payable).

(d)      In the event and to the extent that, at any time, the outstanding principal amount of Advances exceeds the Revolving Credit Commitment then in effect, then the Borrower shall immediately, without notice or demand, make a payment to the Lender in respect of the Advances in an amount sufficient to cause the outstanding principal amount of Advances to be equal to or less than the Revolving Credit Commitment then in effect.

(e)      Unless sooner due and payable by reason of an Event of Default or Sale having occurred, the Borrower shall pay in full all of the Obligations to the Lender in respect of all Advances on or prior to the Revolver Maturity Date; provided , however , that upon written request of the Borrower made not more than sixty (60) days or less than thirty (30) days prior to the Revolver Maturity Date, the Lender shall extend the Revolver Maturity Date to the Term Loan Maturity Date, provided and on condition that, on the date of such extension request and on the scheduled Revolver Maturity Date, no Default or Event of Default shall have occurred. Anything elsewhere contained herein to the contrary notwithstanding, in the event that and at such time as the Term Loan shall be repaid in full, the Revolving Credit Commitment shall thereupon terminate and all outstanding Advances, all accrued interest thereon and all other outstanding Obligations shall be immediately due and payable, without requirement of any notice or demand.

(f)       All Advances shall be evidenced by a secured Revolving Credit Note of the Borrower payable to the order of the Lender.

(g)      The Borrower may, at its option, terminate the Revolving Credit Commitment at any time upon ten (10) Business Days’ prior written notice, and paying to the Lender, on the date fixed for termination, an amount equal to the sum of all outstanding principal and accrued interest of the Advances.

Section 2.02.   Term Loan .

(a)      Subject at all times to all of the terms and conditions of this Agreement, the Lender hereby agrees to extend to the Borrower a Term Loan in the principal amount of $2,000,000. The Term Loan shall be borrowed in a single borrowing on the Closing Date, and any principal amounts repaid in respect of the Term Loan may not be reborrowed.

(b)      The Term Loan shall be repayable in installments, in accordance with the schedules of payments set forth in the Term Note. The Borrower shall be required to prepay the Term Loan (i) in full upon the consummation of any Sale, and (ii) in whole or in part from time to time in the event and to the extent of 50% of any Qualified Proceeds received by the Borrower from time to time. Any prepayment required under the foregoing clause (ii) shall be due and payable as and when the amount of Qualified Proceeds is determined (i.e., upon receipt of such Qualified Proceeds in the event that no acquisition transaction is then pending, or thirty (30) days after receipt of such Qualified Proceeds to the extent that such Qualified Proceeds are not applied to the purchase price and/or related expenses of a consummated business acquisition).

(c)      The Borrower shall pay the Lender interest on the principal balance of the Term Loan at the rate(s) per annum as in effect from time to time in accordance with the Term Note. Such interest shall be payable monthly in arrears on the last day of each calendar month and on the Term Loan Maturity Date, and shall be computed on the daily unpaid balance of the Term Loan, based on a three hundred sixty (360) day year, counting the actual number of days elapsed. The Borrower hereby authorizes the Lender to charge the Borrower’s revolving credit loan accounts for all such interest and/or for any or all principal amounts due and payable in respect of the Term Loans; provided , however , that the Lender shall be under no obligation to make any such charge to the Borrower’s revolving credit loan accounts (including, without limitation, if there is insufficient Availability at the time such interest and/or principal is due and payable).

(d)      The Term Loan shall be evidenced by a secured Convertible Term Note of the Borrower payable to the order of the Lender.

Section 2.03.   Fees and Premiums .

(a)      The Borrower shall pay the Closing Fee to the Lender simultaneously with the execution and delivery of this Agreement. The Closing Fee shall be deemed fully earned upon the parties’ execution and delivery of this Agreement, and shall not be refundable in whole or in part and shall not be subject to reduction or set-off under any circumstances.

(b)      The Borrower shall further pay to the Lender, in advance on the Closing Date and on the first (1 ^st ) Business Day of each calendar month prior to the Revolver Maturity Date or the earlier termination of the Revolving Credit Commitment and payment of the Obligations thereon in accordance with this Agreement, a collateral monitoring, availability and administrative fee in the amount of $1,750 per month or portion thereof.

(c)      In the event of any prepayment of all or any portion of the Term Loan, in addition to the payment of the subject principal amount and all unpaid accrued interest thereon, the Borrower shall be required to pay to the Lender a prepayment premium in an amount equal to (i) two (2%) percent of the principal amount being prepaid if such prepayment is made or required to be made on or before the first (1 ^st ) anniversary of the Closing Date, or (ii) one (1%) percent of the principal amount being prepaid if such prepayment is made or required to be made subsequent to the first (1 ^st ) anniversary of the Closing Date; provided , however , that no such prepayment premium shall be required with respect to any required prepayment out of Qualified Proceeds unless and to the extent that such Qualified Proceeds were received from or on behalf of any current holder of Common Stock or any current or future holder of Series D preferred stock of the Borrower.

(d)      Payments received in respect of the Obligations after 12:00 Noon on any day shall be deemed to be received on the next succeeding Business Day, and if any payment is received other than by wire transfer of immediately available funds, such payment shall be subject to three (3) Business Days’ clearance prior to being credited to the Obligations for interest calculation purposes.

(e)      In the event that the Closing Date has not occurred on or before February 28, 2007 and the Lender was, prior thereto, ready, willing and able to consummate the transactions contemplated by this Agreement on substantially the terms hereof, then the Lender may, at any time thereafter until the Closing Date, terminate this Agreement by written notice to the Borrower, in which event the Borrower shall immediately become obligated to pay to the Lender an amount equal to the sum of (i) $90,000 (the “ Breakup Fee ”), plus (ii) all out-of-pocket costs, charges and expenses (including, reasonable attorneys’ fees and expenses) incurred by the Lender in respect of the transactions contemplated by this Agreement (up to a maximum of $35,000). Such payment shall be sooner due and payable in the event that and at such time as the Borrower consummates an alternative financing prior to February 28, 2007.

Section 2.04.  Use of Proceeds . The Borrower shall utilize the proceeds of the Loans solely (a) to repay and retire the Borrower’s existing line of credit facility with the Existing Lender, (b) to repay and retire approximately $238,000 of outstanding Indebtedness owed by the Borrower to Commerce Bank, (c) to repay and retire up to $400,000 of outstanding Indebtedness owed by the Borrower to Richard J. Kurtz, and (d) for working capital and other general corporate purposes of the Borrower.

Section 2.05.  Further Obligations . With respect to all Obligations for which the interest rate is not otherwise specified herein (whether such Obligations arise hereunder, pursuant to the Notes or Security Documents, or otherwise), such Obligations shall bear interest at the rate(s) in effect from time to time pursuant to the Revolving Credit Note.

Section 2.06.  Application of Payments . All amounts paid to or received by the Lender in respect of the Loans from whatever source (whether from the Borrower, any Subsidiary pursuant to the Guaranty Agreement, any realization upon any Collateral, or otherwise) shall, unless otherwise directed by the Borrower with respect to any particular payment (unless an Event of Default shall then be continuing, in which event the Lender may disregard the Borrower’s direction), be applied (a) first, to reimburse the Lender for all out-of-pocket costs and expenses incurred by the Lender which are reimbursable to the Lender in accordance with this Agreement, the Notes and/or any of the other Loan Documents, (b) next, to any accrued but unpaid fees or prepayment premiums, and amounts payable under Section 2.2(c) of the Registration Rights Agreement, (c) next, to unpaid accrued interest on the Term Loan, (d) next, to unpaid accrued interest on the Advances, (e) next, to the outstanding principal of the Term Loan, to the extent then due and payable, (f) next, to the outstanding principal of the Advances, and (g) finally, to the payment of any other outstanding Obligations; and after payment in full of the Obligations, any further amounts paid to or received by the Lender in respect of the Loans shall be paid over to the Borrower or such other Person(s) as may be legally entitled thereto.

Section 2.07.   Sale . Anything elsewhere contained in this Agreement and/or the Notes to the contrary notwithstanding, the Revolving Credit commitment shall terminate and all Obligations shall become immediately due and payable, without requirement of any notice or demand, upon the consummation of any Sale.

Section 2.08.   Obligations Unconditional .

(a)      The payment and performance of all Obligations shall constitute the absolute and unconditional obligations of the Borrower, and shall be independent of any defense or rights of set-off, recoupment or counterclaim which the Borrower might otherwise have against the Lender. All payments required by this Agreement and/or the Notes shall be paid free of any deductions or withholdings for any taxes or other amounts and without abatement, diminution or set-off. If the Borrower is required by law to make such a deduction or withholding from a payment hereunder, the Borrower shall pay to the Lender such additional amount as is necessary to ensure that, after the making of such deduction or withholding, the Lender receives (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. The Borrower shall (i) pay the full amount of any deduction or withholding, which it is required to make by-law, to the relevant authority within the payment period set by the relevant law, and (ii) promptly after any such payment, deliver to the Lender an original (or certified copy) official receipt issued by the relevant authority in respect of the amount withheld or deducted or, if the relevant authority does not issue such official receipts, such other evidence of payment of the amount withheld or deducted as is reasonably acceptable to the Lender.

(b)      If, at any time and from time to time after the Closing Date, (i) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or application thereof, or (iii) compliance by the Lender with any request or directive (whether or not having the force of law) from any governmental authority (A) subjects the Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to the Lender of any amount payable thereunder (except for net income taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally by federal, state or local taxing authorities with respect to interest or commitment fees or other fees payable hereunder or changes in the rate of tax on the overall net income of the Lender or its members), or (B) imposes on the Lender any other condition or increased cost in connection with the transactions contemplated thereby or participations therein, and the result of any of the foregoing is to increase the cost to the Lender of making or continuing any Loan or to reduce any amount receivable hereunder, then, in any such case, the Borrower shall promptly pay to the Lender any additional amounts necessary to compensate the Lender, on an after-tax basis, for such additional cost or reduced amount as determined by the Lender. If the Lender becomes entitled to claim any additional amounts pursuant to this Section 2.08(b), the Lender shall promptly notify the Borrower of the event by reason of which the Lender has become so entitled, and each such notice of additional amounts payable pursuant to this Section 2.08(b) submitted by the Lender to the Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.

Section 2.09.   Reversal of Payments . To the extent that any payment or payments made to or received by the Lender pursuant to this Agreement or any other Loan Document are subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid to any trustee, receiver or other person under any state or federal bankruptcy or other such law, then, to the extent thereof, such amounts shall be revived as Obligations and continue in full force and effect hereunder as if such payment or payments had not been received by the Lender.

As of the Closing Date and on each Borrowing Date (unless the representation and warranty refers to a specific date), the Borrower hereby makes the following representations and warranties to the Lender, all of which representations and warranties shall survive the Closing Date, the delivery of the Notes and the making of the Loans, shall be continuing in nature so long as any Obligations are outstanding or the Revolving Credit Commitment remains in effect, and are as follows:

Section 3.01.   Financial Matters .

(a)      The Borrower has heretofore furnished to the Lender (i) the audited financial statements (including balance sheets, statements of income and statements of cash flows) of the Borrower as at December 31, 2004 and 2005, and for the Fiscal Years then ended, and (ii) the unaudited financial statements of the Borrower as of September 30, 2006 and for the nine (9) months then ended (collectively, the “ Financial Statements ”).

(b)      The Financial Statements (i) have been prepared in accordance with GAAP and Regulation S-X promulgated under the Act on a consistent basis for all periods (subject, in the case of unaudited statements, to the absence of full footnote disclosures, and to normal non-material audit adjustments), (ii) are complete and correct in all material respects, (iii) fairly present the financial condition of the Borrower as of said dates, and the results of its operations for the periods stated, (iv) contain and reflect all necessary adjustments and accruals for a fair presentation of the Borrower’s financial condition and the results of its operations as of the dates of and for the periods covered by such Financial Statements, and (v) make full and adequate provision,