EXHIBIT 10.3
June 5, 2002
Xxxxx Xxxxxxx
The Palladin Group, L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Re: U.S. Plastic Lumber Corp.
Dear Xxxxx:
I have outlined below the terms upon which I believe we have agreed to in
principle relative to the restructure of all securities held by the Halifax
Fund, L.P. subject to the closing of the sale of the Clean Earth, Inc.
transaction. If these terms are acceptable to you, please sign below
acknowledging the same at which point we can pass this term sheet to our
respective attorneys to put into definitive agreements. This term sheet shall
not be binding and the parties shall only be bound by such definitive
agreements.
o The Debentures dated February 2000 and June 2001 will be terminated or
amended and restated as set forth below, subject to advice of counsel.
o The Series D Preferred Stock shall be cancelled, but otherwise included
in the consideration set forth below.
o All defaults charges, fees, and penalties will be waived and Halifax
will release USPL from any actions Halifax now has against USPL
relative to the above mentioned securities.
o Halifax will release its second position on all assets of USPL (only to
the extent it is an asset being transferred as part of the CEI sale
such as certain intellectual property), all assets of Clean Earth, Inc.
and all of it subsidiaries so as to allow USPL to transfer such assets
as part of the sale of Clean Earth, Inc. This includes all intellectual
property, accounts receivables, inventory, equipment, real estate and
any and all other assets being transferred as part of the Clean Earth
sale transaction. Halifax will further assist and authorize USPL to
take all appropriate action in terminating all UCC's relative to said
assets.
In exchange for the above, Halifax and USPL will enter into a new
transaction as follows:
o At closing of the Clean Earth, Inc., Halifax will be paid $2.5 million
in cash.
o At closing, Halifax and USPL shall enter into a Subordinated Junior
Convertible Debenture in the amount of $2.8 million. The Debenture will
be for a term of three years and carry interest at the rate of 10%
accrued daily and compounded semi-annually. During the first two years,
the interest will be paid in kind. During the third year, the interest
will be paid in cash. The subordination terms shall be identical to the
Intercreditor and Subordination Agreement currently in place with Bank
of America. The conversion feature of the Debenture shall be based upon
fixed prices allowing Halifax to convert $933,333.33 of the Debenture
at a price of $.75 per share, $933,333.33 at $1.00 per share, and
$933,333.33 at $1.25 per share. The maturity date of the Debenture
shall be three years from the date of closing of the Clean Earth, Inc
sale. The underlying common stock shall be freely saleable pursuant to
Rule 144(k).
o At closing, Halifax and USPL shall enter into a Subordinated Junior
Note in the amount of $5.6 million. The Debenture will be for a term of
three years and carry interest at the rate of 10% accrued daily and
compounded semi-annually. During the first two years, the interest will
be paid in kind. During the third year, the interest will be paid in
cash. The subordination terms shall be identical to the Intercreditor
and Subordination Agreement currently in place with Bank of America.
This Note shall have no conversion features. The maturity date of the
Debenture shall be three years from the date of closing of the Clean
Earth, Inc sale.
o The second position of Halifax on all USPL assets will be maintained
substantially as in its current form and as provided in the
Intercreditor and Subordination Agreement with Bank of America, except
that USPL shall grant a second mortgage to Halifax on its Ocala real
estate.. USPL will use its best efforts to provide a second mortgage on
the Chicago property, with the understanding that Halifax requires such
a mortgage.
o The parties will negotiate a limitation on the ability of USPL to incur
senior debt based upon a ratio of total senior debt to total assets.
o USPL will pay Halifax's reasonable legal fees in connection herewith,
and undertakes to settle its current outstanding legal bills with
Xxxxxxxxx Xxxxxx.
We look forward to finalizing this transaction along with the Clean Earth, Inc
sale transaction. Please call me should you have any questions.
Very truly yours,
/s/ XXXXX X. XXXXXXX
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Xxxxx X. Xxxxxxx
Executive Vice President and General Counsel
Cc: Xxxx X. Xxxxxxxxx, CEO
Xx Xxxxx
Xxxx X. XxXxxxxx, Xx.
Acknowledged and Accepted by:
Halifax Fund, L.P.
By: /s/ XXXXXX XXXXXXX
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Xxxxxx Xxxxxxx, Managing Director
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